Contract
Exhibit 4.2
WARRANT AGREEMENT
By and Among
PG&E CORPORATION
and
LB I GROUP INC.
and
EACH OTHER INITIAL HOLDER
PARTY HERETO
__________________________
Dated as of October 18, 2002
__________________________
TABLE OF CONTENTS
Page
ARTICLE I
Definitions............................................3
SECTION 1.01.
Definitions...................................3
ARTICLE II Warrant
Certificates.....................................6
SECTION 2.01. Form of
Warrant Certificates.....................6
SECTION 2.02. Execution
and Delivery of Warrants and Warrant
Certificates..................................6
SECTION 2.03. Loss or
Mutilation..............................7
ARTICLE III Representations, Warranties and
Covenants...................7
SECTION 3.01.
Representations Warranties and Covenants of the
Company...........................................7
SECTION 3.02.
Representations Warranties and Covenants of the Initial
Holders......................................9
SECTION 3.03. Payments
of Cash Dividends......................10
ARTICLE IV Exercise
Terms..........................................10
SECTION 4.01. Terms of
Warrants; Exercise of Warrants...........10
SECTION 4.02. Adjustment
of Exercise Price and Number of Warrant Shares
Issuable....................................11
SECTION 4.03. Manner of
Exercise.............................16
SECTION 4.04. Issuance
of Warrant Shares......................16
SECTION 4.05. Fractional
Warrant Shares.......................16
SECTION 4.06.
Reservation of Warrant Shares...................17
SECTION 4.07. Compliance
with Law............................17
SECTION 4.08. Payment of
Taxes..............................17
SECTION 4.09. Failure to
Deliver Shares.......................17
ARTICLE V Transfer
Restrictions.....................................17
SECTION 5.01.
Restrictions on Transfers of the Warrants and the Warrant
Shares......................................17
SECTION 5.02. Notation;
Removal of Legend.....................18
SECTION 5.03. Surrender
of Warrant Certificates................18
ARTICLE VI
Miscellaneous...........................................18
SECTION 6.01. SEC
Reports and other Financial Information........18
SECTION 6.02. Persons
Benefiting............................19
SECTION 6.03. Amendments
and Waivers.........................19
SECTION 6.04.
Notices......................................19
SECTION 6.05. Governing
Law; Waiver of Jury Trial; Submission of
Jurisdiction.................................20
SECTION 6.06. Successors
and Assigns.........................20
SECTION 6.07.
Severability.................................21
SECTION 6.08. Entire
Agreement..............................21
SECTION 6.09.
Counterparts.................................21
SECTION 6.10.
Headings.....................................21
SECTION 6.11.
Remedies.....................................21
SECTION 6.12.
Waiver......................................21
SECTION 6.13.
Register.....................................21
Annex A Form of Addendum
Exhibit A Form of Warrant Certificate
Exhibit B Form of Transfer Restriction Legend
Exhibit C Form of Accredited Investor Certificate
Transferee Letter of Representation
WARRANT
AGREEMENT, dated as of October 18, 2002, by and among
PG&E
Corporation, a California corporation (the "Company"), LB I Group
Inc., a Delaware
corporation ("LB I Group"), and each other entity that becomes
signatory to an addendum
to this Agreement prior to the issuance of the Warrants (as defined
below) (each, an
"Initial Holder" and collectively, the "Initial
Holders").
W I T N E S E T H:
WHEREAS, the
Company and the Initial Lender (as defined below) are parties
to
the Credit Agreement (as defined below);
WHEREAS, as
a condition to the effectiveness of the Credit Agreement, the
Company desires to issue to each Initial Holder a number of
warrants calculated in the
manner set forth in Section 2.02 below, (each, a "Warrant", which
term shall include
warrants issued upon transfer, division, combination of, or in
substitution for, any
Warrant) which will, subject to adjustment as provided herein,
entitle the Holders
thereof to purchase shares of common stock, no par value (the
"Common Stock"), of the
Company on the terms described herein (the Common Stock issuable
upon exercise of the
Warrants being referred to herein as the "Warrant Shares");
WHEREAS, in
order to induce the Initial Lender to enter into the Credit
Agreement, the Company has agreed to provide to the Initial
Holders, among other things,
the Warrants and the registration rights for the Warrant Shares as
set forth in the
Equity Registration Rights Agreement, dated as of the date hereof
(the "Registration
Rights Agreement"), among the Company and the Initial
Holders;
NOW, THEREFORE, intending to be legally bound, each party hereto
agrees as
follows for the benefit of the other parties and for the equal and
ratable benefit of the
Holders of the Warrants:
ARTICLE I
Definitions
SECTION
1.01. Definitions. Capitalized terms used but not
otherwise defined
herein shall have the meanings ascribed to such terms in the Credit
Agreement and the
principles of construction set forth in Appendix A to the Credit
Agreement shall apply to
this Agreement.
"Addendum":
an instrument, substantially in the form of Annex A hereto,
by
which each Initial Holder, other than LB I Group, becomes a party
to this Agreement prior
to the issuance of the Warrants.
"Agreement"
shall mean this Warrant Agreement, as the same may be
amended,
modified or supplemented from time to time.
"Aggregate
Warrant Number" shall have the meaning set forth in Section
2.02
hereof.
"Assignee"
shall have the meaning set forth in Section 5.01(b) hereof.
"Board"
shall mean the board of directors of the Company or any
committee
thereof duly authorized to act on behalf of such board of
directors.
"Business
Day" shall mean any day other than a Saturday or Sunday or any
day
on which banking institutions in the City of New York or the City
of San Francisco are
authorized or obligated by law or regulation to close.
"Cash
Dividends" means periodic, special, extraordinary or non-recurring
cash
dividends on the Company's Common Stock as declared by the
Company's Board of Directors.
"Cashless
Exercise" shall have the meaning set forth in Section 4.01
hereof.
"Common
Stock" shall have the meaning set forth in the second recital
hereof.
"Company"
shall have the meaning set forth in the first paragraph hereof,
and
its successors and assigns.
"Credit
Agreement" shall mean the Second Amended and Restated Credit
Agreement, dated as of the date hereof, among the Company, the
Initial Lender and the
other Lenders party thereto, Xxxxxx Commercial Paper Inc., as
Syndication Agent and
Administrative Agent and Xxxxxx Brothers Inc., as Lead Arranger and
Bookrunner, as such
agreement may be subsequently amended from time to time pursuant to
the provisions
thereof.
"Current
Market Price" of a Warrant Share as of any date shall mean,
except
as hereinafter provided, the average of the daily market prices for
the Common Stock of
the Company for the 20 consecutive Trading Days preceding such
date. The market price for
each such day shall be the last sale price on such day as reported
on the New York Stock
Exchange consolidated tape, or, if such Common Stock of the Company
is not listed on the
New York Stock Exchange, or reported on such consolidated tape,
then the last sale price
on such day on the principal domestic stock exchange on which such
Common Stock of the
Company is then listed or admitted to trading, or, if no sale takes
place on such day on
such exchange, the average of the closing bid and asked prices on
such day as officially
quoted on such exchange, or, if such Common Stock of the Company is
not then listed or
admitted to trading on any domestic stock exchange but is quoted on
the Nasdaq Stock
Market's National Market, then the Current Market Price for each
such Trading Day shall
be the last sale price on such day as quoted on the Nasdaq Stock
Market's National
Market, or, if no sale takes place on such day or if such Common
Stock of the Company is
neither listed or admitted to trading on any domestic stock
exchange nor quoted on such
day on the Nasdaq Stock Market's National Market, then the Current
Market Price for each
such Trading Day shall be the average of the reported closing bid
and asked price
quotations on such day in the over-the-counter market, as reported
by the Nasdaq Stock
Market, or, if not so reported, as furnished by the National
Quotation Bureau, Inc., or,
if such firm at the time is
not engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business as
selected by the Company,
or, if there is no such firm, as furnished by any member of the
National Association of
Securities Dealers, Inc. selected by the Company with the written
approval of a Majority
in Interest of Evaluating Holders.
If at any
time the Common Stock of the Company is not listed on any
domestic
exchange or quoted in the domestic over-the-counter market or not
registered under the
Exchange Act, the Current Market Price of a Warrant Share shall be
the fair market value
per share of the Common Stock of the Company as determined by a
panel of independent
appraisers (the "Appraisers") who shall be investment banks
experienced in the evaluation
of the value of securities of a corporation of a type similar to
the Company. Initially,
such panel shall be comprised of two Appraisers, one selected by
the Company and one
selected by the relevant Holder or a Majority in Interest of
Evaluating Holders, as
applicable. In making such determination, the Appraisers
shall not take into account any
discount attributable to the minority status of the Warrants and/or
Warrant Shares, or
any other minority interest, or the illiquidity of the Warrants
and/or Warrant Shares.
In the event
the Appraisers are unable to agree upon the Current Market
Price
within 10 days of their selection, then the two Appraisers shall
select a third
independent Appraiser who shall be an investment bank experienced
in the evaluation of
the value of securities of a corporation of a type similar to the
Company to determine
the Current Market Price within 15 days of its selection. A
determination by such third
Appraiser of the Current Market Price shall be final and binding
upon the Company and the
Holders.
The Company
shall pay the fees and expenses of the Appraiser it appoints.
The
relevant Holder or Evaluating Holders, as applicable, shall pay the
fees and expenses of
the Appraiser it, or they, appoint; provided that, when applicable,
such fees and
expenses shall be divided pro rata among the Evaluating Holders in
proportion to their
respective ownership interests in the securities being
evaluated.
Should a
third Appraiser be appointed, each of the Company and the
relevant
Holder (or Evaluating Holders, where applicable) shall pay 50% of
the expense associated
with such appointment. Where applicable, the portion of the fees
and expenses payable by
the Evaluating Holders shall be divided pro rata among such
Evaluating Holders in
proportion to their respective ownership interests in the
securities being evaluated.
"Dividend"
shall mean any dividend (including Cash Dividends) or other
distribution on the Common Stock whether in the form of cash,
evidences of the Company's
indebtedness, or any other assets, properties or securities (other
than shares of Common
Stock) or any options, warrants or other rights to subscribe for or
to purchase any of
the foregoing.
"ERISA"
shall have the meaning set forth in Section 3.02(g) hereof.
"Evaluating Holders" shall mean, at any time and from time to time,
the
Holders of the securities whose Current Market Price is being
ascertained at such time.
"Excess
Shares" shall have the meaning set forth in Section 4.01
hereof.
"Exchange
Act" shall mean the Securities Exchange Act of 1934, as
amended,
and the rules and regulations of the SEC promulgated
thereunder.
"Exercise
Limitations" shall have the meaning set forth in Section 4.01
hereof.
"Exercise
Price" shall have the meaning set forth in Section 4.01
hereof.
"Expiration
Date" shall have the meaning set forth in Section 4.01
hereof.
"4.9%
Limitation" shall have the meaning set forth in Section 4.01
hereof.
"Governmental Authority" shall mean any federal, state, municipal
or other
governmental department, commission, board, bureau, agency or
instrumentality, or any
court, in each case whether of or within the United States of
America or foreign.
"Holder"
shall mean the Initial Holders and any Assignee, designee or
transferee of the Warrants or any portion thereof or any Warrant
Shares.
"Initial Holders" shall have the meaning set forth in the first
paragraph
hereof.
"Initial
Lender" shall mean Xxxxxx Commercial Paper Inc.
"LB I Group"
shall have the meaning set forth in the first paragraph
hereof.
"Xxxxxx"
shall have the meaning set forth in Section 2.02 hereof.
"Majority in
Interest of Evaluating Holders" shall mean, at any time and
from
time to time, the Holders of more than a 50% interest in the
Warrant Shares whose Current
Market Price is being ascertained at such time.
"Material
Adverse Change" shall mean, with respect to any Person, a
material
adverse change in the condition (financial or otherwise), results
of operations,
business, Properties or liabilities of such Person.
"Material
Adverse Effect" shall mean any event, circumstance or
condition
which is reasonably likely to (A) have a material adverse effect on
the condition
(financial or otherwise), results of operations, business,
Properties, or liabilities of
the Company, as the case may be, (B) materially and adversely
affect the ability of the
Company, as the case may be, to perform its obligations under this
Agreement or (C)
materially and adversely affect the rights and remedies of the
Holders under this
Agreement.
"Person"
means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company,
trust, unincorporated
organization, or government or any agency or political subdivision
thereof.
"Preferred
Stock" shall mean, with respect to any Person, any capital
stock
issued by such Person which has a preference over such Person's
Common Stock.
"Proceeding"
shall mean an action, claim, suit or proceeding (including,
without limitation, an investigation or partial proceeding, such as
a deposition),
whether commenced or threatened.
"Registration Rights Agreement" shall have the meaning set forth in
the third
recital hereof, as the same may be amended, modified or
supplemented from time to time.
"Register"
shall have the meaning set forth in Section 6.13 hereof.
"Required
Holders" shall mean the Holders of at least a 40% interest in
the
Warrants or the Warrant Shares.
"Securities
Act" shall mean the Securities Act of 1933, as amended, and
the
rules and regulations promulgated by the SEC thereunder.
"Share
Delivery Default" shall have the meaning set forth in Section
4.09
hereof.
"Shareholder
Limitation" shall have the meaning set forth in Section 4.01
hereof.
"Third
Parties" shall have the meaning set forth in Section 4.01
hereof.
"13D Person"
shall mean any "person" as such term is defined in Section
13(d)(3) of the Exchange Act.
"Trading
Day" means a day during which trading in securities generally
occurs
on the NYSE or, if the Common Stock is not listed on the NYSE, on
the principal other
national or regional securities exchange on which the Common Stock
then is listed or, if
the Common Stock is not listed on a national or regional securities
exchange, on the
National Association of Securities Dealers Automated Quotation
System or, if the Common
Stock is not quoted on the National Association of Securities
Dealers Automated Quotation
System, on the principal other market on which the Common Stock is
then traded.
"Transfer
Agent" shall have the meaning set forth in Section 4.04
hereof.
"VWAP" shall
mean, for any security as of any date, the dollar-weighted
average price for such security on the principal United States
securities exchange on
which such security is traded (which is currently the New York
Stock Exchange with
respect to the Common Stock) during the period beginning at 9:30
a.m. (New York time) (or
such other time as such exchange publicly announces is the official
open of trading), and
ending at 4:00 p.m. (New York time) (or such other time as such
exchange publicly
announces is the official close of trading) as reported by
Bloomberg Financial Markets
(or any successor thereto, "Bloomberg") through its "Volume at
Price" functions, or, if
the foregoing does not apply, the dollar weighted average price of
such security in the
over-the counter-market on the electronic bulletin board for such
security during the
period beginning at 9:30 a.m. (New York time) (or such other time
as such exchange
publicly announces is the official open of trading), and ending at
4:00 p.m. (New York
time) (or such other time as such exchange publicly announces is
the official close of
trading) as reported by Bloomberg, or if no dollar weighted average
price is reported for
such security by Bloomberg for such hours, the average of the
highest closing bid price
and lowest closing ask price of any of the market makers for such
security as reported in
the "pink sheets" by the National Quotation Bureau, Inc. If
the VWAP cannot be
calculated for such security on such date on any of the foregoing
bases, the VWAP of such
security on such date shall be the fair market value as mutually
determined by the
Company and the Holders of a majority of the Warrants then
outstanding. All such
determinations to be appropriately adjusted for any stock dividend,
stock split, stock
combination or other similar transaction during such period.
"Warrant"
shall have the meaning set forth in the second recital
hereof.
"Warrant
Agreement" shall mean this Agreement.
"Warrant
Certificates" shall have the meaning set forth in Section
2.01
hereof.
"Warrant
Number" shall have the meaning set forth in Section 4.02
hereof.
"Warrant
Shares" shall have the meaning set forth in the second
recital
hereof.
ARTICLE II
Warrant Certificates
SECTION
2.01. Form of Warrant Certificates. Certificates
representing the
Warrants (the "Warrant Certificates") shall be in registered form
only and substantially
in the form attached hereto as Exhibit A. The Warrant
Certificates shall be dated the
date of their issuance and signed by the Company and shall have
such insertions as are
appropriate or required or permitted by this Agreement and may have
such letters, numbers
or other marks of identification and such legends and endorsements
typed, stamped,
printed, lithographed or engraved thereon as the Company may deem
appropriate and as are
not inconsistent with the provisions of this Agreement, or as may
be required to comply
with any law or with any rule or regulation pursuant thereto, or to
conform to usage.
The terms
and provisions contained in the form of Warrant Certificate
annexed
hereto as Exhibit A shall constitute, and are hereby expressly
made, a part of this
Agreement.
The
definitive Warrant Certificates shall be typed, printed,
lithographed or
engraved or produced by any combination of these methods, all as
determined by the
officers of the Company executing such Warrant Certificates, as
evidenced by such
officers' execution of such Warrant Certificates.
SECTION
2.02. Execution and Delivery of Warrants and Warrant
Certificates.
The Company shall issue an aggregate number of Warrants (the
"Aggregate Warrant Number")
equal to the quotient of (a) 25,200,000, divided by (b) the sum of
(i) the average of the
VWAP of the Common Stock for each of the ten Trading Days beginning
on the fifth Trading
Day prior to the Closing Date and extending until the fourth
Trading Day following the
Closing Date (such ten Trading Day period to include the Closing
Date itself) minus (ii)
$0.01. Warrant Certificates each evidencing the number of
Warrants to be issued to each
Initial Holder shall be executed and delivered to each Initial
Holder by the Company no
later than the tenth Trading Day following the Closing Date.
The exact number of
Warrants to be distributed to any particular Initial Holder out of
the Aggregate Warrant
Number shall be based on terms previously agreed upon between
Xxxxxx Brothers Inc.
("Xxxxxx") and each Initial Holder and shall be provided to the
Company by Xxxxxx prior
to the execution and delivery of the Warrant Certificates.
The Warrant
Certificates shall be executed manually on behalf of the
Company
by its Chief Executive Officer, President, any Senior Vice
President or any Vice
President. In case any officer of the Company whose signature
shall have been placed
upon any of the Warrant Certificates shall cease to be such officer
of the Company before
the issuance and delivery thereof, such Warrant Certificates may,
nevertheless, be issued
and delivered with the same force and effect as though such person
had not ceased to be
such officer of the Company.
SECTION
2.03. Loss or Mutilation. In case any of the
Warrant Certificates
shall be mutilated, lost, stolen or destroyed, the Company, at its
expense, shall issue,
execute and deliver to the Holder of the lost, stolen, destroyed or
mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant
Certificate of the same
tenor and for a like aggregate number of Warrants, but only upon
receipt of evidence
satisfactory to the Company of such loss, theft, mutilation or
destruction of such
Warrant Certificate and indemnity, if requested, also reasonably
satisfactory to the
Company; provided, however, that if the owner of the same is the
Initial Holders or any
affiliate thereof or an institutional lender or investor, its own
agreement of indemnity
shall be deemed to be satisfactory. Every new Warrant
Certificate executed and delivered
pursuant to this Section 2.03 in lieu of any lost, stolen,
mutilated or destroyed Warrant
Certificate shall constitute a contractual obligation of the
Company, whether or not the
allegedly lost, stolen or destroyed Warrant Certificates shall be
at any time enforceable
by anyone, and shall be entitled to the benefits of this Agreement
equally and
proportionately with any and all other Warrant Certificates duly
executed and delivered
hereunder. The provisions of this Section 2.03 are exclusive
and shall preclude (to the
extent lawful) all other rights or remedies with respect to the
replacement of mutilated,
lost, stolen, or destroyed Warrant Certificates.
ARTICLE III
Representations, Warranties and Covenants
SECTION
3.01. Representations Warranties and Covenants of the
Company. The
Company represents and warrants to, and agrees with, the Holders as
follows:
(a) The Company has been duly incorporated and is
validly existing as a
corporation in good standing under the laws of the state of
California.
(b)
The Company has the corporate power and authority (i) to
execute,
deliver and perform its obligations under this Agreement and the
Registration Rights
Agreement, (ii) to issue and deliver the Warrants, (iii) to issue
and deliver the Warrant
Shares upon the due exercise of any Warrant, and (iv) to cause the
Transfer Agent to
record the issuance of the Warrant Shares issuable upon due
exercise of any Warrant.
(c)
This Agreement and the Registration Rights Agreement have been
duly
executed and delivered by the Company and, assuming the due
authorization, execution and
delivery by the Initial Holders, each of this Agreement and the
Registration Rights
Agreement constitutes a legally valid and binding agreement of the
Company, enforceable
against the Company in accordance with its terms, subject to the
effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws
relating to or affecting creditors' rights generally, general
equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good
faith and fair dealing, and except with respect to any rights of
indemnification and
contribution hereunder, where enforcement hereof may be limited by
federal or state
securities laws, the policies underlying such laws and public
policy considerations.
(d)
The Warrants have been duly authorized by the Company and, when
issued
and delivered by the Company, will constitute legally valid and
binding obligations of
the Company, enforceable against the Company in accordance with
their terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium
and other similar laws relating to or affecting creditors' rights
generally, general
equitable principles (whether considered in a proceeding in equity
or at law) and an
implied covenant of good faith and fair dealing, and except with
respect to any rights of
indemnification and contribution hereunder, where enforcement
hereof may be limited by
federal or state securities laws, the policies underlying such laws
and public policy
considerations.
(e)
Each of (i) the execution, delivery and performance of this
Agreement
and the Registration Rights Agreement by the Company, (ii) the
offering, issuance and
delivery of the Warrants and the Warrant Shares issuable upon the
exercise of any
Warrant, and (iii) the fulfillment of and compliance with the terms
and provisions of
this Agreement (A) have been duly authorized by all requisite
corporate and, if
necessary, stockholder action of the Company and (B) will not (1)
conflict with, violate
or constitute a default under (x) any provision of the articles of
incorporation, by-laws
or other constitutive documents of the Company, (y) any law,
statute, rule or regulation
or any order of any Governmental Authority applicable to the
Company or any of its
subsidiaries or properties or (z) any provision of any indenture or
other material
agreement or other material instrument to which the Company or any
of its subsidiaries
are a party or by which they or any of their respective properties
are or may be bound,
(2) be in conflict with, result in a breach of or constitute (alone
or with notice or
lapse of time or both) a default under, or give rise to any right
to accelerate or to
require the prepayment, repurchase or redemption of any obligation
under, any such
indenture, agreement or other instrument or (3) result in the
creation or imposition of
any Lien upon or with respect to any property or assets now owned
or hereafter acquired
by the Company or any of its subsidiaries, except, in each
case, where any such
conflict, creation or imposition would not result in a Material
Adverse Effect.
(f) No
action, consent, waiver, authorization or approval of,
registration
or filing with or any other action by any Governmental Authority or
any nongovernmental
Person (including, without limitation, any creditor, partner or
shareholder of the
Company) is or will be required in connection with (i) the
execution, delivery and
performance of this Agreement and the Registration Rights Agreement
by the Company, other
than with respect to any filings required to be made pursuant to
the Registration Rights
Agreement, (ii) the issuance and delivery of the Warrants and the
Warrant Shares issuable
upon the exercise of any Warrant in accordance with this Agreement,
other than with
respect to any filings under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976
that may be required upon the exercise by any Holder of any
Warrants, and (iii) the
performance by the Company of its obligations under this Agreement
and the Registration
Rights Agreement, other than with respect to any filings required
to be made pursuant to
the Registration Rights Agreement, or as a condition to the
legality, validity or
enforceability of this Agreement or the Registration Rights
Agreement or the consummation
of the transactions contemplated hereby, other than such
authorizations and approvals as
have already been obtained and are in full force and
effect.
(g)
Except as set forth on Schedule 5.6 to the Credit Agreement, there
are
no legal or arbitral proceedings or investigations, or any
proceedings by or before any
Governmental Authority or any Person, pending or threatened against
the transactions
contemplated by this Agreement or the Registration Rights Agreement
which could
reasonably be expected to have a Material Adverse Effect, and there
are no other legal or
arbitral proceedings or investigations, or any proceedings by or
before any Governmental
Authority or any Person pending against the Company, LLC, NEG, Inc.
or the Significant
Subsidiaries which could reasonably be expected to result in a
Material Adverse Change to
the Company, or a Material Adverse Change to LLC, NEG, Inc. and the
Significant
Subsidiaries, taken as a whole. There are no legal or
arbitral proceedings or
investigations, or any proceedings by or before any Governmental
Authority or any Person,
pending or threatened which could reasonably be expected to have a
Material Adverse
Effect (other than under clauses (A) and (B) of the definition
thereof).
(h)
Subject to the accuracy of the Initial Holders' representations
set
forth in Section 3.02 and, in the case of a transfer of a Warrant
or Warrant Shares,
compliance with Article V, the issuance of the Warrants and the
offering, sale and
delivery of the Warrants and the Warrant Shares under the
circumstances contemplated by
this Agreement constitute exempt transactions under the
registration provisions of the
Securities Act, and do not require the registration of the Warrants
or the Warrant Shares
under the Securities Act.
(i)
The Warrant Shares, when issued and delivered against payment of
the
Exercise Price therefor, will be duly authorized, validly issued,
fully paid and
nonassessable, and subject to no Liens, taxes, security interests
or adverse claims
created by the Company, and such Warrant Shares will not be subject
to the preemptive or
similar rights of any securityholder of the Company.
(j)
The Company will not amend its Charter Document in a manner
inconsistent with this Agreement or enter into any agreement
inconsistent with this
Agreement or that would make the Company unable to comply with the
terms of this
Agreement.
(k) As
of the date hereof, the Company's authorized capital stock
consists
of 800,000,000 shares of Common Stock and 85,000,000 shares of
preferred stock including
5,000,000 shares designated as Series A Preferred Stock. As
of 8:00 a.m. (Eastern
Standard Time) on the date hereof, 404,191,726 shares of Common
Stock were validly issued
and outstanding and no shares of preferred stock were issued and
outstanding. Such
404,191,726 shares of Common Stock have been validly issued, fully
paid and non-
assessable.
(l)
The Company will take no action to increase the par value of the
Common
Stock.
SECTION
3.02. Representations Warranties and Covenants of the
Initial
Holders. Each Initial Holder represents and warrants to, and
agrees with, the Company,
severally and not jointly, as follows:
(a)
Such Initial Holder is a knowledgeable and sophisticated investor,
is
experienced in business and financial matters, qualifies as an
"accredited investor" as
defined in Rule 501(a) of Regulation D and as a "qualified
institutional buyer" as
defined in Rule 144A under the Securities Act.
(b)
Such Initial Holder is knowledgeable regarding the Company and has
been
afforded access to information about the Company and the financial
condition, results of
operations, business, property, management and prospects of the
Company sufficient to
enable it to evaluate its investment in the Warrants and the
Warrant Shares. Such
Initial Holder and its advisors, if any, have been afforded the
opportunity to ask
questions of the Company. Such Initial Holder has sought such
accounting, legal and tax
advice as it has considered necessary to make an informed
investment decision with
respect to its acquisition of the Warrants and the Warrant
Shares.
(c)
Such Initial Holder understands that its investment in the Warrants
and
the Warrant Shares involves a high degree of risk. Such
Initial Holder is able to bear
the economic risk of its investment in the Warrants and the Warrant
Shares and is
presently able to afford the complete loss of such
investment.
(d)
Such Initial Holder is acquiring the Warrants and the Warrant
Shares
solely for its own account and not as a nominee or agent for any
other person and not
with a view to any distribution thereof in a transaction that would
violate the
Securities Act or the securities laws of any State of the United
States or any applicable
jurisdiction.
(e)
Such Initial Holder has not and will not offer or sell the Warrants
and
the Warrant Shares by means of any form of general solicitation or
general advertising
within the meaning of Rule 502(c) of Regulation D, including (i)
any advertisement,
article, notice or other communication published in any newspaper,
magazine or similar
medium or broadcast over television or radio, or (ii) any seminar
or meeting whose
attendees have been invited by any general solicitation or general
advertising in the
United States.
(f)
Such Initial Holder is a resident of that jurisdiction specified in
its
address for notices set forth (i) in the case of LB I Group, on its
signature page to
this Agreement and (ii) in the case of each other Initial Holder,
in the Addendum
executed by such Initial Holder.
(g)
Such Holder is not acquiring the Warrants with assets of any
"employee
benefit plan" (within the meaning of Section 3(3) of the Employee
Retirement Income
Security Act of 1974, as amended ("ERISA")) that is subject to
Title I of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as
amended.
(h)
Assuming the capitalization of the Company set forth in its most
recent
report filed under the Exchange Act, such Initial Holder, together
with its "affiliates"
(as defined in Rule 144 promulgated under the Securities Act), is
the beneficial owner
(as defined in Rule 13d-3 promulgated under the Exchange Act) of
not more than 4.9% of
the outstanding shares of Common Stock immediately after the
purchase of the Warrants.
The Company
and, for purposes of the opinions to be delivered pursuant to
the
Credit Agreement, counsel to the Company, General Counsel to the
Company and counsel to
the Initial Holders, will rely upon the accuracy and truth of the
foregoing
representations and agreements and the Initial Holders hereby
consent to such reliance.
SECTION
3.03. Payments of Cash Dividends. Subject to the
record date
provisions described below, the Company shall pay to each holder of
Warrants an amount
per Warrant equal to the amount of all Cash Dividends, if any,
which would have been paid
by the Company with respect to each share of Common Stock then
issuable upon the exercise
of such Warrant if it had been exercised on the record date for the
payment of the cash
dividend. Cash Dividends, if any, will be payable on the payment
date of each such Cash
Dividend to Holders as of the record date for determination of the
stockholders entitled
to receive such Cash Dividend.
ARTICLE IV
Exercise Terms
SECTION
4.01. Terms of Warrants; Exercise of Warrants. The
initial exercise
price per share at which Warrant Shares shall be issuable upon the
exercise of a Warrant
(the "Exercise Price") shall be equal to $0.01 per share of Common
Stock. Each Warrant
shall entitle the Holder thereof, subject to and upon compliance
with the provisions of
this Agreement, to purchase from the Company one share of Common
Stock, subject to
adjustment pursuant to the terms of this
Agreement.
Subject to
the terms of this Agreement, each Holder shall have the
right,
which may be exercised commencing on the date that the Warrants
have been issued and
delivered to each Holder pursuant to Section 2.02 and shall
continue until 5:00 p.m., New
York City time on the later of (i) September 2, 2006 and (ii) to
the extent that any
Transfer Restricted Securities (as defined in the Registration
Rights Agreement) remain
outstanding on September 6, 2006, ten Business Days after the
effective date of a
registration statement under the Securities Act with respect to the
Warrant Shares
issuable upon the exercise of the Warrants, but no later than
September 2, 2007 (the
"Expiration Date"), to receive from the Company the number of fully
paid and
nonassessable Warrant Shares which the Holder may at the time be
entitled to receive on
exercise of the Warrants and payment of the Exercise Price then in
effect for such
Warrant Shares. In the alternative, each Holder may exercise its
right to receive Warrant
Shares on a net basis (a "Cashless Exercise"), such that, without
the exchange of any
funds, the holder receives that number of Warrant Shares otherwise
issuable (or payable)
upon exercise of the Warrants less that number of Warrant Shares
having an aggregate
Current Market Price at the time of exercise equal to the aggregate
Exercise Price that
would otherwise have been paid by the Holder of the Warrant Shares.
If the Warrants are
not exercised prior to 5:00 p.m., New York City time, on the
Expiration Date, they shall
become void and all rights thereunder and all rights in respect
thereof under this
Agreement shall cease as of such time. No adjustments as to
Dividends will be made upon
exercise of the Warrants.
The Holders
will only be able to exercise their Warrants (i) by means of
a
cashless exercise or (ii) if any registration statement under the
Securities Act relating
to the Warrant Shares is effective or the exercise of such Warrants
is exempt from the
registration requirements of the Securities Act and such securities
are qualified for
sale or exempt from qualification under the applicable securities
laws of the states or
other jurisdictions in which such Holders reside.
No Holder
may exercise any Warrant to the extent that, immediately
following
such exercise and upon receipt of any Warrant Shares issuable upon
such exercise, such
Holder would either (i) become or be included in any 13D Person
that is the single
largest holder of voting power represented by the Company's capital
stock (or otherwise
become the single largest holder of the Common Stock) (the
"Shareholder Limitation"), or
(ii) beneficially own (as such term is defined in Section 13(d)(3)
of the Exchange Act)
or be included in any 13D Person that beneficially owns in excess
of 4.9% of the voting
power represented by the Company's capital stock (or otherwise
beneficially own in excess
of 4.9% of the outstanding Common Stock) (the "4.9% Limitation")
after, in either case,
giving effect to such exercise (the Shareholder Limitation and the
4.9% Limitation are
collectively referred to herein as the "Exercise
Limitations"). The determinations of
the number of shares that (i) constitute 4.9% of the outstanding
Common Stock or voting
power and (ii) are held by the largest holder will be made in
reliance upon the
information contained in publicly available filings made with the
SEC unless the Company
is aware that such information is incorrect and has made the
correct information public,
to the extent material, and disclosed such information to the
Holders at the time of any
such proposed exercise. In order to facilitate compliance with the
foregoing, each Holder
will be required to make a representation that it and its
affiliates will comply with the
Exercise Limitations immediately after the exercise of any Warrant
and receipt of any
shares of Common Stock issuable upon such exercise.
Notwithstanding the Exercise Limitation, however, a Holder may
exercise any
Warrant that would otherwise cause such Holder to hold Warrant
Shares in excess of the
Exercise Limitations if, as to such excess number of Warrant Shares
(the "Excess
Shares"), such Holder (i) irrevocably covenants to the Company to
sell such Excess Shares
within 10 days after the date of exercise and (ii) confirms that it
has, on or prior to
such exercise date, entered into a binding arrangement to sell the
Excess Shares within
10 days after such exercise date either (a) in a regular way
transaction on a national
securities exchange (or the principal market where shares of Common
Stock are then
traded) or (b) to one or more persons that are not "affiliates"
(used herein as defined
in Rule 144 promulgated under the Securities Act) of such Holder
("Third Parties"), each
of whom represents for the benefit of the Company that, upon
purchase of the applicable
Excess Shares, such Third Party, together with its affiliates, will
not be the beneficial
owner of a number of shares of Common Stock in excess of the
Exercise Limitations. In
addition, such Holder shall agree to vote the applicable Excess
Shares only in accordance
with the recommendations of the Board of Directors of the Company
or any Third Party that
has agreed to purchase such shares, if any record date for a vote
of the Common Stock is
established for any day between the exercise date and the
consummation of the sale of the
applicable Excess Shares. The Exercise Limitations will cease
to have any force and
effect upon consummation of the Utility Spin-Off, if, on the date
that is 14 days after
delivery to the Company of a request by the Required Holders to
such effect (which
request may be given no more than once during any 180-day period),
the Company shall not
have delivered a certificate to the Holders stating that the
removal of the Exercise
Limitations would, in the good faith judgment of the Company, not
be consistent with
applicable regulatory or other legal requirements.
SECTION
4.02. Adjustment of Exercise Price and Number of Warrant
Shares
Issuable. The number of Warrant Shares issuable upon the
exercise of each Warrant (the
"Warrant Number") is subject to adjustment from time to time upon
the occurrence of the
events enumerated in this Section 4.02; provided that no adjustment
shall be made
pursuant to this Section 4.02 which shall have the effect of
decreasing the Warrant
Number (except pursuant to Section 4.02(a)(3)) or increasing the
Exercise Price (except
pursuant to Section 4.02(a)(3)). For purposes of this Section 4.02,
"Common Stock" means
shares now or hereafter authorized of any class of common stock of
the Company and any
other stock of the Company, however designated, that has the right
(subject to any prior
rights of any class or series of preferred stock) to participate in
any distribution of
the assets or earnings of the Company without limit as to per share
amount.
(a)
Adjustment for Change in Capital Stock.
If the
Company:
(1) pays a dividend or makes a distribution on its Common
Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater
number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller
number;
(4) makes a distribution on its Common Stock in shares of its
capital
stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares
of its
capital stock,
then Warrant Number immediately prior to such action shall be
proportionately adjusted so
that the Holder of any Warrant thereafter exercised shall receive
the aggregate number
and kind of shares of capital stock of the Company which such
Holder would have owned
immediately following such action if such Warrant had been
exercised immediately prior to
such action.
The
adjustment shall become effective immediately after the record date
in
the case of a dividend or distribution and immediately after the
effective date in the
case of a subdivision, combination or reclassification.
If after an
adjustment a Holder upon exercise of a Warrant may receive
shares
of two or more classes of capital stock of the Company, the Company
shall reasonably
determine the allocation of the adjusted Exercise Price between the
classes of capital
stock. After such allocation, the exercise privilege and the
number of shares of each
such class of capital stock shall thereafter be subject to
adjustment on terms comparable
to those applicable to Common Stock in this Section 4.02.
Such
adjustment shall be made successively whenever any event listed
above
shall occur.
(b)
Adjustment for Rights Issue. If the Company distributes any
rights,
warrants or options to all holders of its Common Stock entitling
them for a period
expiring within 60 days after the record date mentioned below to
purchase shares of
Common Stock at a price per share less than the Current Market
Price per share on that
record date, the Warrant Number shall be adjusted in accordance
with the formula:
O + A
N' = N x O + A x
P
M
where:
N' = the
adjusted Warrant Number.
N = the
current Warrant Number.
O = the
number of shares of Common Stock outstanding on the record
date.
A = the
number of additional shares of Common Stock offered.
P = the
purchase price per share of the additional shares.
M = the
Current Market Price per share of Common Stock on the record
date.
The
adjustment shall be made successively whenever any such rights,
warrants
or options are issued and shall become effective immediately after
the record date for
the determination of stockholders entitled to receive the rights,
warrants or options. If
at the end of the period during which such rights, warrants or
options are exercisable,
not all rights, warrants or options shall have been exercised, the
Warrant Number shall
be immediately readjusted to what it would have been if "A" in the
above formula had been
the number of shares actually issued.
(c)
Adjustment for Other Distributions. Except with respect to
any
distribution provided for in Section 4.02(d), if the Company
distributes to all holders
of its Common Stock any of its assets (other than Cash Dividends)
or debt securities or
any rights, options or warrants to purchase debt securities, assets
(other than Cash
Dividends) or other securities of the Company, the Warrant Number
shall be adjusted in
accordance with the formula:
M
N' = N x _______
M –
F
where:
N'
= the adjusted Warrant Number.
N
= the current Warrant
Number.
M
= the Current Market Price per
share of Common Stock on the record
date mentioned below.
F
= the fair market value on the
record date of the assets,
securities, rights or warrants distributable to one share of
Common Stock. The Board of the Company shall reasonably and
in
good faith determine the fair market value.
The
adjustment shall be made successively whenever any such
distribution is
made and shall become effective immediately after the record date
for the determination
of stockholders entitled to receive the distribution.
This
subsection (c) does not apply to rights, warrants or options
referred to
in subsection (b) of this Section 4.02 or any assets distributed
pursuant to subsection
(d) of this Section 4.02. If any adjustment is made pursuant
to this subsection (c) as a
result of the issuance of rights, warrants or options and at the
end of the period during
which any such rights, warrants or options are exercisable, not all
such rights, warrants
or options shall have been exercised, the Warrants shall be
immediately readjusted as if
"F" in the above formula was the fair market value on the record
date of the indebtedness
or assets actually distributed upon exercise of such rights,
warrants or options divided
by the number of shares of Common Stock outstanding on the record
date. Notwithstanding
anything to the contrary contained in this subsection (c), if "M -
F" in the above
formula is less than $1.00 (or is a negative number) then in lieu
of the adjustment
otherwise required by this subsection (c), the Company shall
distribute to each Holder of
a Warrant, the evidences of indebtedness, assets, rights, warrants
or options (or the
proceeds thereof) which would have been distributed to such Holder
had such Warrant been
exercised immediately prior to the record date for such
distribution.
(d)
Adjustments for Spin-Offs. Upon consummation of any
distribution
consisting of shares of Capital Stock of, or similar equity
interests in, one or more of
the Company's Subsidiaries (a
"Spin-Off"), including, without limitation,
the
consummation of the Utility Spin-Off or a Spin-Off of NEG, Inc.,
the Warrant Number shall
be adjusted in accordance with the following formula:
P + U
N' = N
P
Where:
N'
= the
adjusted Warrant Number.
N
=
the then current Warrant Number.
P
=
the arithmetic average of the VWAP of the Common Stock of
the reorganized Company over the Trading Period.
U
=
the arithmetic average of the VWAP of the Common
Stock of
the Subsidiary which was subject to the Spin-Off over the
Trading Period.
Trading
Period = the 20 consecutive Trading Days commencing on and
including
the 20th day of trading of the Common Stock after the
effectiveness of such Spin-Off.
The
adjustment shall be made successively whenever any such Spin-Off is
made
and shall become effective immediately after such
Spin-Off.
(e)
Other Adjustments. The Warrant Shares are subject to
further
adjustment in the manner set forth in Section 4.09 and Section 3 of
the Registration
Rights Agreement.
(f)
When De Minimis Adjustment May Be Deferred; Rounding. No adjustment
in
the Warrant Number need be made unless the adjustment would require
an increase or
decrease of at least 1% in the Warrant Number. Any adjustments that
are not made shall be
carried forward and taken into account in any subsequent
adjustment.
th
All calculations under this Section 4.02 shall be made to the
nearest 1/1000
cent or to the nearest 1/10 millionth of a share, as the case may
be.
(g)
When No Adjustment Required. No adjustment need be made for a
transaction referred to in subsections (b), (c) or (d) of this
Section 4.02 if the Holders are to participate, without requiring
the Warrants to be exercised, in the
transaction on a basis and with notice that the Board of the
Company reasonably determine
to be fair and appropriate in light of the basis and notice on
which holders of Common
Stock participate in the transaction.
To the
extent the Warrants become convertible into cash, no adjustment
need
be made thereafter as to the amount of cash into which the Warrants
are exercisable.
Interest will not accrue on the cash.
(h)
Notices to Holders. Upon any adjustment of the Warrant Number
pursuant
to this Section 4.02, the Company shall promptly thereafter, and in
any event within ten
days, (i) provide a certificate executed by the Chief Financial
Officer, the Treasurer,
any Assistant Treasurer, Controller or any Assistant Controller of
the Company setting
forth the Warrant Number and the Exercise Price after such
adjustment and setting forth
in reasonable detail the method of calculation and the facts upon
which such calculations
are based and (ii) cause to be given to each of the Holders at its
address appearing on
the Register written notice of such adjustments by first-class
mail, postage prepaid.
Where appropriate, such notice may be given in advance and included
as a part of the
notice required to be mailed under the other provisions of this
Section 4.02(h). The
Holders shall be fully protected in relying on any such certificate
and on any adjustment
therein contained and shall not be deemed to have knowledge of such
adjustment unless and
until it shall have received such certificate.
In
case:
(1)
the Company shall authorize the issuance to all holders of shares
of
Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common
Stock or of any other subscription rights or warrants; or
(2)
the Company shall authorize the distribution to all holders of
shares
of Common Stock of evidences of its indebtedness or assets (other
than Cash Dividends or
Dividends payable in shares of Common Stock or distributions
referred to in subsection
(a) of this Section 4.02); or
(3) of
any consolidation or merger to which the Company is a party and
for
which approval of any shareholders of the Company is required, or
of the conveyance or
transfer of the properties and assets of the Company substantially
as an entirety, or of
any reclassification or change of Common Stock issuable upon
exercise of the Warrants
(other than as a result of a subdivision or combination), or a
tender offer or exchange
offer for shares of Common Stock; or
(4) of
the voluntary or involuntary dissolution, liquidation or winding
up
of the Company; or
(5)
the Company proposes to take any action (other than actions of
the
character described in Section 4.02(a) hereof) which would require
an adjustment of the
Warrant Number pursuant to this Section 4.02,
then the Company shall cause to be given to each Holder at its
address appearing on the
Register, at least 20 calendar days (or 10 calendar days in any
case specified in clauses
(1) or (2) above) prior to the applicable record date hereinafter
specified, or promptly
in the case of events for which there is no record date, by
first-class mail, postage
prepaid, a written notice stating (i) the date as of which the
holders of record of
shares of Common Stock to be entitled to receive any such rights,
options, warrants or
distribution are to be determined, or (ii) the date on which any
such consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to
become effective or consummated, and the date as of which it is
expected that holders of
record of shares of Common Stock shall be entitled to exchange such
shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The
failure to give the
notice required by this Section 4.02(h) or any defect therein shall
not affect the
legality or validity of any distribution, right, option, warrant,
consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or
the vote upon any
action.
(i)
Voluntary Increase. The Company from time to time may increase
the
Warrant Number by any amount for any period of time (including,
without limitation,
permanently) if such period is at least 20 days.
An increase
of the Warrant Number does not change or adjust the Warrant
Number otherwise in effect for purposes of subsections (a), (b),
(c) and (d) of this
Section 4.02.
(j)
Notice of Certain Transactions.
If:
(1) the Company takes any action that would require an
adjustment in
the Warrant Number pursuant to subsections
(a), (b), (c) and (d) of this Section
4.02 and if the Company does not arrange
for the Holders to participate pursuant to
subsection (g) of this Section 4.02;
(2) the Company takes any action that would require a
supplemental
Warrant Agreement pursuant to subsection
(k) of this Section 4.02; or
(3) there is a liquidation or dissolution of the
Company,
the Company shall, if not already provided pursuant to Section
4.02(h) above, mail to the
Holders a notice stating the proposed record date for a dividend or
distribution or the
proposed effective date of a subdivision, combination,
reclassification, consolidation,
merger, transfer, lease, liquidation or dissolution. The Company
shall mail the notice at
least 15 days before such date. Failure to mail the notice or any
defect in it shall not
affect the validity of the transaction.
(k)
Reorganization of Company. If the Company consolidates or
merges with
or into any person, upon consummation of such transaction, the
Warrants shall
automatically become exercisable for the kind and amount of
securities, cash or other
assets which the Holder would have owned immediately after such
consolidation or merger
if such Holder had exercised the Warrant immediately before the
effective date of the
transaction. Concurrently with the consummation of any such
transaction, the corporation
formed by or surviving any such consolidation or merger if other
than the Company shall
enter into a supplemental Agreement so providing and further
providing for adjustments
which shall be as nearly equivalent as may be practical to the
adjustments provided for
in this Section. The successor Company shall mail to Holders a
notice describing the
supplemental Agreement.
If the
issuer of securities deliverable upon exercise of the Warrants
under
the supplemental Agreement is an affiliate of the formed or
surviving, corporation, that
issuer shall join in the supplemental Agreement.
If this
subsection (k) applies, subsections (a), (b), (c) and (d) of
this
Section 4.02 do not apply.
(l)
When Issuance or Payment May Be Deferred. In any case in
which this
Section 4.02 shall require that an adjustment in the Warrant Number
be made effective as
of a record date for a specified event, the Company may elect to
defer until the
occurrence of such event (i) issuing to the Holder of any Warrant
that is exercised after
such record date the Warrant Shares and other capital stock of the
Company, if any,
issuable upon such exercise over and above the Warrant Shares and
other capital stock of
the Company, if any, issuable upon such exercise on the basis of
the Warrant Number prior
to any adjustment and (ii) paying to such holder any amount in cash
in lieu of a
fractional share pursuant to Section 4.05 hereof, provided,
however, that the Company
shall deliver to such holder a due xxxx or other appropriate
instrument evidencing such
Holder's right to receive such additional Warrant Shares, other
capital stock and cash
upon the occurrence of the event requiring such adjustment.
(m)
Adjustment in Exercise Price. Upon each event that provides for
an
adjustment of the Warrant Number pursuant to this Section 4.02,
Section 4.09 and Section
3 of the Registration Rights Agreement, each Warrant outstanding
prior to making the
adjustment shall thereafter evidence the right to receive that
number of shares of Common
Stock (calculated to the nearest ten millionth) equal to the
adjusted Warrant Number at
an Exercise Price per share of Common Stock obtained from the
following formula:
N
E' = E x N'
where:
N' = the
adjusted Warrant Number.
N =
the Warrant Number prior to adjustment.
E' = the
adjusted Exercise Price per share of Common Stock.
E =
the Exercise Price per share of Common Stock prior to
adjustment.
(n)
Form of Warrants.
(i)
Irrespective of any adjustments in the Warrant Number or the number
or
kind of
shares issuable upon the exercise of the Warrants, the
Warrants
theretofore
or thereafter issued may continue to express the same price
and
number and
kind of shares as are stated in the Warrants initially
issuable
pursuant to
this Agreement.
(ii) The
form of Warrant Certificate need not be changed because of
any
adjustment
made pursuant to this Section 4.02, and Warrant Certificates
issued after
such adjustment may state the same Warrant Number and the
same
number of
shares of Common Stock issuable upon exercise of the Warrants
as
are stated
in the Warrant Certificates initially issued pursuant to this
Agreement. The Company, however, may at any time in its sole
discretion make
any change
in the form of Warrant Certificate that they may deem
appropriate
to give
effect to such adjustments and that does not affect the substance
of
the Warrant
Certificate, and any Warrant Certificate thereafter issued,
whether in
exchange or substitution for an outstanding Warrant Certificate
or
otherwise,
may be in the form as so changed.
SECTION
4.03. Manner of Exercise.
(a)
The Warrants may be exercised upon (i) surrender to the Company of
the
related Warrant Certificate, together with the form of election
attached thereto to
purchase Common Stock on the reverse thereof duly filled in and
signed by the Holder
thereof and (ii) payment to the Company of the Exercise Price for
the Warrant Shares
being purchased upon such exercise.
(b)
Payment of the aggregate Exercise Price shall be made (i) in cash
or by
certified or official bank check payable to the order of the
Company in New York Clearing
House Funds, (ii) by Cashless Exercise in the manner provided in
the second paragraph of
Section 4.01.
(c)
Subject to the limitations set forth in the third paragraph of
Section
4.01, the Warrants shall be exercisable at the election of such
Holder either in full or
in part at any time or from time to time, but in no event later
than the Expiration Date.
SECTION
4.04. Issuance of Warrant Shares. Upon the
surrender of the Warrant
Certificates and the payment of the Exercise Price, the Company
shall issue, and shall
cause its transfer agent for the Common Stock, which may be the
Company (the "Transfer
Agent"), to deliver with all reasonable dispatch to or upon the
written order of the
respective Holder and in such name or names as such Holder may
designate, a certificate
or certificates for the number of full Warrant Shares so purchased
upon the exercise of
such Warrants together with cash as provided in Section 4.05.
Such certificate or
certificates shall be deemed to have been issued and any Person so
designated to be named
therein shall be deemed to have become a Holder of record of such
Warrant Shares as of
the date of the payment of the Exercise Price. To the extent
required by Section
5.02(b), the Company shall, and shall cause the Transfer Agent to,
comply with the
requirements of such Section.
The Company
shall keep copies of this Agreement and any notices given or
received hereunder available for inspection by the Holders during
normal business hours
at their respective offices at the addresses set forth in Section
7.04 hereof.
SECTION
4.05. Fractional Warrant Shares. The Company shall
not be required
to issue fractional Warrant Shares on the exercise of the
Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by
the same Holder, the
number of full Warrant Shares which shall be issued upon the
exercise thereof shall be
computed on the basis of the aggregate number of Warrant Shares
issuable upon exercise of
the Warrants so presented. If any fraction of a Warrant Share
would, except for the
provisions of this Section
4.05, be issuable on the exercise of any Warrant (or
specified
portion thereof), the Company shall pay an amount in cash equal to
the Current Market
Price per Warrant Share on the day immediately preceding the date
the Warrant is
presented for exercise, multiplied by such fraction, computed to
the nearest whole cent.
SECTION
4.06. Reservation of Warrant Shares. The Company
will at all times
reserve and keep available, free from preemptive or similar rights,
out of the aggregate
of its authorized but unissued Common Stock or its authorized and
issued Common Stock
held in its treasury, for the purpose of enabling it to satisfy any
obligation to
transfer Warrant Shares upon exercise of each Warrant, the maximum
number of shares of
Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
The Holders shall have no duty to verify availability of such
shares set aside by the
Company.
The Company
will keep a copy of this Agreement on file with the Transfer
Agent and with every subsequent transfer agent for any shares of
the Company's Common
Stock issuable upon the exercise of the Warrants. The Company
will supply such Transfer
Agent with duly executed stock certificates required to honor the
Warrants upon exercise
thereof in accordance with the terms of this Agreement and the
Company will provide or
otherwise make available any cash which may be payable as provided
in Section 4.05
hereof. The Company will furnish such Transfer Agent a copy
of all notices of
adjustments and certificates related thereto.
SECTION
4.07. Compliance with Law. If any shares of Common
Stock required to
be reserved for purposes of exercise of the Warrants require, under
any Federal or state
law or applicable governing rule or regulation of any national
securities exchange,
registration with or approval of any Governmental Authority or
listing on any such
national securities exchange before such shares may be purchased
upon exercise, the
Company will in good faith and as expeditiously as possible
endeavor also to cause such
shares to be duly registered, approved or listed on the relevant
national securities
exchange, as the case may be.
SECTION
4.08. Payment of Taxes. Except as set forth in
Section 6.13, the
Company will pay all documentary stamp taxes attributable to the
issuance of Warrant
Shares upon the exercise of any Warrant.
SECTION
4.09. Failure to Deliver Shares. If, for any
reason whatsoever, the
Company shall fail to, or is otherwise unable to, deliver any
Warrant Shares to any
Holder upon the exercise of such Holder's Warrants (a "Share
Delivery Default"), the
Company hereby agrees to pay liquidated damages to the Holders on a
monthly basis in an
amount such that, each Warrant outstanding shall evidence the right
to receive upon
payment of the Exercise Price that number of shares of Common Stock
(calculated to the
nearest ten millionth) obtained from the following formula:
N' = N . 1.005
Where:
N' =
the adjusted number of Warrant Shares issuable upon the exercise of
a
Warrant by payment of the Exercise Price.
N
= the number of Warrant Shares previously issuable upon the
exercise of a
Warrant by payment of the Exercise Price prior to adjustment.
The adjustment made pursuant to this Section shall be made on a
monthly basis beginning
on and including the day following the Share Delivery Default to
but excluding the day on
which the Share Delivery Default has been cured. Following
the cure of each such Share
Delivery Default with respect to such Warrants and Warrant Shares,
the accrual of
liquidated damages with respect to such Warrants and Warrant Shares
will cease.
ARTICLE V
Transfer Restrictions
SECTION
5.01. Restrictions on Transfers of the Warrants and the
Warrant
Shares. The following restrictions on transfer shall apply to
the Warrants and Warrant
Shares:
(a) No
Holder or transferee thereof shall sell, transfer or convey in
any
manner whatsoever any Warrant or Warrant
Shares except in accordance with the terms
and provisions of this Agreement.
(b)
Each Holder may, without the consent of the Company, sell or assign
any
Warrants or Warrant Shares and the other
rights and obligations of such Holder to
any Person or any assignee thereof (an
"Assignee"). The Assignee shall agree to be
bound by the terms of this Agreement and
such Warrants pursuant to an assignment
and assumption agreement in a form
reasonably acceptable to the Company and shall
provide:
(i) if such Warrants or Warrant Shares are being transferred
pursuant
to an
exemption from registration in accordance with Rule 144 under
the
Securities
Act or Regulation S under the Securities Act or, in the case
of
the Warrant
Shares, pursuant to an effective registration statement under
the
Securities
Act, a certification to that effect (in the form attached to
the
Warrant
Certificate) and, in the case of a transfer pursuant to Rule 144,
an
opinion of
counsel reasonably acceptable to the Company to the effect
that
such
transfer does not require registration under the Securities Act or
any
other
evidence reasonably satisfactory to the Company as to the
compliance
with the
legend set forth in Exhibit B; or
(ii) if such Warrants or Warrant Shares are being transferred
in
reliance on
another exemption from the registration requirements of the
Securities
Act, a certification to that effect (in the form attached to
the
Warrant
Certificate), an opinion of counsel reasonably acceptable to
the
Company to
the effect that such transfer does not require registration
under
the
Securities Act and a representation letter from the transferee in
the
form of
Exhibit C hereto,
and effective immediately upon such transfer or assignment, the
Assignee shall be deemed
a Holder and shall have the rights and obligation of a Holder
pursuant to this Agreement.
(c)
Notwithstanding any other provision contained in this Agreement to
the
contrary, any Holder may assign all or any
portion of the Warrants or Warrant
Shares held by it as collateral
security.
SECTION
5.02. Notation; Removal of Legend. (a) A
notation will be made in
the appropriate transfer records of the Company with respect to any
such transfer of the
Warrants and Warrant Shares referred to in this
Agreement.
(b) If any Warrant or Warrant Shares are being transferred
pursuant to an
exemption from registration in accordance with Rule 144 under the
Securities Act, the
Company shall, or shall cause the Transfer Agent to, remove from
any Warrant Certificate
or other certificate representing the Warrant Shares, the transfer
restriction legend set
forth in Exhibit B hereto or any other legend or markings which in
any way purport to
restrict the transferability of the Warrants or the Warrant
Shares.
SECTION
5.03. Surrender of Warrant Certificates. Any
Warrant Certificate
surrendered for registration of transfer, exchange or exercise of
the Warrants
represented thereby shall, if surrendered to the Company, be
promptly canceled by the
Company and shall not be reissued by the Company and, except as
provided in this
Article V or in Article II hereof in case of the exercise of less
than all the Warrants
represented thereby or in case of a mutilated Warrant Certificate
or in the case of a
transfer, no Warrant Certificate shall be issued hereunder in lieu
thereof. The Company
shall dispose of such canceled Warrant Certificates in any manner
as the Company may so
desire.
ARTICLE VI
Miscellaneous
SECTION
6.01. SEC Reports and other Financial Information.
The Company shall
provide the Holders, within 15 days after the Company files the
same with the SEC, copies
of the Company's annual report and of the information, documents
and other reports (or
copies of such portions of any of the foregoing as the SEC may by
rules and regulations
prescribe) which the Company is required to file with the SEC
pursuant to Section 13 or
15(d) of the Exchange Act, provided that if any such information,
documents or reports
are filed with the SEC and available to Holders through XXXXX, then
no such information,
documents or other reports need be provided. Notwithstanding that
the Company may not be
required to remain subject to the reporting requirements of Section
13 or 15(d) of the
Exchange Act, until such time as there are no Warrants or Warrant
Shares which constitute
Transfer Restricted Securities (as defined in the Registration
Rights Agreement), the
Company shall continue to file such annual reports and information,
documents and other
reports with the SEC, if such continue to be accepted by the SEC,
and the Company shall
provide the Holders with such annual reports and such information,
documents and other
reports as the Company provides to the holders of its Common Stock
or other securities.
SECTION
6.02. Persons Benefiting. Nothing in this
Agreement is intended or
shall be construed to confer upon any Person other than the Company
and the Holders any
right, remedy or claim under or by reason of this Agreement or any
part hereof.
SECTION
6.03. Amendments and Waivers. The provisions of
this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented,
and waivers or consents to departures from the provisions hereof
may not be granted
except by the written agreement of the Company and the holders of a
majority of the
Warrants then outstanding.
SECTION
6.04. Notices. All notices, requests and other
communications
provided for hereunder shall be in writing (including, unless the
context expressly
otherwise provides, by facsimile transmission, provided that any
matter transmitted by
the Company by facsimile (i) shall be immediately confirmed by a
telephone call to the
recipient at the number specified on the applicable signature page
hereof, and (ii) shall
be followed promptly by a hard copy original thereof by express
courier) and faxed or
delivered, to the address or facsimile number specified for notices
on the applicable
signature page hereof or to such other address as shall be
designated by such party in a
written notice to the other parties hereto.
All such
notices, requests and communications (i) sent by express
courier
will be effective upon delivery to or refusal to accept delivery by
the addressee, and
(ii) transmitted by facsimile will be effective when sent and
facsimile confirmation
received; except that all notices and other communications to any
Holder shall not be
effective until actually received.
The Company
acknowledges and agrees that any agreement of any Holder to
receive certain notices by telephone and facsimile is solely for
the convenience and at
the request of the Company. The Holder shall be entitled to rely on
the authority of any
Person purporting to be a Person authorized by the Company to give
such notice and the
Holder shall not have any liability to the Company or other Person
on account of any
action taken or not taken by the Holder in reliance upon such
telephonic or facsimile
notice.
If the
notice or communication shall be in writing, then such notice
or
communication shall be delivered (i) to the Company at the address
set forth below in
this Section 6.04(c) (or to such other address or addresses as the
Company may notify the
Holders in accordance with this Section 6.04), (ii) to LB I Group
at the address or
addresses set forth on its signature page to this Agreement (or to
such other address or
addresses as LB I Group may notify the Company in accordance with
this Section 6.04,
(iii) to any other Initial Holder at the address or addresses set
forth on the Addendum
executed by such Initial Holder (or to such other address or
addresses as such Initial
Holder may notify the Company in accordance with this Section 6.04)
and (iii) to any
other Holders at the address or addresses provided by such Holder
to the Company in
accordance with this Section 6.04 upon becoming a Holder (or to
such other address or
addresses as such Initial Holder may notify the Company in
accordance with this Section
6.04):
The
Company:
PG&E Corporation
One Market, Xxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Assistant Treasurer
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with copies
to:
PG&E Corporation
Xxx Xxxxxx, Xxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Counsel – Corporate
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
and
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
Each party
hereto by notice to the other parties may designate additional
or
different addresses for subsequent notices or communications.
Failure to
mail a notice or communication to a Holder or any defect in
it
shall not affect its sufficiency with respect to any other Holders.
If a notice or
communication is mailed in the manner provided above, it is duty
given, whether or not
the addressee receives it.
SECTION
6.05. Governing Law; Waiver of
Jury Trial; Submission of
Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(a)
EACH OF THE COMPANY AND THE HOLDERS CONSENTS AND AGREES TO
THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF
NEW YORK, STATE OF
NEW YORK, AND WAIVES ANY OBJECTION BASED ON VENUE OR FORUM NON
CONVENIENS WITH RESPECT TO
ANY ACTION INSTITUTED THEREIN, AND AGREES THAT, EXCEPT WITH THE
WRITTEN CONSENT OF THE
HOLDERS, ANY DISPUTE CONCERNING THE CONDUCT OF ANY PARTY IN
CONNECTION WITH THIS
AGREEMENT OR OTHERWISE SHALL BE HEARD ONLY IN THE COURTS DESCRIBED
ABOVE.
(b)
EACH OF THE COMPANY AND THE HOLDERS HEREBY WAIVES PERSONAL SERVICE
OF
ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY
HAND DELIVERY TO EACH SUCH PERSON AT ITS ADDRESS SET FORTH ABOVE
OR, AT THE OPTION OF A
HOLDER, BY SERVICE UPON CT CORPORATION SYSTEM, WHICH THE COMPANY
IRREVOCABLY APPOINTS AS
SUCH PERSON'S AGENT FOR THE PURPOSE OF ACCEPTING SERVICE OF PROCESS
WITHIN THE STATE OF
NEW YORK. THE COMPANY HEREBY CONSENTS TO SERVICE OF PROCESS AS
AFORESAID.
(c)
NOTHING IN THIS SECTION 6.05 SHALL AFFECT THE RIGHT OF THE HOLDERS
TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF THE
HOLDERS TO BRING ANY ACTION OR PROCEEDING AGAINST THE COMPANY OR
THEIR PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION.
(d)
EACH THE COMPANY AND THE HOLDERS HEREBY WAIVES ANY RIGHT TO TRIAL
BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING
UNDER THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH
OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED
HERETO, IN EACH CASE, WHETHER NOW EXISTING OR HEREAFTER ARISING,
AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE. EACH OF THE COMPANY AND THE HOLDERS
HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION
6.06. Successors and Assigns. All agreements of
each of the parties
hereto in this Agreement shall inure to the benefit and be binding
upon their respective
successors and permitted assigns. The Company may not assign its
rights or obligations
hereunder without the prior written consent of each of the
Holders.
SECTION
6.07. Severability. Any provision hereof which is
prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the
extent of such prohibition or unenforceability without invalidating
the remaining
provisions hereof and without affecting the validity or
enforceability of any provision
in any other jurisdiction.
SECTION
6.08. Entire Agreement. This Agreement represents
the final and
complete agreement of the parties hereto, and all prior
negotiations, representations,
understandings, writings and statements of any nature are hereby
superseded in their
entirety by the terms of this Agreement. There are no restrictions,
agreements,
warranties or undertakings other than those set forth or referred
to herein, including
with respect to the registration rights granted by the Company with
respect to the
Warrant Shares.
SECTION
6.09. Counterparts. This Agreement may be executed
in any number of
counterparts and by the different parties hereto on separate
counterparts, each of which
when so executed and delivered shall be an original, but all of
which shall together
constitute one and the same instrument.
SECTION
6.10. Headings. The headings of the Articles and
Sections of this
Agreement have been inserted for convenience of reference only, are
not intended to be
considered a part hereof and shall not modify or restrict any of
the terms or provisions
hereof.
SECTION
6.11. Remedies. In the event of a breach by the
Company or a Holder
of any of their obligations under this Agreement, each Holder or
the Company, as the case
may be, in addition to being entitled to exercise all rights
provided herein or granted
by law, including recovery of damages, will be entitled to specific
performance of its
rights under this Agreement. The Company and each Holder agree that
monetary damages
would not be adequate compensation for any loss incurred by reason
of a breach by it of
any of the provisions of this Agreement and hereby further agrees
that, in the event of
any action for specific performance in respect of such breach, it
shall waive the defense
that a remedy at law would be adequate. The remedies provided
herein are cumulative and
not exclusive of any remedies provided by law.
SECTION
6.12. Waiver. The Company waives any claim it may
have against any
Holder for any consequential, exemplary or punitive damage now or
hereafter under or in
connection with or relating to this Agreement or any other
Financing Document.
SECTION
6.13. Register. The Company hereby agrees to
maintain a register
(the "Register") on which it will record the number of Warrants
held by each Holder from
time to time. With respect to any Holder, the transfer, exchange or
exercise of any
Warrants of such Holder and the rights pursuant to such Warrant
shall not be effective
until such transfer, exchange or exercise is recorded on the
Register maintained by the
Company with respect to ownership of such Warrants and any Warrant
Certificate
representing such Warrants is surrendered to the Company for
recordation of such
transfer, exchange or exercise and prior to such recordation all
rights of the transferor
with respect to such Warrants shall remain the transferor's. The
registration of
assignment or transfer of all or part of any Holder's Warrants
shall be recorded promptly
by the Company only upon the receipt by the Company of a properly
executed and delivered
assignment and assumption agreement pursuant to, and all other
documents and instruments
required under, Section 5.01(b). Upon the request of any Holder,
the Company shall at any
time and from time to time provide the requesting Holder, at no
cost, a list of all of
the Holders of the Warrants. To permit registrations of
transfers and exchanges, the
Company shall make available a sufficient number of executed
Warrant Certificates to
effect such registrations of transfers and exchanges. No
service charge shall be made to
the Holder for any registration of transfer or exchange of
Warrants, but the Company may
require from the transferring or exchanging Holder payment of a sum
sufficient to cover
any transfer tax or similar governmental charge payable upon
exchanges pursuant to
Section 2.03 and exchanges in respect of portions of Warrants not
exercised and the
Company may deduct such taxes from any payment of money to be made
and such transfer or
exchange shall not be consummated (if such taxes are not deducted
in full) unless or
until the Holder shall have paid to the Company the amount of such
tax or shall have
established to the satisfaction of the Company that such tax has
been paid.
[signature pages follow]
IN WITNESS
WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
PG&E CORPORATION
By:
Name:
Title:
LB I GROUP INC.
By:
Name:
Title:
Notice Address: Executive Office:
000 Xxxxxxx Xxxxxx,
Xxx Xxxx, XX 00000
Registered Office:
0000 Xxxxxx Xxxx,
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx
Xxxxxxx
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Jurisdiction of Organization:
Delaware
ANNEX A
FORM OF ADDENDUM
Reference is
made to the Warrant Agreement (as amended, supplemented or
otherwise modified from time to time, the "Warrant Agreement"),
dated as of October 18,
2002, among PG&E Corporation, a California corporation (the
"Company"), LB I Group, Inc.,
a Delaware corporation ("LB I Group"), and each other entity that
is a signatory to an
addendum to the Warrant Agreement prior to the issuance of the
Warrants (as defined
therein)(each, an "Initial Holder" and collectively, the "Initial
Holders"). Unless
otherwise defined herein, terms defined in the Warrant Agreement
and used herein shall
have the meanings given to them in the Warrant Agreement.
By executing
and delivering this Addendum, the undersigned hereby becomes
a
party to the Warrant Agreement as an Initial Holder thereunder with
the same force and
effect as if originally a signatory thereto. The undersigned hereby
represents and
warrants that each of the representations and warranties contained
in Section 3.2 of the
Warrant Agreement is true and correct on and as of the date hereof
as if made on and as
of such date.
THIS
ADDENDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This
Addendum may be executed by one or more of the parties hereto on
any
number of separate counterparts, and all of said counterparts taken
together shall be
deemed to constitute one and the same instrument. Delivery of
an executed signature page
hereof by facsimile transmission shall be effective as delivery of
a manually executed
counterpart hereof.
IN WITNESS
WHEREOF, the parties hereto have caused this Addendum to be
duly
executed and delivered by their proper and duly authorized officers
as of this ___ day of
October, 2002.
__________________________________________
Name of Holder
By:
Name:
Title:
Accepted and agreed:
PG&E CORPORATION
By:
_______
Name:
Title:
LB I GROUP INC.
By:
Name:
Title:
Schedule 1
NOTICE ADDRESS
1. Name of Holder: ____________________________
Notice Address:
____________________________
____________________________
____________________________
Attention:
____________________________
Telephone:
____________________________
Facsimile:
____________________________
2. Jurisdiction of Organization:
EXHIBIT A TO
WARRANT AGREEMENT
No. [ ] Certificate for
[ ] Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
PG&E CORPORATION
THE WARRANTS ARE SUBJECT TO THE SUBORDINATION AND OTHER PROVISIONS
SET FORTH IN THE
INTERCREDITOR AND SUBORDINATION AGREEMENT DATED AS OF JUNE 25, 2002
AMONG THE
ADMINISTRATIVE AGENT, THE TRANCHE A LENDERS PARTY THERETO,
THE TRANCHE B LENDERS PARTY
THERETO, THE HOLDERS PARTY THERETO, AND THE COLLATERAL AGENT,
AND THE HOLDER OF THIS
INSTRUMENT, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE TERMS
OF SUCH INTERCREDITOR
AND SUBORDINATION AGREEMENT, AS THE SAME MAY BE AMENDED,
SUPPLEMENTED OR OTHERWISE
MODIFIED FROM TIME TO TIME. A COPY OF THE INTERCREDITOR AND
SUBORDINATION AGREEMENT
REFERENCED IN THIS LEGEND IS ON FILE WITH THE COLLATERAL AGENT AND
IS AVAILABLE FOR
INSPECTION AT THE COLLATERAL AGENT'S OFFICES AT DEUTSCHE BANK TRUST
COMPANY AMERICAS, 100
XXXXX XXX, XX: 0603, JEXXXX XXXX, XX 00000.
THIS
CERTIFIES THAT
[
], or its registered assigns, is
the registered holder of the number of Warrants set forth above
(the "Warrants"). Each
Warrant entitles the holder thereof (the "Holder"), at its option
and subject to the
provisions contained herein and in the Warrant Agreement referred
to below, to purchase
from PG&E CORPORATION, a California corporation (the
"Company"), one share of Common
Stock, no par value (the "Common Stock"), of the Company, at
the per share Exercise
Price of $0.01 (the "Exercise Price"). Each Warrant shall
terminate and become void as
of 5:00 p.m., New York City time, on the later of (i) September 2,
2006 and (ii) to the
extent that any Transfer Restricted Securities (as defined in the
Equity Registration
Rights Agreement, dated as of October 18, 2002, among the
Company, LB I Group Inc. and
each other entity named on the signature pages thereof (the
"Registration Rights
Agreement"), remain outstanding on September 6, 2006 and ten
Business Days after the
effective date of a registration statement under the Securities Act
with respect to the
Warrant Shares issuable upon the exercise of the Warrants, but no
later than September 2,
2007 (the "Expiration Date"). The number of Warrant Shares
issuable upon exercise of
each Warrant (the "Warrant Number") and the Exercise Price per
share shall be subject to
adjustment from time to time upon the occurrence of certain events
enumerated in the
Warrant Agreement.
This Warrant
Certificate is issued under and in accordance with the
Warrant
Agreement, dated as of October 18, 2002 (the "Warrant Agreement"),
by and among the
Company and each entity named on the signature pages thereof (each,
an "Initial Holder"
and collectively, the "Initial Holders"), and is subject to the
terms and provisions
contained in the Warrant Agreement, to all of which terms and
provisions the Holder of
the Warrants evidenced by this Warrant Certificate consents by
acceptance hereof. The
Warrant Agreement is hereby incorporated herein by reference and
made a part hereof.
Reference is hereby made to the Warrant Agreement for a full
statement of the respective
rights, limitations of rights, duties and obligations of the
Company and the Holders of
the Warrants. Capitalized terms used but not defined herein
shall have the meanings
ascribed thereto in the Warrant Agreement.
Subject to
the terms of the Warrant Agreement, the Warrants may be
exercised
in whole or in part by presentation and surrender of this Warrant
Certificate with the
Election to Purchase attached hereto duly executed and with the
simultaneous payment of
the Exercise Price in cash or check to the Company (for its
account) at the office of the
Company designated for such purpose. Notwithstanding the
foregoing, Warrants may also be
exercised without exchange of funds pursuant to the net exercise
("Cashless Exercise")
provisions of Section 4.01 of the Warrant Agreement.
As provided
in the Warrant Agreement and subject to the terms and
conditions
therein set forth, the Warrants shall be exercisable at any time
and from time to time on
any Business Day on or after the date on which the Warrants have
been issued and
delivered to each Holder pursuant to Section 2.02 of the Warrant
Agreement, but no later
than 5:00 p.m., New York City time on the Expiration Date;
provided, however, that
Holders of Warrants will only be able to exercise their Warrants
(i) by means of a
Cashless Exercise or (ii) if any Registration Statement under the
Securities Act relating
to the Warrant Shares is effective or the exercise of such Warrants
is exempt from the
registration requirements of the Securities Act of 1933 and such
securities are qualified
for sale or exempt from qualification under the applicable
securities laws of the states
or other jurisdictions in which such Holders reside; provided,
further, however, that no
Warrant shall be exercisable after the Expiration Date.
No Holder
may exercise any Warrant to the extent that, immediately
following
such exercise and upon receipt of any Warrant Shares issuable upon
such exercise, such
Holder would either (i) become or be included in any 13D Person
that is the single
largest holder of voting power represented by the Company's capital
stock (or otherwise
become the single largest holder of the Common Stock) (the
"Shareholder Limitation"), or
(ii) beneficially own (as such term is defined in Section 13(d)(3)
of the Exchange Act)
or be included in any 13D Person that beneficially owns in excess
of 4.9% of the voting
power represented by the Company's capital stock (or otherwise
beneficially own in excess
of 4.9% of the outstanding Common Stock) (the "4.9% Limitation")
after, in either case,
giving effect to such exercise (the Shareholder Limitation and the
4.9% Limitation are
collectively referred to herein as the "Exercise
Limitations"). The determinations of
the number of shares that (i) constitute 4.9% of the outstanding
Common Stock or voting
power and (ii) are held by the largest holder will be made in
reliance upon the
information contained in publicly available filings made with the
SEC unless the Company
is aware that such information is incorrect and has made the
correct information public,
to the extent material, and disclosed such information to the
Holders at the time of any
such proposed exercise. In order to facilitate compliance with the
foregoing, each Holder
will be required to make a representation that it and its
affiliates will comply with the
Exercise Limitations immediately after the exercise of any Warrant
and receipt of any
shares of Common Stock issuable upon such exercise.
Notwithstanding the Exercise Limitation, however, a Holder may
exercise any
Warrant that would otherwise cause such Holder to hold Warrant
Shares in excess of the
Exercise Limitations if, as to such excess number of Warrant Shares
(the "Excess
Shares"), such Holder (i) irrevocably covenants to the Company to
sell such Excess Shares
within 10 days after the date of exercise and (ii) confirms that it
has, on or prior to
such exercise date, entered into a binding arrangement to sell the
Excess Shares within
10 days after such exercise date either (a) in a regular way
transaction on a national
securities exchange (or the principal market where shares of Common
Stock are then
traded) or (b) to one or more persons that are not "affiliates"
(used herein as defined
in Rule 144 promulgated under the Securities Act) of such Holder
("Third Parties"), each
of whom represents for the benefit of the Company that, upon
purchase of the applicable
Excess Shares, such Third Party, together with its affiliates, will
not be the beneficial
owner of a number of shares of Common Stock in excess of the
Exercise Limitations. In
addition, such Holder shall agree to vote the applicable Excess
Shares only in accordance
with the recommendations of the Board of Directors of the Company
or any Third Party that
has agreed to purchase such shares, if any record date for a vote
of the Common Stock is
established for any day between the exercise date and the
consummation of the sale of the
applicable Excess Shares. The Exercise Limitations will cease
to have any force and
effect upon consummation of the Utility Spin-Off, if, on the date
that is 14 days after
delivery to the Company of a request by the Required Holders to
such effect (which
request may be given no more than once during any 180-day period),
the Company shall not
have delivered a certificate to the Holders stating that the
removal of the Exercise
Limitations would, in the good faith judgment of the Company, not
be consistent with
applicable regulatory or other legal requirements.
The Holders
are entitled to certain registration rights with respect to
the
Warrant Shares. Said registration rights are set forth in
full in the Registration
Rights Agreement.
The Warrant
Agreement provides that the number of Warrant Shares and the
Exercise Price may, subject to certain conditions, be
adjusted. No fractional Warrant
Shares will be issued upon the exercise of the Warrants, but the
Company shall pay an
amount in cash equal to the Current Market Value per Warrant Share
on the day immediately
preceding the date the Warrant is presented for exercise,
multiplied by the fraction of a
Warrant Share that would be issuable on the exercise of any
Warrant.
The Company
may require from the transferring or exchanging Holder payment
of
a sum sufficient to cover any transfer tax or similar governmental
charge payable upon
exchanges pursuant to Section 2.03 of the Warrant Agreement and
exchanges in respect of
portions of Warrants not exercised and the Company may deduct such
taxes from any payment
of money to be made and such transfer or exchange shall not be
consummated (if such taxes
are not deducted in full) unless or until the Holder shall have
paid to the Company the
amount of such tax or shall have established to the satisfaction of
the Company that such
tax has been paid.
Upon any
exercise of the Warrants for less than all of the Warrants
represented by this Warrant Certificate, there shall be issued to
the Holder hereof a new
Warrant Certificate representing those Warrants which were not
exercised. This Warrant
Certificate may be exchanged at the office of the Company by
presenting this Warrant
Certificate properly endorsed with a request to exchange this
Warrant Certificate for
other Warrant Certificates evidencing an equal number of
Warrants. All shares of Common
Stock issuable by the Holders upon the exercise of the Warrants
shall be duly and validly
issued and fully paid and non-assessable.
The holder
in whose name this Warrant Certificate is registered may be
deemed
and treated by the Company as the absolute owner of the Warrants
evidenced by this
Warrant Certificate for all purposes whatsoever and the Company
shall not be affected by
notice to the contrary.
The Warrants
do not entitle any Holder hereof to any of the rights of a
stockholder of the Company.
THE TERMS
AND CONDITIONS OF THE WARRANTS SHALL BE GOVERNED BY, AND
CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
[Signature page follows]
This
Warrant Certificate shall not be valid or obligatory for any
purpose
until it shall have been signed by the Company.
PG&E CORPORATION
By:
Name:
Title:
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
PG&E
CORPORATION
The
undersigned hereby irrevocably elects to exercise ______________
Warrants
to acquire from PG&E Corporation (the "Company") shares of
Common Stock, no par value
(the "Common Stock"), of the Company, at an Exercise Price per
share of Common Stock of
$0.01 and otherwise on the terms and conditions specified in the
within Warrant
Certificate and the Warrant Agreement therein referred to,
surrenders this Warrant
Certificate and all right, title and interest therein to PG&E
Corporation and directs
that the shares of Common Stock deliverable upon the exercise of
such Warrants be
registered or placed in the name and at the address specified below
and delivered
thereto. Notwithstanding the foregoing, the undersigned may
elect to exercise the
Warrants without the exchange of funds pursuant to the net exercise
provisions of Section
4.01 of the Warrant Agreement if the box set forth below opposite
"Cashless Exercise" is
checked. If such election is not made, payment of the
Exercise Price by check must
accompany this election.
Cashless Exercise: __
Date:
1/
_________________________________________________________
(Signature of Owner)
__________________________________________________________
(Sxxxxx Xxxxxxx)
__________________________________________________________
(City) (State) (Zip Code)
Signature Guaranteed by:_________________________________
Securities and/or check to be issued to:__________________
Please insert social security or identifying number:
Name:_______________________________________________
Street
Address______________________________________
City, State and Zip
Code:___________________________
A new
Warrant Certificate evidencing any unexercised Warrants evidenced
by
the within Warrant Certificate is to be issued to:
Please insert social security or
identifying number:__________________
Name:______________________________________________
Street
Address:____________________________________
City, State and Zip
Code:__________________________
The
undersigned, on behalf of itself and its affiliates, hereby
represents to
the Company that upon and after the exercise of the Warrants
pursuant to this certificate
into shares of Common Stock, it and its affiliates are and will be
in compliance with the
Exercise Limitations applicable to such Warrants pursuant to
paragraphs 6 and 7 of the
warrant certificate.
____________________________
Signature
Signature Guarantee:
____________________________
Signature
1/ The
signature must correspond with the name as written upon the face of
the attached Warrant Certificate in every particular, without
alteration or enlargement or any change whatever, and must be
guaranteed by a national bank or trust company or by a member firm
of any national securities exchange.
FORM OF TRANSFER
CERTIFICATE
In
connection with any transfer of any of the Warrants attached
hereto
occurring prior to the expiration of the period referred to in Rule
144(k) under the
Securities Act after the later of the date on which the Warrants
have been issued and
delivered to each Holder pursuant to Section 2.02 of the Warrant
Agreement and the last
date, if any, on which such Warrants were owned by the Company or
any Affiliate of the
Company, the undersigned certifies that such Warrants are being
transferred in accordance
with its terms:
CHECK ONE BOX BELOW
(1) to the
Company; or
(2) pursuant
to an effective registration statement under the Securities
Act
of 1933; or
(3) pursuant
to Rule 144 under the Securities Act of 1933; or
(4) outside
the United States in accordance with Rule 904 of Regulation S
under the Securities Act of 1933; or
(5) pursuant
to another available exemption from registration provided
under
the Securities Act of 1933.
Unless one
of the boxes is checked, the Company will refuse to register
any
of the Warrants evidenced by this certificate in the name of any
person other than the
registered holder thereof; provided, however, that if box (3) or
(5) is checked, the
Company may require, prior to registering any such transfer of the
Warrants, such legal
opinions, additional certifications and other information as the
Company has reasonably
requested to confirm that such transfer is being made pursuant to
an exemption from, or
in a transaction not subject to, the registration requirements of
the Securities Act of
1933, such as the exemption provided by Rule 144 under such
Act.
____________________________
Signature
EXHIBIT B
TO THE WARRANT AGREEMENT
FORM OF TRANSFER RESTRICTION LEGEND
THIS SECURITY (OR ITS PREDECESSOR) AND THE WARRANT SHARES TO BE
ISSUED UPON ITS EXERCISE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER
REPRESENTS THAT (1) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" OR NOT A "U.S. PERSON"
(AS DEFINED IN RULE 902 OF THE SECURITIES ACT) AND (2) AGREES TO
OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY PRIOR TO THE DATE WHICH IS TWO YEARS AFTER
THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) ONLY (A) TO
THE COMPANY OR ANY OF THEIR SUBSIDIARIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) OUTSIDE
THE UNITED STATES IN
ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT
OR (D) PURSUANT TO RULE
144 OR ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES
ACT.
EXHIBIT C TO
WARRANT AGREEMENT
FORM OF ACCREDITED INVESTOR CERTIFICATE
TRANSFEREE LETTER OF REPRESENTATION
PG&E Corporation
One Market, Spxxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Xttention: Assistant Treasurer
Ladies and Gentlemen:
In
connection with our proposed purchase of
[ ] Warrants (the
"Warrants") entitling the holders thereof to purchase shares of
common stock, no par
value, of PG&E Corporation, a California corporation (the
"Company"), we confirm that:
1. We are (a) an institutional "accredited investor"
(as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act of 1933, as
amended (the "Securities Act")), purchasing for our own account or
for the account of
such an institutional "accredited investor" as to which we exercise
sole investment
discretion, and we have such knowledge and experience in financial
and business matters
as to be capable of evaluating the merits and risks of our
investment in the Warrants,
and we and any account for which we are acting are each able to
bear the economic risk of
our or its investment or (b) a non "U.S. person" (as defined in
Rule 902 of the
Securities Act).
2. We understand and acknowledge that the Warrants have
not been
registered under the Securities Act or any other applicable
securities law, and that the
Warrants may not be offered or sold except as permitted in the
following sentence. We
agree, on our own behalf and on behalf of any account for which we
are acting, that if we
should sell any Warrants within the time period referred to in Rule
144(k) of the
Securities Act, we will do so only (A) to the Company or any
subsidiary thereof, (B) to
an institutional "accredited investor" (as defined above) that,
prior to such transfer,
furnishes to the Company under the Warrant Agreement, dated as of
October 18, 2002,
governing the Warrants a signed letter containing certain
representations and agreements
relating to the restrictions on transfer of the Warrants (the form
of which letter can be
obtained from either the Company) and an opinion of counsel
acceptable to the Company
that such transfer is in compliance with the Securities Act, (C)
outside the United
States in accordance with Rule 904 of Regulation S under the
Securities Act, (D) pursuant
to the exemption from registration provided by Rule 144 under the
Securities Act (if
available) or (E) pursuant to an effective registration statement
under the Securities
Act, and we further agree to provide to any person purchasing any
of the Warrants from us
a notice advising such purchaser that resales of the Warrants are
restricted as stated
herein.
3. We understand that, on any proposed resale of any
Warrants, we will be
required to furnish to the Company such certifications, legal
opinions and other
information as the Company may reasonably require to confirm that
the proposed sale
complies with the foregoing restrictions. We further
understand that the Warrants
purchased by us will bear a legend to the foregoing effect.
4. We are acquiring the Warrants for investment
purposes and not with a
view to distribution thereof or with any present intention of
offering or selling any
Warrants, except as permitted above; provided that the disposition
of our property and
property of any accounts for which we are acting as fiduciary will
remain at all times
within our control.
You and the
Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to
any interested party in
any administrative or legal proceeding or official inquiry with
respect to the matters
covered hereby.
THIS LETTER
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK.
Very truly yours,
(Name of Purchaser)
By: ____________________________
Name:
Title:
Date: ___________________________
Upon
transfer, the Warrants would be registered in the name of the
new
beneficial owner as follows:
By: ______________________________
Date: _____________________________
Taxpayer ID number: _______________
