RESTATED ARTICLES OF INCORPORATION

                                      OF

                              PUGET ENERGY, INC.

 

 

                                ARTICLE 1. NAME

 

     The name of this corporation is Puget Energy, Inc.

 

                               ARTICLE 2. SHARES

 

2.1  Authorized Capital

 

     The total number of shares which the corporation is authorized to issue is

300,000,000, consisting of 250,000,000 shares of Common Stock having a par value

of $.01 per share and 50,000,000 shares of Preferred Stock having a par value of

$.01 per share. The Common Stock is subject to the rights and preferences of the

Preferred Stock as set forth below.

 

2.2  Issuance of Preferred Stock in Series

 

     The Preferred Stock may be issued from time to time in one or more series

in any manner permitted by law and the provisions of these Articles of

Incorporation, as determined from time to time by the Board of Directors and

stated in the resolution or resolutions providing for its issuance, prior to the

issuance of any shares. The Board of Directors shall have the authority to fix

and determine and to amend, subject to these provisions, the designation,

preferences, limitations and relative rights of the shares of any series that is

wholly unissued or to be established. Unless otherwise specifically provided in

the resolution establishing any series, the Board of Directors shall further

have the authority, after the issuance of shares of a series whose number it has

designated, to amend the resolution establishing such series to decrease the

number of shares of that series, but not below the number of shares of such

series then outstanding.

 

2.3  Designation of Rights and Preferences of Series R Participating Cumulative

     Preferred Stock

 

     The following series of Preferred Stock is hereby designated, which

series shall have the rights, preferences and privileges and limitations set

forth below:

 

     2.3.1  Designation of Series R Participating Cumulative Preferred Stock

 

            The shares of such series shall be designated the "Series R

     Participating Cumulative Preferred Stock" (the "Series R Preferred Stock"),

     par value $0.01 per share. The number of shares initially constituting the

     Series R Preferred Stock shall be 1,000,000; provided, however, if more

     than a total of 1,000,000 shares of Series R Preferred Stock shall be

     issuable upon the exercise of Rights (the "Rights") issued pursuant to the

     Rights Agreement dated as of December 21, 2000 between the Company

 

                                       1

<PAGE>

 

     and Mellon Investor Services LLC, as Rights Agent (the "Rights Agreement"),

     the Company's Board of Directors, pursuant to Section 23B.06.020 of the

     Revised Code of Washington, shall direct by resolution or resolutions that

     Articles of Amendment be properly executed and filed with the Washington

     Secretary of State providing for the total number of shares of Series R

     Preferred Stock authorized for issuance to be increased (to the extent that

     the Restated Articles of Incorporation then permit) to the largest number

     of whole shares (rounded up to the nearest whole number) issuable upon

     exercise of such Rights. In addition, such number of shares may be

     decreased by resolution of the Board of Directors; provided, however, that

     no decrease shall reduce the number of shares of Series R Preferred Stock

     to a number less than the number of shares then outstanding plus the number

     of shares reserved for issuance upon the exercise of outstanding options,

     rights or warrants or upon the conversion of any outstanding securities

     issued by the Company convertible into Series R Preferred Stock.

 

     2.3.2  Dividends and Distributions

 

            (a)  Subject to the prior and superior rights of the holders of

     shares of any other series of Preferred Stock or other class of capital

     stock of the Company ranking prior and superior to the shares of Series R

     Preferred Stock with respect to dividends, the holders of shares of Series

     R Preferred Stock shall be entitled to receive, when, as, and if declared

     by the Board of Directors, out of the assets of the Company legally

     available therefor, quarterly dividends payable in cash on the last day of

     each fiscal quarter in each year, or such other dates as the Company's

     Board of Directors shall approve (each such date being referred to in this

     Designation as a "Quarterly Dividend Payment Date"), commencing on the

     first Quarterly Dividend Payment Date after the first issuance of a share

     or a fraction of a share of Series R Preferred Stock, in an amount per

     share (rounded to the nearest cent) equal to the greater of (i) $.01 and

     (ii) the Formula Number (as hereinafter defined) then in effect times the

     cash dividends then to be paid on each share of Common Stock. In addition,

     if the Company shall pay any dividend or make any distribution on the

     Common Stock payable in assets, securities or other forms of noncash

     consideration (other than dividends or distributions solely in shares of

     Common Stock), then, in each such case, the Company shall simultaneously

     pay or make on each outstanding whole share of Series R Preferred Stock a

     dividend or distribution in like kind equal to the Formula Number then in

     effect times such dividend or distribution on each share of Common Stock.

     As used in this Designation and in the Rights Agreement, the "Formula

     Number" shall be 100; provided, however, that if at any time after December

     29, 2000 the Company shall (i) declare or pay any dividend on the Common

     Stock payable in shares of Common Stock or make any distribution on the

     Common Stock in shares of Common Stock, (ii) subdivide (by a stock split or

     otherwise) the outstanding shares of Common Stock into a larger number of

     shares of Common Stock, or (iii) combine (by a reverse stock split or

     otherwise) the outstanding shares of Common Stock into a smaller number of

     shares of Common Stock, then in each such event the Formula Number shall be

     adjusted to a number determined by multiplying the Formula Number in effect

     immediately prior to such event by a fraction, the numerator of which is

     the number of shares of Common Stock that are outstanding immediately after

     such event

 

                                       2

<PAGE>

 

     and the denominator of which is the number of shares of Common Stock that

     are outstanding immediately prior to such event (and rounding the result to

     the nearest whole number); and provided further, that if at any time after

     December 29, 2000 the Company shall issue any shares of its capital stock

     in a merger, reclassification or change of the outstanding shares of Common

     Stock, then in each such event the Formula Number shall be appropriately

     adjusted to reflect such merger, reclassification or change so that each

     share of Preferred Stock continues to be the economic equivalent of a

     Formula Number of shares of Common Stock prior to such merger,

     reclassification or change.

 

          (b)  The Corporation shall declare a dividend or distribution on the

     Series R Preferred Stock as provided in Section 2.3.2(a) immediately prior

     to or at the same time it declares a dividend or distribution on the Common

     Stock (other than a dividend or distribution solely in shares of Common

     Stock); provided, however, that in the event no dividend or distribution

     (other than a dividend or distribution in shares of Common Stock) shall

     have been declared on the Common Stock during the period between any

     Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend

     Payment Date, a dividend of $.01 per share on the Series R Preferred Stock

     shall nevertheless be payable on such subsequent Quarterly Dividend Payment

     Date. The Corporation's Board of Directors may fix a record date for the

     determination of holders of shares of Series R Preferred Stock entitled to

     receive a dividend or distribution declared thereon, which record date

     shall be the same as the record date for any corresponding dividend or

     distribution on the Common Stock and which shall not be more than 60 days

     prior to the date fixed for payment thereof.

 

          (c)  Dividends shall begin to accrue and be cumulative on outstanding

     shares of Series R Preferred Stock from and after the Quarterly Dividend

     Payment Date next preceding the date of original issue of such shares of

     Series R Preferred Stock; provided, however, that dividends on such shares

     that are originally issued after the record date for the determination of

     holders of shares of Series R Preferred Stock entitled to receive a

     quarterly dividend on or prior to the next succeeding Quarterly Dividend

     Payment Date shall begin to accrue and be cumulative from and after such

     Quarterly Dividend Payment Date. Notwithstanding the foregoing, dividends

     on shares of Series R Preferred Stock that are originally issued prior to

     the record date for the determination of holders of shares of Series R

     Preferred Stock entitled to receive a quarterly dividend on or prior to the

     first Quarterly Dividend Payment Date shall be calculated as if cumulative

     from and after the last day of the fiscal quarter (or such other Quarterly

     Dividend Payment Date as the Company's Board of Directors shall approve)

     next preceding the date of original issuance of such shares. Accrued but

     unpaid dividends shall not bear interest. Dividends paid on the shares of

     Series R Preferred Stock in an amount less than the total amount of such

     dividends at the time accrued and payable on such shares shall be allocated

     pro rata on a share-by-share basis among all such shares at the time

     outstanding.

 

          (d)  So long as any shares of Series R Preferred Stock are

     outstanding, no dividends or other distributions shall be declared, paid or

     distributed, or set aside for payment or distribution, on the Common Stock

     unless, in each case, the dividend required

 

                                       3

<PAGE>

 

     by this Section 2.3.2 to be declared on the Series R Preferred Stock shall

     have been declared.

 

            (e)  The holders of shares of Series R Preferred Stock shall not be

     entitled to receive any dividends or other distributions except as provided

     in this Designation.

 

     2.3.3  Voting Rights

 

     The holders of shares of Series R Preferred Stock shall have the following

     voting rights:

 

            (a)  Each holder of Series R Preferred Stock shall be entitled to a

     number of votes equal to the Formula Number then in effect for each share

     of Series R Preferred Stock held of record on each matter on which holders

     of the Common Stock or shareholders generally are entitled to vote,

     multiplied by the maximum number of votes per share that any holders of the

     Common Stock or shareholders generally then have with respect to such

     matter (assuming any holding period or other requirement to vote a greater

     number of shares is satisfied).

 

            (b)  Except as otherwise provided in this Designation or by

     applicable law, the holders of shares of Series R Preferred Stock and the

     holders of shares of Common Stock and any other capital stock of the

     Company having general voting rights shall vote together as one class for

     the election of directors of the Company and on all other matters submitted

     to a vote of shareholders of the Company.

 

            (c)  Except as provided in this Designation or by applicable law,

     holders of Series R Preferred Stock shall have no special voting rights and

     their consent shall not be required (except to the extent they are entitled

     to vote with holders of Common Stock as set forth in this Designation) for

     authorizing or taking any corporate action.

 

     2.3.4  Certain Restrictions

 

            (a)  Whenever quarterly dividends or other dividends or

     distributions payable on the Series R Preferred Stock as provided in

     Section 2.3.2 are in arrears, thereafter and until all accrued and unpaid

     dividends and distributions, whether or not declared, on shares of Series R

     Preferred Stock outstanding shall have been paid in full, the Company shall

     not:

 

                 (i)  declare or pay dividends on, make any other distributions

            on, or redeem or purchase or otherwise acquire for consideration any

            shares of stock ranking junior (either as to dividends or upon

            liquidation, dissolution or winding up) to the Series R Preferred

            Stock;

 

                 (ii) declare or pay dividends on or make any other

            distributions on any shares of stock ranking on a parity (either as

            to dividends or upon liquidation, dissolution or winding up) with

            the Series R Preferred Stock, except dividends

 

                                       4

<PAGE>

 

            paid ratably on the Series R Preferred Stock and all such parity

            stock on which dividends are payable or in arrears in proportion to

            the total amounts to which the holders of all such shares are then

            entitled;

 

                 (iii) redeem or purchase or otherwise acquire for consideration

            shares of any stock ranking junior (either as to dividends or upon

            liquidation, dissolution or winding up) with the Series R Preferred

            Stock; provided, however, that the Company may at any time redeem,

            purchase or otherwise acquire shares of any such junior stock in

            exchange for shares of any stock of the Company ranking junior

            (either as to dividends or upon dissolution, liquidation or winding

            up) to the Series R Preferred Stock; or

 

                 (iv)  redeem or purchase or otherwise acquire for consideration

            any shares of Series R Preferred Stock, or any shares of stock

            ranking on a parity with the Series R Preferred Stock, except in

            accordance with a purchase offer made in writing or by publication

            (as determined by the Company's Board of Directors) to all holders

            of such shares upon such terms as the Company's Board of Directors,

            after consideration of the respective annual dividend rates and

            other relative rights and preferences of the respective series and

            classes, shall determine in good faith will result in fair and

            equitable treatment among the respective series or classes.

 

            (b)  The Company shall not permit any subsidiary of the Company to

     purchase or otherwise acquire for consideration any shares of stock of the

     Company unless the Company could, under paragraph (a) of this Section

     2.3.4, purchase or otherwise acquire such shares at such time and in such

     manner.

 

     2.3.5  Liquidation Rights

 

            Upon the liquidation, dissolution or winding up of the Company,

     whether voluntary or involuntary, no distribution shall be made to (a) the

     holders of shares of stock ranking junior (either as to dividends or upon

     liquidation, dissolution or winding up) to the Series R Preferred Stock

     unless, prior thereto, the holders of shares of Series R Preferred Stock

     shall have received an amount equal to the greater of (i) $.01 per share

     and (ii) the accrued and unpaid dividends and distributions thereon,

     whether or not declared, to the date of such payment, plus an aggregate

     amount per share equal to the Formula Number then in effect times the

     aggregate amount to be distributed per share to holders of Common Stock or

     (b) the holders of shares of stock ranking on a parity (either as to

     dividends or upon liquidation, dissolution or winding up) with the Series R

     Preferred Stock, except distributions made ratably on the Series R

     Preferred Stock and all other such parity stock in proportion to the total

     amounts to which the holders of all such shares are entitled upon such

     liquidation, dissolution or winding up.

 

                                       5

<PAGE>

 

     2.3.6  Consolidation, Merger, etc.

 

            In case the Company shall enter into any consolidation, merger,

     combination or other transaction in which the shares of Common Stock are

     exchanged for or changed into other stock or securities, cash and/or any

     other property, then in any such case the then outstanding shares of Series

     R Preferred Stock shall at the same time be similarly exchanged or changed

     into an amount per share equal to the Formula Number then in effect times

     the aggregate amount of stock, securities, cash and/or any other property

     (payable in kind), as the case may be, into which or for which each share

     of Common Stock is exchanged or changed. In the event both this Section

     2.3.6 and Section 2.3.2 appear to apply to a transaction, this Section

     2.3.6 will control.

 

     2.3.7  No Redemption; No Sinking Fund

 

            (a)  The shares of Series R Preferred Stock shall not be subject to

     redemption by the Company or at the option of any holder of Series R

     Preferred Stock; provided, however, that the Company may purchase or

     otherwise acquire outstanding shares of Series R Preferred Stock in the

     open market or by offer to any holder or holders of shares of Series R

     Preferred Stock.

 

            (b)  The shares of Series R Preferred Stock shall not be subject to

     or entitled to the operation of a retirement or sinking fund.

 

     2.3.8  Ranking

 

            The Series R Preferred Stock shall rank junior to all other series

     of Preferred Stock of the Company, unless the Company's Board of Directors

     shall specifically determine otherwise in fixing the powers, preferences

     and relative, participating, optional and other special rights of the

     shares of such series and the qualifications, limitations and restrictions

     thereof.

 

     2.3.9  Fractional Shares

 

            The Series R Preferred Stock shall be issuable upon exercise of the

     Rights issued pursuant to the Rights Agreement in whole shares or in any

     fractional share that is one one-hundredth (1/100th) of a share or any

     integral multiple of such fraction, and shall entitle the holder, in

     proportion to such holder's fractional shares, to receive dividends,

     exercise voting rights, participate in distributions and have the benefit

     of all other rights of holders of Series R Preferred Stock. In lieu of

     fractional shares, the Company, prior to the first issuance of a share or a

     fractional share of Series R Preferred Stock, may elect to (a) make a cash

     payment as provided in the Rights Agreement for a fractional share other

     than one one-hundredth (1/100th) of a share or any integral multiple

     thereof or (b) issue depository receipts evidencing such authorized

     fractional share of Series R Preferred Stock pursuant to an appropriate

     agreement between the Company and a depository selected by the Company;

     provided, however, that such agreement shall provide that the

 

                                       6

<PAGE>

 

     holders of such depository receipts shall have all the rights, privileges

     and preferences to which they are entitled as holders of the Series R

     Preferred Stock.

 

     2.3.10  Reacquired Shares

 

             Any shares of Series R Preferred Stock purchased or otherwise

     acquired by the Company in any manner whatsoever shall be retired and

     canceled promptly after the acquisition thereof. All such shares shall upon

     their cancellation become authorized but unissued shares of Preferred

     Stock, without designation as to series until such shares are once more

     designated as part of a particular series by the Company's Board of

     Directors pursuant to the provisions of the Articles of Incorporation.

 

     2.3.11  Amendment

 

             None of the powers, preferences and relative, participating,

     optional and other special rights of the Series R Preferred Stock as

     provided in this Designation or in the Articles of Incorporation shall be

     amended in any manner that would alter or change the powers, preferences,

     rights or privileges of the holders of Series R Preferred Stock so as to

     affect them adversely without the affirmative vote of the holders of at

     least two-thirds of the outstanding shares of Series R Preferred Stock,

     voting as a separate class.

 

                    ARTICLE 3. REGISTERED OFFICE AND AGENT

 

     The name of the initial registered agent of this corporation and the

address of its initial registered office are as follows:

 

                         James W. Eldredge

                         411 - 108/th/ Avenue N.E.

                         Bellevue, Washington 98004-5515

 

                            ARTICLE 4. INCORPORATOR

 

     The name and address of the incorporator are as follows:

 

                         James W. Eldredge

                         411 - 108/th/ Avenue N.E.

                         Bellevue, Washington 98004-5515

 

                         ARTICLE 5. PREEMPTIVE RIGHTS

 

     No preemptive rights shall exist with respect to shares of stock or

securities convertible into shares of stock of this corporation.

 

                                       7

<PAGE>

 

                         ARTICLE 6. CUMULATIVE VOTING

 

     The right to cumulate votes in the election of Directors shall not exist

with respect to shares of stock of this corporation.

 

                             ARTICLE 7. DIRECTORS

 

     The number of Directors of this corporation shall not be less than nine

nor more than fifteen, the exact number to be determined in the manner provided

by the Bylaws and may be increased or decreased from time to time in the manner

provided therein. The Directors shall be divided into three classes, each class

to be as nearly equal in number as possible. The terms of the Directors in the

first class shall expire at the first annual shareholders' meeting after their

election, the terms of the Directors in the second class shall expire at the

second annual shareholders' meeting after their election, and the terms of the

Directors in the third class shall expire at the third annual shareholders'

meeting after their election. At each annual shareholders' meeting held

thereafter, the Directors shall be chosen for a term of three years to succeed

those whose terms expire. The Directors of this corporation may be removed only

for cause in the manner provided by the Bylaws.

 

                               ARTICLE 8. BYLAWS

 

     The Board of Directors shall have the power to adopt, amend or repeal

the Bylaws of this corporation, subject to the power of the shareholders to

amend or repeal such Bylaws. The shareholders shall also have the power to amend

or repeal the Bylaws of this corporation and to adopt new Bylaws.

 

              ARTICLE 9. AMENDMENTS TO ARTICLES OF INCORPORATION

 

     This corporation reserves the right to amend or repeal any of the

provisions contained in these Articles of Incorporation in any manner now or

hereafter permitted by the Washington Business Corporation Act, and the rights

of the shareholders of this corporation are granted subject to this reservation.

 

                 ARTICLE 10. LIMITATION OF DIRECTOR LIABILITY

 

     Except as such limitation or elimination of director liability is

specifically prohibited by the Washington Business Corporation Act, as now in

effect or as it may hereafter be amended, a Director of this corporation shall

not be liable to this corporation or its shareholders for monetary damages for

conduct as a Director. Any amendments to or repeal of this Article 10 shall not

adversely affect any right or protection of a Director of this corporation for

or with respect to any acts or omissions of such Director occurring prior to

such amendment or repeal.

 

                                       8

<PAGE>

 

                          ARTICLE 11. INDEMNIFICATION

 

11.1  Definitions.

 

      Capitalized terms used in this Article 11 have the meaning given to such

terms in Section 23B.08.500 of the Washington Business Corporation Act.

 

11.2  Indemnification

 

      This corporation shall indemnify its Directors, officers, employees and

agents against Liability and Expenses and shall advance Expenses to its

Directors, officers, employees and agents in connection with any proceeding to

the fullest extent permitted by the Washington Business Corporation Act, as now

in effect or as it may hereafter be amended.

 

                        ARTICLE 12. SHAREHOLDER ACTIONS

 

      Any action required or permitted to be taken at a shareholders' meeting

may be taken without a meeting or a vote if the action is taken by all

shareholders entitled to vote on the action.

 

                         ARTICLE 13. SPECIAL MEETINGS

 

     Shareholders shall not have the right to call a special meeting.

 

Dated: December 21, 2000.

 

                                            PUGET ENERGY, INC.

 

 

                                            /s/ James W. Eldredge

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

                                            James W. Eldredge

                                            Corporate Secretary

 

 

 

ARTICLES OF AMENDMENT

 

OF

 

PUGET ENERGY, INC.

 

The following Articles of Amendment are executed by the undersigned, a Washington corporation:

 

1.           The name of the corporation is Puget Energy, Inc.

 

2.           Article 7 of the Restated Articles of Incorporation of the corporation is amended in its entirety to read as follows:

 

ARTICLE 7. DIRECTORS

 

(a)           The number of Directors of this corporation shall not be less than nine nor more than fifteen, the exact number to be determined in the manner provided by the Bylaws and may be increased or decreased from time to time in the manner provided therein. The Directors shall be divided into three classes, each class to be as nearly equal in number as possible. The terms of the Directors in the first class shall expire at the first annual shareholders’ meeting after their election, the terms of the Directors in the second class shall expire at the second annual shareholders’ meeting after their election, and the terms of the Directors in the third class shall expire at the third annual shareholders’ meeting after their election. At each annual shareholders’ meeting held thereafter, the Directors shall be chosen for a term of three years to succeed those whose terms expire. The Directors of this corporation may be removed only for cause in the manner provided by the Bylaws. Notwithstanding the foregoing, in an election to which plurality voting does not apply, the term of a Director who does not receive a majority of the votes cast in accordance with Section (b) of this Article 7 shall continue only until the next annual shareholder’s meeting and until his or her successor is duly elected, or his or her earlier resignation or removal.

   

(b)           A nominee for director shall be elected to the Board of Directors if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election; provided, however, that if the number of nominees for any election of Directors exceeds the number of Directors to be elected, the Directors shall be elected by a plurality of the votes cast. If Directors are to be elected by a plurality of the votes cast, shareholders shall not be permitted to vote against a nominee. 

 

3.           The date of the adoption of the amendment by the shareholders of the corporation is May 4, 2007.  The amendment was duly approved by the shareholders of the corporation in accordance with the provisions of RCW 23B.10.030 and RCW 23B.10.040.

 

Dated:  May 4, 2007

 

PUGET ENERGY, INC.

 

/s/ James W. Eldredge

James W. Eldredge

Vice President, Corporate Secretary and Chief Accounting Officer