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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting Material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act
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Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act
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Item 1.01 – Entry into a Material Definitive Agreement
Consistent with PG&E Corporation’s past practice of granting equity incentives on the first business day of the year, on January 3, 2005, PG&E Corporation granted stock options, restricted stock, and performance shares under the PG&E Corporation Long-Term Incentive Program (LTIP) to key employees and executive officers of PG&E Corporation and its subsidiary, Pacific Gas and Electric Company. The LTIP, including the Stock Option Plan, has been previously filed with the Securities and Exchange Commission. Under the current form of stock option agreement, options generally vest ratably over four years in equal installments (25%) on the first, second, third, and fourth anniversaries of the date of grant. In addition, vesting may be accelerated under certain circumstances. Stock options granted under the LTIP generally expire ten years and one day from the date of grant, subject to earlier expiration in the event of termination of employment. The exercise price of stock options is equal to the closing price of PG&E Corporation common stock on the date of grant. The current form of stock option agreement is attached to this report as Exhibit 99.1.
Also attached to this report, as Exhibit 99.2, is the current form of performance share agreement. Performance shares generally vest at the end of a three-year performance period, subject to forfeiture in certain circumstances. In addition, vesting may be accelerated under certain circumstances. Performance shares are paid out in cash depending on PG&E Corporation’s total shareholder return over the performance period relative to the total shareholder returns of companies in a comparator group over the performance period. No payment is made if PG&E Corporation’s total shareholder return for the performance period falls below the 25 th percentile of the comparator group. The number of performance shares will be multiplied by a payout percentage ranging from 25% if PG&E Corporation’s total shareholder return falls in the 25 th percentile to 200% if PG&E Corporation’s total shareholder return falls in the 90 th percentile or above. The payment, if any, is calculated by multiplying the resulting number of performance shares by the average closing price of a share of PG&E Corporation common stock for the last 30 calendar days of the preceding year. Each time PG&E Corporation declares a dividend with respect to its common stock, an amount equal to the dividend multiplied by the number of a recipient’s performance shares is accrued on the recipient’s behalf. Upon payment, if any, with respect to the performance shares, recipients also are entitled to receive a payment equal to the amount of dividends accrued with respect to the performance shares multiplied by the same payout percentage used to determine the performance share payout.
The current form of restricted stock agreement is attached to this report as Exhibit 99.3. The restrictions on the restricted stock generally lapse ratably over four years in equal installments (25%) on the first, second, third, and fourth anniversaries of the date of grant. In general, shares of restricted stock as to which the restrictions have not yet lapsed are subject to forfeiture upon termination of employment. In addition, the lapse of restrictions may be accelerated under certain circumstances. Any dividends on restricted stock will be held in escrow and are subject to the same restrictions as the shares to which the dividends relate.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits
99.1 |
Form of Stock Option Agreement under the PG&E Corporation Long-Term Incentive Program |
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99.2 |
Form of Performance Share Agreement under the PG&E Corporation Long-Term Incentive Program |
99.3 |
Form of Restricted Stock Agreement under the PG&E Corporation Long-Term Incentive Program |
SIGNATURE |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
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PG&E CORPORATION |
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By: |
LINDA Y.H. CHENG |
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LINDA Y.H. CHENG
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PACIFIC GAS AND ELECTRIC COMPANY |
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By: |
LINDA Y.H. CHENG |
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LINDA Y.H. CHENG
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Dated: January 6, 2005
EXHIBIT INDEX
No .
99.1 |
Form of Stock Option Agreement under the PG&E Corporation Long-Term Incentive Program |
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99.2 |
Form of Performance Share Agreement under the PG&E Corporation Long-Term Incentive Program |
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99.3 |
Form of Restricted Stock Agreement under the PG&E Corporation Long-Term Incentive Program |
Exhibit 99.1
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
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Number Of
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Option Price Per Share |
Social Security Number |
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PG&E Corporation (the "Corporation"), pursuant to action of the Nominating, Compensation, and Governance Committee of its Board of Directors 2 , hereby grants to you, the Optionee, an option to purchase the above stated number of shares of Common Stock of the Corporation, at the Option Price stated above, subject to and in accordance with the Corporation's Stock Option Plan, as amended to date, and subject to and in accordance with the following terms and conditions:
This is a non-qualified (nonstatutory) stock option which shall expire at the close of business ten years and one day after the date of grant, after which time it shall cease to be exercisable. This option is not an Incentive Stock Option within the meaning of the Internal Revenue Code of 1986.
This option shall terminate and cease to be exercisable prior to its expiration date on the date the Optionee's employment is terminated by reason of discharge for cause. See Section 12 of the Plan for other instances in which this option may be terminated and cease to be exercisable prior to its expiration date.
This option is nontransferable except that it may pass to a successor in interest by the laws of descent and distribution or by the will of the Optionee. During the lifetime of the Optionee, this option is exercisable only by the Optionee, except that in the event of the Optionee's incompetency, this option may be exercised by the Optionee's guardian or legal representative.
2 Capitalized words shall have the same meaning as defined in the PG&E Corporation Stock Option Plan unless otherwise defined herein. In the event of any conflict or inconsistency between the provisions of this Agreement and the Plan document, the Plan document shall govern.
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This option shall be exercisable during the employment of the Optionee and prior to its expiration or termination, whichever occurs first, as follows:
(i) up to one-fourth of the shares subject to the option may be purchased on and any time after January 3 of the first year following the year in which the options were granted; (ii) up to two-fourths of the shares subject to the option may be purchased on and any time after January 3 of the second year following the year in which the option was granted; (iii) up to three-fourths of the shares subject to the option may be purchased on and any time after January 3 of the third year following the year in which the option was granted; and (iv) up to 100 percent of the shares subject to the option may be purchased on and any time after January 3 of the fourth year following the year in which the options were granted.
See Section 12 of the Plan for other exercise rights and limitations after the Optionee's employment has been terminated.
This option does not confer upon the Optionee any right to continue as an employee of the Corporation, Pacific Gas and Electric Company, or any of the Corporation’s other subsidiaries, or interfere in any way with the right of any of those entities to terminate such employment at any time or to increase or decrease the Optionee's compensation from that in existence at the day of the grant.
Except as provided in Section 9 of the Plan (Dividend Equivalent Account), the Optionee shall have no rights as a shareholder with respect to any shares of Common Stock subject to this option prior to the date of exercise and payment of the full Option Price.
The Corporation may make such adjustments as it shall deem appropriate, to prevent dilution or enlargement of rights, in the price of the shares and the number allotted or subject to allotment if there are any changes in the Common Stock of the Corporation by reason of stock dividends, stock splits, reverse stock splits, recapitalization, mergers, or consolidations. If such adjustments are made, the price of and number of shares included in this option which have not theretofore been purchased shall be adjusted consistent with any such change. |
I, the above-named Optionee, by affixing my signature hereto hereby acknowledge receipt of this option subject to and in accordance with the terms and conditions stated above.
(Signature of Optionee) (Date)
RETURN TO: PG&E Corporation
Human Resources
One Market, Spear Tower
Suite 400
San Francisco, CA 94105
EXHIBIT 99.2
PG&E
CORPORATION
LONG-TERM INCENTIVE PROGRAM
FORM OF PERFORMANCE SHARE AGREEMENT
PG&E CORPORATION , a California corporation, hereby grants Performance Shares to the Recipient named below. The Performance Shares have been awarded under the PG&E Corporation Long-Term Incentive Program (the “LTIP”). The terms and conditions of the Performance Shares are set forth in this cover sheet and the attached Performance Share Agreement (the “Agreement”).
Date of Grant: January 3, 2005
Name of Recipient:
Recipient’s Social Security Number: _____-____-_____
Number of Performance Shares:
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Recipient:
(Signature)
Attachment
Please
return your signed Agreement to PG&E Corporation, Human
Resources,
One Market Street, Spear Street Tower, Suite 400, San Francisco,
California 94105
PG&E CORPORATION LONG-TERM INCENTIVE PROGRAM
PERFORMANCE SHARE AGREEMENT
By signing the cover
sheet of this Agreement, you agree to all of the terms and
conditions described above and in the LTIP.
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1 The identities of the companies currently comprising the comparator group are included in the prospectus. PG&E Corporation reserves the right to change the companies comprising the comparator group at any time.
EXHIBIT 99.3
PG&E CORPORATION
LONG-TERM INCENTIVE PROGRAM
FORM OF RESTRICTED STOCK AGREEMENT
PG&E CORPORATION , a California corporation, hereby grants shares of Restricted Stock to the Recipient named below. The shares of Restricted Stock have been awarded under the PG&E Corporation Long-Term Incentive Program (the “LTIP”). The terms and conditions of the Restricted Stock are set forth in this cover sheet and in the attached Restricted Stock Award Agreement (the “Agreement”).
Date of Award: January 3, 2005
Name of Recipient:
Recipient’s Social Security Number: _____-____-_____
Number of Shares of Restricted Stock Awarded:
Aggregate Fair Market Value of Restricted Stock on Date of Award: $____________
By signing this cover sheet, you agree to all of the terms and conditions described in the attached Agreement. You and PG&E Corporation agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of the attached Agreement. You are also acknowledging receipt of this Agreement and a copy of the prospectus describing the LTIP and the Restricted Stock dated January 1, 2005.
Recipient:
(Signature)
Attachment
Please return your signed Agreement to PG&E Corporation,
Human Resources,
One Market Street, Spear Street Tower, Suite 400, San Francisco,
California 94105
PG&E CORPORATION
LONG-TERM INCENTIVE PROGRAM
RESTRICTED STOCK AGREEMENT
The LTIP and Other Agreements |
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This Agreement constitutes the entire understanding between you
and PG&E Corporation regarding the Restricted Stock, subject to
the terms of the LTIP. Any prior agreements, commitments or
negotiations are superseded. In the event of any conflict or
inconsistency between the provisions of this Agreement and the
LTIP, the LTIP shall govern.
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Grant of Restricted Stock |
PG&E Corporation grants you the number of shares of
Restricted Stock shown on the cover sheet of this Agreement.
The shares of Restricted Stock are subject to the terms and
conditions of this Agreement and the LTIP.
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Lapse of Restrictions |
As long as you remain employed with PG&E Corporation (or any
of its subsidiaries), the restrictions will lapse as to 25 percent
of the total number of shares of Restricted Stock originally
subject to this Agreement, as shown above on the cover sheet, on
the first business day of January of each of the first, second,
third and fourth years following the Date of Award (each such day
an “Annual Lapse Date”). Except as described
below, all shares of Restricted Stock subject to this Agreement as
to which the restrictions have not lapsed shall be forfeited upon
termination of your employment.
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Voluntary Termination |
In the event that you terminate your employment with PG&E
Corporation voluntarily, you will automatically forfeit to PG&E
Corporation all of the shares of Restricted Stock as to which the
restrictions have not lapsed subject to this Agreement as of the
date of such Termination.
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Termination for Cause |
If your employment with PG&E Corporation (or any of its
subsidiaries) is terminated by PG&E Corporation or the
subsidiary for cause, you will automatically forfeit to PG&E
Corporation all shares of Restricted Stock as to which the
restrictions have not lapsed subject to this Agreement as of the
date of such termination. In general, termination for
“cause” means termination of employment because of
dishonesty, a criminal offense or violation of a work rule, and
will be determined by and in the sole discretion of PG&E
Corporation or the employing subsidiary.
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Termination other than for Cause |
If your employment with PG&E Corporation (or any of its
subsidiaries) is terminated by PG&E Corporation or the
subsidiary other than for cause before the restrictions on your
Restricted Stock lapse, and you are an officer in Bands 1-5, the
restrictions on your outstanding shares of Restricted Stock that
would have lapsed during the period of the “Severance
Multiple” under the applicable severance policy shall
continue to lapse pursuant to the regular lapse schedule (or
sooner, in the event of a Change in Control during such period). In
the event of your involuntary termination other than for cause, if
you are not an officer in Bands 1-5, the restrictions on your
outstanding shares of Restricted Stock that would have lapsed
within 12 months following such termination will continue to lapse
pursuant to the regular lapse schedule (or sooner, in the event of
a Change in Control during such period). All other
outstanding shares of Restricted Stock shall automatically be
forfeited to PG&E Corporation upon such termination.
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Retirement |
In the event of your Retirement, the restrictions on your
outstanding shares of Restricted Stock will continue to lapse as
though your employment had continued subject to your continued
compliance with certain post-employment restrictions. You
will be considered to have retired if you are age 55 or older on
the date of termination and if you were employed by PG&E
Corporation or any of its subsidiaries for at least five
consecutive years ending on the date of termination of your
employment.
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Death/Disability |
If your employment terminates due to your death or disability,
the restrictions on all of your shares of Restricted Stock shall
lapse on the next Annual Lapse Date. In the event of a Change
in Control of PG&E Corporation after such termination and
before such next Annual Lapse Date, the restrictions as to all
shares of Restricted Stock shall immediately lapse as described
below under “Change in Control.”
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Termination Due to Disposition of Subsidiary |
If (1) your employment is terminated (other than for cause or
your voluntary 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 or (2) if your employment is terminated (other than for cause
or your voluntary termination) coincident with the sale of all or
substantially all of the assets of a subsidiary of PG&E
Corporation, the restrictions on all shares of Restricted Stock
shall lapse on the next Annual Lapse Date. In the event of a
Change in Control of PG&E Corporation after such Termination
and before such next Annual Lapse Date, the restrictions as to all
shares of Restricted Stock shall immediately lapse as described
below under “Change in Control.”
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Escrow |
The certificates for the Restricted Stock shall be deposited in
escrow with the Corporate Secretary of PG&E Corporation to be
held in accordance with the provisions of this paragraph.
Each deposited certificate shall be accompanied by any assignment
documents PG&E Corporation may require you to execute.
The deposited certificates shall remain in escrow until such time
as the certificates are to be released or otherwise surrendered for
cancellation as discussed below. Upon delivery of the
certificates to PG&E Corporation, you shall be issued an
instrument of deposit acknowledging the number of shares of
Restricted Stock delivered in escrow to the Corporate Secretary of
PG&E Corporation.
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Release of Shares and Withholding Taxes |
The shares of Restricted Stock held in escrow hereunder shall be subject to the following terms and conditions relating to their release from escrow or their surrender to PG&E Corporation:
Note that you must make arrangements acceptable to PG&E
Corporation to satisfy withholding or other taxes that may be due
before your shares will be released to you. If you so elect,
PG&E Corporation will assist you in selling your shares through
a broker so that you can use the sales proceeds to satisfy
applicable taxes. You will receive the remaining proceeds in
cash. However, if you wish to receive the stock certificates
in lieu of selling your shares, you will need to make arrangements
to pay the applicable taxes either by check or through payroll
deduction. PG&E Corporation will notify you about how to
instruct PG&E Corporation to sell your shares when the
restrictions lapse or make other arrangements.
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Change in Control |
The restrictions on all of your outstanding shares of Restricted
Stock shall automatically lapse and become nonforfeitable in the
event there is a Change in Control of PG&E Corporation.
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Code Section 83(b) Election |
Under Section 83(a) of the Internal Revenue Code of 1986, as
amended (the “Code”), the Fair Market Value of the
Restricted Stock on the date any forfeiture restrictions applicable
to such Restricted Stock lapse will be reportable as ordinary
income at that time. For this purpose, “forfeiture
restrictions” include surrender to PG&E Corporation of
Restricted Stock as described above. You may elect to be
taxed at the time the Restricted Stock is awarded to you, rather
than when the restrictions lapse by filing an election under
Section 83(b) of the Code with the Internal Revenue Service within
thirty (30) days after the Date of Award. Failure to make this filing within the thirty (30) day period will
result in the recognition of ordinary income by you (in the event
the Fair Market Value of the Restricted Stock increases after the
date of purchase) as the forfeiture restrictions lapse.
YOU ACKNOWLEDGE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT
PG&E CORPORATION’S, TO FILE A TIMELY ELECTION UNDER CODE
SECTION 83(b). YOU ARE RELYING SOLELY ON YOUR OWN ADVISORS
WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE A CODE
SECTION 83(b) ELECTION.
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Leaves of Absence |
For purposes of this Agreement, if you are on an approved leave
of absence from PG&E Corporation (or any of its subsidiaries),
or a recipient of Company sponsored disability benefits, you will
continue to be considered as employed. If you do not return
to active employment upon the expiration of your leave of absence
or the expiration of your PG&E Corporation sponsored disability
benefits, you will be considered to have voluntarily terminated
your employment. See above under “Voluntary
Termination.”
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Voting and Other Rights |
Subject to the terms of this Agreement, you shall have all the
rights and privileges of a shareholder of PG&E Corporation
while the Restricted Stock is held in escrow, including the right
to vote. As described above, all dividends, if any, on the
Restricted Stock shall be held in escrow and subject to the same
restrictions as the shares to which they relate.
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Restrictions on
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PG&E Corporation will not issue any Restricted Stock if the
issuance of such Restricted Stock at that time would violate any
law or regulation.
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Restrictions on Resale and Hedge Transactions |
By signing this Agreement, you agree not to sell any Restricted
Stock before the restrictions lapse or sell any shares acquired
under this award at a time when applicable laws, regulations or
Company or underwriter trading policies prohibit sale. In
particular, in connection with any underwritten public offering by
PG&E Corporation of its equity securities pursuant to an
effective registration statement filed under the Securities Act of
1933, you shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or
otherwise dispose or transfer for value or agree to engage in any
of the foregoing transactions with respect to any shares acquired
under this award without the prior written consent of PG&E
Corporation or its underwriters, for such period of time after the
effective date of such registration statement as may be requested
by PG&E Corporation or the underwriters.
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No Retention Rights |
This Agreement is not an employment agreement and does not give
you the right to be retained by PG&E Corporation (or its
subsidiaries). Except as otherwise provided in an applicable
employment agreement, the Company (or any of its subsidiaries)
reserves the right to terminate your employment at any time and for
any reason.
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Legends |
All certificates representing the Restricted Stock issued under this award shall, where applicable, have endorsed thereon the following legends:
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER SET FORTH IN AN AGREEMENT BETWEEN
PG&E CORPORATION AND THE REGISTERED HOLDER, OR HIS OR HER
PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICE OF PG&E CORPORATION AND WILL BE
FURNISHED UPON WRITTEN REQUEST TO THE CORPORATE SECRETARY OF
PG&E CORPORATION BY THE HOLDER OF RECORD OF THE SHARES
REPRESENTED BY THIS CERTIFICATE.”
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Applicable Law |
This Agreement will be interpreted and enforced under the laws
of the State of California.
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By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the LTIP.