As filed with the Securities and Exchange Commission on April 27, 1999
Registration No. 333-_____
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
PG&E CORPORATION
(Exact name of registrant as specified in its charter)
California 94-3234914
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Market, Spear Street Tower, Suite 2400
San Francisco, California 94105
(Address of principal executive offices) (zip code)
PG&E CORPORATION LONG-TERM INCENTIVE PROGRAM
(Full title of the Plan)
Gary P. Encinas, Esq.
One Market, Spear Tower
Suite 400
San Francisco, California 94105
(Name and address of agent for service)
Telephone number, including area code, of agent for service:(415) 267-7000
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================
Title of each class Amount to be Proposed Proposed
of securities to be Registered maximum maximum Amount
registered: offering aggregate of
price per offering registration
share (1) price fee
<S> <C> <C> <C> <C>
Common stock, 11,000,000 shs $31.375 $345,125,000 $95,944
no par value
- --------------------------------------------------------------------------
</TABLE>
(1) The registration fee was calculated pursuant to Rules 457(h)(1) and
457(c) of the Securities Act of 1933, on the basis of the average of the
high and low prices of the registrant's common stock on April 23, 1999 as
reported on the New York Stock Exchange.
Pursuant to Rule 416, this registration statement also covers securities
that may be offered under the above referenced plan to prevent dilution
resulting from stock splits, stock dividends, or similar transactions.
<PAGE>
PART I
Information required by Items 1 and 2 of Part I of Form S-8 is
not required to be filed as part of this registration statement.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The following documents are incorporated by reference in
this registration statement: (i) the latest annual report of PG&E
Corporation (the "Registrant") filed pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (ii) all other reports filed by the Registrant
pursuant to Section 13(a) or 15(d) of the Exchange Act since the
end of the fiscal year covered by the annual report referred to
in clause (i) above; and (iii) the description of the
Registrant's common stock ("Common Stock") filed pursuant to the
Exchange Act, including any amendment or report filed for the
purpose of updating such description. All documents filed by the
Registrant after the date of this registration statement pursuant
to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act, prior
to the filing of a post-effective amendment (that indicates all
securities offered have been sold or deregisters all securities
then remaining unsold), shall be incorporated by reference in
this registration statement and to be a part hereof from the date
of filing of such documents.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
The legality of the common stock to be offered under the above-
referenced plan will be passed upon by Gary P. Encinas, Chief
Counsel, Corporate, of PG&E Corporation. Mr. Encinas, together
with other members of the PG&E Corporation Law Department who
have participated in the preparation of his opinion, attached
hereto as Exhibit 5, beneficially own 802 shares of
PG&E Corporation common stock, and hold options to purchase an
additional 48,600 shares of PG&E Corporation common stock.
Item 6. Indemnification of Officers and Directors.
Section 317 of the California Corporations Code and Article SIXTH
of the Registrant's Articles of Incorporation provide for
indemnification of the Registrant's directors and officers under
certain circumstances. The Registrant's Board of Directors has
adopted a resolution regarding the Registrant's policy of
indemnification and the Registrant maintains insurance that
insures directors and officers of the Registrant against certain
liabilities.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
5 Opinion of Gary P. Encinas, Chief Counsel, Corporate
23.1 Consent of Gary P. Encinas (See exhibit 5 above.)
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney.
24.2 Resolution of the Board of Directors authorizing the
execution of this Registration Statement.
99 PG&E Corporation Long-Term Incentive Program
Item 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities offered hereby, a post-
effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement; and
(iii) To include any material information with respect
to the plan of distribution not previously disclosed
in this registration statement or any material
change to such information in this registration
statement;
provided, however, that the undertakings set forth in
-------- -------
paragraphs (i) and (ii) above do not apply if the
information required to be
<PAGE>
included in a post-effective
amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in this registration
statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of such
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, such
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the
Securities Act of 1933, the Registrant certifies that it has
reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and County of
San Francisco, State of California, on the 26th day of April,
1999.
PG&E CORPORATION
(Registrant)
GARY P. ENCINAS
By ---------------------------
GARY P. ENCINAS
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities indicated and on the dates indicated.
Signatures Title Date
---------- ----- ----
A. Principal Executive
Officer
*ROBERT D. GLYNN, JR. Chairman of the April 26, 1999
Board, President,
and Chief
Executive Officer
B. Principal Financial
Officer
*MICHAEL E. RESCOE Senior Vice President
and Chief Financial April 26, 1999
Officer
C. Controller or
Principal Accounting
Officer
*CHRISTOPHER P. JOHNS Vice President
and Controller April 26, 1999
D. Directors April 26, 1999
*ROBERT D. GLYNN, JR.
*RICHARD A. CLARKE
*DAVID A. COULTER
<PAGE>
*C. LEE COX
*WILLIAM S. DAVILA
*DAVID M. LAWRENCE
*RICHARD B. MADDEN
*MARY S. METZ
*REBECCA Q. MORGAN
*JOHN C. SAWHILL
*BARRY LAWSON WILLIAMS
GARY P. ENCINAS
* By ------------------------------
(Gary P. Encinas,
Attorney-in-Fact)
<PAGE>
EXHIBIT INDEX
5 Opinion of Gary P. Encinas, Chief Counsel , Corporate
23.1 Consent of Gary P. Encinas (See exhibit 5 above.)
23.2 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney.
24.2 Resolution of the Board of Directors authorizing the
execution of this Registration Statement
99 PG&E Corporation Long-Term Incentive Program
[LETTERHEAD OF PG&E CORPORATION}
EXHIBIT 5
April 26, 1999
PG&E Corporation
One Market, Spear Tower
Suite 2400
San Francisco, CA 94105
Re: PG&E Corporation - Registration Statement on Form S-8
Relating to the PG&E Corporation Long-Term Incentive Program
Ladies and Gentlemen:
At your request, I, Chief Counsel, Corporate for PG&E
Corporation, a California corporation (the "Company"), am
rendering this opinion in connection with the proposed issuance
of 11,000,000 shares of the Company's common stock (the "Shares")
pursuant to the PG&E Corporation Long-Term Incentive Program (the
"Program").
I, or other members of PG&E Corporation's Law Department acting
under my direction and under my supervision, have examined
instruments, documents, and records which I deemed relevant and
necessary for the basis of my opinion herein after expressed. In
such examination, I have assumed the following: (a) the
authenticity of original documents and the genuineness of all
signatures; (b) the conformity to the originals of all documents
submitted to me as copies; and (c) the truth, accuracy and
completeness of the information, representations and warranties
contained in the records, documents, instruments and certificates
I have reviewed.
Based on such examination, I am of the opinion that the Shares,
when issued in accordance with the provisions of the Program,
will be legally issued, fully paid and nonassessable.
I express no opinion as to matters of law in jurisdiction other
than the State of California and federal law of the United
States.
I hereby consent to the filing of this opinion as to an exhibit
to this Registration Statement and to the use of my name wherever
it appears in said Registration Statement. In giving such
consent, I do not consider that I am an "expert" within the
meaning of such term as used in the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and
Exchange Commission issued thereunder, with respect to any part
of the Registration Statement, including this opinion as an
exhibit or otherwise.
Very truly yours,
GARY P. ENCINAS
GARY P. ENCINAS
Exhibit 23.2
[ARTHUR ANDERSEN LLP LETTERHEAD]
To the Board of Directors of PG&E Corporation:
As independent public accountants, we hereby
consent to the use of our report included in this
registration statement and to the incorporation by
reference in this registration statement of our
report dated February 8, 1999 included in PG&E
Corporation's Form 10-K for the year ended December,
31, 1998 and to all references to our Firm included
in this registration statement.
Arthur Andersen LLP
---------------------------------
Arthur Andersen LLP
San Francisco, California,
April 23, 1999
Exhibit 24.1
POWER OF ATTORNEY
Each of the undersigned Directors of PG&E Corporation
hereby constitutes and appoints LESLIE H. EVERETT, LINDA
Y.H. CHENG, WONDY S. LEE, ERIC MONTIZAMBERT, GARY P.
ENCINAS, JOHN E. FORD, and KATHLEEN HAYES, and each of them,
as his or her attorneys in fact with full power of
substitution to sign and file with the Securities and
Exchange Commission in his or her capacity as such Director
of said corporation one or more registration statements
relating to the offer and sale of 11 million shares of said
corporation's common stock pursuant to the Long-Term
Incentive Program maintained by said corporation, and any
and all amendments or supplements thereto, and hereby
ratifies all that said attorneys in fact or any of them may
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, we have signed these presents this
17th day of February, 1999.
Robert D. Glynn, Jr. Richard A. Clarke
- ---------------------- ----------------------
Robert D. Glynn, Jr. Richard A. Clarke
- ---------------------- ----------------------
David A. Coulter Rebecca Q. Morgan
- ---------------------- ----------------------
David A. Coulter Rebecca Q. Morgan
- ---------------------- ----------------------
C. Lee Cox Mary S. Metz
- ---------------------- ----------------------
C. Lee Cox Mary S. Metz
- ---------------------- ----------------------
Barry Lawson Williams Richard B. Madden
- ---------------------- ----------------------
Barry Lawson Williams Richard B. Madden
- ----------------------
William S. Davila
- ----------------------
William S. Davila
- ----------------------
David M. Lawrence
- ----------------------
David M. Lawrence
- ----------------------
John C. Sawhill
- ----------------------
John C. Sawhill
<PAGE>
POWER OF ATTORNEY
ROBERT D. GLYNN, JR., the undersigned, Chairman of
the Board, Chief Executive Officer, and President of PG&E
Corporation, hereby constitutes and appoints LESLIE H.
EVERETT, LINDA Y.H. CHENG, WONDY S. LEE, ERIC MONTIZAMBERT,
GARY P. ENCINAS, JOHN E. FORD, and KATHLEEN HAYES, and each
of them, as his attorneys in fact with full power of
substitution to sign and file with the Securities and
Exchange Commission in his capacity as Chairman of the Board
and Chief Executive Officer (principal executive officer) of
said corporation one or more registration statements
relating to the offer and sale of 11 million shares of said
corporation's common stock pursuant to the Long-Term
Incentive Program maintained by said corporation, and any
and all amendments or supplements thereto, and hereby
ratifies all that said attorneys in fact or any of them may
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have signed these presents
this 17th day of February, 1999.
Robert D. Glynn, Jr.
----------------------
Robert D. Glynn, Jr.
<PAGE>
POWER OF ATTORNEY
MICHAEL E. RESCOE, the undersigned, Senior Vice
President and Chief Financial Officer of PG&E Corporation,
hereby constitutes and appoints LESLIE H. EVERETT, LINDA
Y.H. CHENG, WONDY S. LEE, ERIC MONTIZAMBERT, GARY P.
ENCINAS, JOHN E. FORD, and KATHLEEN HAYES, and each of them,
as his attorneys in fact with full power of substitution to
sign and file with the Securities and Exchange Commission in
his capacity as Senior Vice President and Chief Financial
Officer (principal financial officer) of said corporation
one or more registration statements relating to the offer
and sale of 11 million shares of said corporation's common
stock pursuant to the Long-Term Incentive Program maintained
by said corporation, and any and all amendments or
supplements thereto, and hereby ratifies all that said
attorneys in fact or any of them may do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, I have signed these presents
this 17th day of February, 1999.
Michael E. Rescoe
----------------------
Michael E. Rescoe
<PAGE>
POWER OF ATTORNEY
CHRISTOPHER P. JOHNS, the undersigned, Vice
President and Controller of PG&E Corporation, hereby
constitutes and appoints LESLIE H. EVERETT, LINDA Y.H.
CHENG, WONDY S. LEE, ERIC MONTIZAMBERT, GARY P. ENCINAS,
JOHN E. FORD, and KATHLEEN HAYES, and each of them, as his
attorneys in fact with full power of substitution to sign
and file with the Securities and Exchange Commission in his
capacity as Vice President and Controller (principal
accounting officer) of said corporation one or more
registration statements relating to the offer and sale of
11 million shares of said corporation's common stock
pursuant to the Long-Term Incentive Program maintained by
said corporation, and any and all amendments or supplements
thereto, and hereby ratifies all that said attorneys in fact
or any of them may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have signed these presents
this 17th day of February, 1999.
Christopher P. Johns
----------------------
Christopher P. Johns
Exhibit 24.2
RESOLUTION OF THE
BOARD OF DIRECTORS OF
PG&E CORPORATION
February 17, 1999
WHEREAS, the Nominating and Compensation Committee has
recommended to the Board of Directors that it is advisable to
approve an increase in the number of shares of this corporation's
common stock authorized for issuance under the PG&E Corporation
Long-Term Incentive Program ("Program") to a total of
34.4 million shares from the previously authorized number of 23.4
million shares (the "Increase"); and
WHEREAS, the Board of Directors has determined that it
is in the best interests of this corporation and its shareholders
to approve the Increase in order to (i) continue to provide
equity incentives to participating employees of this corporation
and its subsidiaries to increase their proprietary interest in
the long-term growth of this corporation, (ii) continue to align
the interests of the officers and other key employees of this
corporation and its subsidiaries with the interests of this
corporation's shareholders by tying a significant portion of
their total compensation package to the success of this
corporation; and (iii) continue to attract and retain the best
qualified personnel necessary for the long-term growth of this
corporation and its subsidiaries by offering significant equity
incentives as part of a total competitive compensation package;
NOW, THEREFORE, BE IT RESOLVED that the Increase is
hereby approved; and
BE IT FURTHER RESOLVED that there is hereby reserved
for issuance pursuant to the Program an additional 11 million
shares of this corporation's common stock which shares may be
newly issued shares or shares purchased on the open market or
otherwise; and
BE IT FURTHER RESOLVED that the Increase shall be
submitted for approval by this corporation's shareholders at the
corporation's 1999 annual meeting of shareholders, or
<PAGE>
any
adjournment or postponement thereof, and the appropriate officers
of this corporation are hereby authorized and directed to solicit
proxies from this corporation's shareholders to vote such
shareholders' shares at the annual meeting in favor of the
Increase; and
BE IT FURTHER RESOLVED that the Increase shall become
effective after it is duly approved by this corporation's
shareholders at the annual meeting; and
BE IT FURTHER RESOLVED that, following shareholder
approval of the Increase, the appropriate officers and counsel of
this corporation are hereby authorized and directed to prepare
and file one or more registration statements with the Securities
and Exchange Commission ("SEC") to register the offer and sale of
the additional shares authorized by the Increase pursuant to the
Program; and
BE IT FURTHER RESOLVED that, following shareholder
approval of the Increase, the appropriate officers and counsel of
this corporation are hereby authorized and directed to prepare
and file one or more listing applications with respect to the
additional shares authorized by the Increase with the New York
Stock Exchange and any other exchange which such officers deem
appropriate or necessary; and
BE IT FURTHER RESOLVED that the officers and counsel of
this corporation are hereby authorized and directed to take such
action and execute such agreements and documents on behalf of
this corporation as may in their judgment be necessary or
appropriate to carry out this resolution; and
BE IT FURTHER RESOLVED that LESLIE H.EVERETT, LINDA
Y.H. CHENG, WONDY S. LEE, ERIC MONTIZAMBERT, GARY P. ENCINAS,
JOHN E. FORD, and KATHLEEN M. HAYES are hereby authorized,
jointly and severally, to sign on behalf of this corporation as
attorneys in fact for the Chairman of the Board, Chief Executive
Officer, and President, the Senior Vice President, Chief
Financial Officer, and Treasurer, and the Vice President and
Controller of this corporation, one or more registration
statements, and any and all amendments and supplements thereto,
and to do any and all acts necessary to satisfy the requirements
of the Securities Act of 1933 and the regulations of the SEC
adopted pursuant thereto with regard to the filing of said
registration statement(s), and amendments and
<PAGE>
supplements, and
the offer and sale of this corporation's common stock pursuant to
the Program.
<PAGE>
I, LINDA Y.H. CHENG, do hereby certify that I am an
Assistant Corporate Secretary of PG&E CORPORATION, a corporation
organized and existing under the laws of the State of California;
that the above and foregoing is a full, true, and correct copy of
a resolution which was duly adopted by the Board of Directors of
said corporation at a meeting of said Board which was duly and
regularly called and held at the office of said corporation on
February 17, 1999; and that this resolution has never been
amended, revoked, or repealed, but is still in full force and
effect.
WITNESS my hand and the seal of said corporation
hereunto affixed this 23rd day of April, 1999.
Linda Y.H. Cheng
_______________________________
Linda Y.H. Cheng
Assistant Corporate Secretary
PG&E CORPORATION
C O R P O R A T E
S E A L
Exhibit 99
PG&E CORPORATION
LONG-TERM INCENTIVE PROGRAM
(As amended effective as of April 21, 1999)
1. Purpose of the Program
This is the controlling and definitive statement of the
PG&E Corporation Long-Term Incentive Program, as
amended and restated herein (hereinafter called the
PROGRAM(1)). The purpose of the PROGRAM is to advance
the interests of the CORPORATION by providing ELIGIBLE
PARTICIPANTS with financial incentives to promote the
success of its long-term (five to ten years) business
objectives, and to increase their proprietary interest
in the success of the CORPORATION. It is the intent of
the CORPORATION to reward those ELIGIBLE PARTICIPANTS
who have a significant impact on improved long-term
corporate achievements. Inasmuch as the PROGRAM is
designed to encourage financial performance and to
improve the value of shareholders' investment in PG&E
CORPORATION, the costs of the PROGRAM will be funded
from corporate earnings.
2. Program Administration
The PROGRAM shall be administered by the COMMITTEE,
except that the BOARD OF DIRECTORS shall administer the
PROGRAM with respect to grants of INCENTIVE AWARDS TO
NON-EMPLOYEE DIRECTORS. The BOARD OF DIRECTORS may at
any time revest authority to administer the PROGRAM in
all respects in the BOARD OF DIRECTORS. Subject to the
provisions of the PROGRAM, the COMMITTEE or the BOARD
OF DIRECTORS, as the case may be, shall have full and
final authority, in its sole discretion:
(a) to determine the ELIGIBLE PARTICIPANTS to whom
INCENTIVE AWARDS shall be granted and the number of shares
of COMMON STOCK to be awarded under each INCENTIVE AWARD,
based on the recommendation of the CHIEF EXECUTIVE OFFICER
(except that awards to the CHIEF EXECUTIVE OFFICER shall be
based on the recommendation of the BOARD OF DIRECTORS and
awards to NON-EMPLOYEE DIRECTORS shall be based on the
recommendation of the COMMITTEE);
(b) to determine the time or times at which INCENTIVE
AWARDS shall be granted;
(c) to designate the types of INCENTIVE AWARD being
granted;
- --------------------
(1) Capitalized words are defined in Section 20 hereof.
<PAGE>
(d) to vary the OPTION vesting schedule described in the
STOCK OPTION PLAN;
(e) to determine the terms and conditions, not inconsistent
with the terms of the PROGRAM, of any INCENTIVE AWARD
granted hereunder (including, but not limited to, the
consideration and method of payment for shares purchased
upon the exercise of an INCENTIVE AWARD, and any vesting
acceleration or exercisability provisions in the event of a
CHANGE IN CONTROL or TERMINATION), based in each case on
such factors as the COMMITTEE or BOARD OF DIRECTORS shall
deem appropriate;
(f) to approve forms of agreement for use under the
PROGRAM;
(g) to construe and interpret the PROGRAM and any related
INCENTIVE AWARD agreement and to define the terms employed
herein and therein;
(h) except as provided in Section 18 hereof, to modify or
amend any INCENTIVE AWARD or to waive any restrictions or
conditions applicable to any INCENTIVE AWARD or the exercise
or realization thereof;
(i) except as provided in Section 18 hereof, to prescribe,
amend and rescind rules, regulations and policies relating
to the administration of the PROGRAM;
(j) except as provided in Section 18 hereof, to suspend,
terminate, modify or amend the PROGRAM;
(k) to delegate to one or more agents such administrative
duties as the COMMITTEE or BOARD OF DIRECTORS may deem
advisable, to the extent permitted by applicable law; and
(l) to make all other determinations and take such other
action with respect to the PROGRAM and any INCENTIVE AWARD
granted hereunder as the COMMITTEE may deem advisable, to
the extent permitted by applicable law.
Notwithstanding the provisions contained in the
foregoing paragraph, the CHIEF EXECUTIVE OFFICER shall
have the authority, in his sole discretion: (a) to
grant INCENTIVE AWARDS to any ELIGIBLE PARTICIPANT who,
at the time of the INCENTIVE AWARD grant, (i) is not an
officer of the CORPORATION or a DIRECTOR, and (ii) if
such ELIGIBLE PARTICIPANT is an EMPLOYEE, is receiving
an annual salary which is below the level which
requires approval by the COMMITTEE; (b) to determine
the time or times at which INCENTIVE AWARDS shall be
granted to such ELIGIBLE PARTICIPANTS; (c) to designate
the types of INCENTIVE AWARD being granted to such
ELIGIBLE
<PAGE>
PARTICIPANTS; and (d) to vary the OPTION
vesting schedule described in the STOCK OPTION PLAN for
the OPTIONS granted to such ELIGIBLE PARTICIPANTS;
provided, however, that all grants of INCENTIVE AWARDS
by the CHIEF EXECUTIVE OFFICER shall conform to the
guidelines previously approved by the COMMITTEE.
3. Shares of Stock Subject to the Program
There shall be reserved for use under the PROGRAM
(subject to the provisions of Section 13 hereof) a
total of 34,389,230 shares of COMMON STOCK, which
shares may be authorized but unissued shares of COMMON
STOCK or issued shares of COMMON STOCK which shall have
been reacquired by PG&E CORPORATION. Such shares
consist of (i) 13,000,000 shares of COMMON STOCK
originally reserved for use under the PROGRAM at the
time it first became effective on January 1, 1992,
(ii) 389,230 shares of COMMON STOCK remaining under the
1986 OPTION PLAN and carried over to the PROGRAM,
(iii) 10,000,000 shares of COMMON STOCK added to the
PROGRAM effective as of January 1, 1996, and (iv)
11,000,000 shares of COMMON STOCK added to the PROGRAM
effective as of April 21, 1999.
If (i) any INCENTIVE AWARD expires or terminates for
any reason without having been exercised or purchased
in full, (ii) an INCENTIVE AWARD is surrendered in
exchange for one or more other INCENTIVE AWARDS, or
(iii) any RESTRICTED STOCK is forfeited, then, in each
such case, any unexercised, unpurchased, surrendered or
forfeited shares which were subject to such INCENTIVE
AWARD (except shares as to which a related TANDEM SAR
has been exercised) shall again be available for the
future grant of INCENTIVE AWARDS under the PROGRAM
(unless the PROGRAM has terminated). In addition,
shares may be reused or added back to the PROGRAM to
the extent permitted by applicable law.
4. Eligibility
INCENTIVE AWARDS will be granted only to ELIGIBLE
PARTICIPANTS. ISOS will be granted only to EMPLOYEES.
The COMMITTEE, in its sole discretion, may grant
INCENTIVE AWARDS to an ELIGIBLE PARTICIPANT who is a
resident or citizen of a foreign country, with such
modifications as the COMMITTEE may deem advisable to
reflect the laws, tax policy or customs of such foreign
country.
The PROGRAM shall not confer upon any RECIPIENT any
right to continuation of employment, service as a
DIRECTOR or consulting relationship with the
CORPORATION; nor shall it interfere in any way with the
right of the RECIPIENT or the CORPORATION to terminate
such employment, service as a DIRECTOR or consulting
relationship at any time, with or without cause.
<PAGE>
5. Designation of Incentive Awards
At the time of the grant of each INCENTIVE AWARD under
the Program, the COMMITTEE (or the CHIEF EXECUTIVE
OFFICER, in the case of INCENTIVE AWARDS granted by the
CHIEF EXECUTIVE OFFICER to certain ELIGIBLE
PARTICIPANTS pursuant to Section 2 hereof, or the BOARD
OF DIRECTORS, in the case of INCENTIVE AWARDS granted
by the BOARD OF DIRECTORS to NON-EMPLOYEE DIRECTORS)
shall determine whether such INCENTIVE AWARD is to be
designated as an ISO, NON-QUALIFIED STOCK OPTION, SAR,
DIVIDEND EQUIVALENT, PERFORMANCE UNIT, stock grant,
RESTRICTED STOCK, LSAR, PHANTOM STOCK or other STOCK-
BASED AWARD; provided, however, that ISOS may be
granted only to EMPLOYEES.
Notwithstanding such designation, to the extent that
the aggregate FAIR MARKET VALUE (determined for each
share as of the date of grant of the OPTION covering
each share) of the shares with respect to which OPTIONS
designated as ISOS become exercisable for the first
time by any RECIPIENT during any calendar year exceeds
$100,000, such OPTIONS shall be treated as NON-
QUALIFIED STOCK OPTIONS.
Any INCENTIVE AWARD may be granted alone, contingent
upon, in addition to or in TANDEM with one or more
other INCENTIVE AWARDS granted under the PROGRAM. In
addition, except as provided in Section 12 hereof, any
INCENTIVE AWARD may be granted in exchange for one or
more other INCENTIVE AWARDS.
6. Stock Options, Tandem Stock Appreciation Rights and
Tandem Dividend Equivalents
Except as provided in Section 9 below (relating to
grants of INCENTIVE AWARDS to NON-EMPLOYEE DIRECTORS),
the COMMITTEE, in its sole discretion, may grant ISOS,
NON-QUALIFIED STOCK OPTIONS, TANDEM SARS and TANDEM
DIVIDEND EQUIVALENTS to ELIGIBLE PARTICIPANTS, subject
to the terms and conditions set forth in the STOCK
OPTION PLAN attached hereto as Exhibit A.
7. Performance Units
Except as provided in Section 9 below (relating to
grants of INCENTIVE AWARDS to NON-EMPLOYEE DIRECTORS),
the COMMITTEE, in its sole discretion, may grant
PERFORMANCE UNITS to ELIGIBLE PARTICIPANTS, subject to
the terms and conditions set forth in the PERFORMANCE
UNIT PLAN attached hereto as Exhibit B.
<PAGE>
8. Other Incentive Awards
Except as provided in Section 9 below (relating to
grants of INCENTIVE AWARDS to NON-EMPLOYEE DIRECTORS),
the COMMITTEE, in its sole discretion, may grant other
INCENTIVE AWARDS (including, but not limited to, SARS
granted without OPTIONS, DIVIDEND EQUIVALENTS granted
without OPTIONS, stock grants, RESTRICTED STOCK, LSARS,
PHANTOM STOCK or other STOCK-BASED AWARDS) to ELIGIBLE
PARTICIPANTS, subject to such terms and conditions as
the COMMITTEE shall deem appropriate.
9. Grants of Incentive Awards to Non-Employee Directors
NON-EMPLOYEE DIRECTORS will only be eligible to be
granted DIRECTOR RESTRICTED STOCK, PHANTOM STOCK and
NON-QUALIFIED STOCK OPTIONS in accordance with, and
subject to the terms and conditions contained in, the
NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN RULES
attached hereto as Exhibit C.
10. Termination of Employment or Relationship with the
CORPORATION
The COMMITTEE may, in its sole discretion, establish
terms and conditions pertaining to the effect of
TERMINATION on INCENTIVE AWARDS granted to a RECIPIENT
prior to TERMINATION, to the extent permitted by
applicable law.
11. Tax Withholding
When a RECIPIENT incurs tax liability in connection
with the exercise of an INCENTIVE AWARD or the receipt
of shares of COMMON STOCK pursuant to an INCENTIVE
AWARD, which tax liability is subject to tax
withholding under applicable tax laws, and the
RECIPIENT is obligated to pay the CORPORATION an amount
required to be withheld under applicable tax laws, the
RECIPIENT may satisfy the withholding tax obligation by
(i) electing to have the CORPORATION withhold such
amount from his or her current compensation through
payroll deductions, or (ii) making a direct payment to
the CORPORATION in cash or by check.
The COMMITTEE may, in its sole discretion, permit a
RECIPIENT to satisfy all or part of his or her
withholding tax obligations by having the CORPORATION
withhold from the shares to be issued to the RECIPIENT
that number of shares having a FAIR MARKET VALUE equal
to the amount required to be withheld determined on the
date when taxes otherwise would be withheld in cash.
The payment of withholding taxes in this manner, if
permitted by the COMMITTEE, shall be subject to such
restrictions as the COMMITTEE may impose, including any
restrictions required by rules of the Securities and
Exchange Commission.
<PAGE>
12. Replacement of Grants
The COMMITTEE may, in its sole discretion, offer a
RECIPIENT (other than NON-EMPLOYEE DIRECTORS) the
option of surrendering an unexercised OPTION or other
INCENTIVE AWARD in exchange for another INCENTIVE AWARD
of the same type or for a different type of INCENTIVE
AWARD; provided, however, that no OPTION or INCENTIVE
AWARD may be exchanged for a new OPTION or INCENTIVE
AWARD having an OPTION PRICE or purchase price that is
lower than the OPTION PRICE or purchase price of the
original OPTION or INCENTIVE AWARD.
13. Deferral of Payments
The COMMITTEE may, in its sole discretion, approve a
RECIPIENT'S deferral of any cash payments which may
become due under the PROGRAM. Such deferrals shall be
subject to any conditions, restrictions or requirements
as the COMMITTEE may determine.
14. Adjustments Upon Changes in Number or Value of Shares
of Common Stock
If there are any changes in the number or value of
shares of COMMON STOCK by reason of stock dividends,
stock splits, reverse stock splits, recapitalizations,
mergers, consolidations or other events that materially
increase or decrease the number or value of issued and
outstanding shares of COMMON STOCK, the COMMITTEE may
make such adjustments as it shall deem appropriate, in
order to prevent dilution or enlargement of rights.
15. Non-Transferability of Incentive Awards
An INCENTIVE AWARD shall not be transferable by the
RECIPIENT otherwise than by will or the laws of descent
and distribution, or pursuant to a qualified domestic
relations order as defined by the CODE, Title I of
ERISA or the rules thereunder. During the lifetime of
the RECIPIENT, an INCENTIVE AWARD may be exercised only
by the RECIPIENT or by an alternate payee under a
qualified domestic relations order.
16. Change in Control
Upon the occurrence of a CHANGE IN CONTROL (as defined
below):
(a) Any time periods relating to the exercise or
realization of any INCENTIVE AWARD granted hereunder shall
be accelerated so that such INCENTIVE AWARD may be
immediately exercised or realized in full;
(b) All shares of RESTRICTED STOCK granted hereunder shall
immediately cease to be forfeitable; and
<PAGE>
(c) All conditions relating to the realization of any STOCK-
BASED AWARD granted hereunder shall immediately terminate.
A "CHANGE IN CONTROL" shall be deemed to have occurred
if:
(a) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the EXCHANGE ACT, but excluding any benefit
plan for EMPLOYEES or any trustee, agent or other fiduciary
for any such plan acting in such person's capacity as such
fiduciary), directly or indirectly, becomes the beneficial
owner of securities of the CORPORATION representing twenty
percent (20%) or more of the combined voting power of the
CORPORATION's then outstanding securities;
(b) during any two consecutive years, individuals who at
the beginning of such a period constitute the BOARD OF
DIRECTORS cease for any reason to constitute at least a
majority of the BOARD OF DIRECTORS, unless the election, or
the nomination for election by the shareholders of the
CORPORATION, of each new DIRECTOR was approved by a vote of
at least two-thirds (2/3) of the DIRECTORS then still in
office who were DIRECTORS at the beginning of the period; or
(c) the shareholders of the CORPORATION shall have approved
(i) any consolidation or merger of the CORPORATION other
than a merger or consolidation which would result in the
voting securities of the CORPORATION outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent of such surviving entity)
at least 70 percent of the Combined Voting Power of the
CORPORATION, such surviving entity or the parent of such
surviving entity outstanding immediately after the merger or
consolidation; (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of
the CORPORATION, or (iii) any plan or proposal for the
liquidation or dissolution of the CORPORATION. For purposes
of this paragraph, the term Combined Voting Power shall mean
the combined voting power of the CORPORATION's or other
relevant entity's then outstanding voting securities.
17. Listing and Registration of Shares
Each INCENTIVE AWARD shall be subject to the
requirement that if at any time the COMMITTEE shall
determine, in its discretion, that the listing,
registration or qualification of the shares covered
thereby under any securities exchange or under any
state or federal law or the consent or approval of any
governmental regulatory body, including the California
Public Utilities Commission, is necessary or desirable
as a condition of, or in connection with, the granting
of such
<PAGE>
INCENTIVE AWARD or the issue or purchase of
shares thereunder, such INCENTIVE AWARD may not be
exercised in whole or in part unless and until such
listing, registration, qualification, consent or
approval shall have been effected or obtained free of
any conditions not acceptable to the COMMITTEE.
18. Amendment and Termination of the Program and Incentive
Awards
The BOARD OF DIRECTORS or the COMMITTEE may at any time
suspend, terminate, modify or amend the PROGRAM in any
respect; provided, however, that to the extent
necessary and desirable to comply with Section 422 of
the CODE (or any other applicable law or regulation,
including the requirements of any stock exchange on
which the COMMON STOCK is listed or quoted),
shareholder approval of any PROGRAM amendment shall be
obtained in such a manner and to such a degree as is
required by the applicable law or regulation.
No suspension, termination, modification or amendment
of the PROGRAM may, without the consent of the
RECIPIENT, adversely affect his or her rights under
INCENTIVE AWARDS theretofore granted to such RECIPIENT.
In the event of amendments to the CODE or applicable
rules or regulations relating to ISOS subsequent to the
date hereof, the CORPORATION may amend the PROGRAM, and
the CORPORATION and RECIPIENTS holding OPTION agree
ments may agree to amend outstanding OPTION agreements,
to conform to such amendments.
The BOARD OF DIRECTORS or COMMITTEE may make such
amendments or modifications in the terms and conditions
of any INCENTIVE AWARD as it may deem advisable, or
cancel or annul any grant of an INCENTIVE AWARD;
provided, however, that no such amendment,
modification, cancellation or annulment may, without
the consent of the RECIPIENT, adversely affect his or
her rights under such INCENTIVE AWARD; and provided
further the BOARD OF DIRECTORS or COMMITTEE may not
reduce the OPTION PRICE or purchase price of any OPTION
or INCENTIVE AWARD below the original OPTION PRICE or
purchase price.
Notwithstanding the foregoing, the BOARD OF DIRECTORS
or COMMITTEE reserves the right, in its sole
discretion, to (i) convert any outstanding ISOS to NON-
QUALIFIED STOCK OPTIONS, (ii) to require a RECIPIENT to
forfeit any unexercised or unpurchased INCENTIVE
AWARDS, any shares received or purchased pursuant to an
INCENTIVE AWARD, or any gains realized by virtue of the
receipt of an INCENTIVE AWARD in the event that such
RECIPIENT competes against the CORPORATION, and
(iii) to cancel or annul any grant of an INCENTIVE
AWARD in the event of a RECIPIENT'S TERMINATION FOR
CAUSE. For purposes of the PROGRAM, "TERMINATION FOR
CAUSE" shall include, but not be limited to,
termination because of dishonesty, criminal offense or
violation of a work rule, and shall be determined by,
and in the sole discretion of, the BOARD OF DIRECTORS
or COMMITTEE.
<PAGE>
19. Effective Date of the Program and Duration
The Program first became effective as of January 1,
1992. The first amendment and restatement of the
PROGRAM as of January 1, 1996, was approved by the
shareholders of Pacific Gas and Electric Company at its
Annual Meeting on April 17, 1996. Effective January 1,
1997, the PROGRAM was assumed by PG&E CORPORATION. At
its meeting on December 17, 1997, the BOARD OF
DIRECTORS amended and restated the PROGRAM effective
January 1, 1998, to (i) reflect the adoption of new
RULE 16B-3 which became effective November 1, 1996, and
(ii) provide automatic formula awards of NON-QUALIFIED
STOCK OPTIONS and PHANTOM STOCK to NON-EMPLOYEE
DIRECTORS within the limits of the PROGRAM as
previously approved by shareholders in 1996. The
PROGRAM was subsequently amended on October 21, 1998.
Effective April 21, 1999, the PROGRAM was amended to
add 11,000,000 shares of COMMON STOCK to the total
number of shares of COMMON STOCK reserved for use under
the PROGRAM. Unless terminated sooner pursuant to
Section 16 hereof, the PROGRAM shall terminate on
December 31, 2005.
20. Definitions
(a) BOARD OF DIRECTORS means the Board of Directors of PG&E
CORPORATION.
(b) CHANGE IN CONTROL has the meaning set forth in
Section 16 hereof.
(c) CHIEF EXECUTIVE OFFICER means the Chief Executive
Officer of PG&E CORPORATION.
(d) CODE means the Internal Revenue Code of 1986, as
amended from time to time.
(e) COMMITTEE means the Nominating and Compensation
Committee of the BOARD OF DIRECTORS or any successor to such
committee.
(f) COMMON STOCK means common shares of PG&E CORPORATION
with no par value and any class of common shares into which
such common shares hereafter may be converted.
(g) CONSULTANT means any person, including an advisor, who
is engaged by the CORPORATION to render services.
(h) CORPORATION means PG&E CORPORATION, and any parent
corporation (as defined in Section 424(e) of the CODE) or
subsidiary corporation (as defined in Section 424(f) of the
CODE).
(i) DIRECTOR means any person who is a member of the BOARD
OF DIRECTORS or the Board of Directors of any parent
corporation (as
<PAGE>
defined in Section 424(e) of the CODE) which
may hereafter be established, including an advisory,
emeritus or honorary director.
(j) DIRECTOR RESTRICTED STOCK means RESTRICTED STOCK
granted to a NON-EMPLOYEE DIRECTOR under the NON-EMPLOYEE
DIRECTOR STOCK INCENTIVE PLAN.
(k) DIVIDEND EQUIVALENT means a right that entitles the
RECIPIENT to receive cash or COMMON STOCK based on the
dividends declared on the COMMON STOCK covered by such
right.
(l) ELIGIBLE PARTICIPANT means any KEY EMPLOYEE. It also
means, if so identified by the COMMITTEE (or by the CHIEF
EXECUTIVE OFFICER, in the case of INCENTIVE AWARDS granted
by the CHIEF EXECUTIVE OFFICER to certain ELIGIBLE
PARTICIPANTS pursuant to Section 2 hereof), other EMPLOYEES,
DIRECTORS, CONSULTANTS, employees or consultants of any
affiliates of PG&E CORPORATION, and other persons whose
participation in the PROGRAM is deemed by the COMMITTEE (or
by the CHIEF EXECUTIVE OFFICER, in the case of INCENTIVE
AWARDS granted by the CHIEF EXECUTIVE OFFICER to certain
ELIGIBLE PARTICIPANTS pursuant to Section 2 hereof) to be in
the best interests of the CORPORATION.
(m) EMPLOYEE means any person who is employed by the
CORPORATION. The payment of a director's fee or consulting
fee by the CORPORATION shall not be sufficient to constitute
"employment" by the CORPORATION.
(n) ERISA means the Employee Retirement Income Security Act
of 1974, as amended.
(o) EXCHANGE ACT means the Securities Exchange Act of 1934,
as amended.
(p) FAIR MARKET VALUE means the closing price of the COMMON
STOCK reported on the New York Stock Exchange Composite
Transactions for the date specified for determining such
value.
(q) INCENTIVE AWARD means any ISO, NON-QUALIFIED STOCK
OPTION, SAR, DIVIDEND EQUIVALENT, PERFORMANCE UNIT or other
STOCK-BASED AWARD granted under the PROGRAM.
(r) ISO means an OPTION intended to qualify as an incentive
stock option under Section 422 of the CODE.
<PAGE>
(s) KEY EMPLOYEE means the Corporate Secretary, Treasurer,
Vice Presidents and other executive officers of PG&E
CORPORATION above the rank of Vice President. It also
means, if so identified by the COMMITTEE (or by the CHIEF
EXECUTIVE OFFICER, in the case of INCENTIVE AWARDS granted
by the CHIEF EXECUTIVE OFFICER to certain ELIGIBLE
PARTICIPANTS pursuant to Section 2 hereof), executive
officers of wholly-owned subsidiaries of PG&E CORPORATION
(including subsidiaries which become such after adoption of
the PROGRAM) and any other key management employee of PG&E
CORPORATION or any wholly-owned subsidiary of PG&E
CORPORATION.
(t) LSAR means a limited stock appreciation right which is
exercisable only in the event of a CHANGE IN CONTROL.
(u) 1986 OPTION PLAN means the Pacific Gas and Electric
Company 1986 Stock Option Plan, as amended to date.
(v) NON-EMPLOYEE DIRECTOR means a DIRECTOR who is not an
EMPLOYEE.
(w) NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN RULES means
the Non-Employee Director Stock Incentive Plan attached
hereto as Exhibit C or any successor rules which the BOARD
OF DIRECTORS may adopt from time to time with respect to the
grant of INCENTIVE AWARDS to NON-EMPLOYEE DIRECTORS under
the PROGRAM.
(x) NON-QUALIFIED STOCK OPTION means any OPTION which is
not an ISO.
(y) OPTION means an option to purchase shares of COMMON
STOCK granted under the STOCK OPTION PLAN.
(z) OPTION PRICE means the purchase price for the COMMON
STOCK upon exercise of an OPTION.
(aa) PERFORMANCE UNIT means a performance unit granted under
the PERFORMANCE UNIT PLAN.
(bb) PERFORMANCE UNIT PLAN means the Performance Unit Plan
Rules attached hereto as Exhibit B or any successor rules
which the COMMITTEE may adopt from time to time with respect
to the grant of PERFORMANCE UNITS under the PROGRAM.
(cc) PG&E CORPORATION means PG&E CORPORATION, a California
corporation.
<PAGE>
(dd) PHANTOM STOCK means allocated hypothetical shares of
COMMON STOCK that can be converted at a future date into
cash or stock.
(ee) PROGRAM means the PG&E Corporation Long-Term Incentive
Program set forth herein and as may be amended from time to
time.
(ff) RECIPIENT means the ELIGIBLE PARTICIPANT receiving the
INCENTIVE AWARD, or his or her legal representative,
legatees, distributees or alternate payees, as the case may
be.
(gg) RESTRICTED STOCK means COMMON STOCK that is subject to
forfeiture by the RECIPIENT to the CORPORATION under such
circumstances as may be specified by the COMMITTEE in its
sole discretion.
(hh) RETIREMENT means the Actual Retirement Date under the
Pacific Gas and Electric Company Retirement Plan.
(ii) RULE 16b-3 means Rule 16b-3 under the EXCHANGE ACT or
any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the Plan.
(jj) SAR means a stock appreciation right whose value is
based on the increase in the FAIR MARKET VALUE of the COMMON
STOCK covered by such right.
(kk) SECTION 16 OFFICER means any person who is designated
by the BOARD OF DIRECTORS as an executive officer of PG&E
CORPORATION and any other person who is designated as an
officer of PG&E CORPORATION for purposes of Section 16 of
the EXCHANGE ACT.
(ll) STOCK-BASED AWARD means any award that is valued in
whole or in part by reference to, or is otherwise based on,
the COMMON STOCK, including, but not limited to, stock
grants, RESTRICTED STOCK, LSARS and PHANTOM STOCK.
(mm) STOCK OPTION PLAN means the Stock Option Plan Rules
attached hereto as Exhibit A or any successor rules which
the COMMITTEE may adopt from time to time with respect to
the grant of OPTIONS under the PROGRAM.
(nn) TANDEM refers to an INCENTIVE AWARD granted in
conjunction with another INCENTIVE AWARD.
(oo) TERMINATION occurs when an EMPLOYEE ceases to be
employed by the CORPORATION as a common law employee, when a
DIRECTOR
<PAGE>
ceases to be a member of the BOARD OF DIRECTORS or
the Board of Directors of any parent corporation which may
hereafter be established (as the case may be), or when the
relationship between the CORPORATION and a CONSULTANT or
other ELIGIBLE PARTICIPANT terminates, as the case may be.
(pp) TERMINATION FOR CAUSE has the meaning set forth in
Section 18 hereof.
<PAGE>
EXHIBIT A
PG&E CORPORATION
STOCK OPTION PLAN
(As amended effective as of April 21, 1999)
1. Purpose of the Plan
This is the controlling and definitive statement of the
PG&E Corporation Stock Option Plan set forth herein and
as may be amended from time to time (hereinafter called
the PLAN(2)). The purpose of the PLAN is to advance the
interests of the CORPORATION by providing ELIGIBLE
PARTICIPANTS with financial incentives to promote the
success of its long-term (five to ten years) business
objectives, and to increase their proprietary interest
in the success of the CORPORATION. It is the intent of
the CORPORATION to reward those ELIGIBLE PARTICIPANTS
who have a significant impact on improved long-term
corporate achievements. Inasmuch as the PLAN is
designed to encourage financial performance and to
improve the value of shareholders' investment in PG&E
CORPORATION, the costs of the PLAN will be funded from
corporate earnings.
2. Plan Administration
The PLAN shall be administered by the COMMITTEE, which
shall be constituted in such a manner as to comply with
the rules governing a plan intended to qualify as a
discretionary plan under RULE 16b-3.
Subject to the provisions of the PLAN, the COMMITTEE
shall have full and final authority, in its sole
discretion:
(a) to determine the ELIGIBLE PARTICIPANTS to whom
OPTIONS shall be granted and the number of shares
of COMMON STOCK to be awarded under each OPTION,
based on the recommendation of the CHIEF EXECUTIVE
OFFICER (except that awards to the CHIEF EXECUTIVE
OFFICER shall be shall be based on the
recommendation of the BOARD OF DIRECTORS);
provided, however, that the number of shares of
COMMON STOCK to be awarded under each OPTION shall
be subject to the limitations specified in
Section 5 hereof;
(b) to determine the time or times at which OPTIONS
shall be granted;
- --------------------
(2) Capitalized words are defined in Section 20 hereof.
<PAGE>
(c) to designate the OPTIONS being granted as ISOS or
NON-QUALIFIED STOCK OPTIONS;
(d) to vary the OPTION vesting schedule described in
Section 11 hereof;
(e) to determine the terms and conditions, not
inconsistent with the terms of the PLAN, of any
OPTION granted hereunder (including, but not
limited to, the consideration and method of
payment for shares purchased upon the exercise of
an OPTION, and any vesting acceleration or
exercisability provisions in the event of a CHANGE
IN CONTROL or TERMINATION), based in each case on
such factors as the COMMITTEE shall deem
appropriate;
(f) to approve forms of agreement for use under the
PLAN;
(g) to construe and interpret the PLAN and any related
OPTION agreement and to define the terms employed
herein and therein;
(h) except as provided in Section 18 hereof, to modify
or amend any OPTION or to waive any restrictions
or conditions applicable to any OPTION or the
exercise thereof;
(i) except as provided in Section 18 hereof, to
prescribe, amend and rescind rules, regulations
and policies relating to the administration of the
PLAN;
(j) except as provided in Section 18 hereof, to
suspend, terminate, modify or amend the PLAN;
(k) to delegate to one or more agents such
administrative duties as the COMMITTEE may deem
advisable, to the extent permitted by applicable
law; and
(l) to make all other determinations and take such
other action with respect to the PLAN and any
OPTION granted hereunder as the COMMITTEE may deem
advisable, to the extent permitted by applicable
law.
Notwithstanding the provisions contained in the
foregoing paragraph, the CHIEF EXECUTIVE OFFICER shall
have the authority, in his sole discretion: (a) to
grant OPTIONS to any ELIGIBLE PARTICIPANT who, at the
time of the OPTION grant, (i) is not an officer of the
CORPORATION or a DIRECTOR, and (ii) if such ELIGIBLE
PARTICIPANT is an EMPLOYEE, is receiving an annual
salary which is below the level which requires approval
by the COMMITTEE; (b) to determine the time or times at
which OPTIONS shall be granted to such ELIGIBLE
PARTICIPANTS; (c) to designate the OPTIONS being
granted to such ELIGIBLE PARTICIPANTS as ISOS or NON-
QUALIFIED STOCK
<PAGE>
OPTIONS; and (d) to vary the OPTION
vesting schedule described in Section 11 hereof for the
OPTIONS granted to such ELIGIBLE PARTICIPANTS;
provided, however, that (x) all grants of OPTIONS by
the CHIEF EXECUTIVE OFFICER shall conform to the
guidelines previously approved by the COMMITTEE, and
(y) the number of shares of COMMON STOCK to be awarded
under each OPTION shall be subject to the limitations
specified in Section 5 hereof.
3. Shares of Stock Subject to the Plan
There shall be reserved for use under the PLAN and for
the grant of any other incentive awards pursuant to the
PROGRAM (subject to the provisions of Section 14
hereof) a total of 34,389,230 shares of COMMON STOCK,
which shares may be authorized but unissued shares of
COMMON STOCK or issued shares of COMMON STOCK which
shall have been reacquired by PG&E CORPORATION.
If any OPTION expires or terminates for any reason
without having been exercised in full, then any
unexercised, shares which were subject to such OPTION
(except shares as to which a related TANDEM SAR has
been exercised) shall again be available for the future
grant of OPTIONS under the PLAN (unless the PLAN has
terminated). In addition, shares may be reused or
added back to the PLAN to the extent permitted by
applicable law.
4. Eligibility
OPTIONS will be granted only to ELIGIBLE PARTICIPANTS.
ISOS will be granted only to EMPLOYEES. The COMMITTEE,
in its sole discretion, may grant OPTIONS to an
ELIGIBLE PARTICIPANT who is a resident or citizen of a
foreign country, with such modifications as the
COMMITTEE may deem advisable to reflect the laws, tax
policy or customs of such foreign country.
The PLAN shall not confer upon any OPTIONEE any right
to continuation of employment, service as a DIRECTOR or
consulting relationship with the CORPORATION; nor shall
it interfere in any way with the right of the OPTIONEE
or the CORPORATION to terminate such employment,
service as a DIRECTOR or consulting relationship at any
time, with or without cause.
5. Limitation on Options and SARs Awarded to Any Eligible
Participant
The aggregate number of shares of COMMON STOCK with
respect to which any ELIGIBLE PARTICIPANT may be
granted OPTIONS and SARS under the PLAN during any
calendar year shall in no event exceed two percent (2%)
of the total number of shares reserved for use under
the PLAN.
<PAGE>
6. Designation of Options
At the time of the grant of each OPTION under the PLAN,
the COMMITTEE (or the CHIEF EXECUTIVE OFFICER, in the
case of OPTIONS granted by the CHIEF EXECUTIVE OFFICER
to certain ELIGIBLE PARTICIPANTS pursuant to Section 2
hereof) shall determine whether such OPTION is to be
designated as an ISO or a NON-QUALIFIED STOCK OPTION;
provided, however, that ISOS may be granted only to
EMPLOYEES.
Notwithstanding such designation, to the extent that
the aggregate FAIR MARKET VALUE (determined for each
share as of the date of grant of the OPTION covering
each share) of the shares with respect to which OPTIONS
designated as ISOS become exercisable for the first
time by any OPTIONEE during any calendar year exceeds
$100,000, such OPTIONS shall be treated as NON-
QUALIFIED STOCK OPTIONS.
7. Option Price
The OPTION PRICE of the COMMON STOCK under each OPTION
issued shall be the FAIR MARKET VALUE of the COMMON
STOCK on the date of grant.
8. Stock Appreciation Rights
At the discretion of the COMMITTEE, an OPTION may be
granted with or without a TANDEM SAR which permits the
OPTIONEE to surrender unexercised an OPTION or portion
thereof and to receive in exchange a payment having a
value equal to the difference between (x) the FAIR
MARKET VALUE of the COMMON STOCK covered by the
surrendered portion of the OPTION on the date the SAR
is exercised and (y) the OPTION PRICE for such COMMON
STOCK. The SAR is subject to the same terms and
conditions as the related OPTION, except that (i) the
SAR may be exercised only when there is a positive
spread (i.e., when the FAIR MARKET VALUE of the COMMON
STOCK subject to the OPTION exceeds the OPTION PRICE),
(ii) in accordance with Section 9 hereof, payment of
the DEA (if any) to the OPTIONEE may be restricted, and
(iii) if the OPTIONEE is a SECTION 16 OFFICER, DIRECTOR
or other person whose transactions in the COMMON STOCK
are subject to Section 16(b) of the EXCHANGE ACT, the
SAR may be exercised only during the period beginning
on the third (3rd) business day following the date of
release of the CORPORATION's quarterly or annual
statement of earnings and ending on the twelfth (12th)
business day following such date. Upon the exercise of
a SAR, the number of shares subject to exercise under
the related OPTION shall be automatically reduced by
the number of shares represented by the OPTION or
portion thereof surrendered. No payment will be
required from the OPTIONEE upon the exercise of a SAR,
except that any amount necessary to satisfy applicable
federal, state or local tax requirements shall be
withheld.
<PAGE>
9. Dividend Equivalent Account
At the discretion of the COMMITTEE, an OPTION may be
granted with or without TANDEM DIVIDEND EQUIVALENTS.
When an OPTION is granted with TANDEM DIVIDEND
EQUIVALENTS, a Dividend Equivalent Account ("DEA")
shall be established for the OPTIONEE. This DEA shall
be credited quarterly on each dividend record date with
dividends which would have been paid on the COMMON
STOCK subject to the unexercised portion of the OPTION
(including any portion which has not yet vested on the
record date), if such portion had been exercised.
Except as provided in Section 12(d) hereof, at the time
the OPTION or any related SAR is exercised, the
OPTIONEE shall receive all funds which have accumulated
in the DEA with respect to the shares of COMMON STOCK
for which the OPTION or SAR is being exercised;
provided, however, that if the OPTIONEE exercises a
SAR, such DEA funds shall only be paid to the OPTIONEE
if (i) the percentage increase in the FAIR MARKET VALUE
of the COMMON STOCK over the OPTION PRICE averages at
least five percent (5%) per year for the first five (5)
years after the grant, or (ii) in the case of OPTIONS
held for longer than five (5) years from the date of
grant, such FAIR MARKET VALUE has increased by at least
twenty-five percent (25%) over the OPTION PRICE.
10. Terms of Options
The term of each ISO shall be for ten (10) years from
the date of grant, subject to earlier termination as
provided in Section 12 hereof. The term of each NON-
QUALIFIED STOCK OPTION shall be ten (10) years and one
(1) day from the date of grant, subject to earlier
termination as provided in Section 12 hereof. Any
provision of the PROGRAM to the contrary
notwithstanding, no OPTION shall be exercised after the
time limitations stated in this Section 10.
11. Limitations on Exercise
(a) Each OPTION granted under the PROGRAM shall become
exercisable and vested only to the following
extent: (i) up to one-third (1/3) of the OPTIONS
granted may be exercised on or after the second
(2nd) anniversary of the date of grant; (ii) up to
two-thirds (2/3) of the OPTIONS granted may be
exercised on or after the third (3rd) anniversary
of the date of grant; and (iii) up to one hundred
percent (100%) of the OPTIONS granted may be
exercised on or after the fourth (4th) anniversary
of the date of grant.
(b) No OPTION under the PROGRAM designated by the
COMMITTEE as an ISO and granted before January 1,
1987 may be exercised while there is outstanding
in the hands of the OPTIONEE any ISO which was
granted
<PAGE>
before the granting of the ISO hereunder
sought to be exercised. For this purpose an ISO
shall be treated as outstanding until such OPTION
is (i) exercised in full, (ii) surrendered in full
by exercising SARS pursuant to Section 8 hereof,
or (iii) rendered void by reason of lapse of time.
12. Termination of Employment or Relationship with the
CORPORATION
(a) In the event of a TERMINATION by reason of a
discharge or TERMINATION FOR CAUSE, any
unexercised OPTIONS theretofore granted to an
OPTIONEE under the PROGRAM shall forthwith
terminate.
(b) In the event of a TERMINATION by reason of
RETIREMENT, all OPTIONS held by the OPTIONEE, to
the extent that such OPTIONS have not previously
expired or been exercised, shall become fully
exercisable and vested, notwithstanding the
provisions of Section 11(a) hereof, and the
OPTIONEE shall have the right to exercise such
OPTIONS in full at any time within their
respective terms or within five (5) years after
such RETIREMENT, whichever is shorter. This five-
year period shall be extended if an OPTIONEE
remains on the BOARD OF DIRECTORS after
RETIREMENT. In such case, the OPTIONS may be
exercised as long as the OPTIONEE remains a
DIRECTOR and for a period of six (6) months
thereafter, or within five (5) years after
RETIREMENT, whichever is longer; provided,
however, that no OPTION may be exercised after the
expiration of its term. To the extent any ISO
held by the OPTIONEE is exercised after the
expiration of three (3) months after such
TERMINATION, the exercise will be deemed to
involve the exercise of a NON-QUALIFIED STOCK
OPTION.
(c) In the event of a TERMINATION by reason of
disability or death, all OPTIONS held by the
OPTIONEE, to the extent that such OPTIONS have not
previously expired or been exercised, shall become
fully exercisable and vested, notwithstanding the
provisions of Section 11(a) hereof, and the
OPTIONEE (or the OPTIONEE'S estate or a person who
acquired the right to exercise such OPTIONS by
bequest or inheritance) shall have the right to
exercise such OPTIONS at any time within their
respective terms or within one (1) year after the
date of such TERMINATION, whichever is shorter.
The term "disability" shall, for the purposes of
the PLAN, be defined in Section 22(e)(3) of the
CODE.
(d) In the event of a TERMINATION by reason of a
divestiture or change in control of a subsidiary
of PG&E CORPORATION, which divestiture or change
in control results in such subsidiary no longer
qualifying as a subsidiary corporation under
Section 424(f) of the CODE, all OPTIONS held by
the OPTIONEE, to the extent that such OPTIONS have
not previously expired or been exercised, shall
become fully exercisable and
<PAGE>
vested,
notwithstanding the provisions of Section 11(a)
hereof, and the OPTIONEE shall have the right to
exercise such OPTIONS in full at any time within
their respective terms or within three (3) years
after such TERMINATION, whichever is shorter.
This three-year period shall be extended if an
OPTIONEE remains on the BOARD OF DIRECTORS after
such TERMINATION. In such case, the OPTIONS may
be exercised as long as the OPTIONEE remains a
DIRECTOR and for a period of six (6) months
thereafter, or within three (3) years after such
TERMINATION, whichever is longer; provided,
however, that no OPTION may be exercised after the
expiration of its term. To the extent any ISO
held by the OPTIONEE is exercised after the
expiration of three (3) months after such
TERMINATION, the exercise will be deemed to
involve the exercise of a NON-QUALIFIED STOCK
OPTION.
(e) In the event of a TERMINATION within one year
after a CHANGE IN CONTROL of the CORPORATION
(other than a TERMINATION covered by clauses (a),
(b), or (c) above), OPTIONEE shall have the right
to exercise OPTIONS which OPTIONEE then holds
(which OPTIONS will have been accelerated
previously in accordance with Section 16 below),
to the extent that such OPTIONS have not
previously expired or been exercised, in full at
any time within their respective terms or within
three (3) years after such TERMINATION, whichever
is shorter. This three-year period shall be
extended if an OPTIONEE remains on the BOARD OF
DIRECTORS after such TERMINATION. In such case,
the OPTIONS may be exercised as long as the
OPTIONEE remains a DIRECTOR and for a period of
six (6) months thereafter, or within three (3)
years after such TERMINATION, whichever is longer;
provided, however, that no OPTION may be exercised
after the expiration of its term. To the extent
any ISO held by the OPTIONEE is exercised after
the expiration of three (3) months after such
TERMINATION, the exercise will be deemed to
involve the exercise of a NON-QUALIFIED STOCK
OPTION.
(f) In the event of a TERMINATION for any reason other
than those specified in subparagraphs (a) through
(e) above, (i) any unexercised OPTION or OPTIONS
granted under the PROGRAM shall be deemed canceled
and terminated forthwith, except that the OPTIONEE
may exercise any unexercised OPTIONS theretofore
granted which are otherwise exercisable and vested
within the provisions of Section 11(a) hereof,
during the balance of their respective terms or
within thirty (30) days of such TERMINATION,
whichever is shorter, and (ii) the DEA (if any)
shall not be credited with any dividends paid
after the date of such TERMINATION.
<PAGE>
(g) Notwithstanding the provisions of
subparagraphs (a) through (f) above, the COMMITTEE
may, in its sole discretion, establish different
terms and conditions pertaining to the effect of
TERMINATION, to the extent permitted by applicable
federal and state law.
13. Payment for Shares Upon Exercise of Options
The exercise of any OPTION shall be contingent upon
receipt by the CORPORATION of (i) cash (including any
DEA funds payable to the OPTIONEE in connection with
the exercise of such OPTION), (ii) check, (iii) shares
of COMMON STOCK, (iv) an executed exercise notice
together with irrevocable instructions to a broker to
either sell the shares subject to the OPTION or hold
such shares as collateral for a margin loan and to
promptly deliver to the CORPORATION the amount of sale
or loan proceeds required to pay the OPTION PRICE,
(v) any combination of the foregoing in an amount equal
to the full OPTION PRICE of the shares being purchased,
or (vi) such other consideration and method of payment,
other than a note from the OPTIONEE, as the COMMITTEE,
in its sole discretion, may allow (which, in the case
of an ISO shall be determined at the time of grant), to
the extent permitted by applicable law. For purposes
of this paragraph, shares of COMMON STOCK that are
delivered in payment of the OPTION PRICE must have been
previously owned by the OPTIONEE for a minimum of one
year, and shall be valued at their FAIR MARKET VALUE as
of the date of the exercise of the OPTION. The
CORPORATION shall not make loans to any OPTIONEE for
the purpose of exercising OPTIONS.
14. Adjustments Upon Changes in Number or Value of Shares
of Common Stock
If there are any changes in the number or value of
shares of COMMON STOCK by reason of stock dividends,
stock splits, reverse stock splits, recapitalizations,
mergers, consolidations or other events that materially
increase or decrease the number or value of issued and
outstanding shares of COMMON STOCK, the COMMITTEE may
make such adjustments as it shall deem appropriate, in
order to prevent dilution or enlargement of rights.
15. Non-Transferability of Options
An OPTION shall not be transferable by the OPTIONEE
otherwise than by will or the laws of descent and
distribution, or pursuant to a qualified domestic
relations order as defined by the CODE, Title I of
ERISA or the rules thereunder. During the lifetime of
the OPTIONEE, an OPTION may be exercised only by the
OPTIONEE or by an alternate payee under a qualified
domestic relations order.
<PAGE>
16. Change in Control
Upon the occurrence of a CHANGE IN CONTROL (as defined
below), any time periods relating to the exercise of
any OPTION granted hereunder shall be accelerated so
that such OPTION may be immediately exercised in full.
A "CHANGE IN CONTROL" shall be deemed to have occurred
if:
(a) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the EXCHANGE ACT,
but excluding any benefit plan for EMPLOYEES or
any trustee, agent or other fiduciary for any such
plan acting in such person's capacity as such
fiduciary), directly or indirectly, becomes the
beneficial owner of securities of PG&E CORPORATION
representing twenty percent (20%) or more of the
combined voting power of the CORPORATION's then
outstanding securities;
(b) during any two consecutive years, individuals who
at the beginning of such a period constitute the
BOARD OF DIRECTORS cease for any reason to
constitute at least a majority of the BOARD OF
DIRECTORS, unless the election, or the nomination
for election by the shareholders of the
CORPORATION, of each new DIRECTOR was approved by
a vote of at least two-thirds (2/3) of the
DIRECTORS then still in office who were DIRECTORS
at the beginning of the period; or
(c) the shareholders of the CORPORATION shall have
approved (i) any consolidation or merger of the
CORPORATION other than a merger or consolidation
which would result in the voting securities of the
CORPORATION outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity or any parent
of such surviving entity) at least 70 percent of
the Combined Voting Power of the CORPORATION, such
surviving entity or the parent of such surviving
entity outstanding immediately after the merger or
consolidation; (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of
related transactions) of all or substantially all
of the assets of the CORPORATION, or (iii) any
plan or proposal for the liquidation or
dissolution of the CORPORATION. For purposes of
this paragraph, the term Combined Voting Power
shall mean the combined voting power of the
CORPORATION's or other relevant entity's then
outstanding voting securities.
<PAGE>
17. Listing and Registration of Shares
Each OPTION shall be subject to the requirement that if
at any time the COMMITTEE shall determine, in its
discretion, that the listing, registration or
qualification of the shares covered thereby under any
securities exchange or under any state or federal law
or the consent or approval of any governmental
regulatory body, including the California Public
Utilities Commission, is necessary or desirable as a
condition of, or in connection with, the granting of
such OPTION or the issue or purchase of shares
thereunder, such OPTION may not be exercised in whole
or in part unless and until such listing, registration,
qualification, consent or approval shall have been
effected or obtained free of any conditions not
acceptable to the COMMITTEE.
18. Amendment and Termination of the Plan and Options
The BOARD OF DIRECTORS or the COMMITTEE may at any time
suspend, terminate, modify or amend the PLAN in any
respect; provided, however, that, to the extent
necessary and desirable to comply with Section 422 of
the CODE (or any other applicable law or regulation,
including the requirements of any stock exchange on
which the COMMON STOCK is listed or quoted),
shareholder approval of any PLAN amendment shall be
obtained in such a manner and to such a degree as is
required by the applicable law or regulation.
No suspension, termination, modification or amendment
of the PLAN may, without the consent of the OPTIONEE,
adversely affect his or her rights under OPTIONS
theretofore granted to such OPTIONEE. In the event of
amendments to the CODE or applicable rules or
regulations relating to ISOS subsequent to the date
hereof, the CORPORATION may amend the PLAN, and the
CORPORATION and OPTIONEES holding OPTION agreements may
agree to amend outstanding OPTION agreements, to
conform to such amendments.
The COMMITTEE may make such amendments or modifications
in the terms and conditions of any OPTION as it may
deem advisable, or cancel or annul any grant of an
OPTION; provided, however, that no such amendment,
modification, cancellation or annulment may, without
the consent of the OPTIONEE, adversely affect his or
her rights under such OPTION; and provided further the
COMMITTEE may not reduce the OPTION PRICE or purchase
price of any OPTION or OPTION below the original OPTION
PRICE or purchase price.
Notwithstanding the foregoing, the COMMITTEE reserves
the right, in its sole discretion, to (i) convert any
outstanding ISOS to NON-QUALIFIED STOCK OPTIONS,
(ii) to require a OPTIONEE to forfeit any unexercised
or unpurchased OPTIONS, any shares received or
purchased pursuant to an OPTION, or any gains realized
by virtue of the receipt of an OPTION in the event that
such OPTIONEE competes against the CORPORATION, and
(iii) to cancel or annul any grant of an
<PAGE>
OPTION in the
event of a OPTIONEE'S TERMINATION FOR CAUSE. For
purposes of the PROGRAM, "TERMINATION FOR CAUSE" shall
include, but not be limited to, termination because of
dishonesty, criminal offense or violation of a work
rule, and shall be determined by, and in the sole
discretion of, the COMMITTEE.
19. Effective Date of the Plan and Duration
The PLAN first became effective as of January 1, 1992.
It has since been amended and restated. The amended
and restated PLAN became effective as of January 1,
1996, upon approval by the shareholders of Pacific Gas
and Electric Company at its Annual Meeting on April 17,
1996. Effective January 1, 1997, the PLAN was assumed
by PG&E CORPORATION. The COMMITTEE amended and
restated the PLAN effective October 21, 1998.
Effective April 21, 1999, the PLAN, and the PROGRAM of
which the PLAN is a part, were amended to add
11,000,000 shares of COMMON STOCK to the total number
of shares of COMMON STOCK reserved for use under the
PLAN and the PROGRAM. Unless terminated sooner
pursuant to Section 18 hereof, the PLAN shall terminate
on December 31, 2005.
20. Definitions
(a) BOARD OF DIRECTORS means the Board of Directors of PG&E
CORPORATION.
(b) CHANGE IN CONTROL has the meaning set forth in
Section 16 hereof.
(c) CHIEF EXECUTIVE OFFICER means the Chief Executive
Officer of PG&E CORPORATION.
(d) CODE means the Internal Revenue Code of 1986, as
amended from time to time.
(e) COMMITTEE means the Nominating and Compensation
Committee of the BOARD OF DIRECTORS or any successor to such
committee.
(f) COMMON STOCK means common shares of PG&E CORPORATION
with no par value and any class of common shares into which
such common shares hereafter may be converted.
(g) CONSULTANT means any person, including an advisor, who
is engaged by the CORPORATION to render services.
<PAGE>
(h) CORPORATION means PG&E CORPORATION, and any parent
corporation (as defined in Section 424(e) of the CODE) or
subsidiary corporation (as defined in Section 424(f) of the
CODE).
(i) DEA means a Dividend Equivalent Account described in
Section 9 hereof.
(j) DIRECTOR means any person who is a member of the BOARD
OF DIRECTORS or the Board of Directors of any parent
corporation (as defined in Section 424(e) of the CODE) which
may hereafter be established, including an advisory,
emeritus or honorary director.
(k) DIVIDEND EQUIVALENT means a right that entitles the
OPTIONEE to receive cash or COMMON STOCK based on the
dividends declared on the COMMON STOCK covered by such
right.
(l) ELIGIBLE PARTICIPANT means any KEY EMPLOYEE. It also
means, if so identified by the COMMITTEE (or by the CHIEF
EXECUTIVE OFFICER, in the case of OPTIONS granted by the
CHIEF EXECUTIVE OFFICER to certain ELIGIBLE PARTICIPANTS
pursuant to Section 2 hereof), other EMPLOYEES, DIRECTORS,
CONSULTANTS, employees or consultants of any affiliates of
PG&E CORPORATION, and other persons whose participation in
the PROGRAM is deemed by the COMMITTEE (or by the CHIEF
EXECUTIVE OFFICER, in the case of OPTIONS granted by the
CHIEF EXECUTIVE OFFICER to certain ELIGIBLE PARTICIPANTS
pursuant to Section 2 hereof) to be in the best interests of
the CORPORATION; provided, however, that DIRECTORS who are
not EMPLOYEES shall not be ELIGIBLE PARTICIPANTS for
purposes of the PLAN.
(m) EMPLOYEE means any person who is employed by the
CORPORATION. The payment of a director's fee or consulting
fee by the CORPORATION shall not be sufficient to constitute
"employment" by the CORPORATION.
(n) ERISA means the Employee Retirement Income Security Act
of 1974, as amended.
(o) EXCHANGE ACT means the Securities Exchange Act of 1934,
as amended.
(p) FAIR MARKET VALUE means the closing price of the COMMON
STOCK reported on the New York Stock Exchange Composite
Transactions for the date specified for determining such
value.
<PAGE>
(q) ISO means an OPTION intended to qualify as an incentive
stock option under Section 422 of the CODE.
(r) KEY EMPLOYEE means the Corporate Secretary, Treasurer,
Vice Presidents and other executive officers of PG&E
CORPORATION above the rank of Vice President. It also
means, if so identified by the COMMITTEE (or by the CHIEF
EXECUTIVE OFFICER, in the case of OPTIONS granted by the
CHIEF EXECUTIVE OFFICER to certain ELIGIBLE PARTICIPANTS
pursuant to Section 2 hereof), executive officers of wholly-
owned subsidiaries of PG&E CORPORATION (including
subsidiaries which become such after adoption of the
PROGRAM) and any other key management employee of PG&E
CORPORATION or any wholly-owned subsidiary of PG&E
CORPORATION.
(s) NON-EMPLOYEE DIRECTOR means a DIRECTOR who is not an
EMPLOYEE.
(t) NON-QUALIFIED STOCK OPTION means any OPTION which is
not an ISO.
(u) OPTION means an option to purchase shares of COMMON
STOCK granted under the PLAN.
(v) OPTIONEE means the ELIGIBLE PARTICIPANT receiving the
OPTION, or his or her legal representative, legatees,
distributees or alternate payees, as the case may be.
(w) OPTION PRICE means the purchase price for the COMMON
STOCK upon exercise of an OPTION.
(x) PG&E CORPORATION means PG&E CORPORATION, a California
corporation.
(y) PLAN means this Stock Option Plan as amended and
restated herein and as may be amended from time to time, or
any successor plan which the COMMITTEE may adopt from time
to time with respect to the grant of OPTIONS under the
PROGRAM.
(z) PROGRAM means the PG&E Corporation Long-Term Incentive
Program, as amended effective as of April 21, 1999, and as
may be amended from time to time, pursuant to which the PLAN
is adopted.
(aa) RETIREMENT means the Actual Retirement Date under the
Pacific Gas and Electric Company Retirement Plan.
<PAGE>
(bb) RULE 16b-3 means Rule 16b-3 under the EXCHANGE ACT or
any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the PLAN.
(cc) SAR means a stock appreciation right whose value is
based on the increase in the FAIR MARKET VALUE of the COMMON
STOCK covered by such right.
(dd) SECTION 16 OFFICER means any person who is designated
by the BOARD OF DIRECTORS as an executive officer of PG&E
CORPORATION and any other person who is designated as an
officer of PG&E CORPORATION for purposes of Section 16 of
the EXCHANGE ACT.
(ee) TANDEM refers to a DIVIDEND EQUIVALENT or SAR (as the
case may be) granted in conjunction with an OPTION.
(ff) TERMINATION occurs when an EMPLOYEE ceases to be
employed by the CORPORATION as a common law employee, when a
DIRECTOR ceases to be a member of the BOARD OF DIRECTORS or
the Board of Directors of any parent corporation which may
hereafter be established (as the case may be), or when the
relationship between the CORPORATION and a CONSULTANT or
other ELIGIBLE PARTICIPANT terminates, as the case may be.
(gg) TERMINATION FOR CAUSE has the meaning set forth in
Section 12 hereof.
<PAGE>
EXHIBIT B
PG&E CORPORATION
PERFORMANCE UNIT PLAN
This is the controlling and definitive statement
of the Performance Unit Plan ("PLAN"(3)) for ELIGIBLE
EMPLOYEES of PG&E CORPORATION ("CORPORATION") and such other
companies, affiliates, subsidiaries, or associations as the
BOARD OF DIRECTORS may designate from time to time. The
PLAN was first adopted by the BOARD in 1989 and was
effective January 1, 1990. It has since been amended from
time to time, most recently on October 21, 1998. Effective
April 21, 1999, the PROGRAM, of which the PLAN is a part,
was amended to add 11,000,000 shares of COMMON STOCK to the
total number of shares of COMMON STOCK reserved for use
under the PROGRAM.
ARTICLE I
DEFINITIONS
1.01 Board of Directors or Board shall mean the
BOARD OF DIRECTORS of the CORPORATION or, when appropriate,
any committee of the BOARD which has been delegated the
authority to take action with respect to the PLAN.
1.02 Committee shall mean the Nominating and
Compensation Committee of the BOARD OF DIRECTORS.
1.03 Corporation shall mean PG&E CORPORATION, a
California corporation.
1.04 Eligible Employee shall mean employees of
the CORPORATION who are officers at the vice presidential
level or above, the corporate secretary, the controller, and
the treasurer of the CORPORATION, and such other employees
of the CORPORATION, other companies, affiliates,
subsidiaries, or associations as may be designated by the
COMMITTEE.
1.05 Performance Targets shall mean the annual
CORPORATION financial and operational goals adopted by the
COMMITTEE to be used in determining awards under the PLAN.
1.06 Plan shall mean the Performance Unit Plan
("PUP") as set forth herein and as may be amended from time
to time.
- --------------------
(3) Words in all capitals are defined in Article I.
<PAGE>
1.07 Plan Administrator shall mean the COMMITTEE
or such individual or individuals as that COMMITTEE may
appoint to handle the day-to-day affairs of the PLAN.
1.08 Price shall mean the average market price of
STOCK for the last 30-day period of the YEAR preceding the
YEAR in which UNITS are payable.
1.09 PUP Units shall mean the units granted to
ELIGIBLE EMPLOYEES who participate in the PLAN. A PUP UNIT
has the equivalent value of the current market price of a
share of STOCK at the time of grant.
1.10 Stock shall mean the common stock of the
CORPORATION and any class of common shares into which such
STOCK hereafter may be converted.
1.11 Vesting Period shall mean the three calendar
YEARS commencing with the YEAR in which PUP UNITS are
granted.
1.12 Year shall mean a calendar year.
ARTICLE II
2.01 Prior to the beginning of each YEAR, the
COMMITTEE shall determine whether PUP UNITS will be granted
for such YEAR, the ELIGIBLE EMPLOYEES to whom PUP UNITS will
be granted, and the number of PUP UNITS to be granted to
each ELIGIBLE EMPLOYEE. Employees who become ELIGIBLE
EMPLOYEES after the beginning of a YEAR shall be entitled to
a prorata grant of PUP UNITS.
2.02 At the same time that the COMMITTEE makes
its determination as to the granting of PUP UNITS, it shall
also establish PERFORMANCE TARGETS. Although it is intended
that PERFORMANCE TARGETS will not change in the course of
the YEAR, the COMMITTEE reserves the right to modify or
adjust a previously set PERFORMANCE TARGET if, in its sole
discretion, extraordinary events warrant such modification
or adjustment; provided, however, that no such modification
or adjustment shall increase the amount of any payment that
would otherwise be due based upon performance as measured
against the original PERFORMANCE TARGET.
2.03 Each grant of PUP UNITS shall have its own
VESTING PERIOD. Subject to modification as measured against
a given YEAR's applicable PERFORMANCE TARGET, each grant of
PUP UNITS shall be payable as follows:
a. One-third after the end of the first YEAR of
the VESTING PERIOD;
<PAGE>
b. One-third after the end of the second YEAR of
the VESTING PERIOD; and
c. One-third after the end of the third YEAR of
the VESTING PERIOD.
2.04 To determine the number of PUP UNITS earned,
the applicable PERFORMANCE TARGET shall be the PERFORMANCE
TARGET for the YEAR in which the PUP UNITS vest.
Performance as measured against the applicable PERFORMANCE
TARGET for a YEAR shall modify all PUP UNITS that vest at
the end of such YEAR. The PERFORMANCE TARGETS established
by the COMMITTEE may modify the number of UNITS earned from
0% to 200% of the number of vested UNITS.
2.05 ELIGIBLE EMPLOYEES shall receive a cash
payment as soon as practicable following the YEAR PUP UNITS
vest pursuant to the schedule set forth in Section 2.03.
The amount of the payment shall be equal to the product of
the number of PUP UNITS earned multiplied by the PRICE of
STOCK.
2.06 Each time that the CORPORATION declares a
dividend on its STOCK, an amount equal to the dividend
multiplied by an ELIGIBLE EMPLOYEE's outstanding, but
unearned PUP UNITS, shall be accrued on behalf of each
ELIGIBLE EMPLOYEE. As soon as practicable following the end
of each YEAR, ELIGIBLE EMPLOYEES shall receive a cash
payment of the dividends accrued for that YEAR, modified by
performance for that YEAR as measured under Section 2.04.
2.07 An ELIGIBLE EMPLOYEE may elect to defer the
payment of PUP UNITS and/or dividends paid on PUP UNITS by
making a timely election under the Deferred Compensation
Plan. Deferrals of benefits payable under this Plan shall
be subject to the rules contained in the Deferred
Compensation Plan governing elections to defer and receipt
of deferred amounts.
ARTICLE III
3.01 Retirement. Upon retirement under the terms
of Pacific Gas and Electric Company's Retirement Plan, all
outstanding PUP UNITS continue to be payable according to
the terms of the PLAN. Thus, the number of UNITS eventually
earned by a retired employee is still subject to
modification depending on the extent to which applicable
PERFORMANCE TARGETS are met during the YEAR preceding the
January in which UNITS become payable under the schedule of
Section 2.03. A retired employee is not entitled to receive
grants of PUP UNITS after normal or early retirement date,
as those terms are defined under Pacific Gas and Electric
Company's Retirement Plan.
3.02 Disability. If an ELIGIBLE EMPLOYEE is both
disabled and entitled to receive benefits under Pacific Gas
and Electric Company's Long Term
<PAGE>
Disability Plan, UNITS
granted prior to the date of disability shall continue to be
payable according to the terms of this PLAN. An ELIGIBLE
EMPLOYEE is not entitled to receive grants of PUP UNITS
after the date of disability as determined under the
provisions of the Long Term Disability Plan. If an ELIGIBLE
EMPLOYEE ceases to be an ELIGIBLE EMPLOYEE because of
disability and is not entitled to receive benefits under
Pacific Gas and Electric Company's Long Term Disability
Plan, all outstanding grants of PUP UNITS become vested and
payable as soon as practicable in the YEAR following the
YEAR in which the ELIGIBLE EMPLOYEE ceases to be an ELIGIBLE
EMPLOYEE. All of the UNITS payable shall be subject to
modification based upon performance as measured against the
PERFORMANCE TARGET for the YEAR in which the ELIGIBLE
EMPLOYEE ceases to be an ELIGIBLE EMPLOYEE.
3.03 Death. In the event of the death of an
ELIGIBLE EMPLOYEE, all outstanding grants of PUP UNITS held
by the ELIGIBLE EMPLOYEE at the date of death shall become
vested and payable as soon as practicable in the YEAR
following the YEAR of death. All of the UNITS payable after
an ELIGIBLE EMPLOYEE's death shall be subject to
modification based upon performance as measured against the
PERFORMANCE TARGET for the YEAR in which the death of the
ELIGIBLE EMPLOYEE occurs.
3.04 Termination. If an ELIGIBLE EMPLOYEE ceases
to be an ELIGIBLE EMPLOYEE for any reason other than
retirement as defined under Pacific Gas and Electric
Company's Retirement Plan, disability, or death, all
outstanding grants of PUP UNITS shall be canceled as of the
date that the ELIGIBLE EMPLOYEE ceases to be an ELIGIBLE
EMPLOYEE unless otherwise provided in the PG&E Corporation
Officer Severance Policy.
3.05 Change in Control. Upon a Change in Control
as defined in the PG&E Corporation Long Term Incentive
Program (Program), all PUP UNITS shall become vested and
payable as soon as practicable in the YEAR following the
Change in Control in accordance with Section 16 of the
Program.
ARTICLE IV
ADMINISTRATIVE PROVISIONS
4.01 Administration. The PLAN shall be
administered by the PLAN ADMINISTRATOR who shall have the
authority to interpret the PLAN and make such rules as it
deems appropriate. The PLAN ADMINISTRATOR shall have the
duty and responsibility of maintaining records, making the
requisite calculations, and disbursing payments hereunder.
The PLAN ADMINISTRATOR's interpretations, determinations,
rules, and calculations shall be final and binding on all
persons and parties concerned.
<PAGE>
4.02 Amendment and Termination. The CORPORATION
may amend or terminate the PLAN at any time, provided,
however, that no such amendment or termination shall
adversely affect PUP UNITS which an ELIGIBLE EMPLOYEE has
earned prior to the date of such amendment or termination.
PUP UNITS outstanding but unearned at the date of any such
amendment or termination may, in the sole discretion of the
CORPORATION, be canceled, and the CORPORATION shall have no
obligation to provide a substitute benefit of lesser, equal,
or greater value.
4.03 Nonassignability of Benefits. The benefits
payable under this PLAN or the right to receive future
benefits under this PLAN may not be anticipated, alienated,
pledged, encumbered, or subject to any charge or legal
process, and if any attempt is made to do so, or a person
eligible for any benefits becomes bankrupt, the interest
under the PLAN of the person affected may be terminated by
the PLAN ADMINISTRATOR which, in its sole discretion, may
cause the same to be held if applied for the benefit of one
or more of the dependents of such person or make any other
disposition of such benefits that it deems appropriate.
4.04 No Guarantee of Employment. Nothing
contained in this PLAN shall be construed as a contract of
employment between the CORPORATION or the ELIGIBLE EMPLOYEE,
or as a right of the ELIGIBLE EMPLOYEE to be continued in
the employ of the CORPORATION, to remain as an officer of
the CORPORATION, or as a limitation on the right of the
CORPORATION to discharge any of its employees, with or
without cause.
4.05 Benefits Unfunded and Unsecured. The
benefits under this PLAN are unfunded, and the interest
under this PLAN of any ELIGIBLE EMPLOYEE and such ELIGIBLE
EMPLOYEE's right to receive a distribution of benefits under
this PLAN shall be an unsecured claim against the general
assets of the CORPORATION.
4.06 Applicable Law. All questions pertaining to
the construction, validity, and effect of the PLAN shall be
determined in accordance with the laws of the United States,
and to the extent not preempted by such laws, by the laws of
the State of California.
<PAGE>
EXHIBIT C
PG&E CORPORATION
NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
(As amended effective as of April 21, 1999)
1. Purpose of the Plan
This is the controlling and definitive statement of the
PG&E Corporation Non-Employee Director Stock Incentive
Plan (hereinafter called the PLAN(4)). The purpose of
the PLAN is to advance the interests of the CORPORATION
by providing NON-EMPLOYEE DIRECTORS with financial
incentives to promote the success of its long-term
(five to ten years) business objectives, and to
increase their proprietary interest in the success of
the CORPORATION. Inasmuch as the PLAN is designed to
encourage financial performance and to improve the
value of shareholders' investment in PG&E CORPORATION,
the costs of the PLAN will be funded from corporate
earnings.
2. Formula Awards of Director Restricted Stock, Non-
Qualified Stock Options and Phantom Stock to Non-Employee
Directors
All awards of DIRECTOR RESTRICTED STOCK, NON-QUALIFIED
STOCK OPTIONS and PHANTOM STOCK under the PLAN shall be
automatic and non-discretionary, and shall be made
strictly in accordance with the provisions contained
herein. No person shall have any discretion to select
which NON-EMPLOYEE DIRECTORS shall be granted DIRECTOR
RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS or
PHANTOM STOCK. Further, no person shall have any
discretion to determine the number of shares of
DIRECTOR RESTRICTED STOCK awarded to a NON-EMPLOYEE
DIRECTOR, and, except as otherwise provided in Section
4 with respect to a NON-EMPLOYEE DIRECTOR'S election to
allocate formula awards between NON-QUALIFIED STOCK
OPTIONS and PHANTOM STOCK, no person shall have any
discretion to determine the number of shares underlying
NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK awarded
to a NON-EMPLOYEE DIRECTOR.
3. Awards of Director Restricted Stock
(a) On the first business day of each calendar year
beginning on January 1, 1998, during the duration of the
PLAN, each person who is a NON-EMPLOYEE DIRECTOR on the
first business day of the applicable calendar year shall
receive a grant of DIRECTOR RESTRICTED STOCK in an amount to
be determined in accordance with the formula set forth in
this Section 3(a). The number of shares of DIRECTOR
RESTRICTED
(4) Capitalized words are defined in Section 15 hereof.
<PAGE>
STOCK to be granted to each NON-EMPLOYEE DIRECTOR
each calendar year shall be determined by (i) dividing ten
thousand dollars ($10,000) by the FAIR MARKET VALUE of the
COMMON STOCK on the first business day of the applicable
calendar year, and (ii) rounding the resulting number down
to the nearest whole share. No person shall receive more
than one (1) grant of DIRECTOR RESTRICTED STOCK during any
calendar year.
(b) Shares of DIRECTOR RESTRICTED STOCK shall vest
cumulatively as follows: (i) twenty percent (20%) of such
shares on the first anniversary of the date of grant;
(ii) forty percent (40%) of such shares on the second
anniversary of the date of grant; (iii) sixty percent (60%)
of such shares on the third anniversary of the date of
grant; (iv) eighty percent (80%) of such shares on the
fourth anniversary of the date of grant; and (v) one hundred
percent (100%) of such shares on the fifth anniversary of
the date of grant. Shares of DIRECTOR RESTRICTED STOCK may
not be resold or otherwise transferred by a GRANTEE until
such shares are vested in accordance with the provisions of
this Section 3(b).
4. Annual Election to Receive Non-Qualified Stock Options
and Phantom Stock
By June 30 of each calendar year during the term of the
Plan, each person who is then a NON-EMPLOYEE DIRECTOR
shall deliver to the Corporate Secretary a written
election to receive either NON-QUALIFIED STOCK OPTIONS
or PHANTOM STOCK, or both, with an aggregate value of
$20,000, on the first business day of the following
calendar year, provided the person continues to be a
NON-EMPLOYEE DIRECTOR on the date the award would
otherwise be made. A NON-EMPLOYEE DIRECTOR may
allocate between NON-QUALIFIED STOCK OPTIONS and
PHANTOM STOCK in minimum increments with a value equal
to $5,000, as determined in accordance with Section 5
below with respect to NON-QUALIFIFED STOCK OPTIONS, and
Section 6 below, with respect to PHANTOM STOCK. All
awards of NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK
made to NON-EMPLOYEE DIRECTORS shall comply with
Section 5 and Section 6 below, respectively. A NON-
EMPLOYEE DIRECTOR who has failed to make a timely
election or who became a NON-EMPLOYEE DIRECTOR after
June 30 shall be awarded NON-QUALIFIED STOCK OPTIONS
and PHANTOM STOCK, each with a value of $10,000 as
determined in accordance with Section 5 and Section 6,
respectively, provided that the NON-EMPLOYEE DIRECTOR
continues to be a NON-EMPLOYEE DIRECTOR on the on the
first business day of the following calendar year.
Notwithstanding the foregoing, elections for calendar
year 1998 must be received by December 31, 1997, to be
effective on the first business day of calendar year
1998.
<PAGE>
5. Grant of Non-Qualified Stock Options to Non-Employee
Directors
(a) On the first business day of each calendar year
beginning on January 1, 1998, during the duration of the
PLAN, each person who is then a NON-EMPLOYEE DIRECTOR and
who has elected to receive an award of NON-QUALIFIED STOCK
OPTIONS in accordance with Section 4, shall receive a grant
of NON-QUALIFIED STOCK OPTIONS with an aggregate value equal
to $5,000, $10,000, $15,000, or $20,000, as previously
elected by the NON-EMPLOYEE DIRECTOR (or $10,000 in the case
of a NON-EMPLOYEE DIRECTOR who has failed to make a timely
election in accordance with Section 4 or who became a NON-
EMPLOYEE DIRECTOR after June 30) (the "Elected Option
Value"). The number of shares subject to the NON-QUALIFIED
STOCK OPTIONS shall be determined by dividing the Elected
Option Value by the value of a NON-QUALIFIED STOCK OPTION to
purchase a single share of PG&E Corporation common stock as
of the first business day of the applicable calendar year.
The per stock option value shall be calculated in accordance
with the Black-Scholes stock option valuation method using
the average preceding November closing price of PG&E
Corporation stock and reducing the per option value so
calculated by twenty percent. The resulting number of NON-
QUALIFIED STOCK OPTIONS shall be rounded down to the nearest
whole share. No person shall receive more than one grant of
NON-QUALIFIED STOCK OPTIONS during any calendar year.
(b) The OPTION PRICE of the COMMON STOCK subject under each
NON-QUALIFIED STOCK OPTION shall be the FAIR MARKET VALUE of
the COMMON STOCK on the date of grant. The exercise of any
NON-QUALIFIED STOCK OPTION shall be contingent upon receipt
by the CORPORATION of (i) cash, (ii) check, (iii) shares of
COMMON STOCK, (iv) an executed exercise notice together with
irrevocable instructions to a broker to either sell the
shares subject to the NON-QUALIFIED STOCK OPTION or hold
such shares as collateral for a margin loan and to promptly
deliver to the CORPORATION the amount of sale or loan
proceeds required to pay the OPTION PRICE, or (v) any
combination of the foregoing in an amount equal to the full
OPTION PRICE of the shares being purchased. For purposes of
this paragraph, shares of COMMON STOCK that are delivered in
payment of the OPTION PRICE must have been previously owned
by the GRANTEE for a minimum of one year, and shall be
valued at their FAIR MARKET VALUE as of the date of the
exercise of the NON-QUALIFIED STOCK OPTION. The CORPORATION
shall not make loans to any GRANTEE for the purpose of
exercising NON-QUALIFIED STOCK OPTIONS.
(c) Each NON-QUALIFIED STOCK OPTION granted under the Plan
shall become exercisable and vested cumulatively as follows:
(i) up to thirty-
<PAGE>
three percent (33%) of the NON-QUALIFIED
STOCK OPTION may be exercised on or after the second
anniversary of the date of grant; (ii) up to sixty-six
percent (66%) of the NON-QUALIFIED STOCK OPTION may be
exercised on or after the third anniversary of the date of
grant; and (iii) up to one hundred percent (100%) of the NON-
QUALIFIED STOCK OPTION may be exercised on or after the
fourth anniversary of the date of grant.
(d) The term of each NON-QUALIFIED STOCK OPTION shall be
ten years and one day from the date of grant, subject to
earlier termination as provided in Section 9 hereof. Any
provision of the PLAN to the contrary notwithstanding, no
NON-QUALIFIED STOCK OPTION shall be exercised after the time
limitations stated in this Section 5(d).
6. Awards of Phantom Stock to Non-Employee Directors
(a) On the first business day of each calendar year
beginning on January 1, 1998, during the duration of the
PLAN, each person who is then a NON-EMPLOYEE DIRECTOR and
who has elected to receive an award of PHANTOM STOCK in
accordance with Section 4, shall be credited with an amount
of PHANTOM STOCK with a value (as determined by the FAIR
MARKET VALUE of the COMMON STOCK on the first business day
of the applicable calendar year) equal to $5,000, $10,000,
$15,000, or $20,000, as previously elected by the NON-
EMPLOYEE DIRECTOR (the "Elected Phantom Stock Value"). The
number of shares of PHANTOM STOCK (including fractions
computed to three decimal places) to be granted to each NON-
EMPLOYEE DIRECTOR each calendar year shall be determined by
dividing the Elected Phantom Stock Value (or $10,000 in the
case of a NON-EMPLOYEE DIRECTOR who has failed to make a
timely election in accordance with Section 4 or who became a
NON-EMPLOYEE DIRECTOR after June 30) by the FAIR MARKET
VALUE of the COMMON STOCK on the first business day of the
applicable calendar year. No person shall receive more than
one grant of PHANTOM STOCK during any calendar year. The
shares of PHANTOM STOCK awarded to a NON-EMPLOYEE DIRECTOR
shall be credited to a newly established PHANTOM STOCK
account for the NON-EMPLOYEE DIRECTOR. Each share of
PHANTOM STOCK shall be deemed to be equal to one share (or
fraction thereof) of COMMON STOCK on the date of grant, and
shall thereafter flucuate in value in accordance with the
FAIR MARKET VALUE of the COMMON STOCK.
(b) Each NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account
shall be credited quarterly on each dividend payment date
with additional shares of PHANTOM STOCK (including fractions
computed to three decimal places) determined by dividing (i)
the aggregate amount of dividends, i.e,. the dividend
multiplied by the number of shares of
<PAGE>
PHANTOM STOCK credited
to the participant's account as of the dividend record date,
by (ii) by the FAIR MARKET VALUE of the COMMON STOCK on the
dividend payment date.
(c) Payment of the shares of PHANTOM STOCK credited to a
NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall only be
made after the NON-EMPLOYEE DIRECTOR'S RETIREMENT or
MANDATORY RETIREMENT from the BOARD OF DIRECTORS. Payment
shall be made only in the form of shares of COMMON STOCK
equal to the number of shares of PHANTOM STOCK credited to
the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account on the
date of distribution, rounded down to the nearest whole
share. The NON-EMPLOYEE DIRECTOR may elect to receive the
number of shares of COMMON STOCK to which he is entitled in
a lump sum distribution of the entire amount or in a series
of ten or less approximately equal annual installments,
provided that distribution shall commence no later than
January of the year following the year in which the NON-
EMPLOYEE DIRECTOR'S RETIREMENT or MANDATORY RETIREMENT
occurred.
7. Shares of Stock Subject to the Plan
There shall be reserved for use under the PLAN and for
the grant of any other INCENTIVE AWARDS pursuant to the
PROGRAM (subject to the provisions of Section 10
hereof) a total of 34,389,230 shares of COMMON STOCK,
which shares may be authorized but unissued shares of
COMMON STOCK or issued shares of COMMON STOCK which
shall have been reacquired by PG&E CORPORATION.
8. Dividend, Voting and Other Shareholder Rights
Except as otherwise provided in the PLAN, each GRANTEE
shall have all of the rights of a shareholder of PG&E
CORPORATION with respect to all outstanding shares of
DIRECTOR RESTRICTED STOCK registered in his or her
name, whether or not such shares are vested, including
the right to receive dividends and other distributions
paid or made with respect to such shares and the right
to vote such shares. No GRANTEE shall have any of the
rights of a shareholder of PG&E CORPORATION with
respect to a NON-QUALIFIED STOCK OPTION until the
shares acquired upon exercise of such NON-QUALIFIED
STOCK OPTION have been issued and registered in his or
her name. No GRANTEE shall have any of the rights of a
shareholder of PG&E CORPORATION with respect to PHANTOM
STOCK credited to the NON-EMPLOYEE DIRECTOR'S PHANTOM
STOCK account under the Plan.
<PAGE>
9. Termination of Status as a Non-Employee Director
(a) In the event of a TERMINATION by reason of disability
or death, (i) all shares of DIRECTOR RESTRICTED STOCK held
by the GRANTEE shall become fully vested, notwithstanding
the provisions of Section 3(b) hereof, and the GRANTEE (or
the GRANTEE'S estate or a person who acquired the shares of
DIRECTOR RESTRICTED STOCK by bequest or inheritance) shall
have the right to resell or transfer such shares at any
time, (ii) all NON-QUALIFIED STOCK OPTIONS held by the
GRANTEE, to the extent that such NON-QUALIFIED STOCK OPTIONS
have not previously expired or been exercised, shall become
fully vested and exercisable, notwithstanding the provisions
of Section 5(c) hereof, and the GRANTEE (or the GRANTEE'S
estate or a person who acquired the right to exercise the
NON-QUALIFIED STOCK OPTION by bequest or inheritance) shall
have the right to exercise the NON-QUALIFIED STOCK OPTIONS
at any time within their respective terms or within one
(1) year after the date of the GRANTEE'S death or
disability, whichever is shorter, and (iii) all shares of
PHANTOM STOCK credited to the NON-EMPLOYEE DIRECTOR'S
PHANTOM STOCK account shall immediately become payable to
the GRANTEE (or the GRANTEE'S estate or a person who
acquired the shares of PHANTOM STOCK by bequest or
inheritance) in the form of a number of shares of COMMON
STOCK equal to the number of shares of PHANTOM STOCK
credited to the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK
account, rounded down to the nearest whole share. The term
"disability" shall, for the purposes of the PLAN, be defined
in Section 22(e)(3) of the CODE.
(b) In the event of a TERMINATION by reason of MANDATORY
RETIREMENT, (i) all shares of DIRECTOR RESTRICTED STOCK held
by the GRANTEE shall become fully vested, notwithstanding
the provisions of Section 3(b) hereof, and the GRANTEE shall
have the right to resell or transfer such shares at any
time, (ii) the NON-QUALIFIED STOCK OPTIONS then held by the
GRANTEE, to the extent that such NON-QUALIFIED STOCK OPTIONS
have not previously expired or been exercised, shall become
fully vested and exercisable, notwithstanding the provisions
of Section 5(c) hereof, and the GRANTEE shall have the right
to exercise the NON-QUALIFIED STOCK OPTIONS at any time
within their respective terms or within five (5) years after
such MANDATORY RETIREMENT, whichever is shorter; and (iii)
all shares of PHANTOM STOCK credited to the NON-EMPLOYEE
DIRECTOR'S PHANTOM STOCK account shall become payable to the
GRANTEE in accordance with Section 6(c) hereof.
(c) In the event of a TERMINATION for any reason other than
those specified in subparagraphs (a) and (b) above, (i) any
unvested shares of DIRECTOR RESTRICTED STOCK granted
hereunder shall be forfeited and the GRANTEE shall return to
the CORPORATION for cancellation any stock certificates
representing such forfeited shares which forfeited shares
shall
<PAGE>
be deemed to be canceled and no longer outstanding as
of the date of TERMINATION; and from and after the date of
TERMINATION, the GRANTEE shall cease to be a shareholder
with respect to such forfeited shares and shall have no
dividend, voting or other rights with respect thereto, (ii)
any NON-QUALIFIED STOCK OPTIONS granted hereunder that have
not yet vested and become exercisable shall terminate, (iii)
the GRANTEE shall have the right to exercise NON-QUALIFIED
STOCK OPTIONS, to the extent that such NON-QUALIFIED STOCK
OPTIONS have vested and become exercisable as of the date of
TERMINATION, at any time within their respective terms or
within three months after such TERMINATION, whichever is
shorter, after which the NON-QUALIFIED STOCK OPTIONS shall
terminate, and (iv) all shares of PHANTOM STOCK credited to
the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall be
forfeited on the date of TERMINATION; provided, however,
that if the TERMINATION results from the NON-EMPLOYEE
DIRECTOR'S RETIREMENT, then the PHANTOM STOCK credited to
the NON-EMPLOYEE DIRECTOR'S PHANTOM STOCK account shall
become payable in accordance with Section 6(c) hereof.
(d) Notwithstanding the provisions of subparagraphs (a)
through (c) above, the BOARD OF DIRECTORS may, in its sole
discretion, establish different terms and conditions
pertaining to the effect of TERMINATION, to the extent
permitted by applicable federal and state law.
10. Adjustments Upon Changes in Number or Value of Shares
of Common Stock
If there are any changes in the number or value of
shares of COMMON STOCK by reason of stock dividends,
stock splits, reverse stock splits, recapitalizations,
mergers, consolidations or other events that materially
increase or decrease the number or value of issued and
outstanding shares of COMMON STOCK, the BOARD OF
DIRECTORS or COMMITTEE may make such adjustments as it
shall deem appropriate, in order to prevent dilution or
enlargement of rights.
11. Non-Transferability
NON-QUALIFIED STOCK OPTIONS, PHANTOM STOCK, and shares
of DIRECTOR RESTRICTED STOCK that have not vested in
accordance with the provisions of Section 3(b) hereof,
shall not be transferable by the GRANTEE otherwise than
by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order as
defined by the CODE, Title I of ERISA or the rules
thereunder.
<PAGE>
12. Change in Control
Upon the occurrence of a CHANGE IN CONTROL (as defined
below), (i) any time periods relating to the vesting of
any shares of DIRECTOR RESTRICTED STOCK granted
hereunder shall be accelerated so that all such shares
immediately become fully vested, (ii) any time periods
relating to the vesting of NON-QUALIFIED STOCK OPTIONS
granted hereunder shall be accelerated so that all such
NON-QUALIFIED STOCK OPTIONS immediately become fully
vested and exercisable for the remainder of their
terms, and (iii) all shares of PHANTOM STOCK credited
to the NON-EMPLOYEE DIRECTORS' PHANTOM STOCK accounts
shall become payable in accordance with Section 6(c)
hereof as if the CHANGE IN CONTROL constituted a
RETIREMENT.
A "CHANGE IN CONTROL" shall be deemed to have occurred
if:
(a) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the EXCHANGE ACT, but excluding any benefit
plan for EMPLOYEES or any trustee, agent or other fiduciary
for any such plan acting in such person's capacity as such
fiduciary), directly or indirectly, becomes the beneficial
owner of securities of PG&E CORPORATION representing twenty
percent (20%) or more of the combined voting power of PG&E
CORPORATION's then outstanding securities;
(b) during any two consecutive years, individuals who at
the beginning of such a period constitute the BOARD OF
DIRECTORS cease for any reason to constitute at least a
majority of the BOARD OF DIRECTORS, unless the election, or
the nomination for election by the shareholders of PG&E
CORPORATION, of each new DIRECTOR was approved by a vote of
at least two-thirds (2/3) of the DIRECTORS then still in
office who were DIRECTORS at the beginning of the period; or
(c) the shareholders of the CORPORATION shall have approved
(i) any consolidation or merger of the CORPORATION
other than a merger or consolidation which would result
in the voting securities of the CORPORATION outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of the surviving entity or any
parent of such surviving entity) at least 70 percent of
the Combined Voting Power of the CORPORATION, such
surviving entity or the parent of such surviving entity
outstanding immediately after the merger or
consolidation; (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets
of the CORPORATION, or (iii) any plan or proposal for
the liquidation or dissolution of the CORPORATION. For
purposes of this paragraph, the term Combined Voting
Power shall mean the combined voting power of the
CORPORATION's or other relevant entity's then
outstanding voting securities.
<PAGE>
13. Amendment and Termination of the Plan
The BOARD OF DIRECTORS or the COMMITTEE may at any time
suspend, terminate, modify or amend the PLAN in any
respect; provided, however, that, to the extent
necessary and desirable to comply with the CODE (or any
other applicable law or regulation, including the
requirements of any stock exchange on which the COMMON
STOCK is listed or quoted), shareholder approval of any
PLAN amendment shall be obtained in such a manner and
to such a degree as is required by the applicable law
or regulation.
No suspension, termination, modification or amendment
of the PLAN may, without the consent of the GRANTEE,
adversely affect his or her rights with respect to
DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS
or PHANTOM STOCK theretofore granted to such GRANTEE.
Except as provided in Section 2 hereof, the BOARD OF
DIRECTORS or COMMITTEE may make such amendments or
modifications in the terms and conditions of any grant
of DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK
OPTIONS or PHANTOM STOCK as it may deem advisable, or
cancel or annul any grant of DIRECTOR RESTRICTED STOCK,
NON-QUALIFIED STOCK OPTIONS or PHANTOM STOCK; provided,
however, that no such amendment, modification,
cancellation or annulment may, without the consent of
the GRANTEE, adversely affect his or her rights with
respect to such grant.
14. Effective Date of the Plan and Duration
This PLAN became effective as of January 1, 1996, upon
approval by the shareholders of Pacific Gas and
Electric Company at its Annual Meeting on April 17,
1996. Effective January 1, 1997, the PLAN was assumed
by PG&E CORPORATION. At its meeting on December 17,
1997, the BOARD OF DIRECTORS amended and restated the
PLAN effective January 1, 1998, to (i) reflect the
adoption of new RULE 16B-3 which became effective
November 1, 1996, and (ii) provide automatic formula
awards of NON-QUALIFIED STOCK OPTIONS and PHANTOM STOCK
to NON-EMPLOYEE DIRECTORS within the limits of the
PROGRAM as previously approved by shareholders in 1996.
The COMMITTEE made various amendments to the PLAN
effective October 21, 1998. Effective April 21, 1999,
the PLAN, and the PROGRAM of which the PLAN is a part,
were amended to add 11,000,000 shares of COMMON STOCK
to the total number of shares of COMMON STOCK reserved
for use under the PLAN and the PROGRAM. Unless
terminated sooner pursuant to Section 13 hereof, the
PLAN shall terminate on December 31, 2005.
15. Definitions
(a) BOARD OF DIRECTORS means the Board of Directors of PG&E
CORPORATION.
<PAGE>
(b) CHANGE IN CONTROL has the meaning set forth in
Section 12 hereof.
(c) CODE means the Internal Revenue Code of 1986, as
amended from time to time.
(d) COMMITTEE means the Nominating and Compensation
Committee of the BOARD OF DIRECTORS or any successor to such
committee.
(e) COMMON STOCK means common shares of PG&E CORPORATION
with no par value and any class of common shares into which
such common shares hereafter may be converted.
(f) CORPORATION means PG&E CORPORATION, and any parent
corporation (as defined in Section 424(e) of the CODE) or
subsidiary corporation (as defined in Section 424(f) of the
CODE).
(g) DIRECTOR means any person who is a member of the BOARD
OF DIRECTORS or the Board of Directors of any parent
corporation (as defined in Section 424(e) of the CODE) which
may hereafter be established, including an advisory,
emeritus or honorary director.
(h) DIRECTOR RESTRICTED STOCK means RESTRICTED STOCK
granted to a NON-EMPLOYEE DIRECTOR under the PLAN.
(i) EMPLOYEE means any person who is employed by the
CORPORATION. The payment of a director's fee or consulting
fee by the CORPORATION shall not be sufficient to constitute
"employment" by the CORPORATION.
(j) ERISA means the Employee Retirement Income Security Act
of 1974, as amended.
(k) EXCHANGE ACT means the Securities Exchange Act of 1934,
as amended.
(l) FAIR MARKET VALUE means the closing price of the COMMON
STOCK reported on the New York Stock Exchange Composite
Transactions for the date specified for determining such
value.
(m) GRANTEE means the NON-EMPLOYEE DIRECTOR receiving the
DIRECTOR RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS and
PHANTOM STOCK or his or her legal representative, legatees,
distributees or alternate payees, as the case may be.
(n) MANDATORY RETIREMENT means retirement as a DIRECTOR at
age 70 or at such other age as may be specified in the
retirement policy for the BOARD OF DIRECTORS or the Board of
Directors of any parent
<PAGE>
corporation which may hereafter be
established (as the case may be), as in effect at the time
of a NON-EMPLOYEE DIRECTOR'S TERMINATION.
(o) NON-EMPLOYEE DIRECTOR means a DIRECTOR who is not an
EMPLOYEE.
(p) NON-QUALIFIED STOCK OPTION means a option to purchase
shares of COMMON STOCK which is not intended to qualify as
an incentive stock option under Section 422 of the CODE.
(q) PG&E CORPORATION means PG&E CORPORATION, a California
corporation.
(r) PHANTOM STOCK means allocated hypothetical shares of
COMMON STOCK that can be converted at a future date into
stock.
(s) PLAN means this Non-Employee Director Stock Incentive
Plan, as may be amended from time to time, or any successor
plan which the COMMITTEE or BOARD OF DIRECTORS may adopt
from time to time with respect to the grant of DIRECTOR
RESTRICTED STOCK, NON-QUALIFIED STOCK OPTIONS, PHANTOM STOCK
or other stock-based incentive awards under the PROGRAM.
(t) PROGRAM means the PG&E Corporation Long-Term Incentive
Program, as amended effective April 21, 1999, and as may be
amended from time to time, pursuant to which this PLAN is
adopted.
(u) RESTRICTED STOCK means COMMON STOCK that is subject to
forfeiture by the GRANTEE to the CORPORATION under such
circumstances as may be specified by the COMMITTEE.
(v) RETIREMENT means TERMINATION of service on the BOARD OF
DIRECTORS after serving continuously for five consecutive
years.
(w) RULE 16b-3 means Rule 16b-3 under the EXCHANGE ACT or
any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the PLAN.
(x) TERMINATION occurs when a NON-EMPLOYEE DIRECTOR ceases
to be a member of the BOARD OF DIRECTORS or the Board of
Directors of any parent corporation which may hereafter be
established (as the case may be).
