EXHIBIT 4.2
EXECUTION COPY
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UTILITY STOCK BASE PLEDGE AGREEMENT
by and among
PG&E CORPORATION,
as Pledgor
BANK ONE, N.A.,
as Trustee
and
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Collateral Agent
for the benefit of the Secured Parties
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Dated as of July 2, 2003
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UTILITY STOCK BASE PLEDGE AGREEMENT
UTILITY STOCK BASE PLEDGE AGREEMENT (as amended, restated,
supplemented, or otherwise modified from time to time, this "Agreement"), dated
as of July 2, 2003, among PG&E CORPORATION, a California corporation (the
"Pledgor"), BANK ONE, N.A., a national banking association organized to do
business under the laws of the United States of America (the "Trustee") acting
in its capacity as Trustee for the Noteholders (as hereinafter defined) and
DEUTSCHE BANK TRUST COMPANY AMERICAS (the "Collateral Agent"), as Collateral
Agent for the benefit of and the representative of the Noteholders (as
hereinafter defined) and the Additional Debt Holders (as hereinafter defined,
and together with the Noteholders, the "Secured Parties").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Indenture dated as of the date
hereof (including all annexes, exhibits and schedules thereto, as from time to
time amended, restated, supplemented or otherwise modified from time to time,
the "Indenture") by and among the Pledgor and the Trustee for the noteholders
under the Indenture (collectively, the "Noteholders"), the Pledgor will issue to
the Noteholders 6-7/8% Senior Secured Notes due 2008 in an initial maximum
aggregate principal amount of $600,000,000 (such notes, as the same may be
amended, exchanged, extended, renewed, restated, supplemented or otherwise
modified from time to time, together with any additional notes issued pursuant
to the Indenture, being herein collectively referred to as the "Notes");
WHEREAS, it is contemplated that, from time to time to the extent
permitted by the Indenture, the Pledgor may, from time to time, issue or
guaranty certain New Senior Secured Debt (as hereinafter defined) and/or New
Junior Secured Debt (as hereinafter defined);
WHEREAS, the Pledgor is the record and beneficial owner of
approximately 94% of the issued and outstanding common stock of Pacific Gas and
Electric Company, a California corporation (the "Utility"); and
WHEREAS, the Pledgor wishes to pledge and grant security interests
in the Collateral (as hereinafter defined) in favor of the Collateral Agent, for
the benefit of the Noteholders and the holders of any New Senior Secured Debt
(the "New Senior Secured Debt Holders"; and together with the Noteholders, the
"Senior Secured Parties"), and for the benefit of the holders of any New Junior
Secured Debt (the "New Junior Secured Debt Holders"; and together with the New
Senior Secured Debt Holders, the "Additional Debt Holders");
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements hereinafter contained, the Pledgor hereby agrees with the
Collateral Agent, for the benefit of the Secured Parties, as follows:
1. DEFINITIONS.
1.1 Unless otherwise defined herein, all capitalized terms used
herein and defined in the Indenture shall be used herein as therein defined.
1.2 The following capitalized terms used herein shall have the
definitions specified below:
"Additional Debt Holders" shall have the meaning set forth in the
fourth recital hereto.
"Additional Notes" shall mean any notes (other than the Initial
Notes), if any, issued under the Indenture in accordance with Sections
2.02, 2.14 and 4.09 thereof.
"Additional Secured Obligations" shall mean, collectively, the New
Senior Secured Obligations and the New Junior Secured Obligations.
"Affiliates" of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control," as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through
the ownership of voting securities, by agreement or otherwise; provided
that beneficial ownership of 10% or more of the Voting Stock of a Person
shall be deemed to be control. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" have
correlative meanings.
"Agent Related Person" shall have the meaning set forth in Section
22.6 hereof.
"Agreement" has the meaning set forth in the first paragraph hereof.
"Board of Directors" shall mean: (1) with respect to a corporation,
the board of directors of the corporation; (2) with respect to a
partnership, the board of directors of the general partner of the
partnership; and (3) with respect to any other Person, the board or
committee of such Person serving a similar function.
"Capital Stock" shall mean: (1) in the case of a corporation,
corporate stock; (2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock; (3) in the case of a partnership
or limited liability company, partnership or membership interests (whether
general or limited); and (4) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
"Capital Lease Obligation" shall mean, at the time any determination
is to be made, the amount of the liability in respect of a capital lease
that would at that time be required to be capitalized on a balance sheet
in accordance with GAAP.
"Collateral" shall have the meaning set forth in Section 3.1 hereof.
"Debt Documents" shall mean, collectively, the Note Documents, the
New Senior Secured Debt Documents and the New Junior Secured Debt
Documents.
"Default" shall mean any event that is, or with the passage of time
or the giving of notice or both would be, an Event of Default.
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"Disqualified Stock" shall mean any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible, or for
which it is exchangeable, in each case at the option of the holder of the
Capital Stock), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or is redeemable at the option of the holder of the Capital
Stock, in whole or in part, on or prior to the date that is ninety-one
days after the date on which the Notes mature. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified
Stock solely because the holders of the Capital Stock have the right to
require the Pledgor to repurchase such Capital Stock upon the occurrence
of a change of control, spin-off or an asset sale will not constitute
Disqualified Stock if the terms of such Capital Stock provide that the
Pledgor may not repurchase or redeem any such Capital Stock pursuant to
such provisions prior to compliance by the Pledgor with the covenants
contained in Section 4.10 and Section 4.15 of the Indenture and unless
such repurchase or redemption complies with Section 4.07 of the Indenture.
"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 Interests" shall mean Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Event of Default" shall mean (1) an "Event of Default" as defined
in Section 12 of the Indenture; (2) any "Event of Default" (or similarly
defined event or condition) under any New Senior Secured Debt Document;
and (3) any "Event of Default" (or similarly defined event or condition)
as defined in any New Junior Secured Debt Document.
"Existing Secured Obligations" shall mean, collectively, (1) the
debts, liabilities, and obligations, howsoever arising, owed by the
Pledgor under the Indenture and the other Note Documents in respect of the
Notes as of the date of this Agreement, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising and howsoever evidenced, and the due performance and compliance by
the Pledgor with the terms thereof; (2) any and all sums advanced by the
Trustee or any Noteholder pursuant to the terms of the Note Documents in
order to preserve the Collateral or preserve its security interest in the
Collateral; and (3) the reasonable expenses of retaking, holding,
preparing for sale, selling or otherwise disposing of or realizing on the
Collateral, or of any exercise by the Collateral Agent, the Trustee or any
Noteholder of its rights under this Agreement, together with reasonable
attorneys' fees and court costs.
"GAAP" shall mean generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial
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Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"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.
"Guarantee" shall mean a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, of all or any part of any Indebtedness in any manner
including, without limitation, by way of a pledge of assets or through
letters of credit or reimbursement agreements in respect thereof.
"Hedging Obligations" shall mean, with respect to any specified
Person, the obligations of such Person incurred under: (1) interest rate
swap agreements, interest rate cap agreements and interest rate collar
agreements; (2) foreign exchange contracts and currency protection
agreements; (3) any commodity futures contract, commodity option or other
similar agreement or arrangement; and (4) other similar agreements or
arrangements.
"Indebtedness" shall mean with respect to any specified Person, any
indebtedness of such Person, whether or not contingent: (1) in respect of
borrowed money; (2) evidenced by bonds, notes, debentures or similar
instruments; (3) in respect of banker's acceptances or letters of credit
(or reimbursement agreements in respect thereof) or similar instruments;
(4) representing Capital Lease Obligations; (5) representing the balance
deferred and unpaid of the purchase price of any property, except any such
balance that constitutes an accrued expense or trade payable; (6)
representing the net obligations of such Person under any Hedging
Obligations (the amount of any such obligations to be equal at any time to
the termination value of the agreement or arrangement giving rise to such
obligation that would be payable by such Person at such time); or (7) the
principal component or liquidation preference of all obligations of such
Person with respect to the redemption, repayment or other repurchase of
any Disqualified Stock or, with respect to any Restricted Subsidiary, any
preferred stock; if and to the extent any of the preceding items (other
than letters of credit, Hedging Obligations, Disqualified Stock or, with
respect to any Restricted Subsidiary, preferred stock) would appear as a
liability upon a balance sheet of the specified Person prepared in
accordance with GAAP. In addition, the term "Indebtedness" includes all
Indebtedness of others to the extent secured by a Lien on any asset of the
specified Person (whether or not such Indebtedness is assumed by the
specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any Indebtedness of any other Person. The
amount of any Indebtedness outstanding as of any date will be: (1) the
accreted value of the Indebtedness, in the case of any Indebtedness issued
with original issue discount; and (2) the principal amount of the
Indebtedness, together with any interest on the Indebtedness that is more
than 30 days past due, in the case of any other Indebtedness.
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"Indemnified Liabilities" shall mean 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 any
Unmatured Surviving Obligations) be imposed on, incurred by or asserted
against any Indemnified Person in any way relating to or arising out of
this Agreement or any other Debt Document 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 any Secured Debt
Representative, the Collateral Agent and any Secured Debt Holder of any of
its respective rights or remedies under any of the Debt 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 Debt Document or the
Secured Debt, or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto; provided, that the Pledgor 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 as determined by a final judgment of
a court of competent jurisdiction.
"Indemnified Person" shall mean each of the Secured Debt
Representatives, the Collateral Agent and each Secured Party and each of
their respective officers, directors, employees, counsel, agents and
attorneys-in-fact and Affiliates.
"Indenture" shall have the meaning set forth in the first recital
hereto.
"Initial Notes" shall mean $600.0 million in aggregate principal
amount of 6-7/8% Senior Secured Notes due 2008 issued under the Indenture
on the Issue Date.
"Issue Date" shall mean July 2, 2003.
"Law" shall mean, with respect to any Person (1) 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 (2) 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).
"Lien" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement
to sell or give a security interest in such asset.
"Moody's" shall mean Moody's Investors Service, Inc. or any
successor rating agency.
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"NEG" shall mean PG&E National Energy Group, LLC, a Delaware limited
liability company, and each of its Subsidiaries.
"Newco" shall mean one or more Persons that, directly or indirectly,
through one or more subsidiaries, own all of the assets of the Utility
other than such assets of the Utility that are distributed as part of a
Spin-Off.
"New Debt Documents" shall mean, collectively, the New Senior
Secured Debt Documents and the New Junior Secured Debt Documents.
"Newco Stock" shall mean the Capital Stock of Newco.
"New Junior Secured Debt" shall be a collective reference to all
Indebtedness of the Pledgor issued pursuant to Section 4.09 of the
Indenture (1) that is permitted by the Indenture and the New Senior
Secured Debt Documents (if applicable) to share in the security interests
granted under this Agreement in accordance with Section 3 hereof; (2) that
is designated as "New Junior Secured Debt" by the Pledgor to each of the
Collateral Agent and the Trustee in a writing substantially in the form of
Exhibit 2 attached hereto and (3) with respect to which, the provisions of
Section 2.2 and Section 21 have been satisfied.
"New Junior Secured Debt Documents" shall mean this Agreement, the
Utility Protective Stock Pledge Agreement and all indentures, debentures,
notes, guaranties and other documents executed by the Pledgor in
connection with the issuance of any New Junior Secured Debt.
"New Junior Secured Debt Holders" shall have the meaning set forth
in the fourth recital hereto.
"New Junior Secured Debt Representative" shall mean any trustee,
administrative agent or like representative of the holders of any New
Junior Secured Debt.
"New Junior Secured Obligations" shall mean, collectively, (1) all
loans, advances, debts, liabilities, and obligations, howsoever arising,
owed by the Pledgor under a New Junior Secured Debt Document to the New
Junior Secured Debt Representative or any New Junior Secured Debt Holder
or its Affiliates 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 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 Pledgor;
(2) any and all sums advanced by the New Junior Secured Debt
Representative or any New Junior Secured Debt Holder pursuant to the
provisions of the New Junior Secured Debt Documents in order to preserve
the Collateral or preserve its security interest in the Collateral; and
(3) the reasonable expenses of retaking, holding, preparing for sale,
selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Collateral Agent, the New Junior Secured Debt
Representative or any New Junior Secured Debt Holder of its rights under
this Agreement, together with reasonable attorneys' fees and court costs.
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"New Secured Debt" shall mean, collectively, the New Senior Secured
Debt and the New Junior Secured Debt.
"New Senior Secured Debt" shall be a collective reference to all
Indebtedness, including Indebtedness issued under the Indenture, of the
Pledgor issued pursuant to Section 4.09 of the Indenture (1) that is
permitted by the Indenture to share in the security interests granted
under this Agreement in accordance with Section 3 hereof; (2) that is
designated as "New Senior Secured Debt" by the Pledgor to each of the
Collateral Agent and the Trustee in a writing substantially in the form of
Exhibit 2 attached hereto and (3) with respect to which, the provisions of
Section 2.1 and Section 21 have been satisfied.
"New Senior Secured Debt Documents" shall mean this Agreement, the
Utility Protective Stock Pledge Agreement and all indentures, debentures,
notes, guaranties and other documents executed by the Pledgor in
connection with the issuance of any New Senior Secured Debt.
"New Senior Secured Debt Holders" shall have the meaning set forth
in the fourth recital hereto.
"New Senior Secured Debt Representative" shall mean any trustee,
administrative agent or like representative of the holders of any New
Senior Secured Debt.
"New Senior Secured Obligations" shall mean, collectively, (1) all
loans, advances, debts, liabilities, and obligations, howsoever arising,
owed by the Pledgor under a New Senior Secured Debt Document to the New
Senior Secured Debt Representative or any New Senior Secured Debt Holder
or its Affiliates 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 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 Pledgor;
(2) any and all sums advanced by the New Senior Secured Debt
Representative or any New Senior Secured Debt Holder pursuant to the
provisions of the New Senior Secured Debt Documents in order to preserve
the Collateral or preserve its security interest in the Collateral; and
(3) 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 New Senior Secured Debt
Representative or any New Senior Secured Debt Holder of its rights under
this Agreement, together with reasonable attorneys' fees and court costs.
"Non-Recourse Debt" shall mean Indebtedness: (1) as to which neither
the Pledgor nor any of its Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument
that would constitute Indebtedness), (b) is directly or indirectly liable
as a guarantor or otherwise, or (c) is the lender; (2) no default with
respect to which (including any rights that the holders of the
Indebtedness may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the Notes) of the Pledgor or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment of the Indebtedness to be accelerated or payable prior
to its stated maturity; and (3)
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as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Pledgor or any of its
Restricted Subsidiaries.
"Note Documents" shall mean the Indenture, this Agreement, and the
Utility Protective Stock Pledge Agreement.
"Noteholders" shall have the meaning set forth in the first recital
hereof.
"Officer" shall mean, with respect to any Person, the chairman of
the Board of Directors, the chief executive officer, the president, the
chief financial officer, the treasurer, any assistant treasurer, the
controller, the secretary, any assistant secretary or any vice-president
of such Person.
"Officer's Certificate" shall mean a certificate signed on behalf of
the Pledgor by an Officer of the Pledgor that meets the requirements of
Section 12.05 of the Indenture.
"Permitted Lien" shall mean: (1) Liens on assets (other than assets
that constitute Collateral) securing Indebtedness incurred pursuant to
clauses (b)(i) or (b)(xiii) of Section 4.09 of the Indenture; (2) Liens
securing the Notes; (3) Liens existing on the Issue Date; (4) Liens in
favor of the Pledgor; (5) Liens to secure Indebtedness of any Restricted
Subsidiaries; provided that the Indebtedness is permitted by the terms of
the Indenture to be incurred; (6) Liens on property of a Person existing
at the time such Person is merged with or into or consolidated with the
Pledgor or any Restricted Subsidiary of the Pledgor or otherwise becomes a
Restricted Subsidiary of the Pledgor; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation or
such Person becoming a Restricted Subsidiary of the Pledgor and do not
extend to any assets other than those of such Person; (7) Liens on
property existing at the time of acquisition of the property by the
Pledgor or any Restricted Subsidiary of the Pledgor; provided that such
Liens were not incurred in connection with such acquisition; (8) Liens to
secure Indebtedness (including Capital Lease Obligations) permitted by
clause (b)(iv) of Section 4.09 of the Indenture; (9) Liens securing
Permitted Refinancing Indebtedness incurred to refinance Indebtedness that
was previously so secured; provided that any such Lien is limited to all
or part of the same property or assets (plus improvements, accessions,
proceeds or distributions in respect thereof) that secured or, under the
written arrangements under which the original Lien arose, could secure the
Indebtedness being refinanced; (10) Liens securing Hedging Obligations so
long as the related Indebtedness is, and is permitted to be under the
Indenture, secured by a Lien on the same property securing such Hedging
Obligation; (11) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business; (12) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; provided that any reserve or
other appropriate provision as is required in conformity with GAAP has
been made therefor; (13) pledges or deposits by such Person under
workmen's compensation laws, unemployment insurance laws and other types
of social security or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Person is
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a party, or deposits to secure public or statutory obligations of such
Person or deposits of cash or United States government bonds to secure
surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import or customs duties or for the
payment of rent, in each case incurred in the ordinary course of business;
(14) Liens imposed by law, including carriers', warehousemen's and
mechanics' Liens, in each case for sums not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted; provided that any reserve or other
appropriate provision as is required in conformity with GAAP has been made
therefor; (15) Liens arising solely by virtue of any statutory or common
law provisions relating to banker's Liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with
a depositary institution; provided that (a) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions
against access by the Pledgor in excess of those set forth by regulations
promulgated by the Federal Reserve Board and (b) such deposit account is
not intended by the Pledgor or any Restricted Subsidiary to provide
collateral to the depositary institution; (16) easements, rights-of-way,
minor survey exceptions, zoning and similar restrictions and other similar
encumbrances or title defects incurred or imposed, which do not materially
interfere with the ordinary conduct of the Pledgor's business or the
business of its Subsidiaries; (17) judgment Liens not giving rise to an
Event of Default so long as such Liens are adequately bonded and any
appropriate legal proceedings that may have been duly initiated for the
review of such judgment have not been finally terminated or the period
within which such proceedings may be initiated has not expired; (18) Liens
incurred or deposits made in the ordinary course of business of the
Pledgor or any Restricted Subsidiary of the Pledgor with respect to
obligations that do not exceed $10.0 million at any one time outstanding;
(19) Liens consisting of any interest or title of a licensor in the
property subject to a license; (20) Liens arising from sales or other
transfers of accounts receivable in the ordinary course of business; and
(21) any extensions, substitutions, replacements or renewals of the
foregoing.
"Permitted Refinancing Indebtedness" shall mean any Indebtedness of
the Pledgor or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease
or refund other Indebtedness of the Pledgor or any of its Subsidiaries
(other than intercompany Indebtedness); provided that: (1) the principal
amount (or accreted value, if applicable), the principal component or
liquidation preference, as the case may be, of such Permitted Refinancing
Indebtedness does not exceed the principal amount (or accreted value, if
applicable), the principal component or liquidation preference, as the
case may be, of the Indebtedness extended, refinanced, renewed, replaced,
defeased or refunded (plus all accrued interest on the Indebtedness and
the amount of all expenses and premiums incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (3) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness is
subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (4) such Permitted Refinancing Indebtedness is
incurred either by (i) the Pledgor or (ii) by the Subsidiary that is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
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"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, limited-liability company or government or other entity.
"Pledged Stock" shall mean the shares of Capital Stock of the
Utility described on Annex A hereto, and any shares of Capital Stock of
the Utility at any time issued in respect of the Capital Stock described
on Annex A hereto.
"Pledge Agreements" shall mean, collectively, this Agreement and the
Utility Stock Protective Pledge Agreement.
"Pledgor" shall have the meaning set forth in the first paragraph
hereof.
"Proceeds" shall have the meaning given such term in the UCC.
"Reorganization Event" shall mean a merger of the Pledgor into an
Affiliate of the Pledgor; provided that either (a) (i) the Senior Secured
Obligations are secured on an equal and ratable basis with any senior
secured Indebtedness of such Affiliate at any time outstanding and (ii)
the Junior Secured Obligations, if any, are secured on junior basis on
substantially the same terms as this Agreement or (b) the Senior Secured
Obligations are rated Baa3 or better by Moody's and BBB- or better by
Standard & Poor's immediately after the consummation of such transaction.
"Required Secured Parties" shall mean, for the purposes of directing
the Collateral Agent with respect to actions taken pursuant to the Pledge
Agreements, (1) the Secured Parties holding (a) more than 50% of the
aggregate amount of the aggregate outstanding principal amount of the
Notes issued and outstanding under the Indenture, if any, (b) more than
50% of the aggregate amount of the aggregate outstanding principal amount
of any class or issuance of New Senior Secured Debt which the Pledgor has
designated, in a written notice to the Collateral Agent at the time of the
incurrence of such New Senior Secured Debt, as being entitled to the
benefits of this clause (b), if any, and (c) more than 50% of the
aggregate amount of the aggregate outstanding principal amount of all
other New Senior Secured Debt, if any, in each case, voting separately as
a class, until the indefeasible payment in full in cash of all Senior
Secured Obligations, (2) and thereafter, for the purposes of directing the
Collateral Agent with respect to actions taken pursuant to the Pledge
Agreements, the Secured Parties holding more than 50% of the aggregate
outstanding principal amount of the New Junior Secured Debt, if any. For
the avoidance of doubt, unless and until all Senior Secured Obligations
have been indefeasibly paid in full, no New Junior Secured Debt Holder
shall have any voting rights with respect to Section 7 hereof.
"Restricted Subsidiary" shall mean any Subsidiary of the Pledgor
that is not an Unrestricted Subsidiary.
"SEC" shall mean the Securities and Exchange Commission.
"Secured Debt Representatives" shall mean, collectively, each of the
Trustee, each New Senior Secured Debt Representative and each New Junior
Secured Debt Representative.
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"Secured Obligations" shall mean, collectively, the Existing Secured
Obligations and the Additional Secured Obligations.
"Secured Parties" shall have the meaning set forth in the first
paragraph hereto.
"Senior Secured Parties" shall have the meaning set forth in the
fourth recital hereof.
"Senior Secured Obligations" shall mean, collectively, the Existing
Secured Obligations and the New Senior Secured Obligations.
"Securities Act" shall mean the Securities Act of 1933, as amended
and as in effect from time to time.
"Spin-Off" shall mean the distribution of any business or businesses
of the Utility to the shareholders of the Pledgor, pursuant to a confirmed
plan of reorganization under Chapter 11 of Title 11 of the United States
Code.
"Standard & Poor's" shall mean Standard & Poor's Rating Service, a
division of McGraw Hill Inc., a New York corporation, or any successor
rating agency.
"State" shall mean the District of Columbia or any state of the
United States of America.
"Subsidiary" shall mean, with respect to any specified Person: (1)
any corporation, association or other business entity of which more than
50% of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees of the corporation, association or other
business entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of
that Person (or a combination thereof); and (2) any partnership (a) the
sole general partner or the managing general partner of which is such
Person or a Subsidiary of such Person or (b) the only general partners of
which are that Person or one or more Subsidiaries of that Person (or any
combination thereof).
"Trustee" shall have the meaning set forth in the first paragraph
hereof.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939 (15
U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which the
Indenture is qualified under the Trust Indenture Act.
"UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York from time to time.
"Unmatured Surviving Obligations" shall mean any obligation which is
contingent and unliquidated and not due and owing and which pursuant to
the provisions of the relevant Debt Document survives termination of such
Debt Document.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Pledgor
that is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a board resolution, but only to the extent that such
Subsidiary: (1) has no Indebtedness other than Non-Recourse
11
Debt; (2) is not party to any agreement, contract, arrangement or
understanding with the Pledgor or any Restricted Subsidiary of the Pledgor
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Pledgor or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Pledgor; (3) is a Person with respect to which
neither the Pledgor nor any of its Restricted Subsidiaries has any direct
or indirect obligation (a) to subscribe for additional Equity Interests or
(b) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results; (4) has
not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Pledgor or any of its Restricted Subsidiaries;
and (5) has at least one director on its Board of Directors that is not a
director or executive officer of the Pledgor or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of the Pledgor or any of its Restricted Subsidiaries.
Notwithstanding the foregoing, each of the Utility and NEG, and each of
their respective direct and indirect Subsidiaries shall be deemed to be
Unrestricted Subsidiaries, unless the Pledgor designates one or more of
them as Restricted Subsidiaries in accordance with the terms set forth in
the Indenture. Any designation of a Subsidiary of the Pledgor as an
Unrestricted Subsidiary will be evidenced to the Trustee by filing with
the Trustee a certified copy of a resolution of the Board of Directors
giving effect to such designation and an Officer's Certificate certifying
that such designation complied with the preceding conditions and was
permitted pursuant to Sections 4.07 and 4.17 of the Indenture. If, at any
time, any Unrestricted Subsidiary, other than the Utility or NEG, and each
of their respective direct and indirect Subsidiaries, would fail to meet
the preceding requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Pledgor as of such date and, if
such Indebtedness is not permitted to be incurred as of such date under
Section 4.09 of the Indenture, the Pledgor will be in default of such
covenant. The Board of Directors of the Pledgor may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that
such designation will be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Pledgor of any outstanding Indebtedness of
such Unrestricted Subsidiary and such designation will only be permitted
if (1) such Indebtedness is permitted under Section 4.09 of the Indenture,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default would
be in existence following such designation.
"Utility" shall have the meaning set forth in the third recital
hereto.
"Utility Protective Stock Pledge Agreement" shall mean the Utility
Protective Stock Pledge Agreement, dated as of the date hereof and as
amended, restated, supplemented or otherwise modified from time to time,
among the parties hereto, pursuant to which 65% of the common stock of the
Utility owned by the Pledgor is being pledged to secure the Secured
Obligations.
"Voting Stock" of any Person as of any date shall mean the Capital
Stock of such Person that is at the time entitled to vote in the election
of the Board of Directors of such Person.
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"Weighted Average Life to Maturity" shall mean, when applied to any
Indebtedness or Disqualified Stock at any date, the number of years
obtained by dividing: (1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund, serial
maturity or other required payments of principal, including payment at
final maturity, in respect of the Indebtedness or redemption or similar
payment in respect of the Disqualified Stock by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date
and the making of such payment; by (2) the then outstanding principal
amount of such Indebtedness or principal component or liquidation
preference of such Disqualified Stock, as the case may be.
1.3 Rules of Interpretation. Unless the context otherwise requires:
(a) a term has the meaning assigned to it; (b) an accounting term not otherwise
defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not
exclusive; (d) words in the singular include the plural, and in the plural
include the singular; (e) provisions apply to successive events and
transactions; and (f) references to sections of, or rules under, the Securities
Act will be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
2. SECURITY FOR OBLIGATIONS; PRIORITY.
2.1 Senior Secured Obligations. This Agreement is made by the
Pledgor for the benefit of the Collateral Agent, acting for the benefit of the
Senior Secured Parties (as more particularly described in Section 3.1), to
secure the full and prompt payment when due (whether at stated maturity, by
acceleration or otherwise) of all Senior Secured Obligations; provided, however,
that the pledge made and security interest granted in Section 3.1 and any other
provisions of this Agreement shall be effective as to any obligations in respect
of any New Senior Secured Debt Documents only if the New Senior Secured Debt
Holders or the New Senior Secured Debt Representative shall have executed and
delivered to the Collateral Agent a counterpart of this Agreement or an
acknowledgment to this Agreement acknowledged by the Collateral Agent in the
form attached hereto as Exhibit 1.
2.2 Additional Junior Obligations. This Agreement is made by the
Pledgor for the benefit of the Collateral Agent, acting for the benefit of the
New Junior Secured Debt Holders, if any, (as more particularly described in
Section 3.2), to secure the full and prompt payment when due (whether at stated
maturity, by acceleration or otherwise) of all New Junior Secured Obligations;
provided, however, that the pledge made and security interest granted in Section
3.1 and any other provisions of this Agreement shall be effective as to any
obligations in respect of any New Junior Secured Debt Documents only if the New
Junior Secured Debt Holders or the New Junior Secured Debt Representative shall
have executed and delivered to the Collateral Agent a counterpart of this
Agreement or an acknowledgment to this Agreement acknowledged by the Collateral
Agent in the form attached hereto as Exhibit 1.
2.3 Rights in Collateral. Notwithstanding anything to the contrary
contained in any Debt Document, and irrespective of: (a) the time, order or
method of attachment or perfection of the security interests created hereby; (b)
the time, order or filing or recording of financing statements or other
documents filed or recorded to perfect security interests in any Collateral; and
(c) the rules for determining priority under the UCC or any other Law or rule
governing the relative priorities of secured creditors, (i) any security
interest in any Collateral heretofore or hereafter granted to secure any Senior
Secured Obligation shall be secured on an equal and ratable basis and (ii) any
security
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interest in any Collateral heretofore or hereafter granted to secure any Senior
Secured Obligation has and shall have priority, to the extent of any unpaid
Senior Secured Obligations, over any security interest in such Collateral
granted to secure the New Junior Secured Obligation.
3. PLEDGE OF PLEDGED STOCK, ETC.
3.1 Senior Pledge. (a) The Pledgor hereby transfers, pledges and
assigns to the Collateral Agent, and grants to the Collateral Agent for the
ratable benefit of the Senior Secured Parties, a first priority security
interest in, all of the right, title and interest of the Pledgor in and to the
following, whether now existing or hereafter from time to time acquired by the
Pledgor (collectively, the "Collateral"):
(i) the Pledged Stock;
(ii) all other property hereafter delivered in substitution
for any of the Pledged Stock, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, distributions, rights and other property at any time
and from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof (including, without
limitation, any Newco Stock distributed to the Pledgor in respect of the
Pledged Stock); and
(iii) all Proceeds of any and all of the foregoing.
(b) The foregoing transfer, pledge, assignment and grant of a
security interest is made to secure the prompt and complete payment and
performance when due of the Senior Secured Obligations.
3.2 Junior Pledge. The Pledgor hereby transfers, pledges and assigns
to the Collateral Agent, and grants to the Collateral Agent for the ratable
benefit of the New Junior Secured Debt Holders, if any, a second priority
security interest in the Collateral. The foregoing transfer, pledge, assignment
and grant of a security interest is made to secure the prompt and complete
payment and performance when due of the New Junior Secured Obligations, if any.
3.3 Protective Pledge Agreement. Concurrently herewith, the parties
hereto are entering into the Utility Stock Protective Pledge Agreement, covering
collateral that is separate and distinct from the Collateral. It is the
intention of the parties hereto and thereto that the security interest and lien
created hereby shall be a separate security interest and lien from those created
by the Utility Stock Protective Pledge Agreement.
3.4 Procedures. (a) To the extent that the Pledgor at any time or
from time to time owns, acquires or obtains any right, title or interest in any
Collateral, such Collateral shall automatically (and without the taking of any
action by the Pledgor) be pledged pursuant to Section 3.1 and Section 3.2 of
this Agreement and, in addition thereto, the Pledgor shall (as promptly as
practicable and, in any event, within ten days after it obtains such Collateral)
deliver to the Collateral Agent any stock certificates evidencing such
Collateral, duly endorsed in blank, and take such other actions as the
Collateral Agent shall reasonably request to perfect the Collateral Agent's
security interest in such Collateral.
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(b) In addition to the actions required to be taken pursuant to
Section 3.4(a) hereof, the Pledgor shall from time to time, at the sole expense
of the Pledgor, cause appropriate financing statements (on Form UCC-1 or other
appropriate form) under the Uniform Commercial Code as in effect in the various
relevant States, in form covering all Collateral hereunder (with the form of
such financing statements to be reasonably satisfactory to the Collateral
Agent), to be filed in the relevant filing offices so that at all times the
Collateral Agent has a security interest in all Collateral which is perfected by
the filing of such financing statements (in each case to the maximum extent
perfection by filing may be obtained under the laws of any relevant State).
3.5 Subsequently Acquired Collateral. If the Pledgor shall acquire
(by purchase, dividend or similar distribution or otherwise) any additional
Collateral at any time or from time to time after the date hereof, such
Collateral shall automatically (and without any further action being required to
be taken) be subject to the pledge and security interests created pursuant to
Section 3.1 and Section 3.2 hereof and, furthermore, the Pledgor will promptly
thereafter take (or cause to be taken) all action with respect to such
Collateral in accordance with the procedures set forth in Section 3.4 hereof,
and will promptly thereafter deliver to the Collateral Agent (i) a certificate
executed by a principal executive officer of the Pledgor describing such
Collateral and certifying that the same has been duly pledged in favor of the
Collateral Agent (for the benefit of the Secured Parties) hereunder and (ii)
supplements to Annex A and Annex B hereto as are reasonably necessary to cause
such annexes to be complete and accurate at such time.
3.6 Transfer Taxes. Each pledge of Collateral under Section 3.1 and
Section 3.2 hereof shall be accompanied by any transfer tax stamps required in
connection with the pledge of such Collateral.
3.7 Certain Representations and Warranties Regarding the Collateral.
The Pledgor represents and warrants that on the date hereof (i) the Pledged
Stock consists of the number and type of shares described in Annex A hereto;
(ii) the Pledged Stock constitutes that percentage of the issued and outstanding
common stock of the Utility as is set forth in Annex A hereto; and (iii) the
Pledgor has complied with the respective procedures set forth in Sections 3.4
hereof with respect to each item of Collateral hereunder.
4. APPOINTMENT OF SUBAGENTS; ENDORSEMENTS, ETC. If and to the extent
necessary to enable the Collateral Agent to perfect its security interest in any
of the Collateral or to exercise any of its remedies hereunder, the Collateral
Agent shall have the right to appoint one or more subagents for the purpose of
retaining physical possession of the Collateral, which may be held in the name
of the Pledgor, endorsed or assigned in blank or in favor of the Collateral
Agent or any nominee or nominees of the Collateral Agent or a subagent appointed
by the Collateral Agent.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until there
shall have occurred and be continuing an Event of Default, the Pledgor shall be
entitled to exercise any and all voting and other consensual rights pertaining
to the Collateral owned by it, and to give consents, waivers or ratifications in
respect thereof.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. All cash dividends, cash
distributions, cash Proceeds and other cash amounts payable in respect of the
Collateral (other than proceeds of any foreclosure in respect of the Collateral
pursuant to Section 7 hereof, which proceeds shall be distributed and applied as
provided in Section 9 hereof) shall be received (a) by the Pledgor,
15
if no Event of Default shall have occurred and be continuing and (b) by
the Collateral Agent, if any Event of Default shall have occurred and be
continuing for application toward the payment of the Secured Obligations
as provided for in Section 9. The Collateral Agent shall also be entitled
to receive directly, and to retain as part of the Collateral:
(i) all other or additional capital stock or other property
(including, but not limited to, cash dividends other than as set forth
above) paid or distributed by way of dividend or otherwise in respect of
the Collateral;
(ii) all other or additional capital stock or other property
paid or distributed in respect of the Collateral by way of split,
spin-off, split-up, reclassification, combination or similar
rearrangement;
(iii) all other or additional capital stock or other property
(including, but not limited to, cash) which may be paid in respect of the
Collateral by reason of any consolidation, merger, exchange, conveyance of
assets, liquidation or similar reorganization; and
(iv) without limiting the generality of the foregoing, all
shares of Newco Stock distributed in respect of the Collateral.
Nothing contained in this Section 6 shall limit or restrict in any
way the Collateral Agent's right to have pledged to it Proceeds of the
Collateral in any form in accordance with Section 3 of this Agreement. All
dividends, distributions or other payments which are received by the Pledgor
contrary to the provisions of this Section 6 and Section 7 hereof shall be
received in trust for the benefit of the Collateral Agent, shall be segregated
from other property or funds of the Pledgor and shall be forthwith paid over to
the Collateral Agent as Collateral in the same form as so received (with any
necessary endorsement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT.
7.1 Certain Remedies. Subject to Section 7.2 and Section 7.3, if
there shall have occurred and be continuing an Event of Default, the Collateral
Agent shall be entitled to exercise all of the rights, powers and remedies
(whether vested in it by the Pledge Agreements, any other Debt Document or by
law) for the protection and enforcement of its rights in respect of the
Collateral, and the Collateral Agent shall be entitled to exercise all the
rights and remedies of a secured party under the Uniform Commercial Code as in
effect in any relevant jurisdiction and also shall be entitled, without
limitation, to exercise the following rights:
(a) to receive all amounts payable in respect of the Collateral;
(b) upon receipt of all requisite Governmental Approvals, to
transfer all or any part of the Collateral into the Collateral Agent's name or
the name of its nominee or nominees;
(c) upon receipt of all requisite Governmental Approvals, to vote
all or any part of the Collateral (whether or not transferred into the name of
the Collateral Agent) and give all consents, waivers and ratifications in
respect of the Collateral and otherwise act with respect thereto as though it
were the outright owner thereof (the Pledgor hereby irrevocably constituting and
16
appointing the Collateral Agent the proxy and attorney-in-fact of the Pledgor,
with full power of substitution to do so) and to exercise any and all of the
rights or powers of the Pledgor in its capacity as a stockholder of the Utility;
(d) at any time and from time to time to sell, assign and deliver,
or grant options to purchase, all or any part of the Collateral, or any interest
therein, at any public or private sale, without demand of performance,
advertisement or notice of intention to sell or of the time or place of sale or
adjournment thereof or to redeem or otherwise (all of which are hereby waived by
the Pledgor to the extent permitted by applicable Law), for cash, on credit or
for other property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the Collateral
Agent in its absolute discretion may determine, in each case, to the extent
permitted by applicable Law. The Collateral Agent shall not be obligated to make
any such sale of Collateral regardless of whether any notice of sale has
theretofore been given. The Pledgor hereby waives and releases to the fullest
extent permitted by Law any right or equity of redemption with respect to the
Collateral, whether before or after sale hereunder (other than the right to pay
the Secured Obligations in full), and all rights, if any, of marshalling the
Collateral and any other security for the Secured Obligations or otherwise. At
any such sale, to the extent permitted by applicable Law, the Collateral Agent
may bid for and purchase all or any part of the Collateral so sold free from any
such right or equity of redemption. The Collateral Agent shall not be liable for
failure to collect or realize upon any or all of the Collateral or for any delay
in so doing nor shall any of them be under any obligation to take any action
whatsoever with regard thereto. The Collateral Agent shall incur no liability as
a result of the sale of the Collateral or any part thereof at any sale pursuant
to this Section 7.1 conducted in a commercially reasonable manner. Each of the
Pledgor, the Secured Debt Representatives and the Secured Parties hereby waives
any claims against the Collateral Agent arising by reason of the fact that the
price at which the Collateral may have been sold at such sale was less than the
price that might have been obtained; and
(e) to set off any and all Collateral against any and all Secured
Obligations and to apply such Collateral to the payment of any and all Secured
Obligations.
If, pursuant to applicable Law, prior notice of any of the foregoing
actions is required to be given to the Collateral Agent, the Collateral Agent
hereby acknowledges that the minimum time required by such applicable Law, or if
no minimum is specified, ten days, shall be deemed a reasonable notice period.
7.2 Decisions Relating to Exercise of Remedies. (a) If there shall
have occurred and be continuing an Event of Default, the Collateral Agent agrees
to make such demands and give such notices under this Agreement as the
appropriate Secured Debt Representative or Secured Debt Representatives, as the
case may be, acting on behalf of the Required Secured Parties, may request in
writing, and to take such action to enforce this Agreement and to foreclose
upon, collect and dispose of the Collateral or any portion thereof as may be
directed in writing by the appropriate Secured Debt Representative or Secured
Debt Representatives, as the case may be, acting on behalf of the Required
Secured Parties.
(b) Each Secured Party executing this Agreement or an acknowledgment
hereto agrees that (i) the Collateral Agent may act as the Required Secured
Parties may request (regardless of whether any Secured Party or any holder
represented thereby agrees, disagrees or abstains with respect to such request),
(ii) the Collateral Agent shall have no liability for acting in accordance with
17
such request and (iii) no Secured Party or any holder presented thereby shall
have any liability to any other Secured Party or any holder represented thereby
for any such request. The Collateral Agent shall give prompt notice to each
Secured Debt Representative of actions taken pursuant to the instructions of the
Required Secured Parties; provided, however, that the failure to give any such
notice shall not impair the right of the Collateral Agent to take any such
action or the validity or enforceability under this Agreement of the action so
taken.
(c) Each Secured Party agrees that unless and until such Secured
Party is entitled to give direction to the Collateral Agent pursuant to Section
7.2(a), the only rights of such Secured Party under this Agreement shall be to
be secured by the Collateral and to receive payments provided for in Section 9
hereof.
7.3 Limitation on Exercise of Remedies. Notwithstanding anything in
this Agreement to the contrary, the Collateral Agent shall not exercise any
remedy provided for in this Section 7 for the purpose of realizing value on the
Collateral to be applied to the payment of the New Junior Secured Obligations
unless (a) such remedy is concurrently being exercised for the purpose of
realizing value on the Collateral to be applied to the payment of the Senior
Secured Obligations or (b) all the Senior Secured Obligations (other than
Unmatured Surviving Obligations) shall have been indefeasibly paid in full.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and
remedy of the Collateral Agent provided for in this Agreement or in any other
Debt Document, or now or hereafter existing at law or in equity or by statute
shall be cumulative and concurrent and shall be in addition to every other such
right, power or remedy. The exercise or beginning of the exercise by the
Collateral Agent of any one or more of the rights, powers or remedies provided
for in this Agreement or any other Debt Document or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by the Collateral Agent of all such other rights, powers or
remedies, and no failure or delay on the part of the Collateral Agent to
exercise any such right, power or remedy shall operate as a waiver thereof. No
notice to or demand on the Pledgor in any case shall entitle it to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of any of the rights of the Collateral Agent to any other or further
action in any circumstances without notice or demand.
9. APPLICATION OF PROCEEDS. All monies collected by the Collateral
Agent upon any sale or other disposition of the Collateral pursuant to the terms
of this Agreement, together with all other monies received by the Collateral
Agent hereunder, shall be applied for satisfaction of the Secured Obligations as
follows:
First, to the payment of the costs and expenses of such sale,
collective or other realization, including reasonable compensation to the
Collateral Agent and its agents and counsel, and all expenses, liabilities
and advances made or incurred by the Collateral Agent in connection
therewith;
Second, to the payment of the Senior Secured Obligations for the
ratable benefit of the Senior Secured Parties, if any;
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Third, only after the payment in full of all Senior Secured
Obligations (other than Unmatured Surviving Obligations), to the payment
of the New Junior Secured Obligations for the ratable benefit of the New
Junior Secured Debt Holders, if any; and
Fourth, after the payment in full of all Secured Obligations (other
than Unmatured Surviving Obligations), to the Pledgor, or its successors
or assigns, or to whomsoever may be lawfully entitled to receive the same
or as a court of competent jurisdiction may direct, of any surplus then
remaining from such Proceeds.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Collateral Agent hereunder (whether by virtue of the power of sale herein
granted, pursuant to judicial process or otherwise), the receipt given by the
Collateral Agent or the officer making the sale shall be a sufficient discharge
to the purchaser or purchasers of the Collateral so sold, and such purchaser or
purchasers shall not be obligated to see to the application of any part of the
purchase money paid over to the Collateral Agent or such officer or be
answerable in any way for the misapplication or nonapplication thereof.
11. CERTAIN LIMITATIONS (a) The Collateral Agent shall not be
obligated to perform or discharge any obligation of the Pledgor as a result of
the pledge hereby effected.
(b) The acceptance by the Collateral Agent of this Agreement, with
all the rights, powers, privileges and authority so created, shall not at any
time or in any event obligate the Collateral Agent to appear in or defend any
action or proceeding relating to the Collateral to which it is not a party, or
to take any action hereunder or thereunder, or to expend any money or incur any
expenses or perform or discharge any obligation, duty or liability under the
Collateral.
(c) Nothing in this Agreement shall obligate the Pledgor to sell or
otherwise dispose of the Pledged Stock or any shares of Newco Stock that may
become Collateral hereunder during the continuance of an Event of Default or
otherwise.
12. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) At any time and from
time to time, upon the written request of the Collateral Agent, and at the sole
expense of the Pledgor, the Pledgor will promptly and duly execute and deliver
any and all such further instruments and documents and take such further action
as the Collateral Agent reasonably may deem appropriate in order to perfect and
preserve the Collateral Agent's security interest in the Collateral and in order
for the Collateral Agent to obtain the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the Uniform Commercial Code in
effect in any jurisdiction and the filing of any other equivalent or similar
statement or document under any other applicable Law with any other applicable
Governmental Authority with respect to the security interests granted hereby.
The Pledgor also hereby authorizes the Collateral Agent to file any such
financing or continuation statement without the signature of the Pledgor to the
extent permitted by applicable Law. If any amount payable under or in connection
with any of the Collateral shall be or become evidenced by any promissory note
or other instrument, such note or instrument shall be immediately delivered to
the Collateral Agent and pledged to the Collateral Agent hereunder, duly
endorsed, to the extent necessary, to the Collateral Agent.
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(b)The Pledgor hereby appoints the Collateral Agent such Pledgor's
attorney-in-fact, with full authority in the place and stead of the Pledgor and
in the name of the Pledgor or otherwise, to act from time to time, solely after
the occurrence and during the continuance of an Event of Default, in the
Collateral Agent's reasonable discretion to take any action and to execute any
instrument which the Collateral Agent may deem reasonably necessary or advisable
to accomplish the purposes of this Agreement.
13. TRANSFER BY THE PLEDGOR. The Pledgor will not sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except as may be
permitted in accordance with the terms of the Debt Documents).
14. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. i) The
Pledgor represents, warrants and covenants that:
(i) it is the legal, beneficial and record owner of, and has
good and valid title to, all Collateral consisting of Pledged Stock and it
has all rights in the Collateral necessary for the security interest
purported to be created hereunder to attach (subject, in each case, to no
pledge, lien, security interest, charge, option or other encumbrance
whatsoever, except the liens and security interests created by this
Agreement);
(ii) it has full power, authority and legal right to pledge
all the Collateral pledged by it pursuant to this Agreement;
(iii) this Agreement has been duly authorized, executed and
delivered by the Pledgor and constitutes a legal, valid and binding
obligation of the Pledgor enforceable against the Pledgor in accordance
with its terms, except to the extent that the enforceability hereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws generally affecting creditors' rights and by
equitable principles (regardless of whether enforcement is sought in
equity or at law);
(iv) except to the extent already obtained or made, no consent
of any other party (including, without limitation, any stockholder or
creditor of the Pledgor or the Utility) and no consent, license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any Governmental Authority is
required to be obtained by the Pledgor in connection with (a) the
execution, delivery or performance of this Agreement, (b) the validity or
enforceability of this Agreement, (c) the perfection or enforceability of
the Collateral Agent's security interest in the Collateral or (d) except
for compliance with or as may be required by applicable securities laws,
the exercise by the Collateral Agent of any of its rights or remedies
provided herein; provided, that any Person acquiring the voting securities
of the Utility or Newco may require prior approval from one or more
Governmental Authorities having jurisdiction over public utilities.
(v) the execution, delivery and performance of this Agreement
will not violate any provision of any applicable Law or regulation or of
any order, judgment, writ, award or decree of any court, arbitrator or
Governmental Authority, domestic or foreign, applicable to the Pledgor, or
of the certificate of incorporation, operating agreement, limited
liability company agreement, partnership agreement or by-laws of the
Pledgor or the Utility
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or of any securities or other interests issued by the Pledgor or the
Utility, or of any mortgage, deed of trust, indenture, lease, loan
agreement, credit agreement or other material contract, agreement or
instrument or undertaking to which the Pledgor or the Utility is a party
or by which any of its assets may be bound and will not result in the
creation or imposition of (or the obligation to create or impose) any lien
or encumbrance on any of the assets of the Pledgor or the Utility except
as contemplated by this Agreement;
(vi) all of the Collateral consisting of Pledged Stock has
been duly and validly issued and acquired, is fully paid and
non-assessable and is subject to no options to purchase or similar rights;
and
(vii) the pledge and collateral assignment to the Collateral
Agent of the Collateral consisting of Pledged Stock, together with
continued possession by the Collateral Agent of any certificates,
instruments, documents or other writings evidencing the Pledged Stock
and/or the making of relevant filings or recordings and/or any other
action required to be taken in accordance with Section 3.4 (all of which
have been made or taken, as the case may be), creates in favor of the
Collateral Agent a valid and perfected first and second priority security
interest in such Collateral, and the proceeds thereof, subject to no prior
Lien or encumbrance (other than any Permitted Lien that is a
non-consensual lien arising by operation of law) or to any agreement
purporting to grant to any third party a Lien or encumbrance (other than
any Permitted Lien that is a non-consensual lien arising by operation of
law) on the property or assets of the Pledgor which would include the
Pledged Stock and the Collateral Agent is entitled to all the rights,
priorities and benefits afforded by the Uniform Commercial Code or other
relevant Law as enacted in any relevant jurisdiction to perfected security
interests in respect of such Collateral.
(b) The Pledgor covenants and agrees that it will defend the
Collateral Agent's right, title and security interest in and to the Collateral
and the proceeds thereof against the claims and demands of all persons
whomsoever; and the Pledgor covenants and agrees that it will have like title to
and right to pledge any other property at any time hereafter pledged to the
Collateral Agent as Collateral hereunder and will likewise defend the right
thereto and security interest therein of the Collateral Agent.
15. JURISDICTION OF ORGANIZATION; NAME. The Pledgor's name,
jurisdiction of organization and identification number are set forth in Annex B
hereto. The Pledgor will not change its name or its jurisdiction of
organization, except upon fifteen days' prior written notice to the Collateral
Agent and delivery to the Collateral Agent of all additional executed financing
statements and other documents reasonably requested by the Collateral Agent to
maintain the validity, perfection and priority of the security interests
provided for herein.
16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of the
Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever (except as provided under Section 18), including, without
limitation: (i) any renewal, extension, amendment or modification of or addition
or supplement to or deletion from any Debt Document or any other instrument or
agree referred to therein, or any assignment or transfer of any thereof; (ii)
any waiver, consent, extension, indulgence or other action or inaction under or
in respect of any such agreement or instrument
21
including, without limitation, this Agreement; (iii) any furnishing of any
additional security to the Collateral Agent or its assignee or any acceptance
thereof or any release of any security by the Collateral Agent or its assignee
(except as provided under Section 18); (iv) any limitation on any party's
liability or obligations under any such instrument or agreement or any
invalidity or unenforceability, in whole or in part, of any such instrument or
agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to the Pledgor or the Utility, or any action taken with
respect to this Agreement by any trustee or receiver, or by any court, in any
such proceeding, whether or not the Pledgor shall have notice or knowledge of
any of the foregoing.
17. REGISTRATION, ETC. ii) If there shall have occurred and be
continuing an Event of Default, then upon receipt by the Pledgor from the
Collateral Agent of a written request or requests that the Pledgor cause any
registration, qualification or compliance under any Federal or state securities
law or laws to be effected with respect to all or any part of the Collateral
consisting of Pledged Stock, the Pledgor as soon as practicable and at its
expense will use its commercially reasonable best efforts to cause such
registration to be effective (and be kept effective) and will use its
commercially reasonable best efforts to cause such qualification and compliance
to be declared effective (and be kept effective) as may be so requested if such
registration, qualification or compliance is necessary to permit or facilitate
the sale and distribution of such Collateral, including, without limitation,
registration under the Securities Act, as then in effect (or any similar statute
then in effect), appropriate qualifications under applicable blue sky or other
state securities laws and appropriate compliance with any other government
requirements, provided, that (i) the Collateral Agent shall furnish to the
Pledgor such information regarding the Collateral Agent as the Pledgor may
reasonably request in writing and as shall be required in connection with any
such registration, qualification or compliance, (ii) the Pledgor shall not be
required file or cause such registration statement, qualification or to become
effective if such registration statement or qualification is not permissible
under applicable law or SEC policy or the Pledgor is not able to comply, after
exercising its commercially reasonable best efforts, with the requirements of
the Securities Act or SEC policy with respect to such registration statement,
and (iii) the Pledgor shall not be required to register or qualify as a foreign
corporation, in each case, if that would subject it to the service of process in
suits or to taxation in any jurisdiction where it is not now so subject. The
Pledgor will cause the Collateral Agent to be kept advised in writing as to the
progress of each such registration, qualification or compliance and as to the
completion thereof, will furnish to the Collateral Agent such number of
prospectuses, offering circulars or other documents incident thereto as the
Collateral Agent from time to time may reasonably request, and will indemnify
the Collateral Agent and all others participating in the distribution of such
Collateral against all claims, losses, damages and liabilities caused by any
untrue statement (or alleged untrue statement) of a material fact contained
therein (or in any related registration statement, notification or the like) or
by any omission (or alleged omission) to state therein (or in any related
registration statement, notification or the like) a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same may have been caused by an untrue statement or
omission based upon information furnished in writing to the Pledgor by the
Collateral Agent expressly for use therein.
(b) If at any time when the Collateral Agent shall determine to
exercise its right to sell all or any part of the Collateral consisting of
Pledged Stock pursuant to Section 7 hereof, and the Collateral or the part
thereof to be sold shall not, for any reason whatsoever, be effectively
registered under the Securities Act, as then in effect, the Collateral Agent may
sell such Collateral or part thereof, as the case may be, by private sale in
such manner and under such circumstances as the
22
Collateral Agent may deem necessary or reasonably advisable in order that such
sale may legally be effected without such registration. Without limiting the
generality of the foregoing, in any event the Collateral Agent (i) may proceed
to make such private sale notwithstanding that a registration statement for the
purpose of registering such Collateral or part thereof shall not have been filed
under such Securities Act, (ii) may approach and negotiate with a single
possible purchaser to effect such sale, and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Collateral or part thereof. In the event of any such sale, the Collateral
Agent shall incur no responsibility or liability, except to the extent incurred
by reason of its gross negligence, bad faith or willful misconduct, for selling
all or any part of the Collateral at a price which the Collateral Agent, in its
sole and absolute discretion, deems reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might have
been realized if the sale were deferred until after registration as aforesaid.
18. TERMINATION; RELEASE.
18.1 General. After payment in full of the Secured Obligations
(other than Unmatured Surviving Obligations) and the termination of the Debt
Documents, this Agreement and the security interest created hereby shall
terminate, and the Collateral Agent, at the written request and expense of the
Pledgor, will execute and deliver to the Pledgor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to the Pledgor (without recourse and
without any representation or warranty) such of the Collateral as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any monies at the time held by the Collateral Agent or
any of its sub-agents hereunder.
18.2 Release of the Collateral. iii) The security interest created
hereby for the benefit of the Noteholders shall be released in whole, (1) upon
payment in full of the principal of, accrued and unpaid interest and premium and
Additional Interest, if any, on the Notes and payment in full of all other
obligations related thereto due and payable at or prior to the time such
principal, accrued and unpaid interest and premium and Additional Interest, if
any, are paid and (2) upon satisfaction and discharge of the Indenture or (3)
upon a legal defeasance or covenant defeasance as set forth in Section 8.02 and
Section 8.03 of the Indenture, respectively.
(b) The security interest created hereby for the benefit of the
Additional Debt Holders shall be released, in whole, as provided for in the
relevant New Senior Secured Debt Document or New Junior Secured Debt Document,
as the case may be.
18.3 Release of Collateral with Respect to Notes and New Secured
Debt. The security interest created hereby for the benefit of the Secured
Parties shall be released iv) in part, as to any property constituting
Collateral that is sold or otherwise disposed of by the Pledgor in a transaction
permitted by the Indenture, the Pledge Agreements and the then existing New Debt
Documents, if any, at the time of such sale or disposition, to the extent of the
interest sold or disposed of; v) if such Collateral is the Capital Stock of the
Utility which is being distributed, transferred or otherwise disposed of in
connection with the Spin Off, then on the date necessary to permit the Pledgor
to distribute, transfer or otherwise dispose of such Capital Stock free and
clear of any Lien under this Agreement so long as prior to such date: (1) the
Newco Stock has been distributed to the Pledgor, and (2) the Pledgor has made
all filings or recordings and/or taken all
23
other action required to be taken in accordance with Section 3.4 with respect to
the Newco Stock; vi) if such Collateral constitutes all or substantially all of
the Collateral, with the consent of at least (1) 66 2/3% in aggregate principal
amount of the Notes then outstanding, voting as a single class, (including,
without limitation, consents obtained in connection with a tender offer or
exchange offer for, or purchase of, the Notes), (2) the required amount of the
New Senior Secured Debt, if any, as provided for in the relevant New Senior Debt
Documents and (3) the required amount of the New Junior Secured Debt, if any, as
provided for in the relevant New Junior Secured Debt Documents, in each case,
voting separately as a class; vii) if such Collateral constitutes less than all
or substantially all of the Collateral, (1) with the consent of at least a
majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), (2) the required amount of the New Senior
Secured Debt, if any, as provided for in the relevant New Senior Secured Debt
Documents and (3) the required amount of the New Junior Secured Debt, if any, as
provided for in the relevant New Junior Secured Debt Documents, in each case,
voting separately as a class; or viii) upon the occurrence of a Reorganization
Event. For the avoidance of doubt, the release of the security interest with
respect to each class of Secured Debt, as provided for in the foregoing clauses
(c) and (d), shall require only the consent of the holders of that class of
Secured Debt with respect to which such security interest is being released.
19. NOTICES, ETC. All notices, requests, demands or other
communications hereunder shall be in writing and faxed, mailed or delivered, if
to the Pledgor or the Collateral Agent, at its respective facsimile number or
address set forth below or, if to any other Person, at the address or facsimile
number specified for such Person in the applicable Debt Document (or to such
other facsimile number or address for any party as indicated in any notice given
by that party to the other parties). All such notices and communications shall
be effective (i) when sent by an overnight courier service of recognized
standing, on the second Business Day following the deposit with such service;
(ii) when mailed, first class postage prepaid and addressed as aforesaid through
the United States Postal Service, upon receipt; (iii) when delivered by hand,
upon delivery; and (iv) when faxed, upon confirmation of receipt:
(a) If to the Pledgor, at:
PG&E Corporation
One Market, Spear Tower Suite 2400
San Francisco, CA 94105
Attention: Chief Counsel - Corporate
Tel.: (415) 817-8200
Fax.: (415) 817-8225
(b) If to the Collateral Agent, at:
Deutsche Bank Trust Company Americas
60 Wall Street
New York, NY 10005
Attention: Escrow Department
Tel: (212) 250-4660
Fax: (212) 797-8622
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with a copy to the Trustee at:
Bank One, N.A.
1 Bank One Plaza, Suite IL1-0595
Chicago, Illinois 60670
Attention: Janice Ott Rotunno
Tel: (312) 407-1682
Fax: (312) 336-8840
20. WAIVER; AMENDMENT.
20.1 General. None of the terms and conditions of this Agreement may
be changed, waived, modified or varied in any manner whatsoever unless in
writing duly signed by the Pledgor and the Collateral Agent.
20.2 Amendment Adverse to the Senior Secured Debt Holders. Any
amendment to, or waiver of, the provisions of this Agreement in any manner (a)
that adversely affects the rights of the Senior Secured Parties, if any, or (b)
that releases any of the Collateral from the Liens under this Agreement (in each
case, other than in accordance with the terms hereof,) shall require the consent
of (i) the Noteholders of at least 66 2/3% of the aggregate principal amount of
Notes then outstanding, if any, and (ii) the New Senior Secured Debt Holders, if
any, of the required amount of the New Senior Secured Debt, as provided for in
the relevant New Senior Secured Debt Documents, in each case, voting separately
as a class; provided, however, that such consent shall not be required if the
Senior Secured Obligations (other than Unmatured Surviving Obligations) have
been indefeasibly paid in full.
20.3 Amendment Adverse to the New Junior Secured Debt Holders. In
addition to any requirements set forth in this Section 20, any amendment to, or
waiver of, the provisions of this Agreement in any manner (a) that adversely
affects the rights of the Junior Secured Debt Holders, if any, or (b) that
releases any of the Collateral from the Liens under this Agreement (in each
case, other than in accordance with the terms hereof) shall require, the consent
of the New Junior Secured Debt Holders, if any, of the required amount of the
New Junior Secured Debt, as provided for in the relevant New Junior Secured Debt
Documents; provided, however, that such consent shall not be required if the New
Junior Secured Obligations (other than Unmatured Surviving Obligations) have
been indefeasibly paid in full.
20.4 Amendment to Cure Defect, Etc. Notwithstanding the requirements
set forth in Section 20.2 and Section 20.3, the Pledgor and the Collateral Agent
may amend or supplement this Agreement without the consent of any Noteholder or
any Additional Debt Holder: (i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for the assumption of the Pledgor's obligations to the
Noteholders and the Additional Debt Holders, as the case may be, in the case of
a merger or consolidation or sale of all or substantially all of the Pledgor's
assets; (iii) to make any change that would provide any additional rights or
benefits to the Secured Parties or that does not adversely affect the legal
rights under the Indenture, any New Senior Debt Document or any New Junior Debt
Document, as the case may be, of any such Secured Party; or (iv) to comply with
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
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21. NEW SECURED DEBT. At any time when the Pledgor desires to secure
any Indebtedness that is permitted by the Indenture to share in the security
interest granted under this Agreement, the Pledgor shall execute and deliver (or
cause to be executed and delivered) (a) all such documents (including, without
limitation, any amendments or supplements to this Agreement) as the Collateral
Agent and the Pledgor shall reasonably agree are necessary to appoint the
Collateral Agent as collateral agent hereunder with respect to such Indebtedness
and otherwise to effectuate the inclusion of the relevant Indebtedness as New
Secured Debt hereunder (which documents shall include, without limitation, a
notification of the Collateral Agent and the Trustee in respect of such New
Secured Debt substantially in the form attached hereto as Exhibit 2) and (b) all
other documents that the holder of such Indebtedness shall deem necessary or
desirable in connection with the creation and perfection of such security
interests, provided that such documentation is reasonably acceptable to the
Collateral Agent and the Pledgor.
22. COLLATERAL AGENT.
22.1 Appointment. Each Secured Party hereby appoints, designates and
authorizes the Collateral Agent to take such action on its behalf under the
provisions of the Pledge Agreements and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of any such Pledge
Agreement, together with such powers as are reasonably incidental thereto. Each
Secured Party authorizes the Collateral Agent to execute, deliver and perform
each of the Pledge Agreements and such Secured Party agrees to be bound by all
of the agreements of the Collateral Agent contained in the Pledge Agreements.
Notwithstanding any provision to the contrary contained in the Pledge
Agreements, the Collateral Agent shall not have any duties or responsibilities
except those expressly set forth in the Pledge Agreements, and the Collateral
Agent does not have or shall not be deemed to have any fiduciary relationship
with any Secured Party, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into the Debt Documents or
otherwise exist against the Collateral Agent. Without limiting the generality of
the foregoing sentence, the use of the term "Collateral Agent," in this
Agreement with reference to the Collateral Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable Law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only a relationship between
independent contracting parties.
22.2 Exculpatory Provisions. Neither the Collateral Agent nor any of
its officers, directors, employees or agents shall (i) be liable for any action
taken or omitted to be taken by it under or in connection with the Pledge
Agreements or the transactions contemplated thereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of the Secured Parties or any other Person for any recital, statement,
representation or warranty made by the Pledgor or any Affiliate of the Pledgor,
or any officer thereof, contained in the Pledge Agreements, or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Collateral Agent under or in connection with, the Pledge
Agreements, or for the value of or title to any Collateral, or the validity,
effectiveness, genuineness, enforceability or sufficiency of the Pledge
Agreements, or for any failure of the Pledgor or any other party to the Pledge
Agreements to perform its obligations thereunder. The Collateral Agent shall not
be under any obligation to any Secured Party to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, any Pledge Agreement, or to inspect the books or records of the
Pledgor or any Affiliate of the Pledgor. Anything in the Pledge Agreements to
the
26
contrary notwithstanding, in no event shall the Collateral Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to loss of profits).
22.3 Reliance by Collateral Agent. The Collateral Agent shall be
entitled to rely conclusively, and shall be fully protected in so relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Collateral Agent. The Collateral Agent shall be fully justified in failing or
refusing to take any action under the Pledge Agreements (i) if such action
would, in the opinion of the Collateral Agent (upon consultation with counsel),
be contrary to applicable Law or the terms of the Pledge Agreements, (ii) if
such action is not specifically provided for in the Pledge Agreements and it
shall not have received such written advice or concurrence of the Required
Secured Parties, in each case as the Collateral Agent deems appropriate, (iii)
unless, if it so requests, such Collateral Agent shall first be indemnified to
its satisfaction by the Secured Parties against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Collateral Agent shall in all cases be fully protected in
acting, or in refraining from acting, under the Pledge Agreements in accordance
with a written request or written consent of the Required Secured Parties, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Secured Parties.
22.4 Notice of Default. The Collateral Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
unless the Collateral Agent shall have received written notice from a Secured
Party or the Pledgor referring to the relevant Debt Document, describing such
Default or Event of Default and stating that such notice is a "Notice of
Default". If the Collateral Agent receives any such notice of the occurrence of
a Default or an Event of Default, it shall give notice thereof to each Secured
Debt Representative. The Collateral Agent shall take such action with respect
to such Default or Event of Default as may be requested in writing by the
Required Secured Parties; provided, however, that unless and until the
Collateral Agent has received any such request, the Collateral Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default under the Pledge
Agreements as it shall deem advisable or in the best interest of the Secured
Parties.
22.5 Fees and Expenses. The Pledgor covenants and agrees to pay to
the Collateral Agent from time to time, and the Collateral Agent shall be
entitled to, the fees and expenses agreed in writing between Pledgor and the
Collateral Agent, and will further pay or reimburse the Collateral Agent upon
its request for all reasonable expenses, disbursements and advances incurred or
made by the Collateral Agent in accordance with the provisions hereof or any
other documents executed in connection herewith (including the reasonable
compensation and the reasonable expenses and disbursements of its counsel and
all persons not regularly in its employ). The obligations of the Pledgor under
this Section 22.5 to compensate the Collateral Agent and to pay or reimburse the
Collateral Agent for the reasonable expenses, disbursements and advances shall
survive the satisfaction and discharge of this Agreement or the earlier
resignation or removal of the Collateral Agent.
22.6 Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Secured Parties shall indemnify upon demand the
Collateral Agent, its officers, directors, employees, counsel, agents and
attorneys-in-fact ("Agent Related Person") (to the extent
27
not reimbursed by or on behalf of the Pledgor within ninety days of the
Collateral Agent's request to the Pledgor for payment and without limiting the
obligation of the Pledgor to do so), pro rata in accordance with the aggregate
principal amount of the Secured Debt held by such Secured Parties (as determined
by the Secured Debt Representatives), from and against any and all Indemnified
Liabilities; provided, however, that no Secured Party shall be liable for the
payment to the Collateral Agent or the Agent Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Secured Party shall reimburse the Collateral Agent upon demand as provided above
of any costs or out-of-pocket expenses incurred by such Collateral Agent or
Agent Related Person (to the extent not reimbursed by or on behalf of the
Pledgor within ninety days of the Collateral Agent's request to the Pledgor for
payment and without limiting the obligation of the Pledgor to do so) in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, the Pledge Agreements or any document contemplated by or
referred to therein, pro rata in accordance with the aggregate principal amount
of the Loans held by such Secured Parties (as determined by the Secured Debt
Representatives). The provisions of this section shall survive termination of
the Pledge Agreements or earlier resignation or removal of the Collateral Agent.
Notwithstanding anything herein to the contrary, the Collateral
Agent shall be entitled to set off from any Collateral or proceeds thereof any
amounts due and owing to it pursuant to this Section 22.6 solely to the extent
such amounts are not paid by the Pledgor or the Secured Parties as provided in
the Pledge Agreements and such amounts remain unpaid by the Secured Parties for
a period of thirty days after demand therefor.
22.7 Successor Collateral Agent. Subject to the appointment and
acceptance of a successor as provided below, the Collateral Agent may resign at
any time by giving notice thereof to the Secured Parties and the Pledgor, and
the Collateral Agent may be removed at any time with or without cause by the
Required Secured Parties upon thirty days prior written notice. Upon any such
resignation or removal, the Required Secured Parties shall have the right to
appoint a successor to the Collateral Agent. If no successor Collateral Agent
shall have been appointed by the Required Secured Parties, and shall have
accepted such appointment within thirty days after the resigning Collateral
Agent's giving of notice of resignation or the giving of any notice of removal
of such Collateral Agent, then the resigning Collateral Agent or Collateral
Agent being removed, as the case may be, may at the Pledgor's expense, appoint a
successor to such Collateral Agent or petition a court of competent jurisdiction
for a successor. If the Collateral Agent shall resign or be removed pursuant to
the foregoing provisions, upon the acceptance of appointment by a successor
Collateral Agent hereunder, the former Collateral Agent shall deliver all
Collateral then in its possession to the successor Collateral Agent. Upon the
acceptance of its appointment as a successor Collateral Agent hereunder, such
successor Collateral Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of such resigning or removed
Collateral Agent, and such resigning Collateral Agent or removed Collateral
Agent shall be discharged from its duties and obligations under the Pledge
Agreements.
22.8 Miscellaneous. ix) None of the provisions of the Pledge
Agreements shall require the Collateral Agent to expend or risk its own funds or
otherwise to incur any liability, financial or otherwise, in the performance of
any of its duties thereunder, or in the exercise of any of
28
its rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or indemnity satisfactory to it against such risk or
liability is not assured to it.
(b) The Collateral Agent may execute any of the trusts or powers or
perform any duties under any Pledge Agreement either directly or by or through
agents, attorneys, custodians or nominees appointed with due care, and shall not
be responsible for any willful misconduct or negligence on the part of any
agent, attorney, custodian or nominee so appointed.
(c) Any corporation into which the Collateral Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Collateral Agent shall
be a party, or any corporation succeeding to the business of the Collateral
Agent shall be the successor of the Collateral Agent under the Pledge Agreements
without the execution or filing of any paper with any party to the Pledge
Agreements or any further act on the part of any of the parties to the Pledge
Agreements except where an instrument of transfer or assignment is required by
law to effect such succession, anything herein to the contrary notwithstanding.
(d) The Collateral Agent shall not take any instructions with
respect to the Pledge Agreements from any entity that is not a Secured Party
hereunder.
23. MISCELLANEOUS. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns and shall inure to the
benefit of and be enforceable by each of the parties hereto and its successors
and assigns, provided that the Pledgor may not assign any of its rights or
obligations under this Agreement without the prior written consent of the
Collateral Agent. The headings in this Agreement are for purposes of reference
only and shall not limit or define the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one instrument. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Agreement which
shall remain binding on all parties hereto.
24. GOVERNING LAW. THIS AGREEMENT, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE AND MATTERS RELATING TO THE CREATION,
VALIDITY, ENFORCEMENT OR PRIORITY OF THE SECURITY INTERESTS CREATED BY THIS
AGREEMENT, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAWS RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW), EXCEPT AS MAY BE REQUIRED BY OTHER MANDATORY
PROVISIONS OF LAW.
25. 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, 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 NOTEHOLDERS
TO PURCHASE THE NOTES, THE ADDITIONAL DEBT HOLDERS, IF ANY, TO ISSUE ANY NEW
SECURED
29
DEBT AND THE COLLATERAL AGENT TO ENTER INTO THIS AGREEMENT AND ANY OTHER
RELEVANT DEBT DOCUMENT TO WHICH IT IS A PARTY.
30
IN WITNESS WHEREOF, the Pledgor, the Trustee and the Collateral
Agent have caused this Agreement to be executed by their duly elected officers
duly authorized as of the date first above written.
PLEDGOR
PG&E CORPORATION
By /s/ Peter A. Darbee
-----------------------------------
Name: Peter A. Darbee
Title: Senior Vice President and
Chief Financial Officer
TRUSTEE
BANK ONE, N.A.
By /s/ Janice Ott Rotunno
-----------------------------------
Name: Janice Ott Rotunno
Title: Vice President,
Assistant Secretary
COLLATERAL AGENT
DEUTSCHE BANK TRUST COMPANY AMERICAS
By /s/ Carmina Bitar Day
-----------------------------------
Name: Carmina Bitar Day
Title: Vice President
[Signature page to Utility Stock Base Pledge Agreement]
ANNEX A
to
PLEDGE AGREEMENT
LIST OF PLEDGED STOCK
Percentage of the issued
Name of Type of Number of and outstanding common
Utility Interest Shares stock of the Utility Certificate No.
- ------- ------------ ----------- -------------------- ---------------
Pacific Gas and Electric Company Common Stock 105,641,741 32.88% ZQU10
ANNEX B
to
PLEDGE AGREEMENT
Name of Pledgor: PG&E Corporation
Jurisdiction of Organization: California
Identification Number: C1953580
EXHIBIT 1
to
PLEDGE AGREEMENT
Pledge Agreement Acknowledgment
Ladies and Gentlemen:
Reference is made to the Utility Stock Base Pledge Agreement, made
as of July 2, 2003, by and between PG&E Corporation, as Pledgor, Bank One, N.A.,
as Trustee, and Deutsche Bank Trust Company Americas, as Collateral Agent (the
"Base Pledge Agreement") and the Utility Stock Protective Pledge Agreement, made
as of July 2, 2003, by and between PG&E Corporation, as Pledgor, Bank One, N.A.,
as Trustee, and Deutsche Bank Trust Company Americas, as Collateral Agent (the
"Protective Pledge Agreement"; together with the Base Pledge Agreement, the
"Pledge Agreements"). Defined terms used in this acknowledgment and not
otherwise defined have the meanings given to such terms in the Pledge
Agreements.
The undersigned hereby acknowledges and agrees to be bound by the
terms of the Pledge Agreements. The undersigned further agrees that the
obligations owing to it under the [INSERT NAMES OF RELEVANT DEBT DOCUMENT(S)]
shall be treated as [New Senior Secured Debt][New Junior Secured Debt] under
such Pledge Agreements.
[ADDITIONAL DEBT HOLDER]
[ ]
------------------------------
By
-----------------------------
Name:
Title:
AGREED AND ACCEPTED BY:
DEUTSCHE BANK TRUST COMPANY
AMERICAS, as Collateral Agent
By
--------------------------------
Name:
Title:
EXHIBIT 2
to
PLEDGE AGREEMENT
New Secured Debt Notification
Via Facsimile
Deutsche Bank Trust Company Americas
60 Wall Street
New York, NY 10005
Attention: Escrow Department
Tel: (212) 250-4660
Fax: (212) 797-8622
Bank One, N.A.
1 Bank One Plaza, Suite IL 1-0595
Chicago, Illinois 60670
Attention: Janice Ott Rotunno
Tel: (312) 407-1682
Fax: (312) 336-8840
Ladies and Gentlemen:
Reference is made to the Utility Stock Base Pledge Agreement, made
as of July 2, 2003, by and between PG&E Corporation, as Pledgor, Bank One, N.A.,
as Trustee, and Deutsche Bank Trust Company Americas, as Collateral Agent (the
"Base Pledge Agreement") and the Utility Stock Protective Pledge Agreement, made
as of July 2, 2003, by and between PG&E Corporation, as Pledgor, Bank One, N.A.,
as Trustee, and Deutsche Bank Trust Company Americas, as Collateral Agent (the
"Protective Pledge Agreement"; together with the Base Pledge Agreement, the
"Pledge Agreements"). Defined terms used in this notification and not otherwise
defined have the meanings given to such terms in the Pledge Agreements.
In accordance with Section 21 of the Pledge Agreements, PG&E
Corporation hereby notifies you that it has issued [NEW SECURED DEBT] which
shall be treated as [New Senior Secured Debt][New Junior Secured Debt] under the
terms of the Pledge Agreements. [The holders of such New Senior Secured Debt
[shall be][shall not be] entitled to vote separately as a class in any matter
requiring the consent of the Required Secured Parties under the terms of the
Pledge Agreements.]
PG&E Corporation further advises you that all notices, requests,
demands or other communications required to be given to the holders of such [New
Senior Secured Debt][New Junior Secured Debt] in accordance with the terms of
the Pledge Agreements should be directed to [NEW DEBT REPRESENTATIVE] at the
following address: [ADDRESS OF NEW DEBT REPRESENTATIVE].
PG&E CORPORATION, as Pledgor
By
-----------------------------------
Name:
Title:
AGREED AND ACCEPTED BY:
BANK ONE, N.A., as Trustee
By
--------------------------------
Name:
Title:
DEUTSCHE BANK TRUST COMPANY
AMERICAS, as Collateral Agent
By
--------------------------------
Name:
Title: