PUGET SOUND ENERGY INC
CREDIT AGREEMENT AMONG PSE AND VARIOUS BANKS
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<TYPE>EX-10
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<FILENAME>ex10-110.htm
<DESCRIPTION>CREDIT AGREEMENT AMONG PSE AND VARIOUS BANKS
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<TITLE>PUGET ENERGY 10-k 2000 EXHIBIT 10.110</TITLE>
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<P ALIGN="LEFT"><B>EXHIBIT 10.110</B></P>

<P ALIGN="CENTER"><B>CREDIT AGREEMENT</B></P>

<P ALIGN="CENTER"><B>Dated as of December 18, 1996</B></P>

<P ALIGN="CENTER"><B>among</B></P>

<P ALIGN="CENTER"><B>PUGET SOUND ENERGY COMPANY</B></P>

<P ALIGN="CENTER">(the new name of the corporation</P>

<P ALIGN="CENTER">surviving the merger of</P>

<H5 ALIGN="CENTER">WASHINGTON ENERGY COMPANY</H5>

<P ALIGN="CENTER">and its wholly owned subsidiary</P>

<H5 ALIGN="CENTER">WASHINGTON NATURAL GAS COMPANY</H5>

<P ALIGN="CENTER">into</P>

<H5 ALIGN="CENTER">PUGET SOUND POWER &amp; LIGHT COMPANY),</H5>

<P ALIGN="CENTER"><B>VARIOUS BANKS</B>,</P>

<P ALIGN="CENTER"><B>and</B></P>

<H3>BANK OF AMERICA NW, N.A. doing business as SEAFIRST BANK,</H3>
<P ALIGN="CENTER">as Administrative Agent,</P>

<H3 ALIGN="CENTER">FIRST CHICAGO CAPITAL MARKETS, INC.,</H3>

<P ALIGN="CENTER">as Syndication Agent, and</P>

<H3 ALIGN="CENTER">NATIONSBANK of TEXAS, N.A.,</H3>

<P ALIGN="CENTER">as Documentation Agent</P>




<PRE>
                                              <B>TABLE OF CONTENTS</B>


                                                                                   Page
                                                                                   ----

SECTION 1             CERTAIN DEFINITIONS.........................................1

         "Adjustment Certificate".................................................1

         "Affected Bank"..........................................................1

         "Affiliate"..............................................................1

         "Administrative Agent"...................................................1

         "Agreement"..............................................................1

         "Applicable Law".........................................................1

         "Applicable Lending Office"..............................................2

         "Bank"   2

         "Base Rate"..............................................................2

         "Base Rate Margin".......................................................2

         "Business Day"...........................................................2

         "Commitment(s)"..........................................................2

         "Company"................................................................2

         "Consenting Bank(s)".....................................................2

         "Consolidated Subsidiary"................................................2

         "Domestic Office"........................................................3

         "Effective Date".........................................................3

         "Eligible Institution"...................................................3

         "Environmental Laws".....................................................3

         "ERISA"  3

         "Eurodollar Loan"........................................................3

         "Eurodollar Office"......................................................3

         "Eurodollar Rate"........................................................4

         "Eurodollar Reserve Percentage"..........................................4

         "Federal Funds Effective Rate"...........................................4

         "First Mortgage".........................................................4

         "First Mortgage Bond"....................................................4

         "Floating Rate"..........................................................5

         "Floating Rate Loan".....................................................5

         "Indebtedness"...........................................................5

         "Liability"..............................................................5

         "LIBOR"  5

         "LIBOR Margin"...........................................................6

         "Liens"  6

         "Loan(s)"................................................................6

         "Loan Period"............................................................6

         "Non-Consenting Bank(s)".................................................6

         "Note(s)"................................................................6

         "Parent" 6

         "Percentage".............................................................6

         "Permitted Liens"........................................................6

         "Person" 8

         "Plan"   ................................................................8

         "Public Utility Holding Company Act".....................................8

         "Puget"  8

         "Reference Rate".........................................................8

         "Regulatory Change"......................................................8

         "Replacement Bank(s)"....................................................9

         "Required Banks".........................................................9

         "Retiring Bank(s)".......................................................9

         "Secured Debt Rating"....................................................9

         "Significant Subsidiary".................................................9

         "Subsidiary"............................................................10

         "Substitute Loan(s)"....................................................10

         "Termination Date"......................................................10

         "Unmatured Event of Default"............................................10

         "WECO"   10

         "Wholly-Owned Subsidiary"...............................................10

SECTION 2             COMMITMENTS OF THE BANKS; TYPES OF LOANS;
                      PROCEDURES FOR BORROWING...................................10

         2.1      Commitments....................................................10

         2.2      Various Types of Loans.........................................11

         2.3      Borrowing Procedures...........................................11

         2.4      Extension of Termination Date..................................13

         2.5      Removal of Banks...............................................14

         2.6      Removal of Retiring Banks......................................14

         2.7      Representations and Warranty...................................16

SECTION 3             REPAYMENT OF LOANS; NOTES EVIDENCING LOANS...................
         16

         3.1      Repayment of Loans.............................................16

         3.2      Notes..........................................................16

SECTION 4             INTEREST...................................................17

         4.1      Interest Rates.................................................17

         4.2      Applicable Margin..............................................17

         4.3      Interest Payment Dates.........................................17

         4.4      Setting and Notice of Rates....................................17

         4.5      Computation of Interest........................................18

SECTION 5             COMMITMENT FEE.............................................18

SECTION 6             REDUCTION OF THE COMMITMENTS; PREPAYMENTS..................19

         6.1      Optional Reduction or Termination of the Commitments...........19

         6.2      Prepayments....................................................19

SECTION 7             MAKING AND PRORATION OF PAYMENTS; OFFSET.....................
         19

         7.1      Making of Payments.............................................19

         7.2      Application of Certain Payments................................20

         7.3      Proration of Payments..........................................20

         7.4      Payment on Non-Business Days...................................21

         7.5      Offset.........................................................21

SECTION 8         INCREASED COST PROVISIONS AND SPECIAL
                  PROVISIONS FOR EURODOLLAR LOANS................................21

         8.1      Increased Costs................................................21

         8.2      Basis for Determining Interest Rate Inadequate.................22

         8.3      Changes in Law Rendering Certain Loans Unlawful................23

         8.4      Eurodollar Reserve Requirements................................24

         8.5      Funding Losses.................................................24

         8.6      Right of Banks to Fund through Other Offices...................25

         8.7      Discretion of Banks as to Manner of Funding....................25

         8.8      Alternative Lenders............................................25

         8.9      Floating Rate Loans Substituted for Affected Eurodollar Loans..25

         8.10     Conclusiveness of Determination; Survival of Provisions........26

SECTION 9             REPRESENTATIONS AND WARRANTIES.............................26

         9.1      Organization, Etc..............................................26

         9.2      Authorization; No Conflict.....................................26

         9.3      Governmental Approvals.........................................26

         9.4      Validity and Binding Nature....................................27

         9.5      Financial Statements...........................................27

         9.6      Litigation.....................................................27

         9.7      Employee Benefit Plans.........................................27

         9.8      Regulation.....................................................28

         9.9      Public Utility Holding Company Act.............................28

         9.10     Investment Company Act.........................................28

         9.11     Environmental Matters..........................................28

         9.12     Information....................................................28

SECTION 10            CONDITIONS TO EFFECTIVE DATE; LENDING......................29

         10.1     Conditions Precedent to Effective Date.........................29

                  10.1.1   Approval Terms of Merger by WUTC/Banks................29

                  10.1.2   Merger Effected.......................................29

                  10.1.3   Termination of Other Credit Agreements................29

                  10.1.4   Must Occur Not Later Than March 31, 1997..............29

                  10.1.5   Warranties True.......................................30

         10.2     Initial Loan...................................................30

                  10.2.1   Note..................................................30

                  10.2.2   Resolutions and Incumbency............................30

                  10.2.3   Opinion of Counsel for the Company....................30

                  10.2.4   Regulatory Approval...................................31

                  10.2.5   Other.................................................31

         10.3     All Loans......................................................31

         10.4     New Money Loans................................................31

         10.5     Loans On or After Extension of Termination Date................32

                  10.5.1   Bring-Down Opinion....................................32

                  10.5.2   Confirmations.........................................32

SECTION 11            COMPANY'S COVENANTS........................................32

         11.1     Reports, Certificates and Other Information....................32

                  11.1.1   Annual Report.........................................32

                  11.1.2   Interim Reports.......................................33

                  11.1.3   Certificates..........................................33

                  11.1.4   Reports to SEC and to Shareholders....................33

                  11.1.5   Notice of Default and Litigation......................33

                  11.1.6   Other Information.....................................33

         11.2     Preservation of Corporate Existence, Etc.......................34

         11.3     Compliance with Laws, Etc......................................34

         11.4     Maintenance of Insurance.......................................34

         11.5     Visitation Rights..............................................35

         11.6     Keeping of Books...............................................35

         11.7     Maintenance of Properties......................................35

         11.8     Mergers, Etc...................................................35

         11.9     Sales, Etc. of Assets..........................................35

         11.10    Liens..........................................................36

         11.11    Compliance with ERISA..........................................36

         11.12    Use of Proceeds................................................37

         11.13    Scope of Business..............................................37

         11.14    Financial Covenant.............................................37

SECTION 12            EVENTS OF DEFAULT AND THEIR EFFECT.........................37

         12.1     Events of Default..............................................37

                  12.1.1   Non-Payment of Notes, Etc.............................37

                  12.1.2   Non-Payment of Other Indebtedness.....................37

                  12.1.3   Bankruptcy, Insolvency, Etc...........................38

                  12.1.4   Non-Compliance with This Agreement....................38

                  12.1.5   Warranties............................................38

                  12.1.6   Employee Benefit Plans................................38

         12.2     Effect of Event of Default.....................................38

SECTION 13               THE ADMINISTRATIVE AGENT................................39

         13.1     Appointment and Powers.........................................39

         13.2     Limitation on Administrative Agent's Liability.................39

         13.3     Events of Default and Unmatured Events of Default..............40

         13.4     Documentation and Syndication Agents...........................40

         13.5     Rights as a Bank...............................................40

         13.6     Indemnification................................................41

         13.7     Non-Reliance on Administrative Agent and Other Banks...........41

         13.8     Resignation/Removal of the Administrative Agent................42

         13.9     Appointment of Successor Agent.................................42

SECTION 14               GENERAL.................................................42

         14.1     Waiver; Amendments.............................................42

         14.2     Costs, Expenses and Taxes......................................43

         14.3     Notices........................................................43

         14.4     Governing Law..................................................44

         14.5     Counterparts...................................................44

         14.6     Effective Date.................................................44

         14.7     Assignments and Participations Granted by Banks................44

                  14.7.1   Participations........................................44

                  14.7.2   Assignments...........................................45

                  14.7.3   No Increased Costs....................................46

                  14.7.4   Share Information.....................................46

                  14.7.5   No Withholding Tax....................................46

                  14.7.6   Pledge to Federal Reserve Bank........................47

         14.8     Successors and Assigns.........................................47

         14.9     Indemnification of Banks and Agents............................47

         14.10    Waiver of Jury Trial...........................................47

         14.11    Entire Agreement...............................................47

         14.12    Severability...................................................47

         SCHEDULE I - Pricing Grid

         EXHIBITS

         Exhibit A - Form of Note
                           Schedule Attached to Note
         Exhibit B - Form of Adjustment Certificate
                           Annex I to Adjustment Certificate
         Exhibit C - Form of Assignment and Acceptance Agreement
                           Schedule 1 to Assignment and Acceptance Agreement
</PRE>



<H3 ALIGN="CENTER">CREDIT AGREEMENT</H3>

<B>Dated as of December 18, 1996</B>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS AGREEMENT is by and between
PUGET SOUND POWER &amp; LIGHT COMPANY, a Washington corporation
(&#147;Puget&#148;), and Washington Energy Company, a Washington corporation
(&#147;<U>WECO</U>&#148;), both for themselves and for PUGET SOUND ENERGY
COMPANY, the new name of the Washington corporation which shall survive the
merger of WECO into Puget (the &#147;<U>Company</U>&#148;), the undersigned
banks (collectively the &#147;<U>Initial Banks</U>&#148; and individually an
&#147;<U>Initial Bank</U>&#148;) and BANK OF AMERICA NW, N.A. doing business as
Seafirst Bank, as Administrative Agent, FIRST CHICAGO CAPITAL MARKETS, INC., as
Syndication Agent, and NATIONSBANK OF TEXAS, N.A. as Documentation Agent
(together the &#147;<U>Agents</U>&#148;): </P>

<H5 ALIGN="CENTER">SECTION 1</H5>

     <H5 ALIGN="CENTER">CERTAIN DEFINITIONS</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When used herein the following
terms shall have the following meanings: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Adjustment
Certificate</U>&#148; means a certificate substantially in the form of
<U>Exhibit B</U>, with appropriate insertions, executed pursuant to <U>Section
2.6</U> by the applicable parties, together with Annex I thereto, to be
completed by the Administrative Agent. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affected Bank</U>&#148;
has the meaning defined in <U>Section 8.3</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Affiliate</U>&#148; means
with respect to a Person, any other Person that, directly or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, such first Person. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Administrative
Agent</U>&#148; means Bank of America NW, N.A. doing business as Seafirst Bank
and any successor to Seafirst Bank as Administrative Agent for the Banks
hereunder. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Agreement</U>&#148; means
this Agreement, including all schedules, annexes and exhibits hereto. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Applicable Law</U>&#148;
means, anything in <U>Section 14.4</U> to the contrary notwithstanding, (i) all
applicable common law and principles of equity and (ii) all applicable
provisions of all (a) constitutions, statutes, rules, regulations, and orders of
governmental bodies, (b) Governmental Approvals and (c) orders, decisions,
judgments, and decrees of all courts (whether at law or in equity or admiralty)
and arbitrators. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Applicable Lending
Office</U>&#148; means, with respect to any Bank, (i)&#160;in the case of its
Floating Rate Loans, its Domestic Office and (ii)&#160;in the case of its
Eurodollar Loans, its Eurodollar Office. &#147;<U>Bank</U>&#148; means each
Initial Bank, Replacement Bank, Assignee in accordance with <U>Section
14.7.2</U> and any successor thereof. </P>

<P ALIGN="LEFT">&#147;<U>Base Rate</U>&#148; means as of any day the greater of
(a)&#160;the Reference Rate in effect on such day or (b)&#160;the sum of
(i)&#160;the Federal Funds Effective Rate in effect on such day, plus
(ii)&#160;1/2 of 1% per annum. If for any reason the Administrative Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Federal Funds Effective Rate for any reason,
the Base Rate shall be the Reference Rate until the circumstances giving rise to
such inability no longer exist. &#147;<U>Base Rate Margin</U>&#148; means the
margin applicable to Floating Rate Loans as determined in accordance with
<U>Section 4.2</U>. </P>

<P ALIGN="LEFT">&#147;<U>Business Day</U>&#148; means any day other than a
Saturday or Sunday; (a) in the case of a Business Day which relates to a
Eurodollar Loan, any day of the year on which banks are open for business in
Seattle and New York and on which dealings are carried on in the interbank
eurodollar market, and (b)&#160;in the case of a Business Day which relates to a
Floating Rate Loan, any day of the year on which banks are open for business in
Seattle and New York. </P>

<P ALIGN="LEFT">&#147;<U>Commitment(s)</U>&#148; means the commitments of the
Banks to make Loans hereunder, and Commitment as to any Bank shall mean the
commitment of such Bank to make Loans hereunder. &#147;<U>Company</U>&#148;
means Puget Sound Energy Company, the Washington corporation which shall survive
the merger of WECO and its subsidiary, Washington Natural Gas Company, into
Puget on or before the Effective Date hereof and which shall be renamed from
Puget Sound Power &amp; Light Company to Puget Sound Energy Company as of the
same date, and to the extent permitted by the terms of this Agreement, its
successors and assigns. &#147;<U>Consenting Bank(s)</U>&#148; has the meaning
defined in <U>Section 2.6</U>. </P>

<P ALIGN="LEFT">&#147;<U>Consolidated Subsidiary</U>&#148; means, with respect
to the Company or if otherwise specified, any such specified Person, at any
time, any Subsidiary or other Person the accounts of which would be consolidated
with those of the Company or such other specified first Person in its
consolidated financial statements as of such time. &#147;<U>Domestic
Office</U>&#148; means with respect to any Bank the office of such Bank
designated as such with its signature hereto or, with respect to any Replacement
Bank, the office of such Replacement Bank designated as such with its signature
on the Adjustment Certificate executed by it as a Replacement Bank and,
thereafter, such office as such Bank may designate as its Domestic Office by
notice to the Company and the Administrative Agent. </P>

<P ALIGN="LEFT">&#147;<U>Effective Date</U>&#148; means the date specified by
the Administrative Agent, in a notice to the Company and the Banks, as the date
on which all of the conditions precedent to the Effective Date set forth in
<U>Section 10.1 </U>shall have first been met. </P>

<P ALIGN="LEFT">&#147;<U>Eligible Institution</U>&#148; means (i) a commercial
bank organized under the laws of the United States, or any state thereof, and
having a combined capital and surplus of at least $100,000,000; (ii) a
commercial bank organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development (the
&#147;<U>OECD</U>&#148;), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000, provided that
such bank is acting through a branch or agency located in the country in which
it is organized or another country which is also a member of the OECD, or
(iii)&#160;a Person that is primarily engaged in the business of commercial
banking and that is (A) a subsidiary of a Bank, (B) a subsidiary of a Person of
which a Bank is a subsidiary, or (C) a Person of which a Bank is a subsidiary. </P>

<P ALIGN="LEFT">&#147;<U>Environmental Laws</U>&#148; means any and all federal,
state, local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals, or toxic
or hazardous substances or wastes or the clean-up or other remediation thereof.
&#147;<U>ERISA</U>&#148; means the Employee Retirement Income Security Act of
1974, as amended. &#147;<U>Eurodollar Loan</U>&#148; means any Loan which bears
interest at a rate determined by reference to the Eurodollar Rate. </P>

<P ALIGN="LEFT">&#147;<U>Eurodollar Office</U>&#148; means, with respect to any
Bank, the office of such Bank designated as such from time to time by notice
from such Bank to the Company and the Administrative Agent, which shall be
making or maintaining the Eurodollar Loans of such Bank hereunder or such other
office or offices through which such Bank determines its LIBOR. </P>

<P ALIGN="LEFT">&#147;<U>Eurodollar Rate</U>&#148; means with respect to a
Eurodollar Loan that per annum interest rate equal to the sum of the LIBOR
determined for the Loan Period of the Loan and the LIBOR Margin in effect from
time to time during the Loan Period. </P>

<P ALIGN="LEFT">&#147;<U>Eurodollar Reserve Percentage</U>&#148; means for any
day that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding five billion
dollars in respect of &#147;<U>Eurocurrency liabilities</U>&#148; (or in respect
of any other category of liabilities which includes deposits by reference to
which the interest rate on Eurodollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United States
office of any Bank to United States residents). </P>

<P ALIGN="LEFT">&#147;<U>Federal Funds Effective Rate</U>&#148; means for any
day the rate per annum (rounded upward, if necessary, to the nearest 1/100th 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 of New York,
on the Business Day next succeeding such day, provided that (i)&#160;if such day
is not a Business Day, the Federal Funds Effective Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii)&#160;if no such rate is
so published on such next succeeding Business Day, the Federal Funds Effective
Rate for such day shall be the average of the quotations for such Business Day
on such transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>First Mortgage</U>&#148;
means each of (i) that mortgage, dated as of June 2, 1924, as supplemented,
between Puget and First National Bank of Boston, as successor trustee
thereunder, (ii) that mortgage, dated as of April 1, 1957, between WECO&#146;s
Wholly-Owned Subsidiary, Washington Natural Gas Company, and Harris Trust and
Savings Bank, as trustee, as either or each may have been, or may hereafter be,
amended, modified or supplemented from time to time, and (iii) that mortgage, if
any, dated on or after the Effective Date replacing either or both mortgages
described in clauses (i) and (ii). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>First Mortgage
Bond</U>&#148; means that margin applicable to Eurodollar Loans as determined in
accordance with <U>Section&#160;4.2</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Liens</U>&#148; means any
lien, security interest or other charge or encumbrance, or any other type of
preferential arrangement, or assignment of any right to receive goods or
payment. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan(s)</U>&#148; has the
meaning defined in <U>Section 2.1</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Loan Period</U>&#148;
means, with respect to any Eurodollar Loan, the period commencing on the date
such Loan was made and ending one, two, three, or six months thereafter as the
Company may specify pursuant to <U>Section 2.3</U>; <U>provided</U>,
<U>however</U>, that: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) if a Loan Period would
otherwise end on a day which is not a Business Day, such Loan Period shall end
on the next succeeding Business Day, unless such next succeeding Business Day is
the first Business Day of a calendar month, in which case such Loan Period shall
end on the next preceding Business Day; </P>

  <P>   (b) no Loan Period may end later than the Termination Date in effect on the
date the Loan was made: and</P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) if there exists no day
numerically corresponding to the day of such Loan in the month in which the last
day of such Loan Period would otherwise fall, such Loan Period shall end on the
last Business Day of such month. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Non-Consenting
Bank(s)</U>&#148; has the meaning defined in <U>Section 2.4</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Note(s)</U>&#148; has the
meaning defined in <U>Section 3.2</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Parent</U>&#148; means,
with respect to any Bank, any Person controlling such Bank. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Percentage</U>&#148;
means at any time as to any Bank the percentage that the amount of its
Commitment (as set forth opposite such Bank&#146;s name in the column captioned
&#147;<U>Amount of Commitment</U>&#148; in Table I referenced in <U>Section
2.1</U>, or, if different, in Annex I to the most recently executed Adjustment
Certificate, if any) is of the then aggregate amount of the Commitments. </P>

         "Permitted Liens" means:
          ---------------

                 <P> (a)      Liens for taxes, assessments or governmental charges which are not yet delinquent
         or the amount or validity of which is being contested in good faith;</P>

                  <P>(b)      deposits or pledges to secure the payment of workmen's compensation, unemployment
         insurance, old age pensions or other social security benefits or obligations;</P>

                  <P>(c)      mechanics,&#146; materialmen&#146;s, warehousemen&#146;s, carriers&#146; or
          other like Liens arising in the ordinary course of business securing obligations
          which are not overdue for more than 60 days, or which are being contested in
          good faith;</P>

                  <P>(d)      Liens incurred or created in the ordinary course of business in connection with
          or to secure the performance of bids, tenders, contracts (other than for the
          payment of money), leases, statutory obligations, surety bonds or appeal bonds; </P>


                  <p>(e)      Liens (i) which secure obligations not assumed by the Company or any Subsidiary,
          (ii) on account of which the Company or any Subsidiary has not and does not
          expect to pay interest directly or indirectly and (iii) which exist upon real
          estate or rights in or relating to real estate in respect of which the Company
          or any Subsidiary has a right-of-way or other easement for purposes of
          substations, gate stations, regulator stations, or transmission or distribution
          facilities; </P>


                  <P>(f)      rights reserved to or vested in any federal, state or local governmental body or
          agency by the terms of any right, power, franchise, grant, license, contract or
          permit, or by any provision of law, to recapture or to purchase, or designate a
          purchase of or order the sale of, any property of the Company or to terminate
          any such right, power, franchise, grant, license, contract or permit before the
          expiration thereof; </P>


                  <P>(g)      Liens of judgments covered by insurance, or upon appeal and covered by bond, or if
         not so covered not exceeding at one time $10,000,000 in aggregate amount;</P>

                  <P>(h)      easements or reservations in respect of any property of the Company and its
          Subsidiaries for the purpose of roads and transmission and distribution
          facilities and other rights-of-way, including overhead and underground
          transmission and distribution lines, zoning ordinances, regulations,
          reservations, restrictions, covenants, party wall agreements, conditions of
          record and other encumbrances (other than to secure the payment of money), none
          of which materially impairs the use of such property for the purposes for which
          it is held by the Company or Subsidiary; </P>

                  <P>(i)      any Liens, moneys sufficient for the discharge of which shall have been
          deposited in trust with the trustee or mortgagee under the instrument evidencing
          such Lien, with irrevocable authority of such trustee or mortgagee to apply such
          moneys to the discharge of such Lien to the extent required for such purpose; </P>


                  <P>(j)      rights reserved to or vested in any federal, state or local governmental body or
          agency or other public authority to control or regulate any property of the
          Company or Subsidiary, or to use such property in a manner which does not
          materially impair the use of such property for the purposes for which it is held
          by the Company or Subsidiary; </P>

                  <P>(k)      with respect to any property which the Company or any Subsidiary may hereafter
          acquire, any exceptions or reservations therefrom existing at the time of such
          acquisition or any terms, conditions, agreements, covenants, exceptions and
          reservations expressed or provided in the deeds of other instruments,
          respectively, under and by virtue of which the Company or such Subsidiary shall
          hereafter acquire the same, none of which materially impairs the use of such
          property for the purposes for which it is acquired by the Company or such
          Subsidiary. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Person</U>&#148; means
any individual, sole proprietorship, corporation, limited liability company,
general partnership, limited partnership, limited liability partnership, trust,
unincorporated organization, mutual company, joint stock company, estate, union,
employee organization, government or any agency or political subdivision
thereof. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Plan</U>&#148; means, at
any time, the rate of interest publicly announced from time to time by the
Administrative Agent as its reference rate, which rate, while sometimes referred
to as the prime rate, is not necessarily its lowest rate of interest. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Regulatory
Change</U>&#148; means any of the following occurring after the date hereof: the
adoption of any applicable law, rule, regulation or treaty, or any change
therein, or any change in the interpretation, application or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation, application or administration thereof, or compliance by
any Bank (or any Applicable Lending office of such Bank) with any request or
directive (whether or not having the force of law) of any such authority,
central bank, or comparable agency. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Replacement
Bank(s)</U>&#148; has the meaning defined in <U>Section 2.6</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Required Banks</U>&#148;
means, at any time, Banks having an aggregate Percentage of 60% or more of the
Loans outstanding or, if there are no Loans outstanding, an aggregate Percentage
of 60% or more of the aggregate amount of the Commitments. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Retiring
Bank(s)</U>&#148; has the meaning defined in <U>Section 2.6</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Secured Debt
Rating</U>&#148; means the Company&#146;s First Mortgage Bond (or equivalent
long term secured debt) rating as determined by Standard &amp; Poor&#146;s
Corporation and Moody&#146;s Investors Service, Inc., any successor thereof or
any other comparable rating service selected by the Company with the prior
written consent of the Required Banks. If the Company&#146;s rating is split by
the two rating services, the higher of the two ratings shall apply unless the
split is by more than one level (i.e. double-split), in which case the median of
the two ratings shall apply. In the event that either Moody&#146;s Investors
Service, Inc., or Standard &amp; Poor&#146;s Corporation shall cease to exist
and shall not thereupon be succeeded by a successor entity performing similar
functions, or (b)&#160;all such corporations (or any such successor entities)
shall at any time cease to maintain a rating for the Company&#146;s First
Mortgage Bonds or equivalent long term secured debt, the Company, each Bank, and
the Administrative Agent agree to enter into negotiations promptly thereafter in
good faith with a view toward amending this Agreement to provide for an
alternate mechanism (including, without limitation, providing for a replacement
rating agency and range of ratings of the Company&#146;s First Mortgage Bonds
for determining the respective margins (as set forth in <U>Section 4.2)
</U>applicable to Eurodollar Loans and Floating Rate Loans so as to achieve, as
nearly as possible, the same economic basis for determining such margins as
exists on the Effective Date of this Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Significant
Subsidiary</U>&#148; means, as at the time of determination, a Subsidiary
meeting any one of the following conditions: (a)&#160;the assets of such
Subsidiary, or the sum of (i)&#160;the investments in and advances to such
Subsidiary by the Company and the Company&#146;s other Subsidiaries, if any,
plus (ii)&#160; the contingent obligations of the Company and the Company&#146;s
other Subsidiaries, if any, with respect to such Subsidiary, as at the
Company&#146;s last fiscal quarter ending on or before the time of
determination, exceeded 10% of the assets of the Company and its Consolidated
Subsidiaries as at the end of such fiscal quarter, or (b)&#160;the sales and
operating revenues of such Subsidiary for the fiscal year preceding the time of
determination exceeded 10% of the sales and operating revenues of the Company
and the Company&#146;s Consolidated Subsidiaries for such fiscal year, or (c)
such Subsidiary is the parent of one or more Subsidiaries and, together with
such Subsidiaries would, if considered in the aggregate, constitute a
Significant Subsidiary. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Subsidiary</U>&#148;
means a corporation of which the Company and/or its other Subsidiaries own,
directly or indirectly, such number of outstanding shares as have more than 50%
of the ordinary voting power for the election of directors. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Substitute
Loan(s)</U>&#148; has the meaning defined in <U>Section 2.6</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Termination
Date</U>&#148; means the fifth anniversary of the Effective Date and thereafter
each succeeding anniversary to which the Commitments shall have been extended
pursuant to <U>Section 2.4</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Unmatured Event of
Default</U>&#148; means any event which, if it continues uncured or if it is not
waived, will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>WECO</U>&#148; means
Washington Energy Company, a Washington corporation. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<U>Wholly-Owned
Subsidiary</U>&#148; means any Subsidiary, all of the shares of voting capital
stock, together with any and all options, warrants or other securities
convertible into shares of voting capital stock, and all other ownership
interests and rights to acquire ownership interests of which (except
directors&#146; qualifying shares) are, directly or indirectly, owned or
controlled by the Company and/or one or more other such Subsidiaries. </P>

<H5 ALIGN="CENTER">SECTION 2</H5>

<H5 ALIGN="CENTER">COMMITMENTS OF THE BANKS; TYPES OF LOANS;</H5>

<H5 ALIGN="CENTER">PROCEDURES FOR BORROWING</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Commitments</U>. Subject to
the terms and conditions of this Agreement, each of the Banks severally agrees
to make loans (collectively the &#147;<U>Loans</U>&#148; and individually a
&#147;<U>Loan</U>&#148;) from time to time on or after the Effective Date and
prior to the Termination Date in such Bank&#146;s Percentage of such aggregate
amounts as the Company may from time to time request from all Banks;
<U>provided</U>, <U>however</U>, that (i) the aggregate principal amount which
any Initial Bank shall be committed to have outstanding hereunder on loan to the
Company shall not at any one time exceed the amount set forth opposite such
Bank&#146;s name in the column captioned &#147;<U>Amount of Commitment</U>&#148;
in Table I on the following page, or, if different, in the most recently
executed Adjustment Certificate, if any (as such amount may be reduced from time
to time in accordance with this Agreement) and (ii)&#160;the aggregate principal
amount which all Banks shall be committed to have outstanding hereunder on loan
to the Company shall not at any one time exceed $400,000,000 (as such amount
shall be reduced from time to time in accordance with paragraph (a) of
<U>Section 2.6</U> or <U>Section 6.1</U>). The Company may borrow, repay (or
prepay as permitted by <U>Section 6.2</U>), and reborrow in accordance with this
<U>Section 2.1</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <U>Various Types of Loans</U>.
Each Loan shall be either a Floating Rate Loan or a Eurodollar Loan (each a
&#147;<U>type</U>&#148; of Loan), as the Company shall specify in the related
notice of borrowing pursuant to <U>Section 2.3</U>. Floating Rate Loans and
Eurodollar Loans may be outstanding at the same time. Each borrowing under this
<U>Section 2.2</U> shall be in a minimum aggregate amount of $5,000,000 or an
integral multiple of $1,000,000 in excess of such amount, or such lesser amount
as shall result in the Commitments becoming fully drawn, as the Company shall
request in the notice of borrowing. </P>

<H5 ALIGN="CENTER">TABLE I</H5>

<H5 ALIGN="CENTER">COMMITMENT OF EACH INITIAL BANK</H5>

<PRE>
============================================== =====================
Initial Bank                                   Amount of Commitment
============================================== =====================
Bank of America NW, N.A. dba Seafirst Bank     $ 50,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
The First National Bank of Chicago             $ 50,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
NationsBank of Texas, N.A.                     $ 50,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
The Bank of New York                           $ 25,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
The Industrial Bank of Japan, Limited          $ 25,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
U.S. Bank of Washington                        $ 25,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
ABN AMRO Bank, N.V.                            $ 25,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
Bank of Montreal                               $ 25,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
The Chase Manhattan Bank                       $ 25,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
Wells Fargo Bank, N.A.                         $ 25,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
CIBC Inc.                                      $ 15,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
Key Bank of Washington                         $ 15,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
Banca di Roma                                  $ 15,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
Comerica Bank                                  $ 15,000,000
---------------------------------------------- ---------------------
---------------------------------------------- ---------------------
Mellon Bank                                    $ 15,000,000
============================================== =====================
TOTAL                                          $ 400,000,000
============================================== =====================
</PRE>
     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <U>Borrowing Procedures</U>.
(a)&#160;The Company shall give irrevocable notice to the Administrative Agent
of each proposed borrowing by 11:00&#160;A.M., Seattle time, on a day which in
the case of a Floating Rate Loan is at least one Business Day prior to the
proposed date of such borrowing and in the case of a Eurodollar Loan is at least
three Business Days prior to the proposed date of such borrowing. Each such
notice shall be effective upon receipt by the Administrative Agent, shall be in
writing, and shall specify the date, amount and type of borrowing and, in the
case of a Eurodollar Loan borrowing, the Loan Period for such borrowing.
Promptly upon receipt of such notice, the Administrative Agent shall advise each
Bank thereof. Not later than 11:00 A.M., Seattle time, on the date of a proposed
borrowing, each Bank shall provide the Administrative Agent at its principal
office at 701 Fifth Avenue, Seattle, Washington 98104 with immediately available
funds covering such Bank&#146;s Percentage of the borrowing, and the
Administrative Agent shall pay over such funds to the Company on the requested
borrowing date. Except as otherwise permitted by <U>Section 2.6</U> and
<U>Section 8.3</U>, all borrowings and repayments shall be effected so that
after giving effect thereto all types of Loans shall be <U>pro</U> <U>rata</U>
among the Banks according to their respective Percentages. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If any Bank makes a new Loan
hereunder on a day on which the Company is to repay all or any part of an
outstanding Loan from such Bank, such Bank shall apply the proceeds of its new
Loan to make such repayment and only an amount equal to the difference (if any)
between the amount being borrowed and the amount being repaid shall be (i) made
available by such Bank to the Administrative Agent as provided in paragraph (a)
if the borrowing exceeds the amount to be repaid or (ii) remitted by the Company
to the Administrative Agent as provided in <U>Section 7.1</U>, if the borrowing
is less than the amount being repaid. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Unless the Administrative
Agent shall have received notice from a Bank prior to the date of any borrowing
that such Bank will not make available to the Administrative Agent an amount
equal to such Bank&#146;s Percentage of such borrowing, the Administrative Agent
may assume that such Bank has made an amount equal to such Bank&#146;s
Percentage of such borrowing available to the Agent on the date of such
borrowing in accordance with paragraphs (a) and (b) of this <U>Section 2.3</U>
and the Administrative Agent may, in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent such Bank shall not have so made available to the Administrative Agent
the Loan requested to be made by such Bank on such date and the Administrative
Agent shall have so made available to the Company a corresponding amount on
behalf of such Bank, such Bank shall, on demand, pay to the Administrative Agent
such corresponding amount together with interest thereon, for each day from the
date such amount shall have been so made available by the Administrative Agent
to the Company until the date such amount shall have been repaid to the
Administrative Agent, at the Federal Funds Effective Rate. If such Bank shall
repay to the Administrative Agent such corresponding amount, such amount so
repaid shall constitute such Bank&#146;s Loan included in such borrowing for
purposes of this Agreement. If such Bank does not pay such amount promptly upon
the Administrative Agent&#146;s demand therefor, the Administrative Agent shall
promptly notify the Company and the Company shall immediately repay such
corresponding amount to the Administrative Agent together with accrued interest
thereon at a rate per annum equal to the higher of the Federal Funds Effective
Rate and the interest rate applicable thereto pursuant to <U>Section 4.1</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <U>Extension of Termination
Date</U>. (a)&#160;Provided no Event of Default or Unmatured Event of Default
has occurred and is continuing, at least 60 days but not more than 90 days
before each anniversary of the Effective Date (excluding however that
anniversary of the Effective Date which coincides with the then effective
Termination Date), the Company may, by delivering a written request to the
Administrative Agent, request that each Bank extend for one year the Termination
Date with respect to such Bank&#146;s Commitment. The Administrative Agent
shall, upon receipt of such a request, promptly notify each Bank thereof, and
request that each Bank advise the Administrative Agent of its approval or
rejection of such request within 30 days of its receipt of such notification. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Upon receipt of such
notification from the Agent, each Bank may (but shall not be required to), in
its sole and absolute discretion, consent to extend the Termination Date with
respect to its Commitment for a period of one year, and, should it agree to do
so, shall so notify the Agent in writing of its consent no later than 30 days
following the Administrative Agent&#146;s notification of the Company&#146;s
request. If any Bank shall not so notify the Administrative Agent within 30
days, such Bank shall be deemed not to have consented to such request (the Banks
not so consenting or so failing to notify the Administrative Agent collectively
the &#147;<U>Non-Consenting Banks</U>&#148; and individually a
&#147;<U>Non-Consenting Bank</U>&#148;). The Termination Date will not be
extended unless at least the Required Banks consent to the requested extension
pursuant to this paragraph (b). The Administrative Agent shall promptly notify
the Company as to the Banks, if any, that have not consented to such request. If
the requested extension fails to obtain the consent of the Required Banks, the
Administrative Agent shall promptly give written notice to the Company and each
Bank stating that the Termination Date then in effect (and specifying such date)
has not been extended. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Provided at least the Required
Banks have consented to the Company&#146;s request for an extension,
notwithstanding a notice given by the Administrative Agent to the Company that a
Bank has become a Non-Consenting Bank pursuant to paragraph (b) above, the
Termination Date then in effect shall be extended for the requested additional
one-year period on the condition that the Company exercises one or more of the
options set forth in paragraph (a) of <U>Section 2.6</U> and the applicable
transactions are consummated within the time period specified in paragraph (b)
of <U>Section 2.6</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) If the conditions for
extension of a Termination Date pursuant to paragraph (c) above are not met,
promptly following the last day on which the Company could have exercised one or
more of the options to cause an extension of the Termination Date pursuant to
paragraph (c) above (or sooner, if the Company informs the Administrative Agent
that it does not intend to do so), the Administrative Agent shall give written
notice to the Company and each Bank stating that the Termination Date then in
effect (and specifying such date) has not been extended. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <U>Removal of Banks</U>.
Provided no Event of Default has occurred and is continuing, the Company may
give written notice (with a copy to the Administrative Agent) (i) to any one or
more Banks without cause in any year, at least 90 days but not more than 120
days before the anniversary of the Effective Date, or (ii) to any Bank failing
to make a Loan pursuant to <U>Section 2.3</U> within the thirty (30) days
following such failure, that the Company does not desire that such Bank(s)
continue to be a party to this Agreement. Any such Bank(s) may be removed as a
party to this Agreement if the Company exercises one or more of the options set
forth in paragraph (a) of <U>Section 2.6</U> and the applicable transactions are
consummated within the time period specified in paragraph (b) of <U>Section
2.6</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <U>Removal of Retiring
Banks</U>. (a)&#160;Subject to the requirement that after giving effect to the
consummation of the events described in <U>Section 2.6 (a)(i)</U>, <U>(ii)</U>
and <U>(iii)</U>, the entire Commitment of each Non-Consenting Bank or Bank to
which the Company has given notice pursuant to <U>Section 2.5</U> (collectively
the <U>&#147;Retiring Banks</U>&#148; and individually a &#147;<U>Retiring
Bank</U>&#148;) shall be either terminated in its entirety or assumed, and all
amounts owing each Retiring Bank shall be paid on a date mutually acceptable to
the Retiring Bank, the Company and any Replacement or Consenting Bank within the
time period specified in paragraph (b) of <U>Section 2.6</U>, the Company may
exercise one or more of the following options to remove a Retiring Bank as a
Bank under this Agreement: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Company may permanently
terminate the Commitment of each or any Retiring Bank and permanently reduce the
aggregate amount of the Commitments by an amount equal to the aggregate amount
of Commitments of Retiring Banks so terminated (without affecting the Commitment
of any other Bank). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Company may request one
or more Banks that are not Retiring Banks to assume all, or any part, of each or
any Retiring Bank&#146;s Commitment and, if necessary, make substitute Loans for
each and any Retiring Bank&#146;s outstanding Loans as provided in this clause
(ii). If one or more of such Banks shall so agree (collectively the
&#147;<U>Consenting Banks</U>&#148; and individually a &#147;<U>Consenting
Bank</U>&#148;) (A) the Commitment of each such Consenting Bank shall be
increased by its respective share designated by the Company (and agreed to by
such Consenting Bank) of the Commitment(s) of such Retiring Bank(s) being
assumed and (B) if there are any Loans outstanding the Consenting Banks shall,
if necessary, make Floating Rate Loans to the Company <U>pro</U> <U>rata</U>
according to their respective designated shares, in the aggregate principal
amount of the outstanding Floating Rate Loan(s) of such Retiring Bank(s) (each a
&#147;<U>Substitute Loan</U>&#148;). If any Eurodollar Loan of a Retiring Bank
is paid on any day other than the last day of the Loan Period for that Loan
occurring within the time period provided in Paragraph (b) below, the Company
shall pay the Retiring Bank&#146;s funding losses as provided in <U>Section
8.5</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The Company may designate
one or more banks or other financial institutions, which are not Banks but which
are reasonably acceptable to the Administrative Agent, to assume all, or any
part, of the Commitment of each or any Retiring Bank and, if necessary, to make
Substitute Loans to the Company pursuant to this clause (iii) for each or any
Retiring Bank&#146;s then outstanding Loan(s), if any. If one or more such
designated banks or financial institutions so agree (collectively the
&#147;<U>Replacement Banks</U>&#148; and individually a &#147;<U>Replacement
Bank</U>&#148;), (A)&#160;each such Replacement Bank shall assume its respective
share of the Commitment(s) of such Retiring Bank(s) being assumed, and (B) if
there are any Loans outstanding, the Replacement Bank(s) shall, if necessary,
make Floating Rate Loans to the Company <U>pro</U> <U>rata</U> according to
their respective designated shares, in the aggregate principal amount of the
portion of the outstanding Floating Rate Loan(s) of such Retiring Bank(s). If
any Eurodollar Loan of a Retiring Bank is paid on any day other than the last
day of the Loan Period for that Loan occurring within the time period provided
in Paragraph (b) below, the Company shall pay the Retiring Bank&#146;s funding
losses as provided in <U>Section 8.5</U>. Upon such assumption and prepayment,
such Replacement Bank(s) shall be deemed a, &#147;<U>Bank</U>&#148; or
&#147;<U>Banks</U>&#148; for all purposes of this Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The transactions described in
the foregoing paragraph must be consummated not more than 180 days after the
Company&#146;s notice to the Administrative Agent of its (i) request for an
extension of the Termination Date pursuant to <U>Section 2.4 </U>or (ii) removal
of a Bank pursuant to <U>Section 2.5</U> (the &#147;<U>180 Day
Period</U>&#148;). Further, from and after said notice until all Loans of the
Retiring Bank are completely repaid, the Retiring Bank&#146;s Commitment to make
new Loans shall continue, provided that until the earlier of the repayment of
the Retiring Bank or the expiration of the 180 Day Period the Company may not
request a Eurodollar Loan with a Loan Period extending beyond the end of the 180
Day Period. Upon consummation of the applicable transactions, the applicable
parties shall execute and deliver to the Administrative Agent an Adjustment
Certificate. The Administrative Agent shall distribute to the Company and the
Banks copies of the executed Adjustment Certificate. If the transactions are not
fully consummated within the 180 Day Period, the respective requested extension
of the Termination Date or removal of a Bank which triggered the commencement of
said Period shall be of no effect and void from and after the expiration of said
180 Day Period. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Immediately upon the
termination or assumption of its Commitment and the payment in, full of all
amounts then owing to it under this Agreement pursuant to any of the clauses of
the foregoing paragraph, each Retiring Bank shall cease to be a
&#147;<U>Bank</U>&#148; for all purposes of this Agreement and shall no longer
have any obligations or rights hereunder or in connection herewith, other than
the right to be reimbursed pursuant to this Agreement for costs and expenses
attributable to events, acts or conditions occurring prior to such termination
or assumption and payment. If the Company has previously executed and delivered
Notes to the Banks pursuant to <U>Section 3.2</U>, the Company shall provide a
replacement Note to each Consenting Bank (to reflect its increased Commitment)
and/or Replacement Bank (to reflect the amount of its Commitment). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.7 <U>Representations and
Warranty</U>. Each notice of borrowing pursuant to <U>Section 2.3</U> shall
automatically constitute a representation and warranty by the Company to the
Administrative Agent and each Bank to the effect that on the requested date of
such borrowing (a) the representations and warranties of the Company contained
in <U>Sections 9.1</U>, <U>9.2</U>, <U>9.3</U>, <U>9.4</U>, <U>9.7</U>,
<U>9.8</U>, <U>9.9</U>, <U>9.10</U>, <U>9.11</U> and <U>9.12</U>, and, in the
case of borrowings described in <U>Section 10.4</U>, the warranties of the
Company contained in <U>Sections 9.5</U> and <U>9.6</U>, shall be true and
correct as of such requested date as though made on the date thereof, and (b) no
Event of Default or Unmatured Event of Default shall have then occurred and be
continuing or will result therefrom. </P>

<H5 ALIGN="CENTER">SECTION 3</H5>

<H5 ALIGN="CENTER">REPAYMENT OF LOANS; NOTES EVIDENCING LOANS</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <U>Repayment of Loans</U>. The
Company hereby promises to pay the unpaid principal amount of each Eurodollar
Loan on the last day of the Loan Period for such Loan and all Floating Rate
Loans not later than the Termination Date. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Notes</U>. The Loans of
each Bank shall be evidenced by a promissory note substantially in the form set
forth in <U>Exhibit A</U>, with appropriate insertions, dated the date of the
initial Loans or such earlier date as may be acceptable to the Administrative
Agent and payable to the order of such Bank in the principal amount of the
Commitment of such Bank (collectively the &#147;<U>Notes</U>&#148; and
individually a &#147;<U>Note</U>&#148;). Each Bank shall record in its records,
or at its option on the schedule attached to its Note, the date and amount of
each Loan made by such Bank, each repayment or prepayment thereof, and, in the
case of a Eurodollar loan, the dates on which the Loan Period for such Loan
shall begin and end. The aggregate unpaid principal amount so recorded shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on such
Note. The failure to so record any such amount or any error in so recording any
such amount shall not, however, limit or otherwise affect the obligations of the
Company hereunder or under any Note to repay the principal amount of the Loans
together with all interest accruing thereon. </P>

<H5 ALIGN="CENTER">SECTION 4</H5>

<H5 ALIGN="CENTER">INTEREST</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <U>Interest Rates</U>. With
respect to each Loan of each Bank, the Company hereby promises to pay interest
on the unpaid principal amount thereof for the period commencing on the date of
such Loan until such Loan is paid in full as follows: </P>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)
          if such Loan is a Floating Rate Loan, at a rate per annum equal to the sum of
          the Base Rate and the applicable Base Rate Margin from time to time in effect,
          changing as the Base Rate and/or Base Rate Margin changes; </P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
          if such Loan is a Eurodollar Loan, at a rate per annum equal to the Eurodollar
          Rate for such Loan Period, changing as the applicable LIBOR Margin changes. </P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
          Notwithstanding the provisions of preceding clauses (a) or (b), in the event
          that any principal of, or interest on, any Loan is not paid when due (whether by
          acceleration or otherwise), after the due date of such principal or interest
          until such principal or interest is paid, at a rate per annum equal to the Base
          Rate from time to time (but not less than the Base Rate in effect as at such due
          date) plus 2% per annum. </P></TD>
          </TR>
          </TABLE>
          <BR>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <U>Applicable Margin</U>. The
applicable LIBOR Margin and Base Rate Margin shall be determined from the
pricing grid attached hereto as Schedule 1 (which is incorporated by this
reference) in accordance with the Company&#146;s Secured Debt Rating at the time
of such determination. The LIBOR Margin or the Base Rate Margin, as the case may
be, shall be adjusted automatically on and as of the date of public announcement
of any change in the Company&#146;s First Mortgage Bond or equivalent long term
secured debt rating resulting in a change in the Secured Debt Rating. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <U>Interest Payment Dates</U>.
Accrued interest on each Loan shall be payable on (i) the date of payment of any
Loan and, in the case of a Eurodollar Loan, prepayment thereof, (ii) in the case
of each Floating Rate Loan on the last day of each March, June, September and
December which occurs while the Loan is outstanding, and (iii) in the case of
each Eurodollar Loan on the last day of the Loan Period for such Loan and on the
date which is three months after the date the Loan was made in the case of a six
month Loan Period. After maturity, accrued interest on all Loans shall be
payable on demand. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <U>Setting and Notice of
Rates</U>. The applicable Eurodollar Rate for each Loan Period for a Eurodollar
Loan shall be determined by the Administrative Agent as provided herein, and
notice thereof shall be given by the Administrative Agent promptly to the
Company and each Bank. Each determination of the applicable Eurodollar Rate
(including any change thereof during a Loan Period by reason of a change in the
Eurodollar Margin) by the Administrative Agent shall be conclusive and binding
upon the parties hereto, in the absence of manifest error. The Administrative
Agent shall, upon request of the Company or any Bank, deliver to the Company or
such Bank a statement showing the computations used by the Administrative Agent
in determining any applicable Eurodollar Rate hereunder. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <U>Computation of
Interest</U>. Interest shall be computed for the actual number of days elapsed
(including the first day, but excluding the last day) on the basis of a 360-day
year in the case of Eurodollar Loans and a 365/366-day year in the case of
Floating Rate Loans. </P>

<H5 ALIGN="CENTER">SECTION 5</H5>

<H5 ALIGN="CENTER">COMMITMENT FEE</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company agrees to pay to the
Banks that per annum commitment fee for the period from and including the
Effective Date to the Termination Date applied to the daily average of the
unused amount of the Commitments as shall be determined from time to time from
the pricing grid attached hereto as Schedule 1 in accordance with the
Company&#146;s Secured Debt Rating then in effect. The applicable fee rate shall
be adjusted automatically on and as of the date of public announcement of any
change in the Company&#146;s First Mortgage Bond or equivalent long term secured
debt rating which results in a change in the Company&#146;s Secured Debt Rating.
Such commitment fee shall be computed for the actual number of days elapsed
(including the first day but excluding the last day) on the basis of a 365-day
year and payable in arrears on the last day of March, June, September, and
December, commencing March 31, 1997 for that preceding period from the Effective
Date, and thereafter for each preceding three-month period, and on the earlier
of the Termination Date or the date of the termination of the Commitments for
any period then ending for which such commitment fee shall not have been
theretofore paid. </P>

<H5 ALIGN="CENTER">SECTION 6</H5>

<H5 ALIGN="CENTER">REDUCTION OF THE COMMITMENTS; PREPAYMENTS</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1 <U>Optional Reduction or
Termination of the Commitments</U>. The Company may from time to time on at
least five Business Days&#146; prior written notice received by the
Administrative Agent (which shall promptly advise each Bank thereof) permanently
reduce the amount of the Commitments (such reduction to be pro rata among the
Banks according to their respective Percentages) but only upon repayment in
accordance with <U>Section 3.1</U> or prepayment in accordance with <U>Section
6.2</U> of the amount, if any, by which the aggregate unpaid principal amount of
all Loans exceeds the then reduced amount of the Commitments. Any such reduction
shall be in a minimum aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess of such amount. The Company may, at any time, on like
notice terminate the Commitments in full upon payment in full of all Loans and
other obligations of the Company hereunder. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2 <U>Prepayments</U>. The
Company may from time to time prepay the Loans in whole or in part, provided
that (a) the Company shall give the Administrative Agent (which shall promptly
advise each Bank thereof) not less than three (3) Business Days prior notice in
the case of Eurodollar Loans and one (1) Business Day in the case of Floating
Rate Loans, specifying the Loans to be prepaid and the date and amount of
prepayment, (b) Eurodollar Loans shall only be prepaid subject to <U>Section
8.5</U>, and (c) any prepayment of any Loan shall include accrued interest to
the date of such prepayment on the principal amount being prepaid. Each partial
prepayment pursuant to this <U>Section 6.2</U> shall be in a minimum aggregate
principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess
of such amount. </P>

<H5 ALIGN="CENTER">SECTION 7</H5>

<H5 ALIGN="CENTER">MAKING AND PRORATION OF PAYMENTS; OFFSET</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1 <U>Making of Payments</U>. (a)
All payments and prepayments of principal of, or interest on, the Notes
evidencing the Loans shall be made by the Company to the Administrative Agent in
immediately available funds for the account of the holders of the Notes and all
such payments (except those made pursuant to <U>Sections 2.6</U>, <U>8.3</U>,
<U>8.8</U> and <U>8.9</U>) shall be pro rata according to the respective unpaid
principal amounts of all the Notes evidencing the Loans. All payments of
commitment fees shall be made by the Company to the Administrative Agent in
immediately available funds for the account of the Banks pro rata except with
respect to payments made pursuant to <U>Section 2.6</U>) according to their
respective Percentages. All such payments shall be made to the Administrative
Agent at its office &#145;in Seattle not later than 12:00 Noon, Seattle time, on
the date due. Funds received after that hour shall be deemed to have been
received by the Administrative Agent on the next following Business Day. The
Administrative Agent shall promptly remit to each Bank or other holder of a Note
its share of all such payments received in collected funds by the Administrative
Agent for the account of such Bank or holder. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Unless the Administrative
Agent shall have received notice from the Company prior to the date on which any
payment is due to the Banks hereunder that the Company will not make such
payment in full, the Administrative Agent may assume that the Company has made
such payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank (or such lesser amount as may be due such Bank pursuant to <U>Section
2.3 (b)</U>. If and to the extent that the Company shall not have so made such
payment, each Bank shall repay to the Administrative Agent forthwith on demand
such amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date such
Bank repays such amount to the Administrative Agent, at the Federal Funds
Effective Rate. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2 <U>Application of Certain
Payments</U>. Each payment of principal shall be applied to such Loans as the
Company shall direct by notice to be received by tile Administrative Agent on or
before the date of such payment, or in the absence of such notice, as the
Administrative Agent shall determine in its discretion, <U>provided</U>,
<U>however</U>, that, except as otherwise expressly provided herein, the
corresponding Loans of all Banks shall be paid pro rata according to their
respective Percentages and, for purposes hereof, the Floating Rate Loans made
pursuant to <U>Section 8.3 or Section 8.9</U> shall be deemed of the same type
as the corresponding Eurodollar Loans of the other Banks. Concurrently with each
remittance to any Bank of its share of any such payment, the Administrative
Agent shall advise each Bank as to the application of such payment. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3 <U>Proration of Payments</U>.
If any Bank or other holder of a Note shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of offset or otherwise) on
account of principal of or interest (except payments made pursuant to <U>Section
2.6</U> and <U>Section 8</U>) on any Note in excess of its pro rata share of
payments and other recoveries obtained by all Banks or other holders of Notes on
account of principal of and interest on Notes then held by them, such Bank or
other holder shall purchase from the other Banks or holders such participation
in the Notes held by them as shall be necessary to cause such purchasing Bank or
other holder to share the excess payment or other recovery ratably with each of
them; provided, however, that if all or any portion of the excess payment or
other recovery is thereafter recovered from such purchasing Bank or holder, the
purchase shall be rescinded and the purchase price restored to the extent of
such recovery. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.4 <U>Payment on Non-Business
Days</U>. If any payment of principal of or interest on a Loan, or of commitment
fee, falls due on a day that is not a Business Day, then such due date shall be
extended to the next following Business Day and, with respect to principal,
interest shall accrue and be payable for the period of such extension. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.5 <U>Offset</U>. The Company
agrees that the Administrative Agent and each holder of a Note shall have all
rights of set-off and bankers&#146; lien provided by applicable law and that, in
addition, at any time (a) any payment or other amount owing by the Company under
this Agreement is due to the Administrative Agent or any such holder, and (b)
any Unmatured Event of Default described in <U>Section 12.1.3</U> or any Event
of Default exists, the Administrative Agent and each holder may apply to the
payment of such payment or other amount any and all balances, credits, deposits,
accounts, or moneys of the Company then or thereafter with the Administrative
Agent or such holder. </P>

<H5 ALIGN="CENTER">SECTION 8</H5>

<H5 ALIGN="CENTER">INCREASED COST PROVISIONS AND SPECIAL</H5>

<H5 ALIGN="CENTER">PROVISIONS FOR EURODOLLAR LOANS</H5>

     <P>8.1  Increased  Costs. (a) If (i) Regulation D of the Board of Governors
of the Federal Reserve System, or (ii) any Regulatory Change,</P>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)
          shall subject any Bank (or any Applicable Lending Office of such Bank) to any
          tax, duty or other charge with respect to its Eurodollar Loans, its Note or its
          obligation to make Eurodollar Loans, or shall change the basis of taxation of
          payments to any Bank or its Applicable Lending Office of the principal of or
          interest on its Eurodollar Loans or any other amounts due under this Agreement
          in respect of its Eurodollar Loans or its obligation to make Eurodollar Loans
          (except for changes in the rate of tax on the overall net income of such Bank or
          its Applicable Lending Office imposed by the jurisdiction in which such
          Bank&#146;s principal executive office or its Applicable Lending Office is
          located); or </P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)
          shall impose, modify or deem applicable any reserve (including, without
          limitation, any reserve imposed by the Board of Governors of the Federal Reserve
          System, but excluding with respect to any Eurodollar Loan any reserve to the
          extent reimbursed pursuant to <U>Section 8.4</U>), special deposit, special
          assessment or similar requirement against assets of, deposits with, or for the
          account of, or credit extended by, any Bank (or any Applicable Lending Office of
          such Bank); or </P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)
          shall impose on any Bank (or its Applicable Lending Office) or on the London
          interbank market any other condition affecting its Eurodollar Loans, its Note,
          or its obligation to make Eurodollar Loans, and the result of any of the
          foregoing is to increase the cost to (or in the case of Regulation D referred to
          above, to impose a cost on) such Bank (or any Applicable Lending Office of such
          Bank) of making or maintaining any Eurodollar Loan, or to reduce the amount of
          any sum received or receivable by such Bank (or any Applicable Lending Office of
          such Bank) under this Agreement or under its Note with respect thereto, then
          within 10 days after demand by such Bank (which demand shall be accompanied by a
          statement setting forth the basis of such demand (with a copy to the
          Administrative Agent), the Company shall pay directly to such Bank such
          additional amount or amounts as will compensate such Bank for such increased
          cost or such reduction. </P></TD>
          </TR>
          </TABLE>
          <BR>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If any Bank shall determine
that any Regulatory Change has or would have the effect of increasing the amount
of capital such Bank must maintain or of reducing the rate of return on the
capital of such Bank or its Parent as a consequence of such Bank&#146;s
obligations hereunder to a level below that which such Bank or its Parent could
have achieved but for such Regulatory Change (taking into consideration such
Bank&#146;s policies with respect to capital adequacy) by an amount deemed by
such Bank to be material, then following demand by such Bank (which demand shall
be accompanied by a statement setting forth the basis of such demand (with a
copy to the Administrative Agent)), the Company shall pay directly to such Bank
such additional amount or amounts as will compensate such Bank for the cost of
such additional capital or of such reduced return which additional amount shall
be payable on each date on which accrued commitment fees are payable under this
Agreement occurring thereafter until the Company is notified that the
circumstances giving rise to said increased cost no longer exist. In determining
such amount, such Bank may use any reasonable averaging and attribution methods.
The protection of this paragraph (b) shall be available to each Bank regardless
of any possible contention of invalidity or inapplicability of the Regulatory
Change that shall have occurred. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Bank will promptly notify the
Company and the Administrative Agent forthwith upon learning of the occurrence
after the date hereof of any event entitling such Bank to compensation pursuant
to this <U>Section 8.1</U>. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2 <U>Basis for Determining
Interest Rate Inadequate</U>. If on or before the Business Day preceding the
first day of a Loan Period for a requested Eurodollar Loan (a) the
Administrative Agent determines (which determination shall be binding and
conclusive on all parties) that by reason of circumstances affecting the
interbank eurodollar market adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate applicable to such Loan Period, or (b) Banks
having 50% or more of the aggregate amount of the Commitments advise the
Administrative Agent that the Eurodollar Rate will not adequately and fairly
reflect the cost to such Banks of funding their Eurodollar Loans for such Loan
Period, the Administrative Agent shall forthwith give notice thereof to the
Company and the Banks, whereupon until the Administrative Agent notifies the
Company that the circumstances giving rise to such suspension no longer exist,
the obligations of the Banks to make Eurodollar Loans shall be suspended. Unless
the Company notifies the Administrative Agent on or before the Business Day
preceding the first day of the Loan Period for the requested Eurodollar Loan
that it elects not to borrow on the date specified in the Company&#146;s notice
of the proposed borrowing, the proposed borrowing shall instead be made as a
Floating Rate Loan borrowing. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3 <U>Changes in Law Rendering
Certain Loans Unlawful</U>. In the event that the adoption of any applicable
law, rule, or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank, or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any Applicable Lending Office of such
Bank) with any request or directive (whether or not having the force of law) of
any such authority, central bank, or comparable agency, should make it unlawful
or impossible for a Bank or its Applicable Lending Office (&#147;<U>Affected
Bank</U>&#148;) to make, maintain, or fund Eurodollar Loans, then (a) the
Affected Bank shall promptly notify the Administrative Agent (which shall
promptly advise each Bank thereof), (b) the obligation of the Affected Bank to
make Eurodollar Loans shall, upon the effectiveness of such event, be suspended
for the duration of such unlawfulness (and for such duration any requests by the
Company for Eurodollar Loans shall be deemed, with respect to the Affected Bank,
to be requests for Floating Rate Loans repayable on the same date as the
Eurodollar Loans made by the other non-affected Banks), and (c)&#160;if the
Affected Bank so requests, the Company shall prepay in full the then outstanding
principal amount of the Eurodollar Loans of the Affected Bank made unlawful for
the Affected Bank, together with accrued interest thereon and any funding losses
pursuant to <U>Section 8.5</U>, prior to the last day of the Loan Period
therefor, on such date as may be required by the relevant law, regulation, or
interpretation. Concurrently with prepaying each such Eurodollar Loan, the
Company shall borrow, and the Affected Bank shall make, a Floating Rate Loan in
an equal principal amount (on which interest and principal shall be payable
contemporaneously with the related Eurodollar Loans of the other Banks). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4 <U>Eurodollar Reserve
Requirements</U>. For so long as any Bank may be required to maintain reserves
against &#147;<U>Eurocurrency liabilities</U>&#148; under Regulation D of the
Board of Governors of the Federal Reserve System (or, so long as any Bank may be
required, by reason of any Regulatory Change, to maintain reserves against any
other category of liabilities which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement or
against any category of extensions of credit or other assets of such Bank which
includes any Eurodollar Loans hereunder), then any affected Bank shall notify
the Administrative Agent and the Company shall pay to the Administrative Agent
for the account of each Bank, on each date when interest shall be payable in
accordance with <U>Section 4.3</U>, an additional amount with respect to the
outstanding principal amount of its Eurodollar Loans for each day during the
period with respect to which interest is then paid or payable, to be determined
as follows: </P>

<PRE>
                                           (   R                      )             1
    Additional amount = P  X               (  ------        -  R       )    X       ------
                                           (   (1 - r)                )             360
P    =      the principal amount of such Eurodollar Loan outstanding on such day;
R    =      the Eurodollar Rate which is a component of the rate at which interest accrues on such
            Eurodollar Loan for such day (expressed as a decimal); and
r    =      the Eurodollar Reserve Percentage.
</PRE>
     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Administrative Agent shall
provide the Company with notice of the amount payable under this <U>Section
8.4</U> at least two Business Days prior to the required date of payment
thereof. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5 <U>Funding Losses</U>. The
Company hereby agrees that upon demand by any Bank (which demand shall be
accompanied by a statement setting forth the basis for the calculations of the
amount being claimed), the Company will indemnify such Bank against any net loss
or expense which such Bank may sustain or incur (including without limitation
any net loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Bank to fund or maintain Eurodollar
Loans), as reasonably determined by such Bank, as a result of (a) any prepayment
of a Eurodollar Loan of such Bank on a date other than the last day of the Loan
Period for such Loan, or (b)&#160;any failure by the Company to borrow any Loans
on a date specified therefor in a notice of borrowing pursuant to <U>Section
2.3</U>. For this purpose, all notices of borrowings to the Administrative Agent
pursuant to this Agreement shall be deemed to be irrevocable. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.6 <U>Right of Banks to Fund
through Other Offices</U>. Each Bank may, if it so elects, fulfill its
commitment as to any Eurodollar Loan by causing a branch or affiliate of such
Bank to make such Eurodollar Loan, <U>provided</U> that in such event for the
purposes of this Agreement such Eurodollar Loan shall be deemed to have been
made by such Bank and the obligation of the Company to repay such Eurodollar
Loan shall nevertheless be to such Bank and shall be deemed held by it, to the
extent of such Eurodollar Loan, for the account of such branch or affiliate. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.7 <U>Discretion of Banks as to
Manner of Funding</U>. Notwithstanding any provision of this Agreement to the
contrary, each Bank shall be entitled to fund and maintain its funding of all or
any part of its Loans in any manner it sees fit, it being understood, however,
that for the purposes of this Agreement all determinations hereunder shall be
made as if each Bank had actually funded and maintained each Eurodollar Loan
during each Loan Period for such Eurodollar Loan through the purchase of
deposits having a maturity corresponding to such Loan Period and bearing an
interest rate equal to the Eurodollar Rate for such Loan Period. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.8 <U>Alternative Lenders</U>. In
the event that it becomes unlawful or impossible for a Bank to make, maintain,
or fund Eurodollar Loans as described in <U>Section 8.3</U>, or an additional
amount is required to be paid to any Bank under <U>Section 8.1</U>, then at any
time after receipt of notice of such event as required by the respective
sections and upon giving written notice to the Administrative Agent (which shall
promptly communicate such notice to the Bank concerned), the Company, at its
option, may elect to cancel the Commitment of such Bank, but such cancellation
shall be effective only upon the identification and substitution of a bank or
banks to assume the Commitment of the subject Bank; <U>provided</U>,
<U>however</U>, that the Company shall have the foregoing cancellation option
only at a time when there is a single Bank which has been so affected under said
<U>Section 8.3</U> or said <U>Section 8.1</U>. The assumption of the Commitment
of the subject Bank shall be made in accordance with the provisions of clause(s)
(ii) and/or (iii) of paragraph (a) of <U>Section 2.6</U>, as if the subject Bank
were a Retiring Bank and an Adjustment Certificate (with appropriate revisions)
shall be executed by the applicable parties (and the Administrative Agent shall
furnish a copy thereof to the Company and the Banks). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.9 <U>Floating Rate Loans
Substituted for Affected Eurodollar Loans</U>. If any Bank has demanded
compensation under <U>Section 8.1(a)</U>, and the Company shall, by at least
three Business Days prior notice to such Bank through the Administrative Agent,
have elected that the provisions of this <U>Section 8.9</U> shall apply to such
Bank, then, unless and until such Bank notifies the Company that the
circumstances giving rise to such suspension or demand for compensation no
longer apply: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) all Loans which would
otherwise be made by such Bank as Eurodollar Loans shall be made instead as
Floating Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Eurodollar Loans of the other Banks), and </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) after each of its Eurodollar
Loans has been repaid, all payments of principal which would otherwise be
applied to repay such Eurodollar Loans shall be applied to repay its Floating
Rate Loans instead. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.10 <U>Conclusiveness of
Determination; Survival of Provisions</U>. Any determination by a Bank pursuant
to <U>Sections 8.1</U>, <U>8.2</U>, <U>8.3</U>, <U>8.4</U>, <U>8.5</U> or
<U>8.9</U> shall be conclusive absent manifest error. The provisions of
<U>Sections 8.1</U>, <U>8.4</U> and <U>8.5</U> shall survive termination of this
Agreement. </P>

<H5 ALIGN="CENTER">SECTION 9</H5>

<H5 ALIGN="CENTER">REPRESENTATIONS AND WARRANTIES</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To induce the Banks to enter into
this Agreement and to make Loans hereunder, the Company represents and warrants
to the Administrative Agent and the Banks that as of the Effective Date: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U>Organization, Etc</U>. The
Company and each Significant Subsidiary is a corporation duly existing and in
good standing under the laws of the State of Washington or such other state
under the laws of which such Significant Subsidiary is organized and is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction where, because of the nature of its activities or
properties, such qualification is required, unless the failure to so qualify
would not have a material adverse effect on its properties or business. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2 <U>Authorization; No
Conflict</U>. The execution and delivery of this Agreement and the Notes, the
borrowings hereunder, and the performance by the Company of its obligations
under this Agreement and the Notes are within the Company&#146;s corporate
powers, have been duly authorized by all necessary corporate action and do not
and will not contravene or conflict with any provision of law or of the charter
or by-laws of the Company or of any agreement binding upon the Company. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3 <U>Governmental Approvals</U>.
The Washington Utilities and Transportation Commission or other applicable
governmental authority or regulatory body has duly issued any order authorizing
the Company to enter into this Agreement, to execute and deliver this Agreement
and the Notes, to borrow hereunder and to perform its obligations under this
Agreement and the Notes, that may be required under the laws of the State of
Washington and such order, if any is required, remains in full force and effect.
No other authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution and delivery by the Company of this Agreement and the Notes, the
borrowings hereunder, and the performance by the Company of its obligations
under this Agreement and the Notes. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.4 <U>Validity and Binding
Nature</U>. This Agreement is, and the Notes when duly executed and delivered
will be, legal, valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting creditors&#146; rights generally or by general
equitable principles. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.5 <U>Financial Statements</U>.
The audited consolidated financial statements as of December 31, 1995 of Puget
and as of September&#160;30, 1996 of WECO, and, in the case of Puget, its
unaudited consolidated financial statements as of March 31, June 30, and
September 30, 1996, copies of which have been furnished to each Bank, have been
prepared in conformity with generally accepted accounting principles applied on
a basis consistent (except as may be required by any change in generally
accepted accounting principles) with the preceding fiscal period, accurately
present the financial condition of Puget and WECO and their respective
Subsidiaries as of such dates and the results of their operations for the
periods then ended, and since December 31, 1995 for Puget and September 30, 1996
for WECO, there has been no material adverse change in the consolidated
business, assets, revenues, financial condition, operations or prospects of
either Puget or WECO, or, from and after their merger, of the Company and its
Consolidated Subsidiaries, which would adversely impact the Company&#146;s
ability to perform its obligations under this Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.6 <U>Litigation</U>. There is no
action, suit, or proceeding pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency, or official which in
any manner draws into question the validity of this Agreement or the Notes or
(except as disclosed in the respective 1995 or 1996 Form 10-K for either of the
Company&#146;s predecessors) in which there is a reasonable possibility of an
adverse decision which could materially adversely affect the ability of the
Company to perform its obligations under this Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.7 <U>Employee Benefit Plans</U>.
Each Plan complies in all material respects with all applicable requirements of
law and regulation, no Reportable Event (as defined in ERISA with the exception
of the merger of WECO into Puget to form the Company and for which the Pension
Benefit Guaranty Corporation has waived any reporting requirement) has occurred
with respect to any Plan, and no contribution failure has occurred with respect
to any Plan sufficient to give rise to a lien under Section 302(f) of ERISA. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.8 <U>Regulation</U>. The Company
is not engaged directly or indirectly in the business of extending credit for
the purpose of buying or carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal Reserve System) and less than
25% of the assets of the Company and of the Company and its Subsidiaries
consists of margin stock. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.9 <U>Public Utility Holding
Company Act</U>. Either (a) neither the Company nor any Subsidiary is a
&#147;<U>holding company</U>,&#148; or a &#147;<U>subsidiary company</U>&#148;
of a &#147;<U>holding company</U>,&#148; or an &#147;<U>affiliate</U>&#148; of a
&#147;<U>holding </U>company,&#148; within the meaning of the Public Utility
Holding Company Act, or (b)(i) the Company is a <U>&#147;subsidiary
company</U>&#148; of a &#147;<U>holding company</U>&#148; within the meaning of
the Public Utility Holding Company Act, but such &#147;<U>holding
company</U>&#148; and its &#147;<U>subsidiary companies</U>,&#148; including the
Company, are exempt from the provisions thereof, except Section 9(a)(2) thereof,
by virtue of having filed with the Securities and Exchange Commission a
Statement By Holding Company Claiming Exemption Under Rule U-2 From The
Provisions of the Public Utility Holding Company Act of 1935 on Form U3A-2, and
(ii)&#160;such exemption is in full force and effect and, to the best of the
Company&#146;s knowledge, no proceedings to revoke or modify such exemption have
been instituted or are pending. </P>

     <P>9.10 Investment Company Act. The Company is not an "investment company,"
or a company "controlled" by an "investment  company," within the meaning of the
Investment Company Act of 1940, as amended.</P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.11 <U>Environmental Matters</U>.
The Company conducts in the ordinary course of its business a review of the
effect of Environmental Laws on the business, operations, and properties of the
Company and its Subsidiaries, and as a result thereof has reasonably concluded
that Environmental Laws are unlikely to have a material adverse effect on their
operations, taken as a whole, or on the ability of the Company to perform its
obligations under this Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.12 <U>Information</U>. All
information furnished in writing to the Administrative Agent or the Banks by or
on behalf of the Company prior to the Effective Date in connection with or
pursuant to this Agreement and the relationship established hereunder, at the
time the same was so furnished, but in the case of information dated as of a
prior date, as of such date, (i) in the case of any information prepared in the
ordinary course of business, was complete and correct in the light of the
purpose prepared, and, in the case of any information the preparation of which
was requested by any Bank, was complete and correct in all material respects to
the extent necessary to give such Bank true and accurate knowledge of the
subject matter thereof, (ii)&#160;did not contain any untrue statement of a
material fact, and (iii) did not omit to state a material fact necessary in
order to make the statements contained therein not misleading in the light of
the circumstances under which they were made. </P>

<H5 ALIGN="CENTER">SECTION 10</H5>

<H5 ALIGN="CENTER">CONDITIONS TO EFFECTIVE DATE; LENDING</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The effectiveness of this
Agreement and of the Commitment of each Bank to make its Loans is subject to the
following conditions precedent: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1 <U>Conditions Precedent to
Effective Date</U>. The Commitment of each Bank shall not become effective until
(i) each of the following conditions has been met and satisfied and (ii) the
Administrative Agent shall have received, in form and substance satisfactory to
it, and in sufficient copies to provide one to each Bank, evidence of: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.1 <U>Approval Terms of Merger
by WUTC/Banks</U>. The Washington Utilities and Transportation Commission shall
have approved the plan of merger between Puget and WECO upon terms which are
satisfactory to Puget and WECO and which have been approved by Banks holding
aggregate Percentages of at least 66 2/3 % of the total Percentages as evidenced
by written notices of approval to the Administrative Agent. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.2 <U>Merger Effected</U>. The
merger of WECO into Puget on the terms approved by the WUTC and the Banks
pursuant to <U>Section 10.1.1</U> above shall have been completed and fully
effective and the surviving corporation shall have been renamed Puget Sound
Energy Company. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.3 <U>Termination of Other
Credit Agreements</U>. Each of the following credit agreements shall have been
terminated pursuant to the terms thereof, and all payments required to be made
in connection with such termination shall have been made, or the Administrative
Agent has received (a) written notice from the agent for the lenders under each
such credit agreement that such credit agreement will so terminate immediately
upon said lenders&#146; receipt of the amount specified in said notice, and (b)
the Company&#146;s irrevocable written instructions to so direct payment of the
corresponding amount(s) out of the proceeds of the initial Loan: </P>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)
          that credit agreement dated December 1, 1991, among Puget, various banks and
          Seafirst Bank f/k/a Seattle-First National Bank, as agent, </P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)
          that credit agreement dated December 1, 1991, among Puget, various banks and The
          Bank of New York, as agent, and </P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)
          that credit agreement dated March 31, 1995, among WECO, various banks and The
          First National Bank of Chicago, as agent. </P></TD>
          </TR>
          </TABLE>
          <BR>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.4 <U>Must Occur Not Later
Than March 31, 1997</U>. All of the conditions precedent on the Effective Date
set forth in this <U>Section 10.1</U> must be satisfied no later than March 31,
1997 or such later date to which Puget and WECO may agree to extend their merger
agreement with the written consent of Banks holding 66&#160;2/3% of the total
Percentage. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1.5  Warranties True. Each
of the Company's  representations and warranties set forth in Section 9 shall be
true and correct.</P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2 <U>Initial Loan</U>. The
obligation of each Bank to make its initial Loan is, in addition to the
conditions precedent specified in <U>Sections 10.3</U> and <U>10.4</U>, subject
to the condition precedent that the Administrative Agent shall have received all
of the following, each duly executed and dated the date of such Loan, in form
and substance satisfactory to the Administrative Agent, and each (except for the
Notes, of which only the original shall be signed) in sufficient number of
signed counterparts to provide one for each Bank: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.1  Note. The Note of the
Company payable to the order of such Bank.</P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.2 <U>Resolutions and
Incumbency</U>. Certified copies of resolutions of the Board of Directors of the
Company authorizing this Agreement, the Notes and other documents provided for
in this Agreement and the transactions contemplated hereby, together with a
certification of the names of the officer or officers of the Company authorized
to sign this Agreement and the Notes and other documents provided for in this
Agreement and a sample of the true signature of each such officer (upon which
certification each Bank may conclusively rely until it shall have received a
further certification of the Secretary or any Assistant Secretary of the Company
cancelling or amending such prior certification). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.3 <U>Opinion of Counsel for
the Company</U>. The opinion of Perkins Coie LLP, counsel for the Company,
addressed to the Administrative Agent and the Banks, to the effect that: (a) the
Company and its Significant Subsidiaries are corporations duly existing and in
good standing under the laws of the states of their respective incorporation;
(b) the Company has full corporate power to execute, deliver and perform this
Agreement, to borrow moneys hereunder, and to execute, deliver, and perform its
obligations under the Notes; (c) the execution and delivery of this Agreement
and the Notes, the borrowings hereunder, and the performance by the Company of
its obligations under this Agreement and the Notes have been duly authorized by
all necessary corporate action and do not and will not contravene or conflict
with any provision of law or of the charter or by-laws of the Company or, to the
knowledge of such counsel, of any agreement binding upon the Company;
(d)&#160;the Washington Utilities and Transportation Commission or other
applicable governmental authority or regulatory body has duly issued an order
authorizing the Company to enter into this Agreement, to execute and deliver
this Agreement and the Notes, to borrow hereunder, and to perform its
obligations under this Agreement and the Notes, and such order remains in full
force and effect (or no such order is required under the laws of the State of
Washington) and no other authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution and delivery by the Company of this Agreement and
the Notes, the borrowings hereunder, and the performance by the Company of its
obligations under this Agreement and the Notes; (e) this Agreement and the Notes
have been duly executed and delivered by the Company and are the legal, valid,
and binding obligations of the Company, enforceable in accordance with their
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting
creditors&#146; rights generally or by general equitable principles; and (f)
either (i)&#160;neither the Company nor any Subsidiary is a &#147;holding
company,&#148; or a &#147;subsidiary company&#148; of a &#147;holding
company,&#148; or an &#147;affiliate&#148; of a &#147;holding company,&#148;
within the meaning of the Public Utility Holding Company Act, or (ii) (A) the
Company is a &#147;subsidiary company&#148; of a &#147;holding company&#148;
within the meaning of the Public Utility Holding Company Act, but such
&#147;holding company&#148; and its &#147;subsidiary companies,&#148; including
the Company, are exempt from the provisions thereof, except Section 9(a)(2)
thereof, by virtue of having filed with the Securities and Exchange Commission a
Statement By Holding Company Claiming Exemption Under Rule&#160;0-2 From The
Provisions of the Public Utility Holding Company Act of 1935 on
Form&#160;0-3A-2, and (B) such exemption is in full force and effect and, to the
best of such counsel&#146;s knowledge, no proceedings to revoke or modify such
exemption have been instituted or are pending. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.4 <U>Regulatory Approval</U>.
A certified copy of any order of the Washington Utilities and Transportation
Commission or other applicable governmental authority or regulatory body
authorizing the Company to enter into this Agreement and to execute and deliver
the Notes that may be required under the laws of the State of Washington. </P>

     <P  ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.2.5   Other.  Such  other
documents as the Administrative Agent or any Bank may reasonably request.</p>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3 <U>All Loans</U>. The
obligation of each Bank to make the initial Loan and each subsequent Loan is
subject to the following further-conditions precedent that (a)&#160;no Event of
Default or Unmatured Event of Default has occurred and is continuing or will
result from the making of such Loan, and (b) the representations and warranties
of the Company contained in <U>Sections 9.1</U>, <U>9.2</U>, <U>9.3</U>,
<U>9.4</U>, <U>9.7</U>, <U>9.8</U>, <U>9.9</U>, <U>9.10</U>, <U>9.11</U> and
<U>9.12</U> are true and correct as of the date of such requested Loan, with the
same effect as though made on the date of such Loan. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.4 <U>New Money Loans</U>. The
obligation of each Bank to make any Loan that would increase the aggregate
outstanding principal amount of the Loans over the aggregate principal amount of
the Loans outstanding immediately prior to the making of such Loan is subject to
the further condition precedent that the warranties of the Company contained in
<U>Sections 9.5</U> and <U>9.6</U> are true and correct as of the date of such
requested Loan with the same effect as though made on the date of such Loan;
provided, however, that for purposes of the warranties contained in <U>Section
9.5</U> and <U>Section 9.6</U>, the date of the referenced audited fiscal
year-end financial statements and Form 10-K of the Company shall be that last
furnished to the Banks with respect to a requested extension of the Termination
Date pursuant to <U>Section 2.4</U> and which such extension was accepted by the
Required Banks. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.5 <U>Loans On or After
Extension of Termination Date</U>. The obligation of each Bank to make its
initial Loan on or after any extension of the Termination Date is subject to the
following further condition precedent that the Administrative Agent shall have
received all of the following, each duly executed and dated the date of such
Loan, in form and substance satisfactory to the Administrative Agent, and each
in sufficient number of signed counterparts to provide one for each Bank (unless
such Loan is also the initial Loan under this Agreement, in which case the
conditions precedent specified <U>Sections 10.2</U>, <U>10.3</U> and <U>10.4
</U>shall be applicable): </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.5.1 <U>Bring-Down Opinion</U>.
The opinion of Messrs. Perkins Coie or other counsel for the Company acceptable
to the Administrative Agent, addressed to the Administrative Agent and the
Banks, reaffirming their opinion furnished pursuant to <U>Section 10.23</U> (and
applying to this Agreement and borrowings hereunder after giving effect to such
extension of the Termination Date). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.5.2 <U>Confirmations</U>. Such
other confirmations of the continuing effectiveness of any of the documents
referred to in <U>Section 10.2</U> as the Administrative Agent or any Bank may
reasonably request. </P>

<H5 ALIGN="CENTER">SECTION 11</H5>

<H5 ALIGN="CENTER">COMPANY&#146;S COVENANTS</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the Effective Date and until
the expiration or termination of the Commitments and thereafter until all
obligations of the Company hereunder and under the Notes are paid in full, the
Company agrees that, unless at any time the Required Banks shall otherwise
expressly consent in writing, it will: </P>

     <P  ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1  Reports,  Certificates
and Other Information. Furnish to Administrative Agent and each Bank:</p>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.1 <U>Annual Report</U>.
Within 100 days after the end of each fiscal year of the Company, a copy of the
annual audited consolidated financial statements of the Company and its
Subsidiaries prepared in conformity with generally accepted accounting
principles applied on a basis consistent (except as may be required by any
change in generally accepted accounting principles) with the audited
consolidated financial statements of Puget and its Subsidiaries as of December
31, 1995, duly certified by independent certified public accountants of
recognized national standing. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.2 <U>Interim Reports</U>.
Within 60 days after each quarter (except the last quarter) of each fiscal year
of the Company, a copy of the unaudited consolidated financial statements of the
Company and its Subsidiaries prepared in the same manner as the audit report
referred to in <U>Section 11.1.1</U>, signed by the Chief Financial Officer,
Chief Accounting Officer, or the Treasurer of the Company and consisting of at
least a balance sheet as of the close of such quarter, statements of earnings
for such quarter and for the period from the beginning of such fiscal year to
the close of such quarter, and statements of cash flow for the period from the
beginning of such fiscal year to the close of such quarter. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.3 <U>Certificates</U>.
Contemporaneously with the furnishing of a copy of each annual audited
statements and of each set of quarterly statements provided for in this
<U>Section 11.1</U>, a certificate dated as of the date of such annual or
quarterly statement and signed by the President, the Chief Financial Officer,
Chief Accounting Officer, or the Treasurer of the Company, certifying
(i)&#160;the Company&#146;s calculation of the financial covenant ratio pursuant
to <U>Section 11.14</U> and (ii)&#160;that no Event of Default or Unmatured
Event of Default has occurred and is continuing, or, if there is any such event,
describing it and the steps, if any, being taken to cure it. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.4 <U>Reports to SEC and to
Shareholders</U>. Copies of each filing and report made by the Company or any
Subsidiary with or to any securities exchange or the Securities and Exchange
Commission, and of each communication from the Company or any Subsidiary to
shareholders generally, promptly upon the filing or making thereof. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.5 <U>Notice of Default and
Litigation</U>. Forthwith upon learning of the occurrence of either of the
following, written notice thereof, describing the same and the steps being taken
by the Company or the Subsidiary affected with respect thereto: (a)&#160;the
occurrence of an Event of Default or an Unmatured Event of Default, or
(b)&#160;the institution of any litigation, arbitration proceeding, or
governmental proceeding in which there is a reasonable possibility of an adverse
decision, or any adverse determination therein, which could materially adversely
affect the ability of the Company to perform its obligations under this
Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1.6 <U>Other Information</U>.
From time to time such other information concerning the Company and its
Subsidiaries as any Bank or the Administrative Agent may reasonably request. All
information furnished in writing to the Administrative Agent or the Banks by or
on behalf of the Company on or after the Effective Date in connection with or
pursuant to this Agreement or in connection with or pursuant to any amendment or
modification of, or waiver of rights under, this Agreement, shall, at the time
the same is so furnished, but in the case of information dated as of a prior
date, as of such date, (i)&#160;in the case of any information prepared in the
ordinary course of business, be complete and correct in the light of the purpose
prepared, and, in the case of any information required by the terms of this
Agreement or the preparation of which was requested by any Bank, be complete and
correct to the extent necessary to give the Banks true and accurate knowledge of
the subject matter thereof, (ii) not contain any untrue statement of a material
fact, and (iii)&#160;not omit to state a material fact necessary in order to
make the statements contained therein not misleading in the light of the
circumstances under which they were made, and the furnishing of the same to the
Administrative Agent or any Bank shall constitute a representation and warranty
by the Company made on the date the same are so furnished to the effect
specified in clauses (i), (ii), and (iii). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2 <U>Preservation of Corporate
Existence, Etc</U>. Preserve and maintain, and cause each Significant Subsidiary
to preserve and maintain, its corporate existence, rights (charter and
statutory), franchises, and licenses in the state of its incorporation and
qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is reasonably necessary in view of its business and
operations or the ownership of its properties, except as permitted under
<U>Section 11.3</U> or <U>Section 11.8</U>; <U>provided</U>, <U>however</U>,
that neither the Company nor any Significant Subsidiary shall be required to
preserve any right, franchise, or license if the loss thereof is not
disadvantageous in any material respect to the Banks. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3 <U>Compliance with Laws,
Etc</U>. Comply, and cause each of its Subsidiaries to comply, in all respects
with all applicable laws, rules, regulations, and orders of any governmental
authority, the non-compliance with which is likely to result in a material
adverse change in the consolidated financial condition or results of operations
of the Company and its Subsidiaries, such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments, and
governmental charges imposed upon it or upon its property, except to the extent
contested in<B> </B>good faith and by appropriate proceedings. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.4 <U>Maintenance of
Insurance</U>. Maintain, and cause each of its Significant Subsidiaries to
maintain, insurance with responsible and reputable insurance companies or
associations or through its own program of self-insurance in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same general area in which the
Company or such Significant Subsidiary operates; <U>provided</U>,
<U>however</U>, that the portion of such insurance constituting self-insurance
is comparable to that usually maintained by such companies and the reserves
established with respect to any such self-insurance programs are deemed adequate
by the officer or officers of the Company responsible for insurance matters. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5 <U>Visitation Rights</U>. At
any reasonable time and from time to time, permit any Bank or the Administrative
Agent or any agents or representatives thereof at their own expense to examine
and make copies of and abstracts from the records and books of account of the
Company and any of its Subsidiaries, and visit the properties of the Company and
any of its Subsidiaries, and to discuss the affairs, finances, and accounts of
the Company and any of its Subsidiaries with its officers. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.6 <U>Keeping of Books</U>.
Keep, and cause each of its Significant Subsidiaries to keep, proper books of
record and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Company and each of
its Significant Subsidiaries in accordance with generally accepted accounting
principles consistently applied (except as may be required by any change in
generally accepted accounting principles). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.7 <U>Maintenance of
Properties</U>. Maintain and preserve, and cause each of its Significant
Subsidiaries to maintain and preserve, all of its properties which are used or
which are useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted; <U>provided</U>, <U>however</U>,
that nothing herein shall prevent the Company from discontinuing the operation
or reducing the capacity of any of its plants or properties if (a) in the
reasonable judgment of the Company, any such action is necessary or desirable in
the conduct of the business of the Company, provided that such discontinuation
or reduction shall not be such as to result in a material adverse change in the
financial condition or results of operations of the Company, or (b) the Company
is ordered to do so by any regulatory authority having jurisdiction over the
Company. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.8 <U>Mergers, Etc</U>. Not
merge with or into or consolidate with or into, or acquire all or substantially
all of the assets of, any Person, or permit any Significant Subsidiary to do so,
except that (a)&#160;any Subsidiary of the Company may merge or consolidate with
or into or transfer assets to the Company or any other Subsidiary thereof, or
(b)&#160;the Company or any of its Subsidiaries may merge or consolidate with,
acquire by purchase of stock or acquire the assets of any other Person the
assets of which at the time of such merger or consolidation do not exceed 10% of
the assets of the Company and its Consolidated Subsidiaries, provided that in
the case of any such merger or consolidation involving the Company, it is the
surviving entity. The above determinations in this <U>Section 11.8</U> shall be
based on pro forma consolidated financial statements of the Company and its
Subsidiaries as of the date of such acquisition. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.9 <U>Sales, Etc. of Assets</U>.
Not sell, lease, transfer, or otherwise dispose of, or permit any Significant
Subsidiary to sell, lease, transfer, or otherwise dispose of, any material part
of its assets (except to the extent permitted by <U>Section 11.10</U>) if such
sale, lease, transfer or other disposition adversely impacts the Company&#146;s
ability to perform its obligations under this Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.10 <U>Liens</U>. Not create,
incur, assume, or suffer to exist any Lien upon or with respect to any of its
properties, whether now owned or hereafter acquired, to secure any Indebtedness
of any Person, any obligation of such Person to pay the deferred purchase price
of property or services (except a trade account payable that arises in the
ordinary course of business but only if and so long as the same is payable on
customary trade terms), or any obligation of such Person as lessee under a
capital lease, other than: </P>

                  (a)      Permitted Liens;

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
          the Lien of the First Mortgage and any Lien described in any deeds or other
          instruments under which property has been conveyed to the Company and to which
          the Lien of the First Mortgage is expressly made subject; </P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)
           "permitted encumbrances" as defined in the First Mortgage;</P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)
          purchase money mortgages or other purchase money liens upon any property
          hereafter acquired, mortgages or liens existing upon property hereafter acquired
          at the date of acquisition and security interests under conditional sale
          agreements or other similar title retention agreements entered into with respect
          to any property hereafter acquired within six months of the date of such
          acquisition (excluding, however, in each case, property referred to in paragraph
          (e) below); <U>provided</U>, <U>however</U>, that no such mortgage, lien, or
          security interest permitted under this paragraph (d) shall extend to or cover
          any property of the Company or any Subsidiary then owned or thereafter acquired
          (except the property then being acquired, property being acquired with the
          proceeds of indebtedness secured by such purchase money mortgages, liens or
          security interests, replacements thereof, fixed improvements erected thereon,
          and fixed improvements appertaining thereto erected on adjacent property); or </P></TD>
          </TR>
          </TABLE>
          <BR>

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)
          Liens on coal or other fuel or fuel products not supplying any plant of the
          Company in existence on the date hereof as security for any indebtedness
          incurred by the Company for the purpose of financing the acquisition of such
          coal or other fuel or fuel products. </P></TD>
          </TR>
          </TABLE>
          <BR>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.11 <U>Compliance with
ERISA</U>. Not (a) voluntarily terminate any Plan such that the termination
results in any material liability of the Company to the Pension Benefit Guaranty
Corporation or any other Person under Title IV of ERISA, (b) enter into any
Prohibited Transaction (as defined in Section 4975 of the Internal Revenue Code
of 1986, as amended, and in ERISA) involving any Plan which results in any
material liability of the Company to the Pension Benefit Guaranty Corporation or
any other Person under Title IV of ERISA, (c) cause any occurrence of any
Reportable Event which results in any material liability of the Company to the
Pension Benefit Guaranty Corporation or any other Person under Title IV of
ERISA, or (d) allow or suffer to exist any other event or condition known to the
Company which results in any material liability of the Company to the Pension
Benefit Guaranty Corporation or any other Person under Title IV of ERISA. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.12 <U>Use of Proceeds</U>. Use
the proceeds of the Loans for general working capital purposes and not use or
permit any proceeds of the Loans to be used, either directly or indirectly, for
the purpose, whether immediate, incidental or ultimate, of &#147;buying or
carrying margin stock&#148; within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended from time to time. </P>

     <P  ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.13   Scope  of  Business.
Engage only in substantially the same types of businesses as it is engaged in on
the date hereof. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.14 <U>Financial Covenant</U>.
Not permit the aggregate Indebtedness of the Company to exceed 65% of the sum of
said Indebtedness plus preferred and common shareholder equity as determined at
the end of each fiscal quarter of the Company. </P>

<H5 ALIGN="CENTER">SECTION 12</H5>

<H5 ALIGN="CENTER">EVENTS OF DEFAULT AND THEIR EFFECT</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1  Events of Default. Each
of  the  following   shall   constitute   an  "Event  of  Default"   under  this
Agreement:</P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.1 <U>Non-Payment of Notes,
Etc</U>. Default in the payment when due of any principal of any Note, or
default and the continuance thereof for five days in the payment when due of any
interest on any Note or any fees payable by the Company hereunder. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.2 <U>Non-Payment of Other
Indebtedness</U>. Default in the payment when due, whether by acceleration or
otherwise, of any Indebtedness (other than the Loans under this Agreement) of
the Company or any Significant Subsidiary, or guaranteed by the Company or any
Significant Subsidiary, in an amount which exceeds $10,000,000 individually or
default in the performance or observance of any obligation or condition with
respect to any such other Indebtedness if the effect of such default is to
accelerate the maturity of any such Indebtedness or to permit the holder or
holders thereof, or any trustee or agent for such holders, to cause such
Indebtedness to become due and payable prior to its expressed maturity. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.3 <U>Bankruptcy, Insolvency,
Etc</U>. The Company or any Significant Subsidiary becomes insolvent or
generally fails to pay, or admits in writing its inability to pay, debts as they
become due; or the Company or any Significant Subsidiary applies for, consents
to, or acquiesces in the appointment of, a trustee, receiver, or other custodian
for the Company or such Significant Subsidiary or for a substantial part of the
property of any thereof, or makes a general assignment for the benefit of
creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver, or other custodian is appointed for the Company or any
Significant Subsidiary or for a substantial part of the property of any thereof
and is not discharged within 60 days; or any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or insolvency law,
or any dissolution or liquidation proceeding (except the voluntary dissolution,
not under any bankruptcy or insolvency law, of a Significant Subsidiary), is
commenced in respect of the Company or any Significant Subsidiary, and if such
case or proceeding is not commenced by the Company or such Significant
Subsidiary, it is consented to or acquiesced in by the Company or such
Significant Subsidiary or remains for 60 days undismissed or an order for relief
is entered involuntarily before the expiration of 60 days; or the Company or any
Significant Subsidiary takes any corporate action to authorize, or in
furtherance of, any of the foregoing. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.4 <U>Non-Compliance with This
Agreement</U>. Failure by the Company to (a) preserve its corporate existence,
(b) comply with the provisions of paragraph (a) <U>of Section 11.1.5</U>, (c)
comply with the provisions of <U>Sections 11.8</U>, <U>11.9</U>, or
<U>11.11</U>, or (d) comply with or to perform any other provision of this
Agreement (and not constituting an Event of Default under any of the preceding
provisions of this <U>Section </U>12) and, in the case of paragraph (d) hereof,
continuance of such failure for 30 days after notice thereof to the Company from
the Administrative Agent, or the Required Banks. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.5 <U>Warranties</U>. Any
representation, warranty, certification, or statement made (or deemed made) by
the Company herein or by the Company (or any of its officers) in connection
herewith or with the execution and delivery of its Notes or in any certificate,
financial statement, or other document delivered pursuant to this Agreement
shall prove to have been (i) fraudulent or (ii) misleading in any respect
material to the Company&#146;s ability to perform its obligations under this
Agreement when made (or deemed made). </P>

     <P   ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1.6   Employee   Benefit
Plans.  With respect to any Plan,  a Reportable  Event (as defined in ERISA) has
occurred and is continuing.</p>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.2 <U>Effect of Event of
Default</U>. (a)&#160;&#160;If any Event of Default described in <U>Section
12.1.1</U> or <U>Section 12.1.3</U> shall occur with respect to the Company, the
Commitments shall immediately terminate and all Notes (with accrued interest
thereon) and all other amounts payable under this Agreement shall become
immediately due and payable, all without notice of any kind, (b) in the case of
any other Event of Default, the Administrative Agent may (and upon written
request of the Required Banks shall) declare the Commitments to be terminated
and all Notes, accrued interest thereon, and all other amounts payable under
this Agreement to be due and payable, whereupon the Commitments shall
immediately terminate and all Notes (with accrued interest thereon) and all such
other amounts shall become immediately due and payable, all without notice of
any kind, (c) the Administrative Agent shall promptly advise the Company and
each Bank of any such declaration, but failure to do so shall not impair the
effect of such declaration, and (d) notwithstanding the foregoing, the effect as
an Event of Default of any event described in <U>Section 12.1.1</U> or
<U>Section 12.1.3 </U>may be waived by the written concurrence of the holders of
100% of the aggregate unpaid principal amount of the Notes, and the effect as an
Event of Default of any other event described in this <U>Section 12</U> may be
waived by the written concurrence of the Required Banks. </P>

<H5 ALIGN="CENTER">SECTION 13</H5>

<H5 ALIGN="CENTER">THE ADMINISTRATIVE AGENT</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1 <U>Appointment and
Powers</U>. Each Bank hereby irrevocably appoints and authorizes Bank of America
NW, N.A. doing business as Seafirst Bank, and Seafirst Bank hereby agrees, to
act as the agent of such Bank under this Agreement with such powers as are
delegated to the Administrative Agent by the terms hereof, together with such
other powers as are reasonably incidental thereto. The Administrative
Agent&#146;s duties shall be purely ministerial and it shall have no duties or
responsibilities except those expressly set forth in this Agreement and shall
not be required under any circumstances to take any action that, in its
judgment, is contrary to this Agreement or Applicable Law or would expose it to
Liability. The Administrative Agent shall not, by reason of its serving as the
Administrative Agent, be a trustee or other fiduciary for any Bank </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2 <U>Limitation on
Administrative Agent&#146;s Liability</U>. Neither the Administrative Agent nor
any of its directors, officers, employees, or agents shall be liable or
responsible to the Banks for any action taken or omitted to be taken by it or
them under or in connection with this Agreement, except for its or their own
gross negligence, willful misconduct or knowing violations of law. The
Administrative Agent shall not be responsible to any Bank for (a) any recitals,
statements, representations, or warranties contained in this Agreement or in any
certificate or other document referred to, provided for in, or received by, any
of the Banks under, this Agreement, (b)&#160;the validity, effectiveness, or
enforceability of this Agreement or the Notes or any such certificate or other
document or (c) any failure by the Company to perform any of its obligations
under this Agreement or the Notes. The Administrative Agent may employ agents
and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact. The Administrative Agent
shall be entitled to rely upon any certification, notice, or other communication
(including any thereof by telephone, telex, telecopier, telegram, or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants, and other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement in accordance with
instructions signed by the Required Banks, and such instructions of the Required
Banks and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.3 <U>Events of Default and
Unmatured Events of Default</U>. The Administrative Agent shall not be deemed to
have knowledge of the occurrence of an Event of Default or of an Unmatured Event
of Default (other than the non-payment to it of commitment fees or principal of
or interest on Loans) unless the Administrative Agent has received notice from a
Bank or the Company specifying such Event of Default or Unmatured Event of
Default and stating that such notice is a &#147;Notice of Event of Default or
Unmatured Event of Default.&#148; The Administrative Agent shall (subject to
<U>Section 13.6(b))</U> (a) in the case of an Event of Default take any or all
of the actions referred to in <U>Section 12.2(b)</U> if so directed by the
Required Banks, and (b) in the case of any Event of Default or Unmatured Event
of Default, take such other action with respect to such Event of Default or
Unmatured Event of Default as shall be reasonably directed by the Required
Banks; <U>provided</U>, that, unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Event of Default or Unmatured Event of Default as it shall deem
advisable in the best interests of the Banks. </P>

     <P   ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.4    Documentation   and
Syndication  Agents.  Neither of the Documentation nor Syndication  Agents shall
have any agency  duties or  responsibilities  as agents for any party under this
Agreement.</P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.5 <U>Rights as a Bank</U>. Each
Person acting as the Administrative Agent, Documentation Agent or Syndication
Agent that is also a Bank shall, in its capacity as a Bank, have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not acting as one of said Agents, and the term
&#147;<U>Bank</U>&#148; or &#147;<U>Banks</U>&#148; shall include such Person in
its individual capacity. Each Person acting as the Administrative Agent and its
Affiliates, or as the Documentation Agent or Syndication Agent and their
respective Affiliates may (without having to account therefor to any Bank)
accept deposits from, lend money to, and generally engage in any kind of
banking, trust, or other business with the Company and its Affiliates as if it
were not acting as such Agent, and such Person and its Affiliates may accept
fees and other consideration from the Company and its Affiliates for services in
connection with this Agreement or otherwise without having to account for the
same to the Banks </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.6 <U>Indemnification</U>. (a)
The Banks agree (which agreement shall survive any termination of this
Agreement) to indemnify each of the Administrative Agent, Documentation Agent
and Syndication Agent (to the extent not reimbursed by the Company hereunder),
ratably on the basis of the respective principal amounts of the Loans
outstanding made by the Banks (or, if no Loans are at the time outstanding,
ratably on the basis of their respective Commitments), for any and all
Liabilities, losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by, or asserted against any of such Agents (including the costs and
expenses that the Company is obligated to pay hereunder) in any way relating to
or arising out of this Agreement or any other documents contemplated thereby or
referred to therein or the transactions contemplated thereby or the enforcement
of any of the terms thereof or of any such other documents, provided that no
Bank shall be liable for any of the foregoing to the extent they arise from
gross negligence, willful misconduct or knowing violations of law by such Agent. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notwithstanding any other
provision of this Agreement, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall be
indemnified to its satisfaction by the Banks against any and all Liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.7 <U>Non-Reliance on
Administrative Agent and Other Banks</U>. Each Bank agrees that it has,
independently and without reliance on the Administrative Agent or any other
Bank, and based on such documents and information as it has deemed appropriate,
made its own credit analysis of the Company and its own decision to enter into
this Agreement, and that it will, independently and without reliance upon the
Administrative Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
analysis and decisions in taking or not taking action under this Agreement or
its Note. Except as provided in <U>Section 13.3</U>, the Administrative Agent
shall not be required to keep itself informed as to the performance or
observance by the Company of this Agreement or any other document referred to or
provided for herein or to inspect the properties or books of the Company or any
Subsidiary. Except for notices, reports, and other documents and information
expressly required to be furnished to the Banks by the Administrative Agent
under this Agreement, the Administrative Agent shall not have any duty or
responsibility to provide any Banks with any credit or other information
concerning the affairs, financial condition, or business of the Company or any
Subsidiary that may come into the possession of the Administrative Agent or any
of its Affiliates. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.8 <U>Resignation/Removal of the
Administrative Agent</U>. Subject to the appointment and acceptance of a
successor Administrative Agent as provided below, the Administrative Agent may
resign at any time by giving at least 30 days&#146; prior notice thereof to the
Banks and the Company. So long as no Event of Default or Unmatured Event of
Default exists, the Company with the approval of the Required Banks, excluding
the Bank being removed as Administrative Agent, may remove the Administrative
Agent with or without cause. The Required Banks, excluding the Bank being
removed as Administrative Agent, may remove the Administrative Agent any time
with or without cause, with the consent of the Company, which consent shall not
be unreasonably withheld; <U>provided</U>, <U>however</U>, no approval by the
Company shall be required during any period during which there exists an Event
of Default or Unmatured Event of Default. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.9 <U>Appointment of Successor
Agent</U>. Upon receipt of notice of the Administrative Agent&#146;s resignation
or upon removal of the Administrative Agent by the Required Banks and/or the
Company in accordance with <U>Section 13.8</U>, the Required Banks, excluding
the resigning Administrative Agent, may, with the approval of the Company,
appoint a successor Administrative Agent; <U>provided</U>, <U>however</U>, no
approval by the Company shall be required during any period during which there
exists an Event of Default or Unmatured Event of Default. In the case of the
Administrative Agent&#146;s resignation, if no successor Administrative Agent
shall have been so appointed by the Required Banks and shall have accepted such
appointment within 30 days after the retiring Administrative Agent&#146;s giving
of notice of resignation, then the retiring Administrative Agent may, on behalf
of the Banks, appoint a successor Administrative Agent. Upon the acceptance by
any Person of its appointment as a successor Administrative Agent, such Person
shall thereupon succeed to and become vested with all the rights, powers,
privileges, duties, and obligations of the retiring Administrative Agent and the
retiring or removed Administrative Agent shall be discharged from its duties and
obligations as Administrative Agent under this Agreement. After any such
resignation or removal, the provisions of this <U>Section 13</U> shall continue
in effect for the resigning or removed Administrative Agent&#146;s benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Administrative Agent. </P>

<H5 ALIGN="CENTER">SECTION 14</H5>

<H5 ALIGN="CENTER">GENERAL</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.1 <U>Waiver; Amendments</U>. No
delay on the part of the Administrative Agent, any Bank, or the holder of any
Note in the exercise of any right, power, or remedy shall operate as a waiver
thereof, nor shall any single or partial exercise by any of them of any right,
power, or remedy preclude other or further exercise thereof, or the exercise of
any other right, power, or remedy. No amendment, modification, or waiver of, or
consent with respect to, any provision of this Agreement or the Notes shall in
any event be effective unless the same shall be in writing and signed and
delivered by the Administrative Agent and signed and delivered by Banks having
an aggregate Percentage of not less than the aggregate Percentage expressly
designated herein with respect thereto or, in the absence of such designation as
to any provision of this Agreement or the Notes, by the Required Banks and then
any such amendment, modification, waiver, or consent shall be effective only in
the specific instance and for the specific purpose for which given. No
amendment, modification, waiver, or consent (a) shall extend or increase the
amount of the Commitments, extend the maturity of the Notes or the date for any
payment of principal, interest or commitment fee hereunder, or reduce the
commitment fee hereunder, the rate of interest payable with respect to the
Notes, amounts payable pursuant to <U>Section 8.1</U> or the aggregate
Percentage required to effect an amendment, modification, waiver, or consent
without the consent of all of the Banks or (b)&#160;shall reduce the principal
amount of, or rate of interest on, any Note without the consent of the holder of
such Note. No provisions of <U>Section 13</U> shall be amended, modified, or
waived without the consent of the Administrative Agent or of this <U>Section
14.1 </U>without the consent of all of the Banks. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.2 <U>Costs, Expenses and
Taxes</U>. The Company agrees to pay on demand all out-of-pocket costs and
expenses of the Administrative Agent (including the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent and of local
counsel, if any, who may be retained by said counsel) in connection with the
preparation, execution, delivery, and administration of this Agreement, the
Notes, and all other instruments or documents provided for herein or delivered
or to be delivered hereunder or in connection herewith, and all out-of pocket
costs and expenses (including reasonable attorneys&#146; fees and legal
expenses) incurred by any Bank or the Administrative Agent in connection with
the enforcement of this Agreement, the Notes, and any other such instruments or
documents or any collateral security. Each Bank agrees to reimburse the
Administrative Agent for such Bank&#146;s pro rata share (based upon its
respective Percentage) of any such costs or expenses not paid by the Company. In
addition, the Company agrees to pay, and to save the Administrative Agent and
the Banks harmless from all liability for, any stamp or other taxes which may be
payable in connection with the execution or delivery of this Agreement, the
borrowings hereunder, or the issuance of the Notes or of any other instruments
or documents provided for herein or delivered or to be delivered hereunder or in
connection herewith. All obligations provided for in this <U>Section 14.2</U>
shall survive any termination of this Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.3 <U>Notices</U>. All notices
hereunder shall be in writing to the addresses of the parties set forth below
their respective names on the signature pages hereof or, in the case of notice
to a Replacement Bank, to its address set forth on the Adjustment Certificate
executed by it as a Replacement Bank, or, in the case of an Assignee to its
address as set forth in the Assignment and Assumption Agreement, and in any
case, to such other address as any such party may by notice give to the other
parties hereto. Notices given by mail shall be deemed to have been given three
days after the date sent if sent by registered or certified mail, postage
prepaid. Notices given by telegram, telex, or telecopier shall be deemed to have
been given when sent, if properly addressed to the party to whom sent, at its
address, as aforesaid; <U>provided</U>, that without affecting the effectiveness
of any such electronic transmission, the sender shall be expected to extend the
courtesy of telephonic notice to the recipient of such electronic transmission. </P>

     <P  ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.4   Governing  Law.  This
Agreement  and each Note shall be a contract made under and governed by the laws
of the State of Washington.</P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.5 <U>Counterparts</U>. This
Agreement may be executed in any number of counterparts and by the different
parties on separate counterparts and each such counterpart shall be deemed to be
an original, but all such counterparts shall together constitute but one and the
same Agreement. </P>

     <P  ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.6  Effective  Date.  This
Agreement shall become effective on the Effective Date.</P>

         14.7     Assignments and Participations Granted by Banks.
                  -----------------------------------------------

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.7.1 <U>Participations</U>. Any
Bank may, without the consent of the Company, at any time sell to one or more
banks or other financial institutions (each a &#147;<U>Participant</U>&#148;)
participating interests in any Loan owing to such Bank, any Note held by such
Bank, the Commitment of such Bank hereunder, and any other interest of such Bank
hereunder. After any such sale, each Bank shall notify the Company thereof. In
the event of any such sale by a Bank of a participating interest to a
Participant, such Bank&#146;s obligations under this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of its Note, if any, for all purposes
under this Agreement, and the Company and the Administrative Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank&#146;s rights and obligations under this Agreement. Any agreement pursuant
to which a Bank may grant such a participating interest shall provide that such
Bank shall retain the sole right and responsibility to enforce the obligations
of the Company hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement;
<U>provided</U> that such participation agreement may provide that such Bank
will not agree to any modification, amendment or waiver of this Agreement which
pursuant to <U>Section 14.1</U> requires the consent of all Banks without the
consent of the Participant; <U>provided</U> <U>further</U> that such Participant
shall be bound by any waiver, amendment or other decision that all Banks shall
be required to abide by pursuant to a vote by Required Banks. Subject to the
provisions of <U>Section 14.7.3</U>, the Company agrees that each Participant
shall, to the extent provided in its participation agreement, be entitled to the
benefits of <U>Sections 8.1, 8.4</U> and <U>8.5</U> with respect to its
participating interest. An assignment or other transfer which is not permitted
by <U>Sections 14.7.2</U> and 14.7.5 below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this <U>Section 14.7.1</U>. </P>

                   <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.7.2   Assignments.</p>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Any Bank may at any time sell
to one or more Eligible Institutions (each an &#147;<U>Assignee</U>&#148;) all
or a portion of its rights and obligations under this Agreement and the Notes
with the consent of the Company, provided no consent of the Company shall be
required following an Event of Default or while an Unmatured Event of Default
exists. Each Assignee shall assume all such rights and obligations pursuant to
an Assignment and Assumption Agreement executed by such Assignee, such
transferor Bank and the Company. In no event shall (i)&#160;any Commitment of a
transferor Bank (together with the Commitment of any affiliate of such Bank),
after giving effect to any sale pursuant to this <U>Section 14.7.2</U>, be less
than $10,000,000, or (ii)&#160;any Commitment of an Assignee (together with the
Commitment of any affiliate of such Assignee), after giving effect to any sale
pursuant to this <U>Section 14.7.2</U>, be less than $10,000,000, except in each
case as may result upon the transfer by a Bank of its Commitment in its
entirety. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) So long as no Event of Default
or Unmatured Event of Default has occurred and is continuing, no interest may be
sold by a Bank pursuant to this <U>Section 14.7.2</U> without the prior written
consent of the Company and the Administrative Agent, which shall not be
unreasonably withheld. The withholding of consent by the Company shall not be
deemed unreasonable if based solely upon the Company&#146;s desire to (i)
balance relative loan exposures to such Eligible Assignee among all credit
facilities of the Company or (ii) avoid payment of any additional amounts
payable to such Assignee under <U>Sections 8.1</U>, <U>8.4</U>, and <U>8.5</U>
which would arise from such assignment. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Upon (i)&#160;execution of an
Assignment and Assumption Agreement, (ii)&#160;delivery by the transferor Bank
of an executed copy thereof, together with notice that the payment referred to
in clause (iii) below shall have been made, to the Company and the
Administrative Agent, (iii)&#160;payment by such Assignee to such transferor
Bank of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee and (iv) if the Assignee is organized under the laws of
any Jurisdiction other than the United States or any state thereof, evidence
satisfactory to the Administrative Agent and the Company of compliance with the
provisions of <U>Section 14.7.5</U>, such Assignee shall for all purposes be a
Bank party to this Agreement and shall have all the rights and obligations of a
Bank under this Agreement to the same extent as if it were an original party
hereto with a Commitment as set forth in such Assignment and Assumption
Agreement, and the Transferor Bank shall be released from its obligations
hereunder to a correspondent extent, and no further consent or action by the
Company, the Banks or the Administrative Agent shall be required to effectuate
such transfer. Each Assignee shall be bound by any waiver, amendment or other
decision that all Banks shall be required to abide by pursuant to a vote by
Required Banks. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Upon the consummation of any
transfer to an Assignee pursuant to this <U>Section 14.7.2</U>, the transferor
Bank, the Administrative Agent and the Company shall make appropriate
arrangements so that, if requested by the transferor Bank or the Assignee, a new
Note or Notes shall be delivered from the Company to the transferor Bank and/or
such Assignee. In connection with any such assignment, the Assignee or the
transferor Bank shall pay to the Administrative Agent an administrative fee for
processing such assignment in the amount of $3,500. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.7.3 <U>No Increased Costs</U>.
No Assignee, Participant or other transferee (including any successor Applicable
Lending Office) of any Bank&#146;s rights shall be entitled to receive any
greater payment under <U>Section 8.1</U>, <U>8.4</U>, or <U>8.5</U> than such
Bank would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Company&#146;s prior written consent or by
reason of the provisions of <U>Sections 8.1</U> or <U>8.3</U> requiring such
Bank to designate a different Applicable Lending office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.7.4 <U>Share Information</U>.
Each Bank may, upon the written consent of the Company, which consent shall not
be unreasonably withheld, disclose to any Participant or Assignee (each a
&#147;<U>Transferee</U>&#148;) and any prospective Transferee any and all
financial information in such Bank&#146;s possession concerning the Company that
has been delivered to such Bank by the Company pursuant to this Agreement or
that has been delivered to such Bank by the Company in connection with such
Bank&#146;s credit evaluation prior to entering into this Agreement, subject in
all cases to agreement by such Transferee or prospective Transferee to maintain
the confidentiality of such information. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.7.5 <U>No Withholding Tax</U>.
If pursuant to <U>Section 14.7.2</U>, any interest in this Agreement or any Note
is transferred to any Assignee that is organized under the laws of any
jurisdiction other than the United States or any state thereof, the transferor
Bank shall cause such Assignee, concurrently with the effectiveness of such
transfer, (i)&#160;to represent to the transferor Bank (for the benefit of the
transferor Bank, the Administrative Agent and the Company) that under applicable
law and treaties no taxes will be required to be withheld by the Administrative
Agent, the Company or the transferor Bank with respect to any payments to be
made to such Assignee in respect of the Loans and (ii) to furnish to each of the
Transferor Bank, the Administrative Agent and the Company two duly completed
copies of the duly executed Assignment and Assumption Agreement substantially in
the form of <U>Exhibit C</U> hereto. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.7.6 <U>Pledge to Federal
Reserve Bank</U>. Notwithstanding any provision of this <U>Section </U>14.7 to
the contrary, any Bank may assign or pledge any of its rights and interests in
the Loans to a Federal Reserve Bank without the consent of the Company. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.8 <U>Successors and
Assigns</U>. This Agreement shall be binding upon the Company, the Banks, and
the Administrative Agent and their respective successors and assigns, and shall
inure to the benefit of the Company, the Banks, and the Administrative Agent and
their respective successors and assigns; <U>provided</U>, <U>however</U>, that
the Company may not assign any of its rights or obligations hereunder without
the consent of all of the Banks. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.9 <U>Indemnification of Banks
and Agents</U>. The Company agrees to indemnify and hold harmless each Agent,
Bank, and their officers, directors, employees, and agents from any liability,
loss, or expenses incurred thereby in connection with this Agreement or arising
out of the Company&#146;s use of the proceeds of the Loans, provided that the
Company shall not be liable for any of the foregoing to the extent they arise
from gross negligence, willful misconduct or knowing violations of law by such
Agent(s) and/or Bank(s). </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.10 <U>Waiver of Jury Trial</U>.
The Company, Agents and Banks each waives any right to a trial by jury in any
action or proceeding to enforce or defend any rights under this Agreement, the
Notes, and all other instruments or documents provided for herein or delivered
or to be delivered hereunder or in connection herewith, and agrees that any such
action or proceeding shall be tried before a court and not before a jury. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.11 <U>Entire Agreement</U>.
This Agreement represents the entire agreement among the parties with respect to
the subject matter hereof and supersedes and cancels all other prior agreements
and understandings, whether written or oral, of the parties in connection with
such subject matter. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.12 <U>Severability</U>. The
illegality or unenforceability of any provision of this Agreement or any Note or
any agreement required hereunder shall not in any way affect or impair the
legality or enforceability of the remaining provisions of this Agreement, such
Note or other agreement required hereunder. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delivered at Seattle, Washington,
as of the day and year first above written. </P>

<P ALIGN="LEFT"><B>COMPANY:</B></P>

<PRE>
                  <B>PUGET SOUND ENERGY COMPANY</B>, the Washington corporation
                             surviving the merger of WECO and Puget by

WASHINGTON ENERGY         and              PUGET SOUND POWER
COMPANY                                    &amp; LIGHT COMPANY


/s/ James P. Torgerson                       /s/ Donald E. Gaines
---------------------------                 ----------------------
By:  James P. Torgerson                     By:  Donald E. Gaines
Title:  Executive Vice President and CFO    Title: Treasurer

Address for Notices:                        Address for Notices:
(prior to Effective Date)                   (pre and post Effective Date)
815 Mercer Street                           411 108th Avenue, N.E.
Seattle, WA 98109                           Bellevue, Washington 98004
Attention:     Wayne Hays                   Attention:  Robert P. Bariletti
Telephone:     (206) 224-2122               Telephone: (206) 462-3751
Telecopier:    (206) 521-5143               Telecopier: (206) 462-3515

ADMINISTRATIVE AGENT:
BANK OF AMERICA NW, N.A. d/b/a
SEAFIRST BANK as Administrative Agent


/s/ Dora A. Brown
------------------------------
By:  Dora Brown
Its:  Agency Officer
Address for Notices:
Seafirst Agency Services
701 Fifth Avenue, 16th Floor
Seattle, Washington 98104
Attention:  Dora Brown
Telephone:  (206) 358-0101
Telecopier:  (206) 358-0971

BANKS:
BANK OF AMERICA NW, N.A. d/b/a
SEAFIRST BANK in its individual capacity


/s/ David A. Dehlendorf
---------------------------------
By:  David A. Dehlendorf
Title:  Vice President

Address for Notices and Domestic Office:
Northwest National Division
701 Fifth Avenue, 12th Floor
Seattle, Washington 98104

Attention:  David A. Dehlendorf
Telephone:  (206) 358-3034 Eurodollar Office:
Telecopier:  (206) 358-3113         701 Fifth Avenue, 12th Floor
                                            Seattle, Washington 98104

NATIONSBANK OF TEXAS, N.A.


/s/ Curtis L. Anderson
------------------------------------
By:  Curtis L. Anderson

Title:  Senior Vice President

Address for Notices and Domestic Office:

901 Main Street, Floor 64
Dallas, TX  75202

Attention:  Curtis L. Anderson
Telephone:  (214) 508-1290
Telecopier:  (214) 508-3943

U.S. BANK OF WASHINGTON, N.A.



/s/ Peter Bentley
---------------------------
By:  Peter Bentley
Title:  Vice President

Address for Notices and Domestic Office:
1420 Fifth Avenue, Floor 11
Seattle, WA  98101

Attention:  Wade Black

Telephone:  (206) 587-5234
Telecopier:  (206) 587-5259

THE FIRST NATIONAL BANK OF CHICAGO



/s/ [undecipherable]
------------------------------------
By:  [undecipherable]
Title:  [undecipherable]

Address for Notices and Domestic Office:

One First National Plaza, Suite 0363
Chicago, IL 60670

Attention:  Thomas Cheng

Telephone:  (312) 732-7822
Telecopier:  (312) 732-3055

ABN AMBRO BANK N.V., SEATTLE BRANCH
by:  ABN AMRO NORTH AMERICA, INC., as AGENT



/s/ James J. Rice                   /s/ Lee-Lee Miao
---------------------------         -----------------------------------
By:  James J. Rice                          By:  Lee-Lee Miao
Title:  Vice President and Director         Title:  Vice President and Director

Address for Notices and Domestic Office:

One Union Square, Suite 2323
600 University Street
Seattle, WA 98101

Telephone:  (206) 587-2360
Telecopier:  (206) 682-5641

WELLS FARGO BANK, N.A.



/s/ Adrienne Stone
------------------------------------
By:  Adrienne Stone
Title:  Vice President

Address for Notices and Domestic Office:

999 Third Avenue, Floor 11
Seattle, WA 98104

Telephone:  (206) 292-3397
Telecopier:  (206) 292-3120

THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY



/s/ Shusei Nagai
---------------------------
By:  Shusei Nagai
Title:  General Manager

Address for Notices and Domestic Office:

Steve Arce
350 South Grand Avenue, Suite 1500
Los Angeles, CA  90071

Telephone:  (213) 893-6453
Telecopier:  (213) 488-9840

BANK OF MONTREAL



/s/ John K. Harche
------------------------------------
By:  John K. Harche
Title:  Director

Address for Notices and Domestic Office:

115 South LaSalle Street, 11th Floor
Chicago, IL  60603

Telephone:  (312) 750-3885
Telecopier:  (312) 750-4304

CANADIAN IMPERIAL BANK OF COMMERCE



/s/ Peter R. Saggau
------------------------------------
By:  Peter R. Saggau
Title:  Director

Address for Notices and Domestic Office:

200 West Madison, Suite 2300
Chicago, IL 60606

Telephone:  (312) 855-3252
Telecopier:  (312) 750-0927

BANCO DI ROMA



/s/ Thomas C. Woodruff                      /s/ Richard G. Dietz
------------------------------------        --------------------------------
By:  Thomas C. Woodruff                     Richard G. Dietz
         97469                                       97271

Address for Notcies and Domestic Office:

1 Montgomery Street, Suite 2200
San Francisco, CA 94104

Telephone:  (415) 765-8226
Telecopier:  (415) 433-6725

MELLON BANK, N.A.



/s/ A. J. Sabatelle
------------------------------------
By:  A. J. Sabatelle
Title:  First Vice President

Address for Notices and Domestic Office:

500 Grant Avenue, Room 151-4425
Pittsburgh, PA 15228

Telephone:  (412) 236-2784
Telecopier:  (412) 234-8888

THE BANK OF NEW YORK



/s/ Daniel T. Gates
------------------------------------
By:  Daniel T. Gates
Title:  Vice President

Address for Notices and Domestic Office:

The Energy Industries Division
1 Wall Street, Floor 19
New York, NY 10286

Telephone:  (212) 635-7889
Telecopier:  (212) 635-7923/7924/7552

THE CHASE MANHATTAN BANK



/s/ Michiel V.M. Van Der Voort
--------------------------------------------
By:  Michiel V.M. Van Der Voort
Title:  Vice President

Address for Notices and Domestic Office:

1 Chase Manhattan Plaza, Floor 3
New York, NY 10081

Telephone:  (212) 552-6973
Telecopier:  (212) 552-6276

KEY BANK OF WASHINGTON



/s/ Barry J. Booher
------------------------------------
By:  Barry J. Booher
Title:  Vice President

Address for Notices and Domestic Office:

700 Fifth Avenue, Floor 48
P.O. Box 90
Seattle, WA 98111-0090

Telephone:  (206) 685-6029
Telecopier:  (206) 684-6035

COMERICA BANK\



/s/ Dirk A. Price
---------------------------
By:  Dirk A. Price
Title:  Vice President

Address for Notices and Domestic Office:

1920 Main Street, Suite 1150
Irvine, CA 92714

Telephone:  (714) 476-1933
Telecopier:  (714) 476-1222

</PRE>


<P ALIGN="LEFT"><B>Schedule 1</B></P>

<P ALIGN="LEFT"><B>PUGET SOUND ENERGY COMPANY</B></P>

<PRE>
============================================================
                                      Pricing Grid
============================================================
                                In Basis Points Per Annum
============================================================

PRICING LEVEL       LEVEL  LEVEL  LEVEL  LEVEL   LEVEL
                    I      II     III    IV      V
                    ------ ------ ------ ------- --------
------------------- ------ ------ ------ ------- --------
LIBOR MARGIN        22.5   25.0   30.0   35.0    47.5
                    ------ ------ ------ ------- --------
------------------- ------ ------ ------ ------- --------
BASE RATE MARGIN    0.0    0.0    0.0    0.0     0.0
------------------- ------ ------ ------ ------- --------
                    ------ ------ ------ ------- --------
COMMITMENT FEE      7.5    8.0    9.0    12.5    15.0
=================== ====== ====== ====== ======= ========

Level I: A or A2 or higher
Level II:         A- or A3
Level III:        BBB + or Baa1
Level IV:         BBB or Baa2
Level V: BBB- or Baa3 or lower
</PRE>
     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ratings are determined by the
Standard &amp; Poor&#146;s Corporation and Moody&#146;s Investor&#146;s Service
secured long term debt ratings of the Company. Should the rating services
ratings for the Company be single split-rated, the higher of the ratings will
apply. Should the ratings for the Company be double-split rated, the median of
the ratings will apply. </P>



<P ALIGN="LEFT"><B>EXHIBIT A</B></P>

<P ALIGN="LEFT"><B>FORM OF NOTE</B></P>

<P>$____________________  </P>
<P>Seattle, Washington</P>

<p>__________________________, 199__</P>

<P ALIGN="LEFT">FOR VALUE RECEIVED, the undersigned hereby promises to pay to
the order of
<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>
at the principal office of
<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>
in
<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>
the principal amount of
<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>
dollars ($<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>),
or so much as may be outstanding (as shown in the records of the payee, or at
the payee&#146;s option on the schedule attached hereto and any continuation
thereof) on the Termination Date and with respect to each Eurodollar Loan, the
principal amount of each such Loan at the expiration of the Loan Period thereof. </P>

<P ALIGN="LEFT">The undersigned further promises to pay interest on the unpaid
principal amount of each Loan from the date of such Loan until such Loan is paid
in full, payable at such rate(s) and at such time(s) as provided in the Credit
Agreement hereinafter referred to. </P>

<P ALIGN="LEFT">Presentment, demand, protest, notice of dishonor, and notice of
intent to accelerate are hereby waived by the undersigned. </P>

<P ALIGN="LEFT">This Note is one the Notes referenced in, and evidences
indebtedness incurred under, and is subject to the terms and provisions of, a
credit agreement dated as of
<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>
and, if amended, all amendments thereto among the undersigned, certain banks
(including the payee), and Bank of America N.W., N.A doing business as Seafirst
Bank, as Administrative Agent (the &#147;<U>Credit Agreement</U>&#148;).
Reference is hereby made to the Credit Agreement said for a statement of the
terms and provisions, including those under which the Loans evidenced by this
Note may be paid prior to their respective due dates or their respective due
dates accelerated. Terms used but not otherwise defined herein shall have the
meaning defined in the Credit Agreement when used herein. </P>

<P ALIGN="LEFT">In addition to and not in limitation of the foregoing and the
provisions of the Credit Agreement, the undersigned further agrees, subject only
to any limitation imposed by applicable law, to pay all expenses, including
reasonable attorneys&#146; fees and legal expenses, incurred by the holder of
this Note in endeavoring to collect any amounts payable hereunder which are not
paid when due, whether by acceleration or otherwise. </P>

<P ALIGN="LEFT">This Note is made under and governed by the laws of the State of
Washington. </P>

<P>PUGET SOUND ENERGY COMPANY</P>




<P>By:
   --------------------------------</P>
<P>Title:
      -----------------------------</P>



<P ALIGN="LEFT"><B>Schedule Attached to Note</B></P>

Schedule Attached to Note dated ___________, ____________ of Puget Sound Energy Company payable to the
order of
<PRE>
                            Date and Amount
                            of Repayment or
       Date and              Prepayment of                              Unpaid Principal         Notation Made
    Amount of Loan                  Loan            Loan Period                Balance                   By




                                                1.  FLOATING RATE LOANS





                                                 2.  EURODOLLAR LOANS




</PRE>
<P ALIGN="LEFT"><B>EXHIBIT B</B></P>

<P ALIGN="LEFT"><B>FORM OF</B></P>

<H5 ALIGN="CENTER">ADJUSTMENT CERTIFICATE</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS CERTIFICATE is delivered pursuant
to <U>Section 2.6</U> of the Credit Agreement dated as of
<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>
(together with all amendments, if any, thereafter from time to time made
thereto, the <U>&#147;Credit Agreement</U>&#148;), among Puget Sound Energy
Company, the new name of the Washington corporation which shall survive the
merger of Puget Sound Power &amp; Light Company and Washington Energy Company,
various Banks, and Bank of America NW, N.A. doing business as Seafirst Bank, as
Administrative Agent, their successors and assigns. Unless otherwise defined
herein, terms used herein have the same meanings provided in the Credit
Agreement. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of the undersigned hereby
agrees and certifies that: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[(1) The Company has permanently
[terminated] [reduced] the Commitment(s) of [<I>insert name of each Retiring
Bank</I>],<I> </I>with the effect that the remaining aggregate Commitment for
all of the Banks is reduced to
<U>$&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>.<SUP>1</SUP> </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[(2) [Each] [The] Consenting Bank
listed below under the caption &#147;<U>Consenting Bank</U>&#148; has indicated
its desire to assume all or a portion of the Commitment(s) of one or more
Retiring Banks in the amount set forth opposite [such] [the] Consenting
Bank&#146;s name in the column captioned &#147;<U>Amount of Commitment(s)
Assumed</U>&#148; on the signature page hereof.]<SUP>2</SUP> </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[(3) [Each] [The] Replacement Bank
listed below under the caption &#147;<U>Replacement Bank(s)</U>&#148; has
indicated its desire to assume all or a portion of the Commitment(s) of one or
more Retiring Bank(s) in the amount set forth opposite [such] [the] Replacement
Bank&#146;s name in the column captioned &#147;<U>Amount of
Commitment(s)</U>&#148; Assumed on the signature page hereof.]<SUP>3</SUP> </P>

     <P  ALIGN="LEFT"><SUP>1</SUP>  Insert if  clause  (i) of  paragraph  (a) of
Section 2.6 of the Credit Agreement is applicable.</P>

     <P  ALIGN="LEFT"><SUP>2</SUP>  Insert if  clause  (ii) of  paragraph  (a) of
Section 2.6 of the Credit Agreement is applicable.</P>

     <P  ALIGN="LEFT"><SUP>3</SUP>  Insert if  clause  (iii) of  paragraph  (a) of
Section 2.6 of the Credit Agreement is applicable.</P>

<P ALIGN="LEFT"><B>BANK OF AMERICA NW, N.A. d/b/a SEAFIRST BANK, as</B></P>
<P ALIGN="LEFT"><B>Administrative Agent</B></P>

<P>By
  -------------------------------------------------------</P>
<P>Title
     ----------------------------------------------------</P>

<PRE>
                                 CONSENTING BANK(S)
Amount of                Amount of
Commitment(s) Assumed    Substitute Loan(s)  NAME OF CONSENTING BANK
---------------------    -----------------
                                             By
                                             Title
                                             NAME OF CONSENTING BANK
                                             By
                                             Title



         *        The certificate is to be executed by the Company, the Administrative Agent, and (i) each
Bank that is not a Retiring Bank if clause (i) of paragraph (a) of Section 2.6 of the Credit Agreement is
                                                                   -----------
applicable, (ii) each Consenting Bank if clause (ii) of paragraph (a) of Section 2.6 of the Credit Agreement
                                                                         -----------
is applicable, and (iii) each Replacement Bank if clause (iii) of paragraph (a) of Section 2.6 of the Credit
                                                                                   -----------
Agreement is applicable.
                                              REPLACEMENT BANK(S)
Amount of                Amount of
Commitment(s) Assumed    Substitute Loan(s)   NAME OF REPLACEMENT BANK
                                              By
                                              Title
                                              Address for Notices and Domestic
                                              Office:



                                              Eurodollar Office:





Amount of                Amount of
Commitment(s) Assumed    Substitute Loan(s)   NAME OF REPLACEMENT BANK
                                              By
                                              Title

                                              Address for Notices and Domestic
                                              Office:




                                              Eurodollar Office:


</PRE>
<CENTER><P>ANNEX I TO ADJUSTMENT CERTIFICATE</P></CENTER>



<P>[A.      The Termination Date has been extended to______________,______. (4)</P>

<P>[B.      The Non-Consenting Banks are listed below:]a</P>

     <P>[C.  The Banks which have been given  notice by the Company  pursuant to
Section 2.5 of the Credit Agreement are listed below: (5)</P>

<P ALIGN="LEFT">____. After giving effect to the transactions occurring on the
Adjustment Date referred to in the Adjustment Certificate to which this Annex I
is attached, each of the Banks will have the Commitment amount set forth below
opposite its name in the column captioned &#147;<U>Amount of
Commitment</U>:&quot; </P>
<PRE>

                              Amount of

Name of Bank                  Commitment

Total

</PRE>
     <P>(4)  Insert  if  the  Adjustjment  Certificate  is  being  furnished  in
connection with the removal of Non-Consenting Banks.</P>

     <P>(5) Insert if the Adjustment  Certificate is being  furnished in connection
with the removal of Banks pursuant to Section 2.5 of the Credit Agreement.</P>

     <P>(6) Insert if the aggregate  amount of the Commitments  after giving effect
of the transactions occurring on the Adjustment Date.
</P>

<H5 ALIGN="CENTER">FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT</H5>

<P>Dated ____________      </P>



     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is made to that certain
Credit Agreement dated as of ____________ by and among PUGET SOUND ENERGY
COMPANY, a Washington corporation (the &#147;<U>Company</U>&#148;), the Banks
party thereto, and BANK OF AMERICA NW, N.A. doing business as SEAFIRST BANK, as
administrative agent for the Banks (the &#147;<U>Administrative
</U>Agent&#148;), their successors and assigns (as it may be amended,
supplemented, restated or otherwise modified from time to time, the
&#147;<U>Credit Agreement</U>&#148;; capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined) pursuant to which
<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>
(the &#147;<U>Assignor</U>&#148;) has committed to make loans (the
&#147;<U>Loans</U>&#148;) to the Company. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Assignor and
<U>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</U>
(the &#147;<U>Assignee</U>&#148;) agree as follows: </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to [all/a portion] of the Assignor&#146;s rights
and obligations under the Credit Agreement as of the date hereof which
represents the percentage interest specified in Section 1 of Schedule 1 hereto
of all outstanding rights and obligations under the Credit Agreement (the
&#147;<U>Assigned Interest</U>&#148;), including, without limitation, the
percentage interest specified in Section 1 of Schedule 1 hereto of the
Assignor&#146;s Commitments and the Loans owing to the Assignor. After giving
effect to such sale and assignment, the Assignee&#146;s Commitments and the
amount of the Loans owing to the Assignee will be as set forth in Section 2 of
Schedule 1 hereto. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The sale and assignment
contemplated hereby shall become effective as of the date upon which (i) this
Assignment and Acceptance Agreement has been executed by the Assignor and
Assignee, (ii)&#160;the Assignee has paid to the Assignor, in same day funds, at
such address and account as the Assignor shall advise the Assignee, $_________,
and (iii)&#160;the applicable conditions contained in <U>Section 14.7.2</U> of
the Credit Agreement have been satisfied which said Effective Date set forth in
<U>Section 3</U> of Schedule 1 hereto. From and after the Effective Date, the
Assignor agrees that the Assignee shall be entitled to all rights, powers and
privileges of the Assignor under the Credit Agreement to the extent of the
Assigned Interest, including, without limitation, (a)&#160;the right to receive
all payments in respect of the Assigned Interest for the period from and after
the Effective Date, whether for the period from and after the Effective Date,
increased costs, additional amounts or otherwise; (b)&#160;the right to vote and
to instruct the Administrative Agent under the Credit Agreement according to its
pro rata share based on the Assigned Interest; (c) the right set-off and to
appropriate and apply deposits of the Company as set forth in the Credit
Agreement; and (d) the right to receive notices, requests, demands and other
communications. The Assignor agrees that it will promptly remit to the Assignee
any amount received by it in respect of the Assigned Interest (whether from the
Company, the Agent or otherwise) in the same funds in which such amount is
received by the Assignor. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Assignor (i) represents and
warrants that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; (ii)&#160;other than as provided herein, makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability. genuineness, sufficiency
or value of the Credit Agreement or any other instrument or document furnished
pursuant thereto; and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto.
Except as specified in this <U>Section 3</U>, the assignment of the Assigned
Interest contemplated hereby shall be without recourse to the Assignor. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Assignee (i)&#160;confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements referred to therein and such other documents and
information as it has deemed appropriate to make its own credit analysis and
purchase the Assigned Interest; (ii)&#160;agrees that it will, independently and
without reliance upon the Assignor, the Administrative Agent or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii)&#160;represents and warrants that it is an
Eligible Assignee as required by <U>Section 14.7.2</U> of the Credit Agreement;
(iv) appoints and authorizes the Administrative Agent to take such action as the
Administrative Agent, on its behalf and to exercise such powers under the Credit
Agreement as are delegated to the Administrative Agent by the terms thereof,
together with such powers which are reasonably incidental thereto; and
(v)&#160;agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Assignment may be executed
in any number of counterparts and by different parties in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same instrument. </P>

         6.       THIS ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF WASHINGTON WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties
hereto have caused this Assignment to be executed by their respective officers
thereunto duly authorized, as of the date first above written, such execution
being made on Schedule 1 hereto. </P>

<P ALIGN="center"><B>Schedule 1</B></P>

<P ALIGN="CENTER"><B>to</B></P>

<P ALIGN="CENTER"><B>Assignment and Acceptance Agreement</B></P>

<H5 ALIGN="CENTER">Dated _________, 19___</H5>

<P>Section 1.</P>


<P>Percentage Interest all outstanding rights and
obligations under the Credit Agreement:        </P>
<PRE>                                                     _________________%
</PRE>
<P>Percentage Interest of Assignor's Commitments
and Loans owing to Assignor under the Credit Agreement being assigned to
Assignee hereby:</P>
<PRE>                                                     _________________%
</PRE>
<P>Section 2.</P>

<P>Assignee's Commitment:</P>
<PRE>                                                      $_______________
</PRE>

<P>Aggregate Outstanding Principal Amount of Loans owing to the Assignee:</P>

<PRE>                                                      $_______________
</PRE>


<P>Section 3.</P>


<P>Effective Date ___________________, 19___</P>

<P>[NAME OF ASSIGNOR]</P>


<P>By:___________________________________</P>
   <P> Title:</P>


<P>[NAME OF ASSIGNEE]</P>

<P>By:___________________________________</P>
   <P> Title:</P>


<P>CONSENTED TO AND ACKNOWLEDGED</P>
<P>THIS _________ DAY OF ___________ , 19    </P>


<P>BANK OF AMERICA NW, N.A.,</P>
<P>as the Administrative Agent under the Credit Agreement</P>

<P>By:___________________________________</P>
   <P> Title:</P>



<H5 ALIGN="CENTER">AMENDMENT NUMBER ONE TO CREDIT AGREEMENT</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS AMENDMENT NUMBER ONE TO
CREDIT AGREEMENT (the &#147;Amendment&#148;) is made this 22d day of December,
1997, by and among PUGET SOUND ENERGY COMPANY (successor by merger to both Puget
Sound Power&#160;&amp; Light Company and Washington Energy Company, each a
Washington corporation), a Washington corporation (the &#147;Company&#148;), the
undersigned banks (collectively, the &#147;Banks&#148;) and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION doing business as Seafirst Bank
(successor by merger to Bank of America NW, N.A.), as Administrative Agent,
FIRST CHICAGO CAPITAL MARKETS, INC., as Syndication Agent, and NATIONSBANK OF
TEXAS, N.A., as Documentation Agent (collectively, the &#147;Agents&#148;). </P>

<H5 ALIGN="CENTER">RECITALS</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. The Company, the Banks and the
Agents are parties to that certain Credit Agreement dated as of December 18,
1996 (as the same may be amended, modified or extended from time to time the
&#147;Credit Agreement&#148;) and the related instruments and documents
described therein. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. The revolving loan facility
under the Credit Agreement is currently scheduled to expire on February 13,
2002. The Company has requested, pursuant to Section&#160;2.4(a) of the Credit
Agreement, that the Banks extend the Termination Date until February 13, 2003. </P>

         C.       One of the Banks, ABN AMRO Bank, N.V., has declined to consent to the extension of the
Termination Date.  The Company, pursuant to Section 2.5 of the Credit Agreement, has notified ABN AMRO Bank,
N.V. that it has elected to remove ABN AMRO Bank, N.V. as a party to the Credit Agreement.  The Company has,
pursuant to Section 2.6(a)(i) of the Credit Agreement, further elected to permanently reduce the aggregate
amount of the Commitments by an amount equal to ABN AMRO Bank, N.V.'s Commitment.

         D.       The parties now wish to amend the Credit Agreement to extend the Termination Date, remove
ABN AMRO Bank, N.V. as a party to the Credit Agreement and reduce the aggregate amount of the Commitments,
subject to the terms and conditions set forth herein.

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW, THEREFORE, the parties agree
as follows: </P>

<H5 ALIGN="CENTER">AGREEMENT</H5>

         1.       Definitions.  Capitalized terms used herein and not otherwise defined shall have the
meaning given in the Credit Agreement.

         2.       Amendment to Credit Agreement.  In Section 1 of the Credit Agreement, the definition of
"Termination Date" is hereby amended and restated to read as follows:

          <TABLE WIDTH="100%" CELLPADDING="0" CELLSPACING="0">
          <TR VALIGN="TOP">
               <TD WIDTH="6%">&nbsp;</TD>
               <TD><P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Termination
          Date</U> means February 13, 2003 and thereafter each succeeding anniversary to
          which the Commitments shall have been extended pursuant to
          <U>Section&#160;2.4</U>. </P></TD>
          </TR>
          </TABLE>
          <BR>

         3.       Adjustment Certificate.  This Amendment shall constitute the Adjustment Certificate
required by Section 2.6(b) of the Credit Agreement, and in connection therewith, the parties agree as
follows:

                  (a)      The Company has permanently terminated the Commitment of ABN AMRO Bank,
                           N.V., with the effect of the remaining aggregate Commitment for all Banks
                           is reduced to $375,000,000.

                  (b)      The date on which the aggregate Commitments of the Banks was reduced was
                           December 22, 1997.

                  (c)      After giving effect to the termination of the Commitment of ABN AMRO
                           Bank, N.V., each of the Banks will have the Commitment amount set forth
                           opposite its name in the column captioned "Amount of Commitment:"

<PRE>

--------------------------------------------------- ----------------------

                          Bank                       Amount of Commitment
                          ----                       --------------------
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

Bank of America National Trust and Savings Assoc.        $ 50,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

The First National Bank of Chicago                       $ 50,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

Nations Bank of Texas, N.A.                              $ 50,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

The Bank of New York                                     $ 25,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

The Industrial Bank of Japan, Limited                    $ 25,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

U.S. Bank National Assoc.                                $ 25,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

Bank of Montreal                                         $ 25,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

The Chase Manhattan Bank                                 $ 25,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

Wells Fargo Bank, N.A.                                   $ 25,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

Canadian Imperial Bank of Commerce                       $ 15,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

KeyBank National Assoc.                                  $ 15,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

Banca di Roma                                            $ 15,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

Comerica Bank                                            $ 15,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

Mellon Bank                                              $ 15,000,000
--------------------------------------------------- ----------------------
--------------------------------------------------- ----------------------

         TOTAL                                           $375,000,000
--------------------------------------------------- ----------------------
</PRE>
         4.       Conditions to Effectiveness.  Notwithstanding anything contained herein to the contrary,
this Amendment shall not become effective until each of the following conditions is fully and simultaneously
satisfied:

                  (a)      Delivery of Amendment.  The Company, the Agents and each Bank shall have executed
                           and delivered counterparts of this Amendment to the Agent.

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)</B> <B>Representations
True; No Default.</B> The representations of the Company as set forth in
Section&#160;9 of the Credit Agreement shall be true on and as of the date of
this Amendment with the same force and effect as if made on and as of this date.
No Event of Default and no event which, with notice or lapse of time or both,
would constitute an Event of Default, shall have occurred and be continuing or
will occur as a result of the execution of this Amendment. </P>

                  (c)      Other Documents.  The Agents and the Banks shall have received such other
                           documents, instruments, and undertakings as such Agent or such Bank may reasonably
                           request.

         5.       No Further Amendment.  Except as expressly modified by this Amendment, the Credit Agreement
and the related instruments and documents described therein shall remain unmodified and in full force and
effect and the parties hereby ratify their respective obligations thereunder.

<P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;<B><I>6. Miscellaneous.</I></B></P>

                  (a)      Entire Agreement.  This Amendment comprises the entire agreement of the Company,
                           the Agents and the Banks with respect to the subject matter hereof and supersedes
                           all prior oral or written agreements, representations or commitments.

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>(b)</B> <B>Counterparts.</B>
This Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original, and all of which taken together shall constitute one
and the same Amendment. </P>

                  (c)      Governing Law.  This Amendment and the other agreements provided for herein and
                           the rights and obligations of the parties hereto and thereto shall be construed
                           and interpreted in accordance with the laws of the State of Washington.

<P ALIGN="LEFT"><B>(d) Oral Agreements Not Enforceable.</B></P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><U>ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FOREBEAR FROM ENFORCING
</U></B><U></U> <B><U>REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.</U></B> </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXECUTED AND DELIVERED by the duly
authorized officers of the parties as of the date first above written. </P>

     <HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE>

<PRE>
COMPANY:               PUGET SOUND ENERGY COMPANY, successor by merger to
                       both Puget Sound Power &amp; Light Company and Washington
                       Energy Company



                       By:      /s/ Tommy G. Leong
                          ------------------------
                       Its:     Assistant Treasurer
                            -----------------------



ADMINISTRATIVE AGENT:  BANK OF AMERICA NATIONAL TRUST AND SAVINGS
                       ASSOCIATION doing business as Seafirst Bank,
                       successor by merger to Bank of America NW, N.A.



                       By:
                       Its:



BANKS:                 BANK OF AMERICA NATIONAL TRUST AND SAVINGS
                       ASSOCIATION doing business as Seafirst Bank,
                       successor by merger to Bank of America NW, N.A.



                       By:
                       Its:

                       NATIONS BANK OF TEXAS, N.A.



                       By:
                       Its:

                       U.S. BANK NATIONAL ASSOCIATION, successor by merger
                       to U.S. Bank of Washington N.A.



                       By:
                       Its:

                       THE FIRST NATIONAL BANK OF CHICAGO



                       By:
                       Its:

                       WELLS FARGO BANK, N.A.



                       By:
                       Its:

                       THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES
                       AGENCY



                       By:
                       Its:

                       BANK OF MONTREAL



                       By:
                       Its:

                       CANADIAN IMPERIAL BANK OF COMMERCE



                       By:
                       Its:

                       BANCA DI ROMA



                       By:
                       Its:



                       By:
                       Its:

                       MELLON BANK, N.A.



                       By:
                       Its:

                       THE BANK OF NEW YORK



                       By:
                       Its:

                       THE CHASE MANHATTAN BANK



                       By:
                       Its:

                       KEYBANK NATIONAL ASSOCIATION, successor by merger to
                       Key Bank of Washington



                       By:
                       Its:

                       COMMERICA BANK



                       By:
                       Its:



SYNDICATION AGENT:     FIRST CHICAGO CAPITAL MARKETS, INC.



                       By:
                       Its:



DOCUMENTATION AGENT:   NATIONSBANK OF TEXAS, N.A.



                       By:
                       Its:
</PRE>
<H5 ALIGN="CENTER">ASSIGNMENT AND ACCEPTANCE AGREEMENT</H5>

<H5 ALIGN="CENTER">Dated October 1, 1998</H5>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is made to that certain
Credit Agreement dated <U>December 18, 1996</U>, by and among PUGET SOUND ENERGY
COMPANY, a Washington corporation (the &#147;Company&#146;), the Banks party
thereto, and BANK OF AMERICA NW, N.A. doing business as SEAF1RST BANK, as
administrative agent for the Banks (the &#147;Administrative Agent&#148;), their
successors and assigns (as it may be amended, supplemented, restated or
otherwise modified from time to time, the &#147;Credit Agreement.&#148; Bank of
America NW, N.A. has merged into Bank of America National Trust and Savings
Association, but continues to do business in the State of Washington as
&#147;Seafirst Bank.&#148; References to &#147;Seafirst&#148; or &#147;Bank of
America NW, N.A.&#148; in this Assignment shall mean Bank of America National
Trust and Savings Association, doing business as Seafirst Bank. Capitalized
terms defined therein and not otherwise defined herein being used herein as
therein defined pursuant to which <U>Bank of America National Trust &amp;
Savings Association</U> (the &#147;Assignor&#148;) has committed to make loans
(the &#147;Loans&#148;) to the Company. </P>

         The Assignor and U.S. Bank, N.A. (the "Assignee") agree as follows:
                          ---------------

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, that interest in and to <U>a portion</U> of the Assignor&#146;s rights
and obligations under the Credit Agreement as of the date hereof which
represents the percentage interest specified in Section 1 of Schedule 1 hereto
of all outstanding rights and obligations under the Credit Agreement (the
&#147;Assigned Interest&#148;), including, without limitation, the percentage
interest specified in Section&#160;1 of Schedule&#160;1 hereto of the
Assignor&#146;s Commitments and the Loans owing to the Assignor. After giving
effect to such sale and assignment, the Assignee&#146;s Commitments and the
amount of the Loans owing to the Assignee will be set forth in Section 2 of
Schedule 1 hereto. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The sale and assignment
contemplated hereby shall become effective as of the date upon which
(i)&#160;this Assignment and Acceptance Agreement has been executed by the
Assignor and Assignee, (ii)&#160;the Assignee has paid to the Assignor, in same
day funds, at such address and account as the Assignor shall advise the
Assignee, $<U>0.00,</U> and (iii)&#160;the applicable conditions contained in
Section 14.7.2 of the Credit Agreement have been satisfied which said Effective
Date set forth in Section 3 of Schedule 1 hereto. From and after the Effective
Date, the Assignor agrees that the Assignee shall be entitled to all rights,
powers, and privileges of the Assignor under the Credit Agreement to the extent
of the Assigned Interest, including without limitation (a)&#160;the right to
receive all payments in respect of the Assigned Interest for the period from and
after the Effective Date, whether for the period from and after the Effective
Date, increased costs, additional amounts or otherwise; (b)&#160;the right to
vote and to instruct the Administrative Agent under the Credit Agreement
according to its pro rata share based on the Assigned Interest; (c)&#160;the
right to set-off and to appropriate and apply deposits of the Company as set
forth in the Credit Agreement; and (d)&#160;the right to receive notices,
requests, demands and other communications. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Assignor agrees that it will
promptly remit to the Assignee any amount received by it in respect of the
Assigned Interest (whether from the Company, the Agent or otherwise) in the same
funds in which such amount is received by the Assignor. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Assignor
(i)&#160;represents and warrants that it is the lega1 and beneficial owner of
the interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim; (ii)&#160;other than as provided herein, makes no
representations or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iii)&#160;makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto. Except as specified in this
Section 3, the assignment of the Assigned Interest contemplated hereby shall be
without recourse to the Assignor. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4 The Assignee (i)&#160;confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements referred to therein and such other documents and
information as it had deemed appropriate to make its own credit analysis and
purchase the Assigned Interest; (ii)&#160;agrees that it will, independently and
without reliance upon the Assignor, the Administrative Agent or any other Bank
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii)&#160;represents and warrants that it is an
Eligible Assignee as required by Section 14.7.2 of the Credit Agreement;
(iv)&#160;appoints and authorizes the Administrative Agent to take such action
as the Administrative Agent, on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Administrative Agent by the terms
thereof; together with such powers which are reasonably incidental thereto; and
(v)&#160;agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank. </P>

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Assignment may be executed
in any number of counterparts and by different parties in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute but one and the same instrument. </P>

         6.       THE ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF WASHINGTON WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

     <P ALIGN="LEFT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties
hereto have caused this Assignment to be executed by their respective officers
thereunto duly authorized, as of the date first above written, such execution
being made to Schedule 1 hereto. </P>


<PAGE>


<H5 ALIGN="CENTER">Schedule 1</H5>

<H5 ALIGN="CENTER">to</H5>

<H5 ALIGN="CENTER">Assignment and Acceptance Agreement</H5>

<P ALIGN="LEFT"><B>Dated October 1, 1998</B></P>


<P>Section 1.</P>



         <P>Percentage Interest all outstanding rights
         and obligations under the Credit Agreements:</P>
<PRE>                                                      6,666666667%
                                                      -----------
</PRE>

         <P>Percentage Interest of Assignor's Commitments
         and Loans owing to Assignor under the
         Credit Agreement being assigned to Assignee
         hereby:</P>
<PRE>                                                      6,666666667%
                                                      -----------
</PRE>


<P>Section 2.</P>


         <P>Assignee's Commitment:</P>
<PRE>                                                      $25,000,000.00
                                                      --------------
</PRE>

         <P>Aggregate Outstanding Principal
         Amount of Loans owing to the
         Assignee: </P>
<PRE>                                                      $0.00
                                                      -----
</PRE>


<P>Section 3.</P>


<P>Effective Date:  October 1, 1998</P>


<P>BANK OF AMERICA NATIONAL TRUST &amp; SAVINGS ASSOCIATION, As Assignor </P>



<P>By:  /s/ Gary Tsuyuki</P>
<P>------------------------------------------------</P>
<P>Gary Tsuyuki, MD</P>



<PAGE>



<P> U.S. BANK, N.A., As Assignee</P>



<P> By:    /s/ Wilfred C. Jack    </P>
<P>------------------------------------------------</P>
<P>Wilfred C. Jack, V.P.</P>

<P>CONSENTED TO AND</P>
<P>ACKNOWLEDGED THIS</P>
<P>1 DAY OF October 1998</P>


<P>BANK OF AMERICA NW, N.A.,</P>
<P>as the Administrative Agent under the Credit Agreement</P>



<P>By:      /s/ Carl Fye      </P>
<P>------------------------------------------------</P>
<P>Carl Fye, V.P.</P>


<P>(1)        Insert if clause (i) of paragraph (a) of Section 2.6 of the Credit Agreement is applicable.</P>



<P>(2)        Insert if clause (ii) of paragraph (a) of Section 2.6 of the Credit Agreement is applicable.
</P>


<P>(3)        Insert if clause (iii) of paragraph (a) of Section 2.6 of the Credit Agreement is applicable.
</P>

<P>(4)        Insert if the Adjustment Certificate is being furnished in connection with the removal of Non-Consenting Banks.
</P>

<P>(5)        Insert if the Adjustment Certificate is being furnished in connection with the removal of Banks pursuant to Section&#160;2.5 of the Credit Agreement. </P>

<P>6          Insert the aggregate amount of the Commitments after giving effect of the transactions occurring on the Adjustment Date.</P>
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