EXECUTION COPY
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AMENDED AND RESTATED STOCK PLEDGE AGREEMENT
by and among
PG&E NATIONAL ENERGY GROUP, LLC,
as Pledgor
PG&E NATIONAL ENERGY GROUP, INC.
as Issuer
And
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
and
DEUTSCHE BANK TRUST COMPANY AMERICAS,
as Collateral Agent
for the benefit of the Lenders, as Pledgee
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Dated as of June 25, 2002
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PLEDGE AGREEMENT
AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (as amended, modified or
supplemented from time to time, this "Agreement"), dated as of June 25, 2002,
among PG&E NATIONAL ENERGY GROUP, LLC, a limited liability company organized and
existing under the laws of the State of Delaware (the "Pledgor"), PG&E NATIONAL
ENERGY GROUP, INC., a Delaware corporation, as Issuer (the "Issuer"), LEHMAN
COMMERCIAL PAPER INC., a corporation organized and existing under the laws of
the State of New York, as Administrative Agent for the lenders (the "Lenders")
from time to time parties to the Credit Agreement described below and DEUTSCHE
BANK TRUST COMPANY AMERICAS (the "Pledgee"), as Collateral Agent for the benefit
of the Lenders.
W I T N E S S E T H :
WHEREAS, PG&E Corporation, a corporation organized and existing under the
laws of the State of California ("PG&E"), is a party to the Credit Agreement,
dated as of March 1, 2001 (as amended, the "Existing Credit Agreement"), with
the lenders parties thereto, Lehman Commercial Paper Inc., as Administrative
Agent, and others, pursuant to which such lenders made the Tranche A Loan (as
defined in the Existing Credit Agreement, the "Existing Tranche A Loan") and the
Tranche B Loan (as defined in the Existing Credit Agreement, the "Existing
Tranche B Loan");
WHEREAS, pursuant to the Amended and Restated Credit Agreement, dated as of
the date hereof (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among PG&E, the Lenders parties thereto, the
Administrative Agent and others, the Existing Credit Agreement is being amended
and restated in its entirety to modify certain of the terms applicable to the
Existing Tranche A Loan, to reflect the repayment of the Existing Tranche B Loan
and to provide for the making of an additional Tranche B Loan to PG&E;
WHEREAS, the Pledgor owns one hundred percent (100%) of the issued and
outstanding common stock of the Issuer;
WHEREAS, the Pledgor, the Issuer, the Administrative Agent, the Pledgee,
acting as Collateral Agent for the Lenders, and others, are parties to the Stock
Pledge Agreement, dated as of March 1, 2001 (the "Existing Stock Pledge
Agreement"); and
WHEREAS, it is a condition precedent to the obligation of the Lenders to
agree to amend and restate the Existing Credit Agreement and to make an
additional Tranche B Loan to PG&E that the Existing Stock Pledge Agreement shall
have been amended and restated as provided herein;
NOW, THEREFORE, in consideration of the foregoing premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement, the
Pledgor hereby agrees with the Administrative Agent, for the benefit of the
Lenders, to amend and restate the Existing Stock Pledge Agreement to read in its
entirety as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by the Pledgor for the
benefit of the Pledgee, acting as Collateral Agent for the benefit of the
Lenders (as more particularly described in Sections 3.1 and 3.2) to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all Obligations of PG&E and the
Pledor under the Credit Agreement and the other Financing Documents and the
obligations of PG&E and the Pledgor under the Option 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 PG&E and the Pledgor with the terms thereof;
(ii) any and all sums advanced by the Pledgee or any Lender in order
to preserve the Collateral or preserve its security interest in the
Collateral (as defined below) and
(iii) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities referred to in clauses (i)
and (ii) above, the reasonable expenses of retaking, holding, preparing for
sale or lease, selling or otherwise disposing or realizing on the
Collateral, or of any exercise by the Pledgee of its rights hereunder with
respect thereto, together with reasonable attorneys' fees and court costs
related thereto,
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (iii) of this Section 1, whether now existing or hereafter arising, that
are (x) owing to the Tranche A Lenders, being herein called the "Tranche A
Secured Obligations", and (y) owing to the Tranche B Lenders, being herein
called the "Tranche B Secured Obligations" (collectively, the "Secured
Obligations").
2. DEFINITIONS. (a) Unless otherwise defined herein, all capitalized terms
used herein and defined in Appendix A to the Credit Agreement shall be used
herein as therein defined and the principles of construction set forth in
Appendix A to the Credit Agreement shall apply to this Agreement.
(b) In addition, the following capitalized terms used herein shall have the
definitions specified below:
"Agreement" has the meaning set forth in the first paragraph hereof.
"Collateral" has the meaning set forth in Section 3.1 hereof.
"Credit Agreement" has the meaning set forth in the second recital
hereto.
"Existing Credit Agreement" has the meaning set forth in the first
recital hereto.
"Existing Stock Pledge Agreement" has the meaning set forth in fourth
recital hereto.
"Existing Tranche A Loan" has the meaning set forth in the first
recital hereto.
"Existing Tranche B Loan" has the meaning set forth in the first
recital hereto.
"Holder" has the meaning set forth in the Option Agreement.
"Issuer" has the meaning set forth in the first paragraph hereof.
"Lenders" has the meaning set forth in the first paragraph hereof.
"PG&E" has the meaning set forth in the first recital hereof.
"Pledged Stock" means the shares of Capital Stock of the Issuer set
forth on Annex A hereto, together with all other shares of Capital Stock of
the Issuer at any time issued to, or otherwise held by, the Pledgor.
"Pledgee" has the meaning set forth in the first paragraph hereof.
"Pledgor" has the meaning set forth in the first paragraph hereof.
"Proceeds" has the meaning given such term in the UCC.
"Process Agent" has the meaning set forth in Section 24 hereof.
"Secured Obligations" has the meaning set forth in Section 1 hereof.
"Securities Act" means the Securities Act of 1933, as amended and as
in effect from time to time.
"Tranche A Secured Obligations" has the meaning set forth in Section 1
hereof.
"Tranche B Secured Obligations" has the meaning set forth in Section 1
hereof.
"Transition Date" means the date upon which the Senior Obligations (as
defined in the Intercreditor Agreement) shall have been indefeasibly paid
in full in cash.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York from time to time.
3. PLEDGE OF PLEDGED STOCK, ETC.
3.1 Pledge. (a) The Pledgor hereby confirms that pursuant to the Existing
Stock Pledge Agreement the Pledgor transferred, pledged and assigned to the
Pledgee, and granted to the Pledgee 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"); and the Pledgor does hereby repeat and
confirm, on and as of the date hereof, such transfer, pledge, assignment and
grant of a first priority security interest:
(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; and
(iii) all Proceeds of any and all of the foregoing;
The foregoing transfer, pledge, assignment and grant of a first priority
security interest is made to secure the prompt and complete payment and
performance when due of all Tranche A Secured Obligations.
(b) The Pledgor does hereby transfer, pledge and assign to the Pledgee, and
does hereby grant to the Pledgee a second priority security interest in, all of
the right, title and interest of the Pledgor in all Collateral, whether now
existing or hereafter acquired by the Pledgor.
The foregoing transfer, pledge, assignment and grant of a second priority
security interest is made to secure the prompt and complete payment and
performance when due of the Tranche B Secured Obligations.
(c) The security interest granted in Section 3.1(a) shall be senior in
priority to the security interest granted in Section 3.1(b).
3.2 Separate Security Interests. The security interests created pursuant to
each of Section 3.1(a) and 3.1(b)are separate and distinct security interests in
the Collateral.
3.3. 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 of this Agreement and,
in addition thereto, the Pledgor shall (as promptly as practicable and, in any
event, within 10 days after it obtains such Collateral) deliver to the Pledgee
any stock certificates evidencing such Collateral, duly endorsed in blank, and
take such other actions as the Pledgee shall reasonably request to perfect the
Pledgee's security interest in such Collateral.
(b) In addition to the actions required to be taken pursuant to Section
3.3(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 satisfactory to the Pledgee), to be filed in the
relevant filing offices so that at all times the Pledgee 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).
3.4 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 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 3.3 hereof, and will promptly
thereafter deliver to the Pledgee (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 Pledgee (for the benefit of the
Secured Parties) hereunder and (ii) supplements to Annexes A and B hereto as are
reasonably necessary to cause such annexes to be complete and accurate at such
time.
3.5 Transfer Taxes. Each pledge of Collateral under Section 3.1 hereof
shall be accompanied by any transfer tax stamps required in connection with the
pledge of such Collateral.
3.6 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 Issuer as is set forth in Annex A hereto; and (iii) the Pledgor has
complied with the respective procedure set forth in Sections 3.3(a) and (b)
hereof with respect to each item of Collateral hereunder.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. If and to the extent
necessary to enable the Pledgee to perfect its security interest in any of the
Collateral or to exercise any of its remedies hereunder, the Pledgee shall have
the right to appoint one or more sub-agents 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 Pledgee or any nominee
or nominees of the Pledgee or a sub-agent appointed by the Pledgee.
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; provided, that, in each case, no vote shall be cast or any
consent, waiver or ratification given or any action taken or omitted to be taken
which would violate or be inconsistent with any of the terms of this Agreement
or any other Financing Document, or which would have the effect of impairing the
value of the Collateral or any part thereof or the position or interests of the
Pledgee in the Collateral. All such rights of the Pledgor to vote and to give
consents, waivers and ratifications shall cease in case an Event of Default has
occurred and is continuing, and Section 7 hereof shall become applicable, and
the Pledgee shall without further notice or consent be admitted and become a
shareholder of the Issuer.
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 distributed to PG&E to the extent permitted by the LLC Agreement to be
paid to the Pledgee, to be applied, at the instruction of the Majority Tranche A
Lenders (or, after the Transition Date, the Majority Tranche B Lenders), to the
payment and repayment of the Loans pursuant to Section 3.2 of the Credit
Agreement and the relevant provisions of the Intercreditor Agreement. The
Pledgee 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; and
(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.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee'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 Pledgee, shall be segregated from other property or funds of the Pledgor
and shall be forthwith paid over to the Pledgee as Collateral in the same form
as so received (with any necessary endorsement).
7. REMEDIES IN CASE OF DEFAULT OR EVENT OF DEFAULT. Subject to the Credit
Agreement, if there shall have occurred and be continuing an Event of Default,
the Pledgee shall be entitled to exercise all of the rights, powers and remedies
(whether vested in it by this Agreement, any other Financing Document or by law)
for the protection and enforcement of its rights in respect of the Collateral,
and the Pledgee 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:
(i) to receive all amounts payable in respect of the Collateral;
(ii) to transfer all or any part of the Collateral into the Pledgee's
name or the name of its nominee or nominees;
(iii) to vote all or any part of the Collateral (whether or not
transferred into the name of the Pledgee) 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 appointing the Pledgee 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 Issuer;
(iv) 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 Pledgee in its absolute discretion may determine, in each
case, to the extent permitted by applicable Law. The Pledgee 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 Pledgee may bid for and purchase all or any part of the
Collateral so sold free from any such right or equity of redemption.
The Pledgee 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; and
(v) 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 Pledgee, the Pledgee hereby acknowledges
that the minimum time required by such applicable Law, or if no minimum is
specified, ten (10) days, shall be deemed a reasonable notice period.
8. REMEDIES, ETC., CUMULATIVE. Each and every right, power and remedy of
the Pledgee provided for in this Agreement or in any other Financing 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 Pledgee of any
one or more of the rights, powers or remedies provided for in this Agreement or
any other Financing 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 Pledgee of all such other rights, powers or remedies, and no failure or
delay on the part of the Pledgee 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 Pledgee
to any other or further action in any circumstances without notice or demand.
9. APPLICATION OF PROCEEDS. All monies collected by the Pledgee upon any
sale or other disposition of the Collateral pursuant to the terms of this
Agreement, together with all other monies received by the Pledgee hereunder,
shall be applied at the written instruction of the Majority Tranche A Lenders
(or, after the Transition Date, the Majority Tranche B Lenders) for satisfaction
of the Secured Obligations in the order provided in the Credit Agreement and the
Intercreditor Agreement.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the
Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt given by the Pledgee 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 Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. [OMITTED]
12. CERTAIN LIMITATIONS (a) The Pledgee 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 Pledgee of this Agreement, with all the rights,
powers, privileges and authority so created, shall not at any time or in any
event obligate the Pledgee 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.
13. FURTHER ASSURANCES; POWER-OF-ATTORNEY. (a) At any time and from time to
time, upon the written request of the Pledgee, 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 Pledgee
reasonably may deem appropriate in order to perfect and preserve the Pledgee's
security interest in the Collateral and in order for the Pledgee 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 Pledgee 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 Pledgee and pledged to the
Pledgee hereunder, duly endorsed, to the extent necessary, to the Pledgee.
The Pledgor shall not change its name, identity, principal place of
business or place of organization in any manner unless the Pledgor shall have
given the Pledgee at least sixty (60) days' prior written notice thereof and
shall have taken, at the Pledgor's sole expense, all
action necessary or reasonably requested by the Pledgee in order to continue the
perfection and priority of the security interests in the Collateral intended to
be created by this Agreement.
(b) The Pledgor hereby appoints the Pledgee, 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 and subject to
the Credit Agreement, in the Pledgee's reasonable discretion to take any action
and to execute any instrument which the Pledgee may deem reasonably necessary or
advisable to accomplish the purposes of this Agreement.
14. [OMITTED]
15. 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 Financing Documents).
16. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR. (a) The
Pledgor represents, warrants and covenants that:
(i) it is the legal, beneficial and record owner of, and has good and
marketable 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, partner,
member or creditor of the Pledgor or the Issuer) 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 Pledgee'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 Pledgee of any of
its rights or remedies provided herein;
(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 of any securities or other interests issued by the
Pledgor or the Issuer, 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
Issuer 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 Issuer 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 (other than
pursuant to the Option Agreement); and
(vii) the pledge and collateral assignment to the Pledgee of the
Collateral consisting of Pledged Stock, together with continued
possession by the Pledgee 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 3.3 (all of which have been made or
taken, as the case may be), creates in favor of the Pledgee a valid
and perfected first priority security interest in such Collateral, and
the proceeds thereof, in each case, for the benefit of the holders of
the Tranche A Secured Obligations and a valid and perfected second
priority security interest in such Collateral and the proceeds
thereof, in each case for the benefit of the holders of the Tranche B
Secured Obligations, subject to no prior Lien or encumbrance (other
than any Permitted Lien that is a non-consensual lien arising by
operation of law, and the Option Agreement) 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 Pledgee 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 Pledgee'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 Pledgee as Collateral
hereunder and will likewise defend the right thereto and security interest
therein of the Pledgee.
17. CHIEF EXECUTIVE OFFICE; RECORDS. The chief executive office of the
Pledgor is located at the address specified in Annex B hereto. The Pledgor will
not move its
chief executive office except to such new location as the Pledgor may establish
in accordance with the last sentence of this Section 17. The originals of all
documents in the possession of the Pledgor evidencing all Collateral and the
only original books of account and records of the Pledgor relating thereto are,
and will continue to be, kept at such chief executive office as specified in
Annex B hereto, or at such new locations as the Pledgor may establish in
accordance with the last sentence of this Section 17. The Pledgor shall not
establish a new location for its chief executive office or change its
jurisdiction of organization until (i) it shall have given to the Pledgee not
less than sixty (60) days' prior written notice of its intention so to do,
clearly describing such new location and providing such other information in
connection therewith as the Pledgee may reasonably request and (ii) with respect
to such new location, it shall have taken all action necessary or reasonably
requested by the Pledgee to maintain the security interest of the Collateral
Agent in the Collateral intended to be granted hereby at all times fully
perfected and in full force and effect. Promptly after establishing a new
location for its chief executive office in accordance with the immediately
preceding sentence, the Pledgor shall deliver to the Pledgee a supplement to
Annex B hereto so as to cause such Annex B hereto to be complete and accurate.
18. 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 20), including, without limitation:
(i) any renewal, extension, amendment or modification of or addition or
supplement to or deletion from any Financing Document or any other instrument or
agreement 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 including, without
limitation, this Agreement; (iii) any furnishing of any additional security to
the Pledgee or its assignee or any acceptance thereof or any release of any
security by the Pledgee or its assignee (except as provided under Section 20);
(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 Issuer, 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.
19. REGISTRATION, ETC. (a) If there shall have occurred and be continuing
an Event of Default, then upon receipt by the Pledgor from the Pledgee 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 cause
such registration to be effected (and be kept effective) and will cause such
qualification and compliance to be declared effected (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 the Pledgee shall furnish to the Pledgor
such information regarding the Pledgee as the Pledgor may reasonably request in
writing and as shall be required in connection with any such registration,
qualification or compliance. The Pledgor will cause the Pledgee 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 Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee 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 Pledgee
expressly for use therein.
(b) If at any time when the Pledgee 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 Pledgee may sell such Collateral or part thereof, as
the case may be, by private sale in such manner and under such circumstances as
the Pledgee 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 Pledgee (i) may proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Collateral or part thereof shall 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 Pledgee 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 Pledgee, 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.
20. TERMINATION; RELEASE. (a) After payment in full of the Secured
Obligations and termination of the Credit Agreement, this Agreement and the
security interest created hereby shall terminate, and the Pledgee, at the
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
Pledgee or any of its sub-agents hereunder.
(b) At any time that the Pledgor desires that the Pledgee assign, transfer
and deliver Collateral (and releases therefor) as provided in Section 20(a)
hereof, it shall deliver to
the Pledgee a certificate signed by a principal executive officer of the Pledgor
stating that the release of the respective Collateral is permitted pursuant to
such Section 20(a).
(c) Upon the direction of the Administrative Agent, the Collateral Agent
will release shares of the Pledged Stock in connection with (i) the NEG Equity
Transactions to the extent provided in the Credit Agreement or (ii) any exercise
of the rights of the Holders under the Option Agreement.
21. NOTICES, ETC. All notices, requests, demands or other communications
hereunder shall be made in the manner and with the effect provided in Section
9.3 of the Credit Agreement at the addresses provided below or at such other
address as shall have been furnished in writing by the relevant Person to the
party required to give notice hereunder:
(a) If to the Pledgor, at:
PG&E National Energy Group, LLC
7500 Old Georgetown Road
Bethesda, MD 20814-6161
Attention: General Counsel
Tel.: (301) 280-6815
Fax.: (301) 280-6319
(b) If to the Pledgee, at:
Deutsche Bank Trust Company Americas
Corporate Trust and Agency Services
100 Plaza One, MS: 0603
Jersey City, NJ 07311
Attention: Carmina Bitar Day
Tel: (201) 593-6832
Fax: (201) 593-6420
with a copy to the Administrative Agent at:
Lehman Commercial Paper Inc.
745 Seventh Avenue
New York, New York 10019
Attention: Frank Turner/Rich Divito
Tel: (212) 526-2696/(212) 526-2425
Fax: (646) 758-1986/(646) 758-4618
(c) If to the Issuer, at:
PG&E National Energy Group, Inc.
7500 Old Georgetown Road
Bethesda, MD 20814-6161
Attention: General Counsel
Tel: (301) 280-6815
Fax: (301) 280-6319
22. WAIVER; AMENDMENT. 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 Pledgee.
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 consent of the Pledgee. 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; SUBMISSION TO JURISDICTION. (a) 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.
(b) The Pledgor hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of any
New York State court sitting in New York City for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. The Pledgor hereby irrevocably waives, to the fullest
extent permitted by applicable Law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. The Pledgor hereby irrevocably appoints Corporation
Service Company (the "Process Agent"), with an office on the date hereof at 1177
Avenue of the Americas, 17th Floor, New York, NY 10036, as its agent to receive
on its behalf and on behalf of its property, service of copies of the summons
and complaint and any other process that may be served in any such action or
proceeding. Service upon the Process Agent shall be deemed to be personal
service on the Pledgor and shall be legal and binding upon the Pledgor for all
purposes notwithstanding any failure to mail copies of such legal process to the
Pledgor, or any failure on the part of the Pledgor to receive the same. Nothing
herein shall affect the right of the Pledgee to serve process in any other
manner permitted by applicable Law or any right of the Pledgee to bring legal
action or proceedings in any other competent jurisdiction. The Pledgor further
agrees that the aforesaid courts of the State of New York and of the United
States of America for the Southern District of New York shall have exclusive
jurisdiction with respect to any claim or counterclaim of the Pledgor based upon
the assertion that the rate of interest charged in respect of any of the Secured
Obligations under any Financing Document is usurious. To the extent permitted by
applicable Law, the Pledgor further irrevocably agrees to the service of process
of any of the aforementioned courts in any suit, action or proceeding by the
mailing of copies thereof by certified mail, postage prepaid, return receipt
requested, to the Pledgor at the address referenced in Section 21.
(c) The Pledgor agrees that it will at all times continuously maintain an
agent to receive service of process in the State of New York on behalf of itself
and its properties, and, in the event that for any reason the agent mentioned
above shall not serve as agent for the Pledgor to receive service of process in
the State of New York on its behalf, the Pledgor shall promptly appoint a
successor satisfactory to the Pledgee so to serve, advise the Pledgee thereof,
and deliver to the Pledgee evidence in writing of the successor agent's
acceptance of such appointment. The foregoing provisions constitute, among other
things, a special arrangement for service among the parties to this Agreement
for the purposes of 28 U.S.C. ss. 1608.
(d) To the extent the Pledgor may, in any action or proceeding arising out
of or relating to this Agreement, be entitled under any applicable Law to
require or claim that the Pledgee post security for costs or take similar
action, the Pledgor hereby irrevocably waives and agrees not to claim the
benefit of such entitlement.
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 SECURED PARTIES TO
ENTER INTO THE CREDIT AGREEMENT AND THE OTHER FINANCING DOCUMENTS.
26. WAIVER. The Pledgor waives any claim it may now or hereafter have
against the Pledgee or any Lender for any consequential, exemplary or positive
damages or in connection with relating to this Agreement or the other Financing
Documents.
27. ACKNOWLEDGMENT AND AGREEMENT OF ISSUER. The Issuer agrees and
acknowledges the pledge by the Pledgor of the Pledged Stock hereunder. The
Issuer represents and warrants that on the date hereof (i) the common stock of
the Issuer is described in Annex A hereto; (ii) the Pledged Stock constitutes
100% of the issued and outstanding common stock of the Issuer, as is set forth
in Annex A hereto; (iii) all of the shares of the Pledged Stock have been duly
issued, are fully paid and non-assessable and are free and clear of all Liens
and adverse claims, other than the Liens in favor of the Pledgee created hereby
and the Option Agreement; (iv) the pledge by the Pledgor of, and the granting of
a security interest in, the Pledged Stock, does not violate the charter, by-laws
or any other agreement governing the Issuer, (v) the Pledged Stock is
represented by the stock certificate described in Annex A hereto, (vi) the
Issuer has duly noted the pledge of the Pledged Stock to the Pledgee on its
stock ledger. The
Issuer further covenants and agrees that, unless otherwise notified by the
Pledgee, (a) the Issuer shall deliver all certificates representing additional
shares of common stock of the Issuer to the Pledgee, (b) no additional class of
Capital Stock of the Issuer shall be created after the date hereof and (c) all
distributions in respect of the Collateral consisting of Pledged Stock shall be
held by the Pledgee and applied pursuant to Section 6.
28. THIRD PARTY BENEFICIARIES. The parties hereto agree that the provisions
hereof are for the benefit of the Collateral Agent and the Lenders and that the
Collateral Agent and the Lenders shall be third party beneficiaries of this
Agreement.
IN WITNESS WHEREOF, the Pledgor, the Pledgee and the Issuer have caused
this Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.
PLEDGOR
PG&E NATIONAL ENERGY GROUP, LLC
By__________________________________
Name:
Title:
ADMINISTRATIVE AGENT
LEHMAN COMMERCIAL PAPER INC., as Administrative Agent
By__________________________________
Name:
Title:
PLEDGEE
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral
Agent for the benefit of the Lenders
By__________________________________
Name:
Title:
ISSUER
PG&E NATIONAL ENERGY GROUP, INC.
By__________________________________
Name:
Title:
ANNEX A
to
PLEDGE AGREEMENT
LIST OF PLEDGED STOCK
Name of Type of Number of
Issuer Interest Shares Certificate No. Percentage Owned
- ------------------------------------ ------------ ----------- --------------- ----------------
PG&E National Energy Group, Inc., a Common Stock 1,000 3 100%
Delaware corporation
ANNEX B
to
PLEDGE AGREEMENT
CHIEF EXECUTIVE OFFICE
PG&E National Energy Group, LLC
7500 Old Georgetown Road
Bethesda, MD 20814-6161
Attention: General Counsel
Tel: (301) 280-6815
Fax: (301) 280-6319