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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PG&E CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
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previously. Identify the previous filing by registration statement number,
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[PG&E LOGO] PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY
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Joint Notice of 1999 Annual Meetings - Joint Proxy Statement
March 8, 1999
To the Shareholders of PG&E Corporation and Pacific Gas and Electric Company:
You are cordially invited to attend the third annual meeting of PG&E
Corporation and the 93rd annual meeting of Pacific Gas and Electric Company. The
meetings will be held concurrently on Wednesday, April 21, 1999, at 10:00 am.,
in the Masonic Auditorium, 1111 California Street, San Francisco, California.
PG&E Corporation is an energy-based holding company. It is the parent
company of Pacific Gas and Electric Company, a gas and electric utility serving
Northern and Central California, and unregulated businesses that provide
wholesale and retail energy commodities and services across North America.
The accompanying Joint Proxy Statement contains information about matters to
be considered at both the PG&E Corporation and Pacific Gas and Electric Company
annual meetings. At the annual meetings, PG&E Corporation and Pacific Gas and
Electric Company shareholders will be asked to vote on the election of directors
and ratification of the selection of independent public accountants for 1999 for
their respective companies. The Boards of Directors and management of PG&E
Corporation and Pacific Gas and Electric Company recommend that you vote "FOR"
the nominees for directors and the ratification of the appointment of Deloitte &
Touche as the independent public accountants for 1999, as set forth in the Joint
Proxy Statement.
In addition to the matters described above, PG&E Corporation shareholders
will be asked to vote on a management proposal to increase the number of shares
available to be issued under the Long-Term Incentive Program. For the reasons
stated in the Joint Proxy Statement, the PG&E Corporation Board of Directors and
management recommend that PG&E Corporation shareholders vote "FOR" this
proposal.
PG&E Corporation shareholders also will be asked to vote on the proposals
submitted by individual PG&E Corporation shareholders described in the Joint
Proxy Statement, if such proposals are properly presented at the annual meeting.
For the reasons stated in the Joint Proxy Statement, the PG&E Corporation Board
of Directors and management recommend that PG&E Corporation shareholders vote
"AGAINST" these proposals.
Your vote on the business at the annual meetings is important. If you hold
shares in both PG&E Corporation and Pacific Gas and Electric Company, you will
be provided with a proxy form for each company. Whether or not you plan to
attend, please mark, sign, date, and mail your proxy form as soon as possible in
the accompanying envelope so that your shares can be represented at the annual
meetings. As an alternative to mailing your proxy, you may have the option of
executing and submitting your proxy and voting instructions over the Internet or
by telephone. Please refer to "Voting on the Internet or by Telephone" on page
43 of the Joint Proxy Statement for details.
During the annual meetings, PG&E Corporation and Pacific Gas and Electric
Company management also will report on operations and other matters affecting
PG&E Corporation and Pacific Gas and Electric Company, act on such other matters
as may properly be presented at the meetings, and respond to shareholders'
questions.
Sincerely,
/S/ ROBERT D. GLYNN, JR.
Robert D. Glynn, Jr.
Chairman of the Board, Chief Executive Officer,
and President of PG&E Corporation
Chairman of the Board of
Pacific Gas and Electric Company
<PAGE>
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Table of Contents
<TABLE>
<S> <C> <C>
Joint Notice of Annual Meetings of Shareholders
Joint Proxy Statement
General Information 1
Item No. 1: Election of Directors 3
Information Regarding the Boards of Directors of PG&E Corporation and 7
Pacific Gas and Electric Company
Item No. 2: Ratification of Appointment of Independent Public 13
Accountants
Item No. 3: Management Proposal 14
(To Be Voted on by PG&E Corporation Shareholders Only)
Item Nos. 4-8: Shareholder Proposals 21
(To Be Voted on by PG&E Corporation Shareholders Only)
Executive Compensation 29
Other Information 42
</TABLE>
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Joint Notice of Annual Meetings of Shareholders
of PG&E Corporation and Pacific Gas and Electric Company
March 8, 1999
TO THE SHAREHOLDERS OF PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY:
The annual meetings of shareholders of PG&E Corporation and Pacific Gas and
Electric Company will be held concurrently in the Masonic Auditorium, 1111
California Street, San Francisco, California, on Wednesday, April 21, 1999, at
10:00 a.m., for the purpose of considering the following matters:
(1) For PG&E Corporation and Pacific Gas and Electric Company shareholders,
to elect the following 13 and 14 directors, respectively, to each Board
for the ensuing year:
<TABLE>
<S> <C> <C>
Richard A. Clarke Robert D. Glynn, Jr. Carl E. Reichardt
Harry M. Conger David M. Lawrence, MD John C. Sawhill
David A. Coulter Richard B. Madden Gordon R. Smith*
C. Lee Cox Mary S. Metz Barry Lawson Williams
William S. Davila Rebecca Q. Morgan
* Gordon R. Smith is a nominee for director of the Pacific Gas and Electric
Company Board only.
</TABLE>
(2) For PG&E Corporation and Pacific Gas and Electric Company shareholders,
to ratify each Board of Directors' appointment of Deloitte & Touche as
independent public accountants for 1999 for PG&E Corporation and Pacific
Gas and Electric Company,
(3) For PG&E Corporation shareholders only, to act upon a management
proposal described on pages 14-20 of the Joint Proxy Statement,
(4) For PG&E Corporation shareholders only, to act upon five proposals
submitted by PG&E Corporation shareholders and described on pages 21-27
of the Joint Proxy Statement, if such proposals are properly presented
at the meeting, and
(5) For PG&E Corporation and Pacific Gas and Electric Company shareholders,
to transact such other business as may properly come before the meetings
and any adjournments or postponements thereof.
Shareholders of record of PG&E Corporation and Pacific Gas and Electric
Company at the close of business on February 22, 1999, and valid proxyholders
may attend and vote at the respective annual meetings. If your shares are
registered in the name of a brokerage firm, bank, or trustee and you plan to
attend the meeting, please obtain from the firm, bank, or trustee a letter or
other evidence of your beneficial ownership of those shares to facilitate your
admittance to the meeting.
If you are a participant in the PG&E Corporation Dividend Reinvestment Plan,
please note that the PG&E Corporation proxy covers all shares of common stock in
your account with PG&E Corporation, including any shares which may be held in
that plan. If you hold shares in both PG&E Corporation and Pacific Gas and
Electric Company, you will be provided with a form of proxy for each company.
Please mark, sign, date, and mail the proxy form promptly in the accompanying
envelope.
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If your shares are registered directly with PG&E Corporation and/or Pacific
Gas and Electric Company (including shares held by participants in the PG&E
Corporation Dividend Reinvestment Plan) or if you are a participant who holds
PG&E Corporation stock in any of the defined contribution retirement plans
maintained by PG&E Corporation or any of its subsidiaries, you have the option
of executing and submitting your proxy and voting instructions over the Internet
at http://www.votefast.com or by telephone by calling the toll-free number
1-800-250-9081 from anywhere in the United States. If your PG&E Corporation
and/or Pacific Gas and Electric Company shares are held in an account at a
brokerage firm or bank, you also may have the option of submitting your voting
instructions over the Internet at http://www.proxyvote.com or by telephone by
calling the toll-free telephone number shown on the voting instruction form;
these voting options are provided by ADP Investor Communication Services on
behalf of participating brokerage firms and banks. Please refer to "Voting on
the Internet or by Telephone" on page 43 of the Joint Proxy Statement for
details.
By Order of the Boards of Directors,
/S/ LESLIE H. EVERETT
Leslie H. Everett
Vice President and Corporate
Secretary,
PG&E Corporation and
Pacific Gas and Electric Company
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PG&E Corporation
Pacific Gas and Electric Company
JOINT PROXY STATEMENT
INTRODUCTION
This Joint Proxy Statement is provided to the shareholders of PG&E
Corporation and Pacific Gas and Electric Company in connection with their
respective annual meetings of shareholders and any adjournments or postponements
thereof. The annual meetings are scheduled to be held concurrently at 10:00
a.m., Wednesday, April 21, 1999, at the Masonic Auditorium, 1111 California
Street, San Francisco, California.
PG&E Corporation is an energy-based holding company. It is the parent
company of Pacific Gas and Electric Company, a gas and electric utility serving
Northern and Central California, and unregulated businesses that provide
wholesale and retail energy commodities and services across North America.
As a result of the holding company formation merger in 1997, the outstanding
shares of Pacific Gas and Electric Company common stock were converted, on a
one-for-one basis, into shares of PG&E Corporation common stock. PG&E
Corporation holds 100 percent of the issued and outstanding shares of Pacific
Gas and Electric Company common stock and approximately 95 percent of the total
outstanding voting stock of Pacific Gas and Electric Company. The outstanding
shares of Pacific Gas and Electric Company's first preferred stock are unchanged
by the merger and continue to be outstanding shares of that company. Holders of
Pacific Gas and Electric Company's first preferred stock hold approximately 5
percent of the Company's total outstanding voting stock.
GENERAL INFORMATION
The Boards of Directors of PG&E Corporation and Pacific Gas and Electric
Company are soliciting proxies hereunder for use at their respective annual
meetings to be held on April 21, 1999, and at any adjournments or postponements
thereof, and a respective form of proxy is provided with this Joint Proxy
Statement. This Joint Proxy Statement and the accompanying proxy form were first
mailed on or about March 8, 1999, to PG&E Corporation and Pacific Gas and
Electric Company shareholders entitled to vote at the annual meetings.
To the knowledge of the Boards of Directors of PG&E Corporation and Pacific
Gas and Electric Company, the only items of business to be considered at the
meetings are listed in the preceding PG&E Corporation and Pacific Gas and
Electric Company Joint Notice of Annual Meetings of Shareholders and are
explained in more detail on the following pages. By executing and submitting
your proxy and voting instructions, you authorize the proxyholders named in the
proxy to vote your shares as you indicate on these items of business and to vote
your shares in accordance with management's best judgment in response to other
proposals properly presented at the meeting.
As an alternative to executing and submitting your proxy and voting
instructions by mail, you may have the option of executing and submitting your
proxy and voting instructions over the Internet or by telephone. Please refer to
"Voting on the Internet or by Telephone" on page 43 for further details. The use
of Internet or telephone voting procedures will not affect your right to vote in
person should you decide to attend the annual meeting.
You may revoke your proxy at any time before it is exercised at the annual
meeting. You may do this by advising the Vice President and Corporate Secretary
of PG&E Corporation or Pacific Gas and Electric Company (as the case may be) in
writing of your desire to revoke your proxy, or by submitting a duly executed
proxy bearing a later date. You also may revoke your proxy by attending the
annual meeting and indicating that you wish to vote in person.
The Boards of Directors of PG&E Corporation and Pacific Gas and Electric
Company have established February 22, 1999, as the record date for the
determination of shareholders of PG&E Corporation and Pacific Gas and Electric
Company entitled to receive notice of and to vote at their respective annual
meetings. As of February 22, 1999, there were 382,964,605 shares of PG&E
Corporation common stock, without par value, outstanding and entitled to vote at
the PG&E Corporation annual meeting; each such share is entitled to one vote. As
of February 22, 1999, there were 17,258,280 shares of Pacific Gas and Electric
Company first preferred stock,
1
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$25 par value, and 326,926,667 shares of Pacific Gas and Electric Company common
stock, $5 par value, outstanding and entitled to vote at the Pacific Gas and
Electric Company annual meeting; each such share is entitled to one vote.
Shares represented by properly executed proxies received by PG&E Corporation
or Pacific Gas and Electric Company prior to or at the annual meetings will be
voted at the respective annual meetings in accordance with the instructions
specified in each proxy, and will be counted for purposes of establishing a
quorum, regardless of how or whether such shares are voted on any specific
proposal. If no instructions are specified in the PG&E Corporation proxy, the
subject shares will be voted (1) FOR the election of the nominees of the PG&E
Corporation Board of Directors, unless authority to vote is withheld as provided
in the proxy, (2) FOR ratification of the appointment of Deloitte & Touche as
PG&E Corporation's independent public accountants for 1999, (3) FOR the
management proposal to increase the number of shares available to be issued
under the Long-Term Incentive Program, and (4) AGAINST each of the shareholder
proposals that are properly presented at the meeting. If no instructions are
specified in the Pacific Gas and Electric Company proxy, the subject shares will
be voted (1) FOR the election of the nominees of the Pacific Gas and Electric
Company Board of Directors, unless authority to vote is withheld as provided in
the proxy, and (2) FOR ratification of the appointment of Deloitte & Touche as
Pacific Gas and Electric Company's independent public accountants for 1999.
Except with respect to the election of directors, each proposal which may be
presented at the meetings must receive the affirmative vote of a majority of the
shares represented and voting on the proposal. In addition, the affirmative
votes must constitute at least a majority of the required quorum. The required
quorum is a majority of the outstanding shares of voting stock of PG&E
Corporation or Pacific Gas and Electric Company (as the case may be). PG&E
Corporation and Pacific Gas and Electric Company intend to count abstentions
both for purposes of determining the presence or absence of a quorum and in the
total number of shares represented and voting with respect to a proposal.
Accordingly, abstentions will have the same effect as a vote against a proposal.
Broker non-votes, if any, with respect to a proposal will be counted for
purposes of determining the presence or absence of a quorum, but will not be
counted as shares represented and voting with respect to that proposal. Broker
non-votes occur when brokers or nominees have voted on some of the matters to be
acted on at a meeting, but fail to vote on certain other matters because, under
the rules of the New York Stock Exchange, they are not permitted to vote on such
other matters in the absence of instructions from the beneficial owners of
shares.
2
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Item No. 1:
Election of Directors of PG&E Corporation and
Pacific Gas and Electric Company
Thirteen and 14 directors will be elected to serve on the Boards of
Directors of PG&E Corporation and Pacific Gas and Electric Company,
respectively, to hold office until the next annual meetings or until their
successors shall be elected and qualified. The 13 nominees for director of PG&E
Corporation and the 14 nominees for director of Pacific Gas and Electric Company
whom the respective Boards propose for election are the same, except for Gordon
R. Smith, who is a nominee for the Pacific Gas and Electric Company Board only.
The composition of these slates of nominees is consistent with the policy of
PG&E Corporation and Pacific Gas and Electric Company that at least 75 percent
of their Boards shall be composed of directors who are neither current nor
former officers or employees of PG&E Corporation, Pacific Gas and Electric
Company, or any of their respective subsidiaries.
Information is provided on the following pages about the nominees for
directors, including their principal occupations for the past five years,
certain other directorships, age, and length of service as a director of PG&E
Corporation and Pacific Gas and Electric Company. Membership on Board
committees, attendance at Board and committee meetings, and ownership of stock
in PG&E Corporation and Pacific Gas and Electric Company are indicated in
separate sections following the individual resumes of the nominees.
Directors of PG&E Corporation and Pacific Gas and Electric Company are
elected from those nominated based on a plurality of votes cast. The nominees
receiving the highest number of affirmative votes (up to the number of directors
to be elected) are elected. Votes against a nominee or votes withheld have no
legal effect. Unless authority to vote is withheld or another contrary
instruction is indicated, properly executed proxies received by PG&E Corporation
or Pacific Gas and Electric Company prior to or at the annual meetings will be
voted FOR the election of the nominees listed on the following pages. All of the
nominees named below have agreed to serve if elected. Should any of the nominees
become unavailable at the time of the meeting to accept nomination or election
as a director, the respective proxyholders named in the enclosed PG&E
Corporation or Pacific Gas and Electric Company proxy will vote for substitute
nominees at their discretion.
THE BOARDS OF DIRECTORS OF PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY
RECOMMEND THE ELECTION OF THEIR RESPECTIVE NOMINEES FOR DIRECTOR PRESENTED
IN THIS JOINT PROXY STATEMENT.
3
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Nominees for Directors of PG&E Corporation and
Pacific Gas and Electric Company
BIOGRAPHICAL INFORMATION
[PHOTO] RICHARD A. CLARKE
Mr. Clarke is former Chairman of the Board of Pacific Gas and
Electric Company. He was Chairman of the Board of Pacific Gas
and Electric Company from May 1986 until his retirement in May
1995, and also was Chief Executive Officer of Pacific Gas and
Electric Company from May 1986 to June 1994. Mr. Clarke, 68, has
been a director of Pacific Gas and Electric Company since 1985
and a director of PG&E Corporation since December 1996. He also
is a director of CNF Transportation Inc. and Potlatch
Corporation.
[PHOTO] HARRY M. CONGER
Mr. Conger is Chairman and Chief Executive Officer, Emeritus of
Homestake Mining Company. He was Chairman of the Board of
Homestake Mining Company from 1982 until July 1998 and Chief
Executive Officer from December 1978 until his retirement in May
1996. Mr. Conger, 68, has been a director of Pacific Gas and
Electric Company since 1982 and a director of PG&E Corporation
since December 1996. He also is a director of Apex Silver Mines
Limited, ASA Limited, and CalMat Co.
[PHOTO] DAVID A. COULTER
Mr. Coulter is former Chairman and Chief Executive Officer of
BankAmerica Corporation and Bank of America NT&SA. He joined
Bank of America in 1976 and held a variety of senior management
positions with BankAmerica Corporation and Bank of America NT&SA
until October 1998. Mr. Coulter, 51, has been a director of
Pacific Gas and Electric Company since May 1996 and a director
of PG&E Corporation since December 1996.
[PHOTO] C. LEE COX
Mr. Cox is retired Vice Chairman of AirTouch Communications,
Inc. and retired President and Chief Executive Officer of
AirTouch Cellular (cellular telephone and paging services). He
was an executive officer of AirTouch Communications, Inc. and
its predecessor, PacTel Corporation, from 1987 until his
retirement in April 1997, and continues to serve as a director
of AirTouch Communications, Inc. Mr. Cox, 57, has been a
director of Pacific Gas and Electric Company since February 1996
and a director of PG&E Corporation since December 1996.
[PHOTO] WILLIAM S. DAVILA
Mr. Davila is President Emeritus of The Vons Companies, Inc.
(retail grocery). He was President of The Vons Companies, Inc.
from 1986 until his retirement in May 1992, and continues to
serve as the company spokesperson. Mr. Davila, 67, has been a
director of Pacific Gas and Electric Company since 1992 and a
director of PG&E Corporation since December 1996. He also is a
director of Hormel Foods Corporation and Wells Fargo & Company.
4
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[PHOTO] ROBERT D. GLYNN, JR.
Mr. Glynn is Chairman of the Board, Chief Executive Officer, and
President of PG&E Corporation and Chairman of the Board of
Pacific Gas and Electric Company. He has been an officer of PG&E
Corporation since December 1996 and an officer of Pacific Gas
and Electric Company since January 1988. Mr. Glynn, 56, has been
a director of Pacific Gas and Electric Company since 1995 and a
director of PG&E Corporation since December 1996. He also is a
director of URS Corporation.
[PHOTO] DAVID M. LAWRENCE, MD
Dr. Lawrence is Chairman and Chief Executive Officer of Kaiser
Foundation Health Plan, Inc. and Kaiser Foundation Hospitals,
and has been an executive officer of those companies for more
than the past five years. Dr. Lawrence, 58, has been a director
of Pacific Gas and Electric Company since 1995 and a director of
PG&E Corporation since December 1996. He also is a director of
Hewlett-Packard Company.
[PHOTO] RICHARD B. MADDEN
Mr. Madden is retired Chairman of the Board and Chief Executive
Officer of Potlatch Corporation (diversified forest products).
He was Chief Executive Officer of Potlatch Corporation from 1971
until his retirement in May 1994, and continues to serve as a
director of that company. Mr. Madden, 69, has been a director of
Pacific Gas and Electric Company since 1977 and a director of
PG&E Corporation since December 1996. He also is a director of
CNF Transportation Inc. and URS Corporation.
[PHOTO] MARY S. METZ
Dr. Metz is President of S. H. Cowell Foundation, and has held
that position since January 1999. Prior to that date, she was
Dean of University Extension, University of California, Berkeley
from July 1991 to June 1998. Dr. Metz, 61, has been a director
of Pacific Gas and Electric Company since 1986 and a director of
PG&E Corporation since December 1996. She also is a director of
Longs Drug Stores Corporation, SBC Communications, and
UnionBanCal Corporation.
[PHOTO] REBECCA Q. MORGAN
Mrs. Morgan is retired President and Chief Executive Officer of
Joint Venture: Silicon Valley Network (JVSV Network) (a
non-profit collaborative formed to address critical issues
facing Silicon Valley). She was an executive officer of JVSV
Network from September 1993 until her retirement in December
1998. Prior to her involvement with JVSV Network, she served
nine years as a California State Senator from 1984 to 1993. Mrs.
Morgan, 60, has been a director of Pacific Gas and Electric
Company since 1995 and a director of PG&E Corporation since
December 1996. She also is a director of Greater Bay Bancorp.
5
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Nominees for Directors of PG&E Corporation and
Pacific Gas and Electric Company
CONTINUED
[PHOTO] CARL E. REICHARDT
Mr. Reichardt is retired Chairman of the Board and Chief
Executive Officer of Wells Fargo & Company (bank holding
company) and Wells Fargo Bank, N.A. He was an executive officer
of Wells Fargo Bank, N.A. from 1978 until his retirement in
December 1994. Mr. Reichardt, 67, has been a director of Pacific
Gas and Electric Company since 1985 and a director of PG&E
Corporation since December 1996. He also is a director of
Columbia/HCA Healthcare Corporation, ConAgra, Inc., Ford Motor
Company, McKesson HBOC, Inc., and Newhall Management
Corporation.
[PHOTO] JOHN C. SAWHILL
Dr. Sawhill is President and Chief Executive Officer of The
Nature Conservancy (international environmental organization)
and has held that position since April 1990. Dr. Sawhill, 62,
has been a director of Pacific Gas and Electric Company since
1990 and a director of PG&E Corporation since December 1996. He
also is a director of NACCO Industries, Inc., Newfield
Exploration Company, Procter and Gamble, The Vanguard Group,
Inc., and each of the Vanguard Funds, registered investment
companies.
[PHOTO] GORDON R. SMITH*
Mr. Smith is President and Chief Executive Officer of Pacific
Gas and Electric Company, and has been an officer of Pacific Gas
and Electric Company since June 1980. Mr. Smith, 51, has been a
director of Pacific Gas and Electric Company since 1997.
[PHOTO] BARRY LAWSON WILLIAMS
Mr. Williams is President of Williams Pacific Ventures, Inc.
(business consulting and mediation), and has held that position
since May 1987. Mr. Williams, 54, has been a director of Pacific
Gas and Electric Company since 1990 and a director of PG&E
Corporation since December 1996. He also is a director of
CompUSA Inc., Newhall Management Corporation, R.H. Donnelley,
and Simpson Manufacturing Company Inc.
* Gordon R. Smith is a nominee for director of Pacific Gas and
Electric Company only.
6
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Information Regarding the
Boards of Directors of PG&E Corporation and
Pacific Gas and Electric Company
BOARD COMMITTEES
The committees of the PG&E Corporation Board of Directors are the Executive
Committee, Audit Committee, Finance Committee, Nominating and Compensation
Committee, and Public Policy Committee. The Pacific Gas and Electric Company
Board of Directors has an Executive Committee. The current membership and duties
of these committees are as follows:
<TABLE>
<CAPTION>
NOMINATING AND
EXECUTIVE AUDIT FINANCE COMPENSATION PUBLIC POLICY
COMMITTEES COMMITTEE COMMITTEE COMMITTEE COMMITTEE
<S> <C> <C> <C> <C>
R. D. Glynn, Jr.* H. M. Conger* R. B. Madden* C. E. Reichardt* M. S. Metz*
H. M. Conger C. L. Cox R. A. Clarke D. A. Coulter R. A. Clarke
R. B. Madden W. S. Davila D. A. Coulter C. L. Cox(2) W. S. Davila
M. S. Metz M. S. Metz C. E. Reichardt D. M. Lawrence, MD R. Q. Morgan
C. E. Reichardt B. L. Williams J. C. Sawhill J. C. Sawhill J. C. Sawhill
G. R. Smith(1) B. L. Williams
</TABLE>
* Chair
(1) Member of the Pacific Gas and Electric Company Executive Committee
only.
(2) Effective April 1, 1999.
EXECUTIVE COMMITTEES
Each Executive Committee (no meetings held in 1998), subject to the
provisions of law and certain limits imposed by the PG&E Corporation or the
Pacific Gas and Electric Company Board (as the case may be), may exercise any of
the powers and perform any of the duties of the PG&E Corporation Board or the
Pacific Gas and Electric Company Board, respectively. The Executive Committees
meet as needed.
AUDIT COMMITTEE
The Audit Committee of PG&E Corporation (four meetings were held in 1998)
advises and assists the Board in fulfilling its responsibilities in connection
with financial and accounting practices, internal controls, external and
internal auditing programs, business ethics, and compliance with laws,
regulations, and policies that may have a material impact on the consolidated
financial statements of PG&E Corporation and its subsidiaries. The Audit
Committee satisfies itself as to the independence and competence of PG&E
Corporation's and Pacific Gas and Electric Company's independent public
accountants, and reviews with the independent accountants and with PG&E
Corporation's or Pacific Gas and Electric Company's officers and internal
auditors the scope and results of the independent accountants' audit work,
consolidated annual financial statements, internal audit and control systems,
and compliance with laws, regulations, policies, and programs. The Audit
Committee also recommends to the Board of Directors the firm of independent
public accountants to be selected to audit PG&E Corporation's and Pacific Gas
and Electric Company's accounts, and makes further inquiries as it deems
necessary or desirable to inform itself as to the conduct of PG&E Corporation's
or its subsidiaries' affairs.
The Audit Committee is composed entirely of directors who are neither (a)
current nor former officers or employees of PG&E Corporation or any of its
subsidiaries, (b) consultants to PG&E Corporation or any of its subsidiaries,
nor (c) current nor former officers or employees of any other corporation on
whose board of directors any PG&E Corporation officer serves as a member. One
member of the Committee is appointed by the Board of Directors as the
Committee's Chair.
FINANCE COMMITTEE
The Finance Committee of PG&E Corporation (eight meetings were held in 1998)
advises and assists the Board with respect to the financial and capital
investment policies and objectives of PG&E Corporation and its subsidiary
companies, including specific actions required to achieve those objectives. The
Finance Committee
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reviews long-term financial and investment plans and strategies, annual
financial plans, dividend policy, short-term and long-term financing plans,
proposed capital investments, proposed divestments, major commercial banking,
investment banking, financial consulting, and other financial relations of PG&E
Corporation or its subsidiaries, and price risk management activities.
One member of the Committee, who is neither a current nor former employee
of, nor current consultant to, PG&E Corporation or any of its subsidiaries, is
appointed by the Board of Directors as the Committee's Chair.
NOMINATING AND COMPENSATION COMMITTEE
The Nominating and Compensation Committee of PG&E Corporation (six meetings
were held in 1998) advises and assists the Boards of PG&E Corporation, Pacific
Gas and Electric Company, and other PG&E Corporation subsidiaries having
non-employee directors with respect to the selection and compensation of
directors. It also advises and assists PG&E Corporation and its subsidiaries on
employment, compensation, benefits policies and practices, and the development,
selection, and compensation of policy-making officers. The Nominating and
Compensation Committee reviews and acts upon the compensation of officers of
PG&E Corporation and its subsidiaries, except that of the Chief Executive
Officers of PG&E Corporation and Pacific Gas and Electric Company, whose
compensation is established by the full PG&E Corporation or Pacific Gas and
Electric Company Board (as the case may be) upon recommendation of the
Committee. The Committee also reviews long-range planning for executive
development and succession, and the composition and performance of the Boards of
PG&E Corporation, Pacific Gas and Electric Company, and any other subsidiary
with non-employee directors.
The Nominating and Compensation Committee is composed entirely of directors
who are neither (a) current nor former officers or employees of PG&E Corporation
or any of its subsidiaries, (b) consultants to PG&E Corporation or any of its
subsidiaries, nor (c) current nor former officers or employees of any other
corporation on whose board of directors any PG&E Corporation officer serves as a
member. One member of the Committee is appointed by the Board of Directors as
the Committee's Chair.
The Nominating and Compensation Committee will consider nominees recommended
by shareholders for election to the Boards of Directors of PG&E Corporation and
Pacific Gas and Electric Company. The names of such nominees, accompanied by
relevant biographical information, should be submitted in writing to the Vice
President and Corporate Secretary of PG&E Corporation or Pacific Gas and
Electric Company (as the case may be). The Nominating and Compensation Committee
seeks qualified, dedicated, and highly regarded individuals who have experience
relevant to PG&E Corporation's or Pacific Gas and Electric Company's business
operations, who understand the complexities of PG&E Corporation's or Pacific Gas
and Electric Company's business environment, and who will represent the best
interests of all the shareholders of PG&E Corporation or Pacific Gas and
Electric Company. In accordance with PG&E Corporation's and Pacific Gas and
Electric Company's commitment to equal opportunity, the Committee continues to
seek qualified women and minority candidates for the Boards.
PUBLIC POLICY COMMITTEE
The Public Policy Committee of PG&E Corporation (three meetings were held in
1998) advises and assists the Board of Directors with respect to public policy
issues which could affect significantly the interests of the customers,
shareholders, or employees of PG&E Corporation or its subsidiaries. The Public
Policy Committee reviews the policies and practices of PG&E Corporation and its
subsidiaries with respect to protection and improvement of the quality of the
environment, charitable and community service organizations and activities,
equal opportunity in hiring and promoting employees, and development of
minority-owned and women-owned businesses as suppliers to PG&E Corporation and
its subsidiaries. The Committee also reviews significant societal, governmental,
and environmental trends and issues which may affect the operations of PG&E
Corporation or its subsidiaries.
One member of the Committee, who is neither a current nor former employee
of, nor current consultant to, PG&E Corporation or any of its subsidiaries, is
appointed by the Board of Directors as the Committee's Chair.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
Ten meetings of the PG&E Corporation Board of Directors and 21 meetings of
the PG&E Corporation Board committees were held in 1998. Overall attendance of
incumbent directors at such meetings was 95%. Individual attendance at meetings
of the PG&E Corporation Board of Directors and Board committees was as follows:
R. A. Clarke 100%, H. M. Conger 100%, D. A. Coulter 88%, C. L. Cox 100%,
W. S. Davila 100%, R. D. Glynn, Jr. 100%,
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D. M. Lawrence 81%, R. B. Madden 100%, M. S. Metz 100%, R. Q. Morgan 92%,
C. E. Reichardt 100%, J. C. Sawhill 89%, and B. L. Williams 95%.
Six meetings of the Pacific Gas and Electric Company Board of Directors and
no meetings of the Pacific Gas and Electric Company Executive Committee were
held in 1998. Overall attendance of incumbent directors at such meetings was
99%. Individual attendance at meetings of the Pacific Gas and Electric Company
Board of Directors was as follows: R. A. Clarke 100%, H. M. Conger 100%, D. A.
Coulter 83%, C. L. Cox 100%, W. S. Davila 100%, R. D. Glynn, Jr. 100%, D. M.
Lawrence 100%, R. B. Madden 100%, M. S. Metz 100%, R. Q. Morgan 100%, C. E.
Reichardt 100%, J. C. Sawhill 100%, G. R. Smith 100%, and B. L. Williams 100%.
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of PG&E Corporation or
Pacific Gas and Electric Company receives a quarterly retainer of $7,500 plus a
fee of $1,000 for each Board or Board committee meeting attended. Non-employee
directors who chair Board committees receive an additional quarterly retainer of
$625. Under the Deferred Compensation Plan for Non-Employee Directors, directors
of PG&E Corporation or Pacific Gas and Electric Company may elect to defer all
or part of such compensation for varying periods. Directors who participate in
the Deferred Compensation Plan may convert their deferred compensation into a
number of common stock equivalents, the value of which is tied to the market
value of PG&E Corporation common stock. Alternatively, participating directors
may direct that their deferred compensation earn interest.
No director who serves on both the PG&E Corporation and Pacific Gas and
Electric Company Boards and corresponding committees is paid additional
compensation for concurrent service on Pacific Gas and Electric Company's Board
or its committees, except that separate meeting fees are paid for each meeting
of the Pacific Gas and Electric Company Board, or a Pacific Gas and Electric
Company Board committee, that is not held concurrently or sequentially with a
meeting of the PG&E Corporation Board or a corresponding PG&E Corporation Board
committee. It is the usual practice of PG&E Corporation and Pacific Gas and
Electric Company that meetings of the respective Boards and corresponding
committees are held concurrently with each other and, therefore, that a single
meeting fee is paid to each director for each set of meetings.
In addition, directors of PG&E Corporation or Pacific Gas and Electric
Company are reimbursed for reasonable expenses incurred in attending Board or
committee meetings. Directors of PG&E Corporation or Pacific Gas and Electric
Company also are reimbursed for reasonable expenses incurred in connection with
other activities undertaken on behalf of or for the benefit of PG&E Corporation
or Pacific Gas and Electric Company.
Effective January 1, 1998, the PG&E Corporation Retirement Plan for
Non-Employee Directors was terminated. Directors who had accrued benefits under
the Plan were given a one-time option of receiving at retirement the benefit
accrued through 1997, or of converting the present value of their accrued
benefit into a PG&E Corporation common stock equivalent investment held in the
Deferred Compensation Plan for Non-Employee Directors. The payment of frozen
accrued retirement benefits, or distributions from the Deferred Compensation
Plan attributable to the conversion of retirement benefits, cannot be made until
the later of age 65 or retirement from the Board.
Under the Non-Employee Director Stock Incentive Plan, a component of the
PG&E Corporation Long-Term Incentive Program, on the first business day of
January of each year, each non-employee director of PG&E Corporation is entitled
to receive stock-based awards with a total aggregate equity value of $30,000,
composed of (1) restricted shares of PG&E Corporation common stock valued at
$10,000 (based on the closing price of PG&E Corporation common stock on the
first business day of the year), and (2) a combination of non-qualified stock
options and common stock equivalents with a total equity value of $20,000, based
on equity value increments of $5,000. The exercise price of stock options is
equal to the market value of PG&E Corporation common stock (i.e., the closing
price) on the date of grant. Restricted stock and stock options vest over the
five-year period following the date of grant, except that restricted stock and
stock options will vest immediately upon mandatory retirement from the Board at
age 70, upon a director's death or disability, or in the event of a change in
control. Common stock equivalents awarded are payable in the form of PG&E
Corporation common stock only following a director's retirement from the Board,
upon a director's death or disability, or in the event of a change in control.
Unvested awards are forfeited if the recipient ceases to be a director for any
other reason.
On January 2, 1998, each non-employee director received 327 restricted
shares of PG&E Corporation common stock. Directors who were granted stock
options received options to purchase 1,312 shares of PG&E Corporation common
stock for each $5,000 increment of equity value (subject to the aggregate
$20,000 limit) at an exercise
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price of $30.50 per share, and directors who were granted common stock
equivalents received 163 common stock equivalent units for each $5,000 increment
of equity value (subject to the aggregate $20,000 limit).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Katherine Quadros is a partner in the law firm of Quadros & Johnson. Ms.
Quadros is the sister of E. James Macias, Senior Vice President and General
Manager of the Generation, Transmission, and Supply Business Unit in Pacific Gas
and Electric Company. Quadros & Johnson was paid approximately $540,000 by
Pacific Gas and Electric Company during 1998 in connection with providing
certain legal services to that entity in the normal course of business. Such
services are expected to continue to be provided to Pacific Gas and Electric
Company in the future.
BOARD OF DIRECTORS RETIREMENT POLICY
It is the policy of the Boards of Directors of PG&E Corporation and Pacific
Gas and Electric Company that a person may not be designated as a candidate for
election or re-election as a director after he or she has reached the age of 70.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of PG&E Corporation
common stock beneficially owned (as defined in the rules of the Securities and
Exchange Commission) as of January 31, 1999, by the respective directors of PG&E
Corporation and Pacific Gas and Electric Company, the nominees for director, the
current and former executive officers of PG&E Corporation and Pacific Gas and
Electric Company named in the Summary Compensation Table on page 36, and all
directors and executive officers of PG&E Corporation and Pacific Gas and
Electric Company as a group. The number of shares shown for each such person,
and for the directors, nominees for director, and executive officers as a group,
constituted less than 1 percent of the outstanding shares of PG&E Corporation
common stock. As of January 31, 1999, no director, nominee for director, or
executive officer owned shares of any class of Pacific Gas and Electric Company
securities. The table also sets forth common stock equivalents credited to the
accounts of directors and executive officers under PG&E Corporation deferred
compensation and equity plans.
<TABLE>
<CAPTION>
(A) (B) (C)
BENEFICIAL COMMON STOCK
NAME STOCK OWNERSHIP(1)(2) EQUIVALENTS TOTAL
<S> <C> <C> <C>
Richard A. Clarke(3) 129,359 3,995 133,354
Harry M. Conger(3) 7,158 1,327 8,485
David A. Coulter(3) 2,838 3,788 6,626
C. Lee Cox(3) 6,307 1,354 7,661
William S. Davila(3) 9,649 7,561 17,210
Robert D. Glynn, Jr.(3) 112,704 49,123 161,827
David M. Lawrence, MD(3) 6,513 2,075 8,588
Richard B. Madden(3) 4,476 14,263 18,739
Mary S. Metz(3) 5,218 170 5,388
Rebecca Q. Morgan(3) 6,870 3,405 10,275
Carl E. Reichardt(3) 3,476 11,314 14,790
John C. Sawhill(3) 26,568 6,406 32,974
Gordon R. Smith(4) 59,234 3,418 62,652
Barry Lawson Williams(3) 2,998 4,175 7,173
Scott W. Gebhardt(5) 73,001 0 73,001
Michael E. Rescoe(5) 3,700 1,794 5,494
Bruce R. Worthington(5) 55,249 5,660 60,909
Joseph P. Kearney(6) 359,900 0 359,900
Gregory M. Rueger(7) 41,558 0 41,558
James K. Randolph(7) 28,500 125 28,625
E. James Macias(7) 20,148 702 20,850
Roger J. Peters(7) 19,201 0 19,201
All PG&E Corporation directors and
executive officers as a group (22 persons) 580,524 141,191 721,715
All Pacific Gas and Electric Company directors and
executive officers as a group (20 persons) 504,580 113,396 617,976
</TABLE>
(1) Includes any shares held in the name of the spouse, minor children, or other
relatives sharing the home of the director or executive officer and, in the
case of executive officers, includes shares of PG&E Corporation common stock
held in the defined contribution retirement plans maintained by PG&E
Corporation, Pacific Gas and Electric Company, and their subsidiaries.
Except as otherwise indicated below, the directors, nominees for director,
and executive officers have sole voting and investment power over the shares
shown. Voting power includes the power to direct the voting of the shares
held, and investment power includes the power to direct the disposition of
the shares held.
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Also includes the following shares of PG&E Corporation common stock in which
the beneficial owners share voting and investment power: Mr. Coulter 1,715
shares, Mr. Cox 4,927 shares, Mr. Davila 200 shares, Mr. Madden 4,476
shares, Dr. Metz 2,991 shares, Mr. Smith 3,884 shares, Mr. Peters 2,639
shares, all PG&E Corporation directors and executive officers as a group
18,194 shares, and all Pacific Gas and Electric Company directors and
executive officers as a group 20,834 shares.
(2) Includes shares of PG&E Corporation common stock which the directors and
executive officers have the right to acquire within 60 days of January 31,
1999, through the exercise of vested stock options granted under the PG&E
Corporation Stock Option Plan, as follows: Mr. Clarke 125,000 shares, Mr.
Glynn 95,500 shares, Mr. Smith 51,835 shares, Mr. Gebhardt 49,501 shares,
Mr. Worthington 40,835 shares, Mr. Kearney (deceased) 359,900 shares, Mr.
Rueger 36,501 shares, Mr. Randolph 28,500 shares, Mr. Macias 18,501 shares,
Mr. Peters 14,500 shares, all PG&E Corporation directors and executive
officers as a group 410,673 shares, and all Pacific Gas and Electric Company
directors and executive officers as a group 377,837 shares. The directors
and executive officers have neither voting power nor investment power with
respect to shares shown unless and until such shares are purchased through
the exercise of the options, pursuant to the terms of the Stock Option Plan.
(3) Mr. Clarke, Mr. Conger, Mr. Coulter, Mr. Cox, Mr. Davila, Mr. Glynn, Dr.
Lawrence, Mr. Madden, Dr. Metz, Mrs. Morgan, Mr. Reichardt, Dr. Sawhill, and
Mr. Williams are directors of both PG&E Corporation and Pacific Gas and
Electric Company.
(4) Mr. Smith is a director and an executive officer of Pacific Gas and Electric
Company, and also is an executive officer of PG&E Corporation. He is named
in the Summary Compensation Table on page 36.
(5) Mr. Gebhardt, Mr. Rescoe, and Mr. Worthington are executive officers of PG&E
Corporation named in the Summary Compensation Table on page 36.
(6) Mr. Kearney was an executive officer of PG&E Corporation until his death on
October 3, 1998, and is named in the Summary Compensation Table on page 36.
The information set forth in the table for Mr. Kearney includes shares of
PG&E Corporation common stock and common stock equivalents beneficially
owned by Mr. Kearney's estate.
(7) Mr. Rueger, Mr. Randolph, Mr. Macias, and Mr. Peters are executive officers
of Pacific Gas and Electric Company named in the Summary Compensation Table
on page 36.
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Item No. 2:
Ratification of Appointment of Independent Public Accountants
On the recommendation of the Audit Committee of PG&E Corporation, the Boards
of Directors of PG&E Corporation and Pacific Gas and Electric Company have
selected Deloitte & Touche as the independent public accountants to examine the
financial statements of PG&E Corporation, Pacific Gas and Electric Company, and
their respective subsidiaries for the year 1999. Deloitte & Touche is a major
national accounting firm with substantial expertise in the energy and utility
businesses. The firm of Arthur Andersen LLP was employed as independent public
accountants from 1981 until the selection of Deloitte & Touche. During that
period, good relations were maintained and there were no disagreements on
accounting principles or practices, financial statement disclosure, or audit
scope or procedures.
One or more representatives of Deloitte & Touche and of Arthur Andersen LLP
will be present at the annual meetings, and will have the opportunity to respond
to appropriate questions.
The affirmative vote of a majority of the shares represented and voting on
the proposal is required to ratify the appointment of the independent public
accountants and the affirmative votes must constitute a majority of the required
quorum. Abstentions will have the same effect as a vote against the proposal.
Unless indicated to the contrary, properly executed proxies received by PG&E
Corporation or Pacific Gas and Electric Company prior to or at the annual
meetings will be voted for this proposal.
This appointment is not required to be submitted to a vote of the
shareholders. If the shareholders should not ratify the appointment, the PG&E
Corporation Audit Committee will investigate the reasons for rejection by the
shareholders and each Board of Directors will reconsider the appointment.
THE BOARDS OF DIRECTORS OF PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY
RECOMMEND A VOTE FOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE &
TOUCHE.
- --------------------------------------------------------------------------------
IF YOU DO NOT HOLD ANY SHARES OF PG&E CORPORATION COMMON STOCK, YOU ARE NOT
ENTITLED TO VOTE ON THE FOLLOWING MANAGEMENT PROPOSAL.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
Item No. 3:
Management Proposal
TO BE VOTED ON BY PG&E CORPORATION SHAREHOLDERS ONLY
The following proposal has been submitted by PG&E Corporation's management
for action at the Corporation's annual meeting. To be approved, this proposal
must receive the affirmative vote of a majority of the PG&E Corporation shares
represented and voting on the proposal and the affirmative votes must constitute
at least a majority of the required quorum. Abstentions will be counted in the
number of shares represented and voting, and will have the same effect as a vote
against the proposal. Broker non-votes with respect to the proposal, if any,
will be counted for purposes of determining the presence or absence of a quorum,
but will not be counted in the number of shares represented and voting on the
proposal. Properly executed proxies received by PG&E Corporation prior to or at
the annual meeting will be voted "FOR" for the proposal, unless PG&E Corporation
shareholders specify otherwise in their proxies.
ITEM NO. 3: MANAGEMENT PROPOSAL REGARDING INCREASE IN SHARES AVAILABLE TO BE
ISSUED UNDER THE LONG-TERM INCENTIVE PROGRAM
The PG&E Corporation Board of Directors has unanimously approved, and
recommends to the shareholders for approval, an increase in the number of shares
of PG&E Corporation common stock available to be issued under the PG&E
Corporation Long-Term Incentive Program (the "LTIP"). There are currently
23,389,230 shares of PG&E Corporation common stock reserved for issuance under
the LTIP. As of February 22, 1999, approximately 1.2 million shares of the
Corporation's common stock already had been issued pursuant to stock options
granted under the LTIP and approximately 17.8 million shares were subject to
outstanding awards under the LTIP, leaving approximately 4.4 million shares
available to be issued pursuant to future awards under the LTIP. If the
shareholders approve the proposed increase, an additional 11 million shares
would be reserved for use under the LTIP, bringing the maximum number of shares
available to be issued under the Plan to 34,389,230.
PURPOSE
The LTIP is designed to advance the interests of the Corporation and its
shareholders by providing officers, key management employees, and other eligible
participants with financial incentives tied directly to the Corporation's
long-term business objectives. The LTIP encompasses and supplements three plans:
the Stock Option Plan, the Performance Unit Plan, and the Non-Employee Director
Stock Incentive Plan, each of which is described below. In addition, other types
of incentive awards may be granted to eligible participants in accordance with
such terms as may be adopted by the Committee.
The Nominating and Compensation Committee (the "Committee") of the PG&E
Corporation Board of Directors, a committee composed entirely of outside
directors, recommended that the Board of Directors approve the proposed increase
in the number of shares available to be issued under the LTIP.
TYPES OF INCENTIVE AWARDS
The LTIP contains a number of optional forms of incentive awards which may
be used at the sole discretion of the Committee. Incentive awards under the LTIP
may take the form of stock options, stock appreciation rights ("SARs"), dividend
equivalents, performance units, restricted stock, common stock equivalents, or
other stock-based awards. The stock options may be incentive stock options
("ISOs") intended to qualify for special tax treatment or non-qualified stock
options ("NQSOs").
At the present time, PG&E Corporation uses the LTIP to grant stock options
and other stock-based awards to eligible employees, to award performance units
to eligible employees, and to grant options, restricted stock, and common stock
equivalents to eligible non-employee directors pursuant to the formula
provisions of the Non-Employee Director Stock Incentive Plan component of the
LTIP.
The type of incentive award to be granted, as well as the terms and
conditions of the award, is determined by the Committee at the time of grant,
except that, as described below, non-employee directors are not eligible to
receive any form of incentive award under the LTIP other than pursuant to the
formula provisions of the Non-Employee Director Stock Incentive Plan. (See
"Non-Employee Director Stock Incentive Plan" below.)
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<PAGE>
ELIGIBILITY
All officers of PG&E Corporation are eligible to participate in the LTIP.
Also eligible to participate, if so identified by the Committee (or by the Chief
Executive Officer of PG&E Corporation, to the extent authorized by the LTIP),
are officers of wholly owned subsidiaries of PG&E Corporation, other key
management employees of PG&E Corporation or any wholly owned subsidiary of the
Corporation, other employees or consultants of PG&E Corporation or any
subsidiary or affiliate of the Corporation, and other persons whose
participation in the LTIP is deemed by the Committee to be in the best interests
of the Corporation. As of December 31, 1998, there were 16 current or former
officers of PG&E Corporation, 115 current or former officers of PG&E Corporation
subsidiaries, 695 current or former key management employees of PG&E Corporation
and its subsidiaries, and no other persons participating in the LTIP.
Non-employee directors of PG&E Corporation are eligible to receive grants of
incentive awards in accordance with, and subject to, the terms and conditions of
the Non-Employee Director Stock Incentive Plan component of the LTIP.
Non-employee directors are not eligible to receive any other incentive award
under the LTIP. There currently are 12 non-employee directors of PG&E
Corporation, all of whom are eligible to receive incentive awards under the
formula provisions of the Non-Employee Director Stock Incentive Plan.
ADMINISTRATION OF THE LTIP
Except with respect to incentive awards granted to non-employee directors,
the Committee determines the eligible participants who will be granted incentive
awards, determines the amount and type of award, determines the terms and
conditions of awards, construes and interprets the LTIP, and makes all other
determinations with respect to the LTIP, to the extent permitted by applicable
law and subject to certain restrictions specified in the LTIP. The Chief
Executive Officer of PG&E Corporation has authority to grant incentive awards in
conformance with the guidelines approved by the Committee to eligible
participants who are neither officers nor directors of the Corporation.
EFFECTIVE DATE AND DURATION OF THE LTIP
The LTIP became effective as of January 1, 1992, and will terminate on
December 31, 2005, unless terminated sooner according to the terms of the LTIP.
SHARES SUBJECT TO THE LTIP
If the shareholders approve the proposed increase in shares, the LTIP would
permit a maximum of 34,389,230 shares of PG&E Corporation common stock for use
under the LTIP. Shares of PG&E Corporation common stock covered by previously
granted incentive awards may be reused or added back to the LTIP under certain
circumstances set forth in the LTIP and to the extent permitted by applicable
law.
STOCK OPTION PLAN
The Committee may grant ISOs, NQSOs, tandem SARs, and tandem dividend
equivalents to eligible participants (see "Eligibility" above), subject to the
terms and conditions of the Stock Option Plan adopted by the Committee.
STOCK OPTIONS. Stock options allow the optionee to buy a certain number of
shares of PG&E Corporation common stock at an exercise price equal to the market
price at the time the option is granted. The option may not be exercised until
the right to do so has vested under a schedule approved by the Committee.
Although vesting schedules may vary, the vesting schedule currently used by the
Committee generally provides that one-third of the options may be exercised on
or after the second anniversary of the date of grant, two-thirds on or after the
third anniversary, and 100 percent on or after the fourth anniversary. Options
which are granted in lieu of bonus generally are vested immediately, although
the options may not be exercised for at least one year after the date of grant.
TANDEM SARS. At the discretion of the Committee, options may be granted with
or without tandem SARs which permit an optionee to surrender an option or a
portion thereof in exchange for a cash payment equal to the difference between
the current market value of PG&E Corporation common stock and the exercise
price. A tandem SAR is subject to the same terms and conditions as the related
option, except that it may be exercised only when the market value exceeds the
exercise price. Certain restrictions also exist with respect to the payment of
the dividend equivalent account to the optionee (see "Tandem Dividend
Equivalents" below). In addition, SARs held
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<PAGE>
by executive officers of PG&E Corporation and other participants who are subject
to Section 16 of the Securities Exchange Act of 1934 may be exercised only
during certain quarterly window periods. No SARs have been granted since 1991.
TANDEM DIVIDEND EQUIVALENTS. Options may be granted with or without tandem
dividend equivalents. When an option is granted with tandem dividend
equivalents, a dividend equivalent account is established for the optionee. On
each dividend record date for PG&E Corporation common stock, the optionee's
account is credited with an amount equal to the dividend on PG&E Corporation
common stock subject to the unexercised portion of the option. Funds in the
account are accessible only when (1) the option or related tandem SAR is
exercised, and (2) if an SAR is exercised, the market value of PG&E Corporation
common stock has increased by an average of at least 5 percent per year for the
first five years after the grant or, in the case of options held for longer than
five years, such market value has increased by at least 25 percent. In June
1997, the Committee determined to discontinue granting tandem dividend
equivalents with options and no option grants with dividend equivalents have
been made since that time.
PAYMENT FOR SHARES UPON EXERCISE OF STOCK OPTIONS. At the time an option is
exercised, shares of PG&E Corporation common stock may be purchased using (1)
cash (including any dividend equivalent account funds), (2) shares of PG&E
Corporation common stock owned by the optionee for at least one year, (3) a
"cashless exercise" procedure (whereby a broker sells the shares or holds them
as collateral for a margin loan, and delivers the option sale or loan proceeds
to the optionee), or (4) any combination of the foregoing or any other method of
payment which the Committee may allow. The Corporation will not make loans to
optionees for the purpose of exercising options.
TERM OF OPTIONS AND TANDEM SARS. Although the Committee has the discretion
to vary the term of an option and any related tandem SAR, in general, the term
of each ISO and related tandem SAR is 10 years and the term of each NQSO and
related tandem SAR is 10 years and one day, subject to earlier termination, as
described below.
TERMINATION OF EMPLOYMENT OR RELATIONSHIP WITH THE CORPORATION. Upon
termination of the optionee's employment or relationship with the Corporation
without cause, (1) any unexercised options shall be canceled and terminated
immediately, except that any unexercised options which are vested may be
exercised during the balance of their term or within 30 days of termination,
whichever is shorter, and (2) the optionee's dividend equivalent account (if
any) shall not be credited with any dividends paid after the date of
termination. However, if an optionee is covered by the PG&E Corporation Officer
Severance Policy, unvested options will continue to vest after termination of
employment for a certain time period and all vested options will be exercisable
for a certain time period after termination of employment. If an optionee is
terminated for cause, any unexercised options will be terminated immediately. If
an optionee's employment is terminated by reason of retirement, death,
disability, or divestiture or change in control of a subsidiary of PG&E
Corporation, or if an optionee's employment is terminated without cause within
one year after a change in control of PG&E Corporation, (1) special rules allow
the optionee to exercise all vested and unvested options within certain time
periods after termination, and (2) the optionee's dividend equivalent account
(if any) shall continue to be credited with dividends on unexercised options as
long as those options remain exercisable. For more information, see "Termination
of Employment and Change in Control Provisions" on page 41.
LIMITATION ON OPTIONS AND SARS AWARDED TO ANY OPTIONEE. The LTIP provides
that, during any calendar year, an eligible participant may be granted options
and SARs representing no more than 2 percent of the total number of shares
reserved for use under the LTIP.
PERFORMANCE UNIT PLAN
The Committee may grant performance units to certain officers of PG&E
Corporation and such other employees of PG&E Corporation, other companies,
affiliates, subsidiaries, or associations as may be designated by the Committee,
subject to the terms and conditions of the Performance Unit Plan adopted by the
Committee. The number of units granted to a recipient is determined by the
Committee based upon recommendations made by the Chief Executive Officer of PG&E
Corporation. The number of units granted is based on the Corporation's financial
success, its future business plans, relevant compensation, general economic
conditions, and other appropriate factors.
VESTING. The performance units vest one-third in each of the three years
following the year of grant. At the time of the annual grant of units, the
Committee establishes performance targets to be met within the vesting
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<PAGE>
period as a condition of earning the units. Performance targets may be based
entirely on corporate goals, entirely on business unit goals, or partially on
corporate goals and partially on business unit goals. Performance targets may be
adjusted during the vesting period, at the Committee's sole discretion, to
reflect extraordinary events beyond management's control.
For example, the Committee has approved the following performance target for
the 1999 performance unit grants: to achieve a three-year annual total
shareholder return that equals at least the median three-year annual total
shareholder return of the 50 largest energy utilities nationwide. To the extent
that this performance target is met, the recipient would receive 100 percent of
the vested units; performance below the target results in a reduction or
elimination entirely of the number of units paid to the recipient; and
performance above the target can result in an increase up to 200 percent. The
value of a unit at payment is equal to the average market price of PG&E
Corporation common stock for the 30 calendar day period prior to the end of the
year in which the unit qualifies for payment.
DIVIDEND EQUIVALENTS. Each time a cash dividend is declared on PG&E
Corporation common stock, an amount equal to the cash dividend per share
multiplied by the number of outstanding but unearned units held by the recipient
of a performance unit will be accrued on behalf of the recipient. As soon as
practicable following the end of each year, recipients will receive a cash
payment of the dividends accrued for the year, modified by performance for that
year as measured against the applicable performance target.
TERMINATION OF EMPLOYMENT OR RELATIONSHIP WITH THE CORPORATION. If the
employment of a recipient of performance units is terminated by the Corporation
without cause, unvested awards will be forfeited. However, if the recipient is
covered by the PG&E Corporation Officer Severance Policy, awards under the
Performance Unit Plan will continue to vest and be payable during a certain
period of time after termination of employment. Any unvested awards remaining at
the end of such period will be forfeited. If a recipient's employment is
terminated by reason of retirement, death, or disability, awards will continue
to be payable, subject to modification based upon performance in the year during
which employment terminated. For more information, see "Termination of
Employment and Change in Control Provisions" on page 41.
NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
On the first business day of each calendar year during the term of the LTIP,
each PG&E Corporation director who is not an employee of the Corporation
automatically receives incentive awards with an aggregate fair market value (as
determined in accordance with the Plan) of $30,000. The incentive awards are
composed of restricted stock having an aggregate fair market value as of the
first business day of each calendar year of $10,000, and a combination of stock
options and common stock equivalents having an aggregate value (as is determined
in accordance with the Plan) of $20,000 as of the first business day of the
calendar year.
RESTRICTED STOCK. Shares of restricted stock may be forfeited to PG&E
Corporation to the extent that they are not vested. Such shares generally will
vest at the rate of 20 percent on each anniversary of the grant date.
Non-employee directors will have all of the rights of a PG&E Corporation
shareholder with respect to all outstanding shares of restricted stock,
including the right to vote and receive dividends, whether or not such shares
are vested. Upon termination of service as a PG&E Corporation director, any
unvested shares of restricted stock will be forfeited. In the event of a
termination by reason of mandatory retirement at the age specified in the PG&E
Corporation Board of Directors retirement policy, by reason of death or
disability, or by reason of a change in control, all shares of restricted stock
will become fully vested.
STOCK OPTIONS. The number of stock options to purchase shares of PG&E
Corporation common stock is determined by dividing the equity value increment
(subject to an aggregate $20,000 limit) by the per-option value on the first
business day of the year. (The per-option value is based on the Black-Scholes
stock option valuation method, discounting the resulting value by 20 percent.)
Stock options awarded under the Plan to non-employee directors become
exercisable as to one-third of the options on or after the second anniversary of
the date of grant, as to two-thirds of the options on or after the third
anniversary, and as to 100 percent on or after the fourth anniversary. The
option exercise price is equal to the fair market value of PG&E Corporation
common stock on the date of grant. Dividend equivalents are not granted in
connection with the options. The term of each option is 10 years and one day
from the date of grant. Upon termination of a director's service on the Board by
reason of death, disability, mandatory retirement at age 70, or retirement after
five years of continuous service on the Board, all options will become fully
exercisable. Options will be exercisable for the longer of the remainder of the
option term or five years in the case of termination by reason of mandatory
retirement, or one year in the case of termination by reason of death or
disability. If termination is for any other reason, unvested options shall
terminate
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and vested options shall remain exercisable for three months after termination
or the remainder of the option term, whichever is shorter.
COMMON STOCK EQUIVALENTS. Each common stock equivalent unit awarded under
the Plan to non-employee directors is equal to one share of PG&E Corporation
common stock. The number of common stock equivalents is determined by dividing
the equity value increment (subject to the aggregate $20,000 limit) by the
closing price of PG&E Corporation common stock on the first business day of the
year. On each dividend payment date, additional common stock equivalents are
credited to a director's account determined by dividing the aggregate amount of
the dividends (the dividend multiplied by the number of common stock equivalent
units on the dividend record date) by the closing price of PG&E Corporation
common stock on the dividend payment date. Common stock equivalents are
distributed to the director in the form of an equal number of shares of PG&E
Corporation common stock upon the director's retirement from the Board after
five years of continuous service or upon a director's mandatory retirement at
age 70. Common stock equivalents also become payable immediately in the event of
the director's death or disability. If a director's service on the Board
terminates for any other reason, all common stock equivalents are forfeited on
the date of termination.
OTHER INCENTIVE AWARDS
The Committee also may grant other types of incentive awards, including
stand-alone SARs or stand-alone dividend equivalents (SARs or dividend
equivalents granted without options), stock grants, and limited SARs (SARs which
are exercisable only in the event of a change in control). In October 1997, the
Committee approved the Executive Stock Ownership Program under which certain
officers are subject to stock ownership guidelines and, if they meet or exceed
those guidelines, are entitled to receive a type of incentive award under the
LTIP called a Special Incentive Stock Ownership Premium ("SISOP") to the extent
the eligible officers reach certain designated stock ownership target levels.
(For a further discussion of the Executive Stock Ownership Program, see
"Nominating and Compensation Committee Report on Compensation" on pages 29-33.)
SISOPs are credited to the officer's account under the PG&E Corporation Deferred
Compensation Plan. SISOPs, once vested in accordance with the Executive Stock
Ownership Program, will be distributed to the officer in accordance with the
Deferred Compensation Plan in the form of an equal number of shares of PG&E
Corporation common stock. When SISOPs are awarded, the shares of PG&E
Corporation common stock subject to distribution upon settlement of the SISOPs
are deducted from the pool of shares reserved for issuance under the LTIP. If
SISOPs are forfeited, the shares previously subject to the SISOPs will become
available again under the LTIP.
TAX WITHHOLDING
To the extent that a recipient of an incentive award incurs any tax
liability in connection with the exercise or receipt of an incentive award, the
recipient's withholding obligation may be satisfied through payroll deductions
or a direct cash payment to PG&E Corporation. In addition, the Committee may
allow the recipient to satisfy all or part of such withholding obligation by
allowing PG&E Corporation to withhold a portion of the shares to be issued to
the recipient.
REPLACEMENT OF GRANTS
The Committee may allow a recipient of an incentive award to surrender or
exchange an unexercised option or award for another award of the same or a
different type, as long as the exercise price or purchase price of the new
option or award is not lower than the exercise price or purchase price of the
original option or award.
DEFERRAL OF PAYMENTS
The Committee may allow the deferral of any cash payments which may become
due under the LTIP.
ADJUSTMENT UPON CHANGES IN NUMBER OR VALUE OF SHARES OF COMMON STOCK
In order to prevent enlargement or dilution of rights resulting from stock
dividends, stock splits, recapitalizations, mergers, consolidations, or other
events that materially increase or decrease the number or value of shares of
PG&E Corporation common stock, the Committee may make such adjustments as it
deems appropriate.
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NON-TRANSFERABILITY OF INCENTIVE AWARDS
Incentive awards shall not be transferable otherwise than by will or by the
laws of descent and distribution, and generally may be exercised during the
lifetime of the recipient only by the recipient.
CHANGE IN CONTROL
Upon the occurrence of a change in control (as defined in the LTIP), (1) any
time periods relating to the exercise or realization of any incentive award will
be accelerated so that such award may be exercised or realized in full
immediately upon the change in control, (2) all shares of restricted stock will
immediately cease to be forfeitable, and (3) all conditions relating to the
realization of any stock-based award will immediately terminate. For more
information, see "Termination of Employment and Change in Control Provisions" on
page 41.
AMENDMENT AND TERMINATION OF THE LTIP AND INCENTIVE AWARDS
The PG&E Corporation Board of Directors or the Committee may at any time
suspend, terminate, modify, or amend the LTIP in any respect. However,
shareholder approval of amendments shall be obtained in the manner and to the
degree required by applicable laws or regulations. The Committee also may amend
or modify the terms and conditions of any incentive award, or may cancel or
annul any grant of an award. No suspension, termination, modification, or
amendment of the LTIP, and no amendment, modification, cancellation, or
annulment of any incentive award, may adversely affect a recipient's rights
under the LTIP or such incentive award without the recipient's consent. The
Committee may not reduce the exercise price or purchase price of any outstanding
option or incentive award below the original exercise price or purchase price.
FUNDING
Inasmuch as the LTIP is designed to encourage financial performance and to
improve the value of shareholders' investment in PG&E Corporation, the costs of
the LTIP will be funded from corporate earnings.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the federal income tax consequences
of stock options, tandem SARs, tandem dividend equivalents, performance units,
common stock equivalents, and restricted stock granted under the LTIP under
present tax laws.
NON-QUALIFIED STOCK OPTIONS. There will be no federal income tax
consequences to either the optionee or PG&E Corporation upon the grant of a
NQSO. Upon the exercise of a NQSO, the optionee generally will have taxable
ordinary income equal to the difference between the current market value of the
shares and the option exercise price, and the Corporation will be entitled to a
federal income tax deduction of that amount.
INCENTIVE STOCK OPTIONS. There will be no federal income tax consequences to
either the optionee or PG&E Corporation upon the grant or exercise of an ISO.
However, unless the holding period requirements discussed below are violated,
upon exercise of an ISO, an optionee will be deemed to have a tax preference
item (equal to the difference between the current market value of the shares on
the date of exercise and the option exercise price) that may result in
alternative minimum tax liability. If an optionee exercises an ISO and does not
dispose of the shares within two years from the date of grant or within one year
from the date the shares are transferred to the optionee, any gain realized upon
disposition will be taxable to the employee as long-term capital gain, and the
Corporation will not be entitled to any deduction. If an optionee violates the
holding period requirements, the optionee will realize ordinary income in the
year of disposition, and the Corporation will be entitled to a corresponding
deduction in an amount equal to the excess of (1) the lesser of (a) the amount
realized on the sale or exchange or (b) the fair market value of the shares on
the date of exercise, over (2) the option exercise price.
An ISO which is exercised more than three months after the optionee
terminates employment with the Corporation will be treated as a NQSO for federal
income tax purposes.
TANDEM STOCK APPRECIATION RIGHTS. There will be no federal income tax
consequences to either the optionee or PG&E Corporation upon the grant of a
tandem SAR or during the period that the unexercised right remains outstanding.
Upon the exercise of a tandem SAR, the amount received will be taxable to the
optionee as ordinary income, and the Corporation will be entitled to a
corresponding deduction.
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TANDEM DIVIDEND EQUIVALENTS. There will be no federal income tax
consequences to either the optionee or PG&E Corporation upon the establishment
of a dividend equivalent account or during the period that funds accrue in the
account. Amounts paid from the account will be taxable to the optionee as
ordinary income, and the Corporation will be entitled to a corresponding
deduction.
PERFORMANCE UNITS. There will be no federal income tax consequences to
either the recipient or PG&E Corporation upon the grant of performance units.
Dividend equivalents paid on performance units will be taxable to the recipient
as ordinary income, and the Corporation will be entitled to a corresponding
deduction. Upon the payment of performance units, the amount received will be
taxable to the recipient as ordinary income, and the Corporation will be
entitled to a corresponding deduction.
COMMON STOCK EQUIVALENTS. There will be no federal income tax consequences
to either the recipient or PG&E Corporation upon the grant of common stock
equivalents. The recipient will not recognize any income when additional common
stock equivalents are credited to the recipient's account upon conversion of
dividend equivalents. Upon distribution of common stock equivalents to the
recipient, the recipient will recognize ordinary income equal to the value of
the cash or securities distributed, and the Corporation will be entitled to a
corresponding deduction.
RESTRICTED STOCK. Upon the grant of restricted stock subject to a vesting
schedule, the recipient will be deemed to receive taxable ordinary income equal
to the fair market value of the shares at the time they vest. Upon the sale or
disposition of the shares, the recipient will realize capital gain or loss in an
amount equal to the difference between the fair market value of the shares on
each vesting date and the sale or disposition price.
Section 83(b) of the Internal Revenue Code permits a recipient to elect,
within 30 days after the grant of any shares of restricted stock subject to a
vesting schedule, to be taxed at the time of grant at ordinary income rates on
the fair market value of all shares received, based on the fair market value of
the shares on the date of grant. If the recipient makes a Section 83(b)
election, any later appreciation in the value of the shares will be taxable as
capital gain instead of ordinary income when they are sold or transferred.
At the time a recipient elects to be taxed on the grant of restricted stock,
the Corporation will be entitled to a federal income tax deduction in an amount
equal to the ordinary income recognized by the recipient.
BENEFITS UNDER THE LTIP
Subject to certain limitations, the Committee has full discretion to
determine the number, type, and value of incentive awards to be granted to
eligible participants under the LTIP. Thus, the benefits and amounts that will
be received by or allocated to the officers, directors, and employees of PG&E
Corporation are not determinable. Information regarding incentive awards granted
to the named executive officers during the past year is presented in "Option/SAR
Grants in 1998" on page 38 and "Long-Term Incentive Plan--Awards in 1998" on
page 40. The amount of incentive awards to be received by each non-employee
director is determined under the formula provisions of the Non-Employee Director
Stock Incentive Plan, as discussed above.
The Board of Directors of PG&E Corporation unanimously recommends that
shareholders vote FOR this proposal.
- --------------------------------------------------------------------------------
IF YOU DO NOT HOLD ANY SHARES OF PG&E CORPORATION COMMON STOCK, YOU ARE NOT
ENTITLED TO VOTE ON THE FOLLOWING FIVE SHAREHOLDER PROPOSALS.
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
Item Nos. 4-8:
Shareholder Proposals
TO BE VOTED ON BY PG&E CORPORATION SHAREHOLDERS ONLY
The following proposals have been submitted by shareholders for action at
the PG&E Corporation annual meeting. To be approved, each properly presented
proposal must receive the affirmative vote of a majority of the PG&E Corporation
shares represented and voting on the proposal and the affirmative votes must
constitute at least a majority of the required quorum. Abstentions will be
counted in the number of shares represented and voting, and will have the same
effect as a vote against the proposal. Broker non-votes with respect to a
particular proposal will be counted for purposes of determining the presence or
absence of a quorum, but will not be counted in the number of shares represented
and voting on the proposal. Properly executed proxies received by PG&E
Corporation prior to or at the annual meeting will be voted "AGAINST" these
proposals, unless PG&E Corporation shareholders specify otherwise in their
proxies.
ITEM NO. 4: SHAREHOLDER PROPOSAL REGARDING INDEPENDENT DIRECTORS
Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California
90278, on behalf of Ray T. Chevedden and Veronica G. Chevedden, Trustees of the
Ray T. Chevedden and Veronica G. Chevedden Family Trust, holder of 3,000 shares
of PG&E Corporation common stock, has given notice of his intention to present
the following proposal for action at the PG&E Corporation annual meeting:
"APPOINT INDEPENDENT DIRECTORS TO ALL KEY BOARD COMMITTEES
(Recommended requirement and shareholder proposal)
RESOLVED: Appoint Independent Directors for all Key Board Committees to
enhance management oversight. Key board committees include:
- Compensation
- Nomination &
- Audit Committees
These important oversight-committees require heightened independence,
free of Directors with significant money and management ties to PG&E.
The 1998 PG&E proxy statement listed the following Directors who had
profited directly or indirectly from their financial and management ties to
PG&E in 1997:
<TABLE>
<S> <C> <C>
1. Dr. David Lawrence CEO of Kaiser Health Plan
- PG&E paid $23-Million to Kaiser - up 11% from $21 million in 1996.
2. David Coulter CEO of BankAmerica Corp. (until fired Oct. 1998)
- PG&E paid $2.5 million to Bank of America (to manage $100s-of-millions of
credit, banking and loan services) - up 300% from $.6 million in 1996.
3. Lee Cox Vice Chairman of AirTouch Communications
- PG&E paid $1.5 Million to AirTouch - up 36% from $1.1 million in 1996.
4. Rebecca Morgan CEO of JVSV Network
- PG&E paid $100,000 to JVSV.
5. Richard Clark
- Former PG&E CEO - tends to protect entrenched policies.
</TABLE>
The $10s-of millions PG&E paid to the employers of PG&E Directors again
in 1998 is highlighted in the "CERTAIN RELATIONSHIP AND RELATED
TRANSACTIONS" heading on page __.
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During its policy of paying $10s-of millions to the employers of PG&E
directors, PG&E has substantially under-performed the S&P 500 and the Dow
Jones Utilities Index in the most recent 5-year period. The graph on page 35
shows the PG&E under-performance. Additionally, the 39% dividend cut of
2-1/2 years ago has not been restored.
A director whose employer has an annual contract of $23 million with
PG&E helps determine the pay for the PG&E CEO. This is a clear conflict of
interest and divided loyalty. It sends a message to PG&E's 20,000 employees
that divided loyalty is good for the board and, by example, good for 20,000
employees.
Additionally, the need for greater oversight is clear with the perils
and opportunities from utility deregulation. PG&E said it will be severely
handicapped under deregulation without a $28 billion customer utility tax.
PG&E sent California shareholders a report that said California would
need to raise income taxes by 38% and sales taxes by 45% (using certain
assumptions) unless the $28 billion customer utility tax was upheld.
Under the watered-down PG&E definition of independence, a compensation
committee stacked with directors whose employers each have $23 million in
annual contracts with PG&E, could "ensure independent oversight of
management."
Institutional Shareholder services (www.cda.com/iss), a leading proxy
analysis firm for institutional shareholders, said a fundamental tenet of
corporate governance is a board that is independent and therefore capable of
objective oversight of top management.
ISS supported this resolution in 1998 and also the resolutions to
"Reinstate Simple Majority Vote" and for "Cumulative Voting." These
resolutions are again presented for shareholder approval in this proxy
statement as Items 5 and 7.
APPOINT INDEPENDENT DIRECTORS TO ALL KEY BOARD COMMITTEES
VOTE YES ON ITEM NO. 4"
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
PG&E Corporation agrees that having independent directors on the Audit
Committee and the Nominating and Compensation Committee of the Board of
Directors enhances the Board's performance and oversight of management. The
corporate governance guidelines adopted by the Board require that the Audit
Committee and the Nominating and Compensation Committee each be composed
entirely of independent directors as defined in the guidelines. Independent
directors are defined in the guidelines as directors who are neither (a) current
nor former employees of, nor consultants to, PG&E Corporation or its
subsidiaries, nor (b) current nor former officers or employees of any other
corporation on whose board of directors any officer of PG&E Corporation serves
as a member. All the members of the Audit and Nominating and Compensation
Committees are independent as defined in the guidelines. Further, another
requirement of the guidelines specifies that 75 percent of the Board be composed
of directors who are neither current nor former employees of PG&E Corporation or
any of its subsidiaries.
The Board does not believe that business relationships of the type cited by
the proponent compromise the independence of the director. None of the directors
possesses a personal interest in the business transactions that would preclude
the director's ability to exercise independent judgment or faithfully fulfill
his or her fiduciary duties to PG&E Corporation's shareholders. The transactions
cited by the proponent relate to ordinary business dealings between the named
companies and PG&E Corporation, Pacific Gas and Electric Company (a subsidiary
of PG&E Corporation), and their subsidiaries. Neither the Board, any Board
committee, nor the director affiliated with the named business entity had any
involvement in deciding whether to purchase goods or services from, or provide
financial support to, the named business entity. Ordinary business transactions
necessary to conduct the business of the Corporation and its subsidiaries are
implemented by employees in the course of their employment, without direct Board
involvement. For example, the dollar amount cited by the proponent that was paid
by the Corporation and its subsidiaries to Kaiser Health Plan (the largest
provider of healthcare services in California) represents premiums paid by
employees with pre-tax earnings pursuant to the Corporation's tax-qualified
flexible benefits plan. The Corporation's employees can choose among several
healthcare providers; neither the Board, any Board committee, Dr. Lawrence, nor
Kaiser Health Plan has any influence over which health services provider an
employee chooses.
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The business relationships cited by the proponent are not required by
Securities and Exchange Commission rules to be disclosed in PG&E Corporation's
proxy statement, as these relationships do not meet the threshold for
determining which relationships are significant enough to require proxy
statement disclosure. Each of these business relationships represents less than
5 percent of the consolidated gross revenues of the Corporation and of each of
the entities for the relevant fiscal year. During 1998, no director had any
business relationships requiring disclosure in the "Certain Relationships and
Related Transactions" section of this proxy statement.
The PG&E Corporation Board of Directors believes that the composition of its
Audit Committee and its Nominating and Compensation Committee (each consisting
solely of independent directors) and the presence of a majority of independent
directors on the Board pursuant to the Board's corporate governance policies
ensure independent oversight of management.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
ITEM NO. 5: SHAREHOLDER PROPOSAL REGARDING SIMPLE MAJORITY VOTING
Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California
90278, on behalf of Ersilia N. Davis, 1488 San Pasqual Street, Pasadena,
California 91106, holder of 200 shares of PG&E Corporation common stock, has
given notice of his intention to present the following proposal for action at
the PG&E Corporation annual meeting:
"RESOLVED: REINSTATE SIMPLE MAJORITY VOTE ON ALL ISSUES SUBMITTED TO
SHAREHOLDER VOTE.
PG&E Corporation shareholders recommend the board reinstate simple majority
vote to enhance shareholder value. Delete all PG&E governing document
sections that require an overwhelming 75% shareholder vote. A 75%-vote is
called a super-majority vote.
SUPER-MAJORITY REQUIREMENTS OF ANY KIND ARE WIDELY OPPOSED.
The bi-partisan National Conference of State Legislatures urged States
to ban super-majority requirements. Major pension funds, including those
holding PG&E stock, declare that super-majority provisions are not in the
best interest of the shareholders.
Also, require that any future super-majority proposal be put to
shareholder vote--as a separate issue.
The PG&E super-majority provision means that if a majority of the
shareholders (but less than an overwhelming 75%) vote for change, management
can override the majority.
Proponents of simple majority votes said that super-majority vote
requirements may stifle bidder interest in the company and therefore
devaluate the stock. A competitive management does not need the power to
override a shareholder majority.
PG&E said in its 1998 proxy statement that it was concerned about giving
"unfair weight" to votes cast by minority shareholders. Yet under the PG&E
75% supermajority requirement, each minority vote is worth 3 majority votes.
Therefore, to be consistent with its 1998 proxy argument PG&E would restore
simple majority vote to remove the current "unfair weight" for minority
shareholders.
This resolution received 42% of the for-and-against votes at the 1998
PG&E shareholder meeting--the highest PG&E shareholder resolution vote in 50
years. It would have achieved a higher vote had the PG&E election used more
equitable election practices. PG&E election practices, although technically
legal, give the company a significant advantage to present its negative
message.
THIS RESOLUTION TOPIC RECEIVED AN OUTSTANDING 57% APPROVAL at the 1998
AlliedSignal shareholder meeting. The AlliedSignal resolution was presented
by Harold Mathis, Richmond, Texas.
This resolution is submitted to improve corporate governance at PG&E. "A
number of recent studies show that well-governed companies not only make
more money than poorly governed, but investors are likely to give them a
higher stock market value," said BUSINESS WEEK on September 15, 1997.
Higher stock value is of key importance to PG&E shareholders:
- PG&E stock has yet to match its 1993 price of $36.
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- Meanwhile the Dow Jones industrial average has almost tripled since
1993.
SAN FRANCISCO CHRONICLE April 3, 1998
- PG&E has substantially under-performed the S&P 500 and an industry
peer group in the most recent 5-year period.
Investor Responsibility Research Center
- PG&E earning drop $19 million.
- Loss on sale of Australian natural gas assets cited.
LOS ANGELES TIMES July 16, 1998
- PG&E's 3rd-quarter profit falls 18%.
LOS ANGELES TIMES Oct. 22, 1998
Institutional Shareholder services (www.cda.com/iss) supported this
resolution in 1998. ISS said supermajority votes serve to lock in provisions
that are harmful to shareholders. ISS said that super-majority may entrench
management by preventing action that may benefit shareholders.
To increase shareholder value:
REINSTATE SIMPLE MAJORITY VOTE
VOTE YES FOR ITEM NO. 5"
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
PG&E Corporation's Articles of Incorporation contain only one
"super-majority" vote requirement--the "fair price" provisions in Article Eighth
of the Articles of Incorporation. The Board believes that "super-majority"
voting in this limited application is a valuable tool for protecting
shareholders' interests.
The provision requiring a vote of 75 percent of the outstanding shares to
approve a transaction applies only when a party controlling 5 percent or more of
PG&E Corporation common stock proposes to enter into a transaction with PG&E
Corporation which would result in a merger, sale of assets, or other significant
transaction, without (a) paying the other shareholders a price which meets
certain fair price criteria, or (b) obtaining approval of a majority of the
directors of the Corporation who are not affiliated with the potential acquiror.
These provisions are intended to help ensure that the remaining shareholders are
treated fairly during these transactions and receive a fair price for their
interests in the Corporation. If the potential acquiror is willing to pay the
remaining shareholders a price which meets the fair price criteria, the
super-majority vote provision will not apply. If the potential acquiror is not
willing to pay the other shareholders a fair price, the super-majority vote
provision will create a hurdle that will empower the Board to negotiate a fairer
price for the remaining shareholders.
The Board believes the super-majority vote provision in this limited
situation can enable the Board to protect shareholder interests and negotiate
the best price possible for shareholders in these significant types of
transactions.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
ITEM NO. 6: SHAREHOLDER PROPOSAL REGARDING CORPORATE DEMOCRACY
Ms. Jane Q. Kennedy, 1109 Greenwich, San Francisco, California 94109, holder
of 705 shares of PG&E Corporation common stock, has given notice of her
intention to present the following proposal for action at the PG&E Corporation
annual meeting:
"WHEREAS it is the usual practice for annual stockholders' meeting
announcements to include a statement to the effect that if no direction is
made the proxy will be voted for the nominations made or positions held by
management.
This clouds the voting results as to votes for directors and auditors,
does not accurately reflect the desires of voting stockholders and skews the
results. In a political election it would be tantamount to counting votes of
those who do not vote as being in favor of the incumbent.
THEREFORE it is resolved that the shareholders recommend that the Board
of Directors take the necessary action to cause proxy balloting on nominees
and items contained in the notice of the annual
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meeting to be tabulated for EACH NOMINEE AND PROPOSAL as in favor, opposed,
abstain and returned unmarked. The DECISION SHALL BE DETERMINED BY THE
NUMBER OF THOSE VOTED IN FAVOR AND OPPOSED.
Unmarked ballots shall be considered only for the demonstration of a
quorum.
For each nominee and proposal, stockholders shall be advised of the
official results in the normal course of communication with stockholders."
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
The Board of Directors believes that PG&E Corporation's present voting
procedures, which follow California state law, Securities and Exchange
Commission rules, and customary practice among public corporations, permit the
full exercise of voting rights for those shareholders who are unable or
unwilling to attend the meeting in person. PG&E Corporation believes that its
voting procedures are appropriate and essential for good corporate governance.
When a shareholder returns a properly executed proxy but does not choose to
mark the proxy to indicate a vote on the proposals to be considered at the
meeting, the shareholder has given the proxyholders the authority to vote the
shares in the manner indicated by PG&E Corporation in the proxy statement and
proxy card. PG&E Corporation's proxy statement and proxy card clearly state
that, if the shareholder gives a proxy to the proxyholders without marking
voting instructions, the proxyholders will vote the shares in accordance with
the recommendations of the Board of Directors. It is common practice among
publicly held corporations that those shareholders who properly execute and
return their unmarked proxy are voting in accordance with the recommendations of
the board of directors. Additionally, federal proxy rules promulgated by the
Securities and Exchange Commission explicitly recognize and authorize this
practice.
This shareholder proposal appears to assume that many shareholders who
execute and return unmarked proxy cards do not intend to cast any vote--an
assumption that PG&E Corporation believes is incorrect. If shareholders who
submit executed but unmarked proxies do not intend that the proxyholders vote
their shares, then there would be no point in returning a signed but unmarked
proxy. By doing so, a shareholder would disenfranchise himself or herself,
unless the shareholder attended the meeting and voted in person.
The proxy statement and proxy card also state that properly executed and
returned proxies grant discretionary voting authority to the proxyholders to
vote on matters which may be presented unexpectedly at the meeting and on
certain other matters. If the proponent's proposal were approved by the
shareholders and implemented, this discretionary voting authority would be
eliminated, thereby depriving those shareholders who intended to be fully
represented by proxy at the meeting from having their shares voted with respect
to such other matters.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
ITEM NO. 7: SHAREHOLDER PROPOSAL REGARDING CUMULATIVE VOTING
Mr. Simon Levine, Trustee of the Simon Levine Living Trust, 960 Shorepoint
Court, No. 306, Alameda, California 94501, holder of 5,706 shares of PG&E
Corporation common stock, has given notice of his intention to present the
following proposal for action at the PG&E Corporation annual meeting:
"The shareholders of PG&E Corporation request the Board of Directors
take the necessary steps to amend the company's governing instruments to
adopt the following:
REINSTATE CUMULATIVE VOTING FOR THE ELECTION OF PG&E DIRECTORS.
Cumulative Voting is of the utmost importance in order to let the
shareholders have a voice in the corporation. As recently as 1990,
Cumulative Voting was required by PG&E's corporate By-laws. It allows
shareholders to concentrate all of their vote (15 votes per PG&E share) on
one director or to divide it among particular directors of their choosing.
Our participation, as owners of the Corporation, is when we vote for
Directors and proposals put forth by the Corporation or shareholders. Our
voice has DIMINISHED since the Corporation has repurchased 1.5 billion
dollars of the outstanding common stock. Traditionally stock held by the
company's pension program, Board of Directors and top executives are voted
with the Corporation. These shares enjoy a greater value since none of them
have been repurchased, while we shareholders have lost supporters.
Cumulative voting is essential in letting us, the shareholders, express
ourselves as OWNERS.
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When we are not in accord with those in whom we put our faith and trust
and we want them to know it in no uncertain terms, Cumulative Voting HELPS
emphasize our concern. When we can elect a director of our choosing or
disavow certain proposed directors of the corporation's choosing, Cumulative
Voting PROVIDES us with the necessary tools.
Cumulative voting would contribute to a more diverse board of directors
to encourage the election of at least one director to focus on the financial
impact of questionable or unethical business practices at PG&E, such as the
following:
"PG&E Investigated on charges of Dumping PCB in Streams"
State investigators are looking into allegations that PG&E illegally dumped
toxic PCB chemicals into South Bay streams and then tried to cover up its
activities. A former PG&E worker said that for 28 years he siphoned off
PCB-ladened oil from natural gas lines into three Santa Clara County creeks
under orders from his supervisors.
SAN FRANCISCO CHRONICLE AUGUST 4, 1998
"Heat is On PG&E's Rate-Hike Request"
With promised lower electricity prices barely five months old, PG&E is
already lobbying state regulators for the biggest utility rate increase in
more than 16 years. That amount would more than wipe out any gains consumers
have made from the states recent experiment in free-market electricity.
SAN FRANCISCO CHRONICLE AUGUST 31, 1998
"PG&E Risked Wildfires" "Millions to trim trees were allegedly diverted"
PG&E recklessly pocketed $77.6 million that was supposed to be spent on
trimming trees for fire prevention. PUC's consumer division recommends fines
that could top $200 million.
SAN FRANCISCO CHRONICLE SEPTEMBER 4, 1998
These are not isolated incidents, close to a dozen have been reported in the
last three years.
It is time for the shareholders to send a message to the Board, reminding
them that they have to hold management--and themselves--to a higher
standard!!
Cumulative voting is the only way to protect OUR ownership rights!
Don't let YOUR vote become worthless!
VOTE "YES" TO REINSTATE CUMULATIVE VOTING FOR THE ELECTION OF DIRECTORS."
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
PG&E Corporation believes that cumulative voting would erode shareholders'
ability to elect directors who represent the interests of the shareholders as a
whole.
Under cumulative voting, the total number of votes that each shareholder may
cast in an election for directors is determined by multiplying the number of
directors to be elected by the number of votes to which the shareholder's shares
are entitled. Each shareholder may "cumulate" his or her votes by giving them
all to one candidate, or may distribute his or her votes among as many
candidates as the shareholder sees fit. Thus, where 13 directors are to be
elected, a shareholder or group of shareholders holding less than 8 percent of
the shares voting at the meeting would be capable of electing a director. This
is true even if the holders of the remaining 92 percent of the voting shares are
opposed to the election of that candidate and cast their votes to elect 13 other
directors.
Cumulative voting would give a disproportionate and unfair weight to the
votes cast by a minority shareholder or shareholders. The elimination of
cumulative voting ensures that all directors are elected or removed only by a
majority vote of shareholders voting in the election.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
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<PAGE>
ITEM NO. 8: SHAREHOLDER PROPOSAL REGARDING COMPENSATION CONTINGENT UPON MERGER
OR ACQUISITION
Mr. Chris Rossi, P.O. Box 249, Boonville, California 95415, holder of 1,000
shares of PG&E Corporation common stock, has given notice of his intention to
present the following proposal for action at the PG&E Corporation annual
meeting:
"Resolved, That the stockholders recommend that the board of directors adopt
the following policy: "No compensation shall be paid to any director,
officer or employee of this corporation which is contingent upon the merger
or acquisition of this corporation."
In support of this proposal, Mr. Rossi has submitted the following
statement:
"Management in Corporate America is generally overpaid when there working
for the company, let alone paying them to leave the company. I would be
willing to drop my opposition to golden parachutes if the shareholders were
provided similar protection."
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
The Board of Directors believes that a strict prohibition on paying
compensation that is contingent on a change in control of PG&E Corporation would
interfere with the Board's ability to effectively manage the Corporation and
discharge its responsibility to shareholders. The Board of Directors believes
that, consistent with its duties to shareholders, the Board must retain the
flexibility to consider and adopt appropriate mechanisms to deal with the
uncertainty that a change in control situation creates.
Currently, PG&E Corporation provides for limited protection in the event of
a change in control, as discussed in the Executive Compensation section under
"Termination of Employment and Change in Control Provisions."
The Board believes that such change in control provisions help allow senior
management to stay focused on aggressively maximizing shareholder value during
change in control situations, and not be distracted by concerns about the
perceived need to remain on good terms with management of the acquiring entity.
Change in control provisions also protect the legitimate expectations of senior
management regarding the value they have stored in seniority and continuity
based programs (e.g., stock options, long-term executive awards, and
supplemental retirement plans).
In addition, change in control provisions in plans, policies, or individual
agreements are often part of a total compensation package offered to senior
executives in most public companies. In order for PG&E Corporation to maintain a
competitive compensation package to attract and retain the best qualified
personnel, the Board believes that it needs the flexibility to adopt these types
of change in control arrangements in the future if the Board determines it is
appropriate and in the best interests of shareholders to do so.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
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- --------------------------------------------------------------------------------
Executive Compensation
NOMINATING AND COMPENSATION COMMITTEE REPORT ON COMPENSATION
PG&E Corporation is an energy-based holding company headquartered in San
Francisco, California. The Corporation's businesses provide energy services
throughout North America. The Corporation's regulated utility, Pacific Gas and
Electric Company, is one of the nation's largest investor-owned gas and electric
utilities and serves 13 million people in Northern and Central California. The
Corporation's unregulated businesses provide a wide range of energy products and
services in North America: U.S. Generating Company develops, builds, operates,
owns, and manages power generation facilities to supply wholesale and industrial
customers; PG&E Gas Transmission operates approximately 9,000 miles of natural
gas pipelines, natural gas storage facilities, and natural gas processing plants
in the Pacific Northwest and Texas; PG&E Energy Trading purchases and resells
energy commodities and related financial instruments in North America, serving
PG&E Corporation's other unregulated businesses, unaffiliated utilities, and
large end-use customers; and PG&E Energy Services provides customers nationwide
with competitively priced natural gas and electricity, and services to manage
and make more efficient their energy consumption.
The Nominating and Compensation Committee of the PG&E Corporation Board of
Directors (the "Committee") is responsible for overseeing and establishing
executive compensation policies for PG&E Corporation and its subsidiaries,
including Pacific Gas and Electric Company. The Committee also oversees the PG&E
Corporation Long-Term Incentive Program and other employee benefit plans.
This report relates to the compensation paid to executive officers of PG&E
Corporation and Pacific Gas and Electric Company during the fiscal year ended
December 31, 1998. Compensation for the Chief Executive Officers of PG&E
Corporation and Pacific Gas and Electric Company is approved by their respective
Boards of Directors based on the recommendation of the Committee, which is
composed of independent non-employee directors. In establishing the 1998
compensation of the Chief Executive Officers of PG&E Corporation and Pacific Gas
and Electric Company, the respective Boards approved the recommendations of the
Committee without modification. Compensation for all other PG&E Corporation and
subsidiary officers is approved by the Committee.
The Committee established compensation programs for 1998 to meet four
objectives:
- To attract, retain, and motivate employees with the necessary mix of
skills and experience for the development of PG&E Corporation's
unregulated businesses, as well as the successful operation and expansion
of its utility business.
- To minimize short-term and long-term costs and reduce corporate exposure
to longer-term financial risk.
- To emphasize long-term incentives to further align shareholder and
officers' interests and focus employees on enhancing total return for the
Corporation's shareholders.
- To achieve maximum value for PG&E Corporation's collective workforce by
designing compensation programs that facilitate movement by employees
among the Corporation and its subsidiaries.
The Committee retains an independent consultant, Hewitt Associates, to help
evaluate PG&E Corporation's compensation policies, to provide information about
industry compensation practices and competitive pay levels, and to recommend
compensation alternatives which are consistent with PG&E Corporation's
compensation policies. Founded in 1940, Hewitt Associates is an international
firm of consultants and actuaries specializing in the design and administration
of employee compensation and benefit programs.
To meet its objective of paying compensation that is competitive with
similar companies, the Committee selected a group consisting of 26 major energy
and general industry companies (the "comparator group"). These companies were
selected by the Committee because they are comparable to PG&E Corporation in
size and because their approach to compensation emphasizes long-term incentives.
Twenty-three of the 26 energy and general industry companies in the comparator
group are included in the Standard & Poor's 500 Stock Index.
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For 1998, the Committee established the following specific compensation
targets for officers:
- A significant component of every officer's compensation should be tied
directly to PG&E Corporation's performance for shareholders.
- Annual cash compensation (base salary and target annual incentive) and
benefits should be equal to the average compensation paid to comparable
officers of companies in the comparator group.
- Long-term incentives should be equal to the average compensation paid to
comparable officers of companies in the comparator group, but provide the
opportunity to pay out at the 75th percentile and higher for superior
corporate performance.
Finally, in evaluating compensation program alternatives, the Committee
considers the potential impact on PG&E Corporation of Section 162(m) of the
Internal Revenue Code. Section 162(m) eliminates the deductibility of
compensation over $1 million paid to the five highest paid executive officers of
public corporations, excluding "performance-based compensation." Compensation
programs will qualify as performance-based if (1) the performance targets are
pre-established objective standards, (2) the programs have been approved by
shareholders, and (3) there is no discretion to modify or alter payments after
the performance targets have been established for the year.
The Committee believes that compensation paid under two of PG&E
Corporation's three performance-based plans is deductible under Section 162(m).
A substantial portion of the compensation paid to the executive officers of PG&E
Corporation and Pacific Gas and Electric Company is paid under these qualifying
performance-based plans. Although short-term compensation paid under PG&E
Corporation's third performance-based plan will not be excluded from the
deduction limit under Section 162(m), payments under this plan are conditioned
primarily on the achievement of pre-established corporate financial objectives.
To the extent consistent with the Committee's overall policy of maintaining
a competitive, performance-based compensation program, it is PG&E Corporation's
intent to maintain the tax deductibility of the compensation which it pays.
However, due to the restrictive nature of Section 162(m), technical compliance
with its requirements can reduce or eliminate the value of using certain types
of plans designed to provide incentives to increase shareholder value. As a
result, although the Committee, in designing and maintaining a competitive
incentive compensation program, will qualify as much of the compensation for
deduction under Section 162(m) as is reasonably possible, such qualification is
not a mandatory precondition to payments where technical compliance is
inconsistent with the Committee's objective of incenting performance which
results in increased shareholder value. It is anticipated that the amount of any
tax deduction that may be forgone due to the impact of the Section 162(m) limit
will be insignificant.
PRINCIPAL COMPONENTS OF COMPENSATION
BASE SALARY
PG&E CORPORATION BASE SALARY
PG&E Corporation's executive salaries are reviewed annually by the Committee
based on (1) the results achieved by each individual, (2) expected corporate
financial performance, measured by combined earnings per share, dividends, and
stock price performance, and (3) changes in the average salaries paid to
comparable executives by companies in the comparator group.
In setting the 1998 salary levels for PG&E Corporation's executive officers,
the Committee's objective was that the overall average of the salaries paid to
all officers as a group (including the Chief Executive Officer) should be
approximately equal to the target competitive level.
Robert D. Glynn, Jr., Chief Executive Officer of PG&E Corporation, received
an annual base salary of $700,000 in 1998. The salary level for Mr. Glynn is
21.3 percent below the average salary of chief executive officers of the 26
companies in the comparator group. The overall average of the base salaries
received by all PG&E Corporation officers (including Mr. Glynn) for 1998 was
below the average salary paid to all officers of the comparator group.
PACIFIC GAS AND ELECTRIC COMPANY BASE SALARY
Pacific Gas and Electric Company's executive salaries are reviewed annually
by the Committee based on (1) the results achieved by each individual, (2)
expected corporate financial performance, measured by combined
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<PAGE>
earnings per share, dividends, and stock price performance, and (3) changes in
the average salaries paid to comparable executives by companies in the
comparator group.
In setting the 1998 salary levels for Pacific Gas and Electric Company's
executive officers, the Committee's objective was that the overall average of
the salaries paid to all officers as a group (including the Chief Executive
Officer) should be approximately equal to the target competitive level.
Gordon R. Smith, Chief Executive Officer of Pacific Gas and Electric
Company, received an annual base salary of $425,000 in 1998. Although the salary
level for Mr. Smith is 15.2 percent above the average salary of chief executive
officers of a major line of business within the 26 companies in the comparator
group, his overall total compensation (base, short-term, and long-term) remains
below the average for chief executive officers in the comparator group. The
overall average of the base salaries received by all Pacific Gas and Electric
Company officers (including Mr. Smith) for 1998 was below the average salary
paid to all officers of the comparator group.
SHORT-TERM INCENTIVES
PG&E CORPORATION ANNUAL INCENTIVE
The PG&E Corporation Short-Term Incentive Plan for 1998 was designed to
provide annual incentives to all executive officers based largely on PG&E
Corporation's success in meeting the 1998 corporate earnings per share
objective. To determine whether the earnings per share objective is met, the
Corporation's actual earnings per share is adjusted to eliminate the effect of
extraordinary gains or losses, emphasizing the impact of ongoing results of
operations.
At the beginning of the year, target awards are set based on each
executive's responsibilities and salary level. Final awards are determined by
the Committee and may range from zero to twice the target, depending on the
extent to which the earnings per share is achieved. The Committee has discretion
to modify or eliminate awards.
In 1998, PG&E Corporation achieved actual earnings per share of $1.88. For
purposes of the Short-Term Incentive Plan, this number was adjusted to eliminate
the effect of extraordinary events not normally considered a part of ongoing
operations. Therefore, the majority of PG&E Corporation executive officers
received Short-Term Incentive Plan awards equal to 177 percent of their target
awards.
PACIFIC GAS AND ELECTRIC COMPANY ANNUAL INCENTIVE
The Pacific Gas and Electric Company Short-Term Incentive Plan for 1998 was
designed to provide annual incentives to all executive officers based on meeting
financial, service, and other measures of the Company, as well as those of
specific business units and departments.
At the beginning of the year, target awards are set based on each
executive's responsibilities and salary level. Final awards are determined by
the Committee and may range from zero to twice the target, depending on the
extent to which the stated objectives are achieved. The Committee has discretion
to modify or eliminate awards.
In 1998, Pacific Gas and Electric Company executives received Short-Term
Incentive Plan awards ranging from 182 percent to 197 percent of their target
awards.
STOCK OPTIONS IN LIEU OF SHORT-TERM INCENTIVE PLAN AWARDS
In 1998, to further increase the officers' ability to align their individual
economic interests with those of the Corporation and its shareholders, the
Committee adopted a program whereby eligible officers could elect to convert up
to 50 percent of the award they would otherwise be entitled to receive under
their respective Short-Term Incentive Plan, and instead, receive stock options
under the PG&E Corporation Stock Option Plan described below.
LONG-TERM INCENTIVES
PG&E CORPORATION LONG-TERM INCENTIVE PROGRAM. The PG&E Corporation
Long-Term Incentive Program permits various stock-based incentive awards to be
granted to executive officers and other employees of the Corporation and its
subsidiaries. The Stock Option Plan and the Performance Unit Plan (each of which
is a component of the Long-Term Incentive Program) provide incentives based on
PG&E Corporation's financial performance over time. At the annual meeting,
shareholders will be asked to approve an increase in the number
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of shares available to be issued under the Long-Term Incentive Program. (See
"Item No. 3: Management Proposal Regarding Increase in Shares Available to Be
Issued Under the Long-Term Incentive Program.")
PG&E CORPORATION STOCK OPTION PLAN. The Stock Option Plan provides
incentives based on PG&E Corporation's ability to sustain financial performance
over a three- to 10-year period. Under the Plan, officers, managers, and other
key employees of PG&E Corporation and its subsidiaries receive stock options
based on their responsibilities and position. These options allow them to
purchase a certain number of shares of PG&E Corporation common stock at the
market price on the date of grant (typically the first business day of each
year). Generally, optionees must hold the options for at least two full years
and exercise them within 10 years. Options granted in lieu of Short-Term
Incentive Plan awards, as discussed above, will be vested immediately although
the options may not be exercised for at least one year after the date of grant.
PG&E Corporation does not reprice or change the terms of options once they have
been granted.
At the Committee's discretion, stock options may be granted with tandem
"stock appreciation rights" which have vesting periods and exercise guidelines
that are similar to the options. These rights allow option-holders to surrender
their options when they have vested and receive a cash payment equal to the
difference between the exercise price and the current market price. No stock
appreciation rights have been granted since 1991.
Stock options also may be granted with or without tandem "dividend
equivalents" which provide for credits to be made to a dividend equivalent
account equal to the current common stock dividend multiplied by the recipient's
unexercised options. For options granted with dividend equivalents,
option-holders are entitled to receive the amounts accumulated in their dividend
equivalent account only when, and to the extent that, the underlying options or
stock appreciation rights are exercised. If a stock appreciation right is
exercised, the option-holder receives the associated dividend equivalent only if
the stock price has appreciated by at least 5 percent per year from the date of
grant or by at least 25 percent if the options have been held for more than five
years. In June 1997, the Committee adopted the policy that future stock option
grants will not include dividend equivalents, and no such grants with dividend
equivalents have been made since that time.
The size of the stock option grant for each executive officer of PG&E
Corporation and Pacific Gas and Electric Company in 1998 was determined by the
Committee based on the Committee's objectives of paying target total
compensation at the average target total compensation of the companies in the
comparator group, and of tying a substantial component of target total
compensation directly to financial performance for shareholders. In making stock
option grants, the size of each executive officer's stock option grant was
determined primarily based on the compensation objectives described above.
PG&E CORPORATION PERFORMANCE UNIT PLAN. The Performance Unit Plan provides
incentives based on PG&E Corporation's ability to sustain superior total returns
for shareholders (dividends plus stock price appreciation) over a three-year
period. Under the Plan, officers of PG&E Corporation and its subsidiaries
receive performance units reflecting their level of responsibility. One-third of
the units vest each year. At the end of each year, the number of vested
performance units is increased or decreased based on PG&E Corporation's
three-year total return for shareholders (dividends plus stock price
appreciation) as compared with that of the 49 other largest energy-based
companies in the nation. Each officer receives an incentive payment equal to the
final number of vested units multiplied by the average market price of PG&E
Corporation common stock during the 30 calendar day period prior to the end of
the year.
In determining Performance Unit Plan results for a given year, PG&E
Corporation's corporate performance in the current year is weighted at 60
percent, the performance in the prior year at 25 percent, and the performance in
the year before that at 15 percent. Each time a cash dividend is declared on
PG&E Corporation common stock, an amount equal to the cash dividend per share
multiplied by the number of units held by a recipient will be accrued on behalf
of the recipient and, at the end of the year, the amount of accrued dividend
equivalents will be increased or decreased by the same percentage used to
increase or decrease the recipient's number of vested performance units for the
year.
For the three years ended December 31, 1998, PG&E Corporation's total
shareholder return had a weighted average ranking of 27th among the 50 largest
energy-based companies in the nation. Based on this ranking, officers received
awards which were based on 88 percent of the number of vested units.
EXECUTIVE STOCK OWNERSHIP PROGRAM. Effective January 1, 1998, the Committee
adopted the Executive Stock Ownership Program which contains certain stock
ownership targets for executives to be achieved within five years after becoming
an executive officer. The targets are set as a multiple of the executive's base
salary and vary
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according to the executive's level of responsibility within the Corporation. The
executive stock ownership targets are as follows: three times base salary for
the Chief Executive Officer of PG&E Corporation; two times base salary for heads
of the Corporation's lines of business and the Chief Financial Officer and the
General Counsel of PG&E Corporation; and one and one-half times base salary for
the Senior Vice Presidents of PG&E Corporation. To the extent an executive
officer achieves and maintains the stock ownership targets within the first
three years of becoming an executive officer, the executive officer will be
entitled to receive additional common stock equivalents (called Special
Incentive Stock Ownership Premiums or SISOPs) to be credited to his or her
Deferred Compensation Plan account balance. The additional common stock
equivalents vest three years after the date of grant, subject to accelerated
vesting in accordance with the Officer Severance Policy and upon a change in
control of the Corporation. The additional common stock equivalents are subject
to forfeiture if the executive fails to maintain the applicable stock ownership
target.
BENEFITS
Benefit plans are designed to meet the individual needs of PG&E Corporation
and its subsidiaries and to permit portability of benefits among the Corporation
and its subsidiaries. Tax-deferred savings arrangements provide employees with
an opportunity to supplement their retirement income through employee and
matching contributions by PG&E Corporation or one of its subsidiaries. PG&E
Corporation also provides excess retirement benefits for its executive officers
based on salary and incentive compensation.
The defined contribution benefit plans of PG&E Corporation and its
subsidiaries permit participants in those plans to direct the investment of
their contributions into PG&E Corporation common stock, providing another
opportunity for executive officers to increase their proprietary interest in
PG&E Corporation. The PG&E Corporation Deferred Compensation Plan for Officers
also permits the executives who participate in the plan to direct that the
return on their deferred compensation be tied directly to the performance of
PG&E Corporation common stock.
SUMMARY
We, the members of the Nominating and Compensation Committee of the Board of
Directors of PG&E Corporation, believe that the compensation programs of PG&E
Corporation and Pacific Gas and Electric Company are successful in attracting
and retaining qualified employees and in tying compensation directly to
performance for shareholders and service to customers. We will continue to
monitor closely the effectiveness and appropriateness of each of the components
of compensation to reflect changes in the business environment of PG&E
Corporation and Pacific Gas and Electric Company.
March 8, 1999
NOMINATING AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF PG&E
CORPORATION
Carl E. Reichardt, Chair
David A. Coulter
David M. Lawrence, MD
John C. Sawhill
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COMPARISON OF TWO-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN(1)
[THIS GRAPH COMPARES THE CUMULATIVE TOTAL RETURN ON PG&E CORPORATION COMMON
STOCK (EQUAL TO DIVIDENDS PLUS STOCK PRICE APPRECIATION) DURING THE PAST TWO
FISCAL YEARS WITH THAT OF THE STANDARD & POOR'S 500 STOCK INDEX AND THE DOW
JONES UTILITIES INDEX.]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PG&E CORPORATION STANDARD & POOR'S 500 STOCK INDEX (S&P) DOW JONES UTILITIES INDEX (DJUI)
<S> <C> <C> <C>
12/31/96 $100 $100 $100
3/31/97 $113 $103 $95
6/30/97 $118 $121 $101
9/30/97 $115 $130 $106
12/31/97 $151 $133 $123
3/31/98 $166 $152 $130
6/30/98 $161 $157 $135
9/30/98 $164 $141 $142
12/31/98 $163 $171 $146
</TABLE>
(1) Assumes $100 invested on December 31, 1996, in Pacific Gas and Electric
Company common stock, the Standard & Poor's 500 Stock Index, and the Dow
Jones Utilities Index, and assumes quarterly reinvestment of dividends. The
total shareholder returns shown are not necessarily indicative of future
returns. As of January 1, 1997, all outstanding shares of Pacific Gas and
Electric Company common stock were converted on a one-for-one basis to
shares of PG&E Corporation common stock.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN(1)
[THIS GRAPH COMPARES THE CUMULATIVE TOTAL RETURN ON PG&E CORPORATION COMMON
STOCK (EQUAL TO DIVIDENDS PLUS STOCK PRICE APPRECIATION) DURING THE PAST FIVE
FISCAL YEARS WITH THAT OF THE STANDARD & POOR'S 500 STOCK INDEX AND THE DOW
JONES UTILITIES INDEX.]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PG&E CORPORATION STANDARD & POOR'S 500 STOCK INDEX (S&P) DOW JONES UTILITIES INDEX (DJUI)
<S> <C> <C> <C>
1993 $100 $100 $100
1994 $75 $101 $85
1995 $93 $139 $112
1996 $75 $171 $122
1997 $114 $229 $150
1998 $123 $294 $179
</TABLE>
(1) Assumes $100 invested on December 31, 1993, in Pacific Gas and Electric
Company common stock, the Standard & Poor's 500 Stock Index, and the Dow
Jones Utilities Index, and assumes quarterly reinvestment of dividends. The
total shareholder returns shown are not necessarily indicative of future
returns. As of January 1, 1997, all outstanding shares of Pacific Gas and
Electric Company common stock were converted on a one-for-one basis to
shares of PG&E Corporation common stock.
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SUMMARY COMPENSATION TABLE
[THIS TABLE SUMMARIZES THE PRINCIPAL COMPONENTS OF COMPENSATION PAID TO THE
CHIEF EXECUTIVE OFFICERS AND THE OTHER MOST HIGHLY COMPENSATED EXECUTIVE
OFFICERS OF PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY DURING THE
PAST YEAR.]
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- -----------------------
AWARDS PAYOUTS
(A) (B) (C) (D) (E) (F) (G) (H)
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPEN- OPTIONS/SARS LTIP COMPEN-
SALARY BONUS SATION (# OF PAYOUTS SATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) SHARES) ($)(3) ($)(4)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Glynn, Jr., 1998 $700,000 $931,350 $42,180 235,000 $452,858 $ 32,280
Chairman of the Board, Chief Executive Officer, and 1997 533,334 217,074 39,525 268,000 408,796 24,780
President of PG&E Corporation; Chairman of the Board 1996 450,000 0 13,311 48,000 0 29,108
of Pacific Gas and Electric Company
Scott W. Gebhardt,(5) 1998 $375,000 $179,250 $25,588 126,400 $145,580 $ 170,858
Senior Vice President of PG&E Corporation; President 1997 281,250 175,000 39,355 148,500 66,202 279,258
and Chief Executive Officer of PG&E Energy Services
Corporation
Michael E. Rescoe,(5) 1998 $365,000 $323,755 $14,660 126,400 $145,580 $ 14,544
Senior Vice President, Chief Financial Officer, and 1997 131,250 36,750 23,135 125,000 74,302 95,810
Treasurer of PG&E Corporation
Bruce R. Worthington, 1998 $315,000 $279,405 $12,020 75,900 $140,890 $ 14,175
Senior Vice President and General Counsel of PG&E 1997 284,167 88,960 11,598 58,500 140,123 12,788
Corporation 1996 250,000 0 9,054 23,500 0 11,250
Joseph P. Kearney (deceased),(6) 1998 $318,750 $342,125 $14,660 151,400 $389,869 $1,534,010
Former Senior Vice President of PG&E Corporation; 1997 133,333 150,000 63,744 208,500 74,302 150,655
Former President and Chief Executive Officer of U.S.
Generating Company
Gordon R. Smith, 1998 $425,000 $410,338 $16,328 126,400 $173,662 $ 19,735
Senior Vice President of PG&E Corporation; President 1997 327,917 102,743 12,718 133,500 145,644 15,366
and Chief Executive Officer of Pacific Gas and 1996 250,000 0 10,805 23,500 0 11,861
Electric Company
Gregory M. Rueger, 1998 $278,000 $230,684 $ 8,993 50,600 $110,926 $ 13,260
Senior Vice President and General Manager - Nuclear 1997 268,000 128,833 10,920 33,500 132,430 12,810
Power Generation of Pacific Gas and Electric Company 1996 260,000 57,866 5,310 23,500 0 11,607
James K. Randolph, 1998 $260,000 $213,174 $ 8,465 50,600 $ 96,885 $ 11,700
Senior Vice President and General Manager - 1997 220,000 104,564 8,700 30,000 92,709 9,919
Distribution and Customer Service of Pacific Gas and 1996 180,000 34,288 1,920 4,500 0 8,517
Electric Company
E. James Macias, 1998 $240,000 $207,900 $ 8,640 50,600 $101,546 $ 10,800
Senior Vice President and General Manager - 1997 199,000 134,900 9,239 30,000 99,342 8,955
Generation, Transmission, and Supply of Pacific Gas 1996 160,000 50,370 3,240 5,000 0 4,370
and Electric Company
Roger J. Peters, 1998 $230,000 $196,650 $ 6,529 50,600 $ 33,727 $ 10,350
Senior Vice President and General Counsel of Pacific 1997 204,250 114,896 3,240 14,500 26,481 9,257
Gas and Electric Company 1996 182,520 49,007 0 4,500 0 16,750
</TABLE>
36
<PAGE>
SUMMARY COMPENSATION TABLE
CONTINUED
(1) Represents payments received or deferred from 1997 through 1999 for
achievement of corporate and organizational objectives from 1996 through
1998, under the Short-Term Incentive Plan. For Mr. Glynn, Mr. Worthington,
and Mr. Smith, whose bonuses were based solely on corporate performance, no
payments were made under the Plan in 1997 with respect to corporate
performance in 1996.
(2) Amounts reported consist of (i) reportable officer benefit allowances, (ii)
payments of related taxes, and (iii) dividend equivalent payments on
performance units under the Performance Unit Plan.
(3) Represents payments received or deferred in 1999 and 1998 for achievement of
corporate performance objectives for the periods 1996 through 1998 and 1995
through 1997, respectively, under the Performance Unit Plan. No payments
were made under the Plan in 1997 with respect to corporate performance in
1996.
(4) Amounts reported for 1998 consist of: (i) contributions to defined
contribution retirement plans (Mr. Glynn $7,500, Mr. Gebhardt $15,187, Mr.
Rescoe $14,544, Mr. Worthington $7,200, Mr. Kearney $16,000, Mr. Smith
$7,172, Mr. Rueger $7,200, Mr. Randolph $7,200, Mr. Macias $5,700, and Mr.
Peters $7,200), (ii) premiums on indemnity policies to secure the payment of
benefits under the Supplemental Executive Retirement Plan and the Deferred
Compensation Plan (Mr. Glynn $780, Mr. Smith $610, and Mr. Rueger $750),
(iii) contributions received or deferred under excess benefit arrangements
associated with defined contribution retirement plans (Mr. Glynn $24,000,
Mr. Worthington $6,975, Mr. Kearney $18,010, Mr. Smith $11,953, Mr. Rueger
$5,310, Mr. Randolph $4,500, Mr. Macias $5,100, and Mr. Peters $3,150), and
(iv) one-time payments, including a payment to Mr. Kearney of $1.5 million
as discussed in footnote (6) below and relocation allowances (Mr. Gebhardt
$155,671).
(5) Mr. Gebhardt and Mr. Rescoe were not employed by PG&E Corporation or Pacific
Gas and Electric Company in 1996.
(6) Mr. Kearney was an executive officer of PG&E Corporation from September 19,
1997, until his death on October 3, 1998. He was not employed by PG&E
Corporation or Pacific Gas and Electric Company in 1996. The amount reported
in column (H) for 1998 includes $1.5 million paid to Mr. Kearney as a result
of the termination of a long-term incentive plan maintained by a joint
venture between PG&E Enterprises and Bechtel Enterprises. The amount paid
was based upon the value created for the joint venture during the tenure of
Mr. Kearney as its President and Chief Executive Officer, and prior to its
acquisition by PG&E Corporation.
37
<PAGE>
OPTION/SAR GRANTS IN 1998
[THIS TABLE SUMMARIZES THE DISTRIBUTION AND THE TERMS AND CONDITIONS OF STOCK
OPTIONS GRANTED TO THE EXECUTIVE OFFICERS NAMED IN THE SUMMARY COMPENSATION
TABLE DURING THE PAST YEAR.]
<TABLE>
<CAPTION>
GRANT
INDIVIDUAL GRANTS DATE VALUE
- ---------------------------------------------------------------------------------------------- ------------
(A) (B) (C) (D) (E) (F)
% OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS EXERCISE OR GRANT DATE
UNDERLYING OPTIONS/SARS GRANTED TO BASE PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1)(2) EMPLOYEES IN 1998(2) ($/SH)(3) DATE(4) VALUE ($)(5)
<S> <C> <C> <C> <C> <C>
Robert D. Glynn, Jr. 235,000 3.69% $30.50 01-03-2008 $895,350
Scott W. Gebhardt 126,400 1.98% $30.50 01-03-2008 $481,584
Michael E. Rescoe 126,400 1.98% $30.50 01-03-2008 $481,584
Bruce R. Worthington 75,900 1.19% $30.50 01-03-2008 $289,179
Joseph P. Kearney 126,400 1.98% $30.50 01-03-2008 $481,584
(deceased) 25,000 .39% $31.50 03-18-2008 $ 95,250
Gordon R. Smith 126,400 1.98% $30.50 01-03-2008 $481,584
Gregory M. Rueger 50,600 .79% $30.50 01-03-2008 $192,786
James K. Randolph 50,600 .79% $30.50 01-03-2008 $192,786
E. James Macias 50,600 .79% $30.50 01-03-2008 $192,786
Roger J. Peters 50,600 .79% $30.50 01-03-2008 $192,786
</TABLE>
(1) All options granted to executive officers in 1998 are exercisable as
follows: one-third of the options may be exercised on or after the second
anniversary of the date of grant, two-thirds on or after the third
anniversary, and 100 percent on or after the fourth anniversary, provided
that options will vest immediately upon the occurrence of certain events. No
options were accompanied by tandem dividend equivalents.
(2) No stock appreciation rights (SARs) have been granted since 1991.
(3) The exercise price is equal to the closing price of PG&E Corporation common
stock on the date of grant.
(4) All options granted to executive officers in 1998 expire 10 years and one
day from the date of grant, subject to earlier expiration in the event of
the officer's termination of employment with PG&E Corporation, Pacific Gas
and Electric Company, or one of their respective subsidiaries.
(5) Estimated present values are based on the Black-Scholes Model, a
mathematical formula used to value options traded on stock exchanges and,
for options granted with dividend equivalents, estimated present values
include dividend equivalents. The Black-Scholes Model considers a number of
factors, including the expected volatility and dividend rate of the stock,
interest rates, and time of exercise of the option. The following
assumptions were used in applying the Black-Scholes Model to the 1998 option
grants shown in the table above: volatility of 17.601%, risk-free rate of
return of 6.03%, dividend yield of $1.20 (the annual dividend rate on the
grant date), and an exercise date five years after the date of grant. The
ultimate value of the options will depend on the future market price of PG&E
Corporation common stock, which cannot be forecast with reasonable accuracy.
That value will depend on the future success achieved by employees for the
benefit of all shareholders. The estimated grant date present value for the
options shown in the table was $3.81 per share.
38
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN 1998 AND YEAR-END OPTION/SAR VALUES
[THIS TABLE SUMMARIZES EXERCISES OF STOCK OPTIONS AND TANDEM STOCK APPRECIATION
RIGHTS (GRANTED IN PRIOR YEARS) BY THE EXECUTIVE OFFICERS NAMED IN THE SUMMARY
COMPENSATION TABLE DURING THE PAST YEAR, AS WELL AS THE NUMBER AND VALUE OF ALL
UNEXERCISED OPTIONS HELD BY SUCH NAMED EXECUTIVE OFFICERS AT THE END OF 1998.]
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED ON END OF 1998 (#) END OF 1998 ($)(1)
EXERCISE VALUE REALIZED (EXERCISABLE/ (EXERCISABLE/
NAME (#) ($) UNEXERCISABLE) UNEXERCISABLE)
<S> <C> <C> <C> <C> <C> <C>
Robert D. Glynn, Jr. 0 $0 45,167/ 538,333 $ 99,502/ $2,815,123
Scott W. Gebhardt 0 0 0/ 274,900 0/ 1,351,525
Michael E. Rescoe 0 0 0/ 251,400 0/ 1,056,088
Bruce R. Worthington 0 0 20,168/ 151,732 49,215/ 698,747
Joseph P. Kearney 0 0 0/ 359,900 0/ 1,950,775
(deceased)
Gordon R. Smith 0 0 27,834/ 280,566 43,273/ 1,410,502
Gregory M. Rueger 20,334 66,573 15,000/ 102,266 0/ 466,890
James K. Randolph 0 0 18,833/ 85,100 31,873/ 357,288
E. James Macias 0 0 8,667/ 85,433 26,793/ 358,370
Roger J. Peters 0 0 10,834/ 68,766 27,880/ 190,533
</TABLE>
(1) Based on the difference between the option exercise price (without reduction
for the amount of accrued dividend equivalents, if any) and a fair market
value of $31.50, which was the closing price of PG&E Corporation common
stock on December 31, 1998.
39
<PAGE>
LONG-TERM INCENTIVE PLAN--AWARDS IN 1998
[THIS TABLE SUMMARIZES THE LONG-TERM INCENTIVE AWARDS MADE TO THE EXECUTIVE
OFFICERS NAMED IN THE SUMMARY COMPENSATION TABLE DURING THE PAST YEAR.]
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
AWARDS NON-STOCK PRICE-BASED PLANS
---------------------------------------------- ---------------------------------------
(A) (B) (C) (D) (E) (F)
PERFORMANCE OR
OTHER PERIOD
NUMBER OF SHARES, UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME UNITS, OR OTHER RIGHTS(1) OR PAYOUT ($ OR #)(2) ($ OR #)(2) ($ OR #)(2)
<S> <C> <C> <C> <C> <C>
Robert D. Glynn, Jr. 22,375 3 years 0 units 22,375 units 44,750 units
Scott W. Gebhardt 10,550 3 years 0 units 10,550 units 21,100 units
Michael E. Rescoe 10,550 3 years 0 units 10,550 units 21,100 units
Bruce R. Worthington 7,050 3 years 0 units 7,050 units 14,100 units
Joseph P. Kearney 10,550 3 years 0 units 10,550 units 21,100 units
(deceased)
Gordon R. Smith 10,550 3 years 0 units 10,550 units 21,100 units
Gregory M. Rueger 4,850 3 years 0 units 4,850 units 9,700 units
James K. Randolph 4,850 3 years 0 units 4,850 units 9,700 units
E. James Macias 4,850 3 years 0 units 4,850 units 9,700 units
Roger J. Peters 4,850 3 years 0 units 4,850 units 9,700 units
</TABLE>
(1) Represents performance units granted under the Performance Unit Plan. The
units vest one-third in each of the three years following the grant year,
and are earned over the vesting period based on PG&E Corporation's
three-year total annual shareholder return (dividends plus stock price
appreciation) as compared with that achieved by the 49 other largest
domestic energy utilities. This performance target may be adjusted during
the vesting period, at the sole discretion of the Nominating and
Compensation Committee, to reflect extraordinary events beyond management's
control. In determining PG&E Corporation's total annual shareholder return
relative to the 49 other utilities, third-year performance is weighted at 60
percent, second-year performance at 25 percent, and first-year performance
at 15 percent. Each time a cash dividend is declared on PG&E Corporation
common stock, an amount equal to the cash dividend per share multiplied by
the number of units held by a recipient will be accrued on behalf of the
recipient and, at the end of the year, the amount of accrued dividend
equivalents will be increased or decreased by the same percentage used to
increase or decrease the recipient's number of vested performance units for
the year.
(2) Payments are determined by multiplying the number of units earned in a given
year by the average market price of PG&E Corporation common stock for the
last 30 calendar day period of the year.
RETIREMENT BENEFITS
PG&E Corporation and Pacific Gas and Electric Company provide retirement
benefits to some of the executive officers named in the Summary Compensation
Table on page 36. The benefit formula for eligible executive officers is 1.6
percent of the average of the three highest combined salary and annual incentive
awards during the last 10 years of service multiplied by years of credited
service. As of December 31, 1998, the estimated annual retirement benefits for
the most highly compensated executive officers, assuming credited service to age
65, are as follows: Mr. Glynn $271,711, Mr. Smith $293,751, Mr. Worthington
$227,185, Mr. Rueger $270,305, Mr. Randolph $185,202, Mr. Macias $195,561, and
Mr. Peters $175,611. The amounts shown are single life annuity benefits and
would not be subject to any Social Security offsets.
40
<PAGE>
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL PROVISIONS
On November 1, 1998, the PG&E Corporation Officer Severance Policy became
effective. The policy, which covers most officers of PG&E Corporation and its
subsidiaries, including the executive officers named in the Summary Compensation
Table, provides benefits if a covered officer is terminated without cause.
Benefits under the policy include (i) a lump sum payment of one and one-half or
two times annual base salary and target Short-Term Incentive Plan award (the
applicable severance multiple being dependent on an officer's level), (ii)
continued vesting of equity-based awards for 18 months or two years after
termination (depending on the applicable severance multiple), (iii) accelerated
vesting of up to two-thirds of the common stock equivalents awarded under the
Executive Stock Ownership Program (depending on an officer's level), and (iv)
payment of health care insurance premiums for 18 months or two years after
termination (depending on the applicable severance multiple). In lieu of all or
a portion of the lump sum payment, a terminated officer who is covered by PG&E
Corporation's Supplemental Executive Retirement Plan can elect additional years
of service and/or age for purposes of calculating pension benefits. (For more
information about the treatment of equity-based awards upon termination of
employment, see "Item No. 3: Management Proposal Regarding Increase in Shares
Available to Be Issued Under the Long-Term Incentive Program, -Stock Option
Plan, -Termination of Employment or Relationship with the Corporation" on page
16 and "-Performance Unit Plan, -Termination of Employment or Relationship with
the Corporation" on page 17.)
The Long-Term Incentive Program (LTIP) permits the grant of various types of
stock-based incentive awards, including awards granted under the Stock Option
Plan, the Performance Unit Plan, and the Non-Employee Director Stock Incentive
Plan. (See Item No. 3 on pages 14-20 for a description of the LTIP and the
component plans.) The LTIP and the component plans provide that, upon the
occurrence of a change in control, (1) any time periods relating to the exercise
or realization of any incentive award (including common stock equivalents
awarded under the Executive Stock Ownership Program) will be accelerated so that
such award may be exercised or realized in full immediately upon the change in
control, (2) all shares of restricted stock will immediately cease to be
forfeitable, and (3) all conditions relating to the realization of any
stock-based award will terminate immediately. Under the LTIP, a "change in
control" will be deemed to have occurred if any of the following occurs: (1)
"any person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, 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 20 percent or more of the
combined voting power of PG&E Corporation's then outstanding securities, (2)
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 of the directors then
still in office who were directors at the beginning of the period, or (3) 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 definition, the term "combined voting power"
means the combined voting power of the then outstanding voting securities of the
Corporation or the other relevant entity.
41
<PAGE>
- --------------------------------------------------------------------------------
Other Information
PRINCIPAL SHAREHOLDERS
The following table presents certain information regarding shareholders who
are known to PG&E Corporation or Pacific Gas and Electric Company to be the
beneficial owners of more than 5 percent of any class of voting securities of
PG&E Corporation or Pacific Gas and Electric Company as of January 31, 1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
CLASS OF STOCK BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
<S> <C> <C> <C>
Pacific Gas and Electric PG&E Corporation(1) 346,965,362 100.00%
Company One Market, Spear Tower, Suite 2400
common stock San Francisco, CA 94105
PG&E Corporation State Street Bank and Trust Company(2) 35,986,325 9.41%
common stock 225 Franklin Street
Boston, MA 02110
PG&E Corporation FMR Corp., Edward C. Johnson 3d, and 28,015,199 7.32%
common stock Abigail P. Johnson(3)
82 Devonshire Street
Boston, MA 02109
PG&E Corporation Sanford C. Bernstein & Co., Inc.(4) 21,528,874 5.63%
common stock 767 Fifth Avenue
New York, NY 10153
</TABLE>
(1) As a result of the formation of the holding company, PG&E Corporation became
the holder of all issued and outstanding shares of Pacific Gas and Electric
Company common stock on January 1, 1997.
(2) The information relating to State Street Bank and Trust Company is based on
beneficial ownership as of December 31, 1998, as reported in a Schedule 13G,
dated February 9, 1999, filed with the Securities and Exchange Commission.
The bank holds 30,541,054 shares in its capacity as Trustee of the Pacific
Gas and Electric Company Savings Fund Plan. The Trustee may not vote these
shares in the absence of voting instructions from the plan participants. The
bank also holds 5,445,271 shares of PG&E Corporation common stock in various
other fiduciary capacities. The bank has sole voting power with respect to
4,720,573 of these shares, shared voting power with respect to 308,421 of
these shares, sole investment power with respect to 5,435,145 of these
shares, and shared investment power with respect to 10,126 of these shares.
(3) The information relating to FMR Corp. ("FMR") is based on a Schedule 13G
reporting beneficial ownership as of December 31, 1998, which was filed with
the Securities and Exchange Commission on behalf of FMR, Edward C. Johnson
3d, and Abigail P. Johnson on February 12, 1999. FMR, a holding company,
reported sole voting power with respect to 3,556,215 of these shares, and
FMR, Edward C. Johnson 3d, and Abigail P. Johnson each reported shared
voting power with respect to 0 of these shares, sole investment power with
respect to 28,015,199 of these shares, and shared investment power with
respect to 0 of these shares, through control of, or other affiliation with,
the following entities: (i) Fidelity Management & Research Company
("Fidelity"), a wholly owned subsidiary of FMR, (ii) Fidelity Management
Trust Company ("FMTC"), a wholly owned subsidiary of FMR, and (iii) Fidelity
International Limited ("FIL"), for which members of the Johnson family own,
directly and indirectly, 39.89% of the total votes that may be cast by FIL
voting stock. Together, Fidelity's funds own and have sole dispositive power
with respect to 23,831,119 of these shares (6.23% of the outstanding PG&E
Corporation common stock), and shared dispositive power with respect to 0 of
these shares; power to vote shares owned directly by Fidelity funds is
exercised by each applicable fund's Board of Trustees. FMTC has sole voting
power with respect to 2,041,615 of these shares, shared voting power with
respect to 0 of these shares, sole dispositive power with respect to
2,528,180 of these shares, and shared dispositive power with respect to 0 of
these shares. FIL has sole voting power with respect to 1,514,600 of
42
<PAGE>
these shares, shared voting power with respect to 0 of these shares, sole
dispositive power with respect to 1,655,900 of these shares, and shared
dispositive power with respect to 0 of these shares. Edward C. Johnson 3d is
Chairman of both FMR and FIL, and Abigail P. Johnson is Director of FMR.
Each is owner, respectively, of 12% and 24.5% of the aggregate amount of
outstanding FMR voting stock. Together, various Johnson family members and
trusts for the benefit of Johnson family members have approximately 49% of
the voting power of FMR. Through ownership of FMR voting stock and voting
agreements, the Johnson family members form a controlling group with respect
to FMR.
(4) The information relating to Sanford C. Bernstein & Co., Inc. is based on
beneficial ownership as of December 31, 1998, as reported in a Schedule 13G,
dated February 5, 1999, filed with the Securities and Exchange Commission.
Sanford C. Bernstein & Co., Inc. has sole voting power with respect to
13,331,188 of these shares, shared voting power with respect to 2,428,290 of
these shares, sole investment power with respect to 21,528,874 of these
shares, and shared investment power with respect to 0 of these shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
In accordance with Section 16(a) of the Securities Exchange Act of 1934 and
Securities and Exchange Commission regulations, PG&E Corporation's and Pacific
Gas and Electric Company's respective directors, certain officers, and persons
who own greater than 10 percent of PG&E Corporation's or Pacific Gas and
Electric Company's equity securities are required to file reports of ownership
and changes in ownership of such equity securities with the Securities and
Exchange Commission and the principal national securities exchange on which such
equity securities are registered, and to furnish PG&E Corporation or Pacific Gas
and Electric Company (as the case may be) with copies of all such reports they
file.
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, PG&E Corporation and Pacific Gas
and Electric Company believe that during 1998 all filing requirements applicable
to their directors, officers, and 10 percent shareholders were satisfied.
ANNUAL REPORT
PG&E Corporation's and Pacific Gas and Electric Company's joint 1998 annual
report to shareholders, including financial statements, accompanies this Joint
Proxy Statement.
VOTING ON THE INTERNET OR BY TELEPHONE
For your convenience, you may have the option of executing and submitting
your proxy and voting instructions over the Internet or by telephone. The
Internet and telephone voting procedures that have been made available by PG&E
Corporation and Pacific Gas and Electric Company are designed to authenticate
shareholders' identities, to allow shareholders to submit their proxies and
voting instructions, and to confirm that shareholders' instructions have been
recorded properly. Your proxy and voting instructions will be recorded as if you
submitted your proxy and voting instructions by mail. PG&E Corporation and
Pacific Gas and Electric Company have been advised by counsel that these
Internet and telephone voting procedures are consistent with the requirements of
California law.
Please note that there are separate Internet and telephone voting
arrangements depending upon whether (1) your shares are registered in your name
directly with PG&E Corporation and/or Pacific Gas and Electric Company
(including shares held by participants in the PG&E Corporation Dividend
Reinvestment Plan), or you are a participant who holds PG&E Corporation stock in
any of the defined contribution retirement plans maintained by PG&E Corporation
or any of its subsidiaries, or (2) whether your shares are held in an account at
a brokerage firm or bank.
FOR SHARES REGISTERED IN THE NAME OF A SHAREHOLDER DIRECTLY WITH
PG&E CORPORATION AND/OR PACIFIC GAS AND ELECTRIC COMPANY
(INCLUDING SHARES HELD IN THE PG&E CORPORATION DIVIDEND
REINVESTMENT PLAN), AND FOR PARTICIPANTS WHO HOLD PG&E CORPORATION
STOCK IN ANY OF THE DEFINED CONTRIBUTION RETIREMENT PLANS
MAINTAINED BY PG&E CORPORATION OR ANY OF ITS SUBSIDIARIES:
Holders of such shares may submit their proxies and voting
instructions anytime, 24 hours a day, 7 days a week, over the
Internet at the following address on the World Wide Web:
http://www.votefast.com
43
<PAGE>
or by using a touch-tone telephone and calling the following
toll-free number from anywhere in the United States:
1-800-250-9081
FOR SHARES HELD IN AN ACCOUNT AT A BROKERAGE FIRM OR BANK:
A number of brokerage firms and banks are participating in a
program provided through ADP Investor Communication Services that
offers Internet and telephone voting options. (This program is
different from the program described above for shares registered
in the name of a shareholder directly with PG&E Corporation and/or
Pacific Gas and Electric Company or for participants who hold PG&E
Corporation stock in any of the defined contribution retirement
plans maintained by PG&E Corporation or any of its subsidiaries.)
For shares held in an account at a participating brokerage firm or
bank, shareholders may submit their voting instructions anytime,
24 hours a day, 7 days a week, over the Internet at the following
address on the World Wide Web:
http://www.proxyvote.com
or by using a touch-tone telephone and calling, from anywhere in
the United States, the toll-free telephone number shown on the
voting instruction form.
Shareholders submitting proxies or voting instructions over the Internet
should understand that there may be costs associated with electronic access,
such as usage charges from Internet access providers and telephone companies,
that must be borne by the shareholder. There are no charges to shareholders who
use the telephone voting procedures.
Proxies submitted over the Internet or by telephone must be received by
11:59 p.m. Eastern daylight time, on Tuesday, April 20, 1999. SHAREHOLDERS
SUBMITTING PROXIES AND VOTING INSTRUCTIONS OVER THE INTERNET OR BY TELEPHONE
SHOULD NOT MAIL THE PROXY OR VOTING INSTRUCTION FORM.
METHOD AND COST OF SOLICITING PROXIES
PG&E Corporation and Pacific Gas and Electric Company intend to solicit
proxies principally by mail. Proxies also may be solicited by personal contact,
telephone, or other means by officers and other employees of PG&E Corporation or
Pacific Gas and Electric Company. PG&E Corporation and Pacific Gas and Electric
Company have retained D. F. King & Co., Inc. to assist in the solicitation of
proxies at an estimated fee of $11,500 plus reimbursement of reasonable
expenses. In addition, brokers, banks, and other fiduciaries and nominees will
be reimbursed for the reasonable expenses of forwarding the Joint Proxy
Statement and other proxy materials to beneficial owners of PG&E Corporation and
Pacific Gas and Electric Company stock. The entire cost of soliciting proxies
will be paid by PG&E Corporation and Pacific Gas and Electric Company.
PG&E Corporation and Pacific Gas and Electric Company also have retained
Corporate Election Services, Inc. to assist in the tabulation of proxies and to
act as the independent inspector of election at the annual meetings.
PROPOSALS BY SHAREHOLDERS - 2000
Shareholder proxies obtained by the Boards of Directors of PG&E Corporation
and Pacific Gas and Electric Company in connection with their respective annual
meetings of shareholders in the year 2000 will confer on the proxyholders
discretionary authority to vote on any matters presented at the meetings, unless
notice of the matter is provided to the Vice President and Corporate Secretary
of PG&E Corporation or Pacific Gas and Electric Company, or both (as may be
applicable depending on whether the matter relates to PG&E Corporation or
Pacific Gas and Electric Company, or both) no later than January 23, 2000.
Any proposal by a shareholder to be submitted for possible inclusion in
proxy soliciting materials for the annual meetings of shareholders of PG&E
Corporation and Pacific Gas and Electric Company to be held in the year 2000
must be received by the Vice President and Corporate Secretary after April 21,
1999, but no later than November 9, 1999.
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OTHER MATTERS
Management does not know of any matter to be acted upon at the meetings
other than the matters described above. However, if any other matter should
properly come before the annual meetings, the proxyholders named in the enclosed
proxy will vote the shares for which they hold proxies at their discretion.
By Order of the Boards of Directors of
PG&E Corporation and Pacific Gas and
Electric Company,
/S/ LESLIE H. EVERETT
Leslie H. Everett
Vice President and Corporate Secretary,
PG&E Corporation
and Pacific Gas and Electric Company
YOUR VOTE IS IMPORTANT.
IF YOU ARE NOT EXECUTING AND SUBMITTING YOUR PROXY AND VOTING INSTRUCTIONS OVER
THE INTERNET OR BY TELEPHONE, PLEASE MARK, SIGN, DATE, AND MAIL THE ENCLOSED
PROXY FORM AS SOON AS POSSIBLE.
AT THE ANNUAL MEETINGS OF SHAREHOLDERS, REAL-TIME CAPTIONING SERVICES AND
ASSISTIVE LISTENING DEVICES WILL BE AVAILABLE FOR THE HEARING IMPAIRED. PLEASE
CONTACT AN USHER AT THE MEETING IF YOU WISH TO BE SEATED IN THE REAL-TIME
CAPTIONING SECTION OR TO USE AN ASSISTIVE LISTENING DEVICE.
AUDIO CASSETTE RECORDINGS OF THE MEETINGS WILL BE AVAILABLE, WITHOUT CHARGE,
FOR SHAREHOLDERS WITH IMPAIRED VISION. PLEASE CONTACT THE OFFICE OF THE VICE
PRESIDENT AND CORPORATE SECRETARY, ONE MARKET, SPEAR TOWER, SUITE 2400, SAN
FRANCISCO, CA 94105 OR CALL (415) 267-7070.
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[RECYCLED PAPER LOGO] Printed with soybean ink on recycled/recyclable paper
<PAGE>
Appendix A
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.
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(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
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which INCENTIVE AWARDS shall be granted to such ELIGIBLE PARTICIPANTS;
(c) to designate the types of INCENTIVE AWARD being granted to such
ELIGIBLE 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
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RECIPIENT or the CORPORATION to terminate such employment, service as a
DIRECTOR or consulting relationship at any time, with or without cause.
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
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PARTICIPANTS, subject to the terms and conditions set forth in the
PERFORMANCE UNIT PLAN attached hereto as Exhibit B.
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
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<PAGE>
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.
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):
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(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
(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.
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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 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
agreements 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
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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.
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.
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(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
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.
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(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.
(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.
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(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.
(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.
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(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 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.
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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.
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(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
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being granted to such ELIGIBLE PARTICIPANTS as ISOS or NON-QUALIFIED
STOCK 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.
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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
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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.
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.
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(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 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.
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(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 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)
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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.
(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
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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.
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.
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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
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event that such OPTIONEE competes against the CORPORATION, and (iii) to
cancel or annul any grant of an 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.
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(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.
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(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.
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(aa) RETIREMENT means the Actual Retirement Date under the Pacific Gas
and Electric Company Retirement Plan.
(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.
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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.
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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;
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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.
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3.02 DISABILITY. If an ELIGIBLE EMPLOYEE is both disabled
and entitled to receive benefits under Pacific Gas and Electric Company's
Long Term 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
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payments hereunder. The PLAN ADMINISTRATOR's interpretations,
determinations, rules, and calculations shall be final and binding on all
persons and parties concerned.
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.
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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
- ---------------------------------------
(4) Capitalized words are defined in Section 15 hereof.
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RESTRICTED 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.
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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.
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(c) Each NON-QUALIFIED STOCK OPTION granted under the Plan shall
become exercisable and vested cumulatively as follows: (i) up to
thirty-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.
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(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 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
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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.
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-
38
<PAGE>
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 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.
39
<PAGE>
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.
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
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
40
<PAGE>
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.
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
41
<PAGE>
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.
(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.
42
<PAGE>
(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 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.
43
<PAGE>
(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).
44
<PAGE>
The undersigned hereby appoints Robert D. Glynn, Jr. and Leslie H. Everett,
or either of them, proxies of the undersigned, with full power of
substitution, to vote the stock of the undersigned at the annual meeting of
shareholders of PG&E Corporation, to be held at 1111 California Street, San
Francisco, California, on Wednesday, April 21, 1999, at 10:00 a.m., and at
any adjournment or postponement thereof, as instructed on the reverse hereof
and upon all motions and resolutions which may properly be presented for
consideration at said meeting. THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF PG&E CORPORATION.
Control Number:
PG&E CORPORATION
As an alternative to completing and mailing this form, you may execute and
submit your proxy and voting instructions over the Internet at
http://www.votefast.com or by touch-tone telephone at 1-800-250-9081 (from
anywhere in the United States). These Internet and telephone voting
procedures comply with California law.
If submitting your proxy by mail, please mark, sign, date, and mail this
proxy form promptly, in the accompanying postage-paid envelope, to PG&E
Corporation, c/o Corporate Election Services, P.O. Box 3200, Pittsburgh, PA
15230.
, 1999
- -------------------------------------- ----------------
, 1999
- -------------------------------------- ----------------
SHAREHOLDER'S SIGNATURE DATE
If you are signing for the shareholder, please sign the shareholder's name
and your name, and specify the capacity in which you act.
Shareholder's Proxy for the Annual Meeting on April 21, 1999
- ------------------------------------------------------------------------------
- - IF YOU ARE NOT SUBMITTING YOUR PROXY OVER THE INTERNET OR BY TELEPHONE,
PLEASE DETACH HERE AND MAIL THIS PROXY IN THE ACCOMPANYING ENVELOPE. -
VOTE ON THE INTERNET
1. Read the accompanying Joint Proxy Statement and the above proxy form.
2. Go to the website HTTP://WWW.VOTEFAST.COM--anytime, 24 HOURS A DAY, 7
DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the proxy form.
4. Then follow the simple on-line instructions to submit your proxy and
voting instructions.
VOTE BY TELEPHONE
1. Read the accompanying Joint Proxy Statement and the above proxy form.
2. Using any touch-tone telephone in the U.S., call the TOLL-FREE number
1-800-250-9081--anytime, 24 HOURS A DAY, 7 DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the proxy form.
4. Then follow the simple recorded instructions to submit your proxy and
voting instructions.
VOTE BY MAIL
1. Read the accompanying Joint Proxy Statement and the above proxy form.
2. Mark, sign, and date the proxy form.
3. Detach the proxy form (the top portion of this page) and mail it
promptly, in the accompanying POSTAGE-PAID envelope, to
PG&E Corporation, c/o Corporate Election Services, P.O. Box 3200,
Pittsburgh, PA 15230.
IF YOU SUBMIT YOUR PROXY AND VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DO NOT MAIL THE ABOVE PROXY FORM.
PROXIES AND VOTING INSTRUCTIONS SUBMITTED OVER THE INTERNET OR BY TELEPHONE
MUST BE RECEIVED BY 11:59 P.M., EASTERN DAYLIGHT TIME, ON TUESDAY, APRIL 20,
1999.
- - PLEASE USE THE ATTACHED TICKET TO ATTEND THE PG&E CORPORATION ANNUAL
MEETING, OR YOU MAY REGISTER AT THE MEETING. -
- -------------------------------------------------------------------------------
PG&E CORPORATION
1999 ANNUAL MEETING
PG&E CORPORATION 1999 ANNUAL MEETING TICKET
for the annual meeting of shareholders on APRIL 21, 1999, AT 10:00 A.M., to
be held at the Masonic Auditorium, 1111 California Street, San Francisco.
Doors open at 9:00 a.m. You may bypass the registration area and present
this ticket at the entrance to the auditorium.
(SEE REVERSE SIDE FOR ADDITIONAL INFORMATION.)
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
YOUR PROXY IS SOLICITED BY THE PG&E CORPORATION BOARD OF DIRECTORS. Unless contrary instructions are given below, the above
designated proxies will vote the PG&E Corporation shares for which they hold proxies FOR Items l, 2, and 3 and AGAINST Items 4,
5, 6, 7, and 8.
- -----------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors. Nominees are:
PG&E 01-Richard A. Clarke 04-C. Lee Cox 07-David M. Lawrence, MD 10-Rebecca Q. Morgan
CORPORATION 02-Harry M. Conger 05-William S. Davila 08-Richard B. Madden 11-Carl E. Reichardt
DIRECTORS 03-David A. Coulter 06-Robert D. Glynn, Jr. 09-Mary S. Metz 12-John C. Sawhill
RECOMMEND 13-Barry Lawson Williams
A VOTE / / FOR all nominees listed above / / WITHHOLD vote / / WITHHOLD vote only for
FOR (except as indicated to the contrary) for all nominees ---------------------------------------
ITEMS 1, 2, 2. Ratification of the appointment of Deloitte & Touche as PG&E Corporation's FOR AGAINST ABSTAIN
AND 3 independent public accountants........................................... / / / / / /
3. Proposal to increase shares available to be issued under the Long-Term
Incentive Program........................................................ / / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 4. Shareholder Proposal Regarding Independent Directors..................... / / / / / /
DIRECTORS 5. Shareholder Proposal Regarding Simple Majority Voting.................... / / / / / /
RECOMMEND 6. Shareholder Proposal Regarding Corporate Democracy....................... / / / / / /
A VOTE 7. Shareholder Proposal Regarding Cumulative Voting......................... / / / / / /
AGAINST 8. Shareholder Proposal Regarding Compensation Contingent Upon Merger or
ITEMS 4, 5, 6, Acquisition.............................................................. / / / / / /
7, AND 8
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - IF YOU ARE NOT SUBMITTING YOUR PROXY OVER THE INTERNET OR BY TELEPHONE,
PLEASE DETACH HERE AND MAIL THIS PROXY IN THE ACCOMPANYING ENVELOPE. -
[PG&E LOGO] PG&E CORPORATION-TM-
----------------
ANNUAL MEETING
TO BE HELD AT:
MASONIC AUDITORIUM
1111 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA
APRIL 21, 1999, AT 10:00 A.M.
- - PLEASE USE THE ATTACHED TICKET TO ATTEND THE PG&E CORPORATION ANNUAL
MEETING, OR YOU MAY REGISTER AT THE MEETING. -
- -------------------------------------------------------------------------------
All available space at the Memorial Temple Garage at 1101 California Street
(adjacent to the Masonic Auditorium) has been reserved to provide
complimentary parking for shareholders. However, capacity is limited.
Please show your annual meeting ticket to the garage attendant as you enter
the garage.
NOTE: CELLULAR TELEPHONES, CAMERAS, TAPE RECORDERS, ETC., WILL NOT BE
ALLOWED IN THE AUDITORIUM DURING THE MEETING, OTHER THAN FOR PG&E CORPORATION
PURPOSES. A CHECKROOM WILL BE PROVIDED. FOR YOUR PROTECTION, ALL
BRIEFCASES, PURSES, PACKAGES, ETC., WILL BE SUBJECT TO INSPECTION AS YOU
ENTER THE MEETING. WE REGRET ANY INCONVENIENCE THIS MAY CAUSE YOU.
Real-time captioning services and assistive listening devices will be
available at the meeting for shareholders with impaired hearing. Please
contact an usher at the meeting if you wish to be seated in the real-time
captioning section or to use an assistive listening device.
<PAGE>
PG&E CORPORATION
SHAREHOLDER'S
PROXY
SOLICITED BY THE
BOARD OF DIRECTORS OF
PG&E
CORPORATION
1999
PLEASE MARK, SIGN, DATE,
AND RETURN THIS PROXY
PROMPTLY.
The undersigned hereby appoints Robert D. Glynn, Jr. and Leslie H. Everett,
or either of them, proxies of the undersigned, with full power of
substitution, to vote the stock of the undersigned at the annual meeting of
shareholders of PG&E Corporation, to be held at 1111 California Street, San
Francisco, California, on Wednesday, April 21, 1999, at 10:00 a.m., and at
any adjournment or postponement thereof, as instructed on the reverse hereof
and upon all motions and resolutions which may properly be presented for
consideration at said meeting. THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF PG&E CORPORATION.
, 1999
- ------------------------------------------------ ------------------
, 1999
- ------------------------------------------------ ------------------
SHAREHOLDER'S SIGNATURE DATE
If you are signing for the shareholder, please sign the shareholder's name
and your name, and specify the capacity in which you act.
Shareholder's Proxy for the Annual Meeting on April 21, 1999
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
YOUR PROXY IS SOLICITED BY THE PG&E CORPORATION BOARD OF DIRECTORS. Unless contrary instructions are given below, the above
designated proxies will vote the PG&E Corporation shares for which they hold proxies FOR Items l, 2, and 3 and AGAINST Items 4,
5, 6, 7, and 8.
- -----------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors. Nominees are:
PG&E 01-Richard A. Clarke 04-C. Lee Cox 07-David M. Lawrence, MD 10-Rebecca Q. Morgan
CORPORATION 02-Harry M. Conger 05-William S. Davila 08-Richard B. Madden 11-Carl E. Reichardt
DIRECTORS 03-David A. Coulter 06-Robert D. Glynn, Jr. 09-Mary S. Metz 12-John C. Sawhill
RECOMMEND 13-Barry Lawson Williams
A VOTE / / FOR all nominees listed above / / WITHHOLD vote / / WITHHOLD vote only for
FOR (except as indicated to the contrary) for all nominees ---------------------------------------
ITEMS 1, 2, 2. Ratification of the appointment of Deloitte & Touche as PG&E Corporation's FOR AGAINST ABSTAIN
& 3 independent public accountants........................................... / / / / / /
3. Proposal to increase shares available to be issued under the Long-Term
Incentive Program........................................................ / / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 4. Shareholder Proposal Regarding Independent Directors..................... / / / / / /
DIRECTORS 5. Shareholder Proposal Regarding Simple Majority Voting.................... / / / / / /
RECOMMEND 6. Shareholder Proposal Regarding Corporate Democracy....................... / / / / / /
A VOTE 7. Shareholder Proposal Regarding Cumulative Voting......................... / / / / / /
AGAINST 8. Shareholder Proposal Regarding Compensation Contingent Upon Merger
ITEMS 4, 5, 6, or Acquisition........................................................... / / / / / /
7, & 8
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[PG&E LOGO] PG&E CORPORATION-TM-
Control Number:
1999 ANNUAL MEETING
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN
VOTING INSTRUCTIONS TO THE TRUSTEE
As an alternative to completing and mailing this form, you may execute and
submit your voting instructions over the Internet at http://www.votefast.com
or by touch-tone telephone at 1-800-250-9081 (from anywhere in the United
States). These Internet and telephone procedures comply with California law.
If submitting your instructions by mail, please mark your voting instructions
on the reverse side, sign, date, and return this form promptly, in the
accompanying postage-paid envelope, to State Street Bank and Trust Company,
c/o Corporate Election Services, P.O. Box 535800, Pittsburgh, PA 15253.
, 1999
- ---------------------------------- ---------------
SIGNATURE DATE
- -------------------------------------------------------------------------------
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS FORM IN THE ENCLOSED ENVELOPE. -
TO PARTICIPANTS IN THE SAVINGS FUND PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OF PG&E CORPORATION COMMON STOCK ALLOCATED TO YOUR ACCOUNT. This form
is provided for your use in giving the Trustee of the Plan confidential
instructions to vote your stock held in the Plan at PG&E Corporation's annual
meeting of shareholders on April 21, 1999. You have one vote for each share
of PG&E Corporation common stock credited to your account as of February 22,
1999. Enclosed is a joint proxy statement which sets forth the business to
be transacted at the meeting. Please mark your instructions on this form and
sign, date, and return the top section to State Street Bank and Trust
Company, Trustee of the Plan, in the accompanying envelope. IF YOU SIGN BUT
DO NOT OTHERWISE COMPLETE THE FORM, YOU WILL BE INSTRUCTING THE TRUSTEE TO
VOTE ALL SHARES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE PG&E
CORPORATION BOARD OF DIRECTORS. As an alternative to completing and mailing
this form, you may enter your voting instructions by touch-tone telephone at
1-800-250-9081 (only available in the United States) or over the Internet at
http://www.votefast.com. Stock in your Plan account for which the Trustee has
not received voting instructions will not be voted by the Trustee.
Participants who also own stock outside the Plan will receive a separate
proxy voting instruction form for those shares.
VOTE ON THE INTERNET
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Go to the website HTTP://WWW.VOTEFAST.COM -- anytime, 24 HOURS A DAY, 7
DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple on-line instructions.
VOTE BY TELEPHONE
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Using any touch-tone telephone in the U.S., call the TOLL-FREE number
1-800-250-9081--anytime, 24 HOURS A DAY, 7 DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple recorded instructions.
VOTE BY MAIL
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Mark, sign, and date the voting instruction form.
3. Detach the voting instruction form (the top portion of this page) and
mail it promptly, in the accompanying POSTAGE-PAID envelope, to
State Street Bank and Trust Company, c/o Corporate Election Services,
P.O. Box 535800, Pittsburgh, PA 15253.
IF YOU SUBMIT YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY TELEPHONE,
PLEASE DO NOT MAIL THE ABOVE VOTING INSTRUCTION FORM.
FOR SHARES IN YOUR PLAN ACCOUNT, VOTING INSTRUCTIONS SUBMITTED OVER THE
INTERNET, BY TELEPHONE, OR BY MAIL MUST BE RECEIVED BY THE TRUSTEE BY
11:59 P.M., EASTERN DAYLIGHT TIME, ON TUESDAY, APRIL 20, 1999. VOTING
INSTRUCTIONS RECEIVED AFTER THAT TIME WILL NOT BE COUNTED.
State Street Bank and Trust Company, as Trustee
of the Pacific Gas and Electric Company Savings Fund Plan
c/o Corporate Election Services
P.O. Box 535800
Pittsburgh, PA 15253
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
TO STATE STREET BANK AND TRUST COMPANY, TRUSTEE
PURSUANT TO THE PROVISIONS OF THE PACIFIC GAS AND ELECTRIC COMPANY SAVINGS FUND PLAN, YOU ARE INSTRUCTED AS INDICATED BELOW WITH
RESPECT TO VOTING THE SHARES OF STOCK CREDITED TO MY ACCOUNT IN THE PLAN AS OF FEBRUARY 22, 1999, AT THE ANNUAL MEETING OF
SHAREHOLDERS OF PG&E CORPORATION TO BE HELD ON APRIL 21, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
VOTING INSTRUCTIONS TO THE TRUSTEE -- 1999
- -----------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors. Nominees are:
PG&E 01-Richard A. Clarke 04-C. Lee Cox 07-David M. Lawrence, MD 10-Rebecca Q. Morgan
CORPORATION 02-Harry M. Conger 05-William S. Davila 08-Richard B. Madden 11-Carl E. Reichardt
DIRECTORS 03-David A. Coulter 06-Robert D. Glynn, Jr. 09-Mary S. Metz 12-John C. Sawhill
RECOMMEND 13-Barry Lawson Williams
A VOTE / / FOR all nominees listed above / / WITHHOLD vote / / WITHHOLD vote only for
FOR (except as indicated to the contrary) for all nominees ---------------------------------------
ITEMS 1, 2, 2. Ratification of the appointment of Deloitte & Touche as PG&E Corporation's FOR AGAINST ABSTAIN
AND 3 independent public accountants........................................... / / / / / /
3. Proposal to increase shares available to be issued under the Long-Term
Incentive Program........................................................ / / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 4. Shareholder Proposal Regarding Independent Directors..................... / / / / / /
DIRECTORS 5. Shareholder Proposal Regarding Simple Majority Voting.................... / / / / / /
RECOMMEND 6. Shareholder Proposal Regarding Corporate Democracy....................... / / / / / /
A VOTE 7. Shareholder Proposal Regarding Cumulative Voting......................... / / / / / /
AGAINST 8. Shareholder Proposal Regarding Compensation Contingent Upon Merger
ITEMS 4, 5, 6, or Acquisition........................................................... / / / / / /
7, AND 8
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS VOTING INSTRUCTION FORM IN THE
ACCOMPANYING ENVELOPE. -
<PAGE>
PG&E CORPORATION 1999 ANNUAL MEETING
CONTROL NUMBER:
PG&E ENERGY SERVICES
RETIREMENT PLAN
VOTING INSTRUCTIONS TO THE TRUSTEE
As an alternative to completing and mailing this form, you may execute and
submit your voting instructions over the Internet at http://www.votefast.com
or by touch-tone telephone at 1-800-250-9081 (from anywhere in the United
States). These Internet and telephone procedures comply with California law.
If submitting your instructions by mail, please mark your voting instructions
on the reverse side, sign, date, and return this form promptly, in the
accompanying postage-paid envelope, to Vanguard Fiduciary Trust Company, c/o
Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230.
, 1999
- ---------------------------------- ---------------
SIGNATURE DATE
- -------------------------------------------------------------------------------
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS FORM IN THE ENCLOSED ENVELOPE. -
TO PARTICIPANTS IN THE PG&E ENERGY SERVICES RETIREMENT PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OF PG&E CORPORATION COMMON STOCK ALLOCATED TO YOUR ACCOUNT. This form
is provided for your use in giving the Trustee of the Plan confidential
instructions to vote your stock held in the Plan at PG&E Corporation's annual
meeting of shareholders on April 21, 1999. You have one vote for each share
of PG&E Corporation common stock credited to your account as of February 22,
1999. Enclosed is a joint proxy statement which sets forth the business to be
transacted at the meeting. Please mark your instructions on this form and
sign, date, and return the top section to Vanguard Fiduciary Trust Company,
Trustee of the Plan, in the accompanying envelope. IF YOU SIGN BUT DO NOT
OTHERWISE COMPLETE THE FORM, YOU WILL BE INSTRUCTING THE TRUSTEE TO VOTE ALL
SHARES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE PG&E CORPORATION BOARD
OF DIRECTORS. As an alternative to completing and mailing this form, you may
enter your voting instructions by touch-tone telephone at 1-800-250-9081
(only available in the United States) or over the Internet at
http://www.votefast.com. Stock in your Plan account for which the Trustee has
not received voting instructions will not be voted by the Trustee.
Participants who also own stock outside the Plan will receive a separate
proxy voting instruction form for those shares.
VOTE OVER THE INTERNET
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Go to the website HTTP://WWW.VOTEFAST.COM--anytime, 24 HOURS A DAY, 7
DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple on-line instructions.
VOTE BY TELEPHONE
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Using any touch-tone telephone in the U.S., call the TOLL-FREE number
1-800-250-9081--anytime, 24 HOURS A DAY, 7 DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple recorded instructions.
VOTE BY MAIL
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Mark, sign, and date the voting instruction form.
3. Detach the voting instruction form (the top portion of this page) and
mail it promptly, in the accompanying POSTAGE-PAID envelope, to
Vanguard Fiduciary Trust Company, c/o Corporate Election Services,
P.O. Box 1150, Pittsburgh, PA 15230.
IF YOU SUBMIT YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY TELEPHONE,
PLEASE DO NOT MAIL THE ABOVE VOTING INSTRUCTION FORM.
FOR SHARES IN YOUR PLAN ACCOUNT, VOTING INSTRUCTIONS SUBMITTED OVER THE
INTERNET, BY TELEPHONE, OR BY MAIL MUST BE RECEIVED BY THE TRUSTEE BY 11:59
P.M., EASTERN DAYLIGHT TIME, ON SUNDAY, APRIL 18, 1999. VOTING INSTRUCTIONS
RECEIVED AFTER THAT TIME WILL NOT BE COUNTED.
Vanguard Fiduciary Trust Company, as Trustee
of the PG&E Energy Services Retirement Plan
c/o Corporate Election Services
P.O. Box 1150
Pittsburgh, PA 15230
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TO VANGUARD FIDUCIARY TRUST COMPANY, TRUSTEE
PURSUANT TO THE PROVISIONS OF THE PG&E ENERGY SERVICES RETIREMENT PLAN, YOU ARE INSTRUCTED AS INDICATED BELOW WITH RESPECT TO
VOTING THE SHARES OF STOCK CREDITED TO MY ACCOUNT IN THE PLAN AS OF FEBRUARY 22, 1999, AT THE ANNUAL MEETING OF SHAREHOLDERS OF
PG&E CORPORATION TO BE HELD ON APRIL 21, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
VOTING INSTRUCTIONS TO THE TRUSTEE - 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Election of Directors. Nominees are:
PG&E 01-Richard A. Clarke 04-C. Lee Cox 07-David M. Lawrence, MD 10-Rebecca Q. Morgan
CORPORATION 02-Harry M. Conger 05-William S. Davila 08-Richard B. Madden 11-Carl E. Reichardt
DIRECTORS 03-David A. Coulter 06-Robert D. Glynn, Jr. 09-Mary S. Metz 12-John C. Sawhill
RECOMMEND 13-Barry Lawson Williams
A VOTE / / FOR all nominees listed above / / WITHHOLD vote / / WITHHOLD vote only for
FOR (except as indicated to the contrary) for all nominees ---------------------------------------
ITEMS 1, 2, 2. Ratification of the appointment of Deloitte & Touche as PG&E Corporation's FOR AGAINST ABSTAIN
AND 3 independent public accountants........................................... / / / / / /
3. Proposal to increase shares available to be issued under the Long-Term
Incentive Program........................................................ / / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 4. Shareholder Proposal Regarding Independent Directors..................... / / / / / /
DIRECTORS 5. Shareholder Proposal Regarding Simple Majority Voting.................... / / / / / /
RECOMMEND 6. Shareholder Proposal Regarding Corporate Democracy....................... / / / / / /
A VOTE 7. Shareholder Proposal Regarding Cumulative Voting......................... / / / / / /
AGAINST 8. Shareholder Proposal Regarding Compensation Contingent Upon Merger
ITEMS 4, 5, 6, or Acquisition........................................................... / / / / / /
7, AND 8
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS VOTING INSTRUCTION FORM IN THE
ACCOMPANYING ENVELOPE. -
<PAGE>
PG&E CORPORATION 1999 ANNUAL MEETING
CONTROL NUMBER:
PG&E GAS TRANSMISSION,
NORTHWEST CORPORATION
SAVINGS FUND PLAN
VOTING INSTRUCTIONS TO THE TRUSTEE
As an alternative to completing and mailing this form, you may execute and
submit your voting instructions over the Internet at http://www.votefast.com
or by touch-tone telephone at 1-800-250-9081 (from anywhere in the United
States). These Internet and telephone procedures comply with California law.
If submitting your instructions by mail, please mark your voting instructions
on the reverse side, sign, date, and return this form promptly, in the
accompanying postage-paid envelope, to Merrill Lynch Trust Company, FSB, c/o
Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230.
, 1999
- ---------------------------------- ---------------
SIGNATURE DATE
- -------------------------------------------------------------------------------
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS FORM IN THE ENCLOSED ENVELOPE. -
TO PARTICIPANTS IN THE PG&E GAS TRANSMISSION, NORTHWEST CORPORATION SAVINGS
FUND PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OF PG&E CORPORATION COMMON STOCK ALLOCATED TO YOUR ACCOUNT. This form
is provided for your use in giving the Trustee of the Plan confidential
instructions to vote your stock held in the Plan at PG&E Corporation's annual
meeting of shareholders on April 21, 1999. You have one vote for each share
of PG&E Corporation common stock credited to your account as of February 22,
1999. Enclosed is a joint proxy statement which sets forth the business to be
transacted at the meeting. Please mark your instructions on this form and
sign, date, and return the top section to Merrill Lynch Trust Company, FSB,
Trustee of the Plan, in the accompanying envelope. IF YOU SIGN BUT DO NOT
OTHERWISE COMPLETE THE FORM, YOU WILL BE INSTRUCTING THE TRUSTEE TO VOTE ALL
SHARES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE PG&E CORPORATION BOARD
OF DIRECTORS. As an alternative to completing and mailing this form, you may
enter your voting instructions by touch-tone telephone at 1-800-250-9081
(only available in the United States) or over the Internet at
http://www.votefast.com. Stock in your Plan account for which the Trustee has
not received voting instructions will not be voted by the Trustee.
Participants who also own stock outside the Plan will receive a separate
proxy voting instruction form for those shares.
VOTE OVER THE INTERNET
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Go to the website HTTP://WWW.VOTEFAST.COM--anytime, 24 HOURS A DAY, 7
DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple on-line instructions.
VOTE BY TELEPHONE
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Using any touch-tone telephone in the U.S., call the TOLL-FREE number
1-800-250-9081--anytime, 24 HOURS A DAY, 7 DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple recorded instructions.
VOTE BY MAIL
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Mark, sign, and date the voting instruction form.
3. Detach the voting instruction form (the top portion of this page) and
mail it promptly, in the accompanying POSTAGE-PAID envelope, to Merrill
Lynch Trust Company, FSB, c/o Corporate Election Services, P.O. Box 1150,
Pittsburgh, PA 15230.
IF YOU SUBMIT YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY TELEPHONE,
PLEASE DO NOT MAIL THE ABOVE VOTING INSTRUCTION FORM.
FOR SHARES IN YOUR PLAN ACCOUNT, VOTING INSTRUCTIONS SUBMITTED OVER THE
INTERNET, BY TELEPHONE, OR BY MAIL MUST BE RECEIVED BY THE TRUSTEE BY 11:59
P.M., EASTERN DAYLIGHT TIME, ON SUNDAY, APRIL 18, 1999. VOTING INSTRUCTIONS
RECEIVED AFTER THAT TIME WILL NOT BE COUNTED.
Merrill Lynch Trust Company, FSB, as Trustee
of the PG&E Gas Transmission, Northwest Corporation Savings Fund Plan
c/o Corporate Election Services
P.O. Box 1150
Pittsburgh, PA 15230
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TO MERRILL LYNCH TRUST COMPANY, FSB, TRUSTEE
PURSUANT TO THE PROVISIONS OF THE PG&E GAS TRANSMISSION, NORTHWEST CORPORATION SAVINGS FUND PLAN, YOU ARE INSTRUCTED AS INDICATED
BELOW WITH RESPECT TO VOTING THE SHARES OF STOCK CREDITED TO MY ACCOUNT IN THE PLAN AS OF FEBRUARY 22, 1999, AT THE ANNUAL MEETING
OF SHAREHOLDERS OF PG&E CORPORATION TO BE HELD ON APRIL 21, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
VOTING INSTRUCTIONS TO THE TRUSTEE - 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Election of Directors. Nominees are:
PG&E 01-Richard A. Clarke 04-C. Lee Cox 07-David M. Lawrence, MD 10-Rebecca Q. Morgan
CORPORATION 02-Harry M. Conger 05-William S. Davila 08-Richard B. Madden 11-Carl E. Reichardt
DIRECTORS 03-David A. Coulter 06-Robert D. Glynn, Jr. 09-Mary S. Metz 12-John C. Sawhill
RECOMMEND 13-Barry Lawson Williams
A VOTE / / FOR all nominees listed above / / WITHHOLD vote / / WITHHOLD vote only for
FOR (except as indicated to the contrary) for all nominees ---------------------------------------
ITEMS 1, 2, 2. Ratification of the appointment of Deloitte & Touche as PG&E Corporation's FOR AGAINST ABSTAIN
AND 3 independent public accountants........................................... / / / / / /
3. Proposal to increase shares available to be issued under the Long-Term
Incentive Program........................................................ / / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 4. Shareholder Proposal Regarding Independent Directors..................... / / / / / /
DIRECTORS 5. Shareholder Proposal Regarding Simple Majority Voting.................... / / / / / /
RECOMMEND 6. Shareholder Proposal Regarding Corporate Democracy....................... / / / / / /
A VOTE 7. Shareholder Proposal Regarding Cumulative Voting......................... / / / / / /
AGAINST 8. Shareholder Proposal Regarding Compensation Contingent Upon Merger
ITEMS 4, 5, 6, or Acquisition........................................................... / / / / / /
7, AND 8
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS VOTING INSTRUCTION FORM IN THE
ACCOMPANYING ENVELOPE. -
<PAGE>
PG&E CORPORATION 1999 ANNUAL MEETING
CONTROL NUMBER:
PG&E GAS TRANSMISSION,
TEXAS CORPORATION
SAVINGS FUND PLAN
VOTING INSTRUCTIONS TO THE TRUSTEE
As an alternative to completing and mailing this form, you may execute and
submit your voting instructions over the Internet at http://www.votefast.com
or by touch-tone telephone at 1-800-250-9081 (from anywhere in the United
States). These Internet and telephone procedures comply with California law.
If submitting your instructions by mail, please mark your voting instructions
on the reverse side, sign, date, and return this form promptly, in the
accompanying postage-paid envelope, to Fidelity Management Trust Company, c/o
Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230.
, 1999
- ---------------------------------- ---------------
SIGNATURE DATE
- -------------------------------------------------------------------------------
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS FORM IN THE ENCLOSED ENVELOPE. -
TO PARTICIPANTS IN THE PG&E GAS TRANSMISSION, TEXAS CORPORATION SAVINGS FUND
PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OF PG&E CORPORATION COMMON STOCK ALLOCATED TO YOUR ACCOUNT. This form
is provided for your use in giving the Trustee of the Plan confidential
instructions to vote your stock held in the Plan at PG&E Corporation's annual
meeting of shareholders on April 21, 1999. You have one vote for each share
of PG&E Corporation common stock credited to your account as of February 22,
1999. Enclosed is a joint proxy statement which sets forth the business to be
transacted at the meeting. Please mark your instructions on this form and
sign, date, and return the top section to Fidelity Management Trust Company,
Trustee of the Plan, in the accompanying envelope. IF YOU SIGN BUT DO NOT
OTHERWISE COMPLETE THE FORM, YOU WILL BE INSTRUCTING THE TRUSTEE TO VOTE ALL
SHARES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE PG&E CORPORATION BOARD
OF DIRECTORS. As an alternative to completing and mailing this form, you may
enter your voting instructions by touch-tone telephone at 1-800-250-9081
(only available in the United States) or over the Internet at
http://www.votefast.com. Stock in your Plan account for which the Trustee has
not received voting instructions will not be voted by the Trustee.
Participants who also own stock outside the Plan will receive a separate
proxy voting instruction form for those shares.
VOTE OVER THE INTERNET
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Go to the website HTTP://WWW.VOTEFAST.COM--anytime, 24 HOURS A DAY, 7
DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple on-line instructions.
VOTE BY TELEPHONE
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Using any touch-tone telephone in the U.S., call the TOLL-FREE number
1-800-250-9081--anytime, 24 HOURS A DAY, 7 DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple recorded instructions.
VOTE BY MAIL
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Mark, sign, and date the voting instruction form.
3. Detach the voting instruction form (the top portion of this page) and
mail it promptly, in the accompanying POSTAGE-PAID envelope, to Fidelity
Management Trust Company, c/o Corporate Election Services, P.O. Box 1150,
Pittsburgh, PA 15230.
IF YOU SUBMIT YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY TELEPHONE,
PLEASE DO NOT MAIL THE ABOVE VOTING INSTRUCTION FORM.
FOR SHARES IN YOUR PLAN ACCOUNT, VOTING INSTRUCTIONS SUBMITTED OVER THE
INTERNET, BY TELEPHONE, OR BY MAIL MUST BE RECEIVED BY THE TRUSTEE BY 11:59
P.M., EASTERN DAYLIGHT TIME, ON SUNDAY, APRIL 18, 1999. VOTING INSTRUCTIONS
RECEIVED AFTER THAT TIME WILL NOT BE COUNTED.
Fidelity Management Trust Company, as Trustee
of the PG&E Gas Transmission, Texas Corporation Savings Fund Plan
c/o Corporate Election Services
P.O. Box 1150
Pittsburgh, PA 15230
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TO FIDELITY MANAGEMENT TRUST COMPANY, TRUSTEE
PURSUANT TO THE PROVISIONS OF THE PG&E GAS TRANSMISSION, TEXAS CORPORATION SAVINGS FUND PLAN, YOU ARE INSTRUCTED AS INDICATED
BELOW WITH RESPECT TO VOTING THE SHARES OF STOCK CREDITED TO MY ACCOUNT IN THE PLAN AS OF FEBRUARY 22, 1999, AT THE ANNUAL MEETING
OF SHAREHOLDERS OF PG&E CORPORATION TO BE HELD ON APRIL 21, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
VOTING INSTRUCTIONS TO THE TRUSTEE - 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Election of Directors. Nominees are:
PG&E 01-Richard A. Clarke 04-C. Lee Cox 07-David M. Lawrence, MD 10-Rebecca Q. Morgan
CORPORATION 02-Harry M. Conger 05-William S. Davila 08-Richard B. Madden 11-Carl E. Reichardt
DIRECTORS 03-David A. Coulter 06-Robert D. Glynn, Jr. 09-Mary S. Metz 12-John C. Sawhill
RECOMMEND 13-Barry Lawson Williams
A VOTE / / FOR all nominees listed above / / WITHHOLD vote / / WITHHOLD vote only for
FOR (except as indicated to the contrary) for all nominees ---------------------------------------
ITEMS 1, 2, 2. Ratification of the appointment of Deloitte & Touche as PG&E Corporation's FOR AGAINST ABSTAIN
AND 3 independent public accountants........................................... / / / / / /
3. Proposal to increase shares available to be issued under the Long-Term
Incentive Program........................................................ / / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 4. Shareholder Proposal Regarding Independent Directors..................... / / / / / /
DIRECTORS 5. Shareholder Proposal Regarding Simple Majority Voting.................... / / / / / /
RECOMMEND 6. Shareholder Proposal Regarding Corporate Democracy....................... / / / / / /
A VOTE 7. Shareholder Proposal Regarding Cumulative Voting......................... / / / / / /
AGAINST 8. Shareholder Proposal Regarding Compensation Contingent Upon Merger
ITEMS 4, 5, 6, or Acquisition........................................................... / / / / / /
7, AND 8
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS VOTING INSTRUCTION FORM IN THE
ACCOMPANYING ENVELOPE. -
<PAGE>
PG&E CORPORATION 1999 ANNUAL MEETING
CONTROL NUMBER:
U.S. GENERATING COMPANY
401(k) PROFIT-SHARING PLAN
VOTING INSTRUCTIONS TO THE TRUSTEE
As an alternative to completing and mailing this form, you
may execute and submit your voting instructions over the
Internet at http://www.votefast.com or by touch-tone
telephone at 1-800-250-9081 (from anywhere in the United
States). These Internet and telephone procedures comply with
California law.
If submitting your instructions by mail, please mark your
voting instructions on the reverse side, sign, date, and
return this form promptly, in the accompanying postage-paid
envelope, to CIGNA Investment & Retirement Services, c/o
Corporate Election Services, P.O. Box 1150, Pittsburgh, PA 15230.
, 1999
- ---------------------------------- ---------------
SIGNATURE DATE
- -------------------------------------------------------------------------------
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS FORM IN THE ENCLOSED ENVELOPE. -
TO PARTICIPANTS IN THE U.S. GENERATING COMPANY 401(k) PROFIT-SHARING PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OF PG&E CORPORATION COMMON STOCK ALLOCATED TO YOUR ACCOUNT. This form
is provided for your use in giving the Trustee of the Plan confidential
instructions to vote your stock held in the Plan at PG&E Corporation's annual
meeting of shareholders on April 21, 1999. You have one vote for each share
of PG&E Corporation common stock credited to your account as of February 22,
1999. Enclosed is a joint proxy statement which sets forth the business to be
transacted at the meeting. Please mark your instructions on this form and
sign, date, and return the top section to CIGNA Investment & Retirement
Services, Trustee of the Plan, in the accompanying envelope. IF YOU SIGN BUT
DO NOT OTHERWISE COMPLETE THE FORM, YOU WILL BE INSTRUCTING THE TRUSTEE TO
VOTE ALL SHARES IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE PG&E
CORPORATION BOARD OF DIRECTORS. As an alternative to completing and mailing
this form, you may enter your voting instructions by touch-tone telephone at
1-800-250-9081 (only available in the United States) or over the Internet at
http://www.votefast.com. Stock in your Plan account for which the Trustee has
not received voting instructions will not be voted by the Trustee.
Participants who also own stock outside the Plan will receive a separate
proxy voting instruction form for those shares.
VOTE OVER THE INTERNET
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Go to the website HTTP://WWW.VOTEFAST.COM--anytime, 24 HOURS A DAY, 7
DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple on-line instructions.
VOTE BY TELEPHONE
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Using any touch-tone telephone in the U.S., call the TOLL-FREE number
1-800-250-9081--anytime, 24 HOURS A DAY, 7 DAYS A WEEK.
3. You will be prompted to enter the 10-DIGIT CONTROL NUMBER located in the
box in the upper-left portion of the above voting instruction form.
4. Then follow the simple recorded instructions.
VOTE BY MAIL
1. Read the accompanying Joint Proxy Statement and the above voting
instruction form.
2. Mark, sign, and date the voting instruction form.
3. Detach the voting instruction form (the top portion of this page) and
mail it promptly, in the accompanying POSTAGE-PAID envelope, to CIGNA
Investment & Retirement Services, c/o Corporate Election Services, P.O. Box
1150, Pittsburgh, PA 15230.
IF YOU SUBMIT YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY TELEPHONE,
PLEASE DO NOT MAIL THE ABOVE VOTING INSTRUCTION FORM.
FOR SHARES IN YOUR PLAN ACCOUNT, VOTING INSTRUCTIONS SUBMITTED OVER THE
INTERNET, BY TELEPHONE, OR BY MAIL MUST BE RECEIVED BY THE TRUSTEE BY 11:59
P.M., EASTERN DAYLIGHT TIME, ON SUNDAY, APRIL 18, 1999. VOTING INSTRUCTIONS
RECEIVED AFTER THAT TIME WILL NOT BE COUNTED.
CIGNA Investment & Retirement Services, as Trustee
of the U.S. Generating Company 401(k) Profit-Sharing Plan
c/o Corporate Election Services
P.O. Box 1150
Pittsburgh, PA 15230
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
TO CIGNA INVESTMENT & RETIREMENT SERVICES, TRUSTEE
PURSUANT TO THE PROVISIONS OF THE U.S. GENERATING COMPANY 401(k) PROFIT-SHARING PLAN, YOU ARE INSTRUCTED AS INDICATED BELOW WITH
RESPECT TO VOTING THE SHARES OF STOCK CREDITED TO MY ACCOUNT IN THE PLAN AS OF FEBRUARY 22, 1999, AT THE ANNUAL MEETING OF
SHAREHOLDERS OF PG&E CORPORATION TO BE HELD ON APRIL 21, 1999, AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
VOTING INSTRUCTIONS TO THE TRUSTEE 1999
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Election of Directors. Nominees are:
PG&E 01-Richard A. Clarke 04-C. Lee Cox 07-David M. Lawrence, MD 10-Rebecca Q. Morgan
CORPORATION 02-Harry M. Conger 05-William S. Davila 08-Richard B. Madden 11-Carl E. Reichardt
DIRECTORS 03-David A. Coulter 06-Robert D. Glynn, Jr. 09-Mary S. Metz 12-John C. Sawhill
RECOMMEND 13-Barry Lawson Williams
A VOTE / / FOR all nominees listed above / / WITHHOLD vote / / WITHHOLD vote only for
FOR (except as indicated to the contrary) for all nominees ---------------------------------------
ITEMS 1, 2, 2. Ratification of the appointment of Deloitte & Touche as PG&E Corporation's FOR AGAINST ABSTAIN
AND 3 independent public accountants........................................... / / / / / /
3. Proposal to increase shares available to be issued under the Long-Term
Incentive Program........................................................ / / / / / /
- -----------------------------------------------------------------------------------------------------------------------------------
PG&E FOR AGAINST ABSTAIN
CORPORATION 4. Shareholder Proposal Regarding Independent Directors..................... / / / / / /
DIRECTORS 5. Shareholder Proposal Regarding Simple Majority Voting.................... / / / / / /
RECOMMEND 6. Shareholder Proposal Regarding Corporate Democracy....................... / / / / / /
A VOTE 7. Shareholder Proposal Regarding Cumulative Voting......................... / / / / / /
AGAINST 8. Shareholder Proposal Regarding Compensation Contingent Upon Merger
ITEMS 4, 5, 6, or Acquisition........................................................... / / / / / /
7, AND 8
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS VOTING INSTRUCTION FORM IN THE
ACCOMPANYING ENVELOPE. -
