GOLDMAN SACHS & CO. | 85 BROAD STREET | NEW YORK, NEW YORK 10004 | TEL:
212-902-1000

To:

PG&E Corporation
One Market Street Spear Tower
Suite 2400
San Francisco, CA 94105

From:

Goldman, Sachs & Co.

Subject:

Accelerated Share Repurchase Transaction - VWAP Pricing (Non-Collared)

Ref. No:

As provided in the Supplemental Confirmation

Date:

November 16, 2005

 

This master confirmation ("Master Confirmation") dated as of November 16, 2005
is intended to supplement the terms and provisions of certain Transactions
(each, a "Transaction") entered into from time to time between Goldman, Sachs &
Co. ("GS&Co.") and PG&E Corporation ("Counterparty"). This Master Confirmation,
taken alone, is neither a commitment by either party to enter into any
Transaction nor evidence of a Transaction. The terms of any particular
Transaction shall be set forth in a Supplemental Confirmation in the form of
Annex A, which references this Master Confirmation, in which event the terms and
provisions of this Master Confirmation shall be deemed to be incorporated into
and made a part of each such Supplemental Confirmation. This Master Confirmation
and each Supplemental Confirmation together shall constitute a "Confirmation" as
referred to in the Agreement specified below.

The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (the "Equity Definitions"), as published by the International Swaps
and Derivatives Association, Inc., are incorporated into this Master
Confirmation. This Master Confirmation and each Supplemental Confirmation
evidences a complete binding agreement between Counterparty and GS&Co. as to the
terms of each Transaction to which this Master Confirmation and the related
Supplemental Confirmation relates.

This Master Confirmation and each Supplemental Confirmation, together with all
other documents referring to the 1992 ISDA Master Agreement (Multicurrency-Cross
Border) (the "ISDA Form" or the "Agreement), confirming Transactions entered
into between GS&Co. and Counterparty, shall supplement, form a part of, and be
subject to the ISDA Form as if GS&Co. and Counterparty had executed the
Agreement (but without any Schedule) except that the following elections and
modifications shall be made: (i) the election of Loss and Second Method, New
York law (without regard to conflicts of law principles) as the governing law
and US Dollars ("USD") as the Termination Currency, (ii) the election that
subparagraph (ii) of Section 2(c) will not apply to Transactions, (iii) the
replacement of the word "third" in the last line of Section 5(a)(i) with the
word "first", (iv) the election that the "Cross Default" provisions of Section
5(a)(vi) shall apply to Counterparty, with a "Threshold Amount" of USD 100
million, and (v) the replacement of clause (1) in Section 6(d)(i) with the
clause "(1) showing in reasonable detail such calculations and specifying any
amount payable under Section 6(e) (including, without limitation, providing all
relevant quotations and assumptions and specifying the methodologies used in
sufficient detail so as to enable the other party to replicate the
calculation)". Further, for purposes of determining whether an Event of Default
pursuant to Section 5(a)(vi) of the Agreement has occurred, notwithstanding
anything to the contrary stated in that provision, clause (1) of Section
5(a)(vi) will apply only to Specified Indebtedness that is actually declared to
be due and payable before it would otherwise be due and payable under the
relevant agreement or instrument, and not to Specified Indebtedness that is
merely "capable at such time of being declared" so due and payable.

 

All provisions contained in the Agreement shall govern this Master Confirmation
and the related Supplemental Confirmation relating to a Transaction except as
expressly modified herein or in the related Supplemental Confirmation. With
respect to any relevant Transaction, the Agreement, this Master Confirmation and
the related Supplemental Confirmation shall represent the entire agreement and
understanding of the parties with respect to the subject matter and terms of
such Transaction and shall supersede all prior or contemporaneous written or
oral communications with respect thereto.

If, in relation to any Transaction to which this Master Confirmation and related
Supplemental Confirmation relate, there is any inconsistency between the
Agreement, this Master Confirmation, any Supplemental Confirmation and the
Equity Definitions that are incorporated into this Master Confirmation or any
Supplemental Confirmation, the following will prevail for purposes of such
Transaction in the order of precedence indicated: (i) such Supplemental
Confirmation; (ii) this Master Confirmation; (iii) the Agreement; and (iv) the
Equity Definitions.

Each Transaction constitutes a Share Forward Transaction for the purposes of the
Equity Definitions. Set forth below are the terms and conditions which, together
with the terms and conditions set forth in each Supplemental Confirmation (in
respect of each relevant Transaction), shall govern each such Transaction.

General Terms:

Trade Date: For each Transaction, as set forth in the Supplemental Confirmation.

Seller: Counterparty

Buyer: GS&Co.

Shares: Common Stock of Counterparty (Ticker: PCG)

Number of Shares: For each Transaction, as set forth in the Supplemental
Confirmation.

Forward Price: For each Transaction, as set forth in the Supplemental
Confirmation.

Prepayment: Not Applicable

Variable Obligation: Not Applicable

Exchange: New York Stock Exchange

Related Exchange(s): All Exchanges

Market Disruption Event: The definition of "Market Disruption Event" in Section
6.3(a) of the Equity Definitions is hereby amended by inserting the words "at
any time on any Scheduled Trading Day during the Valuation Period or" after the
word "material," in the third line thereof.

 

Valuation:

Valuation Period: Each Scheduled Trading Day during the period commencing on and
including the Valuation Period Start Date to and including the Valuation Date
(but excluding any day(s) on which the Valuation Period is suspended in
accordance with Section 5 herein and including any day(s) by which the Valuation
Period is extended pursuant to the provision below).

Notwithstanding anything to the contrary in the Equity Definitions, to the
extent that any Scheduled Trading Day in the Valuation Period is a Disrupted
Day, the Valuation Date shall be postponed and the Calculation Agent in its sole
discretion shall extend the Valuation Period and make adjustments to the
weighting of each Relevant Price for purposes of determining the Settlement
Price, with such adjustments based on, among other factors, the duration of any
Market Disruption Event and the volume, historical trading patterns and price of
the Shares. To the extent that there are 9 consecutive Disrupted Days during the
Valuation Period, then notwithstanding the occurrence of a Disrupted Day, the
Calculation Agent shall have the option in its sole discretion to either
determine the Relevant Price using its good faith estimate of the value for the
Share on such 9th consecutive Disrupted Day or elect to further extend the
Valuation Period as it deems necessary or appropriate.

Valuation Period Start Date: For each Transaction, as set forth in the
Supplemental Confirmation.

Valuation Date: For each Transaction, as set forth in the Supplemental
Confirmation (as the same may be postponed in accordance with the provisions of
"Valuation Period" and Section 5 herein).

Settlement Terms:

Settlement Currency: USD (all amounts shall be converted to the Settlement
Currency in good faith and in a commercially reasonable manner by the
Calculation Agent).

Settlement Method Election: Applicable; provided that Section 7.1 of the Equity
Definitions is hereby amended by deleting the word "Physical" in the sixth line
thereof and replacing it with the words "Net Share" and deleting the word
"Physical" in the last line thereof and replacing it with the word "Cash".

Electing Party: Counterparty

Settlement Method Election Date: 10 Scheduled Trading Days prior to the
originally scheduled Valuation Date.

Default Settlement Method: Cash Settlement

Forward Cash Settlement Amount: An amount in the Settlement Currency equal to
the product of (a) the Number of Shares multiplied by (b) an amount equal to (i)
the Settlement Price minus (ii) the Forward Price.

 

 

Settlement Price: The arithmetic mean of the Relevant Prices of the Shares for
each Exchange Business Day in the Valuation Period.

Relevant Price: The New York 10b-18 Volume Weighted Average Price per share of
the Shares for the regular trading session (including any extensions thereof) of
the Exchange on the related Exchange Business Day (without regard to pre-open or
after hours trading outside of such regular trading session) as published by
Bloomberg at 4:15 p.m. New York time on such date.

Cash Settlement Payment Date: 3 Currency Business Days after the Valuation Date.

Counterparty's Contact Details

for Purpose of Giving Notice: Nicholas Bijur

Assistant Treasurer

PG&E Corporation

One Market Street, Spear Tower

Suite 2400

San Francisco, CA 94105

Telephone No.: (415) 817-8199

Facsimile No.: (415) 267-7265

With a copy to:

Gary Encinas

Chief Counsel-Corporate

PG&E Corporation

One Market Street, Spear Tower

Suite 2400

San Francisco, CA 94105

Telephone No.: (415) 817-8201

Facsimile No.: (415) 817-8225

GS&Co.'s Contact Details for

Purpose of Giving Notice: Telephone No.: (212) 902-8996

Facsimile No.: (212) 902-0112

Attention: Equity Operations: Options and Derivatives

With a copy to:

Kelly Coffey

Equity Capital Markets

One New York Plaza

New York, NY 10004

Telephone No.: (212) 902-1037

Facsimile No.: (212) 346-2126

Net Share Settlement:

Net Share Settlement Procedures: Net Share Settlement shall be made in
accordance with the procedures attached hereto as Annex B.

 

Net Share Settlement Price: The Net Share Settlement Price shall be the price
per Share as of the Valuation Time on the Net Share Valuation Date as reported
in the official real-time price dissemination mechanism for the Exchange. In the
event Counterparty owes GS&Co. any amount, the Net Share Settlement Price shall
be reduced by the per Share amount of the underwriting discount and/or
commissions agreed to pursuant to the registration agreement contemplated by
Annex B.

Valuation Time: As provided in Section 6.1 of the Equity Definitions; provided
that Section 6.1 of the Equity Definitions is hereby amended by inserting the
words "Net Share," before the words "Valuation Date" in the first and third
lines thereof.

Net Share Valuation Date: The Exchange Business Day immediately following the
Valuation Date.

Net Share Settlement Date: The third Exchange Business Day immediately following
the Valuation Date.

Reserved Shares: For each Transaction, as set forth in the Supplemental
Confirmation.

Fixed, Floating and Counterparty

Additional Payment Amounts Payable:

Floating Amount Payable by GS&Co.:

Floating Amount Payment Date: The Cash Settlement Payment Date

Floating Amount: For each Transaction, an amount equal to the sum of the
applicable Federal Funds Rate multiplied by (i) the Daily Notional Amount
multiplied by (ii) 1/360 for each day from and including the Floating Amount
Accrual Date to and including the Valuation Date.

Floating Amount Accrual Date: Trade Date

Federal Funds Rate: For any date of determination, the "Fed Funds Open Rate,"
which shall be the interest rate reported on Bloomberg under the symbol
"FEDSOPEN <index>" on such date. For the avoidance of doubt, for any day which
is not a Currency Business Day the "Federal Funds Open Rate" for the immediately
preceding Currency Business Day shall apply.

 

Daily Notional Amount: Commencing with the Floating Amount Accrual Date, for any
date of determination, the Daily Notional Amount shall be an amount equal to the
product of the Initial Notional Amount (as set forth in the Supplemental
Confirmation) multiplied by a fraction with a numerator equal to the Originally
Scheduled Number of Scheduled Trading Days in the Valuation Period minus the
number of Exchange Business Days in the Valuation Period that have elapsed
(other than any days during which the Valuation Period is suspended pursuant to
Section 5 herein) as of such date of determination and a denominator equal to
the Originally Scheduled Number of Scheduled Trading Days in the Valuation
Period (such fraction, the "Remaining Percentage").

To the extent that the Valuation Period is extended pursuant to the terms of
this Master Confirmation, the Calculation Agent shall adjust the Daily Notional
Amount commencing with the first Exchange Business Day after such extension (the
"Valuation Period Extension Date"). The notional amount deemed to be remaining
at the end of the Exchange Business Day before the Valuation Period Extension
Date (the "Remaining Notional Value") shall be the Initial Notional Value
multiplied by the Remaining Percentage at the end of such day. Commencing with
the Valuation Period Extension Date, for any date of determination, the Daily
Notional Amount shall be equal to the product of the Remaining Notional Value
multiplied by a fraction with (a) a numerator equal to (i) the number of
Scheduled Trading Days remaining from and including the Valuation Period
Extension Date to the Valuation Date after extension (the "Remaining Scheduled
Trading Days") minus (ii) the number of Exchange Business Days in the Valuation
Period after extension from and including the Valuation Period Extension Date
that have elapsed (other than any days during which the Valuation Period after
extension is suspended pursuant to Section 5 herein) as of such date of
determination and (b) a denominator equal to the Remaining Scheduled Trading
Days.

Fixed Amount Payable by Counterparty:

Fixed Amount Payment Date: The Cash Settlement Payment Date

Fixed Amount: For each Transaction, an amount equal to the sum of (I) the
applicable Daily Additional Spread multiplied by (i) the Daily Notional Amount
multiplied by (ii) 1/360 for each day from and including the Floating Amount
Accrual Date to and including the Valuation Date plus (II) the applicable Fixed
Rate multiplied by (i)  the Notional Amount multiplied by (ii) 1/360 for each
day from and including the Floating Amount Accrual Date to and including the
Valuation Date.

Fixed Rate: For each Transaction, as set forth in the Supplemental Confirmation.

Daily Additional Spread: The Daily Additional Spread shall be 25 basis points.

 

Notional Amount: For any date of determination, 105% of the Daily Notional
Amount.

Counterparty Additional Amount

Payable by Company:

Counterparty Additional For each Transaction, as set forth in the Supplemental

Payment Amount: Confirmation.

Counterparty Additional

Payment Date: The Cash Settlement Payment Date.

Settlement Terms for Fixed Amount, Floating

Amount and Counterparty Additional

Payment Amount:

Settlement Currency: USD (all amounts shall be converted to the Settlement
Currency in good faith and in a commercially reasonable manner by the
Calculation Agent).

Settlement Method Election: Applicable; provided that Section 7.1 of the Equity
Definitions is hereby amended by deleting the word "Physical" in the sixth line
thereof and replacing it with the words "Net Share" and deleting the word
"Physical" in the last line thereof and replacing it with the word "Cash".

Electing Party: Counterparty

Settlement Method Election Date: 10 Scheduled Trading Days prior to the
originally scheduled Valuation Date.

Default Settlement Method: Cash Settlement

Share Adjustments:

Method of Adjustment: Calculation Agent Adjustment

Extraordinary Events:

Consequences of Merger Events: Subject to Section 7(b) of the Master
Confirmation:

(a) Share-for-Share: Modified Calculation Agent Adjustment

(b) Share-for-Other: Cancellation and Payment on that portion of the Other
Consideration that consists of cash; Modified Calculation Agent Adjustment on
the remainder of the Other Consideration.

(c) Share-for-Combined: Component Adjustment

Determining Party: GS&Co.

Tender Offer: Applicable

Consequences of Tender Offers: Subject to Section 7(b) of the Master
Confirmation:

(a) Share-for-Share: Modified Calculation Agent Adjustment

 

(b) Share-for-Other: Cancellation and Payment on that portion of the Other
Consideration that consists of cash; Modified Calculation Agent Adjustment on
the remainder of the Other Consideration.

(c) Share-for-Combined: Component Adjustment

Determining Party: GS&Co.

Nationalization, Insolvency or Delisting: Subject to Section 7(a) of this Master
Confirmation, Negotiated Close-out; provided that in addition to the provisions
of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a
Delisting if the Exchange is located in the United States and the Shares are not
immediately re-listed, re-traded or re-quoted on any of the New York Stock
Exchange, the American Stock Exchange or The NASDAQ National Market (or their
respective successors); if the Shares are immediately re-listed, re-traded or
re-quoted on any such exchange or quotation system, such exchange or quotation
system shall be deemed to be the Exchange.

Additional Disruption Events:

(a) Change in Law: Applicable; provided that Section 12.9(a)(ii)(Y) of the
Equity Definitions is hereby deleted.

(b) Failure to Deliver: Not Applicable

(c) Insolvency Filing: Applicable

(d) Loss of Stock Borrow: Applicable; provided that Loss of Stock Borrow shall
not constitute an Additional Disruption Event so long as Counterparty agrees to
pay the Hedging Party the amount by which the stock loan rate necessary to
maintain a borrowing of Shares by GS&Co. ("Hedge Position") in connection with
the Transaction exceeds the Maximum Stock Loan Rate.

Maximum Stock Loan Rate: 30 basis points

(e) Hedging Disruption: Not Applicable

(f) Increased Cost of Hedging: Not Applicable

(g) Increased Cost of Stock Borrow: Not Applicable

Hedging Party: GS&Co.

Determining Party: GS&Co.

Non-Reliance: Applicable

Agreements and Acknowledgements

Regarding Hedging Activities: Applicable

Additional Acknowledgements: Applicable

 

Net Share Settlement following

Extraordinary Event: Counterparty shall have the right, in its sole discretion,
to elect that any payment required to be made pursuant to Sections 12.7 or 12.9
of the Equity Definitions (except with respect to any portion of the
consideration for the Shares consisting of cash in the event of a Merger Event
or Tender Offer) following the occurrence of an Extraordinary Event by Net Share
Settlement of the Transactions under this Master Confirmation in accordance with
the terms, and subject to the conditions, for Net Share Settlement herein by
giving written notice to GS&Co. of such election on the day that the notice
fixing the date that the Transactions are terminated or cancelled, as the case
may be (the "Cancellation Date"), pursuant to the applicable provisions of
Section 12 of the Equity Definitions is effective. If Counterparty elects Net
Share Settlement: (a) the Net Share Valuation Date shall be the date specified
in the notice fixing the date that the Transactions are terminated or cancelled,
as the case may be; provided that the Net Share Valuation Date shall be either
the Exchange Business Day that such notice is effective or the first Exchange
Business Day immediately following the Exchange Business Day that such notice is
effective, (b) the Net Share Settlement Date shall be deemed to be the Exchange
Business Day immediately following the Cancellation Date and (c) all references
to the Forward Cash Settlement Amount, the Fixed Amount, the Floating Rate
Amount and the Counterparty Additional Payment Amount, as the case may be, in
Annex B hereto shall be deemed to be references to the Cancellation Amount. The
definition of "Cancellation Amount" in Section 12.8 of the Equity Definitions is
hereby amended by inserting the following paragraph: "(h) The Determining Party
shall show the other party in reasonable detail its calculation of the
Cancellation Amount, including without limitation providing all relevant
quotations and assumptions and specifying the methodologies used in sufficient
detail so as to enable the other party to replicate the calculation".

Net Share Settlement Upon Early Termination: Counterparty shall have the right,
in its sole discretion, to elect that any payment required to be made (the
"Early Termination Amount") pursuant to Sections 6(d) and 6(e) of the Agreement
following the occurrence of an Early Termination Date in respect of the
Agreement by Net Share Settlement of all the Transactions under this Master
Confirmation in accordance with the terms, and subject to the conditions, for
Net Share Settlement herein by giving written notice to GS&Co. of such election
on the day that the notice fixing an Early Termination Date is effective. If
Counterparty elects Net Share Settlement: (a) the Net Share Valuation Date shall
be the datespecified in the notice fixing an Early Termination Date; provided
that the Net Share Valuation Date shall be either the Exchange Business Day that
such notice is effective or the first Exchange Business Day immediately
following the Exchange Business Day that such notice is effective, (b) the Net
Share Settlement Date shall be deemed to be the Exchange Business Day
immediately following the Early

 

Termination Date (except for an Early Termination as a result of Section 7(d),
in which event the Net Share Settlement Date shall be deemed to be the tenth
Exchange Business Day following the Early Termination Date) and (c) all
references to Forward Cash Settlement Amount, the Fixed Amount, the Floating
Rate Amount and the Counterparty Additional Payment Amount, as the case may be,
in Annex B hereto shall be deemed references to the Early Termination Amount.

Transfer: Notwithstanding anything to the contrary in the Agreement, GS&Co. may
assign, transfer and set over all rights, title and interest, powers, privileges
and remedies of GS&Co. under any Transaction, in whole or in part, to an
affiliate of GS&Co. that is fully and unconditionally guaranteed by The Goldman
Sachs Group, Inc. without the consent of Counterparty, provided that
Counterparty is not required to make a payment to GS&Co. in respect of an
Indemnifiable Tax as a result of such transfer.

GS&Co. Payment Instructions: Chase Manhattan Bank New York
For A/C Goldman, Sachs & Co.
A/C # 930-1-011483
ABA: 021-000021

Counterparty Payment Instructions: PG&E Corporation Master Account No. 099023
Mellon Trust of New England, N.A.

Boston, MA
ABA Routing No: 011001234

Calculation Agent: GS&Co.

Representations, Warranties and Covenants of GS&Co. and Counterparty.

Each party represents and warrants that it (i) is an "eligible contract
participant", as defined in the U.S. Commodity Exchange Act, as amended and (ii)
is entering into each Transaction hereunder as principal (and not as agent or in
any other capacity, fiduciary or otherwise) and not for the benefit of any third
party.

Each party acknowledges that the offer and sale of each Share Forward
Transaction to it is intended to be exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), by virtue of Section
4(2) thereof and the provisions of Regulation D promulgated thereunder
("Regulation D"); and this acknowledgement shall not be deemed to extend to
Settlement Shares or Early Settlement Shares. Accordingly, each party represents
and warrants to the other that (i) it has the financial ability to bear the
economic risk of its investment in each Share Forward Transaction and is able to
bear a total loss of its investment, (ii) it is an "accredited investor" as that
term is defined under Regulation D, (iii) it will purchase each Share Forward
Transaction for investment and not with a view to the distribution or resale
thereof, and (iv) the disposition of each Share Forward Transaction is

restricted under this Master Confirmation and each Supplemental Confirmation,
the Securities Act and state securities laws.

Additional Representations, Warranties and Covenants of Counterparty.

As of the date hereof and the date of each Supplemental Confirmation,
Counterparty represents, warrants and covenants to GS&Co. that:

the purchase or writing of each Transaction will not violate Rule 13e-1 or
Rule 13e-4 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act");

it is not entering into any Transaction on the basis of, and is not aware of,
any material non-public information with respect to the Shares or in
anticipation of, in connection with, or to facilitate, a distribution of its
securities, a self tender offer or a third-party tender offer;

it is not entering into any Transaction to create, and will not engage in any
other securities or derivative transaction to create, a false or misleading
appearance of active trading or market activity in the Shares (or any security
convertible into or exchangeable for the Shares), or which would otherwise
violate the Exchange Act;

Counterparty is in compliance with its reporting obligations under the Exchange
Act and its most recent Annual Report on Form 10-K, together with all reports
subsequently filed by it pursuant to the Exchange Act, taken together and as
amended and supplemented to the date of this representation, do not, as of their
respective filing dates, contain any untrue statement of a material fact or omit
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;

each Transaction is being entered into pursuant to a publicly disclosed Share
buy-back program and its Board of Directors has approved the use of the
Transaction to effect the Share buy-back program;

notwithstanding the generality of Section 13.1 of the Equity Definitions, GS&Co.
is not making any representations or warranties with respect to the treatment of
any Transaction under FASB Statements 149 or 150, EITF 00-19 (or any successor
issue statements) or under FASB's Liabilities & Equity Project;

it has not, and during any Valuation Period (as extended pursuant to the
provisions of Section  5 and "Valuation Period" herein) it will not, enter into
agreements similar to the Transactions described herein except with GS&Co. or an
entity affiliated with GS&Co. where the valuation period in such other
transaction will overlap at any time (including as a result of extensions in
such valuation period as provided in the relevant agreements) with any Valuation
Period (as extended pursuant to the provisions of Section 5 and "Valuation
Period" herein) under this Master Confirmation. In the event that the valuation
period in any other similar transaction with an entity other than GS&Co. or an
entity affiliated with GS&Co. overlaps with any Valuation Period under this
Master Confirmation as a result of any extension made pursuant to the provisions
of Section 5 and "Valuation Period" herein, Counterparty shall promptly amend
such transaction to avoid any such overlap; and

it shall report each Transaction as required under the Exchange Act and the
regulations promulgated thereunder.

Suspension of Valuation Period; Extension of Valuation Period.

If Counterparty concludes that it will be engaged in a distribution of the
Shares for purposes of Regulation M promulgated under the Exchange Act
("Regulation M"), Counterparty agrees that it will, on one Scheduled Trading
Day's written notice, direct GS&Co. not to purchase Shares in connection with
hedging any Transaction during the "restricted period" (as defined in Regulation
M). If on any Scheduled Trading Day Counterparty delivers written notice (and
confirms by telephone) by 8:30 a.m. New York Time (the "Notification Time"),
then such notice shall be effective to suspend the Valuation Period as of such
Notification Time. In the event that Counterparty delivers notice and/or
confirms by telephone after the Notification Time, then the Valuation Period
shall be suspended effective as of 8:30 a.m. New York Time on the following
Scheduled Trading Day or as otherwise required by law or agreed between
Counterparty and GS&Co. The Valuation Period shall be suspended and the
Valuation Date extended for each Scheduled Trading Day in such restricted
period.

In the event that GS&Co. concludes, in its reasonable discretion, that it is
appropriate with respect to any legal, regulatory or self-regulatory
requirements or related policies and procedures (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by GS&Co.) for it to refrain from purchasing Shares on any Scheduled
Trading Day during the Valuation Period, GS&Co. may by written notice to
Counterparty elect to suspend the Valuation Period for such number of Scheduled
Trading Days as is specified in the notice. The notice shall not specify, and
GS&Co. shall not otherwise communicate to Counterparty, the reason for GS&Co.'s
election to suspend the Valuation Period. The Valuation Period shall be
suspended and the Valuation Date extended for each Scheduled Trading Day
occurring during any such suspension.

In the event that the Valuation Period is suspended pursuant to Sections 5(a) or
(b) above during the regular trading session on the Exchange then the
Calculation Agent in its sole discretion shall, in calculating the Forward Cash
Settlement Amount, extend the Valuation Period and make adjustments to the
weighting of each Relevant Price for purposes of determining the Settlement
Price, with such adjustments based on, among other factors, the duration of any
such suspension and the volume, historical trading patterns and price of the
Shares.

On the first Exchange Business Day of each calendar week during the Valuation
Period, to the extent that the Number of Daily Reference Shares exceeds 25% of
the ADTV (as defined in Rule 10b-18 under the Exchange Act ("Rule 10b-18")) for
the Shares on such day, the Calculation Agent will (i) adjust the Number of
Daily Reference Shares to equal an amount equal to 15% of ADTV for the Shares
determined and effective on such Exchange Business Day and (ii) deem the
remaining Scheduled Trading Days in the Valuation Period to be equal to the
Remaining Number of Shares divided by the Number of Daily Reference Shares
(after giving effect to any adjustments pursuant to (i) above), rounded up to
the nearest whole number.

"Number of Daily Reference Shares" means, for each Transaction, initially the
Initial Number of Daily Reference Shares (as set forth in the Supplemental
Confirmation) and thereafter as may be adjusted in accordance with this Section
5(d); provided that on the first Exchange Business Day of the fifth calendar
week following any such adjustment the Number of Daily Reference Shares shall
equal the lesser of (i) the Initial Number of Daily Reference Shares and (ii)
15% of the ADTV of the Shares determined on such Exchange Business Day.

"Remaining Number of Shares" means, for each Transaction and as of any date of
determination, a number of Shares equal to (i) the Number of Shares minus (ii)
the sum of, for each Exchange Business Day in the Valuation Period up to and
including such date, the Number of Shares divided by the total number of
Exchange Business Days in the Valuation Period (the "Daily Amount"). The Daily
Amount will be deemed to be zero for each day on which the Valuation Period is
suspended in accordance with Sections 5(a) and (b) hereof. In the event that the
Valuation Period is extended pursuant to the terms of this Master Confirmation,
the Calculation Agent may make corresponding adjustments to the amount of the
Remaining Number of Shares.

Counterparty Purchases. Counterparty represents, warrants and covenants to
GS&Co. that for each Transaction:

Counterparty (or any "affiliated purchaser" as defined in Rule 10b-18) shall
not, purchase any Shares, listed contracts on the Shares or securities that are
convertible into, or exchangeable or exercisable for Shares (including, without
limitation, any Rule 10b-18 purchases of blocks (as defined in Rule 10b-18))
during any Valuation Period (as extended pursuant to the provisions of Section 5
and "Valuation Period" herein) except for purchases through GS&Co. or an entity
affiliated with GS&Co., or if not through GS&Co., with the prior written consent
of GS&Co., and in compliance with Rule 10b-18 or otherwise in a manner that
Counterparty and GS&Co. believe is in compliance with applicable requirements
and except for purchases in connection with management compensation plans or
other employee benefit arrangements and except for purchases of Counterparty's
9.50% Convertible Subordinated Notes due 2010, provided such purchases are made
in compliance with any applicable legal regulatory or self-regulatory
requirements or related policies and procedures (whether such requirements,
policies or procedures are imposed by law or have been voluntarily adopted by
GS&Co. for uniform

 

application to all such purchases). Any such purchase by Counterparty shall be
disregarded for purposes of determining the Forward Cash Settlement Amount. To
the extent that Counterparty makes any such purchase other than through GS&Co.,
or other than in connection with any Transaction, Counterparty hereby represents
and warrants to GS&Co. that (a) it will not take other action that would or
could cause GS&Co.'s purchases of the Shares during the Valuation Period not to
comply with Rule 10b-18 and (b) any such purchases will not otherwise constitute
a violation of Section 9(a) or Rule 10(b) of the Exchange Act. This subparagraph
(a) shall not restrict any purchases by Counterparty of Shares effected during
any suspension of any Valuation Period in accordance with Section 5 herein and
any purchases during such suspension shall be disregarded in calculating the
Forward Cash Settlement Amount; and for the avoidance of doubt, this
subparagraph (a) shall not restrict any holders of outstanding securities of
Counterparty from exercising or converting such securities to Shares; and

Counterparty is entering into this Master Confirmation and each Transaction
hereunder in good faith and not as part of a plan or scheme to evade the
prohibitions of Rule 10b5-1 under the Exchange Act ("Rule 10b5-1"). It is the
intent of the parties that each Transaction entered into under this Master
Confirmation comply with the requirements of Rule 10b5-1(c)(1)(i)(A) and (B) and
each Transaction entered into under this Master Confirmation shall be
interpreted to comply with the requirements of Rule 10b5-1(c). Counterparty will
not seek to control or influence GS&Co. to make "purchases or sales" (within the
meaning of Rule 10b5-1(c)(1)(i)(B)(3)) under any Transaction entered into under
this Master Confirmation, including, without limitation, GS&Co.'s decision to
enter into any hedging transactions. Counterparty represents and warrants that
it has consulted with its own advisors as to the legal aspects of its adoption
and implementation of this Master Confirmation and each Supplemental
Confirmation under Rule 10b5-1.

 

Additional Termination Events. Additional Termination Events will apply under
Section 5(b)(v) of the Agreement. The following will constitute Additional
Termination Events, in each case with Counterparty as the sole Affected Party:

(a) Notwithstanding anything to the contrary in the Equity Definitions, the
occurrence of a Nationalization, Insolvency or a Delisting (in each case
effective on the Announcement Date as determined by the Calculation Agent);

(b) Notwithstanding anything to the contrary in the Equity Definitions, the
occurrence of a Merger Event (effective on the Merger Date) or a Tender Offer
(effective on the Tender Offer Date) in respect of which any Other Consideration
received for the Shares does not consist of cash. For the avoidance of doubt, in
the event that any portion of the consideration received for the Shares consists
of cash or New Shares, this Additional Termination Event shall only apply with
respect to all or any Transaction(s) (or portions thereof) remaining after
giving effect to the provisions in "Consequences of Merger Events" or
"Consequences of Tender Offers", as the case may be, above;

(c) [reserved]; or

(d) Notwithstanding anything to the contrary in the Equity Definitions, one day
prior to the ex-dividend date in respect of any Extraordinary Dividend (as
specified in the Supplemental Confirmation) by the Issuer; provided that in the
event that GS&Co. and Counterparty enter into a mutually acceptable new
transaction (using their good faith and commercially reasonable efforts) on or
prior to one day prior to the ex-dividend date in respect of the Extraordinary
Dividend, the amounts determined pursuant to Section 6(e) of the Agreement or
otherwise to be owed by Counterparty and GS&Co. with respect to the Affected
Transaction(s) shall be deemed to be only the amounts that would otherwise be
owed hereunder in respect of the Forward Cash Settlement Amount (the
"Termination Forward Settlement Amount"), the Floating Amount (the "Termination
Floating Amount"), the Fixed Amount (the "Termination Fixed Amount") and the
Counterparty Additional Payment Amount if the Early Termination Date were the
Cash Settlement Payment Date, and shall be payable in cash or (in the case of
Counterparty) by Net Share Settlement or a combination of the two. In the event
that an Early Termination Date would otherwise occur pursuant to this clause
7(d) while Counterparty is in possession of, or is aware of, material,
non-public information, the Early Termination Date shall not be deemed to occur
until the day after the day on which Counterparty is not in possession of, and
is not aware of, material non-public information so long as, if, at
Counterparty's option, on or prior to one day prior to the ex-dividend date for
such Extraordinary Dividend, Counterparty agrees to pay GS&Co. no later than the
earlier of the entry into the new transaction or the dividend payment date for
such Extraordinary Dividend, a fixed amount in cash or by Net Share Settlement
or a combination of the two, that shall be determined in good faith by GS&Co. as
having a value equal to (i) the amount per share of such Extraordinary Dividend
multiplied by (ii) the actual number of Shares that will remain borrowed by
GS&Co. in connection with any Hedge Positions related to the Transaction as of
such ex-dividend date. If Counterparty does not so agree on or prior to one day
prior to the ex-dividend date for such Extraordinary Dividend, the Early
Termination Date shall occur at the close of business on the Exchange Business
Day that is one day prior to the ex-dividend date. For purposes of this Section
7(d): the Termination Forward Settlement Amount shall mean an amount in
Settlement Currency equal to the product of (a) the Termination Trading Days
multiplied by the Initial Number of Daily Reference Shares multiplied by (b) an
amount equal to (i) the Termination Settlement Price minus (ii) the Forward
Price; the Termination Floating Amount shall mean an amount equal to the sum of
the applicable Federal Funds Rate multiplied by (i) the Daily Notional Amount
multiplied by (ii) 1/360 for each day from and including the Floating Amount
Accrual Date to but excluding the Early Termination Date; and the Termination
Fixed Amount shall mean an amount equal to the sum of (I) the applicable Daily
Additional Spread multiplied by (i) the Daily Notional Amount multiplied by
(ii) 1/360 for each day from and including the Floating Amount Accrual Date to
but excluding the Early Termination Date plus (II) an amount equal to the sum of
the applicable Fixed Rate multiplied by (i)  the Notional Amount multiplied by
(ii) 1/360 for each day from and including the Floating Amount Accrual Date to
but excluding the Early Termination Date. Also for purposes of this Section
7(d): "Termination Trading Days" shall mean the number of Exchange Business Days
(excluding any day(s) on which the Valuation Period was suspended in accordance
with Section 5 herein or as a result of any Scheduled Trading Day being a
Disrupted Day) from and including the Valuation Period Start Date to and
including the Early Termination Date; "Termination Valuation Period" shall mean
the Exchange Business Days during the period commencing on and including the
Valuation Period Start Date to and including the Early Termination Date (but
excluding any day(s) on which the Valuation Period was suspended in accordance
with Section 5 herein or as a result of any Scheduled Trading Day being a
Disrupted Day and including any day(s) by which the Valuation Period was
extended pursuant to the provision below); and the "Termination Settlement
Price" shall mean the arithmetic mean of the Relevant Prices of the Shares for
each Exchange Business Day in the Termination Valuation Period.

Automatic Termination Provisions. Notwithstanding anything to the contrary in
Section 6 of the Agreement:

An Additional Termination Event with Counterparty as the sole Affected Party
will automatically occur without any notice or action by GS&Co. or Counterparty
if the price of the Shares on the Exchange at any time falls below the
Termination Price (as specified in the related Supplemental Confirmation)
provided that (for the avoidance of doubt only) such Additional Termination
Event shall be an Additional Termination Event only with respect to the
Transaction documented in such related Supplemental Confirmation. The Exchange
Business Day that the price of the Shares on the Exchange at any time falls
below the Termination Price will be the "Early Termination Date" for purposes of
the Agreement.

Notwithstanding anything to the contrary in Section 6(d) of the Agreement,
following the occurrence of such an Additional Termination Event, GS&Co. will
notify Counterparty of the amount owing under Section 6(e) of the Agreement
within a commercially reasonable time period (with such period based upon the
amount of time, determined by GS&Co. (or any of its Affiliates) in its
reasonable discretion, that it would take to unwind any of its Hedge Position(s)
related to the Transaction in a commercially reasonable manner based on relevant
market indicia). For purposes of the "Net Share Settlement Upon Early
Termination" provisions herein, (i) the date that such notice is effective (the
"Notice Date") shall constitute the "Net Share Valuation Date", (ii) the
Exchange Business Day immediately following the Notice Date shall be the Net
Share Settlement Date and (iii) all references to the Forward Cash Amount or the
Fixed Amount in Annex B hereto shall be deemed to be the Early Termination
Amount. For the avoidance of doubt, Hedge Position shall only mean any purchase,
sale, entry into or maintenance of one or more stock borrowing transactions by
GS&Co. or its Affiliates in respect of the Shares in connection with this
Transaction and, notwithstanding the forgoing portions of this paragraph and
Sections 6(d) and (e) of the Agreement, Counterparty shall be entitled to
satisfy the Hedge Position by delivery of the Number of Early Settlement Shares
as defined in and pursuant to the provisions of Section 10.

Special Provisions for Merger Events. Notwithstanding anything to the contrary
herein or in the Equity Definitions, to the extent that an Announcement Date for
a potential Merger Transaction occurs during any Valuation Period:

Promptly after request from GS&Co., Counterparty shall provide GS&Co. with
written notice specifying (i) Counterparty's average daily Rule 10b-18 Purchases
(as defined in Rule 10b-18) during the three full calendar months immediately
preceding the Announcement Date that were not effected through GS&Co. or its
affiliates and (ii) the number of Shares purchased pursuant to the proviso in
Rule 10b-18(b)(4) under the Exchange Act for the three full calendar months
preceding the Announcement Date. Such written notice shall be deemed to be a
certification by Counterparty to GS&Co. that such information is true and
correct. Counterparty understands that GS&Co. will use this information in
calculating the trading volume for purposes of Rule 10b-18; and

GS&Co. in its sole discretion may (i) make adjustments to the terms of any
Transaction, including, without limitation, the Valuation Date and the Number of
Shares to account for the number of Shares that could be purchased on each day
during the Valuation Period in compliance with Rule 10b-18 following the
Announcement Date or (ii) treat the occurrence of the Announcement Date as an
Additional Termination Event with Counterparty as the sole Affected Party.

"Merger Transaction" means any merger, acquisition or similar transaction
involving a recapitalization as contemplated by Rule 10b-18(a)(13)(iv) under the
Exchange Act.

Special Settlement Following Early Termination and Extraordinary Events.
Notwithstanding anything to the contrary in this Master Confirmation or any
Supplemental Confirmation hereunder, in the event that an Extraordinary Event
under Article 12 of the Equity Definitions occurs or an Early Termination Date
under Section 6 of the Agreement occurs or is designated with respect to any
Transaction (each an "Affected Transaction"), then either party may elect, by
notice to the other party, to have Counterparty deliver the Number of Early
Settlement Shares to GS&Co. on the date that such notice is effective (provided
that GS&Co. determines in its good faith sole discretion that such delivery is
in compliance with any legal, regulatory or self-regulatory requirements or
related policies and procedures), except for a termination as a result of
Section 7(d), in which event the date of delivery shall be the tenth Business
Day thereafter. To the extent that Counterparty elects to deliver Shares to
GS&Co. accompanied by an effective Registration Statement (satisfactory to
GS&Co. in its reasonable discretion) covering such Early Settlement Shares,
Counterparty must be in compliance with the conditions specified in (iii) though
(ix) in Annex B hereto at the time of such delivery. If Counterparty elects to
deliver Unregistered Shares (as defined in Annex B) to GS&Co., Counterparty and
GS&Co. will negotiate in good faith on acceptable procedures and documentation
relating to the sale of such Unregistered Shares.

 

"Number of Early Settlement Shares" means a number of Shares based on the Hedge
Positions of GS&Co. or any of its Affiliates with respect to each Affected
Transaction under this Master Confirmation at the time of the Extraordinary
Event or Early Termination Date, as applicable.

In determining the amount of Loss under Section 6(e) of the Agreement or the
Cancellation Amount under Article 12, the parties shall take into account the
Floating Rate Amount that would have otherwise been due to Counterparty and the
Fixed Amount that would have otherwise been due to GS&Co., and the difference
between the New York 10b-18 Volume Weighted Average Price per share of the
Shares over the Valuation Period as compared to the Forward Price. Further, if
Counterparty delivers Early Settlement Shares, an amount equal to the product of
(i)  the Number of Early Settlement Shares multiplied by (ii) the Forward Price
(or if Counterparty delivers Unregistered Shares, as reduced by a discount
determined by GS&Co. in a good faith commercially reasonable manner based on the
discount to the New York 10b-18 Volume Weighted Average Price at which it could
sell the Shares and whether GS&Co. and Counterparty have agreed on acceptable
procedures and documentation relating to such Unregistered Shares as described
above) shall be credited against any amount owing under Section 6(e) of the
Agreement or pursuant to Article 12 of the Equity Definitions or otherwise under
this Master Confirmation.

Acknowledgments. The parties hereto intend for:

Each Transaction to be a "securities contract" as defined in Section 741(7) of
the U.S. Bankruptcy Code (Title 11 of the United States Code) (the "Bankruptcy
Code"), a "swap agreement" as defined in Section 101(53B) of the Bankruptcy
Code, or a "forward contract" as defined in Section 101(25) of the Bankruptcy
Code, and the parties hereto to be entitled to the protections afforded by,
among other sections, Sections 362(b)(6), 362(b)(17), 555, 556 and 560 of the
Bankruptcy Code;

A party's right to liquidate or terminate any Transaction, net out or offset
termination values of payment amounts, and to exercise any other remedies upon
the occurrence of any Event of Default under the Agreement with respect to the
other party to constitute a "contractual right" (as defined in the Bankruptcy
Code);

All payments for, under or in connection with each Transaction, all payments for
the Shares and the transfer of such Shares to constitute "settlement payments"
and "transfers" (as defined in the Bankruptcy Code).

Set-Off. The parties agree to amend Section 6 of the Agreement by adding a new
Section 6(f) thereto as follows:

"(f) Upon the occurrence of an Event of Default or Termination Event with
respect to a party who is the Defaulting Party or the Affected Party ("X"), the
other party ("Y") will have the right (but not be obliged) without prior notice
to X or any other person to set-off or apply any obligation of X owed to Y
(whether or not matured or contingent and whether or not arising under the
Agreement, and regardless of the currency, place of payment or booking office of
the obligation) against any obligation of Y owed to X (whether or not matured or
contingent and whether or not arising under the Agreement, and regardless of the
currency, place of payment or booking office of the obligation). Y will give
notice to X of any set-off effected under this Section 6(f).

 

Amounts (or the relevant portion of such amounts) subject to set-off may be
converted by Y into the Termination Currency at the rate of exchange at which
such party would be able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency. If any obligation is
unascertained, Y may in good faith estimate that obligation and set-off in
respect of the estimate, subject to the relevant party accounting to the other
when the obligation is ascertained. Nothing in this Section 6(f) shall be
effective to create a charge or other security interest. This Section 6(f) shall
be without prejudice and in addition to any right of set-off, combination of
accounts, lien or other right to which any party is at any time otherwise
entitled (whether by operation of law, contract or otherwise)."

Payment Date Upon Early Termination. Notwithstanding anything to the contrary in
Section 6(d)(ii) of the Agreement, all amounts calculated as being due in
respect of an Early Termination Date under Section 6(e) of the Agreement will be
payable on the day that notice of the amount payable is effective, except as
otherwise provided in this Master Confirmation or any Supplemental Confirmation.

Share Settlement; Maximum Shares. Notwithstanding anything contained in this
Master Confirmation, the Agreement or the Equity Definitions, Counterparty or
GS&Co. at the election by Counterparty may satisfy all amounts it may owe to the
other party hereunder and under each Supplemental Confirmation by delivery of
Shares in accordance with Annex B and/or Section 10 hereof, and Counterparty is
solely vested with the right to determine whether such obligations may be
satisfied in Shares, in cash or in a combination of the two. Notwithstanding
anything contained in this Master Confirmation, the Agreement or the Equity
Definitions, Counterparty and GS&Co. agree that in the event Counterparty owes
an amount to GS&Co. and Counterparty elects to satisfy its obligations to GS&Co.
by delivery of Shares, the delivery of a number of Shares equal to the Reserved
Shares will satisfy in full the obligation of Counterparty to make any payments
pursuant to Section 6(e) of the Agreement, Article 12 of the Equity Definitions
or otherwise in respect of the Transaction.

Governing Law. The Agreement, this Master Confirmation and each Supplemental
Confirmation and all matters arising in connection with the Agreement, this
Master Confirmation and each Supplemental Confirmation shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
without reference to its choice of law doctrine.

Offices.

The Office of GS&Co. for each Transaction is: One New York Plaza, New York, New
York 10004.

The Office of Counterparty for each Transaction is: One Market Street, Spear
Tower, Suite 2400, San Francisco, CA 94105.

Arbitration.

Arbitration is final and binding on Counterparty and GS&Co.

Counterparty and GS&Co. are waiving their right to seek remedies in court,
including the right to a jury trial.

Pre-arbitration discovery is generally more limited than and different from
court proceedings.

The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings by
the arbitrators is strictly limited.

The panel of arbitrators will typically include a minority of arbitrators who
were or are affiliated with the securities industry.

Any controversy between or among GS&Co. or its affiliates, or any of its or
their partners, directors, agents or employees, on the one hand, and
Counterparty or its agents and affiliates, on the other hand, arising out of or
relating to the Agreement or any Transaction entered into hereunder, shall be
settled by arbitration, in accordance with the then current rules of the
American Arbitration Association ("AAA"), except that the provisions of this
Section 17 shall supersede any conflicting or inconsistent provisions of such
rules. Each party shall appoint a qualified arbitrator within 5 days after the
giving of notice by either party. If either party shall fail timely to appoint a
qualified arbitrator, the appointed, qualified arbitrator shall select the
second qualified arbitrator within 5 days after such party's failure to appoint.
The qualified arbitrators so appointed shall meet and shall, if possible,
determine such matter within 10 days after the second qualified arbitrator is
appointed, and their determination shall be binding on the parties. If for any
reason such two qualified arbitrators fail to agree on such matter within such
period of 10 days, then either party may request the AAA to appoint a qualified
arbitrator who shall be impartial within 7 days of such request and both parties
shall be bound by any appointment so made by the AAA. Within 7 days after the
third qualified arbitrator has been appointed, each of the first two qualified
arbitrators shall submit their respective determinations to the third qualified
arbitrator who must select one or the other of such determinations (whichever
the third qualified arbitrator believes to be correct or closest to a correct
determination) within 7 days after the first two qualified arbitrators shall
have submitted their respective determinations to the third qualified
arbitrator, and the selection so made shall in all cases be binding upon the
parties, and judgment upon such decision may be entered into any court having
jurisdiction. In the event of the failure, refusal or inability of a qualified
arbitrator to act, a successor shall be appointed within 10 days as hereinbefore
provided. The costs of the arbitration shall be funded 50% by each party, and
the parties shall bear their own attorneys' fees, during the arbitration. The
prevailing party shall be repaid all of such expenses by the non-prevailing
party within 10 days after the final determination of the qualified
arbitrator(s). The award of the arbitrators shall be final, and judgment upon
the award rendered may be entered in any court, state or Federal, having
jurisdiction.

Neither party shall bring a putative or certified class action to arbitration,
nor seek to enforce any pre-dispute arbitration agreement against any person who
has initiated in court a putative class action; who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until:

the class certification is denied;

the class is decertified; or

the party is excluded from the class by the court.

Such forbearance to enforce an agreement to arbitrate shall not constitute a
waiver of any rights under the Agreement except to the extent stated herein.

[SIGNATURE PAGE FOLLOWS]

Counterparty hereby agrees (a) to check this Master Confirmation carefully and
immediately upon receipt so that errors or discrepancies can be promptly
identified and rectified and (b) to confirm that the foregoing (in the exact
form provided by GS&Co.) correctly sets forth the terms of the agreement between
GS&Co. and Counterparty with respect to any Transaction, by manually signing
this Master Confirmation or this page hereof as evidence of agreement to such
terms and providing the other information requested herein and immediately
returning an executed copy to Equity Derivatives Documentation Department,
facsimile No. 212-428-1980/83.

Yours sincerely,

GOLDMAN, SACHS & CO.

By /s/ Sharon Siebold            
Authorized Signatory

Agreed and Accepted By:

PG&E CORPORATION

By: /s/ Christopher P. Johns           
Name:
Title:

ANNEX A

SUPPLEMENTAL CONFIRMATION FOR FULLY UNCOLLARED TRANSACTIONS

 

 

To:

PG&E Corporation
One Market Street, Spear Tower
Suite 2400
San Francisco, CA 94105

From:

Goldman, Sachs & Co.

Subject:

Accelerated Share Repurchase Transaction - VWAP Pricing

Ref. No:

SDB1620840449

Date:

March 22, 2006

 

The purpose of this Supplemental Confirmation is to confirm the terms and
conditions of the Transaction entered into between Goldman, Sachs & Co.
("GS&Co.") and PG&E Corporation ("Counterparty") (together, the "Contracting
Parties") on the Trade Date specified below. This Supplemental Confirmation is a
binding contract between GS&Co. and Counterparty as of the relevant Trade Date
for the Transaction referenced below.

1. This Supplemental Confirmation supplements, forms part of, and is subject to
the Master Confirmation dated as of November 16, 2005 (the "Master
Confirmation") between the Contracting Parties, as amended and supplemented from
time to time. The definitions and provisions contained in the Master
Confirmation are incorporated into this Supplemental Confirmation, except as
expressly modified below. In the event of any inconsistency between those
definitions and provisions and this Supplemental Confirmation, this Supplemental
Confirmation will govern.

2. The terms of the Transaction to which this Supplemental Confirmation relates
are as follows:

Trade Date:

March 28, 2006

Forward Price:

USD 34.75 per Share

Number of Shares:

11,385,000 Shares

Valuation Period Start Date:

March 29, 2006

Valuation Date:

June 8, 2006

Termination Price:

$10.00 per Share

Fixed Rate:

25 basis points

Reserved Shares:

Two times the Number of Shares

Extraordinary Dividends:

Any cash dividend declared by the Issuer in excess of $0.00 per Share; provided
that the cash dividend declared by the Counterparty in February 2006 shall not
be an Extraordinary Dividend.

 

Initial Number of Daily Reference Shares:

227,700 Shares

Initial Notional Amount:

The Number of Shares multiplied by the Forward Price.

Counterparty Additional Payment Amount:

USD 3,757,050.00

[SIGNATURE PAGE FOLLOWS]

3. Counterparty represents and warrants to GS&Co. that neither it (nor any
"affiliated purchaser" as defined in Rule 10b-18 under the Exchange Act) have
made any purchases of blocks except through GS&Co. or an entity affiliated with
GS&Co. pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act
during the four full calendar weeks immediately preceding the Trade Date.

Counterparty hereby agrees (a) to check this Supplemental Confirmation carefully
and immediately upon receipt so that errors or discrepancies can be promptly
identified and rectified and (b) to confirm that the foregoing (in the exact
form provided by GS&Co.) correctly sets forth the terms of the agreement between
GS&Co. and Counterparty with respect to this Transaction, by manually signing
this Supplemental Confirmation or this page hereof as evidence of agreement to
such terms and providing the other information requested herein and immediately
returning an executed copy to Equity Derivatives Documentation Department,
facsimile No. 212-428-1980/83.

Yours sincerely,
GOLDMAN, SACHS & CO.

By: /s/ Frank Hujber                          
Authorized Signatory

Agreed and Accepted
PG&E CORPORATION

 

 

By: /s/ G. Robert Powell                          

Name:     G. Robert Powell

Title:       Vice President and Controller

 

 

ANNEX B

NET SHARE SETTLEMENT PROCEDURES

In the event that the Counterparty has elected Net Share Settlement in
accordance with the Master Confirmation, then the settlement procedure shall be
as follows:

In the event that the sum of the Forward Cash Settlement Amount, the Fixed
Amount, the Floating Rate Amount and the Counterparty Additional Payment Amount
(the "Final Settlement Amount") is an amount GS&Co. owes Counterparty,
settlement shall be made by delivery of the number of Shares equal in value to
the Final Settlement Amount, with such Shares' value based on the Relevant
Prices per Share further described below. In such event, on each succeeding
Exchange Business Day after the Net Share Valuation Date, GS&Co. shall purchase
one-half of the maximum amount of Shares Counterparty could purchase each day in
accordance with the provisions of Rule 10b-18(2), (3) and (4), subject to any
delays between the execution and reporting of a trade of the Shares on the
Exchange and other circumstances beyond its reasonable control, until the sum of
the products of the number of Shares purchased by GS&Co. multiplied by the
Relevant Price for the regular trading session (including any extensions
thereof) of the Exchange on the related Exchange Business Day equals the Final
Settlement Amount. GS&Co. shall deliver all Shares purchased pursuant to this
paragraph free of any contractual or other restriction, in good transferable
form on the Third Exchange Business Day following the day on which GS&Co.
completes all such purchases.

In the event that the Final Settlement Amount is an amount that Counterparty
owes GS&Co., settlement shall be made by delivery of the number of Shares equal
in value to the Final Settlement Amount (the "Settlement Shares"), with such
Shares' value based on the Net Share Settlement Price. Delivery of such
Settlement Shares shall be made free of any contractual or other restrictions in
good transferable form (other than with respect to any Unregistered Shares (as
defined below)) on the Net Share Settlement Date. Counterparty (i) shall
represent and warrant to GS&Co. at the time of such delivery that it has good,
valid and marketable title or right to sell and transfer all such Shares to
GS&Co. under the terms of the related Transaction free of any lien charge, claim
or other encumbrance and (ii) shall make the representations and agreements
contained in Section 9.11(ii) through (iv) of the Equity Definitions to GS&Co.
with respect to the Settlement Shares. GS&Co. or any affiliate of GS&Co.
designated by GS&Co. (GS&Co. or such affiliate, "GS") shall resell the
Settlement Shares owed to GS&Co. during a period (the "Resale Period")
commencing no earlier than the Exchange Business Day on which the Settlement
Shares are delivered. GS shall use its good faith, commercially reasonable
efforts to sell the Settlement Shares as promptly as possible at commercially
reasonable prices based on prevailing market prices for the Shares. The Resale
Period shall end on the Exchange Business Day on which GS completes the sale of
all Settlement Shares or a sufficient number of Settlement Shares so that the
realized net proceeds of such sales exceed the sum of Forward Cash Settlement
Amount, the Fixed Amount and the Counterparty Additional Payment Amount.
Notwithstanding the foregoing, if resale by GS of the Settlement Shares, as
determined by GS in its sole discretion (i) occurs during a distribution for
purposes of Regulation M, and if GS would be subject to the restrictions of
Rule 101 of Regulation M in connection with such distribution, the Resale Period
will be postponed or tolled, as the case may be, until the Exchange Business Day
immediately following the end of any "restricted period" as such term is defined
in Regulation M with respect to such distribution under Regulation M or
(ii) conflict with any legal, regulatory or self-regulatory requirements or
related policies and procedures applicable to GS (whether or not such
requirements, policies or procedures are imposed by law or have been voluntarily
adopted by GS), the Resale Period will be postponed or tolled, as the case may
be, until such conflict is no longer applicable. During the Resale Period, if
the realized net proceeds from the resale of the Settlement Shares exceed the
sum of the Forward Cash Settlement Amount, the Fixed Amount and the Counterparty
Additional Payment Amount, GS shall refund such excess in cash to Counterparty
by the close of business on the third Exchange Business Day immediately
following the last day of the Resale Period. If the sum of the Forward Cash
Settlement Amount, the Fixed Amount and the Counterparty Additional Payment
Amount exceeds the realized net proceeds from such resale, Counterparty shall
transfer to GS by the open of the regular trading session on the Exchange on the
third Scheduled Trading Day immediately following the last day of the Resale
Period the amount of such excess (the "Additional Amount") in the number of
Shares ("Make-whole Shares") in an amount that, based on the Net Share
Settlement Price on the last day of the

 

Resale Period (as if such day was the "Net Share Valuation Date" for purposes of
computing such Net Share Settlement Price), has a dollar value equal to the
Additional Amount. The Resale Period shall continue to enable the sale of the
Make-whole Shares. The requirements and provisions set forth below shall apply
to Shares delivered to pay such Additional Amounts. This provision shall be
applied successively until the Additional Amount is equal to zero.

Net Share Settlement of a Transaction by Counterparty is subject to the
following conditions:

Counterparty at its sole expense shall:

(i) as promptly as practicable (but in no event more than five (5) Exchange
Business Days immediately following the Settlement Method Election Date or, in
the case of an election of Net Share Settlement upon the occurrence of an
Extraordinary Event or an Early Termination Date, no more than one Exchange
Business Day immediately following either the Cancellation Date or the Early
Termination Date, as the case may be) file under the Securities Act and use its
best efforts to make effective, as promptly as practicable, a registration
statement or supplement or amend an outstanding registration statement, in any
such case, in form and substance reasonably satisfactory to GS (the
"Registration Statement") covering the offering and sale by GS of not less than
150% of the Shares necessary to fulfill the Net Share Settlement delivery
obligation by Counterparty (determining the number of such Shares to be
registered on the basis of the average of the Settlement Prices on the five
(5) Exchange Business Days prior to the date of such filing, amendment or
supplement, as the case may be);

(ii) maintain the effectiveness of the Registration Statement until GS has sold
all shares to be delivered by Counterparty necessary to satisfy its Net Share
Settlement obligations;

(iii) have afforded GS and its counsel and other advisers a reasonable
opportunity to conduct a due diligence investigation of Counterparty customary
in scope for transactions in which GS acts as underwriter of equity securities,
and GS shall have been satisfied (with the approval of its Commitments Committee
in accordance with its customary review process) with the results of such
investigation;

(iv) have negotiated and entered into a registration agreement with GS in
substantially the form attached as Schedule 1, which such form the parties agree
to amend by January 1, 2006 or anytime thereafter as mutually agreed by the
parties in writing in order to reflect amendments to Rule 415 and Rule 462 and
certain other rules set forth in Securities Act Release 33-8591 (the
"Registration Agreement") covering the shares to be delivered by Counterparty in
satisfaction of its Net Share Settlement obligations;

(v) have delivered to GS such number of prospectuses relating thereto as GS
shall have reasonably requested and shall promptly update and provide GS with
replacement prospectuses as necessary to ensure the prospectus does not contain
any untrue statement of a material fact or any omission of a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading;

(vi) have retained for GS nationally-recognized underwriting counsel acceptable
to GS (in its sole discretion) with broad experience in similar registered
securities offerings and such counsel shall have agreed to act as such;

(vii) have taken all steps necessary for the shares sold by GS to be listed or
quoted on the primary exchange or quotation system that the Shares are listed or
quoted on;

(viii) have paid all reasonable and actual out-of-pocket costs and expenses of
GS and all reasonable and actual fees and expenses of GS's outside counsel and
other independent experts contemplated by the Registration Agreement; and

(ix) take such action as is required to ensure that GS's sale of the Shares does
not violate, or result in a violation of, the federal or state securities laws.

In the event that the Registration Statement is not declared effective by the
Securities Exchange Commission (the "SEC") or any of the conditions specified in
(ii) through (ix) above are not satisfied on or prior to the Valuation Date (or,
in the case of an election of Net Share Settlement upon the occurrence of an
Extraordinary Event or an Early Termination Date, on or prior to the first
Exchange Business Day following either the Cancellation Date or the Early
Termination Date, as the case may be except for any Early Termination as result
of Section 7(d) of the Master Confirmation, in which case, such date shall be
the tenth Exchange Business Day following such Early Termination Date), then
Counterparty may deliver Unregistered Shares to GS in accordance with the
following conditions. If GS and Counterparty can agree on acceptable pricing,
procedures and documentation relating to the sale of such Unregistered Shares
(including, without limitation, applicable requirements in (iii) through (ix)
above and insofar as pertaining to private offerings), then such Unregistered
Shares shall be deemed to be the "Settlement Shares" for the purposes of the
related Transaction and the settlement procedure specified in this Annex B shall
be followed except that in the event that the Forward Cash Settlement Amount
plus the Fixed Amount, exceeds the proceeds from the sale of such Unregistered
Shares then for the purpose of calculating the number of "Make-whole Shares" to
be delivered by Counterparty, GS shall determine the discount to the Net Share
Settlement Price at which it can sell the Unregistered Shares. Notwithstanding
the delivery of the Unregistered Shares, Counterparty shall endeavor in good
faith to have a registration statement declared effective by the SEC as soon as
practical. In the event that GS has not sold sufficient Unregistered Shares to
satisfy Counterparty's obligations to GS contained herein at the time that a
Registration Statement covering the offering and sale by GS of a number of
Shares equal in value to not less than 150% of the amount then owed to GS is
declared effective (based on the Net Share Settlement Price on the Exchange
Business Day (as if such Exchange Business Day were the "Net Share Valuation
Date" for purposes of computing such Net Share Settlement Price) that the
Registration Statement was declared effective), GS shall return all unsold
Unregistered Shares to Counterparty and Counterparty shall deliver such number
of Shares covered by the effective Registration Statement equal to 100% of the
amount then owed to GS based on such Net Share Settlement Price. Such delivered
shares shall be deemed to be the "Settlement Shares" for the purposes of the
related Transaction and the settlement procedure specified in this Master
Confirmation, including, without limitation, this Annex B, (including the
obligation to deliver any Make-whole Shares, if applicable) shall be followed.
In all cases GS shall be entitled to take any and all required actions in the
course of its sales of the Settlement Shares, including without limitation
making sales of the Unregistered Shares only to "Qualified Institutional Buyers"
(as such term is defined under the Securities Act), to ensure that the sales of
the Unregistered Shares and the Settlement Shares covered by the Registration
Statement are not integrated resulting in a violation of the securities laws and
Counterparty agrees to take all actions requested by GS in furtherance thereof.

If GS and Counterparty cannot agree on acceptable pricing, procedures and
documentation relating to the sales of such Unregistered Shares then the number
of Unregistered Shares to be delivered to GS pursuant to the provisions above
shall not be based on the Net Share Settlement Price but rather GS shall
determine the value attributed to each Unregistered Share in a commercially
reasonable manner and based on such value Counterparty shall deliver a number of
Shares equal in value to the Forward Cash Settlement Amount plus the Fixed
Amount. For the purposes hereof "Unregistered Shares" means Shares that have not
been registered pursuant to an effective registration statement under the
Securities Act or any state securities laws ("Blue Sky Laws") and that cannot be
sold, transferred, pledged or otherwise disposed of without registration under
the Securities Act or under applicable Blue Sky Laws unless such sale, transfer,
pledge or other disposition is made in a transaction exempt from registration
thereunder.

In the event that Counterparty delivers Shares pursuant to an election of Net
Share Settlement, then Counterparty and GS agree to indemnify and hold harmless
each other to the extent provided in the Registration Agreement.

In no event shall the number of Settlement Shares (including, but without
duplication or double counting, any Unregistered Shares) and any Make-whole
Shares deliverable by Counterparty hereunder to GS&Co., be greater than the
Reserved Shares minus the amount of any Shares actually delivered under any
other Transaction(s) under this Master Confirmation (the result of such
calculation, the "Capped Number"). Counterparty represents and warrants (which
shall be deemed to be repeated on each day that a Transaction is outstanding)
that the Capped Number is equal to or less than the number of Shares determined
according to the following formula:

 

 

A - B

Where A = the number of authorized but unissued shares of the Issuer that are
not reserved for future issuance on the date of the determination of the Capped
Number; and

B = the maximum number of Shares required to be delivered to third parties if
Counterparty elected Net Share Settlement of all transactions in the Shares
(other than Transactions in the Shares under this Master Confirmation) with all
third parties that are then currently outstanding and unexercised.

 

SCHEDULE 1

Form of Registration Agreement

PG&E Corporation

Common Stock

Registration Agreement

[ ] [  ], 2005

Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004

Ladies and Gentlemen:

PG&E Corporation, a California corporation (the "Company"), proposes to deliver
to Goldman, Sachs & Co. ("GS&Co.") pursuant to this Registration Agreement (this
"Agreement") up to [_____] shares of common stock (no par value) ("Stock") of
the Company (the "Shares") in satisfaction of the Company's obligations to
GS&Co., as counterparty under an Accelerated Share Repurchase Transaction,
Reference Number [_____], as documented pursuant to a Master Confirmation (the
"Master Confirmation"), dated as of [ ] [ ], 2005 (the Master Confirmation, as
may be amended, restated, supplemented or otherwise modified from time to time,
the "ASB"), subject to the terms and conditions stated herein and in the ASB.
The Company does not expect to receive any proceeds from the sale of the Shares.

 1. The Company represents and warrants to, and agrees with, GS&Co. that:
     i.     A registration statement on Form S-3, as amended (File No. 333-
            121518) (including all documents incorporated by reference in the
            prospectus contained therein, the "Initial Registration Statement"),
            in respect of the Shares and the offering thereof from time to time
            in accordance with Rule 415 under the Securities Act of 1933, as
            amended (the "Securities Act"), has been filed with the Securities
            and Exchange Commission (the "Commission"); the Initial Registration
            Statement and any post-effective amendment thereto, each in the form
            heretofore delivered to GS&Co. (excluding exhibits thereto), have
            been declared effective by the Commission in such form; no other
            document with respect to the Initial Registration Statement has
            heretofore been filed with the Commission; and no stop order
            suspending the effectiveness of the Initial Registration Statement
            or any post-effective amendment thereto has been issued and no
            proceeding for that purpose has been initiated or threatened by the
            Commission (any preliminary prospectus included in the Initial
            Registration Statement or filed with the Commission pursuant to Rule
            424(a) of the rules and regulations of the Commission under the
            Securities Act is hereinafter called a "Preliminary Prospectus"; the
            various parts of the Initial Registration Statement, including all
            exhibits thereto and including the documents incorporated by
            reference in the prospectus contained in the Initial Registration
            Statement at the time such part of the Initial Registration
            Statement became effective, each as amended at the time such part of
            the Initial Registration Statement became effective are hereinafter
            collectively called the "Registration Statement"; such final
            prospectus, in the form first filed pursuant to Rule 424(b) under
            the Securities Act, is hereinafter called the "Prospectus"; any
            reference herein to any Preliminary Prospectus or the Prospectus
            shall be deemed to refer to and include the documents incorporated
            by reference therein pursuant to Item 12 of Form S-3 under the
            Securities Act, as of the date of such Preliminary Prospectus or
            Prospectus, as the case may be; and any reference to any amendment
            or supplement to any
    
            Preliminary Prospectus or the Prospectus shall be deemed to refer to
            and include any documents filed after the date of such Preliminary
            Prospectus or Prospectus, as the case may be, under the Securities
            Exchange Act of 1934, as amended (the "Exchange Act"), and
            incorporated by reference in such Preliminary Prospectus or
            Prospectus, as the case may be; and any reference to any amendment
            to the Registration Statement shall be deemed to refer to and
            include any annual report of the Company filed pursuant to Section
            13(a) or 15(d) of the Exchange Act after the effective date of the
            Initial Registration Statement that is incorporated by reference in
            the Registration Statement);
    
     ii.    No order preventing or suspending the use of any Preliminary
            Prospectus has been issued by the Commission, and each Preliminary
            Prospectus, at the time of filing thereof, conformed in all material
            respects to the requirements of the Securities Act and the rules and
            regulations of the Commission thereunder, and did not contain an
            untrue statement of a material fact or omit to state a material fact
            required to be stated therein or necessary to make the statements
            therein, in the light of the circumstances under which they were
            made, not misleading; provided, however, that this representation
            and warranty shall not apply to any statements or omissions made in
            reliance upon and in conformity with information furnished in
            writing to the Company by GS&Co. expressly for use in any
            Preliminary Prospectus;
     iii.   The documents incorporated by reference in the Prospectus, when they
            became effective or were filed with the Commission, as the case may
            be, conformed in all material respects to the requirements of the
            Securities Act or the Exchange Act, as applicable, and the rules and
            regulations of the Commission thereunder, and none of such documents
            contained an untrue statement of a material fact or omitted to state
            a material fact required to be stated therein or necessary to make
            the statements therein not misleading; and any further documents so
            filed and incorporated by reference in the Prospectus or any further
            amendment or supplement thereto, when such documents become
            effective or are filed with the Commission, as the case may be, will
            conform in all material respects to the requirements of the
            Securities Act or the Exchange Act, as applicable, and the rules and
            regulations of the Commission thereunder and will not contain an
            untrue statement of a material fact or omit to state a material fact
            required to be stated therein or necessary to make the statements
            therein not misleading;
     iv.    The Registration Statement conforms, and the Prospectus and any
            further amendments or supplements to the Registration Statement or
            the Prospectus will conform, in all material respects to the
            requirements of the Securities Act and the rules and regulations of
            the Commission thereunder and do not and will not, as of the
            applicable effective date as to the Registration Statement and any
            amendment thereto, and as of the applicable filing date as to the
            Prospectus and any amendment or supplement thereto, contain an
            untrue statement of a material fact or omit to state a material fact
            required to be stated therein or necessary to make the statements
            therein not misleading; provided, however, that this representation
            and warranty shall not apply to any statements or omissions made in
            reliance upon and in conformity with information furnished in
            writing to the Company by GS&Co. expressly for use in the
            Registration Statement or the Prospectus;
     v.     Neither the Company nor any of its subsidiaries has sustained since
            the date of the latest audited financial statements included in the
            Prospectus any material loss or interference with its business from
            fire, explosion, flood or other calamity, whether or not covered by
            insurance, or from any labor dispute or court or governmental
            action, order or decree, otherwise than as set forth or contemplated
            in the Prospectus; and, since the respective dates as of which
            information is given in the Registration Statement and the
            Prospectus, there has not been any material change in the capital
            stock (other than changes occurring in the
    
            ordinary course of business and changes resulting from transactions
            relating to employee benefit plans or dividend reinvestment, stock
            option, stock award, retirement and stock purchase plans or
            repurchases of capital stock by the Company, including repurchases
            associated with the ASB) or any material increase in the long-term
            debt of the Company or any of its subsidiaries or any material
            adverse change, or any development which would reasonably be
            expected to result in a material adverse change, in or affecting the
            general affairs, management, financial position, shareholders'
            equity or results of operations of the Company and its subsidiaries,
            otherwise than as set forth or contemplated in the Prospectus;
    
     vi.    The Company has been duly incorporated and is a validly existing
            corporation in good standing under the laws of the State of
            California, with corporate power and authority to own its properties
            and conduct its business as described in the Prospectus;
     vii.   Each corporation, association, partnership or other business entity
            of which more than 50% of the total voting power or other interests
            entitled to vote in the election of directors, managers or trustees
            thereof that is deemed by the Company to be significant to its
            operations, as set forth on Schedule I hereto, and that is
            controlled, directly or indirectly, by (i) the Company, (ii) the
            Company and one or more subsidiaries or (iii) one or more
            subsidiaries of the Company (each, a "Subsidiary" and collectively,
            the "Subsidiaries"), has been duly incorporated or organized and is
            a validly existing corporation, partnership or limited liability
            company in good standing under the laws of the jurisdiction of its
            incorporation or organization with corporate, partnership or limited
            liability company power and authority, as applicable, to own its
            properties and conduct its business as described in the Prospectus;
            all of the issued and outstanding capital stock, partnership or
            membership interests of each Subsidiary has been duly authorized and
            validly issued and is fully paid and nonassessable; and, except as
            disclosed in the Prospectus, the capital stock or membership
            interests of each Subsidiary are owned directly or indirectly by the
            Company, free and clear of all liens, encumbrances and defects;
     viii.  The Company has an authorized capitalization as set forth in the
            Prospectus, and all of the issued shares of capital stock of the
            Company have been duly authorized and validly issued, are fully paid
            and non-assessable and conform in all material respects to the
            description of the Stock contained in the Prospectus;
     ix.    The Shares have been duly and validly authorized and, when issued
            and delivered as provided herein, will be duly and validly issued
            and fully paid and non-assessable and will conform to the
            description of the Stock contained in the Prospectus; upon delivery
            of the Shares to GS&Co. pursuant to this Agreement, good and valid
            title to the Shares, free and clear of liens, encumbrances, equities
            or claims, will pass to GS&Co.; and, other than the delivery of (i)
            an opinion of counsel and (ii) the Prospectus and, if required, an
            amendment or supplement thereto, clauses (i) - (iv) of Section 9.11
            of the Equity Definitions (as defined in the ASB) apply to the
            Shares and the delivery of the Shares to GS&Co.;
     x.     The issuance and delivery of Shares by the Company and the
            compliance by the Company with all of the provisions of this
            Agreement and the consummation of the transactions herein
            contemplated will not conflict with or result in a breach or
            violation of any of the terms or provisions of, or constitute a
            default under, any indenture, mortgage, deed of trust, loan
            agreement or other agreement or instrument to which the Company or
            any of its subsidiaries is a party or by which the Company or any of
            its subsidiaries is bound or to which any of the property or assets
            of the Company or any of its subsidiaries is subject, except any
            such conflict, breach, violation or default which has been consented
            to or waived by the appropriate counterparty thereto, prior to the
            execution and delivery of this Agreement, nor
    
            will such action result in any violation of the provisions of the
            Certificate of Incorporation or By-laws of the Company or any
            statute or any order, rule or regulation of any court or
            governmental agency or body having jurisdiction over the Company or
            any of its subsidiaries or any of their properties, except for
            conflicts, breaches, violations or defaults (other than any relating
            to the Articles of Incorporation or By-Laws of the Company) that
            would not, individually or in the aggregate, impair the Company's
            ability to consummate the transactions herein contemplated; and no
            consent, approval, authorization, order, registration or
            qualification of or with any such court or governmental agency or
            body is required on the part of the Company for the sale of the
            Shares or the consummation by the Company of the transactions
            contemplated by this Agreement, except (i) the registration under
            the Securities Act of the Shares and such consents, approvals,
            authorizations, registrations or qualifications as may be required
            under state securities or Blue Sky laws in connection with the sale
            of the Shares by GS&Co. and (ii) where the failure to obtain such
            consent, approval, authorization, order, registration or
            qualification would not, individually or in the aggregate, impair
            the Company's ability to consummate the transactions herein
            contemplated;
    
     xi.    None of the Company or its subsidiaries is (i) in violation of its
            Articles of Incorporation or By-Laws (or similar organizational
            document), or (ii) in default (nor has any event occurred which with
            notice or passage of time, or both, would constitute a default) in
            the performance or observance of any material obligation, agreement,
            covenant or condition contained in any indenture, mortgage, deed of
            trust, loan agreement or other material agreement or instrument to
            which it is a party or to which it is subject;
     xii.   The statements set forth in the Prospectus under the caption
            "Description of Capital Stock," insofar as they purport to
            constitute a summary of the terms of the Stock, and the statements
            under the caption "Plan of Distribution", insofar as they purport to
            describe the provisions of the laws and documents referred to
            therein, are accurate, complete and fair in all material respects;
            and the statements in the Prospectus with respect to the ASB are
            accurate, complete and fair in all material respects; provided,
            however, that this representation and warranty shall not apply to
            any statements or omissions made in reliance upon and in conformity
            with information furnished in writing to the Company by GS&Co.
            expressly for use in the Registration Statement or Prospectus;
     xiii.  Other than with GS&Co. or as set forth in the Prospectus, there are
            no contracts, agreements or understandings between the Company and
            any person granting such person the right to require the Company to
            file a registration statement under the Securities Act with respect
            to any securities of the Company owned or to be owned by such person
            or to require the Company to include such securities in the
            securities registered pursuant to the Registration Statement or in
            any securities being registered pursuant to any other registration
            statement filed by the Company under the Securities Act;
     xiv.   Other than as set forth in the Prospectus, there are no legal or
            governmental proceedings pending to which the Company or any of its
            subsidiaries is a party or of which any property of the Company or
            any of its subsidiaries is the subject, which, if determined
            adversely to the Company or any of its subsidiaries, would
            individually or in the aggregate have a material adverse effect on
            the current or future consolidated financial position, shareholders'
            equity or results of operations of the Company and its subsidiaries;
            and, to the Company's knowledge, no such proceedings are threatened
            or contemplated by governmental authorities or threatened by others;
     xv.    
     xvi.   The Company is not and, after giving effect to the offering and sale
            of the Shares, will not be an "investment company", as such term is
            defined in the Investment Company Act of 1940, as amended;
     xvii.  Neither the Company nor any of its affiliates does business with the
            government of Cuba or with any person or affiliate located in Cuba
            within the meaning of Section 517.075 of the Florida Statutes;
     xviii. Deloitte & Touche LLP, who have certified certain financial
            statements of the Company and its subsidiaries and have audited the
            Company's internal control over financial reporting and management's
            assessment thereof, are an independent registered public accounting
            firm as required by the Securities Act and the rules and regulations
            of the Commission and the Public Company Accounting Oversight Board
            (United States) (the "PCAOB") thereunder;
     xix.   The Company maintains a system of internal control over financial
            reporting (as such term is defined in Rule 13a-15(f) of the Exchange
            Act) that complies with the requirements of the Exchange Act and has
            been designed by the Company's principal executive officer and
            principal financial officer, or under their supervision, to provide
            reasonable assurance regarding the reliability of financial
            reporting and the preparation of financial statements for external
            purposes in accordance with generally accepted accounting
            principles; except as disclosed in the Prospectus, the Company's
            internal control over financial reporting is effective and the
            Company is not aware of any material weaknesses in its internal
            control over financial reporting;
     xx.    Except as disclosed in the Prospectus, since the date of the latest
            audited financial statements included in the Prospectus, there has
            been no change in the Company's internal control over financial
            reporting that has materially adversely affected, or is reasonably
            likely to materially adversely affect, the Company's internal
            control over financial reporting;
     xxi.   The Company maintains disclosure controls and procedures (as such
            term is defined in Rule 13a-15(e) of the Exchange Act) that comply
            with the requirements of the Exchange Act; such disclosure controls
            and procedures have been designed to ensure that material
            information relating to the Company and its subsidiaries is made
            known to the Company's management, including its principal executive
            officer and principal financial officer, by others within those
            entities; except as disclosed in the Prospectus, such disclosure
            controls and procedures are effective;
     xxii.  Prior to the date hereof, neither the Company nor any of its
            subsidiaries has taken any action which is designed to or which has
            constituted or which might have been expected to cause or result in
            stabilization or manipulation of the price of any security of the
            Company or any of its subsidiaries in connection with the offering
            of securities of the Company contemplated hereby;
     xxiii. The financial statements of the Company included in the Prospectus
            present fairly in all material respects the financial position of
            the Company and its consolidated subsidiaries as of the dates shown
            and their results of operations and cash flows for the periods
            shown, and such financial statements have been prepared in
            conformity with generally accepted accounting principles in the
            United States applied on a consistent basis, subject, in the case of
            interim statements, to normal year-end adjustments;
     xxiv.  
     xxv.   The common stock of the Company is registered pursuant to Section
            12(b) of the Exchange Act and the outstanding shares of common stock
            (including the Shares) are listed for quotation on the New York
            Stock Exchange (the "NYSE"), and the Company has taken no action
            designed to, or likely to have the effect of, terminating the
            registration of the common stock under the Exchange Act or
            de-listing the common stock from the NYSE, nor has the Company
            received any notification that the Commission or the NYSE is
            contemplating terminating such registration or listing;
     xxvi.  The Company acknowledges and agrees that (i) in connection with the
            sale of Shares pursuant to this Agreement and with the process
            leading to such transaction GS&Co. is acting solely as a principal
            and not the agent or fiduciary of the Company, (ii) GS&Co. has not
            assumed an advisory or fiduciary responsibility in favor of the
            Company with respect to the offering contemplated hereby or the
            process leading thereto (irrespective of whether GS&Co. has advised
            or is currently advising the Company on other matters) or any other
            obligation to the Company except the obligations expressly set forth
            in this Agreement and (iv) the Company has consulted its own legal
            and financial advisors to the extent it deemed appropriate. The
            Company agrees that it will not claim that GS&Co. has rendered
            advisory services of any nature or respect, or owes a fiduciary or
            similar duty to the Company, in connection with such transaction or
            the process leading thereto; and
     xxvii. All of the representations and warranties of the Company in or made
            pursuant to the ASB are true and correct as of the time when made,
            when required to be made and when deemed to be repeated, in each
            case as specified therein.

 2. Upon the delivery of the Shares to GS&Co. and the satisfaction or waiver of
    the conditions set forth in Section 6 of this Agreement, GS&Co. proposes to
    offer the Shares from time to time for sale upon the terms and conditions
    set forth in the Prospectus. GS&Co. intends to sell only such number of
    Shares so that the realized proceeds (net of customary expenses and
    commissions as set forth below) of such sales (the "Proceeds") are equal to
    the amount that the Company owes to GS&Co. under the ASB, and all of the
    Proceeds of such sales shall be retained by GS&Co. in satisfaction of the
    Company's obligations under the ASB. Once GS&Co. has sold such number of
    Shares so that the Proceeds of such sales are equal to the amount that the
    Company owes to GS&Co. under the ASB, and the Company's obligations to
    GS&Co. under the ASB shall have been satisfied in full, any Shares that have
    been delivered to but not sold by GS&Co. shall be promptly returned to the
    Company and any Proceeds in excess of the amount that was owed by the
    Company to GS&Co. under the ASB shall be promptly refunded to the Company.
    All commissions and customary expenses incurred by GS&Co. in connection with
    the sale of the Shares set forth in Section 5 of this Agreement shall be
    deemed to be incurred for the Company's account, and not for the account of
    GS&Co. and shall be paid by the Company. In no event shall commissions
    exceed 2.00% of the sales price of the shares.
 3. The Shares to be delivered to GS&Co. hereunder, in definitive form, and in
    such authorized denominations and registered in such names as GS&Co. may
    request upon at least forty-eight hours' prior notice to the Company, shall
    be delivered by or on behalf of the Company to GS&Co., through the
    facilities of The Depository Trust Company ("DTC"), for the account of
    GS&Co. The Company will cause the certificates representing the Shares to be
    made available for checking and packaging at least twenty-four hours prior
    to the Time of Delivery (as defined below) at the office of DTC or its
    designated custodian (the "Designated Office"). The time and date of such
    delivery shall be 9:30 a.m., New York City time, on [ ___ ], 2005 or such
    other time and date as GS&Co. and the Company may agree upon in writing.
    Such time and date for delivery of the Shares is herein called the "Time of
    Delivery".

    The documents to be delivered at the Time of Delivery by or on behalf of the
    parties hereto pursuant to Section 6 hereof, including the cross receipt for
    the Shares and any additional documents requested by GS&Co. pursuant to
    Section 6(j) hereof, will be delivered at the offices of Cadwalader,
    Wickersham & Taft LLP, One

     

    World Financial Center, New York, New York 10281 (the "Closing Location"),
    and the Shares will be delivered at the Designated Office, all at the Time
    of Delivery. A meeting will be held at the Closing Location at 4:00 p.m.,
    New York City time, on the New York Business Day next preceding the Time of
    Delivery, at which meeting the final drafts of the documents to be delivered
    pursuant to the preceding sentence will be available for review by the
    parties hereto. For the purposes of this Section 3, "New York Business Day"
    shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not
    a day on which banking institutions in New York are generally authorized or
    obligated by law or executive order to close.

 4. The Company agrees with GS&Co.:
     a. To prepare the Prospectus in a form approved by GS&Co. and to file such
        Prospectus pursuant to Rule 424(b) under the Securities Act not later
        than the Commission's close of business on the second business day
        following the execution and delivery of this Agreement, or, if
        applicable, such earlier time as may be required by Rule 430A(a)(3)
        under the Securities Act; maintain the effectiveness of the Registration
        Statement until GS&Co. has sold all of the Shares to be sold as provided
        in Section 2 hereof; to make no further amendment or any supplement to
        the Registration Statement or Prospectus (other than by filing a
        document under the Exchange Act in the ordinary course of business,
        which will be incorporated by reference into the Registration Statement
        or the Prospectus) which shall be disapproved by GS&Co. after reasonable
        notice thereof; to advise GS&Co., promptly after the Company receives
        notice thereof, of the time when any amendment to the Registration
        Statement has been filed or becomes effective or any supplement to the
        Prospectus or any amended Prospectus has been filed and to furnish
        GS&Co. with copies thereof; to file promptly all reports and any
        definitive proxy or information statements required to be filed by the
        Company with the Commission pursuant to Section 13(a), 13(c), 14 or
        15(d) of the Exchange Act subsequent to the date of the Prospectus and
        for so long as the delivery of a prospectus is required in connection
        with the offering or sale of the Shares; to advise GS&Co., promptly
        after the Company receives notice thereof, of the issuance by the
        Commission of any stop order or of any order preventing or suspending
        the use of any Preliminary Prospectus or prospectus, of the suspension
        of the qualification of the Shares for offering or sale in any
        jurisdiction, of the initiation or threatening of any proceeding for any
        such purpose, or of any request by the Commission for the amending or
        supplementing of the Registration Statement or Prospectus or for
        additional information; and, in the event of the issuance of any stop
        order or of any order preventing or suspending the use of any
        Preliminary Prospectus or prospectus or suspending any such
        qualification, promptly to use its best efforts to obtain the withdrawal
        of such order;
     b. Promptly from time to time to take such action as GS&Co. may reasonably
        request to qualify the Shares for offering and sale under the securities
        laws of such jurisdictions as GS&Co. may request and to comply with such
        laws so as to permit the continuance of sales and dealings therein in
        such jurisdictions for as long as may be necessary to complete the sale
        of all of the Shares to be sold as provided in Section 2, provided that
        in connection therewith the Company shall not be required to qualify as
        a foreign corporation or to file a general consent to service of process
        in any jurisdiction;
     c. Prior to 10:00 a.m., New York City time, on the New York Business Day
        next succeeding the date of this Agreement and from time to time, to
        furnish GS&Co. with written and electronic copies of the Prospectus in
        New York City in such quantities as it may reasonably request, and, if
        the delivery of a prospectus is required at any time prior to the time
        of the completion of the offering or sale of the Shares to be sold as
        provided in Section 2 and if at such time any event shall have occurred
        as a result of which the Prospectus as then amended or supplemented
        would include an untrue statement of a material fact or omit to state
        any material fact necessary in order to make the statements therein, in
        the light of the circumstances under which they were made when such
        Prospectus is delivered, not misleading, or, if for any other reason it
        shall be necessary during such period to amend or supplement the
        Prospectus or to file under the Exchange Act any document incorporated
        by reference in the Prospectus in order to comply with the Securities
        Act or the Exchange Act, to notify GS&Co. and
    
        upon its request to file such document and to prepare and furnish
        without charge to GS&Co. and to any dealer in securities as many written
        and electronic copies as GS&Co. may from time to time reasonably request
        of an amended Prospectus or a supplement to the Prospectus which will
        correct such statement or omission or effect such compliance, and in
        case GS&Co. is required to deliver a prospectus in connection with sales
        of any of the Shares at any time nine months or more after the time of
        issue of the Prospectus, upon your request but at the expense of GS&Co.,
        to prepare and deliver to GS&Co. as many written and electronic copies
        as you may request of an amended or supplemented Prospectus complying
        with Section 10(a)(3) of the Securities Act;
    
     d. To make generally available to its securityholders as soon as
        practicable, but in any event not later than eighteen months after the
        effective date of the Registration Statement (as defined in Rule 158(c)
        under the Securities Act), an earnings statement of the Company and its
        subsidiaries (which need not be audited) complying with Section 11(a) of
        the Securities Act and the rules and regulations thereunder (including,
        at the option of the Company, Rule 158);
     e. If not otherwise available on EDGAR or a similar system during a period
        of five years from the effective date of the Registration Statement, to
        furnish to its shareholders as soon as practicable after the end of each
        fiscal year, but in any event within the time period after the end of
        each fiscal year of the Company that would have been required of the
        Company under Form 10-K, an annual report (including a balance sheet and
        statements of income, shareholders' equity and cash flows of the Company
        and its consolidated subsidiaries certified by independent public
        accountants) and, as soon as practicable after the end of each of the
        first three quarters of each fiscal year (beginning with the fiscal
        quarter ending after the effective date of the Registration Statement),
        but in any event within the time period after the end of each fiscal
        quarter of the Company that would have been required of the Company
        under Form 10-Q, to make available to its shareholders consolidated
        summary financial information of the Company and its subsidiaries for
        such quarter in reasonable detail;
     f. If not otherwise available on EDGAR or a similar system during a period
        of five years from the effective date of the Registration Statement, to
        furnish to GS&Co. copies of all reports or other communications
        (financial or other) furnished to shareholders, and to deliver to GS&Co.
        (i) as soon as they are available, copies of any reports and financial
        statements furnished to or filed with the Commission or any national
        securities exchange on which any class of securities of the Company is
        listed; and (ii) such additional information concerning the business and
        financial condition of the Company as GS&Co. may from time to time
        reasonably request (such financial statements to be on a consolidated
        basis to the extent the accounts of the Company and its subsidiaries are
        consolidated in reports furnished to its shareholders generally or to
        the Commission); provided that the Company shall not be required to
        deliver any information that would cause the Company to make a public
        disclosure under Regulation FD as promulgated under the Exchange Act;
        and
     g. Upon request of GS&Co., to furnish, or cause to be furnished, to GS&Co.
        an electronic version of the Company's trademarks, servicemarks and
        corporate logo for use on the website, if any, operated by GS&Co. for
        the purpose of facilitating the on-line offering of the Shares (the
        "License"). The License shall be granted without any fee.

 5. The Company covenants and agrees with GS&Co. that the Company will pay or
    cause to be paid the following: (i) the fees, disbursements and expenses of
    the Company's counsel and accountants and of outside counsel to GS&Co. and
    other independent experts retained by GS&Co. in connection with the
    registration of the Shares under the Securities Act and all other expenses
    in connection with the preparation, printing and filing of the Registration
    Statement, any Preliminary Prospectus and the Prospectus and amendments and
    supplements thereto and the mailing and delivering of copies thereof to
    GS&Co. and dealers; (ii) the cost of printing or producing this Agreement,
    the Blue Sky Memorandum, closing documents (including any compilations
    thereof) and any other documents in connection with the offering, sale and
    delivery of the

    Shares; (iii) all expenses in connection with the qualification of the
    Shares for offering and sale under state securities laws as provided in
    Section 4(b) hereof, including the fees and disbursements of counsel for
    GS&Co. in connection with such qualification and in connection with the Blue
    Sky survey; (iv) the cost of preparing stock certificates; (v) the cost and
    charges of any transfer agent or registrar; and (vi) all other reasonable
    and actual costs and expenses incident to the performance of its obligations
    hereunder. Except as provided in this Section 5 and Section 7 of this
    Agreement, GS&Co. shall pay all other expenses it incurs in connection with
    the registration, offering and sale of the Shares.

 6. The obligations of GS&Co. to accept the Shares to be delivered at the Time
    of Delivery in satisfaction of the Company's obligations under the ASB, and
    the obligations of GS&Co. hereunder with respect to the Shares to be
    delivered at the Time of Delivery, shall be subject, in its discretion, to
    the condition that all representations and warranties and other statements
    of the Company herein and in the ASB are, at and as of the Time of Delivery,
    as of the time when made, (and when required to be made and deemed to be
    repeated with respect to the representations and warranties and other
    statements of the Company in the ASB, in each case as specified therein),
    true and correct, the condition that the Company shall have performed all of
    its obligations hereunder and under the ASB theretofore to be performed, and
    the following additional conditions:
     a. The Prospectus (the form of which was previously approved by GS&Co.)
        shall have been filed with the Commission pursuant to Rule 424(b) within
        the applicable time period prescribed for such filing by the rules and
        regulations under the Securities Act and in accordance with Section 4(a)
        hereof; no stop order suspending the effectiveness of the Registration
        Statement or any part thereof shall have been issued and no proceeding
        for that purpose shall have been initiated or threatened by the
        Commission; and all requests for additional information on the part of
        the Commission shall have been complied with to GS&Co.'s reasonable
        satisfaction;
     b. Cadwalader, Wickersham & Taft LLP, counsel for GS&Co., shall have
        furnished to GS&Co. their written opinion (a draft of such opinion is
        attached as Annex II(a) hereto), dated the Time of Delivery, and such
        counsel shall have received such papers and information as they may
        reasonably request to enable them to pass upon such matters;
     c. Orrick, Herrington & Sutcliffe LLP, counsel for the Company, shall have
        furnished to GS&Co. their written opinion (a draft of such opinion is
        attached as Annex II(b) hereto), dated the Time of Delivery, in form and
        substance satisfactory to GS&Co., to the effect that:
         i.   The Company and Pacific Gas and Electric Company, a California
              corporation (the "Utility") have each been duly incorporated and
              are validly existing and in good standing under the laws of the
              State of California. The Company has all necessary corporate power
              and authority to execute, deliver and perform its obligations
              under this Agreement and to own and hold its properties and
              conduct its business as described in the Registration Statement.
         ii.  This Agreement and the ASB have been duly authorized, executed and
              delivered by the Company.
         iii. The statements in the Prospectus under the caption "Description of
              Capital Stock," insofar as they purport to constitute a summary of
              the terms of the Shares, and under the caption "Plan of
              Distribution," only to the extent that they purport to constitute
              summaries of United States federal statutes, rules and
              regulations, or portions thereof, and agreements referred to
              therein are accurate and fair in all material respects.
         iv.  The Registration Statement and the Prospectus and any further
              amendments and supplements thereto made by the Company prior to
              the date hereof appear on their face to
        
              be appropriately responsive in all material respects to the
              requirements of the Securities Act and the rules and regulations
              of the Commission under the Securities Act except for the
              financial statements, financial statement schedules and other
              financial data included or incorporated by reference in or omitted
              from either of them, as to which we express no opinion; and each
              document filed under the Securities Exchange Act of 1934, as
              amended (the "Exchange Act"), and incorporated by reference in the
              Registration Statement and Prospectus (except for financial
              statements, financial statement schedules and other financial data
              included in either of them, as to which we express no opinion)
              appears on its face to be appropriately responsive in all material
              respects when so filed to the requirements of the Exchange Act and
              the rules and regulations under the Exchange Act.
        
         v.   The Company is not required to be registered as an investment
              company under the Investment Company Act of 1940, as amended, and
              the rules and regulations of the Commission promulgated
              thereunder.
    
        Such counsel shall also state that they have participated in the
        preparation of the Registration Statement and the Prospectus and are
        familiar with the documents incorporated by reference therein and,
        although the limitations inherent in the independent verification of
        factual matters and in the role of outside counsel are such that they
        have not undertaken to investigate or verify independently, and do not
        assume responsibility for, the accuracy, completeness or fairness of the
        statements contained in either of them (other than as explicitly stated
        in paragraph (iv) above), based upon such participation (and relying as
        to certain factual matters in their evaluation of materiality to the
        extent they deemed reasonable on officers, employees and other
        representatives of the Company), no facts have come to their attention
        that led them to believe that (a) the Registration Statement or any
        amendment (except for the financial statements, financial statement
        schedules and other financial data included or incorporated by reference
        in or omitted from those documents, as to which such counsel may express
        no such belief), at the time it became effective, contained an untrue
        statement of a material fact or omitted to state a material fact
        required to be stated therein or necessary to make the statements
        therein not misleading or (b) the Prospectus or any amendment or
        supplement (except for the financial statements, financial statement
        schedules and other financial data included or incorporated by reference
        in or omitted from those documents, as to which such counsel may express
        no such belief), at the time the Prospectus was issued or on the date of
        such counsel's opinion, included or includes an untrue statement of a
        material fact or omitted or omits to state a material fact necessary in
        order to make the statements therein, in the light of the circumstances
        under which they were made, not misleading. Such counsel does not know
        of any amendment to the Registration Statement required to be filed or
        of any contracts or other documents of a character required to be filed
        as an exhibit to the Registration Statement or required to be
        incorporated by reference into the Prospectus or required to be
        described in the Registration Statement or the Prospectus which are not
        filed or incorporated by reference or described as required.
    
     d. Bruce R. Worthington, Esq., Senior Vice President and General Counsel of
        the Company, shall have furnished to GS&Co. his written opinion (a draft
        of such opinion is attached as Annex II(c) hereto), dated the Time of
        Delivery, in form and substance satisfactory to GS&Co., to the effect
        that:
         i.   The Shares to be delivered at the Time of Delivery have been duly
              authorized and, when delivered and paid for in accordance with
              this Agreement, will be validly issued and outstanding, fully paid
              and non-assessable. All of the issued and outstanding shares of
              common stock of the Utility have been duly authorized and are
              validly issued and outstanding, fully paid and non-assessable, are
              owned of record directly or indirectly by the
        
              Company and, to such counsel's knowledge, are owned free and clear
              of all liens, encumbrances, equities or claims, except as
              disclosed in the Prospectus.
        
         ii.  The Registration Statement and the Prospectus and any further
              amendments and supplements thereto made by the Company prior to
              the date hereof appear on their face to be appropriately
              responsive in all material respects to the requirements of the
              Securities Act and the rules and regulations of the Commission
              under the Securities Act except for the financial statements,
              financial statement schedules and other financial data included or
              incorporated by reference in or omitted from either of them, as to
              which such counsel may express no opinion; and each document filed
              under the Exchange Act, and incorporated by reference in the
              Registration Statement and Prospectus (except for financial
              statements, financial statement schedules and other financial data
              included in either of them, as to which such counsel may express
              no opinion) appears on its face to be appropriately responsive in
              all material respects when so filed to the requirements of the
              Exchange Act and the rules and regulations under the Exchange Act.
         iii. The compliance by the Company with all of the provisions of this
              Agreement applicable to it and the performance by the Company of
              its obligations hereunder will not (i) result in a violation of
              Company's Articles of Incorporation, as amended, or By-Laws, as
              amended, (ii) breach or result in a default under any agreement,
              indenture or instrument listed as an Exhibit to the Registration
              Statement or (iii) violate any Applicable Law (other than any
              state securities laws, as to which such counsel may express no
              opinion) or any judgment, order or decree of any court or
              arbitrator known to such counsel, except in the case of clauses
              (ii) and (iii) where the breach or violation would not have a
              material adverse effect on the Company and its subsidiaries taken
              as a whole. For purposes of this opinion, the term "Applicable
              Law" means the federal laws of the United States and the laws of
              the State of California, in each case which, in such counsel's
              experience, are normally applicable to the transactions of the
              type contemplated by this Agreement.
         iv.  Based on such counsel's review of Applicable Law, but without any
              investigation concerning any other laws, rules or regulations, no
              consent, approval, authorization or order of, or filing,
              registration or qualification with, any Governmental Authority,
              which has not been obtained, taken or made (other than as required
              by any state securities laws, as to which we express no opinion)
              is required under any Applicable Law for the performance by the
              Company of its obligations under this Agreement. For purposes of
              this opinion, the term "Governmental Authority" means any
              executive, legislative, judicial, administrative or regulatory
              body of the State of New York, the State of California or the
              United States of America.
         v.   To such counsel's knowledge (without making any docket search or
              similar investigation) and other than as set forth in the
              Prospectus, there are no legal proceedings pending or threatened
              against the Company or the Subsidiaries that could reasonably be
              expected to have a material adverse effect on the Company and the
              Subsidiaries, taken as a whole, or could reasonably be expected to
              materially impair the Company's ability to perform its obligations
              under this Agreement. To such counsel's knowledge, there are no
              legal or governmental actions, suits or proceedings pending or
              threatened which are required to be disclosed in the Registration
              Statement, other than those disclosed therein.
    
        Such counsel shall also state that he has participated in the
        preparation of the Registration Statement and the Prospectus and is
        familiar with the documents incorporated by reference therein and,
        although he has not undertaken to investigate or verify independently,
        and does not assume responsibility for, the accuracy, completeness or
        fairness of the statements contained in either of them, based upon such
        participation (and relying as to certain factual matters in his
        evaluation of materiality to the extent they deemed reasonable on
        officers, employees and other representatives of the Company), no facts
        have come to his attention that led him to believe that (a) the
        Registration Statement or any amendment (except for the financial
        statements, financial statement schedules and other financial data
        included or incorporated by reference in or omitted from those
        documents, as to which such counsel may express no such belief), at the
        time it became effective, contained an untrue statement of a material
        fact or omitted to state a material fact required to be stated therein
        or necessary to make the statements therein not misleading or (b) the
        Prospectus or any amendment or supplement (except for the financial
        statements, financial statement schedules and other financial data
        included or incorporated by reference in or omitted from those
        documents, as to which such counsel may express no such belief), at the
        time the Prospectus was issued or on the date of such counsel's opinion,
        included or includes an untrue statement of a material fact or omitted
        or omits to state a material fact necessary in order to make the
        statements therein, in the light of the circumstances under which they
        were made, not misleading. Such counsel does not know of any amendment
        to the Registration Statement required to be filed or of any contracts
        or other documents of a character required to be filed as an exhibit to
        the Registration Statement or required to be incorporated by reference
        into the Prospectus or required to be described in the Registration
        Statement or the Prospectus which are not filed or incorporated by
        reference or described as required.
    
     e. On the date of the Prospectus at a time prior to the execution of this
        Agreement, at 9:30 a.m., New York City time, on the effective date of
        any post-effective amendment to the Registration Statement filed
        subsequent to the date of this Agreement and also at the Time of
        Delivery, Deloitte & Touche LLP shall have furnished to you a letter or
        letters, dated the respective dates of delivery thereof, in form and
        substance satisfactory to you, to the effect set forth in Annex I hereto
        (the executed copy of the letter delivered prior to the execution of
        this Agreement is attached as Annex I(a) hereto and a draft of the form
        of letter to be delivered on the effective date of any post-effective
        amendment to the Registration Statement and as of the Time of Delivery
        is attached as Annex I(b) hereto);
     f. (i) Neither the Company nor any of its subsidiaries shall have sustained
        since the date of the latest audited financial statements included in
        the Prospectus any loss or interference with its business from fire,
        explosion, flood or other calamity, whether or not covered by insurance,
        or from any labor dispute or court or governmental action, order or
        decree, otherwise than as set forth or contemplated in the Prospectus,
        and (ii) since the respective dates as of which information is given in
        the Prospectus there shall not have been any material change in the
        capital stock (other than changes occurring in the ordinary course of
        business and changes resulting from transactions relating to employee
        benefit plans or dividend reinvestment, stock option, stock award,
        retirement and stock purchase plans or repurchases of capital stock by
        the Company, including repurchases associated with the ASB or long-term
        debt of the Company or any of its subsidiaries or any change, or any
        development which would reasonably be expected to result in a change, in
        or affecting the general affairs, management, financial position,
        shareholders' equity or results of operations of the Company and its
        subsidiaries, otherwise than as set forth or contemplated in the
        Prospectus, the effect of which, in any such case described in clause
        (i) or (ii), is in the judgment of GS&Co. so material and adverse as to
        make it impracticable or inadvisable to proceed with the public offering
        or the delivery of the Shares being delivered at the Time of Delivery on
        the terms and in the manner contemplated in the Prospectus;
     g. 
     h. On or after the date hereof (i) no downgrading shall have occurred in
        the rating accorded the Company's debt securities by any "nationally
        recognized statistical rating organization", as that term is defined by
        the Commission for purposes of Rule 436(g)(2) under the Securities Act,
        and (ii) no such organization shall have publicly announced that it has
        under surveillance or review, with possible negative implications, its
        rating of any of the Company's debt securities;
     i. On or after the date hereof there shall not have occurred any of the
        following: (i) a suspension or material limitation in trading in
        securities generally on the New York Stock Exchange; (ii) a suspension
        or material limitation in trading in the Company's securities on the New
        York Stock Exchange; (iii) a general moratorium on commercial banking
        activities declared by either Federal or New York State authorities or a
        material disruption in commercial banking or securities settlement or
        clearance services in the United States; (iv) the outbreak or escalation
        of hostilities involving the United States or the declaration by the
        United States of a national emergency or war or (v) the occurrence of
        any other calamity or crisis or any change in financial, political or
        economic conditions in the United States or elsewhere, if the effect of
        any such event specified in clause (iv) or (v) in the judgment of GS&Co.
        makes it impracticable or inadvisable to proceed with the public
        offering or the delivery of the Shares being delivered at the Time of
        Delivery on the terms and in the manner contemplated in the Prospectus;
     j. The Shares to be delivered at the Time of Delivery shall have been duly
        listed on the New York Stock Exchange;
     k. The Company shall have complied with the provisions of Section 4(c)
        hereof with respect to the furnishing of prospectuses on the New York
        Business Day next succeeding the date of this Agreement; and
     l. The Company shall have furnished or caused to be furnished to GS&Co. at
        the Time of Delivery certificates of officers of the Company
        satisfactory to GS&Co. as to the accuracy of the representations and
        warranties of the Company herein at and as of the Time of Delivery, as
        to the performance by the Company of all of its obligations hereunder to
        be performed at or prior to the Time of Delivery, and as to the other
        matters as GS&Co. may reasonably request, and the Company shall have
        furnished certificates as to the matters set forth in subsections (a)
        and (e) of this Section, and as to such other matters as GS&Co. may
        reasonably request.

The Company shall indemnify and hold harmless GS&Co., and any such person who
may be deemed to be an "Underwriter" within the meaning of the Securities Act,
each person, if any, who controls GS&Co. within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, and each partner,
principal, member, officer, director, employee and agent of GS&Co. from and
against any and all losses, claims, damages or liabilities to which GS&Co. may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse GS&Co. for any legal or other expenses reasonably incurred by
GS&Co. in connection with investigating or defending any such action or claim as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company by GS&Co. expressly for use therein.
    
 a. GS&Co. will indemnify and hold harmless the Company against any losses,
    claims, damages or liabilities to which the Company may become subject,
    under the Act or otherwise, insofar as such losses, claims, damages or
    liabilities (or actions in respect thereof) arise out of or are based upon
    an untrue statement or alleged untrue statement of a material fact contained
    in any Preliminary Prospectus, the Registration Statement, the Prospectus,
    the Prospectus as amended or supplemented or any other prospectus relating
    to the Shares, or any amendment or supplement thereto, or arise out of or
    are based upon the omission or alleged omission to state therein a material
    fact required to be stated therein or necessary to make the statements
    therein not misleading, in each case to the extent, but only to the extent,
    that such untrue statement or alleged untrue statement or omission or
    alleged omission was made in any Preliminary Prospectus, the Registration
    Statement, the Prospectus, the Prospectus as amended or supplemented or any
    other prospectus relating to the Shares, or any such amendment or
    supplement, in reliance upon and in conformity with written information
    furnished to the Company by GS&Co. expressly for use therein; and will
    reimburse the Company for any legal or other expenses reasonably incurred by
    the Company in connection with investigating or defending any such action or
    claim as such expenses are incurred.
 b. Promptly after receipt by an indemnified party under subsection (a) or (b)
    above of notice of the commencement of any action, such indemnified party
    shall, if a claim in respect thereof is to be made against the indemnifying
    party under such subsection, notify the indemnifying party in writing of the
    commencement thereof; but the omission so to notify the indemnifying party
    shall not relieve it from any liability which it may have to any indemnified
    party otherwise than under such subsection. In case any such action shall be
    brought against any indemnified party and it shall notify the indemnifying
    party of the commencement thereof, the indemnifying party shall be entitled
    to participate therein and, to the extent that it shall wish, jointly with
    any other indemnifying party similarly notified, to assume the defense
    thereof, with counsel satisfactory to such indemnified party (who shall not,
    except with the consent of the indemnified party, be counsel to the
    indemnifying party), and, after notice from the indemnifying party to such
    indemnified party of its election so to assume the defense thereof, the
    indemnifying party shall not be liable to such indemnified party under such
    subsection for any legal expenses of other counsel or any other expenses, in
    each case subsequently incurred by such indemnified party, in connection
    with the defense thereof other than reasonable costs of investigation. No
    indemnifying party shall, without the written consent of the indemnified
    party, effect the settlement or compromise of, or consent to the entry of
    any judgment with respect to, any pending or threatened action or claim in
    respect of which indemnification or contribution may be sought hereunder
    (whether or not the indemnified party is an actual or potential party to
    such action or claim) unless such settlement, compromise or judgment (i)
    includes an unconditional release of the indemnified party from all
    liability arising out of such action or claim and (ii) does not include any
    statement as to or an admission of fault, culpability or a failure to act,
    by or on behalf of any indemnified party.
 c. If the indemnification provided for in this Section 7 is unavailable to or
    insufficient to hold harmless an indemnified party under subsection (a) or
    (b) above in respect of any losses, claims, damages or liabilities (or
    actions in respect thereof) referred to therein, then each indemnifying
    party shall contribute to the amount paid or payable by such indemnified
    party as a result of such losses, claims, damages or liabilities (or actions
    in respect thereof) in such proportion as is appropriate to reflect the
    relative benefits received by the Company on the one hand and GS&Co. on the
    other from the offering of the Shares to which such loss, claim, damage or
    liability (or action in respect thereof) relates. If, however, the
    allocation provided by the immediately preceding sentence is not permitted
    by applicable law or if the indemnified party failed to give the notice
    required under subsection (c) above, then each indemnifying party shall
    contribute to such amount paid or payable by such indemnified party in such
    proportion as is appropriate to reflect not only such relative benefits but
    also the relative fault of the Company on the one hand and GS&Co. on the
    other in connection with the statements or omissions which resulted in such
    losses, claims, damages or liabilities (or actions in respect thereof), as
    well as any other relevant equitable considerations. The relative benefits
    received by the Company on the one hand and GS&Co. on the other shall be
    deemed to be in the same proportion as the total net proceeds from such
    offering (before deducting expenses) received by the Company bear to the
    total commissions received by GS&Co. The relative fault shall be determined
    by reference to, among other things, whether the untrue or alleged untrue
    statement of a material fact or the omission or alleged omission to state a
    material fact relates to information supplied by the Company on the one hand
    or GS&Co. on the other and the parties' relative intent, knowledge, access
    to information and opportunity to correct or prevent such statement or
    omission. The

    Company and GS&Co. agree that it would not be just and equitable if
    contributions pursuant to this subsection (d) were determined by pro rata
    allocation (even if GS&Co. were treated as one entity for such purpose) or
    by any other method of allocation which does not take account of the
    equitable considerations referred to above in this subsection (d). The
    amount paid or payable by an indemnified party as a result of the losses,
    claims, damages or liabilities (or actions in respect thereof) referred to
    above in this subsection (d) shall be deemed to include any legal or other
    expenses reasonably incurred by such indemnified party in connection with
    investigating or defending any such action or claim. Notwithstanding the
    provisions of this subsection (d), GS&Co. shall not be required to
    contribute any amount in excess of the amount by which the total price at
    which the applicable Shares distributed to the public were offered to the
    public exceeds the amount of any damages which GS&Co. has otherwise been
    required to pay by reason of such untrue or alleged untrue statement or
    omission or alleged omission. No person guilty of fraudulent
    misrepresentation (within the meaning of Section 11(f) of the Securities
    Act) shall be entitled to contribution from any person who was not guilty of
    such fraudulent misrepresentation.

 d. The obligations of, and the indemnification provided by, the Company and
    GS&Co. under this Section 7 shall be in addition to any liability which the
    Company and GS&Co. may otherwise have, and, for the avoidance of doubt,
    shall be in addition to any other indemnification provided by the Company
    and GS&Co. or any other party, including the indemnification provided under
    the ASB, and shall extend, upon the same terms and conditions, to each
    Indemnified Party (as defined in the ASB); provided, however, that only this
    Section 7 and not clause (ii) of paragraph 8 of Annex B to the ASB shall
    apply in respect of the Shares.

The respective indemnities, agreements, representations, warranties and other
statements of the Company and GS&Co., as set forth in this Agreement or made by
or on behalf of them, respectively, pursuant to this Agreement, shall remain in
full force and effect, regardless of any investigation (or any statement as to
the results thereof) made by or on behalf of GS&Co. or any controlling person of
GS&Co. or the Company or any officer or director or controlling person of the
Company and shall survive delivery of and payment for the Shares. All
statements, requests, notices and agreements hereunder shall be in writing, and
if to GS&Co. shall be delivered or sent by mail, telex or facsimile transmission
to Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention:
[Registration Department] and if to the Company shall be delivered or sent by
mail to the address of the Company set forth in the Registration Statement,
Attention: General Counsel. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof. This Agreement shall be binding upon,
and inure solely to the benefit of, GS&Co. and the Company and, to the extent
provided in Sections 7 and 8 hereof, each Indemnified Party (as defined in the
ASB), and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No purchaser of any of the Shares from GS&Co. shall be deemed
a successor or assign by reason merely of such purchase. Time shall be of the
essence of this Agreement. As used herein, the term "business day" shall mean
any day when the Commission's office in Washington, D.C. is open for business.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York. Each of the Company and GS&Co. hereby irrevocably waives,
to the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument. The Company is authorized, subject to applicable
law, to disclose any and all aspects of this potential transaction that are
necessary to support any U.S. federal income tax benefits expected to be claimed
with respect to such transaction, and all materials of any kind (including tax
opinions and other tax analyses) related to those benefits, without GS&Co.
imposing any limitation of any kind. However, any information relating to the
tax treatment and tax structure shall remain confidential (and the foregoing
sentence shall not apply) to the extent necessary to enable any person to comply
with securities laws. For this purpose, "tax structure" is limited to any facts
that may be relevant to that treatment.

If the foregoing is in accordance with your understanding, please sign and
return to us five counterparts hereof, and upon the acceptance hereof by GS&Co.,
this letter and such acceptance hereof shall constitute a binding agreement
between GS&Co. and the Company.

Very truly yours,

PG&E Corporation

By:

Name:

Title:

 

Accepted as of the date hereof:

Goldman, Sachs & Co.

By:

(Goldman, Sachs & Co.)

SCHEDULE I

Name

State of Incorporation

Pacific Gas and Electric Company California

ANNEX I

Pursuant to Section 6(e) of the Agreement, the accountants shall furnish letters
to GS&Co. to the effect that:

(i) They are an independent registered public accounting firm with respect to
the Company and its subsidiaries within the meaning of the Securities Act and
the applicable published rules and regulations thereunder adopted by the
Commission and the PCAOB;

(ii) In their opinion, the financial statements and any supplementary financial
information and schedules (and, if applicable, financial forecasts and/or pro
forma financial information) audited by them and included or incorporated by
reference in the Prospectus or the Registration Statement comply as to form in
all material respects with the applicable accounting requirements of the
Securities Act or the Exchange Act, as applicable, and the related published
rules and regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the PCAOB of the unaudited consolidated
interim financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements derived
from audited financial statements of the Company for the periods specified in
such letter, as indicated in their reports thereon, copies of which have been
separately furnished to GS&Co.;

(iii) They have made a review in accordance with standards established by the
PCAOB of the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included in the Company's quarterly report on Form 10-Q
incorporated by reference into the Prospectus as indicated in their reports
thereon copies of which have been separately furnished to GS&Co.; and on the
basis of specified procedures including inquiries of officials of the Company
who have responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and the Exchange Act
and the related published rules and regulations, nothing came to their attention
that caused them to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with the applicable
accounting requirements of the Securities Act and the Exchange Act and the
related published rules and regulations;

(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus and included or
incorporated by reference in Item 6 of the Company's Annual Report on Form 10-K
for the most recent fiscal year agrees with the corresponding amounts (after
restatements where applicable) in the audited consolidated financial statements
for such five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;

(v) On the basis of limited procedures, not constituting an examination in
accordance with the standards of the PCAOB, consisting of a reading of the
unaudited financial statements and other information referred to below, a
reading of the latest available interim financial statements of the Company and
its subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial statements included
in the Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their attention
that caused them to believe that:

(A) (i) the unaudited consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the Prospectus
and/or included or incorporated by reference in the Company's Quarterly Reports
on Form 10-Q incorporated by reference in the Prospectus do not comply as to
form in all material respects with the applicable accounting requirements of the
Securities Act and the Exchange Act and the related published rules and
regulations, or (ii) any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus or included in
the Company's Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus for them to be in conformity with generally accepted accounting
principles;

(B) any other unaudited income statement data and balance sheet items included
or incorporated by reference in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial statements from
which such data and items were derived, and any such unaudited data and items
were not determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements included
or incorporated by reference in the Company's Annual Report on Form 10-K for the
most recent fiscal year incorporated by reference in the Prospectus;

(C) the unaudited financial statements which were not included in the Prospectus
but from which were derived any unaudited condensed financial statements
referred to in clause (A) and any unaudited income statement data and balance
sheet items included or incorporated by reference in the Prospectus and referred
to in clause (B) were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements included or
incorporated by reference in the Company's Annual Report on Form 10-K for the
most recent fiscal year incorporated by reference in the Prospectus;

(D) any unaudited pro forma consolidated condensed financial statements included
or incorporated by reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act and the Exchange Act and the published rules and regulations thereunder or
the pro forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;

(E) as of a specified date not more than five days prior to the date of such
letter, there have been any changes in the consolidated capital stock (other
than issuances of capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon conversions of convertible
securities, in each case which were outstanding on the date of the latest
financial statements included or incorporated by reference in the Prospectus) or
any increase in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current assets or
shareholders' equity or other items specified by GS&Co., or any increases in any
items specified by GS&Co., in each case as compared with amounts shown in the
latest balance sheet included or incorporated by reference in the Prospectus,
except in each case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such letter; and

(F) for the period from the date of the latest financial statements included or
incorporated by reference in the Prospectus to the specified date referred to in
clause (E) there were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net income or other
items specified by GS&Co., or any increases in any items specified by GS&Co., in
each case as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by GS&Co., except in each
case for decreases or increases which the Prospectus discloses have occurred or
may occur or which are described in such letter; and

(vi) In addition to the examination referred to in their report(s) included or
incorporated by reference in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to in
paragraphs (iii) and (vi) above, they have carried out certain specified
procedures, not constituting an examination in accordance with generally
accepted auditing standards, with respect to certain amounts, percentages and
financial information specified by GS&Co., which are derived from the general
accounting records of the Company and its subsidiaries, which appear in the
Prospectus (excluding documents incorporated by reference) or in Part II of, or
in exhibits and schedules to, the Registration Statement specified by GS&Co. or
in documents incorporated by reference in the Prospectus specified by GS&Co.,
and have compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have found
them to be in agreement.

ANNEX II(a)

FORM OF OPINION

OF Cadwalader, Wickersham & Taft LLP

 

ANNEX II(b)

FORM OF OPINION

OF Orrick, Herrington & Sutcliffe LLP

ANNEX II(c)

FORM OF OPINION

OF BRUCE R. WORTHINGTON, ESQ.