EXHIBIT 10.2
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CREDIT AGREEMENT
among
PG&E CORPORATION
as Borrower,
the LENDERS party hereto,
GENERAL ELECTRIC CAPITAL CORPORATION
as Co-Arranger,
LEHMAN COMMERCIAL PAPER INC.
as Administrative Agent
and
LEHMAN BROTHERS INC.
as Lead Arranger and Book Manager
_______________________________________
Dated as of March 1, 2001
_______________________________________
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TABLE OF CONTENTS
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Page
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SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION................... 1
1.1 Defined Terms............................................ 1
1.2 Rules of Interpretation.................................. 1
1.3 Accounting Principles.................................... 1
SECTION 2. AMOUNTS AND TERMS OF CREDIT FACILITY...................... 1
2.1 The Commitment........................................... 1
2.2 Notice of Borrowing...................................... 2
2.3 Disbursement of Funds.................................... 2
2.4 Notes.................................................... 2
2.5 Interest................................................. 2
2.6 Interest Periods......................................... 3
2.7 Increased Costs, Illegality, etc......................... 5
2.8 Compensation............................................. 6
2.9 Extension of Maturity Date .............................. 7
SECTION 3. PREPAYMENTS; PAYMENTS; TAXES.............................. 7
3.1 Voluntary Prepayments.................................... 7
3.2 Mandatory Repayments..................................... 7
3.3 Method and Place of Payment.............................. 9
3.4 Net Payments............................................. 10
3.5 Allocation............................................... 12
3.6 Fee...................................................... 12
3.7 Application of Payments; Sharing......................... 12
SECTION 4. CONDITIONS PRECEDENT...................................... 13
4.1 Conditions to Closing.................................... 13
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS................ 18
5.1 Standing................................................. 19
5.2 Requisite Authority; Etc................................. 19
5.3 No Conflict.............................................. 19
5.4 Consents................................................. 19
5.5 Compliance with Law...................................... 20
5.6 Litigation Claims........................................ 20
5.7 Contracts and Commitments................................ 20
5.8 Liens.................................................... 21
5.9 Insurance................................................ 21
5.10 Capitalization and Ownership................................................ 21
5.11 Financial Statements; Absence of Certain Changes............................ 22
5.12 Taxes....................................................................... 23
5.13 Disclosure.................................................................. 24
5.14 Environmental Matters....................................................... 24
5.15 Brokers' or Finders' Fees................................................... 24
5.16 Certain Regulatory Matters.................................................. 24
5.17 Transactions With Affiliates................................................ 26
5.18 Use of Proceeds............................................................. 26
5.19 Compliance with ERISA....................................................... 26
5.20 Investment Company Act...................................................... 27
5.21 Regulation.................................................................. 27
5.22 Security Documents.......................................................... 27
5.23 Certain Scheduled Projects.................................................. 27
5.24 Environmental Matters....................................................... 28
5.25 Intellectual Property....................................................... 28
5.26 No Default.................................................................. 29
5.27 Single-Purpose Entity....................................................... 29
5.28 Trust Indenture Act......................................................... 29
5.29 [OMITTED]................................................................... 29
5.30 Ratings Letter.............................................................. 29
5.31 Certain Indebtedness........................................................ 29
SECTION 6. AFFIRMATIVE COVENANTS......................................................... 30
6.1 Information Covenants....................................................... 30
6.2 Books, Records and Inspections.............................................. 33
6.3 Maintenance of Property; Insurance.......................................... 33
6.4 Corporate Franchises........................................................ 34
6.5 Compliance with Statutes, etc............................................... 34
6.6 Compliance with Environmental Laws.......................................... 34
6.7 ERISA....................................................................... 35
6.8 End of Fiscal Years; Fiscal Quarters........................................ 36
6.9 Payment of Taxes............................................................ 36
6.10 [OMITTED.................................................................... 36
6.11 Performance of Obligations.................................................. 37
6.12 Use of Proceeds............................................................. 37
6.13 Regulatory Compliance....................................................... 37
6.14 Financial Covenants......................................................... 37
6.15 Charter Documents........................................................... 37
6.16 Further Assurances; etc..................................................... 37
6.17 Tax Refund.................................................................. 38
SECTION 7. NEGATIVE COVENANTS............................................................ 38
7.1 Liens........................................................................ 38
7.2 Consolidation, Merger, Purchase or Sale of Assets, etc....................... 40
ii
7.3 Dividends.................................................................... 41
7.4 Indebtedness................................................................. 41
7.5 Advances, Investments and Loans.............................................. 42
7.6 Transactions with Affiliates................................................. 43
7.7 Capital Expenditures......................................................... 43
7.8 Limitations on Liens on Collateral; Modifications of Certain Indebtedness;
Modifications of Certificate of Incorporation, By-Laws and Certain Other
Agreements, etc............................................................ 43
7.9 Limitation on Issuance of Capital Stock...................................... 44
7.10 Business..................................................................... 45
7.11 Regulatory Compliance........................................................ 45
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.............................................. 45
8.1 Events of Default............................................................ 45
8.2 Acceleration................................................................. 48
8.3 Other Remedies............................................................... 48
SECTION 9. MISCELLANEOUS............................................................... 48
9.1 Costs and Expenses........................................................... 48
9.2 Indemnity.................................................................... 49
9.3 Notices...................................................................... 51
9.4 Benefit of Agreement......................................................... 51
9.5 No Waiver; Remedies Cumulative............................................... 51
9.6 No Third Party Beneficiaries................................................. 52
9.7 Reinstatement................................................................ 52
9.8 No Immunity.................................................................. 52
9.9 Counterparts................................................................. 52
9.10 Amendment or Waiver.......................................................... 52
9.11 Assignments, Participations, etc............................................. 53
9.12 Survival..................................................................... 55
9.13 WAIVER OF JURY TRIAL......................................................... 55
9.14 Right of Set-off............................................................. 55
9.15 Severability................................................................. 55
9.16 Governing Law; Submission to Jurisdiction.................................... 56
9.17 Waiver by Borrower........................................................... 57
9.18 Recourse..................................................................... 57
9.19 Complete Agreement........................................................... 57
9.20 Publicity.................................................................... 57
9.21 Effectiveness................................................................ 57
9.22 Certain Representations and Warranties....................................... 57
9.23 Confidentiality.............................................................. 57
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SECTION 10. THE ADMINISTRATIVE AGENT; THE LEAD ARRANGER, THE CO-
ARRANGER AND THE BOOK MANAGER.................................................58
10.1 Appointment..................................................................58
10.2 Nature of Duties.............................................................58
10.3 Lack of Reliance on the Agent................................................58
10.4 Certain Rights of the Administrative Agent...................................59
10.5 Reliance.....................................................................59
10.6 Indemnification..............................................................59
10.7 The Administrative Agent in its Individual Capacity..........................60
10.8 Holders......................................................................60
10.9 Resignation by the Administrative Agent......................................60
10.10 The Lead Arranger, Co-Arranger and Book Manager..............................61
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APPENDICES:
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Appendix A Defined Terms and Rules of Interpretation
EXHIBITS:
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Exhibit A Form of Notice of Borrowing
Exhibit B Form of Note
Exhibit C Form of Section 3.4(b)(ii) Certificate
Exhibit D Form of Process Agent Letter
SCHEDULES:
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Schedule 3.5 Allocation - Investment Unit
Schedule 4.1(k) SEC Filings
Schedule 5.6 Litigation
Schedule 5.7 Covered Contracts
Schedule 5.8 Liens
Schedule 5.9 Insurance
Schedule 5.10(e) Warrants, etc.
Schedule 5.10(f) Ownership
Schedule 5.14 Environmental Matters
Schedule 5.15 Brokers
Schedule 5.16(e) Regulated Entities
Schedule 5.17 Transactions with Affiliates
Schedule 5.19 ERISA
Schedule 5.23 Scheduled Projects
Schedule 7.1 Certain Liens
Schedule 9.3 Notices
ANNEXES
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Annex A Section 13 of the LLC Agreement
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CREDIT AGREEMENT (this "Agreement"), dated as of March 1, 2001, among
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PG&E Corporation, a California corporation, as the Borrower, the Lenders party
hereto, General Electric Capital Corporation, a New York corporation, as Co-
Arranger, Lehman Commercial Paper Inc., a New York corporation, as
Administrative Agent, and Lehman Brothers Inc., a Delaware corporation, as Lead
Arranger and Book Manager.
W I T N E S S E T H:
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WHEREAS, the Lenders party hereto are willing to provide the credit
facility described herein upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION.
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1.1 Defined Terms. Except as otherwise expressly provided herein,
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capitalized terms used in this Agreement and its Schedules and Exhibits shall
have the respective meanings assigned to such terms in Appendix A hereto.
1.2 Rules of Interpretation. Except as otherwise expressly provided
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herein, the rules of interpretation set forth in Appendix A hereto shall apply
to this Agreement.
1.3 Accounting Principles. Except as otherwise provided in this
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Agreement, all computations and determinations as to financial matters, and all
financial statements to be delivered under this Agreement shall be made or
prepared in accordance with U.S. GAAP (including principles of consolidation
where appropriate) applied on a consistent basis (except to the extent approved
or required by the independent public accountants certifying such statements and
disclosed therein).
SECTION 2. AMOUNTS AND TERMS OF CREDIT FACILITY.
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2.1 The Commitment. (a) Subject to and upon the terms and
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conditions set forth herein, each Lender agrees to make a term loan to the
Borrower, which term loans (i) shall be incurred pursuant to a single drawing on
the Closing Date, (ii) shall be denominated in Dollars, (iii) shall be incurred
and maintained as Eurodollar Loans, except as otherwise specifically provided in
Section 2.7(b), (iv) shall be made on the Closing Date in an aggregate principal
amount which (x) in the case of the Tranche A Loan, equals the Tranche A
Commitment and (y) in the case of the Tranche B Loan, equals the Tranche B
Commitment, and (v) shall mature on the earlier of (A) the date of a Spin-Off of
NEG, Inc. and (B) the Date Certain.
(b) If the Closing Date has not occurred on or prior to March 30,
2001, then, in such event, the Lenders shall have no further obligations or
liabilities under any of the Financing Documents and the Financing Documents
shall have no further force or effect with respect to the Lenders, but the
Borrower's obligation to pay the Commitment Fees and other costs, fees and
expenses as provided herein and to indemnify the other parties to the Financing
Documents shall not be terminated, modified or diminished in any respect.
(c) The Loans are available only on the terms and conditions specified
hereunder, and once repaid, in whole or in part, at maturity or by prepayment,
may not be reborrowed in whole or in part.
2.2 Notice of Borrowing. The Borrower shall give the Lenders prior
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notice of the Eurodollar Loan to be incurred hereunder, provided that any such
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notice shall be deemed to have been given on a certain day only if given before
1:00 P.M. (New York time) on such day. Such notice (the "Notice of Borrowing")
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shall be irrevocable and shall be in writing, or by telephone promptly confirmed
in writing, in the form of Exhibit A, appropriately completed to specify: (i)
the aggregate principal amount of the Loans to be incurred on the Closing Date
(which shall be a Business Day), (ii) the Selected Interest Period for the
period beginning on the Closing Date pursuant to Section 2.6(b), and (iii) the
account information for disbursement of the Loans.
2.3 Disbursement of Funds. No later than 1:00 P.M. (New York time)
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on the Closing Date, each Lender will make available such Lender's pro rata
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share of the amount of Borrowing requested to be made on such date. All such
amounts will be made available in Dollars and in immediately available funds and
disbursed in accordance with the provisions of the Escrow Agreement.
2.4 Notes. (a) The Borrower's obligation to pay the principal of,
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and interest on, any Loan made by a Lender shall be evidenced by a promissory
note duly executed and delivered by the Borrower substantially in the form of
Exhibit B, with blanks appropriately completed in conformity herewith (each, a
"Note").
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(b) The Note issued to a Lender shall (i) be executed by the Borrower,
(ii) be payable to such Lender or its Assignee and be dated the Closing Date
(or, if issued after the Closing Date, be dated the date of issuance thereof),
(iii) be in a stated principal amount equal to the Loan made by, or assigned to,
such Lender, as the case may be, and be payable in the outstanding principal
amount of the Loan evidenced thereby, (iv) mature on the earlier of (A) the date
of a Spin-Off of NEG, Inc. and (B) the Date Certain, (v) bear interest as
provided in the appropriate clause of Section 2.5 in respect of a Base Rate Loan
(if converted pursuant to Section 2.7(b)) or a Eurodollar Loan, as the case may
be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 3.1, and mandatory repayment as provided in Section 3.2, and (vii) be
entitled to the benefits of this Agreement and the other Financing Documents.
(c) Each Lender will note on its internal records the amount of the
Loan made by it and each payment in respect thereof and will prior to any
transfer of its Note endorse on the reverse side thereof the outstanding
principal amount of the Loan evidenced thereby. Failure to make any such
notation or any error in such notation shall not affect the Borrower's
obligations in respect of such Loan.
2.5 Interest. (a) The Borrower agrees to pay interest in respect of
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the unpaid principal amount of any Base Rate Loan from the date of conversion
thereof pursuant to Section
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2.7(b) until the maturity thereof (whether by acceleration or otherwise) at a
rate per annum which shall be equal to the sum of the Applicable Margin plus the
Base Rate each as in effect from time to time.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date of Borrowing thereof
until the earlier of (i) the maturity thereof (whether by acceleration or
otherwise) and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan
pursuant to Section 2.7(b) at a rate per annum which shall, during each Interest
Period applicable thereto, be equal to the sum of the Applicable Margin as in
effect from time to time during such Interest Period plus the Eurodollar Rate
for such Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable by the
Borrower shall, in each case, bear interest at a rate per annum equal to the
rate which is 2% in excess of the rate then borne by such Loan. Interest which
accrues under this Section 2.5(c) shall be payable on demand.
(d) Accrued (and theretofore unpaid) interest shall be payable (i) in
respect of each Base Rate Loan, (x) quarterly in arrears on each Quarterly Date,
(y) on the date of any repayment or prepayment in full of the outstanding
principal amount of such Base Rate Loan, and (z) at maturity (whether by
acceleration or otherwise) and, after such maturity, on demand, and (ii) in
respect of each Eurodollar Loan, (x) on the last day of each Interest Period
applicable thereto and, in the case of an Interest Period in excess of three
months, on each date occurring at three month intervals after the first day of
such Interest Period, and (y) on the date of any repayment or prepayment (on the
amount repaid or prepaid), at maturity (whether by acceleration or otherwise)
and, after such maturity, on demand; provided that the first interest payment
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shall be due and payable in advance on the Closing Date in an amount equal to
the Interest Prepaid Amount and the first Interest Period shall be a one year
period (the "First Interest Period").
(e) Upon each Interest Determination Date with respect to any
Eurodollar Loan, the Administrative Agent shall determine the Eurodollar Rate
for the relevant Interest Period applicable to such Eurodollar Loan and shall
promptly notify the Borrower thereof. Each such determination shall, absent
manifest error, be final and conclusive and binding on all parties hereto.
2.6 Interest Periods. (a) At the time the Borrower gives the Notice
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of Borrowing or prior to 1:00 P.M. (New York time) on the third Business Day
prior to the expiration of an Interest Period applicable to a Eurodollar Loan
(in the case of any subsequent Interest Period), the Borrower shall have the
right to elect the interest period (each an "Interest Period") applicable to
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such Eurodollar Loan, which Interest Period shall, at the option of the
Borrower, be a one, two, three or six-month period; provided that (in each
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case):
(i) the initial Interest Period for any Eurodollar Loan shall
commence on the date of Borrowing of such Eurodollar Loan and each Interest
Period occurring thereafter in respect of such Eurodollar Loan shall
commence on the day on which the next preceding Interest Period applicable
thereto expires;
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(ii) if any Interest Period for a Eurodollar Loan begins on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period, such Interest Period shall end on the
last Business Day of such calendar month;
(iii) if any Interest Period for a Eurodollar Loan would otherwise
expire on a day which is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day; provided, however, that if any
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Interest Period for such Eurodollar Loan would otherwise expire on a day
which is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall
expire on the next preceding Business Day;
(iv) no Interest Period may be selected at any time when a Default
or an Event of Default is then in existence; and
(v) no Interest Period in respect of any Borrowing of any
Eurodollar Loan shall be selected which extends beyond the Date Certain.
If upon the expiration of any Interest Period applicable to any
Eurodollar Loan, the Borrower has failed to elect, or is not permitted to elect,
a new Interest Period to be applicable to such Eurodollar Loan as provided
above, the Borrower shall be deemed to have elected a one-month Interest Period
effective as of the expiration date of such current Interest Period.
(b) During the First Interest Period, the Borrower shall have the
right, at the times indicated and following the procedure set forth in Section
2.6(a), to deliver notice to the Administrative Agent to indicate Interest
Periods of one, two, three or six months (each such Interest Period, with
respect to any Eurodollar Loan, a "Selected Interest Period") for purposes of
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comparing the interest rates. The Administrative Agent shall determine the
Eurodollar Rate for each such Selected Interest Period applicable to a
Eurodollar Loan and the amount of accrued interest (such amount, the "Selected
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Interest Amount") which would be payable in respect of such Eurodollar Loan for
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each such Selected Interest Period, which determination shall, absent manifest
error, be final, conclusive and binding on all parties hereto. On the date
which is the earlier of the date of prepayment of all the Loans by the Borrower
pursuant to the terms hereof and the first anniversary of the Closing Date (x)
the Borrower shall pay to the Administrative Agent the amount by which the sum
of the aggregate Selected Interest Amounts (discounted to present value as of
the Closing Date using a discount factor of 4.25%) plus any amounts due and
payable under Section 2.8 with respect to a Selected Interest Period exceeds the
Interest Prepaid Amount or (y) each Lender shall credit to the Borrower the
amount by which the Interest Prepaid Amount with respect to the Loan of such
Lender exceeds the sum of the aggregate Selected Interest Amounts (discounted to
present value as of the Closing Date using a discount factor of 4.25%) with
respect to the Loan of such Lender plus any amounts due and payable to such
Lender under Section 2.8 or otherwise under this Agreement. In no event shall a
Selected Interest Period extend beyond the last day of the First Interest
Period.
2.7 Increased Costs, Illegality, etc. (a) In the event that a
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Lender shall have determined (which determination shall, absent manifest error,
be final and conclusive and binding upon all parties hereto):
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(i) on any Interest Determination Date that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loan of such Lender because of (x) any change since the
Closing Date in any applicable law or governmental rule, regulation, order,
guideline or request (whether or not having the force of law) or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, order, guideline or request,
such as, for example, but not limited to: (A) a change in the basis of
taxation of payment to such Lender of the principal of or interest on such
Lender's Loan or Note or any other amounts payable to such Lender hereunder
(except for changes in the rate of tax on, or determined by reference to,
the net income or net profits of such Lender pursuant to the laws of the
jurisdiction in which it is doing business, organized or in which its
principal office or applicable lending office is located or any subdivision
thereof or therein) or (B) a change in official reserve requirements, but,
in all events, excluding reserves required under Regulation D to the extent
included in the computation of the Eurodollar Rate and/or (y) other
circumstances (other than with respect to taxes) arising since the Closing
Date affecting such Lender (or its Source), the interbank Eurodollar market
or the position of such Lender in such market; or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has been made (x) unlawful by any law or governmental rule, regulation
or order, (y) impossible by compliance by such Lender in good faith with
any governmental request (whether or not having force of law) or (z)
impracticable as a result of a contingency occurring after the Closing Date
which materially and adversely affects the interbank Eurodollar market;
then, and in any such event, such Lender shall promptly give notice (by
telephone promptly confirmed in writing) to the Borrower of such determination.
Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer
be available until such time as such Lender notifies the Borrower that the
circumstances giving rise to such notice by the Lender no longer exist, (y) in
the case of clause (ii) above, the Borrower agrees to pay to such Lender, upon
such Lender's written request therefor, such additional amounts (in the form of
an increased rate of, or a different method of calculating, interest or
otherwise as such Lender in its sole discretion shall determine) as shall be
required to compensate such Lender for such increased costs or reductions in
amounts received or receivable hereunder (a written notice as to the additional
amounts owed to such Lender, showing in reasonable detail the basis for the
calculation thereof, submitted to the Borrower by such Lender shall, absent
manifest error, be final and conclusive and binding on all the parties hereto)
and (z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 2.7(b) as promptly as possible and, in any event,
within the time period required by Law.
Each Lender, at the sole cost and expense of the Borrower (including,
but not limited to, such Lender's internal costs for use of its personnel and
resources), will use its reason-
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able efforts to minimize taxes indemnifiable by the Borrower under this Section
2.7(a), including by complying with reasonable requests by the Borrower to do or
to refrain from doing any act (including the execution of any certificates or
similar documents required to establish an exemption or relief from any tax), if
such efforts or any such compliance is, in the good faith discretion of such
Lender, of a purely ministerial nature and has no adverse impact on such Lender
or any Affiliate or on the business or operations of the foregoing (unless such
adverse impact is one of a nature and quality such that it is subject to
indemnification and the Borrower has indemnified such Lender against such
adverse impact in a manner satisfactory to such Lender determined in its sole
discretion). The Borrower shall indemnify such Lender for any taxes that may be
imposed on it as a consequence of such compliance.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 2.7(a)(i) or (ii), the Borrower may, and in
the case of a Eurodollar Loan affected by the circumstances described in Section
2.7(a)(iii), the Borrower shall, upon at least three Business Days' written
notice to such Lender, require the affected Lender to convert such Eurodollar
Loan into a Base Rate Loan.
(c) If a Lender determines that after the Closing Date the
introduction of or any change in any applicable law or governmental rule,
regulation, order, guideline, directive or request (whether or not having the
force of law) concerning capital adequacy, or any change in interpretation or
administration thereof by the NAIC or any governmental authority, central bank
or comparable agency, will have the effect of increasing the amount of capital
required or expected to be maintained by such Lender (or its Source) or any
corporation controlling such Lender based on the existence of such Lender's
Commitment hereunder or its obligations hereunder, then the Borrower agrees to
pay to such Lender, upon its written demand therefor, such additional amounts as
shall be required to compensate such Lender or such other corporation for the
increased cost to such Lender or such other corporation or the reduction in the
rate of return to such Lender or such other corporation as a result of such
increase of capital. In determining such additional amounts, each Lender will
act reasonably and in good faith and will use averaging and attribution methods
which are reasonable, provided that such Lender's determination of compensation
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owing under this Section 2.7(c) shall, absent manifest error, be final and
conclusive and binding on all the parties hereto. Such Lender, upon determining
that any additional amounts will be payable pursuant to this Section 2.7(c),
will give prompt written notice thereof to the Borrower, which notice shall show
in reasonable detail the basis for calculation of such additional amounts.
2.8 Compensation. The Borrower agrees to compensate each Lender,
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upon its written request (which request shall set forth in reasonable detail the
basis for requesting such compensation), for all losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Lender to fund its Eurodollar Loan but excluding loss of
anticipated profits) which such Lender may sustain: (i) if any prepayment or
repayment (including any prepayment or repayment made pursuant to Section 3.1,
Section 3.2 or as a result of an acceleration of the Loans pursuant to Section
8.2) or conversion of any Eurodollar Loan is made on a date other than the last
day of the Interest Period (or during the First Interest Period, any Selected
Interest Period) applicable thereto; or (ii) as a consequence of (x) any other
default by the
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Borrower to repay such Eurodollar Loan when required by the terms of this
Agreement or any Note held by such Lender or (y) any election made pursuant to
Section 2.7(b).
2.9 Extension of Maturity Date The Borrower may by notice to the
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Administrative Agent and the holders of the Loans not later than thirty (30)
days prior to the Initial Date Certain or the Extended Date Certain occurring
six months after the Initial Date Certain (if the maturity date of the Loans was
extended on the Initial Date Certain to such Extended Date Certain), and upon
payment of the Extension Fees relating to such extension pursuant to the Fee
Letter and the Lehman Fee Letter, extend the maturity date of the Loans to the
earlier of (i) the date of a Spin-Off of NEG, Inc. and (ii) the Extended Date
Certain, but in no event shall the Date Certain be beyond the third anniversary
of the Closing Date; provided, that there shall be no extension of the maturity
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date of the Loans if on the date of such extension, (a) a Default or an Event of
Default shall be continuing or (b) the aggregate outstanding principal amount of
the Loans at such time shall be more than $692,000,000.
SECTION 3. Prepayments; Payments; Taxes.
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3.1 Voluntary Prepayments. The Borrower shall have the right to
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prepay the Tranche A Loan and the Tranche B Loan, on a pro rata basis, without
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premium or penalty, in whole or in part at any time and from time to time on the
following terms and conditions: the Borrower shall give each Lender prior to
12:00 Noon (New York time) (x) at least one Business Day's prior written notice
(or telephonic notice promptly confirmed in writing) of its intent to prepay a
Base Rate Loan and (y) at least three Business Days' prior written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay a
Eurodollar Loan, which notice (in each case) shall specify the amount of such
prepayment which shall be in an aggregate principal amount of at least
$10,000,000, and minimum increments of $1,000,000 in excess thereof.
3.2 Mandatory Repayments. (a) The principal amount of each Loan, to
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the extent then outstanding, shall be repaid at its maturity (whether by
acceleration or otherwise).
(b) In addition to any other mandatory repayments pursuant to this
Section 3.2, on each date on or after the Closing Date upon which LLC, NEG, Inc.
or any NEG Subsidiary receives any cash proceeds from any incurrence by LLC,
NEG, Inc. or any NEG Subsidiary of Indebtedness for borrowed money, an amount
equal to 100% of the Net Debt Proceeds of the respective incurrence of
Indebtedness shall be applied on such date in accordance with the requirements
of Section 3.2(h); provided that such Net Debt Proceeds shall not be required to
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be so applied to the extent such Net Debt Proceeds are (i) retained as cash or
Cash Equivalents by LLC, NEG, Inc. or any NEG Subsidiary or (ii) applied to
repay Indebtedness for borrowed money of NEG, Inc. or any NEG Subsidiary or
(iii) reinvested in the business of NEG, Inc. or any NEG Subsidiary within the
scope of business as described by the Business Plan; provided, further, that if
-------- -------
a Default or Event of Default shall have occurred and be continuing, such
reinvestment may only be made to the extent specified in Part II of the Business
Plan.
(c) In addition to any other mandatory repayments pursuant to this
Section 3.2, on each date on or after the Closing Date upon which LLC, NEG, Inc.
or any NEG Subsidiary receives any cash proceeds from any sale or issuance of
its equity (other than cash
-7-
proceeds received as part of an IPO which shall be applied pursuant to clause
(d) below) an amount equal to 100% of the Net Equity Proceeds of such sale or
issuance of equity, whether common or preferred, shall be applied on such date
in accordance with the requirements of Section 3.2(h); provided that such Net
--------
Equity Proceeds shall not be required to be so applied to the extent such Net
Equity Proceeds are (i) retained as cash or Cash Equivalents by LLC, NEG, Inc.
or the NEG Subsidiaries or (ii) applied to repay Indebtedness for borrowed money
of NEG, Inc. or any NEG Subsidiary or (iii) reinvested in the business of NEG,
Inc. or any NEG Subsidiary within the scope of business as described by the
Business Plan; provided, further, that if a Default or Event of Default shall
-------- -------
have occurred and be continuing, such reinvestment may only be made to the
extent specified in Part II of the Business Plan.
(d) In addition to any other mandatory repayments required pursuant to
this Section 3.2, on the date of an IPO upon which the Borrower, LLC or NEG,
Inc. receives any proceeds from such IPO, (i) so long as no Default or Event of
Default shall have occurred and be continuing (both before and after giving
effect to such IPO), an amount sufficient to reduce the outstanding principal
amount of the Loans to no more than $500,000,000, or (ii) if a Default or an
Event of Default shall have occurred and be continuing (either before or after
giving effect to such IPO), then (A) in the event such Default or Event of
Default may be cured by the payment of money, an aggregate amount sufficient to
cure such Default or Event of Default and to reduce the aggregate outstanding
principal amount of the Loans to no more than $500,000,000, or (B) in the event
such Default or Event of Default is not subject to cure by the payment of money,
an amount equal to the greater of (x) the amount specified in clause (i) above
or (y) 100% of such proceeds, in each case shall be applied on such date in
accordance with the requirements of Section 3.2(h).
(e) In addition to any other mandatory repayments pursuant to this
Section 3.2, on each date on or after the Closing Date upon which LLC, NEG,
Inc. or any NEG Subsidiary receives any cash proceeds from any Asset Sale by
LLC, NEG, Inc. or any NEG Subsidiary, an amount equal to 100% of the Net Sale
Proceeds therefrom shall be applied in accordance with the requirements of
Section 3.2(h); provided that such Net Sale Proceeds shall not be required to be
--------
so applied to the extent such Net Sale Proceeds are (i) retained as cash or Cash
Equivalents by LLC, NEG, Inc. or the NEG Subsidiaries or (ii) applied to repay
Indebtedness for borrowed money of NEG, Inc. or any NEG Subsidiary or (iii)
reinvested in the business of NEG, Inc. or any NEG Subsidiary within the scope
of business as described by the Business Plan; provided, further, that if a
-------- -------
Default or Event of Default shall have occurred and be continuing, such
reinvestment may only be made to the extent specified in Part II of the Business
Plan.
(f) In addition to any other mandatory repayments pursuant to this
Section 3.2, on each date on or after the Closing Date upon which LLC, NEG, Inc.
or any NEG Subsidiary receives any cash proceeds from any Recovery Event, an
amount equal to 100% of the Net Insurance Proceeds from such Recovery Event
shall be applied in accordance with the requirements of Section 3.2(h); provided
--------
that such Net Insurance Proceeds shall not be required to be so applied to the
extent such Net Insurance Proceeds are (i) applied to repay Indebtedness for
borrowed money of NEG, Inc. or any NEG Subsidiary or (ii) reinvested in the
business of NEG, Inc. or any NEG Subsidiary within the scope of business as
described by the Business Plan within eighteen (18) months of the Recovery
Event; provided, further, that if a Default or Event
-------- -------
-8-
of Default shall have occurred and be continuing, such reinvestment may only be
made to the extent specified in Part II of the Business Plan.
(g) In addition to any other mandatory repayments pursuant to this
Section 3.2, on each date on or after the Closing Date upon which the Borrower
receives a distribution, Dividend or payment of any sort from LLC (other than
the proceeds of an IPO which shall be applied pursuant to clause (d) above and
issuance of the note from NEG, Inc. to LLC or the Borrower or from LLC to the
Borrower, solely in connection with the IPO (but not payments thereunder)), an
amount equal to 100% of such proceeds (net of any amount thereof used to
reimburse the Borrower for (i) any expense related to any income or franchise
Taxes of NEG, Inc. or any NEG Subsidiary (computed as if NEG, Inc. and each of
its Subsidiaries filed a consolidated federal income Tax return and state
consolidated or combined income or franchise Tax returns, where applicable,
separate from the Borrower, PG&E Utility and Subsidiaries of PG&E Utility, for
all taxable periods), (ii) any expenses then due and payable under the Expense
Sharing Agreement or (iii) any amount then due and payable under the note from
NEG, Inc. and payable to LLC or the Borrower solely in connection with the IPO)
shall be applied in accordance with the requirements of Section 3.2(h).
(h) Each amount required to be applied pursuant to this Section 3.2(h)
shall be first paid to the Lenders ratably according to the respective
outstanding principal amounts of Loans held by the Lenders and shall be applied
by each Lender to payment of any amount owing to such Lender under Section 2.8,
then to payment of any interest then due and payable to such Lender, and then to
reduce ratably the remaining principal balance of the Loans of such Lender.
(i) In addition to any other mandatory repayments pursuant to this
Section 3.2, all the then outstanding Loans shall be repaid in full on the
earlier of (x) the date of a Spin-Off of NEG, Inc. and (y) the Date Certain.
(j) The application of any proceeds received by LLC to be applied for
mandatory repayment under Sections 3.2(b), (c), (e) and (f) shall be subject to
Compliance by LLC with the requirements for Distribution under Section 13 of the
LLC Agreement.
(k) Nothing in this Section 3.2 shall limit any other rights or
remedies a Lender may have under Article 8 of this Agreement or under applicable
law in connection with any Event of Default.
3.3 Method and Place of Payment. Except as otherwise specifically
---------------------------
provided herein, all payments under this Agreement and under any Note shall be
made to the Administrative Agent for the account of the Lenders entitled thereto
not later than 12:00 Noon (New York time) on the date when due and shall be made
in Dollars in immediately available funds at the Payment Office or pursuant to
such other instruction as the Administrative Agent shall designate to the
Borrower in writing. Except as otherwise provided herein, whenever any payment
to be made hereunder or under any Note shall be stated to be due on a day which
is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
shall be payable at the applicable rate during such extension.
-9-
3.4 Net Payments. (a) All payments made by the Borrower to the
------------
Administrative Agent or any Lender hereunder and under any Note will be made
without setoff, counterclaim or other defense. Except as provided in Section
3.4(b), all such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein with respect to such payments (but excluding, except as provided in the
second succeeding sentence, any tax imposed on or measured by the net income or
net profits of a Lender pursuant to the laws of the jurisdiction in which it is
doing business, organized or the jurisdiction in which the principal office or
applicable lending office of such Lender is located or any subdivision thereof
or therein) and all interest, penalties or similar liabilities with respect to
such non-excluded taxes, levies, imposts, duties, fees, assessments or other
charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments
or other charges being referred to collectively as "Taxes"). If any Taxes are
-----
so levied or imposed, the Borrower agrees to pay the full amount of such Taxes,
and such additional amounts as may be necessary so that every payment of all
amounts due under this Agreement or under any Note, after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein or in such Note. If any amounts are payable in respect of
Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each
Lender, upon the written request of such Lender, for taxes imposed on or
measured by the net income or net profits of such Lender pursuant to the laws of
the jurisdiction in which such Lender is doing business, organized or in which
the principal office or applicable lending office of such Lender is located or
under the laws of any political subdivision or taxing authority of any such
jurisdiction in which such Lender is doing business, organized or in which the
principal office or applicable lending office of such Lender is located and for
any withholding of taxes as such Lender shall reasonably determine are payable
by, or withheld from, such Lender, in respect of such amounts so paid to or on
behalf of such Lender pursuant to the preceding sentence and in respect of any
amounts paid to or on behalf of such Lender pursuant to this sentence. The
Borrower will furnish to such Lender within 45 days after the date the payment
of any Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by such Borrower. The Borrower agrees to indemnify and
hold harmless each Lender, and reimburse such Lender upon its written request,
for the amount of any Taxes so levied or imposed and paid by such Lender.
(b) Any Lender that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes
agrees to deliver to the Administrative Agent and the Borrower on or prior to
the Closing Date or, in the case of a Lender that is an assignee or transferee
of an interest under this Agreement pursuant to Section 9.11(a) (unless such
Assignee was already a Lender hereunder immediately prior to such assignment in
which case such assignee shall reaffirm its ability to deliver the forms set
forth below in clause (i) or (ii), as applicable), on the date of the assignment
to such Assignee, (i) two accurate and complete original signed copies of
Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete
exemption under an income tax treaty) (or successor forms) certifying to such
Lender's entitlement as of such date to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if any such Lender is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form W-8ECI or
-10-
Form W-8BEN (with respect to a complete exemption under an income tax treaty)
(or any successor forms) pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit C (any such certificate, a "Section
3.4(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio
interest exemption) (or successor form) certifying to such Lender's entitlement
as of such date to a complete exemption from United States withholding tax with
respect to payments of interest to be made under this Agreement and under any
Note. In addition, each such Lender agrees that from time to time after the
Closing Date, when a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect, such
Lender will deliver to the Administrative Agent and the Borrower two new
accurate and complete original signed copies of Internal Revenue Service Form W-
8ECI, Form W-8BEN (with respect to the benefits of any income tax treaty), or
Form W-8BEN (with respect to the portfolio interest exemption) and a Section
3.4(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Lender to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or such Lender shall
immediately notify the Administrative Agent and the Borrower of its inability to
deliver any such Form or Certificate, in which case such Lender shall not be
required to deliver any such Form or Certificate pursuant to this Section
3.4(b). Notwithstanding anything to the contrary contained in Section 3.4(a) and
the immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, fees or other amounts payable
hereunder for the account of any Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income
tax purposes to the extent that such Lender has not provided to the
Administrative Agent and the Borrower U.S. Internal Revenue Service Forms that
establish a complete exemption from such deduction or withholding and (y) the
Borrower shall not be obligated pursuant to Section 3.4(a) to gross-up payments
to be made to a Lender in respect of income or similar taxes imposed by the
United States if (I) such Lender has not provided to the Administrative Agent
and the Borrower the Internal Revenue Service Forms required to be provided to
the Administrative Agent and the Borrower pursuant to this Section 3.4(b) or
(II) in the case of a payment, other than interest, to a Lender described in
clause (ii) above, to the extent that such Forms do not establish a complete
exemption from withholding of such taxes. Notwithstanding anything to the
contrary contained in the preceding sentence or elsewhere in this Section 3.4,
the Borrower agrees to pay any additional amounts and to indemnify each Lender
in the manner set forth in Section 3.4(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any amounts
deducted or withheld by it as described in the immediately preceding sentence as
a result of any changes that are effective after the Closing Date in any
applicable law, treaty, governmental rule, regulation, guideline or order, or in
the interpretation thereof, relating to the deducting or withholding of such
Taxes. The sole consequence of any Lender failing to comply with the requirement
to deliver the Internal Revenue Service Forms or the Section 3.4(b)(ii)
Certificate shall be that the Borrower shall not be obligated pursuant to
Section 3.4(a) to gross-up payments to be made to such Lender in respect of any
resulting U.S. income or similar taxes.
-11-
(c) Any Lender that is (i) an Assignee pursuant to Section 9.11(a) and
(ii) not a United States person (as such term is defined in Section 7701(a)(30)
of the Code) for U.S. Federal income tax purposes will certify to the Borrower
on or prior to the date of the assignment to such Lender that payments to such
Lender hereunder and under any Note are, as of the date of such assignment, not
subject to any withholding tax imposed by any taxing jurisdiction located
outside of the United States.
(d) Each Lender, at the sole cost and expense of the Borrower
(including, but not limited to, the Lender's internal costs for use of its
personnel and resources), will use its reasonable efforts to minimize taxes
indemnifiable by the Borrower under this Section 3.4, including by complying
with reasonable requests by the Borrower to do or to refrain from doing any act
(including the execution of any certificates or similar documents required to
establish an exemption or relief from any tax), if such efforts or any such
compliance is, in the good faith discretion of such Lender, of a purely
ministerial nature and has no adverse impact on such Lender or any Affiliate or
on the business or operations of the foregoing (unless such adverse impact is
one of a nature and quality such that it is subject to indemnification and the
Borrower has indemnified such Lender against such adverse impact in a manner
satisfactory to such Lender determined in its sole discretion). The Borrower
shall indemnify such Lender for any taxes that may be imposed on it as a
consequence of such compliance. No Lender shall be required to disclose any tax
return or filing or any related information it deems confidential and all
positions taken by each Lender in any tax return, filing or proceeding shall be
within the sole control of such Lender.
3.5 Allocation. The parties agree that the Notes issued by the
----------
Borrower under this Agreement and the Options issued by LLC under the Option
Agreement, will for federal tax purposes, be treated as an "investment unit" as
such term is defined under Section 1273(c)(2) of the Code and the parties agree
that the consideration paid by each Lender for its Note and Option shall be
allocated as set forth on Schedule 3.5.
3.6 Fee. The Borrower shall pay to (a) the Tranche A Lender the
---
Commitment Fee payable to it pursuant to the terms of the Fee Letter and (b) the
Tranche B Lender the Commitment Fee payable to it pursuant to the Lehman Fee
Letter.
3.7 Application of Payments; Sharing.
--------------------------------
(a) Subject to the provisions of this Section 3.7, the Administrative
Agent agrees that promptly after its receipt of each payment from or on behalf
of the Borrower in respect of any Obligations of the Borrower hereunder, it
shall promptly distribute such payment to the Lenders pro rata based upon their
--- ----
respective shares, if any, of the Obligations with respect to which such payment
was received.
(b) Each of the Lenders agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Financing Documents, or
otherwise), which, in any such case, is in excess of its ratable share of
payments on account of the Obligations obtained by all Lenders, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an
-12-
interest in the Obligations of the Borrower to such Lenders in such amount as
shall result in a proportional participation by all the Lenders in such amount;
provided, however, that if all or any portion of such excess amount is
- -------- -------
thereafter recovered from such Lender, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
SECTION 4. CONDITIONS PRECEDENT.
--------------------
4.1 Conditions to Closing. The obligation of any Lender to make its
---------------------
Loan shall be subject to the conditions precedent that such Lender shall have
received, or shall have waived receipt of, the following, each of which shall be
in form and substance satisfactory to such Lender, and that the other conditions
set forth below shall have been satisfied or waived by such Lender:
(a) Financing Documents. Each of the Financing Documents (including
-------------------
the LLC Pledge Agreement, the Stock Pledge Agreement and the Option Agreement)
shall have been duly authorized, executed and delivered by each party thereto.
Such Lender shall have received an original of each Financing Document executed
by all parties thereto.
(b) Notes. The Borrower shall have duly authorized, executed and
-----
delivered a Note for the account of such Lender. Each Note shall be
appropriately completed with the name of the payee, the maximum principal amount
thereof and the date of issuance (which shall be the Closing Date) inserted
therein.
(c) Charter Documents. Such Lender shall have received the following
-----------------
documents, each certified as indicated below:
(i) a copy of the Charter Documents of the Borrower, LLC, NEG, Inc.,
the Significant Subsidiaries and the Specified Subsidiaries, as in effect
on the Closing Date, certified by the Secretary of State of the State of
such Person's organization, as applicable, and a certificate, where
available, as to the good standing of and payment of franchise taxes by the
Borrower, LLC, NEG, Inc., the Significant Subsidiaries and the Specified
Subsidiaries from the Secretary of State of the State of such Person's
organization, dated as of a date no earlier than 5 days prior to the
Closing Date;
(ii) a certificate of an Authorized Officer of each of the Borrower,
LLC and NEG, Inc., dated the Closing Date, certifying (A) that attached
thereto is a true and complete copy of the Charter Documents of such
Person, as in effect at all times from the date on which the resolutions
referred to in clause (B) below were adopted to and including the date of
such certificate, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the board of directors (or other equivalent
body) or evidence of all corporate, partnership or limited liability
company action, as the case may be, of such Person, authorizing the
execution, delivery and performance of the Financing Documents to which
such Person is or is intended to be a party, and that such resolutions have
not been modified, rescinded or amended and are in full force and effect,
and (C) as to the name, incumbency and specimen signature of each officer
of such Person executing the Financing Documents to which such Person is
intended to be a party and each other document to be delivered by such
Person from time to time in connection therewith; and
-13-
(iii) a certificate of another Authorized Officer of each of the
Borrower, LLC and NEG, Inc., as to the name, incumbency and specimen
signature of the Authorized Officer of such Person that signed the
certificate referred to in clause (ii) above.
(d) Filings, Registrations, Recordings; Other Perfection Actions. (i)
------------------------------------------------------------
On or prior to the Closing Date, such Lender shall have received certified
copies of Requests for Information or Copies (Form UCC-11), or equivalent
reports, each of a recent date listing all effective financing statements that
name the Borrower, LLC or NEG, Inc., as debtor, together with copies of such
financing statements.
(ii) Any document required to be filed, registered, notarized or
recorded in order to create and perfect the security interest of the Collateral
Agent under the Security Documents as a first priority Lien shall have been
properly filed, registered, notarized or recorded in each office in each
jurisdiction in which such filings, registrations, notarizations and
recordations are required, and any other action required in the judgment of any
Lender to perfect such security interest as such first priority Lien shall have
been effected, and such Lender shall have received acknowledgment copies or
other evidence satisfactory to it that all necessary filing, notarization,
recording and other fees and all taxes and expenses related to such filings,
notarizations, registrations and recordings have been paid in full.
(iii) The Collateral Agent shall have received the stock certificates
representing 100% of the capital stock of NEG, Inc., together with related
appropriate stock powers, duly executed in blank.
(iv) The Collateral Agent shall have received the certificates
representing 100% of the Pledged Interest of the Borrower being pledged pursuant
to the LLC Pledge Agreement, together with related powers, duly executed in
blank.
(e) Borrower's Certificate. Such Lender shall have received an
----------------------
original counterpart of a certificate of an Authorized Officer of the Borrower,
dated the Closing Date, to the effect that: (i) the representations and
warranties of the Borrower contained in Section 5 hereof and the representations
and warranties of the Borrower contained in each of the other Financing
Documents to which the Borrower is a party are true and correct in all material
respects (or in the event any such representation or warranty shall be qualified
by a "Material Adverse Effect" or a materiality threshold, in all respects) on
and as of the Closing Date (or, if stated to have been made solely as of an
earlier date, were true and correct as of such earlier date), (ii) all covenants
required to be performed by the Borrower contained in any Financing Document to
which it is a party prior to the Closing Date have been performed in all
material respects, (iii) all Financing Documents are in full force and effect
under the terms and conditions set forth in such Financing Documents, and (iv)
no Default or Event of Default has occurred and is continuing.
(f) Other Officer Certificates. (i) Such Lender shall have received
--------------------------
a certificate signed by an Authorized Officer of LLC, dated the Closing Date, to
the effect that (i) the representations and warranties of LLC set forth in each
of the Financing Documents to which it is a party are true and correct in all
material respects (or in the event any such representation or warranty shall be
qualified by a "Material Adverse Effect" or a materiality threshold, in all
respects)
-14-
on and as of such date as if made on and as of the Closing Date (or, if stated
to have been made solely as of an earlier date, were true and correct as of such
earlier date) and (ii) all covenants required to be performed by LLC contained
in any Financing Document to which it is a party prior to the Closing Date have
been performed in all material respects.
(ii) Such Lender shall have received a certificate signed by an
Authorized Officer of NEG, Inc., dated the Closing Date, to the effect that (i)
the representations and warranties of NEG, Inc. set forth in each of the
Financing Documents to which it is a party are true and correct in all material
respects (or in the event any such representation or warranty shall be qualified
by a "Material Adverse Effect" or a materiality threshold, in all respects) on
and as of such date as if made on and as of such date (or, if stated to have
been made solely as of an earlier date, were true and correct as of such earlier
date) and on and as of the Closing Date, and (ii) all covenants required to be
performed by NEG, Inc. contained in any Financing Document to which it is a
party prior to the Closing Date have been performed in all material respects.
(g) Financial Information, etc. (i) Such Lender shall have received
--------------------------
copies of the most recent audited and unaudited (x) consolidated financial
statements from each of the Borrower and NEG, Inc. and (y) financial statements
or information from each of the FI Subsidiaries, in each case, in form and
substance satisfactory to such Lender together with a certificate from the Chief
Financial Officer or other Authorized Officer of such Person, dated the Closing
Date, to the effect that, to the best of such officer's knowledge, (A) such
financial statements or information are true, complete and correct in all
material respects and (B) there has been no material adverse change in the
condition (financial or otherwise), results of operations, business, Properties,
liabilities, management or prospects of such Person since the date of the most
recent financial statements or information of such Person; provided that for
--------
purposes of this clause (g), defaults or events of default in respect of the
Indebtedness of the Borrower which is to be Refinanced by the proceeds of the
Loan or other defaults or events of default with respect to the Borrower which
are described in the SEC Filings by the Borrower since December 31, 2000 but
prior to the Closing Date, and any Utility Event shall not be deemed a Material
Adverse Change to such Person.
(ii) Such Lender shall have received such other financial, business
and other information regarding any other Subsidiary of the Borrower as such
Lender shall have reasonably requested.
(h) Process Agent. Such Lender shall have received a copy of a letter
-------------
from CT Corporation System accepting its appointment as process agent in New
York for the Borrower, LLC and NEG, Inc., in substantially the form of Exhibit D
hereto.
(i) Legal Opinions. Such Lender shall have received original
--------------
counterparts of the legal opinions of counsel to the Borrower, LLC and NEG,
Inc., which legal opinions shall be dated the Closing Date, addressed to such
Lender, and in form, scope and substance satisfactory to such Lender.
(j) Due Diligence. Such Lender shall have (i) completed its due
-------------
diligence investigation of the organization and capital structure of the
Borrower and its Subsidiaries and all
-15-
documents and instruments relating thereto, and other matters related to or in
connection with the transactions contemplated hereby, in scope, and with
results, satisfactory to such Lender in all respects, and (ii) been given such
access to the management, records, books of account, contracts, concessions, and
other documents relating to the business, regulatory framework and Property of
the Borrower and its Subsidiaries as such Lender shall have reasonably
requested.
(k) Material Adverse Change. Since December 31, 2000, and except as
-----------------------
disclosed in the SEC Filings by the Borrower since December 31, 2000 but prior
to the Closing Date, there shall not have occurred and be continuing any
Material Adverse Change of the Borrower or of LLC, NEG, Inc. and the Significant
Subsidiaries, taken as a whole; provided that for purposes of this clause (k),
--------
defaults or events of default in respect of the Indebtedness of the Borrower
which is to be Refinanced by the proceeds of the Loan and a Utility Event shall
not be deemed a Material Adverse Change to the Borrower.
(l) Fees; Interest; Expenses. Such Lender shall have received the
------------------------
Commitment Fee pursuant to the Fee Letter or the Lehman Fee Letter, as the case
may be, and all other fees, costs and charges due and owing under the Financing
Documents on or prior to the Closing Date and shall have received its pro rata
--- ----
share of the Interest Prepaid Amount required to be paid pursuant to Section
2.5. The Collateral Agent shall have received the CA Fee for payment of its
services as Collateral Agent under the Financing Documents. Such Lender shall
have received payment of all out-of-pocket expenses payable by the Borrower to
such Lender pursuant to Section 9.1 (including reasonable fees and expenses and
disbursements of legal counsel).
(m) Notice of Borrowing. Such Lender shall have received a Notice of
-------------------
Borrowing pursuant to and in compliance with Section 2.
(n) Governmental Approvals, etc. (i) All Governmental Approvals and
----------------------------
consents or approvals from any third party which under applicable Law or any
agreement, contract or document are required to be obtained by the Borrower or
its Subsidiaries with respect to the transactions contemplated by the Financing
Documents prior to the Closing Date shall have been duly obtained and shall be
final, non-appealable and in full force and effect; (ii) there shall have been
no change in any applicable Law, and no issuance of any order, writ, injunction
or decree of any Governmental Authority or arbitral tribunal, which, in either
such case, could reasonably be expected to have a Material Adverse Effect; and
(iii) there shall have been no proposed change in or modification of any
applicable Law which could reasonably be expected to be enacted and which if
enacted could reasonably be expected to have a Material Adverse Effect.
(o) Material Adverse Effect. There shall exist no circumstance, event
-----------------------
or condition which has had or could reasonably be expected to have a Material
Adverse Effect.
(p) Litigation. No legal or arbitral proceedings or investigations,
----------
or any proceedings by or before any Governmental Authority or any Person, shall
be pending or threatened against the transactions contemplated by the Financing
Documents or any document executed in connection therewith which, if adversely
determined, could reasonably be expected to have a Material Adverse Effect, and
no other legal or arbitral proceedings or investigations, or any pro
-16-
ceedings by or before any Governmental Authority or any Person, shall be pending
in respect of the Borrower, LLC, NEG, Inc. or the Significant Subsidiaries
which, if adversely determined, could reasonably be expected to result in a
Material Adverse Change to the Borrower, or a Material Adverse Change to LLC,
NEG, Inc. and the Significant Subsidiaries, taken as a whole.
(q) Solvency Certificate. On or before the Closing Date, the Borrower
--------------------
shall cause to be delivered to such Lender a solvency certificate from the Chief
Financial Officer of the Borrower in form, scope and substance satisfactory to
such Lender, dated the Closing Date, setting forth the conclusion that, after
giving effect to the transaction contemplated by the Financing Documents and the
incurrence of all the financings contemplated herein, the Borrower (on a stand-
alone basis), the Borrower and its Subsidiaries (on a consolidated basis) and
LLC (on a stand-alone basis), in each case, are not insolvent and will not be
rendered insolvent by the indebtedness incurred in connection therewith, and
will not be left with unreasonably small capital with which to engage in its or
their businesses and will not have incurred debts beyond its or their ability to
pay debts as they mature and become due.
(r) No Breach. Immediately prior to and after giving effect to the
---------
transactions contemplated by the Financing Documents, except as disclosed in
Part E of the Disclosure Letter, there shall exist no default or event of
default under any material agreement or contract to which the Borrower, LLC,
NEG, Inc. or any Significant Subsidiary is a party which would result in a
Material Adverse Change to the Borrower, or a Material Adverse Change to LLC,
NEG, Inc. and the Significant Subsidiaries, taken as a whole.
(s) Refinancing; Existing Indebtedness. (i) On the Closing Date (but
----------------------------------
concurrently with the consummation of the transactions contemplated by the
Financing Documents), all Indebtedness to be Refinanced shall have been repaid
in full in the manner set forth in Part C of the Disclosure Letter by the
Borrower by applying thereto the proceeds of the Loans, and all commitments in
respect thereof shall have been terminated and all Liens and guaranties in
connection therewith shall have been terminated (and all appropriate releases,
termination statements or other instruments of assignment with respect thereto
shall have been obtained) to the reasonable satisfaction of such Lender.
Without limiting the foregoing, there shall have been delivered to such Lender
(x) proper termination statements (Form UCC-3 or the appropriate equivalent) for
filing under the UCC of each jurisdiction where a financing statement (Form UCC-
1 or the appropriate equivalent) was filed with respect to the Borrower or any
of its Subsidiaries in connection with the security interest created with
respect to the Indebtedness to be Refinanced and the documentation related
thereto and (y) terminations of all mortgages, leasehold mortgages and deeds of
trust created with respect to property of the Borrower or any of its
Subsidiaries, in each case, to secure the obligations under the Indebtedness to
be Refinanced, all of which shall be in form and substance satisfactory to such
Lender.
(ii) On the Closing Date and after giving effect to the transactions
contemplated by the Financing Documents, the Borrower and LLC shall have no
Indebtedness or preferred stock outstanding other than the Loan and certain
other indebtedness existing on the Closing Date acceptable to such Lender as
listed on Part B of the Disclosure Letter. On and as of the Closing Date, all
of the existing Indebtedness under the Existing Indebtedness Agreements shall
remain outstanding after giving effect to the transactions contemplated hereby
without any
-17-
default or event of default existing thereunder or arising as a result of the
transaction contemplated hereby (except to the extent amended or waived by the
parties thereto on terms and conditions reasonably satisfactory to such Lender).
(iii) On the Closing Date, such Lender shall have received evidence
in form and substance reasonably satisfactory to such Lender that the matters
set forth in this Section 4.1(s) have been satisfied.
(t) [OMITTED].
-------
(u) Finality of FERC Orders. FERC shall have (i) issued final binding
-----------------------
orders not subject to rehearing in Docket Nos. EC01-49-000 and EC01-41-000, and
(ii) denied all motions to intervene, requests for rehearing, requests to vacate
or any other relief requested in pleadings other than those by LLC or any member
of NEG Group which were filed subsequent to the FERC orders in Docket Nos. EC01-
49-000 and EC01-41-000.
(v) Letter. Such Lender shall have received a copy of letters
------
addressed to the Borrower from third parties, confirming the amount and type of
Indebtedness of the Borrower with respect to items B and C of Part A(IV) of the
Disclosure Letter to be Refinanced hereunder.
(w) Business Plan. Such Lender shall have received a true and
-------------
complete copy of the Business Plan, certified by an Authorized Officer of each
of the Borrower, LLC and NEG, Inc.
(x) Disclosure Letter. Such Lender shall have received the Disclosure
-----------------
Letter.
(y) Proceedings. All corporate and other proceedings, and all Charter
-----------
Documents, other documents, instruments and other legal matters in connection
with the transactions contemplated hereby and the other Financing Documents
shall be satisfactory in form and substance to such Lender and such Lender shall
have received such other documents, certificates and instruments relating to the
Financing Documents or the transactions contemplated thereby as it shall have
reasonably requested, in each case, in form and substance satisfactory to it.
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
------------------------------------------
In order to induce the Administrative Agent and each Lender to enter
into this Agreement, and to induce each Lender to make its Loan, the Borrower
makes the following representations, warranties and agreements as of the date
hereof, all of which shall survive the execution and delivery of this Agreement
and the Notes and the making and continuance of the Loans:
5.1 Standing. (a) Each of the Borrower, LLC, NEG, Inc. and each
--------
Significant Subsidiary (collectively, the "Covered Parties") is a corporation,
limited partnership or limited liability company duly formed, validly existing
and in good standing under the laws of its jurisdiction of organization and has
the requisite power and authority to own, lease and operate its Properties and
to carry on its business as now being conducted.
-18-
(b) Each Covered Party is duly qualified or licensed to do business as
a foreign entity and is in good standing in each jurisdiction in which the use
and ownership of its Property or the conduct of its business requires such
license or qualification, except where the failure to be so qualified or
licensed would not have a Material Adverse Effect.
5.2 Requisite Authority; Etc. Each Covered Party has all requisite
-------------------------
power and authority to enter into the Financing Documents to which it is a
party. All necessary action on the part of each Covered Party has been taken to
authorize the execution and delivery of the Financing Documents to which it is a
party, the performance of its obligations under such Financing Documents and the
consummation of the transactions contemplated hereby and thereby. Each of the
Financing Documents has been duly and validly executed and delivered by each
Covered Party that is a party thereto, and constitutes valid and binding
agreements of each such Covered Party, enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
generally and to general principles of equity (regardless of whether such
enforceability is considered in an proceeding in equity or at law).
5.3 No Conflict. Neither the execution and delivery of the Financing
-----------
Documents nor the consummation of the transactions contemplated by such
Financing Documents nor compliance by any Covered Party with any of the
provisions of such Financing Documents to which it is a party will (i) violate
or conflict with any provision of the charter, certificate of formation, by-laws
or limited liability company agreement or other governing documents of such
Covered Party, or any Law, judgment, order, writ, decree or injunction
applicable to such Covered Party, or (ii) except as set forth in Part F of the
Disclosure Letter, violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or any event which, with or without due
notice or lapse of time, or both, would constitute a default) under, or result
in the termination of, accelerate the performance required by, or, except for
the Liens created by the Financing Documents, result in the creation of any Lien
upon any of the Properties or assets of such Covered Party, under any contract,
note, bond, mortgage, indenture, deed of trust, license, lease, agreement,
permit or other instrument or obligation of which such Covered Party is a party
or by which it or any of its assets are bound.
5.4 Consents. (a) No permit, application, notice, transfer,
--------
consent, approval, order, qualification, waiver from or authorization of, or
declaration, filing or registration with, any Governmental Authority or any
third party is currently required to be made or obtained by any Covered Party or
any of its Subsidiaries in connection with (i) the execution, delivery and
performance of the Financing Documents or the consummation of the transactions
contemplated by such Financing Documents, (ii) the grant by the Borrower or LLC,
or the perfection and maintenance, of the Liens contemplated by the Financing
Documents (including the first priority nature thereof) or (iii) the exercise by
any party to the Financing Documents of any of its rights under any such
Financing Document or any remedies pursuant to the Financing Documents, other
than with respect to the exercise by any Holder of its right to convert the
Option to Option Shares under the Option Agreement which may require filing
under the HSR Act or with FERC or the exercise of the foreclosure rights with
respect to the stock of NEG, Inc. or the LLC Interests which may require filing
with FERC and certain state regulatory agencies.
-19-
(b) No right of first refusal, preemptive right, right of first offer
or other similar rights to acquire (each a "Preferential Right") are required to
------------------
be complied with by any Covered Party or any of its Subsidiaries in connection
with the execution, delivery or performance of the Financing Documents or the
consummation of the transactions contemplated by the Financing Documents.
5.5 Compliance with Law. Each of the Borrower and each member of the
-------------------
NEG Group and each Scheduled Project has been and on the Closing Date is in
compliance in all material respects with all Laws, Governmental Approvals,
orders, writs, injunctions or decrees or its Charter Documents applicable to or
otherwise concerning such Person and such Scheduled Project.
5.6 Litigation Claims. Except as set forth on Schedule 5.6, there
-----------------
are no legal or arbitral proceedings or investigations, or any proceedings by or
before any Governmental Authority or any Person, pending or threatened against
the transactions contemplated by the Financing Documents or any document
executed in connection therewith which could reasonably be expected to have a
Material Adverse Effect, and there are no other legal or arbitral proceedings or
investigations, or any proceedings by or before any Governmental Authority or
any Person pending against the Borrower, LLC, NEG, Inc. or the Significant
Subsidiaries which could reasonably be expected to result in a Material Adverse
Change to the Borrower, or a Material Adverse Change to LLC, NEG, Inc. and the
Significant Subsidiaries, taken as a whole.
5.7 Contracts and Commitments. (a) Schedule 5.7 reflects a complete
-------------------------
and accurate list of all material contracts, agreements or letters of intent or
written understandings (including all amendments and supplements thereto)
entered into by any Covered Party (collectively, the "Covered Contracts") (it
being understood that any contract, agreement or letter of intent or written
understanding (i) entered in the ordinary course of business of the Covered
Parties, or (ii) with respect to Indebtedness of any such Covered Party that is
non-recourse to such Covered Party, or (iii) requiring aggregate payments of
less than $10,000,000 or (iv) with a fixed term of less than three hundred and
sixty-four (364) days shall not be deemed to be a "material" contract, agreement
or letter of intent or written understanding).
(b) Except as otherwise set forth on Part E of the Disclosure Letter,
(i) each of the Covered Contracts is a valid and binding obligation of the
Covered Party which is a party thereto and enforceable by the Covered Parties
(as applicable) in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization or similar laws or equitable
principles relating to creditors' rights generally; (ii) none of the Covered
Parties party to any Covered Contract is in default or alleged to be in default
under any Covered Contract, and no other asserted or, to the best knowledge of
the Borrower, LLC and NEG, Inc., unasserted claim or dispute under any Covered
Contract exists; and (iv) to the best knowledge of the Borrower, there exists no
event, condition or occurrence that, after notice or lapse of time, or both,
would constitute such a default, claim or dispute by the Covered Parties or, to
the best knowledge of the Borrower, any other party to any such Covered
Contract.
-20-
5.8 Liens. Except as set forth on Schedule 5.8, none of the
-----
Properties of the Borrower, LLC or NEG, Inc. are subject to any Lien, other than
the Liens created by this Agreement and the Security Documents.
5.9 Insurance. All insurance policies and fidelity bonds relating to
---------
the Covered Parties and their Properties, including summary descriptions and the
termination dates thereof, in force as of the date of this Agreement are set
forth on Schedule 5.9. The insurance coverage provided by such policies will
not terminate or lapse as a result of the transactions contemplated by this
Agreement or the other Financing Documents. Except as set forth on Schedule
5.9, all such insurance policies and fidelity bonds are in the name of the
Borrower, LLC, NEG, Inc. or a NEG Subsidiary (as indicated on Schedule 5.9).
None of the Covered Parties or, to the best knowledge of the Borrower, any other
party to any such policy or bond is in breach, violation or default (including
with respect to the payment of premiums or the giving of notices), and, to the
best knowledge of the Borrower, no event has occurred that, with notice or the
lapse of time or both, could constitute such a breach, violation or default by
the Covered Parties or any other party, or permit termination, modification or
acceleration, under such policy or bond, except where any such breach,
violation, default, termination, modification or acceleration could not
reasonably be expected to have a Material Adverse Effect.
5.10 Capitalization and Ownership. (a) As of the Closing Date, the
----------------------------
Borrower and Energy NEG Corp. are the sole members of LLC, with the Borrower
owning all of the Class A membership interests of the LLC, which entitle the
Borrower to 100% of the economic interest in LLC, and Energy NEG Corp. owning
all of the Class B membership interests of LLC, which entitle Energy NEG Corp.
to vote solely on certain bankruptcy matters of LLC as provided for in the LLC
Agreement. The Borrower is (and at all times prior to the Closing Date from and
after January 12, 2001, was) the owner of 100% of the Class A membership
interests in LLC and is (and at all times prior to the Closing Date from and
after January 12, 2001, was) the indirect owner (through the Limited Liability
Company Interests) of 100% of NEG, Inc. and the NEG Subsidiaries.
(b) LLC is (and at all times prior to the Closing Date from and after
January 12, 2001,was) the sole direct owner of all of the outstanding Capital
Stock of NEG, Inc., free and clear of all Liens and adverse claims, other than
the Liens in favor of the Collateral Agent created by the Security Documents.
(c) NEG, Inc. is (and at all times prior to the Closing Date from and
after January 1, 1999, was) the ultimate sole parent other than companies owning
NEG, Inc. directly or indirectly, of all Significant Subsidiaries and other NEG
Subsidiaries.
(d) (i) All of the Limited Liability Company Interests have been
duly authorized and, at the Closing Date, are and will be validly issued, free
and clear of all Liens and adverse claims, other than the Liens in favor of the
Collateral Agent created by the Security Documents.
(ii) All shares of the Capital Stock of NEG, Inc. have been duly
authorized and, at the Closing Date, are and will be validly issued and fully
paid and nonassessable and are
-21-
owned by LLC, free and clear of all Liens and adverse claims, other than the
Liens in favor of the Collateral Agent created by the Security Documents.
(e) Except as set forth in Schedule 5.10(e), no Person other than a
member of the NEG Group owns (i) any outstanding option, warrant, purchase
right, subscription right, conversion right, exchange right or other contract,
commitment, arrangement or understanding relating to the issuance by or purchase
from the Borrower of its LLC Interests, LLC, NEG, Inc. or any Significant
Subsidiary of its Equity Interests (as defined below), or (ii) any outstanding
stock appreciation, phantom stock, profit participation or similar rights with
respect to LLC, NEG, Inc. or any Significant Subsidiary, and there are no voting
trusts, proxies or other agreements or understandings with respect to the voting
of LLC Interests or Equity Interests to which the Borrower, LLC, NEG, Inc. or
any Significant Subsidiary is party.
(f) Schedule 5.10(f) sets forth for each of the Borrower, LLC, NEG,
Inc. and the NEG Subsidiaries a complete and accurate listing of (i) its name
and jurisdiction of organization, (ii) its form of organization and (iii) the
percentage (and, where applicable, the amount) of capital stock, partnership
interests (general and limited), membership interests or other equity interests
("Equity Interests") held directly or indirectly by the Borrower.
5.11 Financial Statements; Absence of Certain Changes. (a) Prior to
------------------------------------------------
the execution of this Agreement, the Borrower has delivered to the
Administrative Agent and each Lender the following financial statements, each of
which has been certified by the Chief Financial Officer of the relevant Person
specified below:
(i) (x) the audited consolidated financial statements of the Borrower
as at December 31, 1999, and (y) the unaudited consolidated financial
statements of the Borrower as at June 30, 2000 and September 30, 2000, and
the unaudited consolidating balance sheet and income statement of the
Borrower as at November 30, 2000, which statement has been prepared on a
management basis and does not include accompanying notes;
(ii) (x) the audited financial statements of each of the FI
Subsidiaries as at December 31, 1999, and (y) the unaudited financial
statements of each of the FI Subsidiaries as at June 30, 2000 and September
30, 2000, and the unaudited draft financial statements of each such FI
Subsidiary as at December 31, 2000;
(iii) the unaudited consolidated balance sheet and income statements
of NEG, Inc. as at December 31, 1999 and the estimated unaudited financial
statements of NEG, Inc. as at December 31, 2000.
Any audited financial statements (the "Audited Financial Statements") described
in this Section 5.11(a) (complete with any appropriate footnote disclosures)
present fairly the financial position of the relevant Person as at December 31,
1999, and were prepared in accordance with GAAP, consistently applied. Any
unaudited financial statements (the "Unaudited Financial Statements") described
in this Section 5.11(a) present fairly the financial position of the relevant
Person as at
-22-
such dates. Such Audited Financial Statements and Unaudited Financial Statements
have been prepared from the books of account and financial records of the
relevant Person.
(b) Since December 31, 2000 and except as disclosed in the SEC Filings by
the Borrower since December 31, 2000 but prior to the Closing Date, the Borrower
and all members of the NEG Group have conducted their business only in the
ordinary course of business, and there has not been (i) any event or development
that could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or (ii) any damage, destruction or loss, whether or not
covered by insurance, that could, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect. Except as set forth in the
Audited Financial Statements or otherwise disclosed in writing to each Lender in
the Disclosure Letter or incurred in the ordinary course of business, none of
the Covered Parties or any other NEG Subsidiary has any outstanding claims,
liabilities or indebtedness, contingent or otherwise.
5.12 Taxes. (a) Each of the Covered Parties and its Subsidiaries has filed
-----
or caused to be filed with the appropriate taxing authorities all material
federal, state and local tax returns ("Returns") which are required to be filed
by or with respect to each such Covered Party, its Subsidiaries, or any assets
thereof. The Returns accurately reflect (or will accurately reflect) all
liabilities for Taxes of each such Covered Party or Subsidiary for the periods
covered thereby in all material respects. All material Taxes due by or with
respect to each such Covered Party or Subsidiary, or any assets thereof, whether
or not shown on any Return, have been or will be timely paid in full on or prior
to the Closing Date or accrued and provided for on the books and records of each
such Person, as applicable, in accordance with GAAP. There is no dispute or
claim concerning any liability for Taxes of each of the Covered Parties, its
Subsidiaries, or any assets thereof that has been claimed or raised by any
Governmental Authority, except for disputes or claims for Taxes that have been
provided for on the books and records of each such Person, as applicable, in
accordance with GAAP. No Return of any of the Covered Parties, their
Subsidiaries, or the affiliated group of the Borrower is currently, or has been,
the subject of an audit by any taxing authority and no notice of such an audit
has been received, except for audits with respect to Taxes that have been
provided for on the books and records of each such Covered Party and its
Subsidiaries, as applicable, in accordance with GAAP. None of the Covered
Parties or any of their Subsidiaries have waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency, except with respect to Taxes that have been provided
for on the books and records of each such Covered Party and its Subsidiaries, as
applicable, in accordance with GAAP.
(b) All material Taxes which a Covered Party or any of its Subsidiaries is
(or was) required by Law to withhold or collect with respect to any payments
made in connection with its Property have been duly withheld or collected, and
have been timely paid over to the appropriate authorities to the extent due and
payable.
5.13 Disclosure. All documents, reports or other written information
----------
pertaining to the Covered Parties or its Affiliates that have been furnished to
the Lenders by or on behalf of the Covered Parties, taken as a whole, are true
and correct in all material respects and do not contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements contained therein not misleading. There is no fact, event or
circumstance
-23-
that has not been disclosed to the Lenders in writing, the existence of which
could reasonably be expected to have a Material Adverse Effect or a Material
Adverse Change of NEG, Inc. and the NEG Subsidiaries, taken as a whole.
5.14 Environmental Matters. Except as set forth in Schedule 5.14, (a) each
---------------------
of the Borrower and the members of the NEG Group is in compliance in all
material respects with all applicable Environmental Laws, (b) there is no
Environmental Claim outstanding or pending against the Borrower or any member of
the NEG Group or, to the best knowledge of the Borrower, threatened against the
Borrower or any member of the NEG Group, which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect or to
result in a Material Adverse Change to NEG, Inc. and the NEG Subsidiaries, taken
as a whole, and (c) to the best knowledge of the Borrower, LLC and NEG, Inc.,
none of the Covered Parties or other NEG Subsidiary has made any past or present
releases, emissions, discharges or disposals of any Hazardous Material in
violation of any Environmental Laws or that would give rise to any liability
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or a Material Adverse Change to NEG, Inc. and the NEG
Subsidiaries, taken as a whole.
5.15 Brokers' or Finders' Fees. Except as set forth in Schedule 5.15 (as to
-------------------------
which the Borrower is solely responsible for the payment of any such investment
banker's, brokers' or finders' fee or other commission or similar fee), no
agent, broker, investment banker, Person or firm acting on behalf of the Covered
Parties or any of their Affiliates or under the authority of the Borrower or any
of its Affiliates is or will be entitled to any brokers' or finders' fee or any
other commission or similar fee directly or indirectly from any of the parties
hereto in connection with any of the transactions contemplated hereby.
5.16 Certain Regulatory Matters. (a) Neither Borrower nor any Subsidiary of
--------------------------
Borrower is a "registered holding company" or a "subsidiary company" or an
"affiliate" of a "registered holding company" or a company which is required to
be registered as a "holding company" as such terms are defined under PUHCA.
(b) Each member of the NEG Group that owns assets subject to the
jurisdiction of FERC pursuant to the FPA or sells power at wholesale in the
United States is and at all relevant times has been either: (i) a QF; (ii)
certified by FERC as an EWG, has been granted by FERC the waivers from
regulation under the FPA typically granted to EWGs with market rate authority,
and has been granted by FERC market rate authority without qualifications,
conditions or restrictions other than those typically imposed on utility
affiliates; or (iii) a power marketer which owns no physical assets used for the
generation, transmission or distribution of electric energy as such terms are
used in PUHCA, has been granted by FERC the waivers from regulation under the
FPA typically granted to power marketers, and has been granted by FERC market
rate authority without qualifications, conditions or restrictions other than
those typically imposed on utility affiliates. The applications and additional
information submitted in connection with the certifications for QF status,
applications for EWG certification, applications for power marketer status, and
applications for market rate authority were accurate and complete in all
material respects when made and, as amended or supplemented from time-to-time,
remained at all relevant times and currently remain accurate and complete in all
respects affecting the eligibility for QF
-24-
status, EWG status, power marketer status, or market rate authority as
applicable, and each such FERC authorization or certification is in full force
and effect.
(c) Each member of the NEG Group (other than a QF during the period during
which it was a QF) that owns assets subject to the jurisdiction of FERC pursuant
to the FPA or sells power at wholesale in the United States has charged rates or
provided services only pursuant to either: (i) one or more rate schedules on
file with FERC; or (ii) market rate contracts in compliance with such entity's
market rate authority from FERC. Each QF during the period it was a QF has sold
power only in a manner consistent with its status as a QF.
(d) Each member of the NEG Group which owns natural gas assets, sells
natural gas or provides services subject to the jurisdiction of FERC pursuant to
the Natural Gas Act, as amended, or the Natural Gas Policy Act of 1978, as
amended, (i) has a rate schedule on file with FERC; (ii) has charged rates and
provided services only pursuant to such filed rates; and (iii) has complied and
complies in all material respects with the requirements of FERC orders
applicable to such member of the NEG Group.
(e) No member of the NEG Group is subject to Utility Regulation other than
as set forth in Schedule 5.16(e).
(f) Neither the Borrower nor LLC directly owns any assets subject to the
jurisdiction of FERC pursuant to the FPA.
(g) Except with respect to material licenses issued for the Brayton Point
and Salem Harbor Stations for monitoring equipment used to measure coal supply,
no member of the NEG Group is subject to regulation under the Atomic Energy Act
of 1954.
(h) The Borrower and each of its Subsidiaries is in material compliance
with all orders of the CPUC applicable to it, including without limitation, the
conditions set forth in the orders setting forth the conditions for the creation
of the Borrower and any subsequent CPUC proceedings, Pacific Gas and Electric
------------------------
Company, 69 CPUC2nd 167 (Nov. 6, 1996), Pacific Gas and Electric Company, 194
- ------- --------------------------------
PUR4th 1 (April 22, 1999), and all other CPUC orders purporting to apply to the
Borrower or its Subsidiaries regardless of whether the CPUC had jurisdiction.
(i) The Borrower and each of its Subsidiaries subject to Utility
Regulations is in material compliance with the requirements of Utility
Regulation applicable to it.
(j) None of the Borrower or any member of the NEG Group is subject to any
statute or regulation which would prohibit or require approval of the
transactions contemplated under this Agreement and the other Financing
Documents, including any Utility Regulation.
5.17 Transactions With Affiliates. Except as set forth on Schedule 5.17,
----------------------------
neither the Borrower nor any of its Subsidiaries is a party to any material
contract (i) with PGE Utility on the one hand and Borrower or any member of the
NEG Group on the other, or (ii) with the Borrower on the one hand and any member
of the NEG Group on the other.
-25-
5.18 Use of Proceeds. The proceeds of the Loans will be used for the
---------------
Refinancing in accordance with the provisions of this Agreement. The Borrower is
not engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock and no part of the proceeds of the Loans will
be used to purchase or carry any Margin Stock. Neither the making of the Loans
nor the use of the proceeds thereof will violate or be inconsistent with the
provisions of Regulation U or Regulation X.
5.19 Compliance with ERISA. (i) Schedule 5.19 sets forth each Plan; each
---------------------
Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded
Current Liability; no Plan which is subject to Section 412 of the Code or
Section 302 of ERISA has an accumulated funding deficiency, within the meaning
of such sections of the Code or ERISA, or has applied for or received a waiver
of an accumulated funding deficiency or an extension of any amortization period,
within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA;
all contributions required to be made with respect to a Plan have been timely
made; neither the Borrower nor any Subsidiary of the Borrower nor any ERISA
Affiliate has incurred any material liability (including any indirect,
contingent or secondary liability) to or on account of a Plan pursuant to
Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of
ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any
such liability under any of the foregoing sections with respect to any Plan; no
condition exists which presents a material risk to the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate of incurring a liability to or
on account of a Plan pursuant to the foregoing provisions of ERISA and the Code;
no proceedings have been instituted to terminate or appoint a trustee to
administer any Plan which is subject to Title IV of ERISA; no action, suit,
proceeding, hearing, audit or investigation with respect to the administration,
operation or the investment of assets of any Plan (other than routine claims for
benefits) is pending, expected or threatened; using actuarial assumptions and
computation methods consistent with Part 1 of subtitle E of Title IV of ERISA,
the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA
Affiliates to all Plans which are multiemployer plans (as defined in Section
4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the
close of the most recent fiscal year of each such Plan ended prior to the date
of the most recent Credit Event, would not exceed $100,000; each group health
plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code)
which covers or has covered employees or former employees of the Borrower, any
Subsidiary of the Borrower, or any ERISA Affiliate has at all times been
operated in compliance with the provisions of Part 6 of subtitle B of Title I of
ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on
the assets of the Borrower or any Subsidiary of the Borrower or any ERISA
Affiliate exists or is likely to arise on account of any Plan; and the Borrower
and its Subsidiaries may cease contributions to or terminate any employee
benefit plan maintained by any of them without incurring any material liability.
-26-
(ii) Each Foreign Pension Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. All
contributions required to be made with respect to a Foreign Pension Plan have
been timely made. Neither the Borrower nor any of its Subsidiaries has incurred
any obligation in connection with the termination of, or withdrawal from, any
Foreign Pension Plan. The present value of the accrued benefit liabilities
(whether or not vested) under each Foreign Pension Plan, determined as of the
end of the Borrower's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
5.20 Investment Company Act. The Borrower is not an "investment company,"
----------------------
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended. Neither the making of any Loan, nor the application of the
proceeds or repayment thereof by the Borrower, nor the consummation of the other
transactions contemplated hereby will violate any provisions of such Act or any
rule, regulation or order of the SEC thereunder.
5.21 Regulation. Solely by virtue of the execution, delivery and
----------
performance of, or the consummation of the transactions contemplated by the
Financing Documents (including, without limitation, the assignment of or
transfer into any trust, or any realization or foreclosure upon, any of the LLC
Interests pledged under the LLC Pledge Agreement or any of the collateral
pledged under the Stock Pledge Agreement, or the exercise of any right under the
Option Agreement), neither any Holder nor any Lender shall be or become subject
to regulation (i) as a "holding company," or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company," within the meaning of
the Public Utility Holding Company Act of 1935, (ii) under the Federal Power Act
of 1920, or (iii) as a "public utility" or "public service corporation" or the
equivalent under the applicable Law of any Governmental Authority, except with
respect to the exercise of the foreclosure rights with respect to the stock of
NEG, Inc. or the LLC Interests which may require filing with FERC and certain
state regulatory agencies.
5.22 Security Documents. The provisions of the Security Documents are
------------------
effective to create, in favor of the Collateral Agent, for the benefit of the
Lenders, legal, valid and enforceable Liens on or in all of the collateral
intended to be covered thereby, and all necessary recordings and filings have
been made in all necessary public offices and all other necessary and
appropriate action has been taken so that the Liens created by each Security
Document constitute perfected Liens on or in the collateral intended to be
covered thereby, prior and superior to all other Liens, and all necessary
consents to the creation, effectiveness, priority and perfection of each such
Lien have been obtained. No mortgage or financing statement or other instrument
or recordation covering all or any part of the collateral is on file in any
recording office, except such as may have been filed in favor of the Collateral
Agent, for the benefit of the Lenders.
5.23 Certain Scheduled Projects. Schedule 5.23 sets forth a complete list
--------------------------
of all projects owned directly or indirectly by the Borrower, LLC, NEG, Inc. and
the NEG Subsidiaries ("Scheduled Projects") and a summary of material
------------------
information with respect thereto, including the name, location, capacity and
classification of each Scheduled Project as a QF, EWG or otherwise,
-27-
the equity structure, and the amount of Indebtedness, with respect to each
Scheduled Project and such other information requested by the Lenders.
5.24 Environmental Matters. (a) The Borrower, LLC, NEG, Inc. and the NEG
---------------------
Subsidiaries have complied and are now complying in all material respects with
(i) all Environmental Laws applicable to the Scheduled Projects and (ii) the
requirements of any Governmental Approvals issued under such Environmental Laws
with respect to the Scheduled Projects.
(b) Except as set forth in Schedule 5.14, there are no facts,
circumstances, conditions or occurrences regarding any of the Scheduled Projects
that (i) to the best knowledge of the Borrower, could reasonably be anticipated
to form the basis of an Environmental Claim against such Scheduled Project, the
Borrower, LLC, NEG, Inc. or any NEG Subsidiary or, to the best knowledge of the
Borrower, or any other Person occupying or conducting operations on or about
such Scheduled Project which if adversely determined could reasonably be
expected to have a Material Adverse Effect or a Material Adverse Change to NEG,
Inc. and the NEG Subsidiaries, taken as a whole, (ii) could reasonably be
anticipated to cause such Scheduled Project to be subject to any material
restrictions on its ownership, occupancy, use or transferability under any
Environmental Law or (iii) could be reasonably anticipated to require the filing
or recording of any material notice, registration, permit or disclosure document
under any Environmental Law.
(c) Except as set forth in Schedule 5.14, there are no past, pending, or,
to the best knowledge of the Borrower, threatened, Environmental Claims against
the Borrower, LLC, NEG, Inc., or any of the Scheduled Projects, which if
adversely determined could reasonably be expected to have a Material Adverse
Effect or a Material Adverse Change to NEG, Inc. and the NEG Subsidiaries, taken
as a whole.
(d) Hazardous Materials have not at any time been generated, used,
treated, recycled, stored on, or transported to or from, or Released, deposited
or disposed of on all or any portion of any Scheduled Project other than in
compliance at all times with all applicable Environmental Laws, except to the
extent such non-compliance, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect or a Material Adverse
Change to NEG, Inc., and the NEG Subsidiaries, taken as a whole.
(e) There are not now and, to the best knowledge of the Borrower, never
have been any underground storage tanks located on the Scheduled Projects and
there is no asbestos contained in, forming part of, or contaminating, any part
of the Scheduled Projects, and no polychlorinated biphenyls (PCBs) are used,
stored, located at or contaminate any part of the Scheduled Projects, the
existence of which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect or a Material Adverse Change to NEG,
Inc. and the NEG Subsidiaries, taken as a whole.
5.25 Intellectual Property. Each of the Covered Parties owns or has the
---------------------
right to use all patents, trademarks, permits, service marks, trade names,
copyrights, franchises, formulas, licenses and other rights with respect
thereto, and has obtained assignment of all licenses and other rights of
whatsoever nature necessary for the operation of its business as currently
contem-
-28-
plated without any conflict with the rights of others. To the best knowledge of
the Borrower, no product, process, method, substance, part or other material
sold or employed or presently contemplated to be sold by or employed by any of
the Covered Parties in connection with its business infringes or will infringe
any patent, trademark, permit, service mark, trade name, copyright, franchise,
formula, license or other intellectual property right.
5.26 No Default. No Default or Event of Default has occurred and is
----------
continuing.
5.27 Single-Purpose Entity. LLC has not engaged in any business other than
---------------------
the ownership of 100% of the capital stock of NEG, Inc. LLC has established
offices at 7500 Old Georgetown Road, Bethesda, MD 20814-6161, and does not have
a place of business at any other location. LLC has no Indebtedness and no
significant assets other than the common stock of NEG, Inc.
5.28 Trust Indenture Act. The offering, issuance, sale and delivery of the
-------------------
Notes under the circumstances contemplated by this Agreement and the other
Financing Documents will not require this Agreement to be qualified under the
Trust Indenture Act of 1939, as amended.
5.29 [OMITTED]
5.30 Ratings Letter. Since January 19, 2001, none of NEG, Inc. or any
--------------
Significant Subsidiary has knowledge of or received any notice of a downgrade of
the credit rating of its long-term senior unsecured indebtedness or its being
placed on "credit watch" by Moody's or Standard & Poor's.
5.31 Certain Indebtedness. Part A of the Disclosure Letter sets forth a
--------------------
true and complete list of all Indebtedness of the Borrower and the amount
thereof immediately prior to the Closing Date. Part B of the Disclosure Letter
sets forth a true and complete list of all agreements with respect to the
Indebtedness of the Borrower and the amount thereof existing on the Closing Date
which, subject to Section 7.4, is to remain outstanding after the Closing Date
(the "Existing Indebtedness Agreements"). Except as set forth on Part B, C and D
--------------------------------
of the Disclosure Letter, all Indebtedness of the Borrower will be Refinanced
and repaid in full as at the Closing Date and all commitments in respect thereof
and all Liens and guaranties in connection therewith are terminated, and no
Person shall have any claim against the Borrower and the Borrower shall have no
further obligations with respect thereto. NEG, Inc. has made all reasonable
efforts to offer to repay, refinance or otherwise release the obligations of the
Borrower under such Indebtedness listed on Clauses I, II and III of Part B of
the Disclosure Letter, including the obligations of the Borrower under the
Equity Infusion Agreement and the Trading Contracts. Except as set forth in Part
B of the Disclosure Letter, none of the obligations of the Borrower under the
Existing Indebtedness Agreements are due and payable as of the Closing Date, and
there has been no demand on the Borrower, and the Borrower is not currently
liable, for any payment under such Existing Indebtedness Agreements.
-29-
SECTION 6. AFFIRMATIVE COVENANTS.
---------------------
The Borrower hereby covenants and agrees that in the case of the covenants
described below on and after the Closing Date and until the Loans and the Notes
together with interest, fees and all other Obligations incurred hereunder and
thereunder are paid in full (other than any indemnity, not then due and payable,
which by its terms shall survive such termination and payment):
6.1 Information Covenants. The Borrower will, or will cause the
---------------------
Covered Parties to, furnish to each Lender:
(a) Quarterly Financial Statements. Within 45 days after the close of
------------------------------
the first three quarterly accounting periods in each fiscal year of the
relevant Person specified below, (i) the consolidated and consolidating
balance sheets of each of (x) the Borrower and its consolidated
subsidiaries, (y) NEG, Inc. and its consolidated subsidiaries, and (ii) the
condensed consolidated balance sheets of the Significant Subsidiaries and
their consolidated subsidiaries, as at the end of such quarterly accounting
period and the related consolidated and consolidating statements of income
and cash flows, in each case for such quarterly accounting period and for
the elapsed portion of the fiscal year ended with the last day of such
quarterly accounting period, and in each case, setting forth comparative
figures for the related periods in the prior fiscal year, all of which
shall be certified by the Chief Financial Officer of the relevant Person,
subject to normal year-end audit adjustments.
(b) Annual Financial Statements. Within 90 days after the close of
---------------------------
each fiscal year commencing with the fiscal year 2001, and within 110 days
after the close of the fiscal year 2000, of the relevant Person specified
below, (i) the consolidated balance sheets of each of (x) the Borrower and
its consolidated subsidiaries, (y) NEG, Inc. and its consolidated
subsidiaries, and (ii) the balance sheets of each of the FI Subsidiaries as
at the end of such fiscal year and in each case, the related statements of
income and retained earnings and of cash flows for such fiscal year,
consolidated or otherwise, as applicable, setting forth comparative figures
for the preceding fiscal year and in the case of all such balance sheets
certified by Deloitte & Touche LLP, or such other independent certified
public accountants of recognized national standing reasonably acceptable to
the Lenders, together with a report of such accounting firm stating that in
the course of its regular audit of the financial statements of any of (A)
the Borrower and its consolidated subsidiaries, or (B) NEG, Inc. or any of
its consolidated subsidiaries or (C) any of the FI Subsidiaries, as the
case may be, which audit was conducted in accordance with generally
accepted auditing standards, such accounting firm obtained no knowledge of
any Default or Event of Default which has occurred and is continuing or, if
in the opinion of such accounting firm such a Default or Event of Default
has occurred and is continuing, a statement as to the nature thereof, and
(iii) management's discussion and analysis of the Borrower of the important
operational and financial developments during such fiscal year.
-30-
(c) Management Letters. Promptly after the receipt thereof by the
------------------
Borrower or any of its Subsidiaries, a copy of any "management letter"
received by any such Person from its certified public accountants and the
management's responses thereto.
(d) [OMITTED]
-------
(e) Officer's Certificates. At the time of the delivery of the
----------------------
financial statements provided for in Section 6.1(a) and (b), a certificate
of the Chairman of the Board, the President or Chief Financial Officer of
the Borrower to the effect that, to the best of such officer's knowledge,
no Default or Event of Default has occurred and is continuing or, if any
Default or Event of Default has occurred and is continuing, specifying the
nature and extent thereof.
(f) Notice of Default or Litigation, etc. Promptly, and in any event
------------------------------------
within three (3) Business Days after an officer of the Borrower or any
other Covered Party obtains knowledge thereof, notice of (i) the occurrence
of any event which constitutes a Default or Event of Default, (ii) any
litigation or governmental investigation or proceeding pending or
threatened (x) against the Borrower or any of its Subsidiaries which would
reasonably be expected to have a Material Adverse Effect or result in a
Material Adverse Change to LLC, NEG, Inc. and the Significant Subsidiaries,
taken as a whole, (y) with respect to any Indebtedness in excess of
$10,000,000 of the Borrower or any of its Subsidiaries or (z) with respect
to any Financing Document, (iii) downgrade of the credit rating of the
long-term senior unsecured indebtedness of the Borrower or any other
Covered Party or "negative watch" by Moody's or Standard & Poor's, and (iv)
demand for satisfaction of any guaranty or other Contingent Obligations of
the Borrower or any other Covered Party.
(g) Other Reports and Filings. Promptly, copies of all financial
-------------------------
information, proxy materials and other information and reports, if any,
which the Borrower or any of its Subsidiaries shall receive from FERC, CPUC
or SEC or file with FERC, CPUC or SEC, which could reasonably be expected
to have a Material Adverse Effect or result in a Material Adverse Change to
LLC, NEG, Inc. and the Significant Subsidiaries, taken as a whole, or
deliver to holders of its material Indebtedness pursuant to the terms of
the documentation governing such Indebtedness (or any trustee, agent or
other representative therefor) and holders of their capital stock in their
capacity as such.
(h) Environmental Matters. Promptly upon, and in any event within
---------------------
thirty (30) days after, an officer of the Borrower or any other Covered
Party obtains knowledge thereof, notice of one or more of the following
environmental matters which occurs after the Closing Date, unless such
environmental matters would not, individually or when aggregated with all
other such environmental matters, be reasonably expected to have a Material
Adverse Effect or result in a Material Adverse Change to LLC, NEG, Inc. and
the Significant Subsidiaries, taken as a whole:
-31-
(i) any Environmental Claim pending or threatened in writing
against the Borrower or any of its Subsidiaries or any Real Estate
owned or operated or occupied by the Borrower or any of its
Subsidiaries;
(ii) any condition or occurrence on or arising from any Real
Estate owned or operated or occupied by the Borrower or any of its
Subsidiaries that (a) results in noncompliance by the Borrower or any
of its Subsidiaries with any applicable Environmental Law or (b) would
reasonably be expected to form the basis of an Environmental Claim
against the Borrower or any of its Subsidiaries or any such Real
Estate;
(iii) any condition or occurrence on any Real Estate owned or
operated or occupied by the Borrower or any of its Subsidiaries that
would reasonably be expected to cause such Real Estate to be subject
to any restrictions on the ownership, occupancy, use or
transferability by the Borrower or any of its Subsidiaries of such
Real Estate under any Environmental Law; and
(iv) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
Real Estate owned or operated or occupied by the Borrower or any of
its Subsidiaries as required by any Environmental Law or any
governmental or other administrative agency; provided that in any
--------
event the Borrower shall deliver to each Lender all material notices
received by it or any of its Subsidiaries from any government or
governmental agency under, or pursuant to, CERCLA.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and the Borrower's or such Subsidiary's response thereto. In addition, the
Borrower will provide each Lender, from time to time, with copies of
periodic environmental audit and associated final closeout reports audited
by the environmental management system of any member of the NEG Group and
annual environmental compliance report prepared by any member of the NEG
Group, and copies of all material communications with any government or
governmental agency and all material communications with any Person
relating to any Environmental Claim as to which notice is required to be
given pursuant to this Section 6.1(h), and such detailed reports of any
such Environmental Claim as to which notice is required, as may reasonably
be requested by any Lender.
(i) [OMITTED]
-------
(j) Intercompany Transaction. From time to time, such information or
------------------------
document with respect to any commitment, memorandum of understanding or
agreement, whether in writing or not, with respect to material transactions
between (i) any of the Borrower and any member of the NEG Group or (ii)
between or among any of the Borrower and any member of the NEG Group, on
one hand and PGE Utility and any of its Subsidiaries, on the other hand.
-32-
(k) Certain Other Information. Concurrently therewith, any financial
-------------------------
information provided by NEG, Inc. to its lenders, noteholders or
bondholders pursuant to the terms of the credit agreement, loan agreement
or other equivalent instrument.
(l) Quarterly Meetings with Lender. At the request of the
------------------------------
Administrative Agent, within 50 days after the close of each fiscal quarter
the Borrower shall hold a meeting at a reasonable time and place selected
by the Borrower and acceptable to each Lender at which meeting shall be
reviewed the financial results of the previous fiscal quarter and the
financial condition of the Borrower and its Subsidiaries and the budgets
presented for the current fiscal quarter of the Borrower and its
Subsidiaries.
(m) Cash Reserve Certificate. At the time of delivery of the
------------------------
quarterly financial statements pursuant to clause (a) above, a certificate
of an officer of the Borrower certifying that it is in compliance with
Section 6.18 and setting forth in reasonable detail the calculation and the
amount of cash and Cash Equivalents held by the Borrower with respect to
such compliance at such time.
(n) Other Information. From time to time, such other information or
-----------------
documents (financial or otherwise) with respect to the Borrower or its
Subsidiaries as the Administrative Agent or any Lender may reasonably
request in writing.
6.2 Books, Records and Inspections. The Borrower will, and will
------------------------------
cause all members of the NEG Group to, keep proper books of record and account
in which are made full, true and correct entries in conformity with generally
accepted accounting principles and all requirements of law. The Borrower will,
and will cause the other Covered Parties to, permit officers and designated
representatives of any Lender to visit and inspect, during regular business
hours and under guidance of officers of the Borrower, any of the properties of
the Borrower and the other Covered Parties in whomsoever's possession, and to
examine the books of account of the Borrower and the other Covered Parties and
discuss the affairs (including environmental matters), finances and accounts of
the Borrower and the other Covered Parties with, and be advised as to the same
by, its and their officers and independent accountants, all upon reasonable
advance notice and at such reasonable times and intervals and to such reasonable
extent as such Lender may request, provided, that so long as no Default or Event
--------
of Default has occurred and is continuing, the Borrower shall have the right to
participate in any discussions of the Lender with any independent accountants of
the Borrower.
6.3 Maintenance of Property; Insurance. The Borrower will, and will
----------------------------------
cause all members of the NEG Group to, (i) keep all material properties and
equipment used in its business in good working order and condition (ordinary
wear and tear and loss or damage by casualty or condemnation excepted), (ii)
maintain in full force and effect insurance with reputable and solvent
insurance carriers on all its property in at least such amounts, against at
least such risks and with such deductibles or self-insured retentions as is
consistent and in accordance with industry practice and (iii) furnish to each
Lender, upon written request, full information as to the insurance carried. In
addition to the requirements to the immediately preceding sentence, the Borrower
will at all time cause insurance of the types described in Schedule 5.9 to be
maintained with no less scope of coverage or greater deductibles as are
described in Schedule 5.9 unless Borrower can
-33-
show that such insurance is no longer available to the Borrower at a
commercially reasonable cost. Such insurance shall include physical damage
insurance on all real and personal property (whether now or hereafter acquired)
on an all risk basis and business interruption insurance.
6.4 Corporate Franchises. The Borrower will, and will cause all
--------------------
members of the NEG Group, to do or cause to be done, all things necessary to
preserve and keep in full force and effect its existence and its material
rights, franchises, licenses and patents used in its business.
6.5 Compliance with Statutes, etc. The Borrower will, and will cause
-----------------------------
all members of the NEG Group to, comply with all applicable Law, in respect of
the conduct of its business and the ownership of its Property, except such
noncompliances as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect or result in a Material Adverse
Change to LLC, NEG, Inc. and the Significant Subsidiaries, taken as a whole.
6.6 Compliance with Environmental Laws. (a) The Borrower will
----------------------------------
comply, and will cause all members of the NEG Group to comply, in all material
respects with all Environmental Laws applicable to the operation of its business
or to the ownership or use of Real Estate now or hereafter owned or operated by
the Borrower and the other Covered Parties, will within a reasonable time period
pay or cause to be paid all costs and expenses incurred in connection with such
compliance (except to the extent being contested in good faith), and will
undertake all reasonable efforts to keep or cause to be kept all such Real
Estate free and clear of any Liens imposed pursuant to such Environmental Laws,
except such noncompliances as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or a Material Adverse
Change of LLC, NEG, Inc. and the Significant Subsidiaries, taken as a whole.
The Borrower will not and will cause the other Covered Parties not to generate,
use, treat, store, release or dispose of, or permit the generation, use,
treatment, storage, release or disposal of Hazardous Materials on any Real
Estate now or hereafter owned or operated or occupied by the Borrower or any of
the other Covered Parties, or transport or permit the transportation of
Hazardous Materials to or from any such Real Estate except in compliance with
all applicable Environmental Laws (except such noncompliances as could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or result in a Material Adverse Change to LLC, NEG, Inc. and the
Significant Subsidiaries, taken as a whole) and reasonably required in
connection with the operation, use and maintenance of any such Real Estate or
otherwise in connection with their businesses.
(b) At the written request of any Lender upon a reasonable belief by
such Lender that the Borrower or any of its Subsidiaries has breached any
representation or covenant contained herein relating to environmental matters,
which request shall specify in reasonable detail the basis therefor, the
Borrower will provide, at the Borrower's sole cost and expense, an environmental
audit, reasonable in scope, concerning the subject matter of such representation
or covenant and any Real Estate now or hereafter owned, operated or occupied by
the Borrower or any of its Subsidiaries, prepared by an environmental consulting
firm reasonably acceptable to such Lender, indicating (if relevant to such
breach) the presence or absence of Hazardous Materials and the potential cost of
any removal or remedial action in connection with any Hazardous Materials on
such Real Estate; provided, that such request may be made only if (i) there has
--------
occurred and is continuing a Default, (ii) such Lender reasonably believes that
the
-34-
Borrower or any such Real Estate is not in compliance with Environmental Law and
such circumstances would reasonably be expected to have a Material Adverse
Effect or result in a Material Adverse Change to LLC, NEG, Inc. and the
Significant Subsidiaries, taken as a whole, or (iii) circumstances exist that
reasonably could be expected to form the basis of a material Environmental Claim
against the Borrower or any of its Subsidiaries or any such Real Estate. If the
Borrower fails to provide the same within a reasonable period, not to exceed 90
days, after such request was made, a Lender may order the same, and the Borrower
shall grant and hereby grants to such Lender and its agents access to such Real
Estate and specifically grants such Lender an irrevocable non-exclusive license,
subject to the rights of tenants, to undertake such an assessment, all at the
Borrower's expense.
6.7 ERISA. As soon as possible and, in any event, within ten (10)
-----
days after the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate
knows or has reason to know of the occurrence of any of the following, the
Borrower will deliver to each Lender a certificate of the Chief Financial
Officer of the Borrower setting forth the full details as to such occurrence and
the action, if any, that the Borrower, such Subsidiary or such ERISA Affiliate
is required or proposes to take, together with any notices required or proposed
to be given or filed by such Borrower, such Subsidiary, the Plan administrator
or such ERISA Affiliate to or with the PBGC or any other government agency, or a
Plan participant and any notices received by such Borrower, such Subsidiary or
ERISA Affiliate from the PBGC or any other government agency, or a Plan
participant with respect thereto: that a Reportable Event has occurred (except
to the extent that the Borrower has previously delivered to each Lender a
certificate and notices (if any) concerning such event pursuant to the next
clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13)
of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance
reporting requirement of PBGC Regulation Section 4043.61 (without regard to
subparagraph (b)(1) thereof), and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected
to occur with respect to such Plan within the following 30 days; that an
accumulated funding deficiency, within the meaning of Section 412 of the Code or
Section 302 of ERISA, has been incurred or an application may be or has been
made for a waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan;
that any contribution required to be made with respect to a Plan or Foreign
Pension Plan has not been timely made; that a Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of
ERISA; that a Plan has an Unfunded Current Liability; that proceedings may be or
have been instituted to terminate or appoint a trustee to administer a Plan
which is subject to Title IV of ERISA; that a proceeding has been instituted
pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan;
that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or
may incur any liability (including any indirect, contingent, or secondary
liability) to or on account of the termination of or withdrawal from a Plan
under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with
respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or
Section 409, 502(i) or 502(l) of ERISA or with respect to a group health plan
(as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under
Section 4980B of the Code; or that the Borrower or any Subsidiary of the
Borrower may incur any material liability pursuant to any employee welfare
benefit plan (as defined in Section 3(1) of ERISA) that provides
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benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or any Plan or any Foreign Pension Plan. The Borrower
will deliver to each Lender copies of any records, documents or other
information that must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA. Upon the reasonable request of the Required Waiver
Lenders, the Borrower will also deliver to each Lender a complete copy of the
annual report (on Internal Revenue Service Form 5500-series) of each Plan
(including, to the extent required, the related financial and actuarial
statements and opinions and other supporting statements, certifications,
schedules and information) required to be filed with the Internal Revenue
Service. In addition to any certificates or notices delivered to each Lender
pursuant to the first sentence hereof, copies of annual reports and any records,
documents or other information required to be furnished to the PBGC or any other
government agency, and any material notices received by the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate with respect to any Plan or
Foreign Pension Plan shall be delivered to each Lender no later than ten (10)
days after the date such annual report has been filed with the Internal Revenue
Service or such records, documents and/or information has been furnished to the
PBGC or any other government agency or such notice has been received by the
Borrower, the Subsidiary or the ERISA Affiliate, as applicable. The Borrower and
each of its applicable Subsidiaries shall ensure that all Foreign Pension Plans
administered by it or into which it makes payments obtains or retains (as
applicable) registered status under and as required by applicable law and is
administered in a timely manner in all respects in compliance with all
applicable laws except where the failure to do any of the foregoing would not be
reasonably likely to result in a material adverse effect upon the business,
operations, condition (financial or otherwise) or prospects of the Borrower or
any Subsidiary of the Borrower.
6.8 End of Fiscal Years; Fiscal Quarters. The Borrower shall cause
------------------------------------
(i) each of its, and each of the other Covered Party's, fiscal years to end on
December 31 and (ii) its fiscal quarters to end on March 31, June 30, September
30 and December 31.
6.9 Payment of Taxes. The Borrower (a) will pay and discharge, and
----------------
will cause each of its Subsidiaries to pay and discharge, all material federal
and state income and franchise taxes imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims for sums related thereto that
have become due and payable which, if unpaid, might become a Lien not otherwise
permitted hereunder, and (b) will pay and discharge, and will cause each
Subsidiary to pay and discharge, all other material taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims for sums that have become due and payable which,
if unpaid, might become a Lien not otherwise permitted hereunder, provided that
--------
neither the Borrower nor any of its Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim which is being contested in good
faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP, and provided, further, that this
-------- -------
section 6.9 shall not apply with respect to any taxes of PG&E Utility or any
Subsidiary of PG&E Utility for which Borrower has no liability under applicable
law.
6.10 [OMITTED]
-------
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6.11 Performance of Obligations. The Borrower will, and will cause
--------------------------
each member of the NEG Group to, perform all of its obligations under the terms
of each mortgage, indenture, security agreement, loan agreement or credit
agreement and each other material agreement, contract or instrument by which it
is bound, except such non-performances as could not, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect or
result in a Material Adverse Change to LLC, NEG, Inc. and the NEG Subsidiaries
taken as a whole.
6.12 Use of Proceeds. The Borrower will use the proceeds of the
---------------
Loans only as provided in Section 4.1(s).
6.13 Regulatory Compliance. Borrower will take all actions and cause
---------------------
its Subsidiaries to take all actions reasonably required to comply in all
material respects with applicable Utility Regulations and each order issued
pursuant thereto; provided that, the foregoing shall not prevent Borrower or a
--------
Subsidiary from challenging the validity or effect of any Utility Regulation or
order in any proceeding provided the manner of such challenge could not
reasonably be expected to cause a Material Adverse Effect.
6.14 Financial Covenants. (a) The long-term unsecured debt
-------------------
obligations of NEG, Inc. shall be rated at least BBB- by Standard & Poor's or
Baa3 by Moody's.
(b) The ratio of the Fair Market Value of NEG, Inc. to the aggregate
amount of principal then outstanding under the Loan (the "Required FMV Ratio")
------------------
shall be at least 2:1. The Required FMV Ratio may be determined in accordance
with the procedure set forth in the succeeding paragraph at any time at the
request and expense of the requesting Lender by delivering a notice to the
Borrower no more frequently than once per fiscal quarter of the Borrower.
For purposes hereof, the "Fair Market Value" of NEG, Inc. shall mean
the price at which a willing buyer would buy and a willing seller would sell the
Pledged Interests having full knowledge of the facts, and assuming each party
acts on an arm's-length basis with the expectation of concluding the purchase or
sale within a reasonable time, which determination shall be made by an Approved
Appraiser selected by the Tranche A Lender and the Tranche B Lender (the
"Appraiser"). The Borrower will cooperate and deliver such document and provide
---------
such information as may be reasonably requested by the Tranche A Lender, the
Tranche B Lender or the Appraiser with respect to the determination of the
Required FMV Ratio.
6.15 Charter Documents. The Borrower will, and will cause LLC and
-----------------
the other Specified Subsidiaries to, comply with their respective Charter
Documents in all material respects.
6.16 Further Assurances; etc. The Borrower will, and will cause the
-----------------------
other Covered Parties, at the expense of the Borrower, make, execute, endorse,
acknowledge, file and/or deliver to each Lender from time to time such
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports, and other assurances or
instruments and take such further steps as are necessary or desirable in order
to carry out the intent, purpose, provisions of this Agreement and the other
Financing Document, including any assignment or syndication by any Lender of its
Loan. Furthermore, the Borrower
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will deliver to each Lender such opinions of counsel and other related documents
as may be reasonably requested by any Lender to assure itself that this Section
6.16 has been complied with.
6.17 Tax Refund. The Borrower shall upon receipt of the tax refund
----------
for the fiscal year 2000 use such refund in the manner set forth in Part G of
the Disclosure Letter.
6.18 Cash Reserve. The Borrower shall at all times commencing after
------------
the first anniversary of the Closing Date and until the Loans are repaid in full
own cash or Cash Equivalents in its name in an amount no less than 15% of the
total principal amount of Loans then outstanding, free and clear of all Liens .
SECTION 7. NEGATIVE COVENANTS.
------------------
The Borrower covenants and agrees that on and after the Closing Date
and until the Loans and the Notes, together with interest, fees and all other
obligations incurred hereunder and thereunder, are paid in full (other than any
indemnity, not then due and payable, which by its terms shall survive such
termination and payment):
7.1 Liens. The Borrower will not, and will not permit any of the
-----
other Covered Parties to, create, incur, assume or suffer to exist any Lien upon
or with respect to any Property or assets (real or personal, tangible or
intangible) of the Borrower or any of the other Covered Parties, whether now
owned or hereafter acquired, or sell any such Property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
or assets (including sales of accounts receivable with recourse to the Borrower
or any of the other Covered Parties), or assign any right to receive income or
permit the filing of any financing statement under the UCC or any other similar
notice of Lien under any similar recording or notice statute; provided that the
--------
provisions of this Section 7.1 shall not prevent the creation, incurrence,
assumption or existence of the following (Liens described below are herein
referred to as "Permitted Liens"):
---------------
(i) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due and payable or Liens for taxes, assessments or
governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established
in accordance with generally accepted accounting principles in the United
States;
(ii) Liens in respect of Property or assets of the Covered Parties
imposed by law, which arise or were incurred in the ordinary course of
business and do not secure Indebtedness for borrowed money, such as
carriers', workmen's, repairmen's, warehousemen's, materialmen's and
mechanics' liens, collecting bank's liens, charge back rights of depository
banks for uncollected items and other similar Liens arising or incurred in
the ordinary course of business, and (x) which do not in the aggregate
materially detract from the value of the property or assets of the Borrower
or the other Covered Parties and do not materially impair the use thereof
in the operation of the business of the Borrower or the other Covered
Parties or (y) which are being contested in good faith by appropriate
proceedings, which proceedings (or orders entered in connection with such
proceedings)
-38-
have the effect of preventing the forfeiture or sale of the property or
assets subject to any such Lien;
(iii) Subject to Section 7.4(ii), Liens in existence on the Closing
Date which are listed, and the Property subject thereto described, in
Schedule 7.1;
(iv) Liens created pursuant to this Agreement and the Security
Documents;
(v) licenses, leases or subleases granted to other Persons in the
ordinary course of business not materially interfering with the conduct of
the business of the Borrower and the other Covered Parties, taken as a
whole;
(vi) easements, rights-of-way, restrictions (including zoning
restrictions), covenants, encroachments, protrusions and other similar
charges or encumbrances, and minor title deficiencies, in each case whether
now or hereafter in existence, not securing Indebtedness and not materially
interfering with the conduct of the business of the Borrower and the other
Covered Parties, taken as a whole;
(vii) statutory, contractual and common law landlords' liens under
leases or subleases permitted by this Agreement;
(viii) Liens (other than any Lien imposed by ERISA) (x) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, (y) to secure the performance of tenders, statutory obligations
(other than excise taxes), surety, stay, customs and appeal bonds,
statutory bonds, bids, leases, government contracts, trade contracts,
performance and return of money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money) or (z) arising
by virtue of deposits made in the ordinary course of business to secure
liability for premiums to insurance carriers, provided that the aggregate
--------
amount of deposits at any time pursuant to sub-clauses (y) and (z) shall
not exceed $25,000,000 in the aggregate;
(ix) any interest or title of a lessor, sublessor, licensee or
licensor under any lease or license agreement permitted by this Agreement;
(x) attachment or judgment Liens in an aggregate amount
outstanding at any one time not in excess of the amount of $1,000,000;
(xi) attachment or judgment Liens paid or fully covered by
insurance which are not outstanding for more than sixty (60) days;
(xii) Liens arising from precautionary Uniform Commercial Code
financing statement filings with respect to operating leases or consignment
arrangements entered into by the Borrower or any of the other Covered
Parties in the ordinary course of business; and
-39-
(xiii) other than by LLC, any Lien attendant to transactions
described by the Business Plan.
7.2 Consolidation, Merger, Purchase or Sale of Assets, etc. The
-------------------------------------------------------
Borrower will not, and will not permit any member of the NEG Group to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of (or agree to do
any of the foregoing at any future time) all or any part of its Property or
assets, or enter into any sale-leaseback transactions, or purchase or otherwise
acquire (in one or a series of related transactions) any part of the Property or
assets (other than purchases or other acquisitions of inventory in the ordinary
course of business) of any Person (or agree to do any of the foregoing at any
future time), except to the extent attendant to transactions described by the
Business Plan and except that:
(i) any NEG Subsidiary may in the ordinary course of business,
sell, lease or otherwise dispose of any assets which, in the reasonable
judgment of such Person, are obsolete, worn out or otherwise no longer
useful in the conduct of such Person's business;
(ii) each of the Borrower and any member of the NEG Group may lease
(as lessee) real or personal property in the ordinary course of business
(so long as any such lease does not create a Capital Lease Obligation);
(iii) any NEG Subsidiary may make sales or transfers of inventory,
energy and related products in the ordinary course of business and
consistent with past practices;
(iv) any NEG Subsidiary may sell or discount, in each case without
recourse and in the ordinary course of business, overdue accounts
receivable arising in the ordinary course of business, but only in
connection with the compromise or collection thereof consistent with
customary industry practice (and not as part of any bulk sale);
(v) each of the Borrower and any member of the NEG Group may
license or sublicense software, trademarks and other intellectual property
in the ordinary course of business which do not materially interfere with
the business of the Borrower, LLC, NEG, Inc. and the NEG Subsidiaries,
taken as a whole;
(vi) each of the Borrower, LLC, NEG, Inc. or any NEG Subsidiary may
transfer assets or lease to or acquire or lease assets from the Borrower,
LLC, NEG, Inc. or any other NEG Subsidiary and LLC, NEG, Inc. or any NEG
Subsidiary may be merged into LLC, NEG, Inc. or any other NEG Subsidiary;
(vii) any NEG Subsidiary may sell or otherwise dispose of additional
assets, provided that (x) each such sale or disposition shall be for an
--------
amount at least equal to the fair market value thereof (as determined in
good faith by the senior management of such Person), (y) each such sale
(other than any like-kind exchange) results in consideration at least 75%
of which shall be in the form of cash (for such purpose, taking into
account the amount of cash, the principal amount of any promissory notes
and the fair market value, as determined in good faith by the senior
management of the Borrower, of any other
-40-
consideration), and (z) the Net Sale Proceeds therefrom shall be applied
pursuant to Section 3.2;
(viii) subject to Section 3.2(f), each of the Borrower and any
member of the NEG Group may make transfers of any proceeds of insurance
resulting from any casualty or condemnation of property or assets; and
(ix) the Borrower may sell or otherwise dispose of any assets other
than assets owned by any member of the NEG Group.
7.3 Dividends. The Borrower will not, and will not permit any of the
---------
other Covered Parties to, authorize, declare or pay any Dividends (other than
the Dividend being Refinanced hereunder), except that any Subsidiary of the
Borrower may pay cash Dividends to the Borrower or to LLC, NEG, Inc. or any NEG
Subsidiary and NEG, Inc. may distribute a note to LLC or the Borrower, and LLC
may distribute any such note to the Borrower, solely in connection with the IPO
or LLC may authorize, declare and pay Dividends to the Borrower in connection
with a Spin-Off of NEG, Inc.
7.4 Indebtedness. The Borrower will not, and will not permit any
------------
member of the NEG Group to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(i) Indebtedness incurred pursuant to this Agreement and the other
Financing Documents;
(ii) Existing Indebtedness outstanding on the Closing Date and
listed on Schedule 5.23 or with respect to the Borrower, Part B (I) and
(II) of the Disclosure Letter and with respect to the Covered Parties
(other than the Borrower), Part B (III) of the Disclosure Letter (as
reduced by any repayments of principal thereof), without giving effect to
any subsequent extension, renewal or refinancing thereof; provided that no
--------
later than four (4) months from the Closing Date, the obligations of the
Borrower under the Equity Infusion Agreements shall be fully released and
terminated and no Person shall have any claim against the Borrower and the
Borrower shall have no further obligations with respect thereto, and the
Contingent Obligations of the Borrower to the Trading Counterparties under
the Trading Contracts shall not exceed $50,000,000 in the aggregate and the
amount of such Indebtedness shall not be extended, renewed or refinanced;
(iii) Indebtedness resulting from the endorsement of negotiable
instruments in the ordinary course of business;
(iv) Indebtedness among Borrower or any member of the NEG Group
(other than LLC) and any other NEG Subsidiary from intercompany transfers
of assets made in the ordinary course of business or to the extent
permitted under Sections 7.2 and 7.5;
(v) Indebtedness of a Covered Party (other than LLC) secured by
Liens permitted under Sections 7.1(i), (ii), (vii) and (viii);
(vi) in the case of the Borrower, Specified Rated Indebtedness; and
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(vii) in the case of any member of the NEG Group (other than LLC),
to the extent described by the Business Plan.
7.5 Advances, Investments and Loans. The Borrower will not, and will
-------------------------------
not permit any member of the NEG Group to, directly or indirectly, lend money or
credit or make advances to any other Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, or purchase or own a futures contract or
otherwise become liable for the purchase or sale of currency or other
commodities at a future date in the nature of a futures contract, or hold any
cash or Cash Equivalents (each of the foregoing an "Investment" and,
----------
collectively, "Investments"), except that the following shall be permitted:
-----------
(i) the Borrower and the other Covered Parties may acquire and
hold accounts receivables owing to any of them, if created or acquired in
the ordinary course of business and payable or dischargeable in accordance
with customary trade terms of the Borrower or such other Covered Parties;
(ii) the Borrower and the other Covered Parties may acquire and
hold cash and Cash Equivalents;
(iii) the Borrower and the other Covered Parties may acquire and own
investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in good faith
settlement of delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(iv) any Investment by a Covered Party (other than LLC) to the
extent described by the Business Plan;
(v) any Investment by the Borrower in PGE Utility if the Borrower
reasonably determines that such Investment is required by applicable Law;
(vi) any Investment by the Borrower in PGE Utility if the Borrower
reasonably determines that such Investment is required by the Holding
Company Conditions;
(vii) loans and advances by the Covered Parties (other than LLC) to
their respective directors, officers and employees in a principal amount
not exceeding the amount of $100,000, on an individual basis, and
$1,000,000, on an aggregate basis, at any one time outstanding;
(viii) any NEG Subsidiary and NEG, Inc. may distribute a note to LLC
or the Borrower, and LLC may distribute any such note to the Borrower,
solely in connection with the IPO;
(ix) any Investment made by any of LLC, NEG, Inc. or any NEG
Subsidiary pursuant to Section 3.2(b)(iii), 3.2(c)(iii), 3.2(e)(iii) or
3.2(f)(ii);
-42-
(x) any Investment made by the Borrower or any member of the NEG
Group in a wholly-owned Subsidiary; and
(xi) in addition to the Investments permitted by clauses (i)-(x)
above, the Borrower may make other Investments for operations of the
Borrower or its Subsidiaries not otherwise related to PGE Utility or any of
its Subsidiaries in an amount not to exceed $15,000,000 in the aggregate
for the period commencing March 1, 2001 and ending December 31, 2001, and
$10,000,000 in the aggregate for any subsequent fiscal year.
Notwithstanding anything provided herein or in the Business Plan to the
contrary, no investment may be made by the Borrower or any member of the NEG
Group in the nuclear generation business.
7.6 Transactions with Affiliates. Except as disclosed on Schedule
----------------------------
5.17, the Borrower will not, and will not permit any member of the NEG Group and
any other NEG Subsidiaries to, enter into any transaction or series of related
transactions with any Affiliate of the Borrower or any of its Subsidiaries,
other than (a) in the ordinary course of business and on terms and conditions
substantially as favorable to the Borrower or such Subsidiary as would
reasonably be obtained by the Borrower or such Subsidiary at that time in a
comparable arm's-length transaction with a Person other than an Affiliate,
except for provision of cash, credit or other financial assistance or support by
the Borrower or any member of the NEG Group to PGE Utility or any of its
Subsidiaries (unless such assistance or support is made to the extent provided
in the Business Plan), (b) as reasonably determined by the Borrower that such
transaction is required by applicable Law or the Holding Company Conditions, (c)
among the Borrower and the other Covered Parties and any other NEG Subsidiaries
and among the NEG Group, (d) any other transactions with Affiliates provided at
cost where the difference between the arms-length price and cost is less than
$5,000,000 in the aggregate, (e) the payment of reasonable and customary fees
and reimbursements of expenses payable to directors of any member of the NEG
Group or (f) the employment arrangements with respect to the procurement of
services of directors, officers and employees of any member of the NEG Group in
the ordinary course of business and payment of reasonable and customary fees in
connection therewith.
7.7 Capital Expenditures. The Borrower will not, and will not permit
--------------------
any member of the NEG Group to, make any Capital Expenditures, except to the
extent (a) the Borrower reasonably determines that such Capital Expenditures by
the Borrower in PGE Utility is required by applicable Law, (b) the Borrower
reasonably determines that such Capital Expenditures by the Borrower in PGE
Utility is required by the Holding Company Conditions, (c) that such Capital
Expenditures are made by a Covered Party (other than LLC) attendant to
transactions described by the Business Plan, (d) related to Investment made by
any of LLC, NEG, Inc. or any NEG Subsidiary pursuant to Section 3.2(b)(iii),
3.2(c)(iii), 3.2(e) (iii) or 3.2(f)(ii) or (e) provided in the cash-flow
forecast of the Borrower attached to the solvency certificate of the Borrower
delivered on the Closing Date.
7.8 Limitations on Liens on Collateral; Modifications of Certain
------------------------------------------------------------
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
- --------------------------------------------------------------------------------
Other Agreements, etc. (a)
- ----------------------
-43-
The Borrower will not, and will not permit any of the Covered Parties and the
Specified Subsidiaries to:
(i) create or suffer to exist any Lien on any of the Collateral;
(ii) amend or modify, or permit the amendment or modification of, any
provision of any Existing Indebtedness Agreements which could reasonably be
expected to have a Material Adverse Effect or result in a Material Adverse
Change to LLC, NEG, Inc. and the NEG Subsidiaries, taken as a whole;
(iii) except as provided in the Business Plan with respect to the IPO
or the Spin-Off of NEG, Inc., (w) except to the extent it would not cause
an adverse effect on any Lender, amend, modify or change any material
provision of its certificate or articles of incorporation (including,
without limitation, by the filing or modification of any certificate or
articles of designation), certificate of formation, limited liability
company agreement or by-laws (or the equivalent organizational documents),
as applicable, or (x) amend, modify or change any agreement entered into by
it with respect to its capital stock or other equity interests (including
any shareholders' agreement), or (y) enter into any new agreement with
respect to its capital stock or other equity interests or (z) amend the
Business Plan;
(iv) terminate, cancel or suspend any license, contract or material
franchise agreements which would result in a Material Adverse Effect or a
Material Adverse Change to LLC, NEG, Inc. and the NEG Subsidiaries, taken
as a whole; or
(v) create any Subsidiary of the Borrower which will be a direct or
indirect parent of LLC or create any Subsidiary of LLC which will be a
direct or indirect parent of NEG, Inc. or create any Subsidiary of NEG,
Inc. which would own, directly or indirectly, all or substantially all of
the assets or shares of the NEG Subsidiaries.
7.9 Limitation on Issuance of Capital Stock. (a) Except as
---------------------------------------
otherwise permitted by Sections 7.3 and 7.5 or to the extent attendant to
transactions described by the Business Plan, the Borrower will not permit any of
the Covered Parties (other than the Borrower) to issue (i) any participating
preferred stock or other participating preferred equity interests or preferred
stock or other preferred equity interests convertible to common stock or common
equity interest or (ii) any redeemable common stock or other redeemable common
equity interest other than common stock or other redeemable common equity
interest that is redeemable at the sole option of the Borrower or such Covered
Party, as the case may be.
(b) Except as otherwise permitted by Sections 7.3 and 7.5, the
Borrower will not permit any of the Covered Parties (other than the Borrower) to
issue any capital stock or other equity interests (including by way of sales of
treasury stock) or any options (other than the Option) or warrants to purchase,
or securities convertible into, capital stock or other equity interests, except
(other than LLC) (i) for transfers and replacements of then outstanding shares
of capital stock or other equity interests, (ii) for stock splits, stock
dividends and issuances which do not decrease the percentage ownership of any of
the Covered Parties in any class of the capital stock or other equity interests
of such other Covered Parties, (iii) pursuant to employee stock
-44-
option plans, (iv) to the extent the Borrower reasonably determines that such
issuance is required by applicable Law, or (v) to the extent attendant to
transactions described by the Business Plan.
7.10 Business. The Borrower will not, and will not permit any of the
--------
other Covered Parties to, engage in any business other than the current
businesses engaged in by the Borrower and the other Covered Parties as of the
date hereof or to the extent within the scope of business described by the
Business Plan.
7.11 Regulatory Compliance. The Borrower will not take any actions or
---------------------
allow any of its Subsidiaries to take any action which would materially violate
any applicable Utility Regulations or order issued pursuant thereto; provided
--------
that, the foregoing shall not prevent the Borrower or a Subsidiary from
- ----
challenging the validity or effect of any Utility Regulation or order in any
proceeding provided the manner of such challenge could not reasonably be
expected to cause a Material Adverse Effect. The Borrower will not take any
actions or allow any of its Subsidiaries to take any actions that would prevent
Borrower from reaffirming the representations of Sections 5.16(b), (c), (d), (e)
and (g) as of any date prior to repayment of the Loans in full.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
------------------------------
8.1 Events of Default. The occurrence of any of the following events
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or circumstances shall constitute an "Event of Default" hereunder:
----------------
(a) The Borrower shall (i) default in the payment when due of any
principal of any Loan or any Note or (ii) default, and such default shall
continue unremedied for three or more Business Days, in the payment when
due of any interest on any Loan or Note or any fees or any other amounts
owing hereunder or under any other Financing Document; or
(b) Any representation, warranty or statement made or deemed made by
the Borrower or any other Covered Party herein or in any other Financing
Document or in the Disclosure Letter or in any certificate delivered to the
Administrative Agent or any Lender pursuant hereto or thereto shall prove
to be untrue in any material respect on the date as of which made or deemed
made; or
(c) The Borrower or any of the other Covered Parties shall (i)
default in the due performance or observance by it of any term, covenant or
agreement contained in Section 6 (other than Sections 6.1 and 6.2) or
Section 7; provided, however that a Default under Section 6.14(b) shall not
constitute an Event of Default hereunder unless such Default shall continue
unremedied for sixty (60) days and the Appraiser, at the Required
Acceleration Lenders' request, again reaffirms that the Required FMV Ratio
is below 2:1 after such sixty (60) day period or (ii) except as set forth
in clause (iii) and Section 8.1(g), default in the due performance or
observance by it of any other term, covenant or agreement contained in this
Agreement or in any other Financing Document (other than those set forth in
clauses (a) and (b) of this Section 8.1) and such default shall continue
unremedied for a period of 30 days after written notice thereof to the
defaulting party by
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any Lender or (iii) default in the due performance or observance by it of
any term, covenant or agreement contained in the Option Agreement; or
(d) (i) Any of the Covered Parties shall default in any payment of
any Indebtedness when due, or (ii) any of the Covered Parties shall default
in the observance or performance of any agreement or condition relating to
any Indebtedness or any other event or condition shall occur or exist, the
effect of which event or condition is to cause, or permit the holder or
holders of such Indebtedness to cause any such Indebtedness to become due
prior to its stated maturity, or (iii) any Indebtedness of any of the
Covered Parties shall be declared to be (or shall become) due and payable,
or required to be prepaid other than by regularly scheduled prepayment,
prior to the stated maturity thereof, provided it shall not be a Default or
--------
an Event of Default under this clause (d) unless the aggregate principal
amount of all Indebtedness as described in preceding subclauses (i), (ii)
and (iii) is at least $100,000,000; or
(e) The Borrower or any of the other Covered Parties shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced
---------------
against the Borrower or any of the other Covered Parties, and the petition
is not controverted within 10 days, or is not dismissed within 45 days,
after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of the Borrower or any of the other Covered Parties; or
the Borrower or any of the other Covered Parties commences any other
proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of
any jurisdiction whether now or hereafter in effect relating to the
Borrower or any of the other Covered Parties; or there is commenced against
the Borrower or any of the other Covered Parties any such proceeding which
remains undismissed for a period of 60 days; or the Borrower or any of the
other Covered Parties is adjudicated insolvent or bankrupt; or any order of
relief or other order approving any such case or proceeding is entered; or
the Borrower or any of the other Covered Parties suffers any appointment of
any custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of 45 days; or the Borrower
or any of the other Covered Parties makes a general assignment for the
benefit of creditors; or any corporate, limited liability company or
similar action is taken by the Borrower or any of the other Covered Parties
for the purpose of effecting any of the foregoing; or
(f) (i) Any Plan shall fail to satisfy the minimum funding standard
required for any plan year or part thereof under Section 412 of the Code or
Section 302 of ERISA or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a
contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan
subject to Title IV of ERISA shall be subject to the advance reporting
requirement of PBGC Regulation Section 4043.61 (without regard to
subparagraph (b)(1) thereof) and an event described in subsection .62, .63,
.64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be
reasonably expected to occur with respect to such Plan within the
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following 30 days, any Plan which is subject to Title IV of ERISA shall
have had or is likely to have a trustee appointed to administer such Plan,
any Plan which is subject to Title IV of ERISA is, shall have been or is
likely to be terminated or to be the subject of termination proceedings
under ERISA, any Plan shall have an Unfunded Current Liability, a
contribution required to be made with respect to a Plan or a Foreign
Pension Plan has not been timely made, the Borrower or any Subsidiary of
the Borrower or any ERISA Affiliate has incurred or is likely to incur any
liability to or on account of a Plan under Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971 or 4975 of the Code or on account of a group health plan
(as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code)
under Section 4980B of the Code, or the Borrower or any Subsidiary of the
Borrower has incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1) of ERISA)
that provide benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA) or Plans or Foreign Pension
Plans, a "default" within the meaning of Section 4219(c)(5) of ERISA shall
occur with respect to any Plan, any applicable law, rule or regulation is
adopted, changed or interpreted, or the interpretation or administration
thereof is changed, in each case after the date hereof, by any governmental
authority or agency or by any court (a "Change in Law"), or, as a result of
a Change in Law, an event occurs following a Change in Law, with respect to
-------------
or otherwise affecting any Plan; (ii) there shall result from any such
event or events the imposition of a lien, the granting of a security
interest, or a liability or a material risk of incurring a liability; and
(iii) such lien, security interest or liability, either individually and/or
in the aggregate, has had, or could reasonably be expected to have, a
Material Adverse Effect; or
(g) Any of the Security Documents or the Option Agreement shall cease
to be in full force and effect, or shall cease to give the Collateral Agent
and each Lender or the Holders the Liens, rights, powers and privileges
purported to be created thereby (including, without limitation, a perfected
security interest in, and Lien on, all of the Collateral, in favor of the
Collateral Agent and each Lender, superior to and prior to the rights of
all third Persons and subject to no other Liens), or any Covered Party
shall default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any Security
Document and such default shall continue beyond the period of grace, if
any, specifically applicable thereto pursuant to the terms of such Security
Document; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any other Covered Party involving in the aggregate for the
Borrower and the other Covered Parties a liability (not paid or fully
covered by a reputable and solvent insurance company) of $100,000,000 or
more and such judgments and decrees either shall be final and non-
appealable or shall not be vacated, discharged or stayed or bonded pending
appeal for any period of 60 consecutive days; or
(i) Any final and non-appealable order shall be issued by FERC, CPUC
or other Governmental Authority that could reasonably be expected to have a
Material
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Adverse Effect or result in a Material Adverse Change to the Borrower, LLC,
or NEG, Inc. and the Significant Subsidiaries, taken as a whole; or
(j) The Required FMV Ratio is below 1.25:1 on any date, unless,
within five (5) Business days after such date, the Required Acceleration
Lenders shall have determined and shall have advised the Administrative
Agent that, there shall not be an acceleration of the Loans and other
amounts owing under the Financing Documents.
8.2 Acceleration. (a) If an Event of Default specified in Section
------------
8.1(e) with respect to the Borrower or 8.1(j) shall occur, automatically the
Loans (with accrued interest thereon) and all other amounts owing under the
Financing Documents shall immediately become due and payable.
(b) If any Event of Default (other than an Event of Default referred
to in Section 8.1(e) or 8.1(j)) shall occur, then the Administrative Agent
(acting upon the instructions of the Required Acceleration Lenders) may by
notice to the Borrower either declare the Loans, all accrued and unpaid interest
thereon and all other amounts owing to the Lenders under the Financing Documents
to be due and payable, whereupon the same shall become immediately due and
payable.
(c) Except as expressly provided above in this Section 8.2,
presentment, demand, protest and all other notices and other formalities of any
kind are hereby expressly waived by the Borrower.
8.3 Other Remedies. Upon the occurrence and during the continuation
--------------
of an Event of Default, the Administrative Agent (acting upon the instructions
of the Required Acceleration Lenders) may exercise any or all rights and
remedies at law or in equity (in any combination or order that the
Administrative Agent may elect), including without limitation or prejudice to
any Lender's other rights and remedies, any and all rights and remedies
available under any of the Financing Documents; provided that any Lender may
--------
exercise any or all rights and remedies at law or in equity as provided
hereunder upon the occurrence and during the continuation of an Event of Default
described in Section 8.1(a) or 8.1(e) above.
SECTION 9. MISCELLANEOUS.
-------------
9.1 Costs and Expenses. The Borrower shall, whether or not the
------------------
transactions contemplated hereby are consummated and whether or not any of the
following are incurred before or after the Closing Date, pay, within five
Business Days after demand, all reasonable costs and expenses (including
reasonable fees and expenses of counsel and consultants) of the Administrative
Agent, the Lead Arranger, the Co-Arranger, the Book Manager, each Lender, the
Collateral Agent and each Holder in connection with the preparation, issuance,
delivery, filing, recording and administration of this Agreement, the other
Financing Documents, and any other documents which may be delivered in
connection herewith or therewith, including, without limitation, (a) any and all
amounts which the Administrative Agent, each Lender, the Collateral Agent and
each Holder has paid relative to curing any Event of Default resulting from the
acts or omissions of the Borrower under this Agreement or any other Financing
Document, (b) the
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exercise, enforcement or attempted exercise, enforcement of, or the
investigation or preservation of any rights or remedies under, this Agreement or
any other Financing Document, or (c) any amendment, waiver or consent with
respect to any provision contained in this Agreement or any other Financing
Document. In addition, the Borrower shall pay any and all stamp and other taxes
and fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement or any other Financing
Document, or any other document which may be delivered in connection with this
Agreement, and agrees to save the Administrative Agent, the Lead Arranger, the
Co-Arranger, the Book Manager, each Lender, the Collateral Agent and each Holder
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
9.2 Indemnity. Whether or not the transactions contemplated hereby
---------
are consummated:
(a) The Borrower shall pay, indemnify, and hold each of the
Administrative Agent, the Lead Arranger, the Co-Arranger, the Book Manager, each
Lender, the Collateral Agent and each Holder and each of their respective
officers, directors, employees, counsel, agents and attorneys-in-fact and
Affiliates (each, an "Indemnified Person") harmless from and against any and all
------------------
liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, suits, costs, charges, expenses or disbursements (including
reasonable legal fees and expenses and reasonable fees and expenses of
consultants) of any kind or nature whatsoever which may at any time (including
at any time following repayment of the Loan or the termination, resignation or
replacement of any Administrative Agent, Lead Arranger, Co-Arranger, Book
Manager, Lender, Collateral Agent or Holder) be imposed on, incurred by or
asserted against any such Person in any way relating to or arising out of this
Agreement or any other Financing Document, including the Security Documents and
any other document or instrument contemplated by or referred to herein or
therein, or the transactions contemplated hereby and thereby, or any action
taken or omitted by any such Person under or in connection with any of the
foregoing, including with respect to the exercise by the Administrative Agent,
the Lead Arranger, the Co-Arranger, the Book Manager, any Lender, the Collateral
Agent and any Holder of any of its respective rights or remedies under any of
the Financing Documents, and any investigation, litigation or proceeding
(including any bankruptcy, insolvency, reorganization or other similar
proceeding or appellate proceeding) related to this Agreement or any other
Financing Document or the Loan, or the use of the proceeds thereof, whether or
not any Indemnified Person is a party thereto (all the foregoing, collectively,
the "Indemnified Liabilities"); provided, that the Borrower shall have no
----------------------- --------
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of such
Indemnified Person.
(b) Environmental Indemnity.
-----------------------
(i) Without in any way limiting the generality of the other
provisions contained in this Section 9.2, the Borrower agrees to defend,
protect, indemnify, save and hold harmless each Indemnified Person, whether
as beneficiary of any of the Security Documents, as a mortgagee in
possession, or as successor-in-interest to the Borrower by foreclosure deed
or deed in lieu of foreclosure, or otherwise, from and against any and all
liabilities, obligations, losses, damages (including foreseeable and
unforeseeable conse-
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quential damages and punitive claims), penalties, fees, claims, actions,
judgments, suits, costs, disbursements (including, without limitation,
reasonable legal fees and expenses and consultants' fees and disbursements)
and expenses (collectively, "Losses") of any kind or nature whatsoever that
------
may at any time be incurred by, imposed on, asserted or awarded against any
such Indemnified Person directly or indirectly based on, or arising out of
or resulting from, (A) the actual or alleged presence of Hazardous
Materials on, in, under or affecting all or any portion of any Property of
the Borrower or any member of the NEG Group whether or not the same
originates or emanates from any such Property or any property adjoining or
adjacent to any such Property or from properties at which any Hazardous
Materials generated, stored or handled by the Borrower were Released or
disposed of, (B) any Environmental Claim relating to any such Property or
(C) the exercise of any Secured Party's rights under any of the provisions
of the Security Documents (the "Indemnified Matters"), whether any of the
-------------------
Indemnified Matters arise before or after foreclosure of any of the
security interests or other taking of title to all or any portion of the
Collateral by the Collateral Agent or any Lender, including, without
limitation, (x) the costs of removal of any and all Hazardous Materials
from all or any portion of any such Property or any property adjoining or
adjacent to any such Property, (y) additional costs required to take
reasonable precautions to protect against the Release of Hazardous
Materials on, in, under or affecting any such Property into the air, any
body of water, any other public domain or any surrounding areas, and (z)
costs incurred to comply, in connection with all or any portion of any such
Property or any surrounding areas, with all applicable Environmental Laws
with respect to Hazardous Materials, except to the extent that any such
Indemnified Matter arises from the gross negligence or willful misconduct
of such Indemnified Person.
(ii) In no event shall any site visit, observation, or testing by any
Indemnified Person (or any representative of any such Person) be deemed to
be a representation or warranty that Hazardous Materials are or are not
present in, on, or under, any Property of the Borrower or any member of the
NEG Group, or that there has been or shall be compliance with any
Environmental Law. Neither the Borrower nor any other Person is entitled
to rely on any site visit, observation, or testing by any Indemnified
Person. No Indemnified Person owes any duty of care to protect the
Borrower or any other Person against, or to inform the Borrower or any
other Person of, any Hazardous Materials or any other adverse condition
affecting any such Property. No Indemnified Person shall be obligated to
disclose to the Borrower or any other Person any report or findings made as
a result of, or in connection with, any site visit, observation, or testing
by any Indemnified Person.
(c) Survival; Defense. The obligations in this Section 9.2 shall
-----------------
survive payment of the Loans and all other obligations hereunder. At the
election of any Indemnified Person, the Borrower's indemnification obligations
under this Section 9.2 shall include the obligation to defend such Indemnified
Person using legal counsel satisfactory to such Indemnified Person, at the sole
cost and expense of the Borrower. All amounts owing under this Section 9.2
shall be paid within 30 days after demand.
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(d) Contribution. To the extent that any undertaking in the preceding
------------
paragraphs of this Section 9.2 may be unenforceable because it is violative of
any law or public policy, the Borrower will contribute the maximum portion that
it is permitted to pay and satisfy under applicable Law to the payment and
satisfaction of such undertaking.
(e) Settlement. So long as the Borrower is in compliance with its
----------
obligations under this Section 9.2, the Borrower shall not be liable to any
Indemnified Person under this Section 9.2 for any settlement made by such
Indemnified Person without the Borrower's consent.
9.3 Notices. (a) All notices, requests and other communications
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provided for hereunder shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
--------
matter transmitted by the Borrower by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 9.3, and (ii) shall be followed promptly by a hard copy original
thereof by express courier) and faxed or delivered, to the address or facsimile
number specified for notices on Schedule 9.3 or to such other address as shall
be designated by such party in a written notice to the other parties hereto.
(b) All such notices, requests and communications (i) sent by express
courier will be effective upon delivery to or refusal to accept delivery by the
addressee, and (ii) transmitted by facsimile will be effective when sent and
facsimile confirmation received; except that all notices and other
communications to the Administrative Agent or any Lender shall not be effective
until actually received.
(c) The Borrower acknowledges and agrees that any agreement of the
Administrative Agent or any Lender to receive certain notices by telephone and
facsimile is solely for the convenience and at the request of the Borrower. The
Administrative Agent and each Lender shall be entitled to rely on the authority
of any Person purporting to be a Person authorized by the Borrower to give such
notice and the Administrative Agent and each Lender shall not have any liability
to the Borrower or other Person on account of any action taken or not taken by
any of the Administrative Agent or such Lender in reliance upon such telephonic
or facsimile notice.
9.4 Benefit of Agreement. This Agreement shall be binding upon and
--------------------
inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto. The Borrower may not assign or
otherwise transfer any of its rights under this Agreement or any of the other
Financing Documents.
9.5 No Waiver; Remedies Cumulative. No failure or delay on the part
------------------------------
of the Administrative Agent or any Lender or the holder of any Note in
exercising any right, power or privilege hereunder or under any other Financing
Document and no course of dealing between the Borrower and the Administrative
Agent or any Lender or the holder of any Note shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege
hereunder or under any other Financing Document preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in
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similar or other circumstances or constitute a waiver of the rights of the
Administrative Agent or any Lender or the holder of any Note to take any other
or further action in any circumstances without notice or demand. All remedies,
either under this Agreement or any other Financing Document or pursuant to any
applicable Law or otherwise afforded to the Administrative Agent or any Lender
shall be cumulative and not alternative.
9.6 No Third Party Beneficiaries. The agreement of any Lender to
----------------------------
make extensions of credit to the Borrower on the terms and conditions set forth
in this Agreement and the other Financing Documents is solely for the benefit of
the Borrower, and no other Person shall have any rights hereunder against such
Lender with respect to the Loans, the proceeds thereof or otherwise.
9.7 Reinstatement. To the extent that the Administrative Agent or
-------------
any Lender receives any payment by or on behalf of the Borrower, which payment
or any part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to the Borrower or to its
estate, trustee, receiver, custodian or any other party under any Bankruptcy Law
or otherwise, then to the extent of the amount so required to be repaid, the
obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the Obligations as of the date such initial payment, reduction
or satisfaction occurred.
9.8 No Immunity. To the extent that the Borrower may be entitled, in
-----------
any jurisdiction in which judicial proceedings may at any time be commenced with
respect to this Agreement or any other Financing Document, to claim for itself
or its revenues, assets or Properties any immunity from suit, the jurisdiction
of any court, attachment prior to judgment, attachment in aid of execution of
judgment, set-off, execution of a judgment or any other legal process, and to
the extent that in any such jurisdiction there may be attributed to such Person
such an immunity (whether or not claimed), the Borrower hereby irrevocably
agrees not to claim and hereby irrevocably waives such immunity to the fullest
extent permitted by the Law of the applicable jurisdiction.
9.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered by facsimile or otherwise shall be an
original, but all of which shall together constitute one and the same
instrument.
9.10 Amendment or Waiver. (a) No provision of this Agreement or any
-------------------
other Financing Document may be amended, supplemented, modified or waived,
except by a written instrument signed by the Required Waiver Lenders and the
Borrower and each Covered Party that is a party thereto, and, to the extent that
its rights or obligations may be affected thereby, the Administrative Agent.
Notwithstanding the foregoing provisions, no such waiver and no such amendment,
supplement or modification shall (i) increase or extend the Commitment of any
Lender (it being understood that waivers or modifications after the Closing Date
of covenants, Defaults or Events of Default shall not constitute a change in the
terms of any Commitment of any Lender), without the prior written consent of
such Lender, (ii) postpone or delay any date fixed by this Agreement or any
other Financing Document for any payment of principal, interest, fees or
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other amounts due to any Lender hereunder or under any other Financing Document
(it being understood that waivers or modifications after the Closing Date of
covenants, Defaults or Events of Default shall not constitute a postponement or
delay in any date fixed by this Agreement or any other Financing Document for
any payment of principal, interest, fees or other amounts due to any Lender
hereunder or under any other Financing Document), without the prior written
consent of such Lender, (iii) reduce the principal of, or the rate of interest
specified in any Financing Document on, any Loan of any Lender, without the
prior written consent of such Lender, (iv) release all or substantially all of
the Collateral except as shall be otherwise provided in any Security Document or
other Financing Document or consent to the assignment or transfer by the
Borrower of any of its respective obligations under this Agreement or any other
Financing Document, without the prior written consent of each Lender, (v) amend,
modify or waive any provision of this Section 9.10 or Section 9.1 or 9.2,
without the prior written consent of each Lender, or (vi) reduce the percentage
specified in or otherwise amend the definition of Required Waiver Lenders or
Required Acceleration Lenders, without the prior written consent of each Lender.
(b) Any waiver and any amendment, supplement or modification made or
entered into in accordance with Section 9.10(a) shall be binding upon the
Borrower, the Administrative Agent, the Lenders and their successors and
assigns.
9.11 Assignments, Participations, etc. (a) Each Lender may, without
---------------------------------
the consent of the Borrower, but with prior notice to the Administrative Agent,
sell or assign any part of the Loan of such Lender and the other rights and
obligations of such Lender to any Person or any assignee thereof (an "Assignee")
unless the sale or assignment of the Loan and such other rights and obligations
of such Lender would reasonably put the business of the Borrower at a
competitive disadvantage, then such sale or assignment shall require the consent
of the Borrower. The assigning Lender and the Assignee shall enter into an
assignment agreement, in form and substance satisfactory to the Administrative
Agent (an "Assignment and Acceptance"), with respect to the sale or assignment
-------------------------
of the Loan to be assigned and, subject to paragraphs (e) and (f) of this
Section 9.11, upon execution and delivery of such Assignment and Acceptance, (i)
the Assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, shall have the rights and obligations of a Lender hereunder and
under the other Financing Documents, and this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to effect the addition
of the Assignee, and any reference to the assigning Lender hereunder or under
the other Financing Documents shall thereafter refer to such Lender and to the
Assignee to the extent of their respective interests, and (ii) the assigning
Lender shall, to the extent that rights and obligations hereunder and under the
other Financing Documents have been assigned by it pursuant to such assignment
agreement, relinquish its rights and be released from its obligations under the
Financing Documents.
(b) Each Lender may sell participations to one or more banks or
other entities (other than the Borrower or any of its Affiliates) in or to all
or a portion of its rights and obligations under this Agreement and such
Lender's Note; provided, however, that (i) such Lender's obligations under this
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Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender
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shall remain the holder of any such Note for all purposes of this Agreement,
(iv) the Borrower and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Note, or any consent to any departure by the
Borrower therefrom, except to the extent that such amendment, waiver or consent
would reduce the principal of, or interest on, the Note or any fees or other
amounts payable hereunder, or release of all or substantially all of the
Collateral, in each case to the extent subject to such participation, or
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees or other amounts payable hereunder, in each case to the extent
subject to such participation.
(c) A Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 9.11, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrower furnished to such Lender by or on behalf of
the Borrower; provided, that prior to any such disclosure, the assignee or
--------
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Lender.
(d) Notwithstanding any other provision contained in this Agreement
or any other Financing Document to the contrary, any Lender may assign all or
any portion of the Loan held by it as collateral security, provided that any
--------
payment in respect of such assigned Loan or Note made by the Borrower to or for
the account of the assigning or pledging Lender in accordance with the terms of
this Agreement shall satisfy the Borrower's obligations hereunder in respect to
such assigned Loan or Note to the extent of such payment. No such assignment
shall release the assigning Lender from its obligations hereunder.
(e) The Borrower hereby designates the Administrative Agent to serve
as the Borrower's agent, solely for purposes of this Section 9.11, to maintain a
register (the "Register") on which it will record the Loans made by each of the
Lenders and each repayment in respect of the principal amount of the Loans of
each Lender. Failure to make any such recordation, or any error in such
recordation shall not affect the Borrower's obligations in respect of such
Loans. With respect to any Lender, the transfer of the rights to the principal
of, and interest on, any Loan shall not be effective until such transfer is
recorded on the Register maintained by the Administrative Agent with respect to
ownership of such Loans and prior to such recordation all amounts owing to the
transferor with respect to such Loans shall remain owing to the transferor. The
registration of assignment or transfer of all or part of any Loans shall be
recorded by the Administrative Agent on the Register only upon the acceptance by
the Administrative Agent of a properly executed and delivered Assignment and
Acceptance pursuant to Section 9.11(a). The Borrower agrees to indemnify the
Administrative Agent from and against any and all losses, claims, damages and
liabilities of whatsoever nature which may be imposed on, asserted against or
incurred by the Administrative Agent in performing its duties under this Section
9.11(e).
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in any case where the consent of the
Borrower is required by this Section, by the Borrower) together with payment to
the Administrative Agent of a registration and processing fee of $3,500, the
Administrative Agent shall (i) promptly accept such
-54-
Assignment and Acceptance and (ii) on the effective date determined pursuant
thereto record the information contained therein in the Register and give notice
of such acceptance and recordation to the Borrower. On or prior to such
effective date, the Borrower, at its own expense, upon request, shall execute
and deliver to the Administrative Agent (in exchange for the Note of the
assigning Lender) a new Note to the order of such Assignee in an amount equal to
the Loan acquired by it pursuant to such Assignment and Acceptance and, if such
assigning Lender has retained a Loan, a new Note to the order of such assigning
Lender in an amount equal to the Loan retained by it hereunder.
9.12 Survival. All indemnities set forth herein, including, without
--------
limitation, Section 9.2, shall survive the execution and delivery of this
Agreement and the Notes and the making and repayment of the Loans. In addition,
each representation and warranty made or deemed to be made pursuant hereto shall
survive the making of such representation and warranty, and no Lender shall be
deemed to have waived, by reason of making any extension of credit, any Default
or Event of Default which may arise by reason of such representation or warranty
proving to have been false or misleading, notwithstanding that such Lender may
have had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such extension of credit was made.
9.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
--------------------
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY OTHER FINANCING
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING HERETO OR THERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS TO ENTER INTO THIS AGREEMENT.
9.14 Right of Set-off. In addition to any rights now or hereafter
----------------
granted under applicable Law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, each Lender is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by such Lender (including without limitation by branches
and agencies of such Lender wherever located), to or for the credit or the
account of the Borrower against and on account of the Obligations or liabilities
of the Borrower to such Lender under this Agreement or any of the other
Financing Documents, including all claims of any nature or description arising
out of or connected with this Agreement or any other Financing Document,
irrespective of whether such Lender shall have made any demand hereunder and
although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured.
9.15 Severability. Any provision hereof which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or
-55-
unenforceability without invalidating the remaining provisions hereof and
without affecting the validity or enforceability of any provision in any other
jurisdiction.
9.16 Governing Law; Submission to Jurisdiction. (a) THIS AGREEMENT
-----------------------------------------
AND EACH OF THE OTHER FINANCING DOCUMENTS (UNLESS SUCH DOCUMENT EXPRESSLY STATES
OTHERWISE THEREIN) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF
(OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
(b) The Borrower hereby submits to the nonexclusive jurisdiction of
the United States District Court for the Southern District of New York and of
any New York State court sitting in New York City for the purposes of all legal
proceedings arising out of or relating to this Agreement, any other Financing
Document or the transactions contemplated hereby or thereby. The Borrower hereby
irrevocably waives, to the fullest extent permitted by applicable Law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. The Borrower
hereby irrevocably appoints CT Corporation System (the "Process Agent"), with
-------------
an office on the date hereof at 111 Eighth Avenue, New York, New York 10011, as
its agent to receive on its behalf and on behalf of its Property, service of
copies of the summons and complaint and any other process that may be served in
any such action or proceeding. Service upon the Process Agent shall be deemed to
be personal service on the Borrower and shall be legal and binding upon the
Borrower for all purposes notwithstanding any failure to mail copies of such
legal process to the Borrower, or any failure on the part of the Borrower to
receive the same. Nothing herein shall affect the right to serve process in any
other manner permitted by applicable Law or any right to bring legal action or
proceedings in any other competent jurisdiction, including judicial or non-
judicial foreclosure of real property interests which are part of the
Collateral. The Borrower further agrees that the aforesaid courts of the State
of New York and of the United States of America for the Southern District of New
York shall have exclusive jurisdiction with respect to any claim or counterclaim
of the Borrower based upon the assertion that the rate of interest charged by or
under this Agreement or under the other Financing Documents is usurious. To the
extent permitted by applicable Law, the Borrower further irrevocably agrees to
the service of process of any of the aforementioned courts in any suit, action
or proceeding by the mailing of copies thereof by certified mail, postage
prepaid, return receipt requested, to the Borrower at the address referenced in
Section 9.3, such service to be effective upon the date indicated on the postal
receipt returned from the Borrower.
(c) The Borrower agrees that it will at all times continuously
maintain an agent to receive service of process in the State of New York on
behalf of itself and its Properties, and, in the event that for any reason the
agent mentioned above shall not serve as agent for the Borrower to receive
service of process in the State of New York on its behalf, the Borrower shall
promptly appoint a successor satisfactory to the Administrative Agent so to
serve, advise the Administrative Agent thereof, and deliver to the
Administrative Agent evidence in writing of the successor agent's acceptance of
such appointment. The foregoing provisions constitute, among other things, a
special arrangement for service among the parties to this Agreement for the
purposes of 28 U.S.C. (S) 1608.
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9.17 Waiver by Borrower. The Borrower waives any claim it may now or
------------------
hereafter have against the Administrative Agent, the Collateral Agent, any
Lender and any Holder for any consequential, exemplary or punitive damage under
or in connection with or relating to this Agreement or any of the Financing
Documents.
9.18 Recourse. This Agreement is made with full recourse to the
--------
Borrower and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Borrower contained herein and in the other
Financing Documents to which the Borrower is a party and otherwise in writing in
connection herewith and therewith.
9.19 Complete Agreement. THIS AGREEMENT, THE OTHER FINANCING
------------------
DOCUMENTS, THE FEE LETTER AND THE LEHMAN FEE LETTER REPRESENT THE FINAL AND
COMPLETE AGREEMENT OF THE PARTIES HERETO AND THERETO WITH RESPECT TO THE LOANS,
AND ALL PRIOR NEGOTIATIONS, REPRESENTATIONS, UNDERSTANDINGS, WRITINGS AND
STATEMENTS OF ANY NATURE WITH RESPECT TO THE LOANS ARE HEREBY SUPERSEDED IN
THEIR ENTIRETY BY THE TERMS OF THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS.
9.20 Publicity. Except as otherwise required by law, none of the
---------
parties hereto shall issue any press release relating to, connected with or
arising out of this Agreement and the other Financing Documents or the matters
contained herein or therein, without obtaining the prior approval of each other
party hereto to the contents and the manner of presentation and publication
thereof. No references to any party hereto shall be made by any party hereto in
any public statement without its consent except as otherwise required by Law.
9.21 Effectiveness. This Agreement and the other Financing Documents
-------------
shall be effective as of the Effective Date.
9.22 Certain Representations and Warranties. Each of the Tranche A
--------------------------------------
Lender and the Tranche B Lender by reason of its business or financial
experience, has the capacity to protect its own interests (within the meaning of
Section 25102(f)(2) of the California Corporations Code) in connection with the
transactions contemplated by the Financing Documents.
9.23 Confidentiality. Each Lender agrees to keep confidential in
---------------
accordance with such Lender's customary practices (and in any event in
compliance with applicable law respecting material non-public information) all
information obtained by it pursuant hereto and the other Financing Documents
identified as confidential in writing at the time of delivery and agrees that it
will only use such information in connection with the transactions contemplated
by this Agreement and the other Financing Documents and not disclose any of such
information other than (a) to such Lender's employees, representatives,
directors, attorneys, auditors, agents, professional advisors, trustees or
indirect contractual counterparty in swap agreements or such contractual
counterparty's professional advisor (so long as such contractual counterparty or
professional advisor to such contractual counterparty agrees to be bound by the
provision of this Section 9.23 or is bound by a confidentiality agreement
containing substantially equivalent provisions), (b) to the extent such
information presently is or hereafter becomes available to such
-57-
Lender on a non-confidential basis from any source or such information that is
in the public domain at the time of disclosure, (c) to the extent disclosure is
required by law (including applicable securities laws), regulations, subpoena or
judicial order or process (provided that notice of such requirement or order
--------
shall be promptly furnished to the Borrower unless such notice is legally
prohibited) or requested or required by bank, securities, insurance or
investment company regulations or auditors or any administrative body or
commission (including the Securities Valuation Office of the National
Association of Insurance Commissioners) to whose jurisdiction such Lender may be
subject, (d) to any rating agency to the extent required in connection with any
rating to be assigned to such Lender, (e) to Assignees or prospective Assignees
or participants or prospective participants who agree to be bound by the
provisions of this Section 9.23 or who are subject to confidentiality agreements
containing substantially equivalent provisions, (f) to the extent required in
connection with any litigation between any party hereto or thereto and any
Lender with respect to the Loans or this Agreement and the other Financing
Documents or (g) with the Borrower's prior written consent. The agreements in
this Section 9.23 shall survive repayment of the Loans and all other amounts
payable hereunder.
SECTION 10. THE ADMINISTRATIVE AGENT; THE LEAD ARRANGER, THE CO-
---------------------------------------------------
ARRANGER AND THE BOOK MANAGER.
- -----------------------------
10.1 Appointment. Lehman Commercial Paper Inc. shall be the
-----------
Administrative Agent and shall act as specified herein and in the other
Financing Documents. Each Lender hereby irrevocably authorizes, and the holder
of any Note by the acceptance of such Note shall be deemed irrevocably to
authorize, the Administrative Agent to take such action on its behalf under the
provisions of this Agreement, the other Financing Documents and any other
instruments and agreements referred to herein or therein and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Administrative Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The
Administrative Agent may perform any of its duties hereunder by or through its
officers, directors, agents or employees.
10.2 Nature of Duties. The Administrative Agent shall have no duties
----------------
or responsibilities except those expressly set forth in this Agreement and the
Security Documents. Neither the Administrative Agent nor any of its officers,
directors, agents or employees shall be liable for any action taken or omitted
by it or them hereunder or under any other Financing Document or in connection
herewith or therewith, unless caused by its or their gross negligence or willful
misconduct. The duties of the Administrative Agent shall be mechanical and
administrative in nature; the Administrative Agent shall not have by reason of
this Agreement or any other Financing Document, or by reason of the use of the
term "agent" with reference to the Administrative Agent, a fiduciary
relationship in respect of any Lender or the holder of any Note; and nothing in
this Agreement or any other Financing Document, expressed or implied, is
intended to or shall be so construed as to impose upon the Administrative Agent
any obligations in respect of this Agreement or any other Financing Document
except as expressly set forth herein.
10.3 Lack of Reliance on the Administrative Agent. Independently and
--------------------------------------------
without reliance upon the Administrative Agent, each Lender and each holder of
any Note, to the extent it
-58-
deems appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Borrower in
connection with the making and the continuance of the Loans and the taking or
not taking of any action in connection herewith and (ii) its own appraisal of
the creditworthiness of the Borrower, except as expressly provided in this
Agreement, the Administrative Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender or the holder of any
Note with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter. The Administrative Agent shall not be responsible to any Lender or
the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any document, certificate or other
writing delivered in connection herewith or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, collectibility, priority or
sufficiency of this Agreement or any other Financing Document or the financial
condition of the Borrower or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Financing Document, or the financial condition of
the Borrower or the existence or possible existence of any Default or Event of
Default.
10.4 Certain Rights of the Administrative Agent. If the
------------------------------------------
Administrative Agent shall request instructions from the Required Waiver Lenders
or Required Acceleration Lenders, as the case may be, with respect to any act or
action (including failure to act) in connection with this Agreement or any other
Financing Document, the Administrative Agent shall be entitled to refrain from
such act or taking such action unless and until the Administrative Agent shall
have received instructions from the Required Waiver Lenders or Required
Acceleration Lenders, as the case may be, and the Administrative Agent shall not
incur liability to any Person by reason of so refraining. Without limiting the
foregoing, no Lender or the holder of any Note shall have any right of action
whatsoever against the Administrative Agent as a result of the Administrative
Agent acting or refraining from acting hereunder or under any other Financing
Document in accordance with the instructions of the Required Waiver Lenders or
Required Acceleration Lenders, as the case may be.
10.5 Reliance. The Administrative Agent shall be entitled to rely,
--------
and shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, certificate, telex, teletype or telecopier message,
cablegram, radiogram, order or other document or telephone message signed, sent
or made by any Person that the Administrative Agent believed to be the proper
Person, and, with respect to all legal matters pertaining to this Agreement and
any other Financing Document its duties hereunder and thereunder, upon advice of
counsel selected by it.
10.6 Indemnification. To the extent the Administrative Agent is not
---------------
reimbursed and indemnified by the Borrower, each Lender will reimburse and
indemnify the Administrative Agent, in proportion to its respective Loan, for
and against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses or disbursements of
whatsoever kind or nature which may be imposed on, asserted against or incurred
by the Administrative Agent in performing its duties hereunder or under any
other Financing Document, or in any way relating to or arising out of this
Agreement or any other Financing Document; provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations,
-59-
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's gross negligence or
willful misconduct.
10.7 The Administrative Agent in its Individual Capacity. With
---------------------------------------------------
respect to its obligation to make Loans under this Agreement, and with respect
to any Loan held by it or made by it, the Administrative Agent shall have the
rights and powers specified herein for a "Lender" and may exercise the same
rights and powers as though it were not performing the duties specified herein;
and the term "Lender," "Required Waiver Lenders", "Required Acceleration
Lenders", "holder of Note" or any similar terms shall, unless the context
clearly otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with the
Borrower or any Affiliate of the Borrower as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrower for services in connection with this Agreement and otherwise without
having to account for the same to the Lenders.
10.8 Holders. The Administrative Agent may deem and treat the payee
-------
of any Note as the owner thereof for all purposes hereof unless and until a
written notice of the assignment, transfer or endorsement thereof, as the case
may be, shall have been filed with the Administrative Agent. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Note shall be conclusive
and binding on any subsequent holder, transferee, assignee or indorsee, as the
case may be, of such Note or of any Note or Notes issued in exchange therefor.
10.9 Resignation by the Administrative Agent. (a) The
---------------------------------------
Administrative Agent may resign from the performance of all its functions and
duties hereunder and/or under the other Financing Documents at any time by
giving 15 Business Days' prior written notice to the Borrower and each Lender.
Such resignation shall take effect upon the appointment of a successor
Administrative Agent pursuant to clauses (b) and (c) below or as otherwise
provided below.
(b) Upon any such notice of resignation, the Required Waiver
Lenders shall appoint a successor Administrative Agent hereunder or thereunder
who shall be a commercial bank, trust company or other financial institution
which is a Lender and which (unless an Event of Default shall be continuing)
shall be subject to the reasonable approval of the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the Administrative Agent, with the
consent of the Borrower, may then appoint a successor Administrative Agent who
shall serve as Administrative Agent hereunder or thereunder until such time, if
any, as the Required Waiver Lenders appoint a successor Administrative Agent as
provided above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 20th Business Day after the date such
notice of resignation was given by the Administrative Agent, the Administrative
Agent's resignation shall become effective and the Required Waiver Lenders shall
thereafter perform all the duties of the Administrative
-60-
Agent hereunder and/or under any other Financing Document until such time, if
any, as the Required Waiver Lenders appoint a successor Administrative Agent as
provided above.
10.10 The Lead Arranger, Co-Arranger and Book Manager. None of the
-----------------------------------------------
Lead Arranger, the Co-Arranger and the Book Manager, in such respective
capacities, shall have any duties or responsibilities under this Agreement or
any other Financing Document, nor shall any of such Persons, in such respective
capacities, have any obligations or liabilities hereunder or under any other
Financing Document.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
PG&E CORPORATION
By: /s/ [ILLEGIBLE]^^
------------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION, as a Lender and
Co-Arranger
By: /s/ Mark T Mellana
------------------------------------
Name: Mark T Mellana
Title: Attorney-in-fact
LEHMAN COMMERCIAL PAPER INC., as
a Lender and Administrative Agent
By: /s/ G. Andrew Keith
------------------------------------
Name: G. Andrew Keith
Title: Authorized Signatory
LEHMAN BROTHERS INC., as Lead Arranger
and Book Manager
By: /s/ G. Andrew Keith
------------------------------------
Name: G. Andrew Keith
Title: Authorized Signatory
G. Andrew Keith
Senior Vice President
APPENDIX A
to
Credit Agreement
----------------
DEFINED TERMS AND RULES OF INTERPRETATION
-----------------------------------------
1. Defined Terms.
-------------
"Affiliate" shall mean, with respect to any Person, (a) any other
---------
Person that is directly or indirectly Controlled by, under common Control with
or Controls such Person; (b) any other Person owning beneficially or Controlling
five percent or more of the Voting Stock of such Person; or (c) any officer,
director or partner of such Person, except with respect to any officer or
director of the Borrower.
"Administrative Agent" shall mean Lehman Commercial Paper Inc., acting
--------------------
in its capacity as agent for the Lenders pursuant to the Credit Agreement, and
any successor in such capacity.
"Applicable Margin" shall mean (a) as to the Base Rate Loan, (i)
-----------------
during the period commencing on the Closing Date to but excluding the date
eighteen (18) months from the Closing Date, 2.50% per annum and (ii) during the
period commencing on the date eighteen (18) months from the Closing Date and
thereafter, 4.00% per annum, and (b) as to the Eurodollar Loan, (i) during the
period commencing on the Closing Date to but excluding the date eighteen (18)
months from the Closing Date, 2.50% and (ii) during the period commencing the
date eighteen (18) months from the Closing Date and thereafter, 4.00%.
"Appraiser" shall have the meaning provided in Section 6.14 of the
---------
Credit Agreement.
"Approved Appraiser" shall mean any independent nationally recognized
------------------
investment bank experienced in the valuation of equity interests of a company
similar to NEG, Inc. as may be reasonably proposed by the Borrower at the
request of any Lender; provided that the Borrower shall always propose at least
--------
two alternate investment banks.
"Asset Sale" shall mean any sale, transfer or other disposition of any
----------
Property of the Borrower and any member of the NEG Group.
"Assignee" shall have the meaning provided in Section 9.11 of the
--------
Credit Agreement.
"Audited Financial Statements" shall have the meaning provided in
----------------------------
Section 5.11 of the Credit Agreement.
"Authorized Officer" shall mean (i) with respect to any Person that is
------------------
a corporation or a limited liability company, the Chairman, President, any Vice
President or Secretary of such Person and (ii) with respect to any Person that
is a partnership, the President, any Vice President or Secretary (or Assistant
Secretary) of a general partner or managing partner of such Person and
Appendix A
Page 2
in each case whose name appears on a certificate of incumbency of such Person
delivered in accordance with the Credit Agreement, as such certificate may be
amended from time to time.
"Bankruptcy Code" shall have the meaning provided in Section 8.1(e) of
---------------
the Credit Agreement.
"Bankruptcy Law" shall mean the Bankruptcy Code and any other Law of
--------------
any jurisdiction relating to bankruptcy, insolvency, liquidation,
reorganization, moratorium, winding-up or composition or readjustment of debts
or any similar Law.
"Base Rate", for any day, shall mean the rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus one-half of one percent
(.5%) and (b) the Prime Rate for such day. Any changes in the Base Rate due to
a change in the Prime Rate or the Federal Funds Rate shall be effective on the
effective date of such change in the Prime Rate or Federal Funds Rate.
"Base Rate Loans" shall mean the Loans or any portion thereof which
---------------
bears interest based upon the Base Rate.
"Book Manager" shall mean Lehman Brothers Inc., a Delaware
------------
corporation.
"Borrower" shall mean PG&E Corporation, a California corporation.
--------
"Borrowing" shall mean the borrowing of Loans of one Type from a
---------
Lender on a given date, provided that Base Rate Loans incurred pursuant to
--------
Section 2.7(b) shall be considered part of the related Borrowing of Eurodollar
Loans.
"Business Day" shall mean (i) for all purposes other than as covered
------------
by clause (ii) below, any day except Saturday, Sunday and any day which shall be
in New York City, a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close in such city,
and (ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, any Eurodollar Loan, any day which is a
Business Day described in clause (i) above and which is also a day for trading
by and between banks in the London interbank eurodollar market.
"Business Plan" shall mean the certified copy of the business plan of
-------------
NEG, Inc., dated the Closing Date, as delivered to the Lenders.
"CA Fee" shall mean the fees and expenses of the Collateral Agent set
------
forth in the Schedule of Fees with the Collateral Agent dated the Closing Date.
"Capital Expenditure" shall mean, with respect to any Person, all
-------------------
expenditures by such Person which should be capitalized in accordance with
generally accepted accounting principles, including all such expenditures with
respect to fixed or capital assets (including, without limitation, expenditures
for maintenance and repairs which should be capitalized in accordance with
generally accepted accounting principles) and the amount of Capital Lease
Obligations incurred by such Person.
Appendix A
Page 3
"Capital Lease Obligations" shall mean, for any Person, the
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal Property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under U.S. GAAP (including Statement of
Financial Accounting Standards No. 13 of the Financial Accounting Standards
Board ("Statement No. 13")) and, for purposes of the Credit Agreement, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with U.S. GAAP (including such Statement No. 13).
"Capital Stock" shall mean, with respect to any Person, any and all
-------------
shares, interests, participations and/or rights in or other equivalents (however
designated, whether voting or nonvoting, ordinary or preferred) in the equity or
capital of such Person, now or hereafter outstanding, and any and all rights,
warrants or options exchangeable for or convertible into any thereof.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued
----------------
or directly and fully guaranteed or insured by the United States or any agency
or instrumentality thereof (provided that the full faith and credit of the
--------
United States is pledged in support thereof) having maturities of not more than
one year from the date of acquisition, (ii) time deposits and certificates of
deposit of any commercial bank having, or which is the principal banking
subsidiary of a bank holding company organized under the laws of the United
States, any State thereof or the District of Columbia having capital, surplus
and undivided profits aggregating in excess of $200,000,000, with maturities of
not more than one year from the date of acquisition by such Person, (iii)
repurchase obligations with a term of not more than 90 days for underlying
securities of the types described in clause (i) above entered into with any bank
meeting the qualifications specified in clause (ii) above, (iv) commercial paper
issued by any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by Standard & Poor's or at least P-1 or the equivalent
thereof by Moody's and in each case maturing not more than one year after the
date of acquisition by such Person, and (v) investments in money market funds
substantially all of whose assets are comprised of securities of the types
described in clauses (i) through (iv) above.
"CERCLA" shall mean the Comprehensive Environmental Response,
------
Compensation, and Liability Act of 1980, as the same may be amended from time to
time, 42 U.S.C. (S) 9601 et seq.
-- ----
"Charter Documents" shall mean, with respect to any Person, (i) the
-----------------
articles of incorporation or other similar organizational document of such
Person, (ii) the by-laws or other similar document of such Person, (iii) any
certificate of designation or instrument relating to the rights of preferred
shareholders or other holders of Capital Stock of such Person and (iv) any
shareholder rights agreement or other similar agreement.
"Closing Date" shall mean the date upon which the conditions precedent
------------
set forth in Section 4.1 of the Credit Agreement have been satisfied (or waived
by all the Lenders).
"Co-Arranger" shall mean General Electric Capital Corporation, a New
-----------
York corporation.
Appendix A
Page 4
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code as in effect at the date of the
Credit Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all Property that, in accordance with the
----------
terms of the Security Documents, is intended to be subject to any Lien in favor
of the Collateral Agent, for the benefit of each Lender.
"Collateral Agent" shall mean Bankers Trust Company, acting as
----------------
collateral agent for the benefit of the Lenders.
"Commitment" shall mean individually or collectively, as the context
----------
may require, the Tranche A Commitment or the Tranche B Commitment.
"Commitment Fees" shall mean (i) the fee payable to the Tranche A
---------------
Lender pursuant to the Fee Letter and (ii) the commitment fees payable to the
Tranche B Lender pursuant to the Lehman Fee Letter.
"Compliance" shall have the meaning provided in Section 13 of the LLC
----------
Agreement, attached hereto as Annex A.
"Contingent Obligation" shall mean, as to any Person, any obligation
---------------------
of such Person guaranteeing or intending to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the aggregate
current exposure pursuant to each applicable agreement net of the fair market
value of any posted collateral thereunder.
"Control" shall mean possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of partnership interests or voting securities, by
contract or otherwise.
"Covered Contracts" shall have the meaning provided in Section 5.7 of
-----------------
the Credit Agreement.
"Covered Parties" shall have the meaning provided in Section 5.1 of
---------------
the Credit Agreement.
Appendix A
Page 5
"CPUC" shall mean the California Public Utilities Commission or its
----
successor.
"Credit Agreement" shall mean the Credit Agreement, dated as of March
----------------
1, 2001 among the Borrower, the Lenders party thereto, General Electric Capital
Corporation, as Co-Arranger, Lehman Commercial Paper Inc., as Administrative
Agent and Lehman Brothers Inc., as Lead Arranger and Book Manager, as amended,
modified or supplemented from time to time.
"Date Certain" shall mean the Initial Date Certain, as such date may
------------
be extended pursuant to Section 2.9 of the Credit Agreement.
"Default" shall mean any event or circumstance which with notice or
-------
lapse of time or both would become an Event of Default.
"Dividend" shall mean, with respect to any Person, that such Person
--------
has declared or paid a dividend, distribution or returned any equity capital to
its stockholders, partners or members or authorized or made any other
distribution, payment or delivery of property (other than common equity of such
Person) or cash to its stockholders, partners or members as such, or redeemed,
retired, purchased or otherwise acquired, directly or indirectly, for a
consideration any shares of any class of its capital stock or any partnership or
membership interests outstanding on or after the Closing Date (or any options or
warrants issued by such Person with respect to its capital stock or other equity
interests), or set aside any funds for any of the foregoing purposes, or shall
have permitted any of its Subsidiaries to purchase or otherwise acquire for a
consideration any shares of any class of the capital stock or any partnership or
membership interests of such Person outstanding on or after the Closing Date (or
any options or warrants issued by such Person with respect to its capital stock
or other equity interests). Without limiting the foregoing, "Dividends" with
respect to any Person shall also include all payments made or required to be
made by such Person with respect to any stock appreciation rights, plans, equity
incentive or achievement plans or any similar plans or setting aside of any
funds for the foregoing purposes.
"Disclosure Letter" shall mean the letter from the Borrower, addressed
-----------------
to the Administrative Agent and the Lenders, dated the Closing Date, with
respect to certain disclosure of the Borrower.
"Distribution" shall have the meaning provided in Section 13 of the
------------
LLC Agreement, attached hereto as Annex A.
"Dollars" and the sign "$" shall each mean freely transferable, lawful
------- -
money of the United States.
"Effective Date" shall mean March 1, 2001.
--------------
"Environmental Claim" shall mean, with respect to any Person, (i) any
-------------------
notice, claim, administrative, regulatory or judicial or equitable action, suit,
Lien, judgment or demand by any other Person or (ii) any other written
communication by any Governmental Authority, in either case alleging or
asserting such Person's liability for investigatory costs, cleanup costs,
consultants' fees, governmental response costs, damages to natural resources
(including, without limitation, wetlands, wildlife, aquatic and terrestrial
species and vegetation) or other Property,
Appendix A
Page 6
property damages, personal injuries, fines or penalties arising out of, based on
or resulting from (x) the presence, or Release into the environment, of any
Hazardous Material at any location, whether or not owned by such Person or (y)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law or Governmental Approval issued under any Environmental Law.
"Environmental Laws" shall mean any and all Laws, now or hereafter in
------------------
effect, and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, human health or safety, or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or toxic or
hazardous substances or wastes into the environment including, without
limitation, ambient air, surface water, groundwater, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
toxic or hazardous substances or wastes.
"Equity Infusion Agreements" shall mean the agreements identified as
--------------------------
such on Part B of the Disclosure Letter.
"Equity Interest" shall have the meaning provided in Section 5.10(f)
---------------
of the Credit Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of the Credit Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
---------------
of ERISA) which together with the Borrower or a Subsidiary of the Borrower would
be deemed to be a "single employer" (i) within the meaning of Section
414(b),(c),(m) or (o) of the Code or (ii) as a result of the Borrower or a
Subsidiary of the Borrower being or having been a general partner of such
person.
"Escrow Agreement" shall mean the Escrow Agreement, dated as of March
----------------
1, 2001, among the Borrower, the Lenders party thereto and Bankers Trust
Company, as escrow agent, setting forth the payment and account information in
connection with the Refinancing of the Indebtedness of the Borrower.
"Eurodollar Loan" shall mean any Loan or any portion thereof which
---------------
bears interest based on the Eurodollar Rate.
"Eurodollar Rate" shall mean, with respect to each Interest Period in
---------------
respect of a Eurodollar Loan, the rate per annum (rounded upwards, if necessary,
to the nearest 1/1000 of 1%) determined by the Administrative Agent to be equal
to the quotient obtained by dividing (a) the Eurorate for such Eurodollar Loan
for such Interest Period by (b) 1 minus the Reserve Requirement for such
Eurodollar Loan for such Interest Period.
Appendix A
Page 7
As used herein, "Eurorate" shall mean, with respect to each Interest
Period in respect of a Eurodollar Loan, as determined by the Administrative
Agent, the rate per annum (rounded upwards, if necessary, to the nearest 1/1000
of 1%) appearing on Telerate Page 3750 (or any successor page) as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period. If for any reason such rate is
not available, the term "Eurorate" shall mean, for any Eurodollar Loan for any
--------
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/1000 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
-------- -------
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates (rounded upwards, if necessary, to the
nearest 1/1000 of 1%).
"Event of Default" shall have the meaning provided in Section 8.1 of
----------------
the Credit Agreement.
"EWG" shall mean an "exempt wholesale generator" as defined under
---
PUHCA.
"Existing Indebtedness Agreements" shall have the meaning provided in
--------------------------------
Section 5.31 of the Credit Agreement.
"Expense Sharing Agreement" shall mean each of the agreements entitled
-------------------------
"Continuing Services Agreement" listed and marked with "*" on Schedule 5.17.
"Extended Date Certain" shall mean each of (i) the date which is six
---------------------
months after the Initial Date Certain or (ii) the date which is twelve months
after the Initial Date Certain.
"Extension Fee" shall have the meaning set forth in the Fee Letter or
-------------
the Lehman Fee Letter.
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/1000 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) if the day for which such rate is
--------
to be determined is not a Business Day, the Federal Funds 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) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Administrative Agent (in its individual capacity) on such
day on such transactions as determined by the Administrative Agent.
"Fee Letter" shall mean the Fee Letter dated March 1, 2001 between the
----------
Borrower and the Tranche A Lender.
"FERC" shall mean the Federal Energy Regulatory Commission or its
----
successor.
Appendix A
Page 8
"FI Subsidiaries" shall mean any of PG&E Energy Trading Holdings
---------------
Corp., a California corporation, PG&E Gas Transmission, Northwest Corporation, a
California corporation and PG&E Generating Company LLC, a Delaware limited
liability company.
"Financing Documents" shall mean, collectively, the Credit Agreement,
-------------------
the Note, the Fee Letter, the Lehman Fee Letter, the Escrow Agreement, the
Security Documents and the Option Agreement.
"First Interest Period" shall have the meaning provided in Section
---------------------
2.5(d).
"Foreign Pension Plan" shall mean any plan, fund (including, without
--------------------
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by the Borrower or any one or
more of its Subsidiaries primarily for the benefit of employees of the Borrower
or such Subsidiaries residing outside the United States of America, which plan,
fund or other similar program provides, or results in, retirement income, a
deferral of income in contemplation of retirement or payments to be made upon
termination of employment, and which plan is not subject to ERISA or the Code.
"FPA" shall mean the Federal Power Act, as amended, and the rules and
---
regulations promulgated thereunder.
"Governmental Approval" shall mean any authorization, consent,
---------------------
approval, license, ruling, permit, tariff, rate, certification, exemption,
filing, variance, claim, order, judgment, decree, publication, notice to,
declaration of or with, or registration by or with, any Governmental Authority.
"Governmental Authority" shall mean any government, governmental
----------------------
department, commission, board, bureau, agency, regulatory authority,
instrumentality, judicial or administrative body, domestic or foreign, federal,
state or local having jurisdiction over the matter or matters in question.
"Hazardous Material" shall mean any substance that is regulated or
------------------
could lead to liability under any Environmental Law, including, but not limited
to, any petroleum or petroleum product, asbestos in any form that is or could
become friable, transformers or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls (PCB's), hazardous waste,
hazardous material, hazardous substance, toxic substance, contaminant or
pollutant, as defined or regulated as such under, any applicable Environmental
Law.
"Hedging Agreement" means any agreement in respect of any interest
-----------------
rate swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index option,
bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction,
cross-currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions entered into by
the Borrower.
"Holder" shall have the meaning provided in the Option Agreement.
------
Appendix A
Page 9
"Holding Company Conditions" shall mean the conditions set forth by
--------------------------
the CPUC in Decision 96-11-017 or Decision 99-04-068 and any decision of the
CPUC which imposes a requirement or condition on the Borrower affecting the
Borrower's relationship with PGE Utility.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976.
"Indebtedness" of any Person shall mean (i) all indebtedness of such
------------
Person for borrowed money, (ii) the deferred purchase price of assets or
services which in accordance with U.S. GAAP would be shown on the liability side
of the balance sheet of such Person, (iii) the face amount of all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any
Lien on any Property owned by such first Person, whether or not such
Indebtedness has been assumed, (v) all Capital Lease Obligations of such Person,
(vi) all obligations of such Person to pay a specified purchase price for goods
or services whether or not delivered or accepted, i.e., take-or-pay and similar
----
obligations, (vii) all net obligations of such Person under Hedging Agreements
and (viii) all Contingent Obligations of such Person; provided that Indebtedness
--------
shall not include trade payables arising in the ordinary course of business so
long as such trade payables are payable within 90 days of the date the
respective goods are delivered or the respective services are rendered and are
not overdue.
"Indemnified Liabilities" shall have the meaning provided in Section
-----------------------
9.2(a) of the Credit Agreement.
"Indemnified Matters" shall have the meaning provided in Section
-------------------
9.2(b) of the Credit Agreement.
"Indemnified Person" shall have the meaning provided in Section 9.2 of
------------------
the Credit Agreement.
"Initial Date Certain" shall mean the second anniversary of the
--------------------
Closing Date.
"Insurance Proceeds" shall mean all amounts payable to the Borrower or
------------------
the Collateral Agent in respect of any insurance required to be maintained (or
caused to be maintained) by the Borrower pursuant to Section 5.9 of the Credit
Agreement (other than general liability insurance, delayed completion insurance
and business interruption insurance), regardless of whether such payments are
received from any insurer or from either EPC Contractor pursuant to the EPC
Contracts or otherwise.
"Interest Determination Date" shall mean, with respect to any
---------------------------
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 2.6 of
---------------
the Credit Agreement.
Appendix A
Page 10
"Interest Prepaid Amount" shall mean $73,500,000, which is the total
-----------------------
amount of interest payable on the Loans based on a one-year Eurodollar Rate as
of the Closing Date discounted to present value as of the Closing Date using a
discount rate of 4.25%.
"Investment" in any Person shall mean, without duplication: (a) the
----------
acquisition (whether for cash, securities, other Property, services or
otherwise) or holding of capital stock, bonds, notes, debentures, partnership or
other ownership interests or other securities of such Person, or any agreement
to make any such acquisition or to make any capital contribution to such Person;
or (b) the making of any deposit with, or advance, loan or other extension of
credit to, such Person.
"Investments" shall have the meaning provided in Section 7.5 of the
-----------
Credit Agreement.
"IPO" shall mean the sale, in an initial underwritten offering,
---
registered under the Securities Act, of shares of NEG, Inc.'s common stock,
where after such offering, the common stock sold in such offering is traded on
the Nasdaq National Market or a national securities exchange.
"Law" shall mean, with respect to any Person (i) any statute, law,
---
regulation, ordinance, rule, judgment, order, decree, permit, concession, grant,
franchise, license, agreement or other governmental restriction or any
interpretation or administration of any of the foregoing by any Governmental
Authority (including, without limitation, Governmental Approvals) applicable to
such Person and (ii) any directive, guideline, policy, requirement or any
similar form of decision of or determination by any Governmental Authority which
is binding on such Person, in each case, whether now or hereafter in effect
(including, without limitation, in each case, any Environmental Law).
"Lead Arranger" shall mean Lehman Brothers Inc., a Delaware
-------------
corporation.
"Lehman Fee Letter" shall mean the Lehman Fee Letter dated March 1,
-----------------
2001 among the Borrower, Lehman Brothers Inc. and Lehman Commercial Paper Inc.
"Lender" shall mean, individually or collectively, as the context may
------
require, the Tranche A Lender or the Tranche B Lender and any Assignee thereof
pursuant to Section 9.11 of the Credit Agreement.
"Lien" shall mean, with respect to any Property of any Person, any
----
mortgage, lien, deed of trust, hypothecation, fiduciary transfer of title,
assignment by way of security, lien, pledge, charge, lease, sale and lease-back
arrangement, easement, servitude, trust arrangement, or security interest or
encumbrance of any kind in respect of such Property, or any preferential
arrangement having the practical effect of constituting a security interest with
respect to the payment of any obligation with, or from the proceeds of, any
Property of any kind (and a Person shall be deemed to own subject to a Lien any
Property that it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such Property).
Appendix A
Page 11
"Limited Liability Company Interest" shall have the meaning provided
----------------------------------
in the LLC Pledge Agreement.
"LLC" shall mean PG&E National Energy Group, LLC, a Delaware limited
---
liability company.
"LLC Agreement" shall mean the Amended and Restated Limited Liability
-------------
Company Agreement dated as of March 1, 2001 of PG&E National Energy Group LLC.
"LLC Interests" shall mean, as to LLC, any and all shares of the
-------------
profits and losses of such Person, any and all rights to receive distributions
of such Person's assets, and any and all rights, benefits or privileges
pertaining to any of the foregoing, including, without limitation, voting rights
and the right to participate in management.
"LLC Pledge Agreement" shall mean the LLC Pledge Agreement dated as of
--------------------
March 1, 2001, among the Borrower, as pledgor, NEG, Inc., as issuer, the Lenders
and Bankers Trust Company, as pledgee, as Collateral Agent for the benefit of
the Lenders, as amended, modified or supplemented from time to time.
"Loan" shall mean each of the Tranche A Loan and the Tranche B Loan,
----
and shall also mean, where the context requires, any portion of any such loan
held by a Lender or subject to a particular Interest Period or interest rate
option.
"Losses" shall have the meaning provided in Section 9.2(b) of the
------
Credit Agreement.
"Margin Stock" shall mean margin stock within the meaning of
------------
Regulation U and Regulation X.
"Material Adverse Change" shall mean, with respect to any Person, a
-----------------------
material adverse change in the condition (financial or otherwise), results of
operations, business, Properties, liabilities, management or prospects of such
Person.
"Material Adverse Effect" shall mean a material adverse effect on (i)
-----------------------
the condition (financial or otherwise), results of operations, business,
Properties, liabilities, management or prospects of the Borrower, (ii) the
ability of the Borrower, LLC or NEG, Inc. to timely perform any of its
obligations under any of the Financing Documents to which it is a party, (iii)
the legality, validity or enforceability of any material provision of any
Financing Document, (iv) the rights and remedies of the Collateral Agent, the
Administrative Agent, any Holder or any Lender under any of the Financing
Documents or (v) the security interests provided under the Security Documents or
the value thereof; provided that a Utility Event or defaults on Indebtedness to
--------
be Refinanced as of the Closing Date and other events of default described in
the SEC Filings of the Borrower since December 31, 2000 but prior to the Closing
Date, shall not constitute a Material Adverse Effect.
"Material Agreements" shall have the meaning provided in Section
-------------------
4.1(g)(iii) of the Credit Agreement.
Appendix A
Page 12
"Moody's" shall mean Moody's Investors Service, Inc.
-------
"NAIC" shall mean the National Association of Insurance Commissioners.
----
"NEG Group" means LLC and each of its subsidiaries and each
----------
corporation, company or partnership in which any of the foregoing own a
Controlling equity interest.
"NEG, Inc." shall mean PG&E National Energy Group, Inc., a Delaware
---------
corporation.
"NEG Subsidiary" shall mean, as the context may require, any or all
--------------
Subsidiaries of NEG, Inc.
"Net Debt Proceeds" shall mean, with respect to any incurrence of
-----------------
Indebtedness for borrowed money, the cash proceeds received by any Person (net
of any tax, underwriting discounts and commissions and reasonable costs paid by
such Person associated therewith) from the respective incurrence of such
Indebtedness for borrowed money.
"Net Equity Proceeds" shall mean, with respect to each issuance or
-------------------
sale of any equity by any Person or any capital contribution to such Person, the
cash proceeds received by any Person (net of any tax, underwriting discounts and
commissions and reasonable costs paid by such Person associated therewith) from
the respective sale or issuance of its equity or from the respective capital
contribution.
"Net Insurance Proceeds" shall mean, with respect to any Recovery
----------------------
Event, the cash proceeds received by any Person (net of reasonable costs and
taxes paid by such Person associated therewith) in connection with such Recovery
Event.
"Net IPO Proceeds" shall mean, with respect to the IPO, the cash
----------------
proceeds received by the respective Person from such IPO (net of underwriting
discounts and commissions and other reasonable costs paid by such Person
associated therewith).
"Net Sale Proceeds" shall mean, for any Asset Sale, the gross cash
-----------------
proceeds (including any cash received by way of deferred payment pursuant to a
promissory note, receivable or otherwise, but only as and when received)
received by any Person from such sale of assets (net of the fees and commissions
and other reasonable costs paid by such Person associated therewith) relating to
the assets sold.
"Note" shall have the meaning provided in Section 2.4 of the Credit
----
Agreement.
"Notice of Borrowing" shall have the meaning provided in Section 2.2
-------------------
of the Credit Agreement.
"Obligations" shall mean, collectively, (i) all loans, advances,
-----------
debts, liabilities, and obligations, howsoever arising, owed by the Borrower
under a Financing Document or otherwise to the Administrative Agent or any
Lender of every kind and description (whether or not evidenced by any note or
instrument and whether or not for the payment of money), direct or
Appendix A
Page 13
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, including all interest, fees, charges, expenses, attorneys'
fees and consultants' fees chargeable to the Borrower; (ii) any and all sums
advanced by the Collateral Agent, the Administrative Agent or any Lender in
order to preserve the Collateral; and (iii) the reasonable expenses of retaking,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Collateral, or of any exercise by the Collateral Agent, the
Administrative Agent or any Lender of its rights under the Security Documents,
together with reasonable attorneys' fees and court costs.
"Officer's Certificate" shall mean an officer's certificate signed by
---------------------
an Authorized Officer of the Borrower.
"Option" shall have the meaning provided in the Option Agreement.
------
"Option Agreement" shall mean the Option Agreement dated as of March
----------------
1, 2001 among LLC, NEG, Inc., GPSF-F Inc., a Delaware corporation and LB I Group
Inc., a Delaware corporation.
"Option Shares" shall have the meaning provided in the Option
-------------
Agreement.
"Payment Office" shall mean the office specified from time to time by
--------------
the Administrative Agent as its payment office by notices to the Borrower and
the Lenders.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Lien" shall have the meaning provided in Section 7.1 of the
--------------
Credit Agreement.
"Person" shall mean any individual, corporation, limited liability
------
company, company, voluntary association, partnership, joint venture, trust, or
other enterprises or unincorporated organization or government (or any agency,
instrumentality or political subdivision thereof).
"PGE Utility" shall mean Pacific Gas and Electric Company, a
-----------
California corporation.
"Plan" shall mean any pension plan as defined in Section 3(2) of
----
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an
ERISA Affiliate, and each such plan for the five-year period immediately
following the latest date on which the Borrower, or a Subsidiary of the Borrower
or an Affiliate maintained, contributed to or had an obligation to contribute to
such plan.
"Pledged Interest" shall mean the Limited Liability Company Interests
----------------
pledged under the LLC Pledge Agreement.
"Preferential Rights" shall have the meaning provided in Section
-------------------
5.4(b) of the Credit Agreement.
Appendix A
Page 14
"Prime Rate" shall mean the per annum rate of interest established
----------
from time to time by Bankers Trust Company as its prime rate, which rate may not
be the lowest rate of interest charged by Bankers Trust Company to its
customers.
"Process Agent" shall have the meaning provided in Section 9.16(b) of
-------------
the Credit Agreement.
"Property" shall mean any property or asset of any kind whatsoever,
--------
whether real, personal or mixed and whether tangible or intangible, and any
right or interest therein.
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
-----
amended, and rules and regulations promulgated thereunder.
"QF" shall mean a "qualifying cogeneration facility" or a "qualifying
--
small power production facility" as defined under the Public Utility Regulatory
Policies Act of 1978, as amended.
"Quarterly Dates" shall mean the last Business Day of each of March,
---------------
June, September and December.
"Real Estate" shall mean, with respect to any Person, all real estate
-----------
assets, real property interests, including all easements, rights of way, feehold
interests, leasehold interests and any options with respect to any of the
foregoing, owned by such Person.
"Recovery Event" shall mean the receipt by any Person of any cash
--------------
insurance proceeds or condemnation awards payable (i) by reason of theft, loss,
physical destruction, damage, taking or any other similar event with respect to
any Property or assets of such Person or (ii) under any policy of insurance,
except in the case of the Borrower, excluding such proceeds or awards
attributable to PGE Utility or any Subsidiary of PGE Utility.
"Refinance" or "Refinancing" shall mean the refinancing of the
--------- -----------
Indebtedness of the Borrower as set forth on Part A of the Disclosure Letter in
accordance with the requirements of Section 4.1(s) of the Credit Agreement.
"Register" shall have the meaning provided in Section 9.11(e) of the
--------
Credit Agreement.
"Regulation D" shall mean Regulation D of the Board of Governors of
------------
the Federal Reserve system (or any successor).
"Regulation U" shall mean Regulation U of the Board of Governors of
------------
the Federal Reserve system (or any successor).
"Regulation X" shall mean Regulation X of the Board of Governors of
------------
the Federal Reserve system (or any successor).
Appendix A
Page 15
"Release" shall mean any spilling, leaking, pumping, pouring,
-------
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the environment (including the abandonment or discarding of
barrels, containers, and other closed receptacles containing any Hazardous
Material, but excluding (i) emissions from the engine exhaust of a motor vehicle
and (ii) the normal application of fertilizer).
"Reportable Event" shall mean an event described in Section 4043(c) of
----------------
ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.22, .23, .25, .27 or .28 of PBGC Regulation Section 4043.
"Required Acceleration Lenders" shall mean, at any time, the holders
-----------------------------
of at least 66 2/3% in principal amount of the Loans then outstanding.
"Required FMV Ratio" shall have the meaning provided in Section 6.14
------------------
of the Credit Agreement.
"Required Waiver Lenders" shall mean, at any time, at least two
-----------------------
Lenders which (a) are not Affiliates of each other and (b) together hold, in the
aggregate, more than 66 2/3% in principal amount of the Loans then outstanding.
"Reserve Requirement" shall mean, at any time, the maximum rate at
-------------------
which reserves (including, without limitation, any marginal, special,
supplemental, or emergency reserves) are required to be maintained under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) by member banks of the Federal Reserve System
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks with
respect to (i) any category of liabilities which includes deposits by reference
to which the Eurodollar Rate is to be determined, or (ii) any category of
extensions of credit or other assets which include Eurodollar Loans. The
Eurodollar Rate shall be adjusted automatically on and as of the effective date
of any change in the Reserve Requirement.
"Return" shall have the meaning provided in Section 5.12 of the Credit
------
Agreement.
"Scheduled Project" shall have the meaning provided in Section 5.23 of
-----------------
the Credit Agreement.
"SEC" shall mean the Securities and Exchange Commission.
---
"SEC Filings" shall mean the filings listed on Schedule 4.1(k).
-----------
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated by the SEC thereunder.
"Security Documents" shall mean, collectively, the LLC Pledge
------------------
Agreement, the Stock Pledge Agreement and all Uniform Commercial Code financing
statements and other
Appendix A
Page 16
filings, recordings or regulations required by the Credit Agreement or the LLC
Pledge Agreement or the Stock Pledge Agreement to be filed or made in respect of
any such Security Document.
"Selected Interest Amount" shall have the meaning provided in Section
------------------------
2.6(b).
"Selected Interest Period" shall have the meaning provided in Section
------------------------
2.6(b).
"Significant Subsidiaries" shall mean any of PG&E Gas Transmission,
------------------------
Northwest Corporation, a California corporation, PG&E Energy Trading Holdings
Corporation, a California corporation, PG&E Generating Company, LLC, a Delaware
limited liability company and USGen New England, Inc., a Delaware corporation.
"Source" of a Lender shall mean the source from which such Lender is
------
obtaining funds in connection with the funding or maintenance of its Eurodollar
Loan.
"Specified Rated Indebtedness" shall mean any long-term unsecured
----------------------------
Indebtedness for borrowed money which (a) has a credit rating of no less than
BBB- by Standard & Poor's or Baa3 by Moody's, and (b) a maturity date no earlier
than the Date Certain and (c) such Indebtedness may not be accelerated or
prepaid prior to a repayment and satisfaction in full of all Obligations of the
Borrower under the Credit Agreement and the other Financing Documents.
"Specified Subsidiaries" shall mean any of GTN Holdings LLC, a
----------------------
Delaware limited liability company and PG&E Energy Trading Holdings, LLC, a
Delaware limited liability company.
"Spin-Off" of NEG, Inc. shall mean a spin-off, divestiture,
--------
reorganization or other form of restructuring that results in NEG, Inc. no
longer being a Subsidiary of LLC or the Borrower.
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
-----------------
division of The McGraw-Hill Companies, Inc.
"Stock Pledge Agreement" shall mean the Stock Pledge Agreement dated
----------------------
as of March 1, 2001, among the Borrower, the Lenders party thereto and Bankers
Trust Company, as pledgee, as Collateral Agent for the Lenders, as amended,
modified or supplemented from time to time.
"Subsidiary" shall mean, for any Person, any corporation, partnership
----------
or other entity of which at least a majority of the securities or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
of such corporation, partnership or other entity (irrespective of whether or not
at the time securities or other ownership interests of any other class or
classes of such corporation, partnership or other entity shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
Appendix A
Page 17
"Tax" shall have the meaning provided in Section 3.4 of the Credit
---
Agreement.
"Trading Contracts" shall mean the agreements identified as such on
-----------------
Part A of the Disclosure Letter.
"Trading Counterparties" shall mean parties to the Trading Contracts
----------------------
identified as such on Part B of the Disclosure Letter.
"Tranche A Commitment" shall mean $600,000,000.
--------------------
"Tranche A Lender" shall mean General Electric Capital Corporation, a
----------------
New York corporation.
"Tranche A Loan" shall mean the Loan provided by the Tranche A Lender
--------------
on the Closing Date.
"Tranche B Commitment" shall mean $400,000,000.
--------------------
"Tranche B Lender" shall mean Lehman Commercial Paper Inc., a New York
----------------
corporation.
"Tranche B Loan" shall mean the Loan provided by the Tranche B Lender
--------------
on the Closing Date.
"Type" shall mean the type of Loan determined with regard to the
----
interest option applicable thereto, i.e., whether a Base Rate Loan or a
Eurodollar Loan.
"U.S. GAAP" shall mean generally accepted accounting principles and
---------
practices as in effect from time to time in the United States.
"Unaudited Financial Statements" shall have the meaning provided in
------------------------------
Section 5.11 of the Credit Agreement.
"Unfunded Current Liability" of any Plan shall mean the amount, if
--------------------------
any, by which the value of the accumulated plan benefits under the Plan
determined on a plan termination basis in accordance with actuarial assumptions
at such time consistent with those prescribed by the PBGC for purposes of
Section 4044 of ERISA, exceeds the fair market value of all plan assets
allocable to such liabilities under Title IV of ERISA (excluding any accrued but
unpaid contributions).
"United States" and "U.S." shall each mean the United States of
------------- ----
America.
"Utility Event" shall mean any event, fact or circumstance which
-------------
relates solely to and affects solely PGE Utility (including any voluntary filing
for bankruptcy or dissolution concerning PGE Utility or its Subsidiaries under
the Bankruptcy Code).
"Utility Regulation" means any law, regulation or rule of the Federal
------------------
government, any state, or any agency or political subdivision of the foregoing
which is applicable to an entity
Appendix A
Page 18
by virtue of (i) such entity's ownership or operation of assets used for the
generation, transmission, distribution or sale of electric energy, (ii) such
entity's transportation of natural or manufactured gas, gasoline, oil, or
similar fuels, steam, chilled water or other products resulting in regulation
similar to that imposed on the foregoing, (iii) such entity's engaging in the
sale or provision of electric energy, natural gas or similar fuels, steam,
water, chilled water, or telephone or other public utility services; provided
--------
that, such term shall not include laws, regulations or rules of general
applicability with respect to protection of the environment, hazardous waste, or
public health or safety.
"Voting Stock", with respect to any Person, shall mean Capital Stock
------------
the holders of which are ordinarily, in the absence of contingencies, entitled
to vote for the election of directors (or persons performing similar functions)
of such Person, even if the right so to vote has been suspended by the happening
of a contingency.
2. Rules of Interpretation. In each Financing Document, unless
-----------------------
otherwise indicated:
(a) each reference to, and the definition of, any document (including
any Financing Document) shall be deemed to refer to such document as it may
be amended, supplemented, revised or modified from time to time in
accordance with its terms and, to the extent applicable, the terms of the
Credit Agreement;
(b) each reference to a Law or Governmental Approval shall be deemed
to refer to such Law or Governmental Approval as the same may be amended,
supplemented or otherwise modified from time to time;
(c) any reference to a Person in any capacity includes a reference to
its permitted successors and assigns in such capacity and, in the case of
any Governmental Authority, any Person succeeding to any of its functions
and capacities;
(d) references to days shall refer to calendar days unless Business
Days are specified; references to weeks, months or years shall be to
calendar weeks, months or years, respectively;
(e) all references to a "Section," "Appendix," "Annex," "Schedule" or
"Exhibit" are to a Section of such Financing Document or to an Appendix,
Annex, Schedule or Exhibit attached thereto;
(f) the table of contents and Section headings and other captions
therein are for the purpose of reference only and do not affect the
interpretation of such Financing Document;
(g) defined terms in the singular shall include the plural and vice
versa, and the masculine, feminine or neuter gender shall include all
genders;
Appendix A
Page 19
(h) the words "hereof", "herein" and "hereunder", and words of
similar import, when used in any Financing Document, shall refer to such
Financing Document as a whole and not to any particular provision of such
Financing Document;
(i) the words "include," "includes" and "including" are deemed to be
followed by the phrase "without limitation";
(j) where the terms of any Financing Document require that the
approval, opinion, consent or other input of any Secured Party be obtained,
such requirement shall be deemed satisfied only where the requisite
approval, opinion, consent or other input is given by or on behalf of the
relevant party in writing;
(k) where the terms of any Financing Document require or permit any
action to be taken by the Collateral Agent, such action shall be taken
strictly in accordance with the applicable provisions of the relevant
Financing Documents;
(l) whenever the phrase "material compliance" is used, it shall be
interpreted to mean that either the entity is in full compliance with the
requirement or that any failure of the entity to be in compliance in all
respects with the requirement could not reasonably be expected alone or
together will all other such failures and all of the facts and
circumstances to have a Material Adverse Effect; and
(m) all reference to "knowledge" of a Person shall mean the knowledge
or actual awareness of such Person of the subject matter in question after
due inquiry and investigation and "knowledge" of the Borrower shall mean
and include knowledge of the other Covered Parties.
EXHIBIT A
---------
FORM OF NOTICE OF BORROWING
[DATE]
[Address of Administrative Agent/Lender]
--------------------------------------
Attention: __________________________
Gentlemen:
The undersigned, PG&E Corporation, refers to the Credit Agreement,
dated as of March __, 2001 (as amended from time to time, the "Credit
Agreement," the terms defined therein being used herein as therein defined),
among the undersigned, the Lenders, [and you, as Administrative Agent for the
Lenders,] and hereby gives you notice, irrevocably, pursuant to Section 2.2 of
the Credit Agreement, that the undersigned hereby requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing") as required by Section 2.2
of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is March __, 2001.
(ii) The aggregate principal amount of the Proposed Borrowing is
[________].
(iii) The Proposed Borrowing is to consist of a Eurodollar Loan.
(iv) The initial Interest Period for the Proposed Borrowing is
[_________].
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A) the representations and warranties contained in Section 5 of
the Credit Agreement are correct, before and after giving effect to the Proposed
Borrowing and to the application of the proceeds thereof, as though made on and
as of such date; and
(B) no Default or Event of Default has occurred and is continuing,
or would result from such Proposed Borrowing or from the application of the
proceeds thereof.
Very truly yours,
PG&E Corporation
By_____________________________
Title:
EXHIBIT B
---------
FORM OF NOTE
THIS NOTE MAY NOT BE ASSIGNED EXCEPT IN
ACCORDANCE WITH SECTION 9.11 OF THE CREDIT AGREEMENT
$ _____________ New York, New York
March __, 2001
FOR VALUE RECEIVED, PG&E CORPORATION, a corporation organized and
existing under the laws of California (the "Borrower"), hereby promises to pay
to the order of [_____________________] (the "Lender") or its registered
assigns, in lawful money of the United States of America in immediately
available funds, at the Payment Office (as defined in the Agreement described
below) on the earlier of (a) the date of a Spin-Off of NEG, Inc. and (b) the
Date Certain, the principal sum of __________________ United States dollars or,
if less, the unpaid principal amount of all Loans (as defined in the Agreement)
made by the Lender pursuant to the Agreement.
The Borrower promises also to pay interest on the unpaid principal
amount of the Loans in like money at said office from the date such Loans are
made until paid at the rates and at the times provided in the Agreement.
This Note is one of the Notes referred to in the Credit Agreement,
dated as of March [__], 2001, among the Borrower, the Lenders party thereto,
General Electric Capital Corporation, as Co-Arranger, Lehman Commercial Paper
Inc., as Administrative Agent and Lehman Brothers Inc., as Lead Arranger and
Book Manager (as amended and as from time to time in effect, the "Agreement")
and is entitled to the benefits thereof. Capitalized terms used herein and not
defined shall have the meanings set forth in Appendix A to the Agreement. This
Note is secured by the Security Documents (as defined in the Agreement). As
provided in the Agreement, this Note is subject to voluntary and mandatory
prepayment, in whole or in part.
In case an Event of Default (as defined in the Agreement) shall occur
and be continuing, the principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the effect provided in the
Agreement.
The Borrower hereby waives presentment, demand, protest or notice of
any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAW OF THE STATE OF NEW YORK.
PG&E Corporation
By_____________________________
Name:
Title:
(ii)
EXHIBIT C
---------
Section 3.4(b)(ii) Certificate
------------------------------
Reference is hereby made to the Credit Agreement, dated as of March 1,
2001, among PG&E Corporation, a California corporation, as the Borrower, General
Electric Capital Corporation, a New York corporation, as a Lender and Co-
Arranger, Lehman Commercial Paper Inc., as a Lender and Administrative Agent and
Lehman Brothers Inc., as Lead Arranger and Book Manager (the "Credit
Agreement"). Pursuant to the provisions of Section 3.4(b)(ii) of the Credit
Agreement, the undersigned hereby certifies that it is not a "bank" as such term
is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as
amended.
[NAME OF LENDER]
By__________________________________
Name:
Title:
EXHIBIT D
---------
CT CORPORATION SYSTEM
March 1, 2001
PG&E Corporation
One Market
Spear Street Tower, Suite 2400
San Francisco, CA 94105
Attention: Vice President and Corporate Secretary
PG&E National Energy Group, LLC
One Market
Spear Street Tower, Suite 2400
San Francisco, CA 94105
Attention: Secretary
PG&E National Energy Group, Inc.
One Market
Spear Street Tower, Suite 2400
San Francisco, CA 94105
Attention: Secretary
General Electric Capital Corporation
120 Long Ridge Road
Stamford, CT 06927
Lehman Commercial Paper Inc.
Three World Financial Center
200 Vesey Street
New York, NY 10285
Lehman Brothers Inc.
Three World Financial Center
200 Vesey Street
New York, NY 10285
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of March 1, 2001
(the "Credit Agreement"), among PG&E Corporation, a California ("PG&E Corp."),
General Electric Capital Corporation, Lehman Commercial Paper Inc. and Lehman
Brothers Inc. Unless otherwise defined herein, terms defined in the Credit
Agreement are used herein as therein defined.
Pursuant to Section 9.16(b) of the Credit Agreement and the other
Financing Documents, PG&E Corp., PG&E National Energy Group, LLC and PG&E
National Energy Group, Inc. have appointed CT Corporation System (with an office
on the date hereof at 111 Eighth Avenue, New York, New York 10011, U.S.A.) as
their agent in their name, place and stead to accept process on their behalf of
all writs, process and summonses in any action, suit or proceeding brought in
the State of New York arising out of or relating to the Credit Agreement, any
other Financing Documents or the transactions contemplated thereby.
1350 Treat Boulevard, Suite 100
Walnut Creek, CA 94596
Tel. 800 874 5258
Fax 925 287 9801
A CCH LEGAL INFORMATION SERVICES COMPANY
CT CORPORATION SYSTEM
The undersigned hereby accepts each such appointment as agent and
agrees with you that (a) the undersigned will maintain an office in New York
City until such time as a successor agent shall be appointed by irrevocable
powers of attorney in form and substance acceptable to you and your counsel, and
such successor agent shall have delivered a letter to you accepting its
appointment, (b) the undersigned will perform its duties as agent in accordance
with the Credit Agreement and this letter, and (c) the undersigned will forward
forthwith copies of any writs, process or summonses which the undersigned
receives in connection with its appointment as agent to PG&E Corp., PG&E
National Energy Group, LLC and PG&E National Energy Group, Inc. at the following
addresses (or at such other address of which PG&E Corp., PG&E National Energy
Group, LLC and PG&E National Energy Group, Inc. shall hereafter notify us):
PG&E Corporation
One Market
Spear Street Tower, Suite 2400
San Francisco, CA 94105
Attention: Leslie H. Everett, Vice President
and Corporate Secretary
Fax: (415) 267-7260
Phone: (415) 267-7010
PG&E National Energy Group, LLC
One Market
Spear Street Tower, Suite 2400
San Francisco, CA 94105
Attention: Leslie H. Everett, Secretary
Fax: (415) 267-7260
Phone: (415) 267-7010
PG&E National Energy Group, Inc.
One Market
Spear Street Tower, Suite 2400
San Francisco, CA 94105
Attention: Leslie H. Everett, Secretary
Fax: (415) 267-7260
Phone: (415) 267-7010
This acceptance and agreement shall be binding upon the undersigned
and all successors of the undersigned.
Very truly yours,
CT CORPORATION SYSTEM
By: /s/ Naseem A. Conde
-------------------------------
Name: Naseem A. Conde
Title: Special Asst. Secy.
1350 Treat Boulevard, Suite 100
Walnut Creek, CA 94596
Tel. 800 874 5258
Fax 925 287 9801