SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section
PROXY STATEMENT PURSUANT TO SECTION 14(a) of
the Securities Exchange Act ofOF THE
SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
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14a-6(e)(2))
/ / Definitive Proxy Statement
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/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
| [X] | Preliminary Proxy Statement | |
| [ ] | Definitive Proxy Statement | |
| [ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| [ ] | Definitive Additional Materials | |
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PG & E Corporation
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 | PG&E Corporation and Pacific Gas and Electric Company Joint Notice of 2002 Annual Meetings • Joint Proxy Statement |
March 13, 2000
2002
To the Shareholders of PG&E Corporation and Pacific Gas and Electric Company:
You are cordially invited to attend the fourth annual meeting of PG&E
Corporation and the 94th annual meeting of Pacific Gas and Electric Company. The
meetings will be held concurrently on Wednesday, April 19, 2000, at 10:00 a.m.,
at the Four Seasons Hotel - Boston, 200 Boylston Street, Boston, Massachusetts.
PG&E Corporation is a national energy-based holding company, with businesses
that include a diverse group of U.S.-based power generating, gas pipeline, and
energy commodity trading and services businesses. PG&E Corporation also is the
parent company of Pacific Gas and Electric Company, the regulated utility that
delivers gas and electricity to one in every 20 Americans.
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 2000
| You are cordially invited to attend the 6th annual meeting of PG&E Corporation and the 96th annual meeting of Pacific Gas and Electric Company. The meetings will be held concurrently on Wednesday, April 17, 2002, at 10:00 a.m., in the Masonic Auditorium, 1111 California Street, San Francisco, California. | ||
| 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 appointment of independent public accountants for 2002 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 LLP as the independent public accountants for 2002, as set forth in the Joint Proxy Statement. | ||
| PG&E Corporation shareholders also will be asked to vote on two management proposals to amend PG&E Corporation’s Articles of Incorporation and Bylaws to (1) implement enhancement of simple majority voting, and (2) reduce the authorized range of directors and transfer the provision that establishes the authorized range of directors from the Bylaws to the Articles of Incorporation. 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” these proposals. | ||
| Pacific Gas and Electric Company shareholders also will be asked to vote on five management proposals to amend Pacific Gas and Electric Company’s Articles of Incorporation and Bylaws to (1) establish a classified Board of Directors, (2) reduce the authorized range of directors and transfer the provision that establishes the authorized range of directors from the Bylaws to the Articles of Incorporation, (3) transfer the provision that prohibits cumulative voting in the election of directors from the Bylaws to the Articles of Incorporation, (4) include constituency provisions, and (5) require that shareholder action be taken at an annual or special meeting. For the reasons stated in the Joint Proxy Statement, the Pacific Gas and Electric Company Board of Directors and management recommend that Pacific Gas and Electric Company shareholders vote “FOR” these proposals. | ||
| 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. For your convenience, we offer you the option of executing and submitting your proxy and voting instructions over the Internet, by telephone, or by mail. Whether or not you plan to attend, please vote as soon as possible so that your shares can be represented at the annual meetings. | ||
| 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 come before the meetings, and respond to shareholders’ questions. |
| Sincerely, |
 |
| 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 |
Table of Contents
| Joint Notice of Annual Meetings of Shareholders | |||||
| Joint Proxy Statement | |||||
| Questions and Answers | |||||
| Item No. 1: Election of Directors | |||||
| Information Regarding the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company | |||||
| Item No. 2: Ratification of Appointment of Independent Public Accountants | |||||
| Item Nos. 3-4: PG&E Corporation Management Proposals (To Be Voted on by PG&E Corporation Shareholders Only) | |||||
| Item Nos. 5-9: Pacific Gas and Electric Company Management Proposals (To Be Voted on by Pacific Gas and Electric Company Shareholders Only) | |||||
| Item Nos. 10-16: PG&E Corporation Shareholder Proposals (To Be Voted on by PG&E Corporation Shareholders Only) | |||||
| Executive Compensation | |||||
| Report of the Audit Committees | |||||
| Other Information | |||||
| Appendix A – Articles Third and Eighth of the Restated Articles of Incorporation and Article II of the Bylaws of PG&E Corporation (As Proposed to Be Amended) | |||||
| Appendix B – Articles Fifth, Sixth, Seventh, and Eighth of the Restated Articles of Incorporation and Article II of the Bylaws of Pacific Gas and Electric Company (As Proposed to Be Amended) | |||||
| March 13, 2002 |
To the nominees for directors and the ratification of the appointment of
Deloitte & Touche as the independent public accountants for 2000, 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 two management proposals to amend PG&E Corporation's
Articles of Incorporation. The first proposal implements the elimination of a
"supermajority vote" provision in the corporation's Articles of Incorporation,
consistent with a vote of the shareholders at the 1999 Annual Meeting, and makes
related changes. The second management proposal, which amends the corporation's
Articles of Incorporation, reduces the size of the PG&E Corporation Board of
Directors to a range of between seven and 13 directors, from the current
authorized range of nine to 17. 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" these proposals.
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 separate 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 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
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Table of Contents
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 7
Corporation and
Pacific Gas and Electric Company
Item No. 2: Ratification of Appointment of 13
Independent Public Accountants
Item Nos. 3-4: Management Proposals 14
(To Be Voted on by PG&E Corporation
Shareholders Only)
Item Nos. 5-10: Shareholder Proposals 17
(To Be Voted on by PG&E Corporation
Shareholders Only)
Executive Compensation 25
Other Information 38
Appendix A--Article Eighth of the Restated Articles of A-1
Incorporation of PG&E Corporation
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Joint Notice of Annual Meetings of Shareholders of PG&E Corporation and Pacific Gas and Electric Company
March 13, 2000
TO THE SHAREHOLDERS OF PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY:Company:
The annual meetings of shareholders of PG&E Corporation and Pacific Gas and Electric Company will be held concurrently on Wednesday, April 19, 2000,17, 2002, at 10:00 a.m., atin the Four Seasons Hotel - Boston, 200 BoylstonMasonic Auditorium, 1111 California Street, Boston,
Massachusetts,San Francisco, California, for the purpose of considering the following matters:
(1) For PG&E Corporation and Pacific Gas and Electric Company shareholders,
to elect the following 11 and 12 directors, respectively, to each Board
for the ensuing year:
| (1) | For PG&E Corporation and Pacific Gas and Electric Company shareholders, to elect the following nine and ten directors, respectively, to each Board for the ensuing year: |
| David R. Andrews | Robert D. Glynn, Jr. | Carl E. Reichardt | ||
| David A. Coulter | David M. Lawrence, MD | Gordon R. Smith* | ||
| C. Lee Cox | Mary S. Metz | Barry Lawson Williams | ||
| William S. Davila | ||||
| * Gordon R. Smith is a nominee for director of | ||||
| (2) | For PG&E Corporation and Pacific Gas and Electric Company shareholders, to ratify each Board | |
| (3) | For PG&E Corporation shareholders only, to act upon two management proposals described on pages of the Joint Proxy Statement, | |
| (4) | For Pacific Gas and Electric Company shareholders only, to act upon five management proposals described on pages - of the Joint Proxy Statement, | |
| (5) | For PG&E Corporation shareholders only, to act upon proposals submitted by PG&E Corporation shareholders and described on pages - of the Joint Proxy Statement, if such proposals are properly presented at the meeting, and | |
| (6) | 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. |
The Boards of Directors have fixed the close of business on February 19, 2002, as the record date for the purpose of determining shareholders who are entitled to receive notice of and to vote at the annual meetings.
| By Order of the Boards of Directors, | |
 | |
| Linda Y.H. Cheng | |
| Corporate Secretary, | |
| PG&E Corporation and | |
| Pacific Gas and Electric Company |
Joint Proxy Statement
This Joint Proxy Statement provides information concerning the Joint Annual Meetings of 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 2000 forwhich will be held concurrently on Wednesday, April 17, 2002. The Joint Proxy Statement and proxy cards, together with the PG&E Corporation and Pacific Gas and Electric Company (3) For PG&E Corporation shareholders only,joint 2001 Annual Report to act upon two management
proposals describedShareholders, were mailed beginning on pages [14?]- [16?]or about March 13, 2002.
Questions and Answers
Why did you send me this proxy statement and a proxy card?
The Boards of the Joint Proxy
Statement,
(4) For PG&E Corporation shareholders only, to act upon six proposals
submitted by PG&E Corporation shareholders and described on
pages [17?]-Directors 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(Boards) are soliciting proxies for use at their respective annual meetings, andincluding any adjournments or postponements thereof.
Shareholderspostponements. This proxy statement and a proxy card were sent to anyone who owned shares of recordcommon stock of PG&E Corporation andand/or shares of preferred stock of Pacific Gas and Electric Company at the close of business on February 22, 2000, and valid proxyholders19, 2002. This date is the record date set by the Boards to determine which shareholders may attend and vote at the respectiveJoint Annual Meetings. This Joint Proxy Statement describes the matters management expects will be voted on at the annual meetings. If your shares are
registered in the name of a brokerage firm, bank, or trustee andmeetings, gives 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 bothinformation about PG&E Corporation and Pacific Gas and Electric Company and their managements, and provides general information regarding the voting process and attendance at the annual meetings.
How do I vote?
You can attend and vote at the meetings, or the proxyholders will vote your shares as you indicate on your proxy. There are three ways to submit your proxy.
| Over the Internet at http://www.eproxy.com/pcg/ |
If you submit your proxy over the Internet or by telephone, your vote must be received by 4:00 p.m., Eastern daylight time, on Tuesday, April 16, 2002. These Internet and telephone voting procedures comply with California law.
What am I voting on and what are the Board’s voting recommendations?
PG&E Corporation shareholders will be voting on the following items:
| Item No. | Description | Board’s Voting Recommendation | ||||||
| 1 | Election of Directors | For all nominees | ||||||
| 2 | Ratification of Appointment of Independent Public Accountants | For this proposal | ||||||
| 3-4 | Management Proposals | For these proposals | ||||||
| 10-16 | Shareholder Proposals | Against these proposals | ||||||
Pacific Gas and Electric Company shareholders will be voting on the following items:
| Item No. | Description | Board’s Voting Recommendation | ||||||
| 1 | Election of Directors | For all nominees | ||||||
| 2 | Ratification of Appointment of Independent Public Accountants | For this proposal | ||||||
| 5-9 | Management Proposals | For these proposals | ||||||
1
What vote is required to approve each item?
To elect directors:
| The nominees receiving the largest number of votes cast are elected as directors, up to the maximum number of directors to be chosen at the meetings. In other words, the nine nominees for director of PG&E Corporation and the ten nominees for director of Pacific Gas and Electric Company receiving the greatest number of votes will be elected. Votes against a nominee or votes withheld will have no legal effect. |
To approve the PG&E Corporation management proposals to amend the Articles of Incorporation and Bylaws:
| A majority of the outstanding shares of PG&E Corporation common stock must approve each proposal. Abstentions and broker non-votes (see definition below) will have the same effect as a vote against a proposal. |
| To approve the Pacific Gas and Electric Company management proposals to amend the Articles of Incorporation and Bylaws: |
| A majority of the outstanding shares of Pacific Gas and Electric Company voting stock must approve each proposal. Abstentions and broker non-votes (see definition below) will have the same effect as a vote against a proposal. |
To approve other items:
| For each properly presented proposal, a majority of the shares represented and voting on the proposal must approve the proposal. The approval votes also must be greater than 25 percent of the shares entitled to vote. Abstentions will have the same effect as a vote against a proposal. Broker non-votes (see definition below) will not be considered in determining whether or not a proposal is approved. |
What is a broker non-vote?
If you hold your shares indirectly through a broker, bank, trustee, nominee, or other third party, that party is the registered owner of your shares and submits the proxy to vote your shares. You are the beneficial owner of the shares and typically you will be providedasked to provide the registered owner with instructions as to how your shares should be voted.
Broker non-votes occur when brokers or nominees have voted on some of the matters to be acted on at a meeting, but do not vote on certain other matters because, under the rules of the New York Stock Exchange, they are not permitted to vote on those other matters without instructions from the beneficial owners of the shares.
Will shareholders be asked to vote on matters other than those described on pages to of the Joint Proxy Statement?
If other matters are raised during the joint annual meetings, shareholders will vote on such matters only if PG&E Corporation or Pacific Gas and Electric Company, as appropriate, determines that these other matters satisfy advance notice requirements in the appropriate Bylaws and otherwise properly come before the annual meetings. If any other matter properly comes before the annual meetings, the proxyholders named on the enclosed proxy card will vote the shares for which they hold proxies at their discretion, to the extent permitted by law.
What shares are included on my proxy card?
For PG&E Corporation, the shares included on your proxy card represent all the shares of PG&E Corporation stock in your account, including shares in the PG&E Corporation Dividend Reinvestment Plan. For Pacific Gas and Electric Company, the shares included on your card represent all the shares of Pacific Gas and Electric Company preferred stock in your account.
If you are a shareholder of both PG&E Corporation common stock and Pacific Gas and Electric Company preferred stock, you will receive a separate proxy formcard for each company. Please mark, sign, date, and mail theIf you receive more than one proxy form promptly in the
accompanying envelope.
Ifcard for either company, it means your shares are held in more than one account. You should vote the shares on all your proxy cards. If you would like to consolidate your accounts, you may do so by contacting our transfer agent, Mellon Investor Services LLC, toll-free at 1-800-719-9056.
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How many copies of the proxy statement and annual report will I receive?
If you are a registered directly withholder of PG&E Corporation common stock and/or Pacific Gas and Electric Company (including shares held by participants in thepreferred stock, you will receive one proxy statement and annual report for each account.
If you are a beneficial owner of PG&E Corporation Dividend Reinvestment Plan) or if you are a participant who holds
PG&E Corporationcommon 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.eproxy.com/pcg/ or by telephone by calling the toll-free number
1-800-840-1208 from anywhere in the United States or Canada. 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 submittingpreferred stock and receive 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 byproxy materials through ADP Investor Communication Services on behalf(ADP), and there are multiple beneficial owners at the same address, you may receive fewer proxy statements and annual reports than the number of participating brokerage firmsbeneficial owners at that address. Securities and banks.
Please referExchange Commission regulations permit ADP to "Voting ondeliver only one proxy statement and annual report to multiple beneficial owners sharing an address, unless we receive contrary instructions from any beneficial owner at that same address. If you receive your proxy materials through ADP and wish to receive a separate proxy statement or annual report in the Internet or by Telephone" on pagefuture, please contact the office 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 of PG&E Corporation andor Pacific Gas and Electric Company,
- - --------------------------------------------------------------------------------as appropriate, at P.O. Box 193722, San Francisco, CA 94119-3722 or by calling 1 415-267-7070.
What if I return my proxy but don’t specify how I want my shares voted?
The PG&E Corporation proxyholders will vote those shares “For” Items 1 through 4 and “Against” Items 10 through 16. The Pacific Gas and Electric Company JOINT PROXY STATEMENT
INTRODUCTION
This Joint Proxy Statementproxyholders will vote those shares “For” Items 1, 2, and 5 through 9.
What if I do not submit my proxy?
Your shares will not be voted if you do not provide a proxy or vote at the annual meetings.
Can I change my proxy vote?
Yes, you can change your proxy vote or revoke your proxy any time before the annual meetings by (1) returning a later-dated proxy card, (2) entering a new vote over the Internet or by telephone, (3) notifying the Corporate Secretary in writing, or (4) submitting a written ballot at the meetings.
Is my vote confidential?
Yes. According to each company’s confidential voting policy, shareholder votes will only be revealed to a non-employee proxy tabulator or an independent inspector of election, except (1) as necessary to meet legal requirements, (2) in a dispute regarding authenticity of proxies and ballots, (3) in the event of a proxy contest, if the other party does not agree to comply with the confidential voting policy, and (4) where disclosure may be necessary for either company to assert or defend claims.
Who will count the votes?
Mellon Investor Services LLC (MIS) will act as the proxy tabulators and the inspectors of election for the 2002 annual meetings. MIS is provided to the shareholdersindependent of PG&E Corporation and Pacific Gas and Electric Company in connection withand their respective annual meetings of shareholdersdirectors, officers, and any adjournments or postponements
thereof. The annual meetingsemployees.
How many shares are scheduledeligible to be held concurrently on Wednesday,
April 19, 2000, at 10:00 a.m.,vote at the Four Seasons Hotel - Boston, 200 Boylston
Street, Boston, Massachusetts.
As a result of the formationannual meetings?
On February 19, 2002, there were 364,206,190 shares of PG&E Corporation in 1997, thecommon stock, without par value, outstanding and entitled to vote. Each share is entitled to one vote.
On February 19, 2002, there were 17,258,280 shares of Pacific Gas and Electric Company preferred stock, $25 par value, and 326,926,667 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.$5 par value, outstanding and entitled to vote. Each share is entitled to one vote. PG&E Corporation and a subsidiary hold 100 percent of the issued and outstanding shares of Pacific Gas and Electric Company common stock. Together they own 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 firstCompany’s preferred stock hold approximately 5 percent of the Company'sCompany’s total outstanding voting stock.
GENERAL INFORMATION
The Boards
May I attend the annual meetings?
All shareholders of Directorsrecord as of the close of business on February 19, 2002, may attend the annual meetings of PG&E Corporation and Pacific Gas and Electric CompanyCompany.
3
Real-time captioning services and assistive listening devices will be available at the meetings for the hearing impaired. Please contact an usher if you wish to be seated in the real-time captioning section or require an assistive listening device. Audio cassette recordings of the meetings may be requested by calling the office of the Corporate Secretary to request a cassette.
What do I need to do in order to attend the annual meetings?
If you are soliciting proxies hereunder for use at their respectivea registered shareholder, you will receive an admission ticket along with your proxy card. Please bring the admission ticket to the meetings.
If a broker, bank, trustee, nominee, or other third party holds your shares, please inform that party that you plan to attend the annual meetings and ask for a legal proxy. Bring the legal proxy to the shareholder registration area when you arrive at the meetings and we will issue you an admission ticket. If you cannot get a legal proxy in time, we will issue an admission ticket to you if you bring a copy of your brokerage or bank account statement showing that you owned PG&E Corporation or Pacific Gas and Electric Company stock as of February 19, 2002.
All shareholders must have an admission ticket to attend the annual meetings. Also, shareholders may be asked to present valid picture identification, such as a driver’s license or passport, before being admitted to the meetings. Cameras, recording devices, and other electronic devices will not be permitted at the meetings.
Will I be able to ask questions during the annual meetings?
During the meetings, there may be time for some shareholders to ask questions. The Chair of the meetings may need to limit questions in order to maintain an orderly meeting and to give shareholders the maximum opportunity to participate. Therefore, there may not be enough time for everyone to get a chance to speak. If you do not get a chance to ask questions during the meetings, members of management will be available after the meetings, and no items will be allowed into the meetings which might pose a concern for the safety of those attending.
How do I recommend someone to be helda director?
You may recommend any person to be a director of PG&E Corporation or Pacific Gas and Electric Company by writing to the Corporate Secretary. The Nominating and Compensation Committee will consider nominees recommended by shareholders for election to the Boards.
If you wish to nominate a candidate for director, you must provide timely and proper written notice of the nomination in the manner described in the Bylaws of the appropriate company. Notice of director nominations proposed to be brought before the 2003 annual meetings of PG&E Corporation or Pacific Gas and Electric Company must be received at the principal executive office of the appropriate company no later than January 27, 2003. For a copy of either company’s Bylaws, send a written request to that company’s Corporate Secretary.
When are shareholder proposals due for the 2003 annual meetings?
If you would like to submit a proposal for inclusion in either company’s proxy statement for the 2003 annual meetings, the company’s Corporate Secretary must receive your proposal by November 13, 2002.
If you would like to introduce any other business at either company’s 2003 annual meeting of shareholders, you must provide timely and proper written notice of the matter in the manner described in the Bylaws of the appropriate company. For a copy of either company’s Bylaws, send a written request to that company’s Corporate Secretary.
Notice of other business proposed to be brought before the 2003 annual meetings of PG&E Corporation or Pacific Gas and Electric Company must be received at the principal executive office of the appropriate company no later than January 27, 2003. However, if the 2003 annual meeting of either company is scheduled for a date that differs by more than 30 days from the anniversary date of the 2002 Joint Annual Meetings, the shareholder’s notice will be timely if it is received no later than the tenth day following the date on April 19, 2000,which each company publicly discloses the date of its 2003 annual meeting.
Shareholder proposals and nominations received after these deadlines will not be considered at any adjournments or postponements
thereof, and a respective form ofthe 2003 annual meetings.
4
How much did this proxy is provided with this Joint Proxy
Statement. This Joint Proxy Statement and the accompanying proxy form were first
mailed on or about March 13, 2000, tosolicitation cost?
PG&E Corporation and Pacific Gas and Electric Company shareholders entitledhired D.F. King & Co., Inc. to vote atassist in the annual meetings.
To the knowledgedistribution of the Boardsproxy materials and solicitation of Directors ofvotes. The estimated fee is $11,500 plus reasonable out-of-pocket expenses. In addition, 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 Corporationwill reimburse brokerage houses and Pacific Gasother custodians, nominees, and Electric Company Joint Notice of Annual Meetings of Shareholders and are
explained in more detail on the following pages. By executing and submitting
yourfiduciaries for reasonable out-of-pocket expenses for forwarding proxy and voting instructions,solicitation material to shareholders.
What is the address of the principal executive office?
Correspondence may be addressed to:
| PG&E Corporation or Pacific Gas and Electric Company Corporate Secretary P.O. Box 193722 San Francisco, CA 94119-3722 |
Your vote is important.
5
Nine and 12ten 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.qualified, except in the case of death, resignation, or removal of a director. The 11nine nominees for director of PG&E Corporation and the 12ten 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 inof 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 inon the enclosed PG&E Corporation or Pacific Gas and Electric Company proxy card 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
- - --------------------------------------------------------------------------------
Nominees for
The Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company BIOGRAPHICAL INFORMATION
 | David R. Andrews Mr. Andrews is Senior Vice President Government Affairs, General Counsel, and Secretary of PepsiCo, Inc. (food and beverage businesses), and has held that position since February 2002. Prior to joining PepsiCo, Inc., Mr. Andrews was a partner in the law firm of McCutchen, Doyle, Brown & Enersen, LLP from May | |
 | David A. Mr. Coulter is Vice Chairman of J.P. Morgan Chase & Co. (financial services and retail banking), and has held that position since January 2001. Prior to the merger with J.P. Morgan & Co. Incorporated, he was Vice Chairman of The Chase Manhattan Corporation (bank holding company) from August 2000 to December 2000. He was a | |
 | C. 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. Mr. Cox, | |
 | William S. 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. Mr. Davila, | |
 | Robert D. 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, | |
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 | David M. 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, | |
 | Mary S. 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, | |
 | Carl E. Mr. Reichardt is Vice Chairman of the Ford Motor Company, and has held that position since October 2001. He is the 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, | |
 | Gordon R. Smith* Mr. Smith is President and Chief Executive Officer of and has been an officer of Pacific Gas and Electric Company since 1980. Mr. Smith, 54, has been a director of Pacific Gas and Electric Company since 1997. | |
 | Barry Lawson Williams Mr. Williams is President of Williams Pacific Ventures, Inc. (business consulting and mediation), and has held that position since | |
| * | Gordon R. Smith is a nominee for director of Pacific Gas and Electric Company only. |
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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 and Audit Committee. The current membership and duties of these committees are as follows:
| Nominating and | ||||||||
| Executive | Audit | Finance | Compensation | Public Policy | ||||
| Committees | Committees | Committee | Committee | Committee | ||||
| R. D. Glynn, Jr.* C. L. Cox M. C. E. Reichardt G. R. Smith(1) B. L. Williams | C. L. Cox* D. R. Andrews W. S. Davila M. S. Metz B. L. Williams | B. L. Williams* D. R. Andrews D. A. Coulter C. E. Reichardt | C. E. Reichardt* D. A. Coulter C. L. Cox D. M. Lawrence, MD | M. S. Metz* W. S. Davila D. M. Lawrence, MD |
| * | Chair | |
| (1) | Member of the Pacific Gas and Electric Company Executive Committee only. |
Executive Committee
only.
EXECUTIVE COMMITTEESCommittees
Each Executive Committee, 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. One PG&E Corporation Executive Committee meeting was held in 19992001 and no Pacific Gas and Electric Company Executive Committee meetings were held in 1999.
AUDIT COMMITTEE2001.
Audit Committees
The Audit CommitteeCommittees of PG&E Corporation (five meetings were held in 1999)
advises2001) and assistsPacific Gas and Electric Company (five meetings were held in 2001) advise and assist the BoardBoards of Directors of those entities in fulfilling itstheir 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, Pacific Gas and itsElectric Company, and their respective subsidiaries. The Audit Committee satisfies itselfCommittees satisfy themselves as to the independence and competence of PG&E Corporation'sCorporation’s and Pacific Gas and Electric Company'sCompany’s independent public accountants, and reviewsreview and discussesdiscuss with the independent accountants and with PG&E Corporation's orCorporation’s and Pacific Gas and Electric Company'sCompany’s officers and internal auditors the scope and results of the independent accountants'accountants’ audit work, consolidated quarterly and annual financial statements, the quality and effectiveness of internal audit and
control systems,controls, and compliance with laws, regulations, policies, and programs. The Audit CommitteeCommittees also recommendsrecommend to the appropriate Board of Directors the firm of independent public accountants to be selected to audit PG&E Corporation'sCorporation’s and Pacific Gas and Electric Company'sCompany’s accounts, and makesmake further inquiries as it
deemsthey deem necessary or desirable to inform itselfthemselves as to the conduct of the affairs of PG&E Corporation's or its subsidiaries' affairs.Corporation, Pacific Gas and Electric Company, and their respective subsidiaries.
The members of the Audit Committees of PG&E Corporation and Pacific Gas and Electric Company are identical. The Audit Committee isCommittees are composed entirely of directors who are (a)(1) financially knowledgeable, including at least one member who has accounting or related financial management expertise, (2) neither current nor former officers or employees of PG&E Corporation, Pacific Gas and Electric Company, or any of itstheir subsidiaries, (b)(3) not consultants to PG&E Corporation, Pacific Gas and Electric Company, or any of itstheir subsidiaries, and (c)(4) neither current nor former officers or employees of any other corporation on whose board of directors any PG&E Corporation or Pacific Gas and Electric Company officer serves as a member. The members of the Audit Committees are independent as defined in the listing standards of the New York Stock Exchange and the American
9
Finance Committee
The Finance Committee of PG&E Corporation (eight meetings were held in 1999)2001) 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
7
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'sCommittee’s Chair.
NOMINATING AND COMPENSATION COMMITTEE
Nominating and Compensation Committee
The Nominating and Compensation Committee of PG&E Corporation (five(four meetings were held in 1999)2001) advises and assists the Boards of PG&E Corporation and Pacific Gas and Electric Company 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 the compensation of the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company is established by the full Board of Directors of PG&E Corporation or Pacific Gas and Electric Company Board (as the case may be) upon recommendation of the Committee, and the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers of PG&E Corporation and its subsidiaries. The Committee also reviews long-range planning for executive development and succession, and the composition and performance of the Boards of PG&E Corporation and Pacific Gas and Electric Company.
The Nominating and Compensation Committee is composed entirely of directors who are (a)(1) neither current nor former officers or employees of PG&E Corporation or any of its subsidiaries, (b)(2) not consultants to PG&E Corporation or any of its subsidiaries, and (c)(3) neither 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'sCommittee’s Chair.
The Nominating and Compensation
Public Policy 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(two meetings were held in 1999)2001) advises and assists the Board of Directors with respect to public policy issues whichthat could affect significantly the interests of the customers, shareholders, or employees of PG&E Corporation, or itsPacific Gas and Electric Company, and their respective 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, Pacific Gas and itsElectric Company, and their subsidiaries. The Committee also reviews significant societal, governmental, and environmental trends and issues that may affect the operations of PG&E Corporation, Pacific Gas and Electric Company, or itstheir 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'sCommittee’s Chair.
ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
Eight
Attendance at Board and Committee Meetings
Thirteen meetings of the PG&E Corporation Board of Directors and 22twenty meetings of the PG&E Corporation Board committees were held in 1999.2001. Overall attendance of incumbent directors at such meetings was 95%94%. Individual attendance at meetings of the PG&E Corporation Board of Directors and Board committees was as follows: 8
A. Clarke 100%, H. M. Conger 93%Andrews 96%, D. A. Coulter 95%84%, C. L. Cox 100%, W. S.
Davila 88%, R. D. Glynn, Jr. 100%, D. M. Lawrence 77%, M. S. Metz 100%, C. E.
Reichardt 95%, J. C. Sawhill 96%, and B. L. Williams 95%.
Six meetings of the Pacific Gas and Electric Company Board of Directors were
held in 1999. Overall attendance of incumbent directors at these meetings was
97%. Individual attendance at the meetings 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 83%84%, M. S. Metz 100%95%, C. E. Reichardt 96%, and B. L. Williams 96%.
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Twelve meetings of the Pacific Gas and Electric Company Board of Directors and five meetings of the Pacific Gas and Electric Company Board committees were held in 2001. Overall attendance of incumbent directors at such meetings was 96%. Individual attendance at the meetings was as follows: D. R. Andrews 100%, J.D. A. Coulter 92%, C. SawhillL. Cox 94%, W. S. Davila 100%, R. D. Glynn, Jr. 100%, D. M. Lawrence 92%, M. S. Metz 94%, C. E. Reichardt 92%, G. R. Smith 100%, and B. L. Williams 100%94%. There were no
meetings
Compensation of the Pacific Gas and Electric Company Executive Committee in 1999.
COMPENSATION OF DIRECTORSDirectors
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'sCompany’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 grants 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, as elected by the director, 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'sdirector’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'sdirector’s retirement from the Board, upon a director'sdirector’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 4, 1999,2, 2001, each non-employee director received 323511 restricted shares of PG&E Corporation common stock. DirectorsIn addition, directors who were granted stock options received options to purchase 1,4921,077 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 9
$30.9375$19.5625 per share, and directors who were granted common stock equivalents received 161.616255 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
11
Certain Relationships and Related Transactions
Mr. Andrews, a partner in the law firmdirector of Quadros & Johnson.
Ms. Quadros is the sister of E. James Macias, Senior Vice PresidentPG&E Corporation and General
Manager of the Generation, Transmission, and Supply Business Unit of Pacific Gas
and Electric Company. Quadros & Johnson was paid approximately $218,000 by Pacific Gas and Electric Company, during 1999resigned from the law firm of McCutchen, Doyle, Brown & Enersen, LLP (McCutchen) in connection with providing
certainJanuary 2002. Mr. Andrews did not personally provide legal services to that entity in the normal course of business. SuchPG&E Corporation, Pacific Gas and Electric Company, or their affiliates. During 2001, McCutchen provided general legal services are expected to continue to be provided to Pacific Gas and Electric Company in the future.
BOARD OF DIRECTORS RETIREMENT POLICYnormal course of business.
Legal Proceedings
Proofs of Claims Filed in the Bankruptcy Case
On April 6, 2001, Pacific Gas and Electric Company filed a voluntary petition for relief under the provisions of Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of California (Bankruptcy Court). Pursuant to Chapter 11 of the U.S. Bankruptcy Code, Pacific Gas and Electric Company retains control of its assets and is authorized to operate its business as a debtor in possession while being subject to the jurisdiction of the Bankruptcy Court.
Bankruptcy law imposes an automatic stay to prevent parties from making certain claims or taking certain actions that would interfere with the estate or property of a Chapter 11 debtor. In general, Pacific Gas and Electric Company may not pay pre-petition debts without the Bankruptcy Court’s permission. Through September 5, 2001, the last day for non-governmental creditors to file proofs of claim, non-governmental claims were submitted for an approximate aggregate amount of $42.1 billion. This amount includes claims filed by generators, which Pacific Gas and Electric Company believes have been overstated, and claims by financial institutions, which Pacific Gas and Electric Company believes contain significant duplication. The Bankruptcy Court also has disallowed approximately $9 billion of claims filed by non-governmental entities. J.P. Morgan Trust Co. of Delaware submitted a proof of claim for approximately $1.45 million dollars relating to its ownership interest in shares of Pacific Gas and Electric Company’s preferred stock. J.P. Morgan Chase Bank submitted a proof of claim for approximately $173 million, related to its provision of a stand-by letter of credit which provides credit and liquidity support for certain of Pacific Gas and Electric Company’s Pollution Control Bonds. Both entities are subsidiaries of J.P. Morgan Chase & Co., which was created on December 31, 2000, in a merger between The Chase Manhattan Corporation and J.P. Morgan & Co. Incorporated. Mr. David Coulter, a director of both PG&E Corporation and Pacific Gas and Electric Company, is a Vice Chairman of J.P. Morgan Chase & Co. and J.P. Morgan Chase Bank, responsible for Retail and Middle Market Financial Services and for Investment Management and Private Banking.
California Attorney General Complaint
On January 10, 2002, the California Attorney General (AG) filed a complaint in the San Francisco Superior Court against PG&E Corporation and its directors, as well as against the directors of Pacific Gas and Electric Company, based on allegations of unfair or fraudulent business acts or practices in violation of California Business and Professions Code Section 17200. Among other allegations, the AG alleges that past transfers of money from Pacific Gas and Electric Company to PG&E Corporation, and allegedly from PG&E Corporation to other affiliates of PG&E Corporation, violated various conditions established by the California Public Utilities Commission (CPUC) in decisions approving the holding company formation. The AG also alleges that the December 2000 and January and February 2001 ringfencing transactions by which PG&E Corporation subsidiaries complied with credit rating agency criteria to establish independent credit ratings violated the holding company conditions. The AG alleges that these ringfencing transactions included conditions that restricted PG&E National Energy Group’s ability to provide any funds to PG&E Corporation through dividends, capital distributions or similar payments, reducing PG&E Corporation’s cash and thereby impairing PG&E Corporation’s ability to comply with the first priority condition and subordinating Pacific Gas and Electric Company’s interests to the interests of PG&E Corporation and its other affiliates. (On January 9, 2002, the CPUC issued a decision interpreting the “first priority condition” and concluded that the condition, at least under certain circumstances, includes the requirement that each of the holding companies “infuse the utility with all types of capital necessary for the utility to fulfill its obligation to serve.” The three major California investor-owned energy utilities and their parent holding companies had opposed the broader interpretation, first contained in a proposed decision released for comment on December 26, 2001, as being inconsistent with the prior 15 years’ understanding of that condition as applying more narrowly to a priority on capital needed for investment purposes.)
The AG seeks injunctive relief, the appointment of a receiver, restitution in an amount according to proof, civil penalties of $2,500 against each defendant for each violation of California Business and Professions Code section 17200 and that the total penalty not be less than $500 million, and costs of the lawsuit.
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In addition, the AG alleges that, through Pacific Gas and Electric Company’s bankruptcy proceedings, PG&E Corporation and Pacific Gas and Electric Company engaged in unlawful, unfair, and fraudulent business practices by seeking to implement the transactions proposed in the proposed Plan of Reorganization filed in Pacific Gas and Electric Company’s bankruptcy proceeding. The AG’s complaint also seeks restitution of assets allegedly wrongfully transferred to PG&E Corporation from Pacific Gas and Electric Company. The Bankruptcy Court has original and exclusive jurisdiction of these claims. Therefore, on February 8, 2002, PG&E Corporation filed a notice of removal in the Bankruptcy Court to transfer the AG’s complaint to the Bankruptcy Court.
On February 15, 2002, a motion to dismiss, or in the alternative, to stay, the complaint was filed in the Bankruptcy Court.
Federal Securities Lawsuit
On April 16, 2001, a complaint was filed against PG&E Corporation and Pacific Gas and Electric Company in the U.S. District Court for the Central District of California entitledJack Gillam; DOES 1 TO 5, Inclusive, and All Persons similarly situated vs. PG&E Corporation, Pacific Gas and Electric Company; and DOES 6 to 10, Inclusive.The complaint was filed after Pacific Gas and Electric Company filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Pacific Gas and Electric Company informed plaintiff that the action is stayed by the automatic stay provisions of the U.S. Bankruptcy Code and on or about April 23, 2001, plaintiff filed a notice of voluntary dismissal without prejudice with respect to Pacific Gas and Electric Company. By order entered on or about May 31, 2001, the case was transferred to the U.S. District Court for the Northern District of California.
On August 9, 2001, the plaintiff filed a first amended complaint entitledJack Gillam, et al. vs. PG&E Corporation, Robert D. Glynn, Jr., and Peter A. Darbee,in the U.S. District Court for the Northern District of California. The first amended complaint, purportedly brought on behalf of all persons who purchased PG&E Corporation common stock or certain shares of Pacific Gas and Electric Company’s preferred stock between July 20, 2000, and April 9, 2001, claims that defendants caused PG&E Corporation’s Condensed Consolidated Financial Statements for the second and third quarters of 2000 to be materially misleading in violation of federal securities laws by recording as a deferred cost and capitalizing as a regulatory asset the under-collections that resulted when escalating wholesale energy prices caused Pacific Gas and Electric Company to pay far more to purchase electricity than it was permitted to collect from customers. The defendants filed a motion to dismiss the first amended complaint, based largely on public disclosures by PG&E Corporation, Pacific Gas and Electric Company, and others regarding the under-collections, the risk that they might not be recoverable, the financial consequences of non-recovery, and other information from which analysts and investors could assess for themselves the probability of recovery. On January 14, 2002, the district court granted the defendants’ motion to dismiss the plaintiffs’ complaint with leave to amend the complaint. On February 4, 2002, the plaintiffs filed a second amended complaint in the U.S. District Court for the Northern District of California entitledJack Gillam, et al. vs. PG&E Corporation, and Robert D. Glynn, Jr.In addition to containing many of the same allegations as were contained in the prior complaint, the complaint contains allegations similar to the allegations in the California Attorney General’s complaint against PG&E Corporation, discussed above. The defendants intend to file a motion to dismiss the second amended complaint.
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. 10
SECURITY OWNERSHIP OF MANAGEMENTDue to the current financial and business situation, the Boards of Directors of PG&E Corporation and Pacific Gas and Electric Company elected to adopt a one-year waiver of the retirement policy for purposes of nominating candidates for re-election at the 2002 annual meetings of shareholders. The Boards may determine whether to waive the retirement policy on a year-to-year basis in light of the current business climate.
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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, 2000,2002, 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 pagepages , 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, 2000,2002, 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 CorporationCorporation’s deferred compensation and equity plans.
| Beneficial | Common Stock | |||||||||||
| Name | Stock Ownership(1)(2) | Equivalents(3) | Total | |||||||||
David R. Andrews(4) | 1,025 | 767 | 1,792 | |||||||||
David A. Coulter(4) | 4,630 | 15,218 | 19,848 | |||||||||
C. Lee Cox(4) | 28,544 | 1,506 | 30,050 | |||||||||
William S. Davila(4) | 16,865 | 11,530 | 28,395 | |||||||||
Robert D. Glynn, Jr.(5) | 1,029,201 | 92,451 | 1,121,652 | |||||||||
David M. Lawrence, MD(4) | 27,206 | 2,307 | 29,513 | |||||||||
Mary S. Metz(4) | 19,860 | 2,262 | 22,122 | |||||||||
Carl E. Reichardt(4) | 16,788 | 13,601 | 30,389 | |||||||||
Gordon R. Smith(6) | 471,289 | 13,664 | 484,953 | |||||||||
Barry Lawson Williams(4) | 14,314 | 5,689 | 20,003 | |||||||||
| All PG&E Corporation directors and executive officers as a group (18 persons) | ||||||||||||
| All Pacific Gas and Electric Company directors and executive officers as a group (15 persons) | ||||||||||||
| (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 |
Also includes the following shares of PG&E Corporation common stock in which the beneficial owners share voting and investment power: Mr. Coulter 1,8434,630 shares, Mr. Cox 6,91216,761 shares, Mr. Davila 200 shares, Dr. Lawrence 360 shares, Dr. Metz 3,8865,850 shares, Mr. Smith 3,884 shares, Mr. XX,XXX shares, all PG&E Corporation directors and 11
XX,XXX shares, and all Pacific Gas and Electric Company directors and executive officers as a group XX,XXX 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,
2000, through the exercise of vested stock options granted under the PG&E
Corporation Stock Option Plan, as follows: Mr. Clarke 125,000 shares,
Mr. Coulter 1,749 shares, Mr. Glynn 460,825 shares, Dr. Lawrence 1,749
shares, Dr. Metz 1,312 shares, Mr. Reichardt 1,749 shares, Dr. Sawhill 1,312
shares, Mr. Smith 179,635 shares, Mr. Williams 1,749 shares,
Mr. XX,XXX shares, Mr. XX,XXX shares, all PG&E
Corporation directors and executive officers as a group XXX,XXX shares, and
all Pacific Gas and Electric Company directors and executive officers as a
group XXX,XXX 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) Reflects the number of stock units purchased by officers and directors
through salary and other compensation deferrals. The value of each stock
unit purchased is equal to the value of a share of PG&E Corporation common
stock and fluctuates daily based on the market price of PG&E Corporation
common stock. The directors and officers who have purchased these stock
units share the same market risk as PG&E Corporation shareholders, although
they do not have voting rights with respect to these stock units.
(4) Mr. Clarke, Mr. Conger, Mr. Coulter, Mr. Cox, Mr. Davila, Mr. Glynn,
Dr. Lawrence, Dr. Metz, Mr. Reichardt, Dr. Sawhill, and Mr. Williams are
directors of both PG&E Corporation and Pacific Gas and Electric Company.
(5) 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 .
(6) Mr. , Mr. , and Mr. are executive
officers of PG&E Corporation named in the Summary Compensation Table on page
.
(7) Mr. was an executive officer of PG&E Corporation until
, and is named in the Summary Compensation Table on page . The
information set forth in the table for Mr. includes shares of
PG&E Corporation common stock and common stock equivalents beneficially
owned by Mr. .
(8) Mr. , Mr. , Mr. , and
Mr. are executive officers of Pacific Gas and Electric Company
named in the Summary Compensation Table on page .
12
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| (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, 2002, through the exercise of vested stock options granted under the PG&E Corporation Long-Term Incentive Program, as follows: Mr. Cox 11,783 shares, Mr. Glynn 1,006,691 shares, Dr. Lawrence 11,783 shares, Dr. Metz 11,783 shares, Mr. Reichardt 11,783 shares, Mr. Smith 448,434 shares, Mr. Williams 9,510 shares, , all PG&E Corporation directors and executive officers as a group 2,910,256 shares, and all Pacific Gas and Electric Company directors and executive officers as a group 2,182,837 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 PG&E Corporation Long-Term Incentive Program. |
14
| (3) | Reflects the number of stock units purchased by officers and directors through salary and other compensation deferrals or awarded under equity compensation plans. The value of each stock unit is equal to the value of a share of PG&E Corporation common stock and fluctuates daily based on the market price of PG&E Corporation common stock. The directors and officers who own these stock units share the same market risk as PG&E Corporation shareholders, although they do not have voting rights with respect to these stock units. |
| (4) | Mr. Andrews, Mr. Coulter, Mr. Cox, Mr. Davila, Dr. Lawrence, Dr. Metz, Mr. Reichardt, and Mr. Williams are directors of both PG&E Corporation and Pacific Gas and Electric Company. |
| (5) | Mr. Glynn is a director and executive officer of PG&E Corporation, and also is a director of Pacific Gas and Electric Company. He is named in the Summary Compensation Table on pages . |
| (6) | 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 pages . |
15
On the recommendation of the Audit Committee of PG&E Corporation, the Boards
of DirectorsCommittees of PG&E Corporation and Pacific Gas and Electric Company, the Boards of Directors of those entities have selected Deloitte & Touche LLP as the independent public accountants to examine the consolidated financial statements of PG&E Corporation and Pacific Gas and Electric Company and
their respective subsidiaries for the year 2000.2002. Deloitte & Touche LLP is a major national accounting firm with substantial expertise in the energy and utility businesses. Deloitte & Touche LLP has been employed to perform this function for PG&E Corporation and Pacific Gas and Electric Company since 1999. The firm of
Arthur Andersen LLP was employed as independent public accountants from 1981
until
Audit Fees. For the selection ofyear ended December 31, 2001, estimated fees for services rendered by Deloitte & Touche. DuringTouche LLP for the reviews of Forms 10-Q and for the audits of the financial statements of PG&E Corporation and its subsidiaries are $3.6 million. This amount includes fees for stand-alone audits of various subsidiaries, including estimated fees of $0.9 million for Pacific Gas and Electric Company and its subsidiaries.
Financial Information Systems Design and Implementation Fees. For the year ended December 31, 2001, Deloitte & Touche LLP and its affiliates did not render any services related to the design and implementation of financial information systems for PG&E Corporation or Pacific Gas and Electric Company.
All Other Fees. For the year ended December 31, 2001, aggregate fees for all other services rendered by Deloitte & Touche LLP and its affiliates to PG&E Corporation and its subsidiaries consisted of $1.6 million of fees for services relating to financings, regulatory filings, and accounting consultations that period, good relations
were maintainedshould be performed only by the Corporation’s independent auditor (“audit related fees”), $3.0 million of fees for tax services, and there were no disagreements on accounting principles or
practices, financial statement disclosure, or$4.0 million of other non-audit related fees. These amounts include $24,000 of audit scope or procedures.related fees and $21,000 of other non-audit related fees for Pacific Gas and Electric Company and its subsidiaries.
One or more representatives of Deloitte & Touche LLP will be present at the annual meetings,meetings. They will have the opportunity to make a statement if they so desire, and will be available 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 byquestions from shareholders.
PG&E Corporation orand Pacific Gas and Electric Company prior to or at the annual
meetings will be voted for this proposal.
This appointment isare not required to be submittedsubmit these appointments to a vote of the shareholders. If the shareholders of either PG&E Corporation or Pacific Gas and Electric Company should not ratify the appointment, the PG&E
Corporationrespective Audit Committee will investigate the reasons for rejection by the shareholders and eachthe respective Board of Directors will reconsider the appointment.
THE BOARDS OF DIRECTORS OF
The Boards of Directors of PG&E CORPORATION AND PACIFIC GAS AND ELECTRIC COMPANY
RECOMMEND A VOTE Corporation and Pacific Gas and Electric Company Unanimously Recommend a VoteFOR THE PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE 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 TWO MANAGEMENT PROPOSALS.
- - --------------------------------------------------------------------------------
13
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Touche LLP.
16
To Be Voted on by PG&E CORPORATION SHAREHOLDERS ONLY
ITEM NO.Corporation Shareholders Only
Item No. 3: MANAGEMENT PROPOSAL REGARDING PROPOSED AMENDMENT TOManagement Proposal Regarding a Proposed Amendment to PG&E CORPORATION'S ARTICLES OF INCORPORATION TO IMPLEMENT THE ELIMINATION OF A
"SUPERMAJORITY VOTE" PROVISIONCorporation’s Articles of Incorporation to Implement Enhancement of Simple Majority Voting
At the 19992001 annual meeting of PG&E Corporation, shareholders, a majority of
the shares present and voting approved a shareholder proposal recommending that the Board of Directors reinstate simple majority voting for all matters
submitted for shareholder approval. At present,amend the only mattersfair price provision in the Corporation’s Restated Articles of Incorporation to provide that require
more than a simple majority vote of shareholders are those matters covered bybe the Fair Price Provision contained in Article Eighthonly fair price provision requirement to effect a merger or business combination involving the Corporation or any of its subsidiaries. Because a majority vote of shareholders is already required under California law for significant corporate transactions involving the Corporation or any of its subsidiaries, the adoption of this recommendation would render the fair price provision unnecessary. Also, because the Corporation’s Shareholder Rights Plan already affords shareholders substantial protection against inadequate offers or coercive or unfair takeover tactics, the Board of Directors believes that the fair price provision no longer provides shareholders with any meaningful incremental protection.
The Board of Directors therefore proposes to delete the fair price provision from the Corporation’s Restated Articles of IncorporationIncorporation. This proposed amendment would not affect the constituency provision contained in the Corporation’s Restated Articles of PG&E Corporation.Incorporation. A copy of Article Eighth of the Restated Articles of Incorporation of PG&E Corporation as proposed to be amended is attached to this proxy statement. Capitalized terms used but not defined in this
proxy statement shall have the meaning ascribedJoint Proxy Statement as Appendix A.
The proposed amendment to such terms in
Article Eighth.
PROPOSED AMENDMENTS TO THE FAIR PRICE PROVISION
Under the current Fair Price Provision, the approvalEighth of the holdersRestated Articles of not
less than 75 percent of the outstanding shares of voting stockIncorporation of PG&E Corporation (a "supermajority vote") is required to effect a Business
Combination involving PG&E Corporation or any of its subsidiaries and a Related
Person or any of its Affiliates. A "Business Combination" is broadly defined to
include (i) a merger or consolidation with a Related Person; (ii) a sale, lease,
or exchange to a Related Person of any of the Corporation's assets having an
aggregate fair market value of $100 million or more, or vice versa; (iii) an
issuance, pledge, or transfer of the Corporation's securities to a Related
Person in exchange for cash or other property having an aggregate fair market
value of $100 million or more; (iv) a reclassification of securities,
recapitalization, or other transaction which would directly or indirectly
increase the voting power or the proportionate share of the Corporation's
securities owned by a Related Person; or (v) any merger or consolidation of the
Corporation with any of its Subsidiaries if, after the merger, the surviving
entity's Articles of Incorporation do not contain the Fair Price Provision. A
supermajority vote is not required if any such Business Combination is approved
by the Board of Directors without counting the vote of any director who is not a
Disinterested Director or if certain specified minimum price criteria and
procedural requirements are satisfied.
The proposed amendments to the Fair Price Provision would replace the
requirement for a supermajority vote with the requirement that a Business
Combination be approved by the holders of a majority of PG&E Corporation's
outstanding shares of voting stock (a "majority vote"). A majority vote
requirement will make it easier for a Related Party or its Affiliate to effect a
Business Combination involving PG&E Corporation or any of its subsidiaries,
especially since a Related Party or its Affiliate may participate in the vote.
As a consequence, a majority vote requirement may make it easier for the Related
Party or its Affiliate to engage in transactions that are not necessarily in the
best interests of all shareholders. Therefore, in order to protect shareholders
against acts by a Related Party or its Affiliate that may be detrimental to
shareholders as a whole, the Board of Directors has proposed that the Fair Price
Provision be further amended to require that a proposed Business Combination, in
addition to approval by a majority vote, also (i) be approved by the Board of
Directors of PG&E Corporation without counting the vote of any director who is
not a Disinterested Director or (ii) satisfy the existing minimum price and
procedural requirements contained in the Fair Price Provision.
The proposed amendments also would change the definition of "Subsidiary" to
include non-corporate entities. The proposed amendment also would delete the
requirement that amendments to the Fair Price provision be approved by a
supermajority vote.
14
EFFECTS OF THE AMENDED FAIR PRICE PROVISION
As amended, the Fair Price Provision is not intended to prevent or impede a
third party from acquiring control of PG&E Corporation. Rather, the amended
provision is intended to inhibit abusive conduct on the part of a Related Party
or its Affiliate and is designed to protect shareholders against practices that
do not treat all shareholders fairly and equally, including inadequate or
coercive takeovers or self-dealing transactions. The proposed amendments to the
Fair Price Provision will ensure that either a proposal resulting in a Business
Combination will be scrutinized by the Disinterested Directors on the Board of
Directors or will ensure that the consideration paid to shareholders in the
Business Combination will be no less than the existing minimum price
requirements set forth in the Fair Price Provision.
As amended, the Fair Price Provision may discourage an unsolicited offer
that is favorable to a majority of shareholders but that does not otherwise
(i) have the support of the Disinterested Directors on the Board of Directors or
(ii) satisfy the fair price criteria and other procedural requirements contained
in the Provision. To the extent that the amended Fair Price Provision makes the
accomplishment of a Business Combination more difficult, it would make the
removal of management more difficult even if such removal would be beneficial to
the shareholders generally.
The Board of Directors of PG&E Corporation currently has no intention of
soliciting a shareholder vote on any other proposals that might affect a
possible change of control of PG&E Corporation. However, the Board of Directors
of PG&E Corporation will continue to monitor developments in this area and in
the future may recommend or pursue additional protective measures if it
determines that such measures would be in the best interests of PG&E Corporation
and its shareholders as a whole.
VOTE REQUIRED
The proposed amendments to the Fair Price Provision are permitted under California law and the rules of the New York Stock Exchange, the principal exchange upon which PG&E Corporation'sCorporation’s common stock is listed and traded. The proposed amendmentsamendment will not become effective until (i) they are(1) it is approved by the affirmative vote of the holders of a majority of the outstanding shares of voting stock of PG&E Corporation common stock, and (ii)(2) a certificate of amendment is filed with the California Secretary of State. Abstentions and broker non-votes will
have the same effect as a vote against the proposal. Properly executed proxies
received by
The Board of Directors of PG&E Corporation priorUnanimously Recommends a VoteFOR the Foregoing Amendment to or at the annual meeting will be voted
"FOR" the proposal, unlessArticles of Incorporation of PG&E Corporation shareholders specify otherwise in
their proxies.
THE BOARD OF DIRECTORS OFCorporation.
Item No. 4: Management Proposal Regarding Proposed Amendment to PG&E CORPORATION RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE FOREGOING AMENDMENTS TO THE ARTICLES OF INCORPORATION OFCorporation’s Articles of Incorporation and Bylaws to Reduce the Authorized Range of Directors and Transfer the Provision That Establishes the Authorized Range of Directors from the Bylaws to the Articles of Incorporation
PG&E CORPORATION.
ITEM NO. 4: MANAGEMENT PROPOSAL REGARDING PROPOSED AMENDMENTS TO PG&E
CORPORATION'S ARTICLES OF INCORPORATION TO DECREASE THE AUTHORIZED MINIMUM AND
MAXIMUM NUMBER OF DIRECTORS
PG&E Corporation'sCorporation’s Restated Articles of Incorporation currently provide that the authorized number of directors shall be within a range of between nineseven and seventeen.thirteen. PG&E Corporation’s Bylaws also list the range of the authorized number of directors as set forth in the Restated Articles of Incorporation, and fix the exact authorized number of directors. The current authorized number of directors to be elected at the 20002002 annual meeting is eleven.nine.
On September 20, 2001, PG&E Corporation and Pacific Gas and Electric Company jointly filed a proposed Plan of Reorganization in U.S. Bankruptcy Court that would enable Pacific Gas and Electric Company to pay all valid creditor claims in full and emerge from Chapter 11 bankruptcy proceedings. The proposed Plan reorganizes Pacific Gas and Electric Company and PG&E Corporation into two separate stand-alone companies no longer affiliated with one another. The common shares of the reorganized Pacific Gas and Electric Company will be distributed to PG&E Corporation shareholders (spin-off).
As part of the spin-off of Pacific Gas and Electric Company, the current members of the PG&E Corporation and Pacific Gas and Electric Company Boards of Directors will be divided between the entities. PG&E Corporation is expected to have five directors immediately following the spin-off. This number falls outside the range of directors currently authorized in the Restated Articles of Incorporation and set forth in the Bylaws.
The Board of Directors of PG&E Corporation has unanimously approved (1) an amendment to the Corporation'sCorporation’s Restated Articles of Incorporation to provide that the Board of Directors shall consist of not less than seven
17
The Board of Directors proposesproposed amendment to amend the first paragraph of Article Third to read as follows:
I: The Board of Directors of the Restated Articles of Incorporation of PG&E Corporation shall consistis permitted under California law and the rules of such number
of directors, not less than seven (7) nor more than thirteen (13), as
shall be prescribed in the Bylaws.
VOTE REQUIREDNew York Stock Exchange, the principal exchange upon which PG&E Corporation’s common stock is listed and traded. The proposed amendmentsamendment to the Corporation’s Restated Articles of Incorporation will not become effective until (i) they are(1) it is approved by the affirmative vote of the holders of a majority of the outstanding shares of voting stock of PG&E Corporation common stock, (2) Pacific Gas and (ii)Electric Company becomes a stand-alone entity, as contemplated in the proposed Plan of Reorganization, and (3) a certificate of amendment is filed with the California Secretary of State. Abstentions and broker non-votesThe proposed amendment to the Corporation’s Bylaws will have the same effect as a vote against the
proposal. Properly executed proxies receivednot become effective until (1) it is approved by PG&E Corporation prior to or at
the annual meeting will be voted "FOR" the proposal, unless PG&E Corporation
shareholders specify otherwise in their proxies.
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE FOREGOING AMENDMENT TO THE ARTICLES OF INCORPORATION OF PG&E CORPORATION.
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IF YOU DO NOT HOLD ANY SHARES OF PG&E CORPORATION COMMON STOCK, YOU ARE NOT
ENTITLED TO VOTE ON THE FOLLOWING SIX SHAREHOLDER PROPOSALS.
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16
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Item Nos. 5 to 10
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 outstanding shares, and (2) the foregoing amendment to the Restated Articles of Incorporation becomes effective.
The Board of Directors of PG&E Corporation shares representedUnanimously Recommends a VoteFOR the Foregoing Amendments to the Articles of Incorporation and votingBylaws of PG&E Corporation.
18
To Be Voted on the proposal,by Pacific Gas and the affirmative votes must
constitute at leastElectric Company Shareholders Only
On September 20, 2001, PG&E Corporation and Pacific Gas and Electric Company jointly filed a majorityproposed Plan of Reorganization in U.S. Bankruptcy Court that would enable Pacific Gas and Electric Company to pay all valid creditor claims in full and emerge from Chapter 11 bankruptcy proceedings. The proposed Plan reorganizes Pacific Gas and Electric Company and PG&E Corporation into two separate stand-alone companies no longer affiliated with one another. The common shares of the required quorum. Abstentionsreorganized Pacific Gas and Electric Company will be counteddistributed to PG&E Corporation shareholders (spin-off).
All amendments to Pacific Gas and Electric Company’s Restated Articles of Incorporation and Bylaws proposed in Items Nos. 5 through 9 will only become effective once the Company becomes a stand-alone entity, as contemplated in the Plan of Reorganization. Appendix B of this Joint Proxy Statement sets forth the Company’s Restated Articles of Incorporation and Bylaws, as proposed to be amended in Items Nos. 5 through 9.
Item No. 5: Management Proposal Regarding a Proposed Amendment to Pacific Gas and Electric Company’s Articles of Incorporation to Establish a Classified Board of Directors
Currently, the total number of directors constituting the Board of Directors of Pacific Gas and Electric Company is ten with each director serving a term of one year. As a consequence, shareholders must elect directors to fill the authorized positions at each annual meeting of shareholders.
Pacific Gas and Electric Company proposes amending the Company’s Restated Articles of Incorporation to establish a classified board. If the authorized number of directors is nine or greater, the Board of Directors would be divided into three classes, with members of each class elected for staggered terms of three years. Each class would consist of one-third of the directors or as close an approximation as possible. If the authorized number of directors is reduced to between six and eight directors, the Board would be divided into two classes, with members of each class elected for staggered terms of two years.
If the number of directors changes, the increase or decrease in the number of shares represented and voting, and will havedirectors would be apportioned by the same
effectBoard of Directors as provided for in the proposed amendment. In no event, however, may 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 counteddecrease in the number of shares represented
and voting ondirectors shorten the proposal. Properly executed proxies received by PG&E
Corporation prior to or atterm of any incumbent director. Under California law, vacancies in the annual meeting will be voted "AGAINST" these
proposals, unless PG&E Corporation shareholders specify otherwise in their
proxies.
ITEM NO. 5: SHAREHOLDER PROPOSAL REGARDING INDEPENDENT DIRECTORS
Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California
90278, on behalf of Mr. Ray T. Chevedden and Mrs. Veronica G. Chevedden, holders
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:
"RESOLVED:
APPOINT INDEPENDENT DIRECTORS TO ALL KEY BOARD COMMITTEES
Adopt a policy that Independent Directors are appointed for all Key Board
Committees to enhance management oversight (shareholder recommendation).
Key board committees include:
- Compensation
- Nomination &
- Audit Committees
These important oversight-committees require heightened independence,
free of Directors with significant financial and management ties to PG&E. A
director is deemed independent if his or her only non-trivial professional,
financial or familial connection to the company or its CEO within the past
10 years is his or her directorship.
The following Directors profited directly or indirectly from their
financial and management ties to PG&E (Source--1998 PG&E proxy):
The establishment of a classified Board of Directors would help to ensure continuity and stability in the Board and in the policies adopted by the Board. Following establishment of a classified Board of Directors, only one-third of the directors would be subject to election each year (if the Board is moot,divided into three classes) and, at any given time, two-thirds of the Board members would have had prior experience as directors of the Audit
CommitteeCompany. This would facilitate long-range planning and policy development, and promote the Nominating and Compensation Committeecreation of long-term value for the Company’s shareholders.
The proposed amendment may limit the ability of shareholders of the Company to change the composition of the Board of Directors are each composed entirelyby extending the time required to elect a majority of independent directors as defineddirectors. Adoption of the proposed amendment also may make more difficult, or discourage, certain attempts to take over or acquire control of the Company, even where such action would be favorable to the Company’s shareholders or supported by a majority of shareholders. A principal intent of the proposal to establish a classified Board of Directors, however, is to encourage any person seeking to gain control of the Company to negotiate directly with the Board, thereby giving the Board added leverage in such negotiations to ensure the Corporation's corporate governance 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 employeesfairness of any other corporation on whose boardsuch transaction to all shareholders.
The proposed amendment to the Restated Articles of directors any officerIncorporation 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 officers of PG&E Corporation or any of its subsidiaries, and the
Corporation is in compliance with this requirement.
The Board does not believe that business relationships of the type cited by
the proponent compromise the independence of the director. None of the named
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
types of 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),is permitted under California law 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 businessrules of the CorporationAmerican Stock Exchange, the principal exchange upon which the Company’s preferred stock is listed 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 which was paid by the Corporation and its
subsidiaries to Kaiser Health Plan (the largest provider of healthcare services
in California) represents premium payments directed by individual Corporation
employees, who can choose among many 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.
The business relationships cited by the proponent were not required by
Securities and Exchange Commission (SEC) rules to be disclosed in PG&E
Corporation's 1999 and 2000 proxy statements, as these relationships do not meet
the threshold for determining which relationships are significant enough to
require proxy statement disclosure. Among other things, each of these business
relationships represents less than 5 percent of the consolidated gross revenues
of the Corporation and of each of the entities involved in the cited business
relationships for the relevant fiscal year.
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.
18
Last year, of the Corporation's shares that were voted, approximately
71 percent voted against a similar proposal presented by this proponent.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
ITEM NO. 6: SHAREHOLDER PROPOSAL REGARDING CONFIDENTIAL SHAREHOLDER VOTING
Mr. John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California
90278, on behalf of Mrs. 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:
CONFIDENTIAL SHAREHOLDER VOTING
The shareholders request that the board of directors adopt and implement a
policy requiring all proxies, ballots and voting tabulations that identify
how shareholders vote be kept confidential and the inspectors of election be
independent and not the employees of the company.
SUPPORTING STATEMENT:
The confidential ballot is fundamental to the American political system.
This protection ensures that voters are not subjected to:
1) Actual
2) Perceived or
3) Potential coercive pressure.
The fundamental principle of the confidential ballot should be applied
to public corporations. While there is no inference that PG&E management
uses coercion the existence of this possibility is sufficient to justify
confidentiality.
Many major companies, such as Coca-Cola Co., Dow Chemical,
Georgia-Pacific Corp., Gillette, Kimberly Clark, Louisiana Pacific, and
Quaker Oats, use confidential voting.
The Investor Responsibility Research Center (IRRC) reported that
confidential voting resolutions won 47% shareholder approval in 1998. IRRC
surveyed 56 institutional investors and found that 75% said they
consistently support confidential voting resolutions. PG&E is 51% owned by
institutional shareholders.
Many shareholders believe confidential ownership is guaranteed when
shares are held in street name. This is not always the case. Management has
various means of determining actual ownership. For instance, proxy
solicitors have elaborate databases that can match account numbers with the
identity of some owners.
Moreover, why should shareholders be required to transfer their stock to
street-name in an attempt to maintain confidentiality? This resolution is
the only way to ensure a secret ballot for all shareholders irrespective of
how they own their shares.
The confidential vote is an important step toward improving PG&E
corporate governance.
WHY IMPROVE PG&E'S CORPORATE GOVERNANCE PRACTICES?
Fifty institutional investors, managing a total of $840 million, told
McKinsey & Co. they would pay an 11% average premium for the stock of a
company with good governance practices.
Why the big jump? Some investors said they believed that good governance
would help boost performance over time. Others felt good governance
decreases the risk of bad news--and when trouble occurs, they rebound
faster.
BUSINESS WEEK Sept. 15, 1997
WHAT ISSUES HIGHLIGHT CONCERN ABOUT IMPROVING PG&E'S PERFORMANCE?
The 1998 directors, key-employees and consultants stock option plan has a
total potential stock dilution of 8%--compared to 2% stock dilution for PG&E
peer group.
Investor Responsibility Research Center
PG&E ANNUAL MEETING REPORT March 1999
PG&E stock price is down 17% for the year.
STANDARD & POORS Sept. 18, 1999
19
An administrative law judge proposed that Pacific Gas & Electric Co. be
allowed to increase electric rates by less than a quarter of the $1 billion
plus the company had originally demanded.
REUTERS Oct. 19, 1999
PG&E Corp. reported that third-quarter earnings fell nearly 13 percent.
REUTERS Oct. 15, 1999
ABN AMRO said it has cut by 18% its 1999 earnings estimates for PG&E Corp.
REUTERS Oct. 22, 1999
To improve corporate governance and company performance vote yes:
CONFIDENTIAL SHAREHOLDER VOTING
YES ON 6"
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
The Board of Directors supports policies and practices that maintain the
confidentiality of the Corporation's proxy solicitation and balloting processes,
and believes that the Corporation's current practices and policies enable
shareholders to vote or give a proxy free from coercive pressure.traded. The proposed confidential voting policy unnecessarily goes beyond the Corporation's existing
practices, to restrict access to proxy, ballot, and vote tabulation information
even if such access is legally required or otherwise is in the best interests of
shareholders, such as when shareholders use their proxy cards as a vehicle for
communicating with the Corporation or in the case of a proxy contest.
The Corporation doesamendment will not use proxy or ballot information to identify how
individual registered shareholders vote on particular issues. For years, the
Corporation has used an independent inspector of elections and proxy tabulator,
and has no plans to discontinue this practice. Shareholder proxies are returned
directly to the independent proxy tabulator and are not reviewed by the
Corporation. Confidentiality of voting decisions is preserved even when
shareholders use the proxy card with its postage-paid return envelope to
communicate with the Corporation on items of interest to them, such as
historical account information, lost or stolen stock certificates, and other
matters relating to the Corporation's business. In such cases, the independent
tabulator maintains the confidentiality of the shareholder's vote by blocking
out voting information on the proxy card prior to making a copy for the
Corporation. Registered shareholders desiring additional assurances of
confidentiality can register their shares in the name of a nominee, such as a
stockbroker, bank, or other fiduciary. Since nominee holders do not disclose
specific information regarding how the beneficial owners vote, confidentiality
is preserved. Corporation employees who own stock through employee savings plans
submit their votes through plan trustees, who are required to keep such
information confidential and may not disclose such information to the
Corporation.
The proposed confidential voting policy is not only unnecessary, but also is
overly broad in that it contains no exemptions for proxy contests or situations
in which disclosure of a shareholder's vote is legally required. In the case of
a proxy contest, the proposed confidential voting policy would not apply to the
third party that was soliciting proxies, yet would continue to apply to the
Corporation, thereby giving the third party dissident an unfair advantage. The
dissident would be able to view shareholder voting decisions and other
information, and use that information to persuade individual shareholders to
vote in the dissident's favor. This advantage is not only unfair, but could be
detrimental to shareholders. In contesting the dissident's solicitation of
proxies, the Corporation's Board of Directors has a legal obligation to act in
the best interests of shareholders as a group, whereas the dissident would have
no such obligation and would be free to act purely in his or her own self
interest. Given the unfair advantage the dissident would gain from having access
to voting information, the Board's ability to act in the best interests of
shareholders would be hindered because the directors would not have the same
access to that information. The proposed confidential voting policy also fails
to permit exceptions when access to the shareholder voting information is
required in response to federal or state legal requirements, or may be necessary
to assist the Corporation in making a claim or defending against a claim.
For these reasons, the PG&E Corporation Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
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ITEM NO. 7: SHAREHOLDER PROPOSAL REGARDING SHAREHOLDER DEMOCRACY
Mrs. Sydell B. Lemerman, 1855 Capistrano, Berkeley, California 94707, holder
of 1,291 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:
"SHAREHOLDER DEMOCRACY
We live in a Democracy and our vote is our sacred right, yet PG&E Corp.
denies that right when it comes to voting on company proposals.
"ABSTENTIONS WILL BE COUNTED IN THE NUMBER OF SHARES REPRESENTED AND VOTING,
AND WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSAL."
page 21--Joint notice of 1999 Annual Meetings--Joint Proxy Statement.
It is not in the law! It is not in the rules an regulations of the S.E.C!
The Corporation is not mandated in overriding the shareholders majority vote
if it so wishes, it has made it's own ruling to do so.
A Yes vote means YES! A No vote means NO! An Abstention means I am present
but I am not voting.
In defense of their stance, the Corporation likes to state that the SEC does
not object and that all other companies do the same thing and thereforebecome effective until (1) it is the right thing to do. WRONG!! A Yes vote means YES! A No vote means NO!
An Abstention means neither yes or no and should NOT be counted. There is no
other way.
Make your vote count and mean what you would like it to mean. YES, NO,
NO VOTE!!!
Do not let the Corporation override our majority vote.
Vote YES for Shareholder Democracy."
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
The standard for determining whether shareholders have approved a matter
submitted to them is controlled by the law of the state under which the
corporation is incorporated. Although most publicly traded corporations are
incorporated in Delaware, PG&E Corporation is incorporated in California. Under
California law, most matters presented to shareholders are considered approved by shareholders if (1) the matter receives the affirmative vote of a majority of the outstanding shares "representedof Pacific Gas and Electric Company
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The Board of Directors of Pacific Gas and Electric Company Unanimously Recommends a VoteFOR the Foregoing Amendment to the Articles of Incorporation of Pacific Gas and Electric Company.
Item No. 6: Management Proposal Regarding Proposed Amendments to Pacific Gas and Electric Company’s Articles of Incorporation and Bylaws to Reduce the Authorized Range of Directors and Transfer the Provision That Establishes the Authorized Range of Directors from the Bylaws to the Articles of Incorporation
Currently, the Company’s Bylaws provide that the authorized maximum and minimum number of directors shall be within the range of nine to seventeen. The current authorized number of directors to be elected at leastthe 2002 annual meeting is ten.
As part of the spin-off of Pacific Gas and Electric Company, the current members of PG&E Corporation’s and Pacific Gas and Electric Company’s Boards of Directors will be divided between the entities, such that no directors will serve as director of both entities. Each entity is expected to have five directors immediately following the spin-off. This number falls outside the range of directors currently authorized in the Bylaws.
The proposed amendments would (1) reduce the authorized range of directors from a range of nine to seventeen directors to a range of five to nine directors, (2) transfer the provisions that establish the minimum and maximum authorized number of directors from the Company’s Bylaws to its Restated Articles of Incorporation, and (3) change the exact number of directors specified in the Bylaws to five and clarify the permissible methods for fixing the exact number of directors within the range established by the Articles of Incorporation.
Under California law, the Restated Articles of Incorporation may only be amended by the approval of a majority of the required quorum. SEC rules require thatBoard of Directors and a majority of the proxy
statement discloseoutstanding shares. Specifying the authorized range of directors in the Restated Articles of Incorporation would effectively limit a substantial shareholder’s ability to increase the size of the Board of Directors for the purpose of appointing additional directors to gain control of the Company. However, consistent with the other proposed amendments to the Company’s Restated Articles of Incorporation and Bylaws, this proposed amendment is intended to encourage a takeover bidder to negotiate directly with the Board of Directors. This ensures the fair and equitable treatment of abstentions for each itemall shareholders.
The proposed amendment to be voted upon
by shareholders (except for the ratificationRestated Articles of accountants). PG&E Corporation
reports all affirmative votes, negative votes,Incorporation of Pacific Gas and abstentions cast at each
annual meeting in its first quarterly report on Form 10-Q filed with the SEC
after the meeting.
AlthoughElectric Company is permitted under California law doesand the rules of the American Stock Exchange, the principal exchange upon which the Company’s preferred stock is listed and traded. The proposed amendment to the Company’s Articles of Incorporation will not specifically address the treatment of
abstentions, other states do. For example, in Delaware where the majority of
publicly traded corporations are incorporated, most matters submitted to
shareholders are consideredbecome effective until (1) it is approved if the matter receivesby the affirmative vote of a majority of the outstanding shares "presentof Pacific Gas and entitledElectric Company voting stock, (2) the Company becomes a stand-alone entity, as contemplated in the Plan of Reorganization, and (3) a certificate of amendment is filed with the California Secretary of State. The proposed amendment to vote." Under Delaware law,
abstentions are included in determining the number of shares "present and
entitled to vote." In the absence of controlling authority under California law,
PG&E Corporation has chosen to follow the law of Delaware and treat abstentions
as shares "present and voting." PG&E Corporation believes that most investors in
public corporations understand and expect this treatment of abstentions. The
Corporation's proxy statement fully discloses this intended treatment so that a
shareholder can make an informed decision in deciding whether to cast an
abstention.
Further, California law requires that some matters submitted to
shareholders, such as the proposed amendments of the Corporation's Articles of
Incorporation under Item Nos. 3 and 4 above, beCompany’s Bylaws will not become effective until (1) it is approved by the holdersaffirmative vote of a majority of the Corporation's outstanding shares. Under this approval standard,
abstentions must be counted, sinceshares, and (2) the abstaining shareholder's shares are
outstanding. Therefore,foregoing amendment to the shareholder proposal would be legally impossible to
implement, as it would require the Corporation to violate California law.
For these reasons, the PG&E CorporationRestated Articles of Incorporation becomes effective.
The Board of Directors unanimously
recommends that shareholders vote AGAINST this proposal.
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ITEM NO. 8: SHAREHOLDER PROPOSAL REGARDING CUMULATIVE VOTING
Mr. Simon Levine, Trustee of Pacific Gas and Electric Company Unanimously Recommends a VoteFORthe Simon Levine Living Trust, 960 Shorepoint
Court,Foregoing Amendments to the Articles of Incorporation and Bylaws of Pacific Gas and Electric Company.
Item No. 306, Alameda, California 94501, holder7: Management Proposal Regarding a Proposed Amendment to Pacific Gas and Electric Company’s Articles of 5,706 shares of PG&E
Corporation common stock, has given notice of his intentionIncorporation and Bylaws to presentTransfer the following proposal for action atProvision That Prohibits Cumulative Voting in the PG&E Corporation annual meeting:
"The shareholders of PG&E Corporation request the BoardElection of Directors takefrom the necessary stepsBylaws to amend the company's governing instruments to adopt
the following:
REINSTATE CUMULATIVE VOTING FOR THE ELECTION OF PG&E CORP. DIRECTORS.
Cumulative Voting isArticles of the utmost importance in order to let us, the
shareholders, have a voiceIncorporation
Currently, Pacific Gas and Electric Company’s Bylaws specify that no shareholder may cumulate his or her voting power in the corporation. It is essential in letting us
express ourselves as OWNERS.
When we are not in agreement with those in whom we put our faith and trust
and we want them to know that in no uncertain terms, cumulative voting HELPS
emphasize our concern by disavowing them and voting them out. It provides us
the necessary tools to CHOOSE the directors we want.
It is to US, the ownerselection of the company, to PROVIDE the leadership necessary
to run the company well and profitably.
The following headlines from the San Francisco Chronicle illustrates some of
the problems.
December Blackout no Fluke, PUC Says, reads one headline with the sub-head
Staff report contends PG&E is error prone May 8, 1999
PG&E Fined for Poor Service in '95 Outage - June 25, 1999
PUC Urged To Continue PG&E PROBE - July 1, 1999
These examples, which are part of at least a half dozen negative articles,
demonstrate in no uncertain terms that our board is not doing their job.
This means that we, the owners, are not doing our job and that's SELECTING
the right people to lead and guide this company properly.
The Corporation argument is that a small percentage of shareholders can
elect a Director. True, but the board is doing the same with ONLY 13
Directors. The problem is that the Corporation is addressing the wrong item.
What they should be concerned about is "why did this come up in the first
place and what can we do to rectify it?"
It has been said that the beginning of a long trip is in taking the first
step. Our first step is to make sure we vote for cumulative voting. It is
our RIGHT and RESPONSIBILITY!!!
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.directors. 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'sshareholder’s shares are entitled. Each shareholder may "cumulate"“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 11 directors are
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The proposed amendments will transfer the provision that prohibits cumulative voting from the Company’s Bylaws to be
elected, a shareholder or groupits Restated Articles of shareholders holding less than 9 percentIncorporation. The Board of the sharesDirectors believes that cumulative voting at the meeting would be capable of electing a director. This
is true even if the holders of the remaining 91 percent of the voting shares are
opposed to the election of that candidate and cast their votes to elect 11 other
directors.
Cumulative voting would givegives a disproportionate and unfair weight to the votes cast by a minority shareholder or shareholders. The elimination ofBy prohibiting cumulative voting, the Company ensures that all directors are elected or removed only by a majority vote of shareholders voting in the election.
Last year,
A company’s bylaws may be amended by the board of directors or by a majority of the Corporation'soutstanding shares if permitted by California law. Under California law, the articles of incorporation may be amended only upon approval by both the company’s board of directors and the shareholders. If the prohibition on cumulative voting is moved from the Bylaws to the Restated Articles of Incorporation, shareholders could not initiate cumulative voting unless they first obtained the concurrence and cooperation of the Board of Directors.
The proposed amendment to the Restated Articles of Incorporation of Pacific Gas and Electric Company is permitted under California law and the rules of the American Stock Exchange, the principal exchange upon which the Company’s preferred stock is listed and traded. The proposed amendment to the Company’s Articles of Incorporation will not become effective until (1) it is approved by the affirmative vote of a majority of the outstanding shares of Pacific Gas and Electric Company voting stock, (2) the Company becomes a stand-alone entity, as contemplated in the Plan of Reorganization, and (3) a certificate of amendment is filed with the California Secretary of State. The proposed amendment to the Company’s Bylaws will not become effective until (1) it is approved by the affirmative vote of a majority of the outstanding shares of Pacific Gas and Electric Company voting stock, and (2) the foregoing amendment to the Restated Articles of Incorporation becomes effective.
The Board of Directors of Pacific Gas and Electric Company Unanimously Recommends a VoteFOR the Foregoing Amendments to the Articles of Incorporation and Bylaws of Pacific Gas and Electric Company.
Item No. 8: Management Proposal Regarding a Proposed Amendment to Pacific Gas and Electric Company’s Articles of Incorporation to Include Constituency Provisions
Pacific Gas and Electric Company proposes amending the Company’s Restated Articles of Incorporation to enumerate factors that were voted, approximately
67the Board of Directors may consider in determining what is in the best interests of the Company and its shareholders when evaluating a business combination involving the Company. The proposed “constituency provision” would authorize the Board of Directors, when evaluating certain third-party business combination proposals or offers, to give due consideration to all factors it may consider relevant. Such factors could include, without limitation, (1) the adequacy of the consideration offered, (2) the financial and managerial resources and future prospects of the acquirer, and (3) the legal, economic, environmental, regulatory, and social effects of the proposed transaction on the Company’s and its subsidiaries’ employees, customers, suppliers, and other affected persons and entities, and on the communities and geographic areas in which the Company and its subsidiaries provide utility service or are located, and in particular, the effect on the Company’s and its subsidiaries’ ability to safely and reliably meet any public utility obligations at reasonable rates. Such a constituency provision is included in the Restated Articles of Incorporation of PG&E Corporation, the Company’s parent.
When deciding whether to enter into a merger, a sale of all or substantially all of the assets of the Company, or other similar transaction, the principal consideration of a board of directors is the interests of shareholders. Under California law, it is not entirely clear how far a board may go in considering other factors in evaluating such transactions. Although the manner and extent to which a matter may affect shareholders is a vital element in any consideration of any business combination involving the Company, the impact upon other constituencies that necessarily influence the success of the Company (and hence benefit the shareholders) also is a legitimate factor to consider. The Board of Directors should be authorized to consider other constituencies in its determination of what is in the best interests of the Company and its shareholders.
The constituency provision may make more difficult, or discourage, certain attempts to take over or acquire control of the Company, even where such action would be favorable to the Company’s shareholders or supported by a majority of shareholders. However, the provision would allow the Board of Directors to take into account the effects of a takeover proposal on a broad number of constituencies and to consider any potential adverse effect in determining whether to accept or reject the proposal.
The proposed amendment to the Restated Articles of Incorporation of Pacific Gas and Electric Company is permitted under California law and the rules of the American Stock Exchange, the principal exchange upon which
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The Board of Directors of Pacific Gas and Electric Company Unanimously Recommends a VoteFOR the Foregoing Amendment to the Articles of Incorporation of Pacific Gas and Electric Company.
Item No. 9: Management Proposal Regarding a Proposed Amendment to Pacific Gas and Electric Company’s Articles of Incorporation to Require That Shareholder Action Be Taken at an Annual or Special Meeting
Currently, California law provides that any action which may be taken at any annual or special meeting of Pacific Gas and Electric Company’s shareholders may be taken without a meeting and without prior notice, if a written consent setting forth such action is signed by shareholders having at least the minimum number of votes required by California law.
Pacific Gas and Electric Company proposes amending the Company’s Restated Articles of Incorporation to require that all shareholder action be taken at a duly called annual meeting or special meeting of shareholders and that no action may be taken by the written consent of the shareholders. As currently provided in the Company’s Bylaws, a special meeting of shareholders may be called by the Secretary or an Assistant Secretary upon the written request of holders of not less than 10 percent voted againstof the votes entitled to be cast at that meeting.
The proposed amendment would afford all shareholders an equal opportunity to participate in a similarmeeting where shareholder action is proposed to be taken. The proposal presentedalso would prevent sudden shareholder action to remove the entire Board of Directors and would assist the Board in preserving its ability to negotiate directly with a potential acquirer on behalf of the Company’s shareholders, thus fostering the fair and equitable treatment of all shareholders. However, this also may make more difficult, or discourage, certain attempts to takeover or gain control of the Company, even where such action would be favorable to the Company’s shareholders or supported by a majority of shareholders.
The proposed amendment to the Restated Articles of Incorporation of Pacific Gas and Electric Company is permitted under California law and the rules of the American Stock Exchange, the principal exchange upon which the Company’s preferred stock is listed and traded. The proposed amendment will not become effective until (1) it is approved by the affirmative vote of a majority of the outstanding shares of Pacific Gas and Electric Company voting stock, (2) the Company becomes a stand-alone entity, as contemplated in the Plan of Reorganization, and (3) a certificate of amendment is filed with the California Secretary of State.
The Board of Directors of Pacific Gas and Electric Company Unanimously Recommends a VoteFOR the Foregoing Amendment to the Articles of Incorporation of Pacific Gas and Electric Company.
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To Be Voted on by PG&E Corporation Shareholders Only
Item No. 10: Shareholder Proposal Regarding Independent Directors
Mr. Ray T. Chevedden, 5965 South Citrus Avenue, Los Angeles, California 90043, 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:
“10 — INDEPENDENT DIRECTORS on KEY COMMITTEES
Resolved:
| PG&E Corporation shareholders request a bylaw be adopted that the board (and/or management, if applicable) nominate independent directors to key board committees to the fullest extent possible. | ||
| An independent director is a director whose only nontrivial professional, familial or financial connection to the company, its Chairman, CEO or any other executive officer is his or her directorship. Further information on this definition is under “Independent Director Definition” at the Council of Institutional Investors website,www.cii.org. | ||
| Institutional Investors own 47% of PG&E stock. |
| The key board committees are: |
| • | Audit | ||
| • | Nominating | ||
| • | Compensation |
| Also, request that any change on this proposal topic be put to shareholder vote — as a separate proposal and apply to successor companies. |
| Shareholder-friendly |
| The company could have been shareholder-friendly and allowed a shareholder vote on this topic in 2001. It only needed a small technical change in wording. |
| This topic won 45% approval at the PG&E 2000 shareholder meeting — | |
| This 45% approval was 70% higher than the vote at the 1999 annual meeting. |
| These key oversight committees deserve heightened independence — free of Enron-type director links to PG&E. The following Directors profited directly or indirectly from their links to PG&E (Source — previous PG&E proxies): |
| 1. | David Andrews |
| • | Mr. Andrew’s employer, the law firm of McCutchen, Doyle & Enersen, LLP, collected fees from PG&E. |
| 2. | Dr. David Lawrence CEO of Kaiser Health Plan |
| • | Kaiser collected $23 million from PG&E. |
| 3. | David Coulter CEO of BankAmerica Corp. until Oct. 1998 |
| • | Bank of America collected $2.5 million from PG&E. |
| 4. | Lee Cox Vice Chairman of AirTouch until 1997 |
| • | AirTouch collected $1.5 Million from PG&E. |
| It is a disappointment that the new director, Mr. Andrews with the above Enron-type link to PG&E, was selected after the 45%-vote in favor of greater independence. |
| It is believed that greater accountability, through independent directors on key committees, could help avoid these events that we do not want repeated: |
| • | PG&E bankruptcy work may cost $400 million. | ||
| • | San Francisco voters deal a blow to PG&E. |
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| • | Adopt a proposal to allow the city to set up a public power system to take over the San Francisco PG&E business. | ||
| • | Enron owes PG&E and other California utilities tens of millions. | ||
| • | A PG&E net loss of $3.4 billion in 2001 | ||
| • | PG&E borrowed more than $6.8 billion | ||
| • | Total PG&E debt zoomed to $19 billion | ||
| • | PG&E strategy of blaming the state of California for the PG&E crises | ||
| • | Meanwhile, directors allow CEO to collect $7 million paycheck. |
For improved accountability:
INDEPENDENT DIRECTORS ON KEY COMMITTEES
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
The Board of Directors believes this proponent.proposal is unnecessary. The PG&E Corporation Audit Committee and Nominating and Compensation Committee are each composed entirely of independent directors as defined in the Corporation’s corporate governance guidelines. Independent directors are defined in the guidelines as directors who are neither (1) current nor former employees of, or consultants to, PG&E Corporation or its subsidiaries, nor (2) 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. Further, another requirement of the guidelines specifies that 75 percent of the Board be composed of directors who are neither current nor former officers of PG&E Corporation or any of its subsidiaries. The Corporation is in compliance with this requirement.
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 voteAGAINST this proposal.
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ITEM NO. 9: SHAREHOLDER PROPOSAL REGARDING COMPENSATION OF DIRECTORS IN STOCK
Item No. 11: Shareholder Proposal Regarding Poison Pills (Shareholder Rights Plan)
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,
“11 — SHAREHOLDER VOTE ON POISON PILLS
| PG&E shareholders request a bylaw that our company not adopt a poison pill and shall redeem any existing pill unless it has first received affirmative support from shareholders. | ||
| Why require a shareholder vote to maintain a poison pill? |
| Poison pills: |
| 1) | Adversely affect shareholder value. | ||
| 2) | Injures shareholders by reducing management accountability. | ||
| 3) | Are a major shift of shareholder rights from shareholders to management. |
| POWER AND ACCOUNTABILITY By Nell Minow and Robert Monks |
| 4) The Council of Institutional Investorswww.cii.org institutional investors whose assets exceed $1 Trillion (emphasizing the “T”), recommends poison pills be approved by shareholders. | ||
| 5) Institutional investors own 47% of PG&E stock. Furthermore, institutional investors have a fiduciary duty to vote in the best interest of shareholders. |
24
| 6) Some shareholders may look to institutional shareholders for leadership in evaluating the merits of shareholder proposals. Institutional shareholders have the fiduciary duty to make an independent analysis — plus the staff and resources to study the issues thoroughly from a shareholder-value perspective. |
| Greater Management Accountability |
| It is believed that shareholder vote on poison pills will improve PG&E/ Pacific Gas and Electric Company accountability while our utility subsidiary lingers in bankruptcy: | ||
| A) $17.5 million in bonuses given to top executives while our shattered utility navigates through bankruptcy. | ||
| B) Some of the fattest bonuses include the top 6 officers and 17 other senior managers — their salaries double. | ||
| C) $17.5 million in bonuses follow $50 million in bonuses handed to employees just days before our company filed bankruptcy on April 6, 2001. |
| To take one step |
| I believe that it is consistent with conventional wisdom that when many items are not the best practice — that making one change deserves attention. Specifically, at PG&E there were/are a number of allowed practices that institutional investors believe are not best practices, such as: |
| • | Five of the total of 9 directors have links to PG&E — a widely criticized practice of the high-flying bankrupt Enron. | ||
| • | The newest director, Mr. Andrews, has a link to PG&E — evidence of recent Enron-type practices. | ||
| • | Furthermore, Mr. Andrews for some reason was given a valued seat on the key audit committee which demands greater independence. | ||
| • | 40% of the audit committee has links to PG&E. | ||
| • | 75% of the compensation committee has links to PG&E. | ||
| • | 75% of the nominating committee has links to PG&E. | ||
| • | The Council of Institutional Investors holds that the above 3 key committees be 100% independent. | ||
| • | Management recommended a 2001 management stock option plan that raised our total potential stock dilution to 12% — or 267% higher than the PG&E peer group average |
SHAREHOLDER VOTE ON POISON PILLS
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
The Board of Directors adopted the stockholders requestCorporation’s Shareholder Rights Plan on December 15, 2000, in order to protect the Corporation’s shareholders in the event the Corporation is confronted with an inadequate offer or with coercive or unfair takeover tactics. Plans similar to the Corporation’s Shareholder Rights Plan have been adopted by more than 2,000 U.S. corporations, including about half of the Fortune 500 companies and an increasing number of publicly traded utilities. The Board considers the Shareholder Rights Plan to be invaluable in protecting the right of shareholders to realize the full value of their investment in the Corporation.
The Shareholder Rights Plan is designed to safeguard shareholders from abusive tactics that have been used by certain bidders against other companies and that the Board of Directors adopt
the following policy:
Beginningbelieves are not in the 2001 P.G.&E. Corporation fiscal year, total
compensation of all membersbest interest of the BoardCorporation’s shareholders. These tactics may unfairly pressure shareholders, squeeze them out of Directors shall be at least 50%
in common stock with a significant portion of each year's distribution to be
heldtheir investment without giving them any real choice, and not sold until their term as a director is ended.
The directors enjoy a much greater impact on the conductdeprive them of the Corporation's business than do the shareholders and their compensation
reflects that impact. However, there is no reason that they should not
receive their compensation in a manner that would bring them closer to the
shareholders, namely in common stock. In this manner, thefull value of their compensation is directly related toshares.
These points were underscored in a 1997 study prepared by the performancenationally recognized proxy solicitation and investor relations firm, Georgeson & Company, Inc. This study concluded that companies with shareholder rights plans received higher premiums than companies without shareholder rights plans, and that the presence of a shareholder rights plan did not reduce the corporation.
Many corporations are compensating their directors with common stock
without any losslikelihood of good prospective directors. There is no reason why
P.G.&E. Corporation could not do the same.
In October 21, 1999 of the S.F. Chronicle, the stock quote listed in the
last 52 weeks had gone from $34 down to $22.19. Why should the Directors
continue to earn the same compensation as if nothing happened while the
shareholders suffer?
Vote to compensate the directors in P.G.&E. common stock"
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.
PG&E Corporation agrees that a portion of its directors' compensation should
be composed of equity ownership in the Corporation. In December 1997, the Board
of Directors, upon recommendation of the Nominating and Compensation Committee,
approved amendments to PG&E Corporation's Long-Term Incentive Program to
increase the portion of director pay that is equity-based. The Board believes
these changes have further aligned the interests of directors with those of PG&E
Corporation's shareholders, and provide a total director compensation package
that is more competitive with that provided to directors of other energy and
industrial companies. As a result of these changes, approximately 40 percent of
total director pay is composed of stock-based compensation, an increase from
less than 20 percent based on total director pay in 1997, prior to this change
in policy. Please refer to the discussion of "Compensation of Directors" on
page [9?] for details concerning these changes.
However, the Corporation requires flexibility to set standards for director
compensation and encourage such stock ownership through a variety of programs
and incentives, and should not be limited to the strict standard set forth in
the proposal. PG&E Corporation must be able to design and implement director
compensation packages that can attract quality candidates. Requiring that a set
percentage of compensation paid to directors be in the form of stock could
discourage or prevent highly qualified individuals from serving on the Board in
the future.takeovers.
For these reasons, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.
ITEM NO. 10: SHAREHOLDER PROPOSAL REGARDING SEVERANCE BENEFITS RECEIVED DURING
MERGERS OR ACQUISITIONS
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Item No. 12: Shareholder Proposal Regarding Simple Majority Vote
Mr. Nick Rossi, P.O. Box 249, Boonville, California 95415, holder of 600 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,
“12 — Enhance Simple Majority Vote
| Shareholders request: |
| Under this enhancement, simple-majority vote is to be the sole requirement, to the fullest extent possible, to effect a merger or business combination or other issue for shareholder vote for approval and board action. |
| This provision is to apply as a bylaw even if our company’s poison pill is rescinded or expires. This also includes that, if our directors adopt any part of this proposal, that our directors not adopt another proposal that negates, or tends to negate the impact of this proposal. In other words we want to trust our directors to not — repeat not — take bylaw and/or policy maneuvering steps that reverse each other. | ||
| One reason for this proposal is that our company recently adopted a poison pill without our approval. The poison pill can limit the impact of simple majority shareholder vote. It can also take oversight power from shareholders who may need to exercise more vigilance in evaluating our company’s strategic plan during bankruptcy. | ||
| Core business competency |
| Shareholders may value some input in oversight of our company’s plan to exit bankruptcy. This could help ensure that our company’s plan is focused more on core business competency and less on any perceived over-reliance on avoiding current regulation. |
| To enhance shareholder oversight and value: |
Enhance Simple Majority Vote
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
This proposal is unnecessary. The Board of Directors takes very seriously the stockholders requestopinion of the shareholders and carefully reviewed the recommendation contained in Mr. Rossi’s 2001 shareholder proposal that addressed this same topic. On October 17, 2001, after considering the shareholders’ recommendation, the Board approved an amendment to Article Eighth of the PG&E Corporation Articles of Incorporation that eliminates the minimum price criteria and the required approval of the Board of Directors amendset forth in Article Eighth. Please refer to Item No. 3: Management Proposal Regarding a Proposed Amendment to PG&E Corporation’s Articles of Incorporation to Implement Enhancement of Simple Majority Vote on page of this Joint Proxy Statement. This amendment will become effective upon approval by a majority of PG&E Corporation’s outstanding shares and the company's governing instruments to adoptfiling of a certificate of amendment with the following:
Any severance benefits basedCalifornia Secretary of State.
For this reason, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.
Item No. 13: Shareholder Proposal Regarding Auditor Fees
The United Brotherhood of Carpenters on change of controlbehalf of the companyMassachusetts State Carpenters Pension Fund, 350 Fordham Road, Wilmington, Massachusetts 01887, beneficial owner of 6,400 shares of PG&E Corporation common stock, has given notice of its intention to directors, officerspresent the following proposal for action at the PG&E Corporation annual meeting:
| “Auditor Fees Proposal |
| Resolved, that the shareholders of PG&E Corporation (“Company”) request that the Board of Directors adopt a policy stating that the public accounting firm retained by our Company to provide audit services, or any affiliated company, should not also be retained to provide non-audit services to our Company. |
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| Statement of Support: The role of independent auditors in ensuring the integrity of the financial statements of public corporations is fundamentally important to the efficient and effective operation of the financial markets. The U. S. Securities and Exchange Commission recently stated: |
| Independent auditors have an important public trust. Investors must be able to rely on issuers’ financial statements. It is the auditor’s opinion that furnishes investors with critical assurance that the financial statements have been subjected to a rigorous examination by an objective, impartial, and skilled professional, and that investors, therefore, can rely on them. If investors do not believe that an auditor is independent of a company, they will derive little confidence from the auditor’s opinion and will be far less likely to invest in that public company’s securities. (Division of Corporate Finance, Staff Legal Bulletin #14, 7/13/01) (“Bulletin #14”) |
| It is critically important to the integrity of the auditing process and the confidence of investors that those firms performing audits for public corporations avoid business relationships that might compromise their independence or raise the perception of compromised judgment. At the heart of the challenge to auditor independence is the growing level of business and financial relationships developing between audit firms and their clients. Bulletin #14 identifies these growing business relationships that threaten auditor independence: |
| Accounting firms have woven an increasingly complex web of business and financial relationships with their audit clients. The nature of the non-audit services that accounting firms provide to their audit clients has changed, and the revenues from these services have dramatically increased. |
| The growth of non-audit revenues represents a trend that has been accelerating dramatically in the last several years, with non-audit fees for consulting or advisory services exceeding audit fees at many companies. Our Company is in the category of companies that pays its audit firm more for non-audit advisory services than it does for audit services. The Company’s most recent proxy statement indicated that for the year ended December 31, 2000, Deloitte & Touche LLP received $3,100,000 for audit services, while receiving $11,300,000 for non-audit services rendered. | ||
| We believe that this financial “web of business and financial relationships” may at a minimum create the perception of a conflict of interest that could result in a lack of owner and investor confidence in the integrity of the Company’s financial statements. As long-term shareowners, we believe that the best means of addressing this issue is to prohibit any audit firm retained by our Company to perform audit services from receiving payment for any non-audit services performed by the firm. We urge your support for this resolution designed to protect the integrity of the Company’s auditing and financial reporting processes.” |
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
The Board of Directors believes in the importance of auditor independence. However, this proposal is too extreme because it would prohibit the Corporation from obtaining non-audit services from its independent auditor without regard to the nature of those services.
Numerous safeguards and (or) employees willpolicies oversee non-audit relationships between PG&E Corporation and its independent auditor. In June 2000, the Corporation adopted a policy that only permits engaging the independent auditor for consulting services when they meet a set of specific criteria and gain approval from senior management. The Corporation’s Audit Committee must satisfy itself as to the independence of the independent auditor. The Audit Committee specifically reviews the formal written statement submitted by the independent auditor delineating all relationships between them and PG&E Corporation and its subsidiaries and affiliates, discusses with the independent auditor any disclosed relationships or services that may impact their objectivity and independence, and recommends to the Board any action the Audit Committee deems necessary to ensure the independence of the independent auditor.
Pursuant to Securities and Exchange Commission (SEC) regulations, the independent auditor is prohibited from providing nine specific types of non-audit services, such as certain bookkeeping and financial information systems design and implementation services, which raise independence issues. The Corporation does not obtain these services from its independent auditor. The SEC specifically stated that it does not seek to discourage the development of non-audit services that do not raise independence issues. Instead, the rules were designed to
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The prohibition
would not applydiscretion to existing contracts.
Itdetermine the best allocation of tasks among accounting and other firms is an essential component of the duty and responsibilityability of the Board of directorsand the Audit Committee to oversee
the general order of business toward providing a service and producing a
profit.
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If, in the course of doingdischarge their dutiesresponsibilities to the Corporation is merged with
another company,and its shareholders. We do not believe that the retention of this discretion undermines in any severance benefits a director, officer or employeeway the Corporation’s ability to monitor and ensure the independence of our independent auditor. Corporation officers and the Audit Committee continually monitor and evaluate the performance of the Corporation would receive would beCorporation’s independent auditor in both its audit services and its non-audit services, the same form of compensationfees paid for all such services, and the shareholders would receive, namely through stock dividends and increase in
the valuecompatibility of the stock.
Vote to restrict severance benefits due to a merger or acquisition."
THE BOARD OF DIRECTORS OF PG&E CORPORATION RECOMMENDS A VOTE AGAINST THIS
PROPOSAL.non-audit services with the maintenance of the firm’s independence.
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 would create. The Officer Severance Policy provides certain severance
benefits if an executive officer coveredsafeguards implemented by the policy is terminated without
cause following a change in control, as discussed inCorporation protect the Executive Compensation
section under "Termination of Employment and Change in Control Provisions."
The Board believes that reasonable provisions regarding severance benefits
due to a change in control help allow senior management to remain 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 managementindependence of the acquiring entity. In addition, these types of
changeaudit function and that preventing the independent auditor from performing any non-audit services would result in control provisions are often part of a total compensation package
offeredinefficiencies and increased costs to senior executives in most public companies. In order for PG&Ethe 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.without providing any additional protection.
For these reasons, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.
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Executive Compensation
NOMINATING AND COMPENSATION COMMITTEE REPORT ON COMPENSATION
Item No. 14: Shareholder Proposal Regarding the Board of Directors’ Role
The Laborers’ District Council of Western Pennsylvania Pension Fund, 1109 Fifth Avenue, Pittsburgh, Pennsylvania 15219, beneficial owner of 4,700 shares of PG&E Corporation is a national energy-based holding company, with businesses
that include a diverse groupcommon stock, has given notice of U.S.-based power generating, gas pipeline, and
energy commodity trading and services businesses.its intention to present the following proposal for action at the PG&E Corporation annual meeting:
| “Resolved, that the shareowners of PG&E Corporation (“Company”) hereby urge that the Board of Directors include in future proxy statements a description of the Board’s role in the development and monitoring of the Company’s long-term strategic plan. Specifically, the disclosure should include the following: (1) A description of the Company’s corporate strategy development process, including timelines; (2) an outline of the specific tasks performed by the Board in the strategy development and the compliance monitoring processes, and (3) a description of the mechanisms in place to ensure director access to pertinent information for informed director participation in the strategy development and monitoring processes. | ||
| Statement of Support: The development of a well-conceived corporate strategy is critical to the long-term success of a corporation. While senior management of our Company is primarily responsible for development of the Company’s strategic plans, in today’s fast-changing environment it is more important than ever that the Board engage actively and continuously in strategic planning and the ongoing assessment of business opportunities and risks. It is vitally important that the individual members of the Board, and the Board as an entity, participate directly and meaningfully in the development and continued assessment of our Company’s strategic plan. | ||
| A recent report by PricewaterhouseCoopers entitled “Corporate Governance and the Board — What Works Best” examined the issue of director involvement in corporate strategy development. The Corporate Governance Report found that chief executives consistently rank strategy as one of their top issues, while a poll of directors showed that board contributions to the strategic planning process are lacking. It states: “Indeed, it is the area most needing improvement. Effective boards play a critical role in the development process, by both ensuring a sound strategic planning process and scrutinizing the plan itself with the rigor required to determine whether it deserves endorsement.” | ||
| The Company’s proxy statement, and corporate proxy statements generally, provides biographical and professional background information on each director, indicating his or her compensation, term of office, and board committee responsibilities. While this information is helpful in assessing the general capabilities of individual directors, it provides shareholders no insight into how the directors, individually and as a team, participate in the critically important task of developing the Company’s operating strategy. And while there is no one best process for board involvement in the strategy development and monitoring processes, shareholder disclosure on the Board’s role in strategy development would provide shareholders information with which to better assess the performance of the board in formulating |
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| corporate strategy. Further, it would help to promote “best practices” in the area of meaningful board of director involvement in strategy development. | ||
| We urge your support for this important corporate governance reform.” |
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
The Board of Directors agrees that it plays a vital role in the development and monitoring of the Corporation’s strategic long-term plan. However, proxy statement disclosure of the specific information suggested in this proposal would require the Board to adopt and follow fixed processes and timelines in exercising that role. This would restrict or eliminate the Board’s ability to respond quickly to changes in the business environment.
The Board believes that it needs the flexibility and discretion to determine how best to develop and monitor corporate strategy, and that such matters should not be subject to predetermined reporting requirements.
For this reason, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.
Item No. 15: Shareholder Proposal Regarding Radioactive Wastes
Mr. Ron Rattner, 1998 Broadway Street, #1204, San Francisco, California 94109, beneficial owner of 1,975 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:
“RADIOACTIVE WASTES: RISK REDUCTION POLICY
| Preliminary statement: |
| Pacific Gas and Electric Company’s production and storage of high level radioactive wastes at Diablo Canyon nuclear plant involves significant and possibly catastrophic risks to the public, to the environment, and to our company which must be mitigated. | ||
| National Security Risks: | ||
| Since the 9/11/01 tragedies we have been made aware of our vulnerability to terrorism and urgent need for increased vigilance. A terrorist attack on tons of high level radioactive wastes at Diablo Canyon could make the entire coast of California uninhabitable for generations. Nuclear Regulatory Commission anti-terrorist exercises conducted between 1991-2000 revealed potential vulnerability to “significant core damage” at nearly 50% of 68 nuclear plants tested. The exercises did not consider bombing or a direct hit by large aircraft. After 9/11 the NRC revealed that “nuclear power plants were not designated to withstand such crashes”. |
| Earthquake and Transportation Risks: |
| Diablo Canyon operations are continually creating substantial quantities of high level radioactive wastes in spent fuel pools on the earthquake-prone California Coast. During every day of unrestricted operation each Diablo Canyon reactor produces radioactive wastes equivalent to those of an Hiroshima bomb. No safe off-site storage place exists or will be available-if-ever-for over a decade. Even if storage outside California becomes feasible, shipment to a distant storage site on barges, trains and trucks would entail significantly increased risks of accidents or terrorism. | ||
| Fiscal Risks: | ||
| The Company’s financial prospects are already uncertain and clouded by its entanglement in complex and burdensome California federal bankruptcy proceedings. Share prices have sharply declined; dividends have been suspended; thousands of shareholders, pensioners and retirees have been hurt. Any loss from a catastrophic nuclear attack or accident could jeopardize corporate viability and remaining shareholder equity. | ||
| Public Policy Risks: | ||
| No corporate profit goal can justify profligate disregard of serious hazards to public and environmental health and safety. The recent “Erin Brockovich” film revealed to the shareholders and to the world an institutional disregard of human health and life, which is uncivilized and unacceptable. PG&E must avert moral bankruptcy by promoting the highest good as it pursues the bottom line. |
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| Conclusion: | ||
| Fiscally and morally, PG&E has a compelling duty to mitigate risks arising from production and storage of high level radioactive wastes at Diablo Canyon Nuclear Plant. | ||
| Therefore, it is | ||
| RESOLVED | ||
| That shareholders request the Board of Directors forthwith adopt and implement a new policy and plan to reduce PG&E vulnerability to a catastrophic nuclear accident or terrorist attack at Diablo Canyon. Pursuant to such plan, production of high level radioactive wastes shall not exceed the current capacity of existing spent fuel pools, thereby averting untenable risks of possible off-site shipments or excessive on-site storage.” |
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
The Board of Directors believes this proposal is unnecessary. Pacific Gas and Electric Company’s Diablo Canyon Power Plant (Diablo Canyon) is in compliance with detailed regulations of the United States Nuclear Regulatory Commission (NRC), which has established comprehensive requirements including the monitoring and review of the safety, radiological, and environmental aspects of these facilities, the comprehensive and mandatory quality controls used in the operation of the plant, and the storage and disposal of spent nuclear fuel. These regulations also isrequire that nuclear power plants take adequate measures to protect the parent companypublic from the possibility of exposure to radioactive release caused by acts of sabotage.
Pacific Gas and Electric Company has applied to the regulated utilityNRC for a license to construct and use “dry” steel and concrete storage containers for spent fuel storage after the existing spent fuel pools capacity is depleted. Pacific Gas and Electric Company will comply with NRC requirements regarding use of these containers, including requirements that deliversthe containers be designed to withstand earthquakes and other natural gasdisasters. Currently there is no transportation of spent fuel to or from Diablo Canyon and electricityno existing plans to onecommence such transportation in every 20 Americans.the future. However, any such transportation would be subject to a number of NRC procedures, specifications, and regulations designed to protect containers transporting used nuclear fuel from attack as well as accident.
For these reasons, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.
Item No. 16: Shareholder Proposal Regarding Confidential Voting
Mr. Simon Levine, 960 Shorepoint Court, No. 306, Alameda, California 94501, holder of 5,000 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:
“16 — FREE AND CONFIDENTIAL SHAREHOLDER VOTING
| PG&E shareholders request that the Board of Directors take the steps necessary to adopt a policy of confidential voting at all meetings of company shareholders through a bylaw. This includes the following provisions: | ||
| 1) The voting of all proxies, consents or authorizations will be secret. No such document shall be available for examination, nor shall the vote or identity of any shareholder be disclosed except to the extent necessary to meet the legal requirements, if any, of the Company’s state of incorporation. | ||
| 2) The exception is in a proxy contest where each party is to have equal access to the above. | ||
| 3) Independent election inspectors shall conduct the receipt, certification and tabulation of such votes. |
| Ensure the Integrity of PG&E Elections |
| With confidential shareholder voting the integrity of our company’s elections and shareholder votes can be better protected against potential abuse. |
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| Implementing confidential voting can enhance shareholder value: |
| Shareholders would feel free to question or challenge management nominees and positions on specific ballot items if they are protected by a confidential ballot box. This is especially important for professional money managers whose business relationships can be jeopardized by their voting positions. |
| Fundamental to the American system |
| The confidential ballot is fundamental to the American system. This protection ensures that shareholders are not subjected to: |
| • | Actual | ||
| • | Perceived or | ||
| • | Potential coercive pressure. |
| Confidential voting bylaw |
| According to our company’s 2001 proxy statement confidential voting is apparently not formalized as a bylaw. |
| While there is no inference that PG&E management uses coercion, the existence of this possibility is sufficient to justify confidentiality. Major companies, such as Coca-Cola, Dow Chemical, Georgia-Pacific, Gillette, Kimberly Clark and Louisiana Pacific use confidential voting. | �� | |
| A survey of 56 institutional investors revealed that 75% said they consistently support confidential voting proposals. PG&E is 47% owned by institutional shareholders. | ||
| Institutional investor support of this topic is high-caliber support |
| This proposal topic won significant institutional support to pass at the 2001 annual meetings of other major companies. Institutional investor support is high-caliber support. |
| Institutional investor leadership |
| Some shareholders may look to institutional shareholders for leadership in evaluating the merits of shareholder proposals. Institutional shareholders have the fiduciary duty to encourage an independent analysis of the merits of shareholder proposals — plus the staff and resources to study the issues thoroughly from a shareholder-value perspective. |
CONFIDENTIAL SHAREHOLDER VOTING
The Board of Directors of PG&E Corporation Recommends a VoteAGAINST This Proposal.
PG&E Corporation adopted a formal confidential voting policy in 2000. It states that the vote of any shareholder will not be revealed to anyone other than a non-employee proxy tabulator or an independent inspector of election, except (1) as necessary to meet legal requirements, (2) in a dispute regarding authenticity of proxies and ballots, (3) in the event of a proxy contest, if the other party does not agree to comply with the confidential voting policy, and (4) where disclosure may be necessary for the Corporation to assert or defend claims.
The Board of Directors believes that the introduction of the additional procedural element of a bylaw does not change the essential objective of the proposal, that of requiring confidential voting. This proposal is unnecessary since confidential voting has already been adopted by PG&E Corporation.
For this reason, the PG&E Corporation Board of Directors unanimously recommends that shareholders voteAGAINST this proposal.
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Nominating and Compensation Committee Report on Compensation
The Nominating and Compensation Committee of the PG&E Corporation Board of Directors (the "Committee")(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, 1999.2001. Compensation for the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company is approved by their respective BoardsBoard of Directors based on the recommendation of the Committee, which is composed of independent non-employee directors. In establishing the 19992001 compensation of the Chief Executive Officers of PG&E Corporation and Pacific Gas and Electric Company, the respective Boards approvedeach Board of Directors ratified the recommendations of the Committee without modification.Committee. Compensation for all other PG&E Corporation and subsidiary officers is approved by the Committee, except that the Committee has delegated to the PG&E Corporation Chief Executive Officer the authority to approve compensation for certain officers of PG&E Corporation and its subsidiaries.
The Committee established compensation programs for 19992001 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 from 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 emphasize long-term incentives to further align shareholder and officers’ interests and focus employees on enhancing total return for the Corporation’s shareholders. | |
| • | 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 achieve maximum value from PG&E Corporation’s collective workforce by designing compensation programs that facilitate movement by employees among the Corporation and its subsidiaries. |
To meet its objectivegoal of paying compensation that is competitive with similar companies in 1999,2001, the Committee selected a group consisting of 2611 other major energy and general industry companies (the "comparator group")(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-threeAll of the 26 energy and general industry companies in the comparator group arewere included in the Standard & Poor'sPoor’s 500 Stock Index.
For 1999,2001, 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.
-
| • | 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 | |
| • | For targeted performance, long-term incentives should be equal to the 75th percentile compensation paid to comparable officers of companies in the comparator group. |
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“performance-based compensation."” Compensation programs generally 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'sCommittee’s overall policy of maintaining a competitive, performance-based compensation program, it is PG&E Corporation'sCorporation’s intent to maintain the tax deductibility of the compensation which it pays. However, dueThe Committee endeavors to the restrictive naturemaximize deductibility 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 withof 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 dueInternal Revenue Code to the impactextent practicable while maintaining competitive compensation. However, tax consequences, including but not limited to tax deductibility, are subject to many factors (such as changes in the
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Principal Components of Compensation
Base Salary
PG&E Corporation'sCorporation 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 19992001 salary levels for PG&E Corporation'sCorporation’s executive officers, the Committee'sCommittee’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 $800,000$900,000 in 1999.2001. The salary level for Mr. Glynn is belowcomparable to the average salary of chief executive officers of the 2611 companies in the comparator group. The overall average of the base salaries received by all PG&E Corporation officers (including Mr. Glynn) for 19992001 was comparable to the average salary paid to all officers of the comparator group.
PACIFIC GAS AND ELECTRIC COMPANY BASE SALARY
Pacific Gas and Electric Company'sCompany 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 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 19992001 salary levels for Pacific Gas and Electric Company'sCompany’s executive officers, the Committee'sCommittee’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 $550,000$630,000 in 1999.2001. The salary level for Mr. Smith is comparable to the average salary of senior executives in comparable positions in the 2611 companies in the comparator group. The overall average of the base salaries received by all Pacific Gas and Electric Company officers (including Mr. Smith) for 19992001 was comparable to the average salary paid to all officers of the comparator group.
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SHORT-TERM INCENTIVES
Short-Term Incentives
PG&E CORPORATION ANNUAL INCENTIVECorporation Annual Incentive
The PG&E Corporation Short-Term Incentive Plan for 19992001 was designed to provide annual incentives to all executive officers based largely on PG&E Corporation'sCorporation’s success in meeting the 19992001 corporate operating earnings per share objective. To determine whetherThis objective emphasizes the earnings per share objective is met, the
Corporation's actual earnings per share is adjusted to eliminateimpact of on-going results of operations by eliminating the effect of extraordinary gains or losses, emphasizinglosses. Annual incentives for executive officers with operating responsibility for the impactCorporation’s major lines of ongoingbusiness, Pacific Gas and Electric Company and PG&E National Energy Group, are based on a combination of corporate operating earnings and the results of operations.their line of business.
At the beginning of the year, target awards are set based on each executive'sexecutive’s responsibilities and salary level. Final awards are determined by the Committee and may range from zero to twice the target, depending on the
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In 1999,2001, PG&E Corporation achieved actualCorporation’s corporate operating earnings per share ofwere $ . .
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, theThe majority of PG&E Corporation executive officers received Short-Term Incentive Plan awards equalthat ranged from percent to percent of their total target awards.
PACIFIC GAS AND ELECTRIC COMPANY ANNUAL INCENTIVE
Pacific Gas and Electric Company Annual Incentive
The Pacific Gas and Electric Company Short-Term Incentive Plan for 19992001 was designed to provide annual incentives to all executive officers based on meeting financial, service, and other measures of the Company,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'sexecutive’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 1999,2001, Pacific Gas and Electric Company executivesexecutive officers received Short-Term Incentive Plan awards rangingthat ranged from percent to percent of their total target awards.
STOCK OPTIONS IN LIEU OF SHORT-TERM INCENTIVE PLAN AWARDS
Stock Options in Lieu of Short-Term Incentive Plan Awards
In 1998, to further increase the officers'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 otherwise would 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
Long-Term Incentives
PG&E CORPORATION LONG-TERM INCENTIVE PROGRAM. 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'sCorporation’s financial performance over time.
PG&E CORPORATION STOCK OPTION PLAN. Corporation Stock Option Plan.The Stock Option Plan provides incentives based on PG&E Corporation'sCorporation’s ability to sustain financial performance over a 3- 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).grant. 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 ofre-price options once they have been granted.
At the Committee'sCommittee’s discretion, stock options may be granted with tandem "stock“stock appreciation rights"rights” which have vesting periods and exercise guidelines that are similar to the options. These rights allow option-holders to
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Stock options also may be granted with or without tandem "dividend
equivalents"“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'srecipient’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-holderholder of the right 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 grantgrants for each executive officer of PG&E Corporation and Pacific Gas and Electric Company in 19992001 was determined by the Committee based on the Committee'sCommittee’s objectives of paying target total
compensation at the average 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.shareholders and satisfying
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PG&E CORPORATION PERFORMANCE UNIT PLAN. Corporation Performance Unit Plan.The Performance Unit Plan provides incentives based on PG&E Corporation'sCorporation’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'sCorporation’s three-year total return for shareholders (dividends plus stock price appreciation) as compared with thatranked against a group of the 49 other largest energy-based
companies in the nation.comparator companies. 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'srecipient’s number of vested performance units for the year.
In determining Performance Unit Plan results for units granted in 1999, PG&E Corporation’s performance is compared with that of the 49 other largest energy-based companies in the nation. Current year performance 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. For units granted in 2000 and 2001, PG&E Corporation’s performance is compared with that of a group of 11 energy companies selected from the Dow Jones Utility Index and is based on a two-year cumulative total shareholder return rather than on a weighted annual total shareholder return. These changes to the methodology for determining results provide a better gauge of sustained multi-year performance and focus on performance relative to select industry peers.
For the three years ended December 31, 1999,2001, PG&E Corporation'sCorporation’s total shareholder return had a weighted average ranking of 35th32nd among the 50 largest energy-based companies in the nation. Based on this ranking,these rankings, officers received awards for 2001 performance that were based on 4058 percent of vested units granted in 1999. For the numbertwo years ended December 31, 2001, PG&E Corporation’s total shareholder return had a cumulative ranking of 10th among the 12 company comparator group. Based on these rankings, officers received no payments under the Plan for 2001 performance, based on vested units.
EXECUTIVE STOCK OWNERSHIP PROGRAM. units granted in 2000 and 2001.
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'sexecutive’s base salary and vary according to the executive'sexecutive’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'sCorporation’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.Corporation and the Senior Vice Presidents of Pacific Gas and Electric Company. 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 the deferred compensation portion of his or her Supplemental Retirement Savings 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.
28
BENEFITS
Retention Mechanisms
In an effort to retain certain key personnel to ensure a continued workforce of experienced and knowledgeable employees in light of the energy crisis, bankruptcy proceedings, and the proposed Plan of Reorganization, PG&E Corporation and Pacific Gas and Electric Company implemented various retention mechanisms in 2001. The Management Retention Program provides key employees of PG&E Corporation and Pacific Gas and Electric Company with financial incentives to continue their employment through certain key dates. The Management Retention Program has been approved by the U.S. Bankruptcy Court for the Northern District of California (in which Pacific Gas and Electric Company filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code) and is supported by the Official Committee of Unsecured Creditors, which represents the unsecured creditors in the Company’s bankruptcy case. The Special Senior Executive
35
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 Supplemental Retirement Savings Plan 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
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 13, 2000
NOMINATING AND COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF2002
Nominating and Compensation Committee of the Board of Directors of PG&E CORPORATION
Corporation
Carl E. Reichardt, Chair
36
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.Corporation and Pacific Gas and Electric Company during the past year.]
| Annual Compensation | Long-Term Compensation | |||||||||||||||||||||||||||||||
| Awards | ||||||||||||||||||||||||||||||||
| Other | Payouts | |||||||||||||||||||||||||||||||
| Annual | Restricted | Securities | All Other | |||||||||||||||||||||||||||||
| Compen- | Stock | Underlying | LTIP | Compen- | ||||||||||||||||||||||||||||
| Name and Principal | Salary | Bonus | sation | Award(s) | Options/SARs | Payouts | sation | |||||||||||||||||||||||||
| Position | Year | ($) | ($)(1) | ($)(2) | ($)(3) | (# of Shares) | ($)(4) | ($)(5) | ||||||||||||||||||||||||
| Robert D. Glynn, Jr. | 2001 | $ | 900,000 | |||||||||||||||||||||||||||||
| Chairman of the Board, Chief | 2000 | 900,000 | 0 | 3,806 | 0 | 322,100 | 0 | 41,280 | ||||||||||||||||||||||||
| Executive Officer, and President of PG&E Corporation; Chairman of the Board of Pacific Gas and Electric Company | 1999 | 800,000 | 1,224,000 | 23,181 | 0 | 300,000 | 176,204 | 36,780 | ||||||||||||||||||||||||
| 2001 | ||||||||||||||||||||||||||||||||
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| 2000 | ||||||||||||||||||||||||||||||||
| 1999 | ||||||||||||||||||||||||||||||||
| Gordon R. Smith | 2001 | $ | 630,000 | |||||||||||||||||||||||||||||
| Senior Vice President of PG&E | 2000 | 630,000 | 0 | 820 | 0 | 212,600 | 0 | 28,960 | ||||||||||||||||||||||||
| Corporation; President and Chief Executive Officer of Pacific Gas and Electric Company | 1999 | 550,000 | 460,075 | 10,054 | 0 | 122,500 | 74,436 | 25,360 | ||||||||||||||||||||||||
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37
| (1) | Represents payments received or deferred in 2000, 2001, and 2002 for achievement of corporate and organizational objectives in 1999, 2000, and 2001, respectively, under the Short-Term Incentive Plan. |
| (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) | In an effort to retain certain key personnel to ensure a continued workforce of experienced and knowledgeable employees in light of the |
| (4) | Represents payments received or deferred in 2002, 2001, and 2000 for achievement of corporate performance objectives for the periods 1999 through 2001, 1998 through 2000, and 1997 through 1999, |
| (5) | Amounts reported for 2001 consist of: (i) contributions to defined contribution retirement plans ( ), (ii) contributions received or deferred under excess benefit arrangements associated with defined contribution retirement plans ( ), (iii) above-market interest on deferred compensation ( ), (iv) relocation allowances and other one-time payments, including one-time payments made pursuant to employment arrangements and credited to deferred compensation accounts ( ), and (v) amounts received pursuant to management retention programs ( ). |
38
Option/ SAR Grants in 2001
[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.]
| Grant | ||||||||||||||||||||
| Individual Grants | Date Value | |||||||||||||||||||
| Number of | % of Total | |||||||||||||||||||
| Securities | Options/SARs | Grant | ||||||||||||||||||
| Underlying | Granted to | Exercise or | Date | |||||||||||||||||
| Options/SARs | Employees in | Base Price | Expiration | Present | ||||||||||||||||
| Name | Granted (#)(1)(2) | 2001(2) | ($/Sh)(3) | Date(4) | Value ($)(5) | |||||||||||||||
| (1) | All options granted to executive officers in 2001 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 |
| (4) | All options granted to executive officers in 2001 expire ten years and |
| (5) | Estimated present values are based on the Black-Scholes Model, a mathematical formula used to value options traded on stock exchanges. 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. |
39
Aggregated Option/SAR Exercises in 2001 and Year-End Option/SAR Values
[This table summarizes exercises of corporatestock options and organizational objectives from 1997 through
1999, under the Short-Term Incentive Plan.
(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 2000, 1999, and 1998 for
achievement of corporate performance objectives for the periods 1997 through
1999, 1996 through 1998, and 1995 through 1997, respectively, under the
Performance Unit Plan.
(4) Amounts reported for 1999 consist of: (i) contributions to defined
contribution retirement plans (Mr. Glynn $XX,XXX, Mr. $XX,XXX,
Mr. $XX,XXX, Mr. $XX,XXX, Mr. $XX,XXX,
Mr. Smith $XX,XXX, Mr. $XX,XXX, Mr. $XX,XXX,
Mr. $XX,XXX, and Mr. $XX,XXX), (ii) premiums on
indemnity policies to secure the payment of benefits under the Supplemental
Executive Retirement Plan and the Deferred Compensation Plan (Mr. Glynn
$XXX, Mr. Smith $XXX, and Mr. $XXX), (iii) contributions
received or deferred under excess benefit arrangements associated with
defined contribution retirement plans (Mr. Glynn $XX,XXX, Mr.
$XX,XXX, Mr. $XX,XXX, Mr. Smith $XX,XXX, Mr.
$XX,XXX, Mr. $XX,XXX, Mr. $XX,XXX, and
Mr. $XX,XXX), and (iv) one-time payments, including
($X.X million) and relocation allowances (Mr. $XXX,XXX).
31
OPTION/SAR GRANTS IN 1999
[THIS TABLE SUMMARIZES THE DISTRIBUTION AND THE TERMS AND CONDITIONS OF STOCK
OPTIONS GRANTED TO THE EXECUTIVE OFFICERS NAMED IN THE SUMMARY COMPENSATION
TABLE DURING THE PAST YEAR.]
GRANT
DATE
INDIVIDUAL GRANTS VALUE
- - -------------------------------------------------------------------------------------------------- ------------
(A) (B) (C) (D) (E) (F)
% OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS EXERCISE OR GRANT DATE
UNDERLYING OPTIONS/SARS GRANTED TO BASE PRICE EXPIRATION PRESENT
NAME GRANTED (#)(1)(2) EMPLOYEES IN 1999(2) ($/SH)(3) DATE(4) VALUE ($)(5)
Robert D. Glynn, Jr. 300,000 4.26% $30.9375 01-05-2009 $1,257,000
Gordon R. Smith 122,500 1.74% $30.9375 01-05-2009 $ 513,275
(1) All options granted to executive officers in 1999 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(granted in prior years) by the closing price of PG&E Corporation common
stock on the date of grant.
(4) All options granted to executive officers in 1999 expire 10 years and one
day from the date of grant, subject to earlier expirationnamed in the event ofSummary Compensation Table during the officer's termination of employment with PG&E Corporation, Pacific Gaspast year, as well as the number 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. 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 1999 option grants shown in the table above:
volatility of 16.79%, risk-free rate of return of 4.64%, 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 theall unexercised 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 $4.19 per share.
32
AGGREGATED OPTION/SAR EXERCISES IN 1999 AND YEAR-END OPTION/SAR VALUES
[THIS TABLE SUMMARIZES EXERCISES OF STOCK OPTIONS AND TANDEM STOCK APPRECIATION
RIGHTS (GRANTED IN PRIOR YEARS) BY THE EXECUTIVE OFFICERS NAMED IN THE SUMMARY
COMPENSATION TABLE DURING THE PAST YEAR, AS WELL AS THE NUMBER AND VALUE OF ALL
UNEXERCISED OPTIONS HELD BY SUCH NAMED EXECUTIVE OFFICERS AT THE END OF 1999.]
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES ACQUIRED END OF 1999 (#) END OF 1999 ($)(1)
ON EXERCISE VALUE REALIZED (EXERCISABLE/ (EXERCISABLE/
NAME (#) ($) UNEXERCISABLE) UNEXERCISABLE)
Robert D. Glynn, Jr. 0 $0 153,834/ 852,990 $ 0/ $0
Gordon R. Smith 0 0 85,169/ 345,731 0/ 0
(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 $20.50, which was the closing price of PG&E Corporation common
stock on December 31, 1999.
33
LONG-TERM INCENTIVE PROGRAM--AWARDS IN 1999
[THIS TABLE SUMMARIZES THE LONG-TERM INCENTIVE AWARDS MADE TO THE EXECUTIVE
OFFICERS NAMED IN THE SUMMARY COMPENSATION TABLE DURING THE PAST YEAR.]
ESTIMATED FUTURE PAYOUTS UNDER
AWARDS NON-STOCK PRICE-BASED PLANS
-------------------------------------------- -----------------------------------------
(A) (B) (C) (D) (E) (F)
PERFORMANCE OR
OTHER PERIOD
NUMBER OF SHARES, UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME UNITS, OR OTHER RIGHTS(1) OR PAYOUT ($ OR #)(2) ($ OR #)(2) ($ OR #)(2)
Robert D. Glynn, Jr. 20,000 3 years 0 units 20,000 units 40,000 units
Gordon R. Smith 10,800 3 years 0 units 10,800 units 21,600 units
(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,such named executive officers at the end of 2001.]
| Value of | ||||||||||||||||
| Number of Securities | Unexercised | |||||||||||||||
| Underlying Unexercised | In-the-Money | |||||||||||||||
| Options/SARs at | Options/SARs at | |||||||||||||||
| Shares Acquired | End of 2001 (#) | End of 2001(1) | ||||||||||||||
| on Exercise | Value Realized | (Exercisable/ | (Exercisable/ | |||||||||||||
| Name | (#) | ($) | Unexercisable) | Unexercisable) | ||||||||||||
| (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 $19.24, which was the closing price of PG&E Corporation common stock on December 31, 2001. |
40
Long-Term Incentive Program — Awards in 2001
[This table summarizes the year,long-term incentive awards made to the amount of accrued
dividend equivalents will be increased or decreased byexecutive officers named in the same percentage
used to increase or decreaseSummary Compensation Table during the recipient's number of vested performance
units for thepast year.
(2) Payments are determined by multiplying the number of units earned in a given
year by the average market price of PG&E Corporation common stock for the
last 30 calendar day period of the year.
RETIREMENT BENEFITS]
| Estimated Future Payouts Under | ||||||||||
| Awards | Non-Stock Price-Based Plans | |||||||||
| Performance or | ||||||||||
| Other Period | ||||||||||
| Number of Shares, | Until Maturation | Threshold | Target | Maximum | ||||||
| Name | Units, or Other Rights | or Payout | ($ or #)(1) | ($ or #)(1) | ($ or #)(1) | |||||
| (1) | For units granted pursuant to the Performance Unit Plan, 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 30 calendar day period prior to the end of the year. For grants of phantom restricted stock units, payments will be determined by multiplying the number of units by the closing market price of PG&E Corporation common stock on the date of vesting. |
| (2) | 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 cumulative total shareholder return (dividends plus stock price appreciation) as compared with that achieved by the 11 other companies in the comparator group. 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. Each time a cash dividend is paid 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. |
| (3) | Represents common stock equivalents called Special Incentive Stock Ownership Premiums (SISOPs) earned under the Executive Stock Ownership Program. SISOPs are earned by eligible officers who achieve and maintain minimum PG&E Corporation common stock ownership levels as set by the Nominating and Compensation Committee. All of the officers named in the Summary Compensation Table on pages - , are eligible officers. Each SISOP represents a share of PG&E Corporation common stock that vests at the end of three years. Units can be forfeited prior to vesting if an eligible officer fails to maintain his or her minimum stock ownership level. Upon retirement or termination, vested SISOPs are distributed in the form of an equivalent number of shares of PG&E Corporation common stock. |
41
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 pagepages . During 1999, theThe benefit formula for eligible executive officers was 1.6is 1.7 percent of the average of the three highest combined salary and annual incentive awards during the last 10ten years of service multiplied by years of credited service. Effective January 1, 2000,During 2001, a significant portion of the multiplierunfunded corporate retirement obligations of PG&E Corporation was increasedreduced as a result of tax law changes increasing the annual pension benefit which can be paid from 1.6 percenta tax-qualified pension plan and an amendment to 1.7 percent.the Retirement Plan. As of December 31, 1999,2001, the estimated annual retirement benefits (assuming credited service to age 65) for the most highly compensated executive officers assuming
credited service to age 65, arewere as follows: Mr. Glynn $XXX,XXX, Mr. Smith
$XXX,XXX, Mr. $XXX,XXX, Mr. $XXX,XXX,
Mr. $XXX,XXX, Mr. $XXX,XXX, and
Mr. $XXX,XXX.. The amounts shownestimated annual retirement benefits are single life annuity benefits and would not be subject to any Social Security offsets.
34
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL PROVISIONS
Employment Contracts/Arrangements
Thomas G. Boren’s employment letter entitles him to receive salary, other cash and equity awards as described elsewhere in this proxy statement, and other standard employee benefits. Mr. Boren’s participation in the supplemental defined benefit executive retirement plan includes recognition of credited years with his former employer, Southern Company, although benefits will be reduced by benefits payable from Southern Company’s plan, excluding special enhancements payable as part of his separation from Southern Company. Under his employment letter, Mr. Boren was entitled to receive $1,000,000 in three annual installments, upon satisfaction of annual general business goals. Mr. Boren’s last installment was payable December 31, 2001, upon satisfaction of the 2001 business goals. Mr. Boren also is eligible to receive a mortgage subsidy equal to $26,667 per $100,000 of loan value, limited to a loan amount of $1,500,000, through July 2004, with a maximum subsidy of $400,000 ($80,000 per year). Mr. Boren also will be compensated for the loss of mortgage tax deduction in excess of the $1,000,000 maximum allowed by law, up to the stated maximum mortgage loan amount of $1,500,000.
Thomas B. King’s employment letter entitles him to receive salary, other cash and equity awards as described elsewhere in this proxy statement, and other standard employee benefits. In connection with his relocation to Bethesda, Maryland, at the request of PG&E Corporation, Mr. King received a one-time payment of $150,000, net of taxes, and a one-time taxable payment of $75,000. If Mr. King resigns from his position prior to December 31, 2004 (and is not then an employee of PG&E Corporation or its affiliates), he will be required to repay the gross amount of such payments. Mr. King also received (1) a moving allowance equal to one month’s pay, (2) reimbursement for travel expenses incurred in finding a principal residence in the Bethesda area, and for the reasonable cost of temporary housing, (3) reimbursement of closing costs incurred in the sale of his prior residence and the purchase of a new residence, (4) indemnification for loss suffered on the sale of his prior residence, and (5) reimbursement of certain losses and expenses incurred in placing his children in comparable schools in the Bethesda area. Mr. King also is entitled to receive a mortgage subsidy of $3,500 per month, payable for four years, commencing with the first mortgage payment for his new residence. If Mr. King resigns from employment with PG&E Corporation or one of its subsidiaries or affiliates before December 31, 2004, he will be required to repay all amounts provided under the temporary mortgage subsidy.
L. E. Maddox’s employment letter entitles him to receive salary, other cash and equity awards described elsewhere in this proxy statement, and other standard employee benefits. In connection with his relocation to Bethesda, Maryland, at the request of PG&E Corporation, Mr. Maddox received a one-time payment of $250,000, net of taxes, and a one-time taxable payment of $75,000. If Mr. Maddox resigns from his position before December 31, 2004 (and is not then an employee of PG&E Corporation or its affiliates), he will be required to repay the gross amount of such payments. Mr. Maddox also received (1) a moving allowance equal to one month’s pay, (2) reimbursement for travel expenses incurred in finding a principal residence in the Bethesda area, and for the reasonable cost of temporary housing, (3) reimbursement of closing costs incurred in the sale of his prior residence and the purchase of a new residence, (4) indemnification for loss suffered on the sale of his prior residence, and (5) reimbursement of certain losses and expenses incurred in placing his children in comparable schools in the Bethesda area. Mr. Maddox also is entitled to receive a mortgage subsidy of $3,500 per month, payable for four years, commencing with the first mortgage payment for his new residence. If Mr. Maddox resigns from employment with PG&E Corporation or one of its subsidiaries or affiliates before December 31, 2004, he will be required to repay all amounts provided under the temporary mortgage subsidy.
42
Termination of Employment and Change in Control Provisions
The PG&E Corporation Officer Severance 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. In most situations, benefits under the policy include (i)(1) 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'sofficer’s level), (ii)(2) continued vesting of equity-based awards for 18 months or two years after termination (depending on the applicable severance multiple), (iii)(3) accelerated vesting of up to two-thirds of the common stock equivalents awarded under the Executive Stock Ownership Program (depending on an officer'sofficer’s level), and (iv)(4) 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'sCorporation’s Supplemental Executive Retirement Plan can elect additional years of service and/or age for purposes of calculating pension benefits. Effective July 21, 1999, the policy was amended to provide covered officers with alternative benefits that apply upon actual or constructive termination following a change in control or potential change in control. According to the policy, a "change“change in control"control” occurs upon (i)(1) the acquisition of 20 percent or more of the Corporation'sCorporation’s outstanding voting securities by a single entity or person, (ii)(2) a change in the directors who constitute a majority of the Board of Directors over a two-year period, unless the new directors were nominated by at least two-thirds of the Board of Directors who were directors at the beginning of the two-year period, or (iii)(3) shareholder approval of certain corporate transactions. Constructive termination includes certain changes to a covered officer'sofficer’s responsibilities. In the event of a change in control or potential change in control, the policy provides for a lump sum payment of the sumtotal of (i)(1) unpaid base salary earned through the termination date, (ii)(2) target Short-Term Incentive Plan award calculated for the fiscal year in which termination occurs ("Target Bonus")(Target Bonus), (iii)(3) any accrued but unpaid vacation pay, and (iv)(4) three times the sum of Target Bonus and the officer'sofficer’s annual base salary in effect immediately before either the date of termination or the change in control, whichever base salary is greater. Change in control termination benefits also include reimbursement of excise taxes levied upon the severance benefit pursuant to Internal Revenue Code Section 4999.
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, and stock-based incentive awards granted under the LTIP.Plan. 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“change in control"control” will be deemed to have occurred if any of the following occurs: (1) any "person"“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'sperson’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'sCorporation’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 that 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“combined voting power"power” means the combined voting power of the then outstanding voting securities of the Corporation or the other relevant entity.
35
COMPARISON OF THREE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN(1)
[THIS GRAPH COMPARES THE CUMULATIVE TOTAL RETURN ON
The Special Senior Executive Retention Grants provide certain senior executive officers with phantom restricted stock units that fully vest upon a change in control. For these purposes, “change in control” has the same definition as under the LTIP. The Special Senior Executive Retention Grants are described in more detail in the Nominating and Compensation Committee Report on Compensation on page , in footnote 3 of the Summary Compensation Table on page , and in footnote 3 of the Long-Term Incentive Program — Awards in 2001 Table on page .
43
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 THREE
FISCAL YEARS, SINCE PG&E CORPORATION WAS FORMED, WITH THAT OF THE STANDARD &
POOR'S 500 STOCK INDEX AND THE DOW JONES UTILITIES INDEX.]
[GRAPH]
(1) Assumes $100 invested on December 31, 1996, in Pacific Gas and Electric
CompanyCorporation common stock (equal to dividends plus stock price appreciation) during the past five fiscal years with that of the Standard & Poor'sPoor’s 500 Stock Index and the Dow Jones Utilities Index.]
(PERFORMANCE GRAPH)
| Dow Jones Utilities | Standard & Poor’s 500 | |||||||||||
| PG&E Corporation | Index (DJUI) | Stock Index (S&P) | ||||||||||
| 1996 | 100 | 100 | 100 | |||||||||
| 1997 | 152 | 123 | 133 | |||||||||
| 1998 | 164 | 146 | 171 | |||||||||
| 1999 | 111 | 138 | 208 | |||||||||
| 2000 | 114 | 208 | 189 | |||||||||
| 2001 | 110 | 154 | 166 | |||||||||
| (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. PG&E Corporation was formed on January 1, 1997, and, on that date, 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. |
44
Report of the Audit Committees
The Audit Committees of PG&E Corporation and Pacific Gas and Electric Company common stock were
converted on a one-for-one basis to sharesare composed of at least three independent directors and operate under written charters adopted by their respective Board of Directors. The members of the Audit Committees of PG&E Corporation common stock.
36
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.]
[GRAPH]
(1) Assumes $100 invested on December 31, 1996, inand 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.identical. At both PG&E Corporation was formed on January 1, 1997, and on that date,
all outstanding shares of Pacific Gas and Electric Company, common stockmanagement is responsible for internal controls and the integrity of the financial reporting process.
In this regard, management has represented to the Audit Committees that PG&E Corporation’s and Pacific Gas and Electric Company’s consolidated financial statements were convertedprepared in accordance with generally accepted accounting principles. In addition, the Committees reviewed and discussed these consolidated financial statements with management and the independent auditors. The Committees also reviewed with the independent auditors matters that are required to be discussed by Statement on a one-for-one basisAuditing Standards No. 61 (Communication with Audit Committees).
Deloitte and Touche LLP was the independent auditor for PG&E Corporation and Pacific Gas and Electric Company in 2001. The Corporation’s independent auditors provided to sharesthe Committees the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and the Committees discussed with the independent auditors that firm’s independence. In addition, the Committees have reviewed non-audit fees that PG&E Corporation, Pacific Gas and Electric Company, and their respective subsidiaries have paid to the independent auditors, including amounts for information technology services, for purposes of considering whether such fees are compatible with maintaining the auditor’s independence.
Based on the Committees’ reviews and discussions with management and the independent auditors, the Committees recommended to the Boards of Directors that the audited consolidated financial statements for PG&E Corporation and Pacific Gas and Electric Company be included in the PG&E Corporation and Pacific Gas and Electric Company Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission.
March 13, 2002
Audit Committees of the Boards of Directors of PG&E Corporation common stock.
37
- - --------------------------------------------------------------------------------
and Pacific Gas and Electric Company
C. Lee Cox, Chair
45
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, 2000:
2002:
| Name and Address of | Amount and Nature of | Percent | ||||||||
| Class of Stock | Beneficial Owner | Beneficial Ownership | of Class | |||||||
| Pacific Gas and Electric Company voting stock | PG&E Corporation(1) P.O. Box 193722 San Francisco, CA 94119-3722 | 326,926,667 | 94.99 | % | ||||||
| PG&E Corporation common stock | State Street Bank and Trust Company(2) 225 Franklin Street Boston, MA 02110 | 29,993,967 | 8.24 | % | ||||||
| (1) | As a result of the formation of the holding company on January 1, 1997, PG&E Corporation became the holder of all issued and outstanding shares of Pacific Gas and |
| (2) | The information relating to State Street Bank and |
Section 16 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'sCorporation’s and Pacific Gas and Electric Company'sCompany’s respective directors, certain officers, and persons who own greater than 10 percent of PG&E Corporation'sCorporation’s or Pacific Gas and Electric Company'sCompany’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 19992001 all filing requirements applicable to their directors, officers, and 10 percent shareholders were satisfied, except as follows: a late Form 4that an Initial Statement of Beneficial Ownership was filed late for Thomas B. King regarding a purchase of
shares in October 1999.
38
ANNUAL REPORT
PG&E Corporation's and Pacific Gas and Electric Company's joint 1999 annual
reportDaniel D. Richard, Jr., who became subject 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 which 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 consistentsuch filing requirements 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) 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.eproxy.com/pcg/
or by using a touch-tone telephone and calling the following
toll-free number from anywhere in the United States or Canada:
1-800-840-1208
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
4:00 p.m., Eastern time, on Tuesday, April 18, 2000. SHAREHOLDERS SUBMITTING
PROXIES AND VOTING INSTRUCTIONS OVER THE INTERNET OR BY TELEPHONE SHOULD NOT
MAIL THE PROXY VOTING INSTRUCTION FORM.
39
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
ChaseMellon Shareholder Services, L.L.C., to act as the independent tabulator of
proxies and as the independent inspector of election at the annual meetings.
PROPOSALS BY SHAREHOLDERS - 2001
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 (as may be applicable depending
on whether the matter relatesrespect to PG&E Corporation or Pacific Gas and Electric
Company, or both) to be held in 2001 must be received by the Vice President and
Corporate Secretary after April 19, 2000, but no later than November 13,December 2000.
The Corporation's Bylaws provide that any shareholder wishing to make a
nomination for director, or wishing to introduce any business, at the annual
meeting of shareholders to be held in 2001 must provide timely and proper
written notice of the matter, in the manner described in the Bylaws. To be
timely, the shareholder's written notice must be received at the principal
executive office of the Corporation no later than January 27, 2001. However, if
the 2001 annual meeting is scheduled for a date that differs by more than
30 days from the anniversary date of the 2000 annual meeting, the shareholder's
notice must be received no later than the tenth day following the date on which
the Corporation publicly discloses the date of the 2001 annual meeting. In most
circumstances, the holders of proxies solicited by the PG&E Corporation Board of
Directors will have discretionary authority to vote on shareholder proposals and
shareholder nominations that have been timely submitted to the Corporation,
provided that the Corporation describes the proposal in its proxy statement and
states how the Corporation intends to vote on such proposals. Shareholder
proposals and shareholder nominations received after the deadline will not be
considered at the annual meeting. Shareholders may obtain a copy of the Bylaws
discussed above from the Corporation's reports filed with the Securities and
Exchange Commission which are available through the Corporation's web site at
www.pgecorp.com or by writing to PG&E Corporation's Office of the Corporate
Secretary.
The Bylaws of Pacific Gas and Electric Company do not contain any
requirement for shareholders to provide advance notice of proposals or
nominations they intend to present at the annual meeting. In most circumstances,
the holders of proxies solicited by the Board of Directors of Pacific Gas and
Electric Company will have discretionary authority to vote on shareholder
proposals and nominations that have been timely submitted to the company,
provided that the company describes the matters in its proxy statement and
states how the company intends to vote on such matters. To be timely submitted,
shareholder proposals and nominations must be provided to the Vice President and
Corporate Secretary of Pacific Gas and Electric Company no later than
January 27, 2001. However, if the date of the 2001 annual meeting is changed
more than 30 days from the anniversary date of the 2000 annual meeting, a
shareholder matter will be timely submitted if Pacific Gas and Electric Company
receives notice of the matter a reasonable time before the company mails its
2001 proxy materials. For shareholder proposals and nominations submitted after
the deadline, the proxyholders will have discretionary voting authority with
respect to such matters without including any information about the matter in
the proxy statement.
40
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, | |
| |
| Linda Y.H. Cheng | |
| Corporate Secretary, | |
| PG&E Corporation and | |
| Pacific Gas and Electric Company |
46
Restated Articles of Incorporation
Articles Third 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 ASK A REPRESENTATIVE AT THE SHAREHOLDER REGISTRATION DESK
TO USE AN ASSISTIVE LISTENING DEVICE.
FOR SHAREHOLDERS WITH IMPAIRED VISION, AUDIO CASSETTE RECORDINGS OF THE
MEETINGS WILL BE AVAILABLE WITHOUT CHARGE. 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.
41
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APPENDIX A
RESTATED ARTICLES OF INCORPORATION
OF PG&E CORPORATION
ARTICLE EIGHTH
EIGHTH:Eighth
THIRD:
I. The affirmative vote of the holders of not less than a majority of the
outstanding shares of "Voting Stock" (as hereinafter defined) shall be required
to implement or effect any "Business Combination" (as hereinafter defined)
involving the Corporation or any "Subsidiary" (as hereinafter defined) of the
Corporation and any "Related Person" (as hereinafter defined), or any
"Affiliate" or "Associate" (as hereinafter defined) of a Related Person,
notwithstanding the fact that no vote may be required or that a lesser
percentage may be specified by law, in any agreement with any national
securities exchange or otherwise. In addition, the provisions of either
subparagraph (1) or (2) must be satisfied:
(1) The Business Combination shall have been approved by the Board of
Directors without counting the vote of any director who is not a "Disinterested
Director" (as hereinafter defined); or
(2) All of the following conditions are met:
(i) The cash or "Fair Market Value" (as hereinafter defined) as of the
date of the consummation of the Business Combination (the "Combination
Date") of the property, securities or other consideration to be received per
share by holders of a particular class or series of capital stock, as the
case may be, of the Corporation in the Business Combination is not less than
the highest of:
(a) the highest per share price (including brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by or on behalf of the
Related Person in acquiring beneficial ownership of any of its holdings
of such class or series of capital stock of the Corporation (A) within
the two-year period immediately prior to the first public announcement of
the proposed Business Combination (the "Announcement Date") or (B) in the
transaction or series of transactions in which the Related Person became
a Related Person, whichever is higher; or
(b) the highest Fair Market Value per share of the shares of capital
stock being acquired in the Business Combination as of any date within
the one-year period preceding: (A) the Announcement Date or (B) the date
on which the Related Person became a Related Person, whichever is higher;
or
(c) in the case of Common Stock, the highest per share book value of
the Common Stock as reported at the end of the three fiscal quarters
which preceded the Announcement Date, and in the case of Preferred Stock
the highest preferential amount per share to which the holders of shares
of such class or series of Preferred Stock would be entitled as of the
Combination Date in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation,
regardless of whether the Business Combination to be consummated
constitutes such an event.
The provisions of this paragraph I(2)(i) shall be required to be met
with respect to every class or series of outstanding capital stock, whether
or not the Related Person has previously acquired any shares of a particular
class or series of capital stock. In all of the above instances, appropriate
adjustments shall be made for recapitalizations and for stock dividends,
stock splits and like distributions; and
(ii) The consideration to be received by holders of a particular class
or series of capital stock shall be in cash or in the same form as
previously has been paid by or on behalf of the Related Person in connection
with its direct or indirect acquisition of beneficial ownership of shares of
such class or series of stock. If the consideration so paid for any such
shares varied as to form, the form of consideration for such shares shall be
either cash or the form used to acquire beneficial ownership of the largest
number of shares of such class or series of capital stock previously
acquired by the Related Person; and
(iii) After such Related Person has become a Related Person and prior to
the consummation of such Business Combination: (a) except as approved by the
Board of Directors without counting the vote of any director who is not a
Disinterested Director, there shall have been no failure to declare and pay
at the regular date therefor any full quarterly dividends (whether or not
cumulative) on the outstanding Preferred Stock;
A-1
(b) there shall have been (A) no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any subdivision of
the Common Stock) except as approved by the Board of Directors without
counting the vote of any director who is not a Disinterested Director, and
(B) an increase in such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect of reducing
the number of outstanding shares of the Common Stock, unless the failure so
to increase such annual rate is approved by the Board of Directors without
counting the vote of any director who is not a Disinterested Director; and
(c) such Related Person shall not have become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction which
results in such Related Person becoming a Related Person; and
(iv) After such Related Person has become a Related Person, the Related
Person shall not have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in anticipation of or in
connection with such Business Combination or otherwise; and
(v) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any provisions
subsequently replacing such Act, rules or regulations) shall be mailed to
public shareholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy or
information statement is required to be mailed pursuant to such Act or
subsequent provisions).
II. For purpose of this Article EIGHTH:
(1) The term "Business Combination" shall mean any (i) merger or
consolidation of the Corporation or a Subsidiary with a Related Person or any
other person which is or after such merger or consolidation would be an
Affiliate or Associate of a Related Person; (ii) sale, lease, exchange,
mortgage, pledge, transfer or other disposition or guarantee (in one transaction
or a series of transactions) to or with or for the benefit of any Related Person
or any Affiliate or Associate of any Related Person, of any assets of the
Corporation or of a Subsidiary having an aggregate Fair Market Value of
$100 million or more; (iii) sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions), to the
Corporation or a Subsidiary of any assets of a Related Person or any Affiliate
or Associate of any Related Person having an aggregate Fair Market Value of
$100 million or more; (iv) issuance, pledge or transfer of securities of the
Corporation or a Subsidiary (in one transaction or a series of transactions) to
or with a Related Person or any Affiliate or Associate of any Related Person in
exchange for cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $100 million or more;
(v) reclassification of securities (including any reverse stock split) or
recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction that would
have the effect, either directly or indirectly, of increasing the voting power
or the proportionate share of any class of equity or convertible securities of
the Corporation or any Subsidiary which is directly or indirectly beneficially
owned by any Related Person or any Affiliate or Associate of any Related Person;
and (vi) any merger or consolidation of the Corporation with any of its
Subsidiaries after which the provisions of this Article EIGHTH of the Articles
of Incorporation shall not be contained in the Articles of Incorporation of the
surviving entity.
(2) The term "person" shall mean any individual, firm, corporation or other
entity and shall include any group comprised of any person and any other person
with whom such person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding, voting or disposing of Voting Stock of the Corporation.
(3) The term "Related Person" shall mean any person (other than the
Corporation, or any Subsidiary and other than any dividend reinvestment plan or
profit-sharing, employee stock ownership or other employee benefit or savings
plan of the Corporation or any Subsidiary or any trustee of or fiduciary with
respect to any such plan when acting in such capacity) who or which:
(i) is the beneficial owner (as hereinafter defined) of five percent
(5%) or more of the Voting Stock;
(ii) is an Affiliate or Associate of the Corporation and at any time
within the two-year period immediately prior to the date in question was the
beneficial owner of five percent (5%) or more of the then outstanding Voting
Stock; or
(iii) is an assignee of or has otherwise succeeded to the beneficial
ownership of any shares of Voting Stock which were at any time within the
two-year period immediately prior to such time beneficially owned by any
Related Person, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
A-2
(4) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such person or any of its Affiliates or Associates has,
directly or indirectly, (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, or (b) the right
to vote pursuant to any agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Voting Stock.
(5) For the purposes of determining whether a person is a Related Person
pursuant to subparagraph (3) of this paragraph II, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of subparagraph (4) of this paragraph II but shall not include any
other shares of Voting Stock which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(6) The term "Affiliate," used to indicate a relationship with a specified
person, shall mean a person that directly, or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such specified person. The term "Associate," used to indicate a relationship
with a specified person, shall mean (i) any person (other than the Corporation
or a Subsidiary) of which such specified person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities, (ii) any trust or other estate in which such specified person
has a substantial beneficial interest or as to which such specified person
serves as trustee or in a similar fiduciary capacity, (iii) any relative or
spouse of such specified person or any relative of such spouse, who has the same
home as such specified person or who is a director or officer of the Corporation
or any Subsidiary, and (iv) any person who is a director or officer of such
specified person or any of its parents or subsidiaries (other than the
Corporation or a Subsidiary).
(7) The term "Subsidiary" means any corporation or other entity of which a
majority of any class of equity securities is owned, directly or indirectly, by
the Corporation; provided, however, that for the purposes of the definition of
Related Person set forth in subparagraph (3) of this paragraph II, the term
"Subsidiary" shall mean only a corporation of which a majority of the
outstanding shares of capital stock of such corporation entitled to vote
generally in the election of directors is owned, directly or indirectly, by the
Corporation or, in the case of other entities, the Corporation has the direct or
indirect contractual power to designate a majority of the individuals or
representatives exercising functions similar to those exercised by directors of
a corporation, or the Corporation has the power to approve a transaction which
would otherwise be a Business Combination involving such entity.
(8) The term "Disinterested Director" means any member of the Board of
Directors, while such person is a member of the Board of Directors, who is not
an Affiliate, Associate or a representative of the Related Person involved in a
proposed Business Combination and was a member of the Board of Directors
immediately prior to the time that the Related Person became a Related Person,
and any successor of a Disinterested Director, while such successor is a member
of the Board of Directors, who is not an Affiliate, Associate or a
representative of the Related Person and is recommended or elected to succeed a
Disinterested Director by the Board of Directors without counting the vote of
any director who is not a Disinterested Director.
(9) For the purposes of paragraph I(2)(i) of this Article EIGHTH, the term
"other consideration to be received" shall include, without limitation, capital
stock retained by the shareholders.
(10) The term "Voting Stock" shall mean all of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, and each reference to a proportion of shares of Voting Stock shall
refer to such proportion of the votes entitled to be cast by such shares voting
together as one class.
(11) The term "Fair Market Value" means: (i) in case of capital stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the Composite Tape for the New York
Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite
Tape, on the New York Stock Exchange, or if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such stock exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day period
preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any successor system then in use,
or if no such quotations are available, the fair market value on the
A-3
date in question of a share of such stock as determined in good faith by the
Board of Directors without counting the vote of any director who is not a
Disinterested Director; and (ii) in the case of property other than cash or
stock, the fair market value of such property on the date in question as
determined in good faith by the Board of Directors without counting the vote of
any director who is not a Disinterested Director.
(12) A Related Person shall be deemed to have acquired a share of Voting
Stock at the time when such Related Person became the beneficial owner thereof.
If the Board of Directors without counting the vote of any director who is not a
Disinterested Director is not able to determine the price at which a Related
Person has acquired a share of Voting Stock, such price shall be deemed to be
the Fair Market Value of the shares in question at the time when the Related
Person becomes the beneficial owner thereof. With respect to shares owned by
Affiliates or other persons whose ownership is attributed to a Related Person
under the foregoing definition of Related Person, the price deemed to be paid
therefor by such Related Person shall be the price paid upon the acquisition
thereof by such Affiliate, Associate or other person, or, if such price is not
determinable by the Board of Directors without counting the vote of any director
who is not a Disinterested Director, the Fair Market Value of the shares in
question at the time when the Affiliate, Associate, or other such person became
the beneficial owner thereof.
III. The fact that any Business Combination complies with the provisions of
paragraph I(2) of this Article EIGHTH shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or any
member thereof, to approve such Business Combination or recommend its adoption
or approval to the shareholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
IV. The Board of Directors of the Corporation shall have the power and duty
to determine for the purposesconsist of this Article EIGHTH, on the basis of
information known to them after reasonable inquiry and in accordance with the
terms of this Article EIGHTH, whether a person is a Related Person and whether a
director is a Disinterested Director. Once the Board of Directors has made a
determination pursuant to the preceding sentence that a person is a Related
Person, the Board of Directors of the Corporation, without counting the vote of
any director who is not a Disinterested Director with respect to such Related
Person, shall have the power and duty to interpret all of the terms and
provisions of this Article EIGHTH and to determine on the basis of the
information known to them after reasonable inquiry all facts necessary to
ascertain compliance with this Article EIGHTH including, without limitation,
(1) the number of shares of Voting Stock beneficially owned by any person,
(2) whether a person is an Affiliate or Associate of another, (3) whether the
assets which are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities by the
Corporation or any Subsidiary of the Corporation in any Business Combination
has, an aggregate Fair Market Value of $100 million ordirectors, not less than five (5) nor more and (4) whether all
of the applicable conditions set forth in paragraph I(2) of this Article EIGHTH
have been met with respect to any Business Combination. Any determination
pursuant to this Article EIGHTH made in good faiththan nine (9), as shall be binding and
conclusive on all parties.
V.prescribed in the Bylaws.
EIGHTH:
The directors of the Corporation, when evaluating any proposal or offer which would involve (i) a Business Combination or the merger or consolidation of the Corporation or any of its Subsidiariessubsidiaries with another corporation, the(ii) a sale of all or substantially all of the assets of the Corporation or any of its Subsidiaries,subsidiaries, (iii) a tender offer or exchange offer for any capital stock of the Corporation or any of its Subsidiariessubsidiaries, or (iv) any similar transaction, shall give due consideration to all factors they may consider relevant. Such factors may include, without limitation, (a) the adequacy, both in amount and form, of the consideration offered in relation not only to the current market price of the Corporation'sCorporation’s outstanding securities, but also the current value of the Corporation in a freely negotiated transaction with other potential acquirers and the Board'sBoard’s estimate of the Corporation'sCorporation’s future value (including the unrealized value of its properties, assets and prospects) as an independent going concern, (b) the financial and managerial resources and future prospects of the acquirer, and (c) the legal, economic, environmental, regulatory and social effects of the proposed transaction on the Corporation'sCorporation’s and its Subsidiaries'subsidiaries’ employees, customers, suppliers and other affected persons and entities and on the communities and geographic areas in which the Corporation and its Subsidiariessubsidiaries operate, provide utility service or are located, and in particular, the effect on the Corporation'sCorporation’s and its Subsidiaries'subsidiaries’ ability to safely and reliably meet any public utility obligations they may have at reasonable rates.
Bylaws
Article II
1. Number. The exact number of directors shall be nine (9) until changed, within the limits specified in the Articles of Incorporation, by either a resolution duly adopted by the Board of Directors or an amendment to this Bylaw duly adopted by the Board. No reduction of the authorized number of directors shall have the effect of removing any director before the director’s term of office expires.
A-1
Restated Articles of Incorporation
Articles Fifth, Sixth, Seventh, and Eighth
FIFTH:
I. The Board of Directors of the corporation shall consist of such number of directors, not less than five (5) nor more than nine (9), as shall be prescribed in the Bylaws.
SIXTH:
I. In the event that the authorized number of directors shall be fixed at nine or more, the Board of Directors shall be divided into three classes, designated Class I, Class II, and Class III, with each class consisting of one-third of the directors or as close an approximation as possible. The initial term of office of each director of Class I shall expire at the annual meeting next succeeding his or her election or appointment as a director, the initial term of office of each director of Class II shall expire at the second annual meeting next succeeding his or her election or appointment as a director, and the initial term of office of each director of Class III shall expire at the third annual meeting next succeeding his or her election or appointment as a director, and, in each case, until their successors are duly elected and qualified or until their earlier resignation, removal from office, or death. At each annual meeting, each of the successors to the directors of the class whose term shall have expired at such annual meeting shall be elected for a term running until the third annual meeting next succeeding his or her election and until his or her successor shall have been duly elected and qualified, except in the case of the death, resignation, or removal of such director.
II. In the event that the authorized number of directors shall be fixed with at least six but less than nine, the Board of Directors shall be divided into two classes, designated Class I and Class II, with each class consisting of one-half of the directors or as close an approximation as possible. The initial term of office of each director of Class I shall expire at the annual meeting next succeeding his or her election or appointment as a director and the initial term of office of each director of Class II shall expire at the second annual meeting next succeeding his or her election or appointment as a director, and in each case, until their successors are duly elected and qualified or until their earlier resignation, removal from office, or death. At each annual meeting, each of the successors to the directors of the class whose term shall have expired at such annual meeting shall be elected for a term running until the second annual meeting next succeeding his or her election and until his or her successor shall have been duly elected and qualified, except in the case of the death, resignation, or removal of such director.
III. Notwithstanding the rule that the classes be as nearly equal in number of directors as possible, in the event of any change in the authorized number of directors, each director then continuing to serve as such shall nevertheless continue as a director of the class of which he or she is a member until the expiration of his or her current term, or his or her death, resignation, or removal.
IV. At each annual election, the directors chosen to succeed those whose terms then expire shall be of the same class as the directors they succeed, unless by reason of any intervening changes in the authorized number of directors, the Board of Directors shall designate one or more directorships whose term then expires as directorships of another class in order more nearly to achieve equality of number of directors among the classes.
V. No shareholder may cumulate votes in the election of directors.
SEVENTH:
The Board of Directors of the corporation, when evaluating any proposal or offer of another party to (a) make a tender or exchange offer for any equity security of the corporation; (b) merge or consolidate the corporation with another corporation or entity; (c) purchase or otherwise acquire all or substantially all of the properties and assets of the corporation; or (d) effect any similar transaction, may, in connection with the exercise of its judgment in determining what is in the best interests of the corporation and its shareholders, give due consideration to all factors they may consider relevant. Such factors may include, without limitation, (a) the adequacy, both in amount and form, of the consideration offered in relation not only to the current market price of the corporation’s outstanding securities, but also the current value of the corporation in a freely negotiated transaction with other potential acquirers and the Board of Directors’ estimate of the corporation’s future value
B-1
EIGHTH:
Any action required or permitted to be taken by the shareholders of this corporation must be taken at a duly called annual meeting or a special meeting of shareholders of the corporation and no action may be taken by the written consent of the shareholders.
Bylaws
Article II
1. Number. The exact number of directors shall be construedfive (5) until changed, within the limits specified in the Articles of Incorporation, by a resolution duly adopted by the Board of Directors or an amendment to relievethis Bylaw duly adopted by the Board. No reduction of the authorized number of directors shall have the effect of removing any Related Person from any
fiduciary obligation imposed by law.
A-4
PRELIMINARY COPIES
[LOGO]director before the director’s term of office expires.
B-2
Printed with soybean ink on recycled/recyclable paper.
Your proxy is solicited on behalf of the PG&E CORPORATION-TM-
--------------------
YOUR PROXY IS SOLICITED BY THECorporation Board of Directors. Unless contrary instructions are given on the reverse side of this proxy card, the designated proxies will vote the PG&E CORPORATION BOARD OF DIRECTORS. UNLESS
CONTRARY INSTRUCTIONS ARE GIVEN ON THE REVERSE SIDE OF THIS PROXY CARD, THE
DESIGNATED PROXIES WILL VOTE THE PG&E CORPORATION SHARESCorporation shares for which they hold proxies FOR WHICH THEY HOLD
PROXIES FOR ITEMSItems 1, 2, 3, ANDand 4 ANDand AGAINST ITEMS 5, 6, 7, 8, 9, AND 10.
Items 10, 11, 12, 13, 14, 15, and 16.
The undersigned hereby appoints Robert D. Glynn, Jr. and Leslie H. Everett,Linda Y.H. Cheng, 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 200 Boylston1111 California Street, Boston, Massachusetts,San Francisco, California, on Wednesday, April 19, 2000,17, 2002, at 10:00 a.m., and at any adjournment or postponement thereof, as instructedindicated on the reverse hereofthis proxy card, and upon all motions and resolutions which may properly come before said meeting, adjournments, or postponements thereof.
(Continued, and to be presented for considerationmarked, dated, and signed on the reverse side.)
As an alternative to completing and mailing this proxy card, you may execute and submit your proxy and voting instructions over the Internet at said meeting.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE.)
YOUR PROXY IS SOLICITED BY THEhttp://www.eproxy.com/pcg/or by touch-tone telephone at1-800-435-6710(from anywhere in the United States or Canada). These Internet and telephone voting procedures comply with California law.
Ù If you are not submitting your proxy over the Internet or by telephone, please detach here and mail this proxy card in the accompanying envelope. Ù
ANNUAL MEETING OF SHAREHOLDERS
| To be held at: | |||
| Masonic Auditorium 1111 California Street San Francisco, California | |||
| April 17, 2002, at 10:00 a.m. |
Ú Please use the attached ticket to attend the PG&E CORPORATION BOARD OF DIRECTORS. Corporation Annual Meeting, or you may register at the meeting. Ú
All available space at the Masonic Auditorium 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 attendants as you enter the garage.
Note: Shareholders may be asked to present valid picture identification, such as a driver’s license or passport, before being admitted to the meeting. Cameras, recording devices, and other electronic devices will not be permitted in the auditorium during the annual 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. No items will be allowed into the meeting which might pose a concern for the safety of those attending. We regret any inconvenience this may cause you.
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 require an assistive listening device.
| Your proxy is solicited on behalf of the PG&E Corporation Board of Directors | Please mark your votes as indicated in this example | [X] |
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFORITEMS 1, 2, 3, AND 4.
| FOR ALL | WITHHOLD FOR ALL | FOR | AGAINST | ABSTAIN | ||||||||||
| ITEM 1. ELECTION OF �� DIRECTORS | [ ] | [ ] | ITEM 2. | RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS | [ ] | [ ] | [ ] | |||||||
| NOMINEES ARE: | ITEM 3. | PROPOSAL TO IMPLEMENT ENHANCEMENT OF SIMPLE MAJORITY VOTING | [ ] | [ ] | [ ] | |||||||||
| 01-David R. Andrews, 02-David A. Coulter, 03-C. Lee Cox, 04-William S. Davila, 05-Robert D. Glynn, Jr., 06-David M. Lawrence, MD, 07-Mary S. Metz, 08-Carl E. Reichardt, 09-Barry Lawson Williams WITHHOLD vote only for: | ITEM 4. | PROPOSAL TO REDUCE THE AUTHORIZED RANGE OF DIRECTORS AND TRANSFER THE PROVISION THAT ESTABLISHES THE AUTHORIZED RANGE OF DIRECTORS FROM THE BYLAWS TO THE ARTICLES OF INCORPORATION | [ ] | [ ] | [ ] | |||||||||
PG&E CORPORATION DIRECTORS RECOMMEND
A VOTEAGAINSTITEMS 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15,
AND 11.
Please mark
your votes as /X/
indicated in
this example
ITEM 1. ELECTION OF DIRECTORS FOR WITHHOLD
ALL FOR ALL
/ / / /
NOMINEES ARE:
01-Richard A. Clarke, 02-Harry M. Conger, 03-David A. Coulter, 04-C. Lee Cox,
05-William S. Davila, 06-Robert D. Glynn, Jr., 07-David M. Lawrence, MD, 08-Mary
S. Metz, 09-Carl E. Reichardt, 10-John C. Sawhill, 11-Barry Lawson Williams
WITHHOLD vote only for:
- - ------------------------------------------
FOR AGAINST ABSTAIN
ITEM 2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS / / / / / /
ITEM 3. PROPOSAL TO ELIMINATE
"SUPERMAJORITY VOTE" PROVISION / / / / / /
ITEM 4. PROPOSAL TO REDUCE AUTHORIZED
MINIMUM AND MAXIMUM NUMBER OF / / / / / /
DIRECTORS
ITEM 5. SHAREHOLDER PROPOSAL REGARDING
INDEPENDENT DIRECTORS / / / / / /
ITEM 6. SHAREHOLDER PROPOSAL REGARDING
CONFIDENTIAL SHAREHOLDER VOTING / / / / / /
ITEM 7. SHAREHOLDER PROPOSAL REGARDING
SHAREHOLDER DEMOCRACY / / / / / /
ITEM 8. SHAREHOLDER PROPOSAL REGARDING
CUMULATIVE VOTING / / / / / /
ITEM 9. SHAREHOLDER PROPOSAL REGARDING
COMPENSATION OF DIRECTORS IN / / / / / /
STOCK
ITEM 10. SHAREHOLDER PROPOSAL REGARDING
SEVERANCE BENEFITS RECEIVED DURING / / / / / /
MERGERS OR ACQUISITIONS
SPECIAL ACTION
Mark here to discontinue duplicate Annual Report mailing for this
account (for multiple-account holders only). / /
I/we plan to attend the annual
meeting in Boston, Massachusetts. / /
SIGNATURE____________________________SIGNATURE_____________________________DATE
16.
| FOR | AGAINST | ABSTAIN | ||||||
| ITEM 10. | SHAREHOLDER PROPOSAL REGARDING INDEPENDENT DIRECTORS | [ ] | [ ] | [ ] | ||||
| ITEM 11. | SHAREHOLDER PROPOSAL REGARDING POISON PILLS (SHAREHOLDER RIGHTS PLAN) | [ ] | [ ] | [ ] | ||||
| ITEM 12. | SHAREHOLDER PROPOSAL REGARDING SIMPLE MAJORITY VOTE | [ ] | [ ] | [ ] | ||||
| ITEM 13. | SHAREHOLDER PROPOSAL REGARDING AUDITOR FEES | [ ] | [ ] | [ ] | ||||
| ITEM 14. | SHAREHOLDER PROPOSAL REGARDING THE BOARD OF DIRECTORS’ ROLE | [ ] | [ ] | [ ] | ||||
| ITEM 15. | SHAREHOLDER PROPOSAL REGARDING RADIOACTIVE WASTES | [ ] | [ ] | [ ] | ||||
| ITEM 16. | SHAREHOLDER PROPOSAL REGARDING CONFIDENTIAL VOTING | [ ] | [ ] | [ ] |
| Signature | Signature | Date |
If you are signing for the shareholder, please sign the shareholder'sshareholder’s name and your name, and specify the capacity in which you act.
PRELIMINARY COPIES
[LOGO]
Ù If you are not submitting your proxy over the Internet or by telephone, please detach here and mail this proxy card in the accompanying envelope. Ù
(Retain Annual Meeting Ticket below.)
PRIOR TO VOTING, READ THE ACCOMPANYING JOINT PROXY STATEMENT AND THE ABOVE PROXY CARD.
| TO VOTE OVER THE INTERNET: | |||
| 1. | Go to the websitehttp://www.eproxy.com/pcg/anytime,24 hours a day, 7 days a weekand follow the instructions. | ||
| 2. | When prompted, enter the11-digit Control Numberlocated in the lower-right portion of this proxy form. | ||
| TO VOTE BY TELEPHONE: | |||
| 1. | Using any touch-tone telephone in the U.S. or Canada, call thetoll-free number1-800-435-6710 anytime,24 hours a day, 7 days a weekand follow the instructions. | ||
| 2. | When prompted, enter the11-digit Control Numberlocated in the lower-right portion of this proxy form. | ||
| TO VOTE BY MAIL: | |||
| 1. | Mark, sign, and date the proxy card. | ||
| 2. | Detach the proxy card (the top portion of this page) and mail it promptly, in the accompanyingpostage-paidenvelope. | ||
Proxies and voting instructions submitted over the Internet or by telephone must be received by
4:00 p.m., Eastern daylight time, on Tuesday, April 16, 2002.
| 2002 Annual Meeting Ticket |
Ticket for the annual meeting on April 17, 2002, at 10:00 a.m. to be held at the Masonic Auditorium, 1111 California Street, San Francisco, California. Doors open at 9:00 a.m. You may bypass the shareholder registration area and present this ticket at the entrance to the auditorium.
(See reverse side for additional information.)
Your proxy is solicited on behalf of the PG&E CORPORATION-TM-
--------------------
YOUR PROXY IS SOLICITED BY THECorporation Board of Directors. Unless contrary instructions are given on the reverse side of this proxy card, the designated proxies will vote the PG&E CORPORATION BOARD OF DIRECTORS. UNLESS
CONTRARY INSTRUCTIONS ARE GIVEN ON THE REVERSE SIDE OF THIS PROXY CARD, THE
DESIGNATED PROXIES WILL VOTE THE PG&E CORPORATION SHARESCorporation shares for which they hold proxies FOR WHICH THEY HOLD
PROXIES FOR ITEMSItems 1, 2, 3, ANDand 4 ANDand AGAINST ITEMS 5, 6, 7, 8, 9, AND 10.Items 10, 11, 12, 13, 14, 15, and 16.
The undersigned hereby appoints Robert D. Glynn, Jr. and Leslie H. Everett,Linda Y.H. Cheng, 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 200 Boylston1111 California Street, Boston,
Massachusetts,San Francisco, California, on Wednesday, April 19, 2000,17, 2002, at 10:00 a.m., and at any adjournment or postponement thereof, as instructedindicated on the reverse hereofthis proxy card, and upon all motions and resolutions which may properly be presented for
consideration atcome before said meeting.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE.)
As an alternative to completingmeeting, adjournments, or postponements thereof.
(Continued, and mailing this proxy card, you may execute
and submit your proxy and voting instructions over the Internet at
HTTP://WWW.EPROXY.COM/PCG/ or by touch-tone telephone at 1-800-840-1208 (from
anywhere in the United States or Canada). These Internet and telephone voting
procedures comply with California law.
- - -------------------------------------------------------------------------------
^IF YOU ARE NOT SUBMITTING YOUR PROXY OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS PROXY CARD IN THE ACCOMPANYING
ENVELOPE.^
[LOGO]PG&E CORPORATION-TM-
--------------------
ANNUAL MEETING OF SHAREHOLDERS
To be held at:
Four Seasons Hotel - Boston
200 Boylston Street
Boston, Massachusetts
April 19, 2000, at 10:00 a.m.
[down arrow]PLEASE USE THE ATTACHED TICKET TO ATTEND THE PG&E CORPORATION
ANNUAL MEETING, OR YOU MAY REGISTER AT THE MEETING.[down arrow]
- - -------------------------------------------------------------------------------
Note: Cellular telephones, cameras, tape recorders, etc., will not be allowed
in the meeting room during the annual 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 inmarked, dated, and signed on the real-time
captioning section, or request an assistive listening device from a
representative at the shareholder registration desk.
YOUR PROXY IS SOLICITED BY THE PG&E CORPORATION BOARD OF DIRECTORS. reverse side.)
| Your proxy is solicited on behalf of the PG&E Corporation Board of Directors | Please mark your votes as indicated in this example | [X] |
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFORITEMS 1, 2, 3, AND 4.
| FOR ALL | WITHHOLD FOR ALL | FOR | AGAINST | ABSTAIN | ||||||||||
| ITEM 1. ELECTION OF DIRECTORS | [ ] | [ ] | ITEM 2. | RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS | [ ] | [ ] | [ ] | |||||||
| NOMINEES ARE: | ITEM 3. | PROPOSAL TO IMPLEMENT ENHANCEMENT OF SIMPLE MAJORITY VOTING | [ ] | [ ] | [ ] | |||||||||
| 01-David R. Andrews, 02-David A. Coulter, 03-C. Lee Cox, 04-William S. Davila, 05-Robert D. Glynn, Jr., 06-David M. Lawrence, MD, 07-Mary S. Metz, 08-Carl E. Reichardt, 09-Barry Lawson Williams WITHHOLD vote only for: | ITEM 4. | PROPOSAL TO REDUCE THE AUTHORIZED RANGE OF DIRECTORS AND TRANSFER THE PROVISION THAT ESTABLISHES THE AUTHORIZED RANGE OF DIRECTORS FROM THE BYLAWS TO THE ARTICLES OF INCORPORATION | [ ] | [ ] | [ ] | |||||||||
PG&E CORPORATION DIRECTORS RECOMMEND
A VOTEAGAINSTITEMS 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15,
AND 11.
Please mark
your votes as /X/
indicated in
this example
FOR ALL WITHHOLD FOR ALL
ITEM 1. ELECTION OF DIRECTORS / / / /
NOMINEES ARE:
01-Richard A. Clarke, 02-Harry M. Conger, 03-David A. Coulter,
04-C. Lee Cox, 05-William S. Davila, 06-Robert D. Glynn, Jr.,
07-David M. Lawrence, MD, 08-Mary S. Metz, 09-Carl E. Reichardt,
10-John C. Sawhill, 11-Barry Lawson Williams
WITHHOLD vote only for:
- - -------------------------------------
FOR AGAINST ABSTAIN
ITEM 2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS / / / / / /
ITEM 3. PROPOSAL TO ELIMINATE
"SUPERMAJORITY VOTE" PROVISION / / / / / /
ITEM 4. PROPOSAL TO REDUCE AUTHORIZED
MINIMUM AND MAXIMUM NUMBER OF / / / / / /
DIRECTORS
ITEM 5. SHAREHOLDER PROPOSAL REGARDING
INDEPENDENT DIRECTORS / / / / / /
ITEM 6. SHAREHOLDER PROPOSAL REGARDING
CONFIDENTIAL SHAREHOLDER VOTING / / / / / /
ITEM 7. SHAREHOLDER PROPOSAL REGARDING
SHAREHOLDER DEMOCRACY / / / / / /
ITEM 8. SHAREHOLDER PROPOSAL REGARDING
CUMULATIVE VOTING / / / / / /
ITEM 9. SHAREHOLDER PROPOSAL REGARDING
COMPENSATION OF DIRECTORS IN STOCK / / / / / /
ITEM 10. SHAREHOLDER PROPOSAL
REGARDING SEVERANCE BENEFITS / / / / / /
RECEIVED DURING MERGERS OR
ACQUISITIONS
SPECIAL ACTION
Mark here to discontinue duplicate Annual Report mailing for this
account (for multiple-account holders only). / /
I/we plan to attend the annual meeting in Boston, Massachusetts. / /
SIGNATURE____________________________SIGNATURE_____________________________DATE
16.
| FOR | AGAINST | ABSTAIN | ||||||
| ITEM 10. | SHAREHOLDER PROPOSAL REGARDING INDEPENDENT DIRECTORS | [ ] | [ ] | [ ] | ||||
| ITEM 11. | SHAREHOLDER PROPOSAL REGARDING POISON PILLS (SHAREHOLDER RIGHTS PLAN) | [ ] | [ ] | [ ] | ||||
| ITEM 12. | SHAREHOLDER PROPOSAL REGARDING SIMPLE MAJORITY VOTE | [ ] | [ ] | [ ] | ||||
| ITEM 13. | SHAREHOLDER PROPOSAL REGARDING AUDITOR FEES | [ ] | [ ] | [ ] | ||||
| ITEM 14. | SHAREHOLDER PROPOSAL REGARDING THE BOARD OF DIRECTORS’ ROLE | [ ] | [ ] | [ ] | ||||
| ITEM 15. | SHAREHOLDER PROPOSAL REGARDING RADIOACTIVE WASTES | [ ] | [ ] | [ ] | ||||
| ITEM 16. | SHAREHOLDER PROPOSAL REGARDING CONFIDENTIAL VOTING | [ ] | [ ] | [ ] |
| Signature | Signature | Date |
If you are signing for the shareholder, please sign the shareholder'sshareholder’s name and your name, and specify the capacity in which you act.
- - -------------------------------------------------------------------------------
IF YOU ARE NOT SUBMITTING YOUR PROXY OVER THE INTERNET OR BY TELEPHONE, PLEASE
DETACH HERE AND MAIL THIS PROXY CARD IN THE ACCOMPANYING ENVELOPE.
(RETAIN
2002 ANNUAL MEETING TICKET BELOW)
PRIOR TO VOTING, READ THE ACCOMPANYING JOINT PROXY
STATEMENT AND THE ABOVE PROXY CARD.
VOTE ON THE INTERNET
1. Go to the website HTTP://WWW.EPROXY.COM/PCG/ anytime, 24 HOURS A DAY, 7
DAYS A WEEK and follow the instructions.
2. When prompted, enter the 11-DIGIT CONTROL NUMBER located in the lower-right
portion of this proxy form.
VOTE BY TELEPHONE
1. Using any touch-tone telephone in the U.S. or Canada, call the TOLL-FREE
number 1-800-840-1208 - anytime, 24 HOURS A DAY, 7 DAYS A WEEK and follow
the instructions.
2. When prompted, enter the 11-DIGIT CONTROL NUMBER located in the lower-right
portion of this proxy form.
VOTE BY MAIL
1. Mark, sign, and date the proxy card.
2. Detach the proxy card (the top portion of this page) and mail it promptly, in
the accompanying POSTAGE-PAID envelope.
PROXIES AND VOTING INSTRUCTIONS SUBMITTED OVER THE
INTERNET OR BY TELEPHONE MUST BE RECEIVED BY 4:00
P.M., EASTERN TIME, ON TUESDAY, APRIL 18, 2000.
- - -------------------------------------------------------------------------------
[LOGO]PG&E CORPORATION-TM-
--------------------
2000 ANNUAL MEETING TICKET
Ticket for the annual meeting on April 19, 2000, at 10:00 a.m. to be held at the
Four Seasons Hotel - Boston, 200 Boylston Street, Boston, Massachusetts. Doors
open at 9:00 a.m. You may bypass the shareholder registration area and present
this ticket at the entrance to the meeting room.
(See reverse side for additional information)
[LOGO] PG&E CORPORATION-TM-
--------------------
2000 ANNUAL MEETING
PG&E CORPORATION
RETIREMENT SAVINGS PLAN AND RETIREMENT SAVINGS PLAN FOR
UNION REPRESENTED EMPLOYEES
VOTING INSTRUCTIONS TO THE TRUSTEE - 2000
— 2002
TO FIDELITY MANAGEMENT TRUST COMPANY, TRUSTEE
TRUSTEE:
Pursuant to the provisions of the PG&E Corporation Retirement Savings Plan and Retirement Savings Plan for Union Represented Employees, you are instructed as indicated on the reverse side of this voting
instruction card with respect to votingvote the shares of stock credited to my Plan account in the Plan as of February 22, 2000,19, 2002, at the annual meeting of shareholders of PG&E Corporation to be held on April 19, 2000,17, 2002, and at any adjournment or postponement thereof, as indicated on this voting instruction card, and upon all motions and resolutions which may properly come before said meeting, adjournments, or postponements thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE)
(Continued, and to be marked, dated, and signed on the reverse side.)
TO PARTICIPANTS IN THE RETIREMENT SAVINGS PLAN As an alternative to completing and mailing this voting instructionAND RETIREMENT SAVINGS PLAN FOR UNION REPRESENTED EMPLOYEES:
If you sign but do not otherwise complete the card, you may execute and submitwill be instructing the Trustee to vote all shares in accordance with the recommendations of the PG&E Corporation Board of Directors.
Ù If you are not submitting your voting instructions over the Internet at
HTTP://WWW.EPROXY.COM/PCG/ or by touch-tone telephone, at 1-800-840-1208 (from
anywhereplease detach here and mail this card in the United States or Canada). These Internet and telephone voting
procedures comply with California law.
- - ------------------------------------------------------------------------------
^ IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS CARD IN THE ACCOMPANYING ENVELOPE. ^
accompanying envelope.Ù
TO PARTICIPANTS IN THE RETIREMENT SAVINGS PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OFPLAN AND RETIREMENT SAVINGS PLAN FOR UNION REPRESENTED EMPLOYEES:
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. Corporation common stock allocated to your account.The above voting instruction card is provided for your use in giving the Trustee of the
Plan confidential instructions to vote your stock held in theyour Plan account at PG&E Corporation'sCorporation’s annual meeting of shareholders on April 19, 2000.17, 2002. You have one vote for each share of PG&E Corporation common stock credited to your account as of February 22, 2000.19, 2002. Enclosed is a joint proxy statement which sets forth the business to be transacted at the meeting. Please mark your instructions on the above card and sign, date, and return it in the accompanying envelope. IF YOU SIGN BUT DO NOT OTHERWISE COMPLETE THE CARD, 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 the card, you may enter your voting instructions by touch-tone telephone at 1-800-840-12081-800-435-6710 (only available in the United States and Canada) or over the Internet at HTTP:http://WWW.EPROXY.COM/PCG/www.eproxy.com/pcg/. These Internet and telephone voting procedures comply with California law. 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 card for those shares.
- - ----------------------------------------------------------------------------
| VOTING INSTRUCTIONS TO THE TRUSTEE - 2002 | Please mark your votes as indicated in this example | [X] |
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFOR Please mark
ITEMS 1, 2, 3, AND 4.
| FOR ALL | WITHHOLD FOR ALL | FOR | AGAINST | ABSTAIN | ||||||||||
| ITEM 1. ELECTION OF DIRECTORS | [ ] | [ ] | ITEM 2. | RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS | [ ] | [ ] | [ ] | |||||||
| NOMINEES ARE: | ITEM 3. | PROPOSAL TO IMPLEMENT ENHANCEMENT OF SIMPLE MAJORITY VOTING | [ ] | [ ] | [ ] | |||||||||
| 01-David R. Andrews, 02-David A. Coulter, 03-C. Lee Cox, 04-William S. Davila, 05-Robert D. Glynn, Jr., 06-David M. Lawrence, MD, 07-Mary S. Metz, 08-Carl E. Reichardt, 09-Barry Lawson Williams WITHHOLD vote only for: | ITEM 4. | PROPOSAL TO REDUCE THE AUTHORIZED RANGE OF DIRECTORS AND TRANSFER THE PROVISION THAT ESTABLISHES THE AUTHORIZED RANGE OF DIRECTORS FROM THE BYLAWS TO THE ARTICLES OF INCORPORATION | [ ] | [ ] | [ ] | |||||||||
PG&E CORPORATION DIRECTORS your votes as [X]
RECOMMEND
A VOTEAGAINSTITEMS 5, 6, 7, 8, 9, indicated in
10, 11, 12, 13, 14, 15,
AND 10. this example
16.
| FOR | AGAINST | ABSTAIN | ||||||
| ITEM | SHAREHOLDER PROPOSAL REGARDING INDEPENDENT DIRECTORS | [ ] | [ ] | [ ] | ||||
| ITEM 11. | SHAREHOLDER PROPOSAL REGARDING POISON PILLS (SHAREHOLDER RIGHTS PLAN) | [ ] | [ ] | [ ] | ||||
| ITEM 12. | SHAREHOLDER PROPOSAL REGARDING SIMPLE MAJORITY VOTE | [ ] | [ ] | [ ] | ||||
| ITEM 13. | SHAREHOLDER PROPOSAL REGARDING AUDITOR FEES | [ ] | [ ] | [ ] | ||||
| ITEM 14. | SHAREHOLDER PROPOSAL REGARDING THE BOARD OF | [ ] | [ ] | [ ] | ||||
| ITEM 15. | SHAREHOLDER PROPOSAL REGARDING RADIOACTIVE WASTES | [ ] | [ ] | [ ] | ||||
| ITEM 16. | SHAREHOLDER PROPOSAL REGARDING CONFIDENTIAL VOTING | [ ] | [ ] | [ ] |
| Signature | Signature | Date |
Ù If you are not submitting your proxy over the Internet or by telephone, please detach here and mail this proxy card in the accompanying envelope. Ù
PRIOR TO VOTING, READ THE ACCOMPANYING JOINT PROXY STATEMENT AND THE ABOVE VOTING INSTRUCTIONPROXY CARD.
VOTE ON THE INTERNET
1.
| TO VOTE OVER THE INTERNET: | |||
| 1. | Go to the websitehttp://www.eproxy.com/pcg/anytime,24 hours a day, 7 days a weekand follow the instructions. | ||
| 2. | When prompted, enter the11-digit Control Numberlocated in the lower-right portion of this voting instruction form. | ||
| TO VOTE BY TELEPHONE: | |||
| 1. | Using any touch-tone telephone in the U.S. or Canada, call thetoll-free number1-800-435-6710 anytime,24 hours a day, 7 days a weekand follow the instructions. | ||
| 2. | When prompted, enter the11-digit Control Numberlocated in the lower-right portion of this voting instruction form. | ||
| TO VOTE BY MAIL: | |||
| 1. | Mark, sign, and date the voting instruction card. | ||
| 2. | Detach the voting instruction card (the top portion of this page) and mail it promptly, in the accompanyingpostage-paidenvelope. | ||
For shares in your Plan account, voting instructions submitted over the website HTTP://WWW.EPROXY.COM/PCG/ anytime, 24 HOURS A DAY, 7
DAYS A WEEK and followInternet, by telephone, or by mail must
be received by the instructions.
2. When prompted, enter the 11-DIGIT CONTROL NUMBER located in the
lower-right portion of this voting instruction form.
VOTE BY TELEPHONE
1. Using any touch-tone telephone in the U.S. or Canada, call the TOLL-FREE
number 1-800-840-1208 - anytime, 24 HOURS A DAY, 7 DAYS A WEEK and follow
the instructions.
2. When prompted, enter the 11-DIGIT CONTROL NUMBER located in the
lower-right portion of this voting instruction form.
VOTE BY MAIL
1. Mark, sign, and date the voting instruction card.
2. Detach the voting instruction card (the top portion of this page) and mail
it promptly in the accompanying POSTAGE-PAID envelope.
FOR SHARES IN YOUR PLAN ACCOUNT, VOTING INSTRUCTIONS SUBMITTED OVER THE
INTERNET, BY TELEPHONE, OR BY MAIL MUST BE RECEIVED BY THE TRUSTEE
BYTrustee by 4:00 P.M.p.m., EASTERN TIME, ON SUNDAY, APRIL 16, 2000.
VOTING INSTRUCTIONS RECEIVED AFTER THAT TIME WILL NOT BE COUNTED.
(SEE REVERSE SIDE FOR ADDITIONAL INFORMATION)
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
[LOGO] PG&E CORPORATION-TM-
--------------------
2000Eastern daylight time, on Friday, April 12, 2002.
Voting instructions received after that time will not be counted.
(See reverse side for additional information.)
2002 ANNUAL MEETING
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN
VOTING INSTRUCTIONS TO THE TRUSTEE - 2000
— 2002
TO STATE STREET BANK AND TRUST COMPANY, TRUSTEE
TRUSTEE:
Pursuant to the provisions of the Pacific Gas and Electric Company Savings Fund Plan, you are instructed as indicated on the reverse side of
this voting instruction card with respect to votingvote the shares of stock credited to my Plan account in the Plan as of February 22, 2000,19, 2002, at the annual meeting of shareholders of PG&E Corporation to be held on April 19, 2000,17, 2002, and at any adjournment or postponement thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE)
TO PARTICIPANTS IN THE SAVINGS FUND PLAN
As an alternative to completing and mailingthereof, as indicated on this voting instruction card, youand upon all motions and resolutions which may executeproperly come before said meeting, adjournments, or postponements thereof.
(Continued, and submit your voting instructions overto be marked, dated, and signed on the Internet at HTTP://WWW.EPROXY.COM/PCG/ or by touch-tone telephone at
1-800-840-1208 (from anywhere in the United States or Canada). These
Internet and telephone voting procedures comply with California law.
- - -------------------------------------------------------------------------------
^ IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR
BY TELEPHONE, PLEASE DETACH HERE AND MAIL THIS CARD IN THE ACCOMPANYING
ENVELOPE. ^
reverse side.)
TO PARTICIPANTS IN THE SAVINGS FUND PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OF
If you sign but do not otherwise complete the card, you will be instructing the Trustee to vote all shares in accordance with the recommendations of the PG&E CORPORATION COMMON STOCK ALLOCATED Corporation Board of Directors.
Ù If you are NOT submitting your voting instructions over the Internet or by telephone, please detach here and mail this card in the accompanying envelope.Ù
TO YOUR ACCOUNT. 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.The above voting instruction card 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'sCorporation’s annual meeting of shareholders on April 19, 2000.17, 2002. You have one vote for each share of PG&E Corporation common stock credited to your account as of February 22, 2000.19, 2002. Enclosed is a joint proxy statement which sets forth in the business to be transacted at the meeting. Please mark your instructions on the above card and sign, date, and return it in the accompanying envelope. IF YOU SIGN BUT
DO NOT OTHERWISE COMPLETE THE CARD, 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 the card, you may enter your voting instructions by touch-tone telephone at 1-800-840-12081-800-435-6710 (only available in the United States and Canada) or over the Internet at HTTP:http://WWW.EPROXY.COM/PCG/www.eproxy.com/pcg/. These Internet and telephone voting procedures comply with California law. 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 card for those shares.
- - -------------------------------------------------------------------------------
| VOTING INSTRUCTIONS TO THE TRUSTEE - | Please mark your votes as indicated in this example | [X] |
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFORITEMS 1, 2, 3, AND 4.
| FOR ALL | WITHHOLD FOR | FOR | AGAINST | ABSTAIN | ||||||||||
| ITEM 1. ELECTION OF DIRECTORS | [ ] | [ ] | ITEM 2. | RATIFICATION OF INDEPENDENT PUBLIC | [ ] | [ ] | [ ] | |||||||
| NOMINEES ARE: | ITEM 3. | PROPOSAL TO ENHANCEMENT OF SIMPLE MAJORITY VOTING | [ ] | [ ] | [ ] | |||||||||
| 01-David R. Andrews, 02-David A. Coulter, 03-C. Lee Cox, 05-Robert D. Glynn, Jr., MD, 09-Barry Lawson WITHHOLD vote only for: | ITEM 4. | PROPOSAL TO REDUCE THE AUTHORIZED RANGE OF DIRECTORS THE PROVISION THAT ESTABLISHES THE AUTHORIZED RANGE OF DIRECTORS FROM THE BYLAWS TO THE ARTICLES OF INCORPORATION | [ ] | [ ] | [ ] | |||||||||
PG&E CORPORATION DIRECTORS RECOMMEND
A VOTEAGAINSTITEMS 10, 11, 12, 13, 14, 15,
AND 16.
| FOR | AGAINST | ABSTAIN | ||||||
| ITEM | SHAREHOLDER PROPOSAL | [ ] | [ ] | [ ] | ||||
| ITEM | SHAREHOLDER PROPOSAL | [ ] | [ ] | [ ] | ||||
| ITEM 12. | SHAREHOLDER PROPOSAL REGARDING SIMPLE MAJORITY VOTE | [ ] | [ ] | [ ] | ||||
| ITEM 13. | SHAREHOLDER PROPOSAL REGARDING AUDITOR FEES | [ ] | [ ] | [ ] | ||||
| ITEM 14. | SHAREHOLDER PROPOSAL REGARDING THE BOARD OF DIRECTORS’ ROLE | [ ] | [ ] | [ ] | ||||
| ITEM 15. | SHAREHOLDER PROPOSAL REGARDING RADIOACTIVE WASTES | [ ] | [ ] | [ ] | ||||
| ITEM 16. | SHAREHOLDER PROPOSAL REGARDING CONFIDENTIAL | [ ] | [ ] | [ ] |
| Signature | Date |
Ù If you are NOT submitting your voting instructions over the Internet or by telephone, please detach here and mail this card in the accompanying envelope.Ù
PRIOR TO VOTING, READ THE ACCOMPANYING JOINT PROXY STATEMENT AND THE ABOVE VOTING INSTRUCTION CARD.
| TO VOTE OVER THE | |||
| 1. | Go to the website | ||
| 2. | When prompted, enter the | ||
| TO VOTE BY | |||
| 1. | Using any touch-tone telephone in the U.S. or Canada, call the | ||
| 2. | When prompted, enter the | ||
| TO VOTE BY | |||
| 1. | Mark, sign, and date the voting instruction card. | ||
| 2. | Detach the voting instruction card (the top portion of this page) and mail it promptly, in the accompanying | ||
For shares in your Plan account, voting instructions submitted over the Internet, by telephone, or by mail must
be received by the Trustee by 4:00 p.m., Eastern daylight time, on Monday, April 15, 2002.
Voting instructions received after that time will not be counted.
(See reverse side for additional information.)
2002 ANNUAL MEETING
PG&E GAS TRANSMISSION
NORTHWESTTRANSMISSION-NORTHWEST CORPORATION
SAVINGS FUND PLAN
VOTING INSTRUCTIONS TO THE TRUSTEE - 2000
— 2002
TO MERRILL LYNCH TRUST COMPANY, FSB, TRUSTEE
TRUSTEE:
Pursuant to the provisions of the PG&E Gas Transmission -— Northwest Corporation Savings Fund Plan, you are instructed as indicated on the
reverse side of this voting instruction card with respect to votingvote the shares of stock held forcredited to my Plan account in the Plan as of February 22, 2000,19, 2002, at the annual meeting of shareholders of PG&E Corporation to be held on April 19, 2000,17, 2002, and at any adjournment or postponement thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE REVERSE SIDE)
TO PARTICIPANTS IN THE SAVINGS FUND PLAN
As an alternative to completing and mailingthereof, as indicated on this voting instruction card, youand upon all motions and resolutions which may executeproperly come before said meeting, adjournments, or postponements thereof.
(Continued, and submit your voting instructions overto be marked, dated, and signed on the Internet at
HTTP://WWW.EPROXY.COM/PCG/ or by touch-tone telephone at 1-800-840-1208
(from anywhere in the United States or Canada). These Internet and
telephone voting procedures comply with California law.
- - --------------------------------------------------------------------------------
^ IF YOU ARE NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS CARD IN THE ACCOMPANYING ENVELOPE. ^
reverse side.)
TO PARTICIPANTS IN THE SAVINGS FUND PLAN:
AS A PARTICIPANT, YOU ARE ENTITLED TO DIRECT THE TRUSTEE HOW TO VOTE THE
SHARES OF
If you sign but do not otherwise complete the card, you will be instructing the Trustee to vote all shares in accordance with the recommendations of the PG&E CORPORATION COMMON STOCK ALLOCATED Corporation Board of Directors.
Ù If you are NOT submitting your voting instructions over the Internet or by telephone, please detach here and mail this card in the accompanying envelope.Ù
TO YOUR ACCOUNT. 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.The above voting instruction card 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'sCorporation’s annual meeting of shareholders on April 19,
2000.17, 2002. You have one vote for each share of PG&E Corporation common stock credited to your account as of February 22, 2000.19, 2002. Enclosed is a joint proxy statement which sets forth the business to be transacted at the meeting. Please mark your instructions on the above card and sign, date, and return it in the accompanying envelope. IF YOU SIGN BUT DO NOT OTHERWISE COMPLETE
THE CARD, 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 the card, you may enter your voting instructions by touch-tone telephone at 1-800-840-12081-800-435-6710 (only available in the United States and Canada) or over the Internet at HTTP:http://WWW.EPROXY.COM/PCG/www.eproxy.com/pcg/. These Internet and telephone voting procedures comply with California law. 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 card for those shares.
- - --------------------------------------------------------------------------------
Please mark
| VOTING INSTRUCTIONS TO THE TRUSTEE - 2002 | Please mark your votes as indicated in this example | [X] |
PG&E CORPORATION DIRECTORS RECOMMEND A VOTEFOR your vote as / X /
ITEMS 1, 2, 3, AND 4.
| FOR ALL | WITHHOLD FOR ALL | FOR | AGAINST | ABSTAIN | ||||||||||
| ITEM 1. ELECTION OF DIRECTORS | [ ] | [ ] | ITEM 2. | RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS | [ ] | [ ] | [ ] | |||||||
| NOMINEES ARE: | ITEM 3. | PROPOSAL TO IMPLEMENT ENHANCEMENT OF SIMPLE MAJORITY VOTING | [ ] | [ ] | [ ] | |||||||||
| 01-David R. Andrews, 02-David A. Coulter, 03-C. Lee Cox, 04-William S. Davila, 05-Robert D. Glynn, Jr., 06-David M. Lawrence, MD, 07-Mary S. Metz, 08-Carl E. Reichardt, 09-Barry Lawson Williams WITHHOLD vote only for: | ITEM 4. | PROPOSAL TO REDUCE THE AUTHORIZED RANGE OF DIRECTORS AND TRANSFER THE PROVISION THAT ESTABLISHES THE AUTHORIZED RANGE OF DIRECTORS FROM THE BYLAWS TO THE ARTICLES OF INCORPORATION | [ ] | [ ] | [ ] | |||||||||
PG&E CORPORATION DIRECTORS indicated in
RECOMMEND
A VOTEAGAINSTITEMS 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15,
AND 10. this example
16.
| FOR | AGAINST | ABSTAIN | ||||||
| ITEM | SHAREHOLDER PROPOSAL REGARDING INDEPENDENT DIRECTORS | [ ] | [ ] | [ ] | ||||
| ITEM | SHAREHOLDER PROPOSAL REGARDING POISON PILLS (SHAREHOLDER RIGHTS PLAN) | [ ] | [ ] | [ ] | ||||
| ITEM 12. | SHAREHOLDER PROPOSAL REGARDING SIMPLE MAJORITY VOTE | [ ] | [ ] | [ ] | ||||
| ITEM 13. | SHAREHOLDER PROPOSAL REGARDING AUDITOR FEES | [ ] | [ ] | [ ] | ||||
| ITEM 14. | SHAREHOLDER PROPOSAL REGARDING THE BOARD OF DIRECTORS’ ROLE | [ ] | [ ] | [ ] | ||||
| ITEM 15. | SHAREHOLDER PROPOSAL REGARDING RADIOACTIVE WASTES | [ ] | [ ] | [ ] | ||||
| ITEM 16. | SHAREHOLDER PROPOSAL REGARDING CONFIDENTIAL | [ ] | [ ] | [ ] |
| Signature | Date |
Ù If you are NOT SUBMITTING YOUR VOTING INSTRUCTIONS OVER THE INTERNET OR BY
TELEPHONE, PLEASE DETACH HERE AND MAIL THIS CARD IN THE ACCOMPANYING ENVELOPE. ^
submitting your voting instructions over the Internet or by telephone, please detach here and mail this card in the accompanying envelope.Ù
PRIOR TO VOTING, READ THE ACCOMPANYING JOINT PROXY STATEMENT AND THE ABOVE VOTING INSTRUCTION CARD.
----------------------
VOTE ON THE INTERNET
----------------------
1.
| TO VOTE OVER THE INTERNET: | |||
| 1. | Go to the websitehttp://www.eproxy.com/pcg/anytime,24 hours a day, 7 days a weekand follow the instructions. | ||
| 2. | When prompted, enter the11-digit Control Numberlocated in the lower-right portion of this voting instruction form. | ||
| TO VOTE BY TELEPHONE: | |||
| 1. | Using any touch-tone telephone in the U.S. or Canada, call thetoll-free number1-800-435-6710 anytime,24 hours a day, 7 days a weekand follow the instructions. | ||
| 2. | When prompted, enter the11-digit Control Numberlocated in the lower-right portion of this voting instruction form. | ||
| TO VOTE BY MAIL: | |||
| 1. | Mark, sign, and date the voting instruction card. | ||
| 2. | Detach the voting instruction card (the top portion of this page) and mail it promptly, in the accompanyingpostage-paidenvelope. | ||
For shares in your Plan account, voting instructions submitted over the website HTTP://WWW.EPROXY.COM/PCG/ anytime, 24 HOURS A DAY, 7
DAYS A WEEK and followInternet, by telephone, or by mail must
be received by the instructions.
2. When prompted, enter the 11-DIGIT CONTROL NUMBER located in the
lower-right portion of this voting instruction form.
-------------------
VOTE BY TELEPHONE
-------------------
1. Using any touch-tone telephone in the U.S. or Canada, call the TOLL-FREE
number 1-800-840-1208 - anytime, 24 HOURS A DAY, 7 DAYS A WEEK and
follow the instructions.
2. When prompted, enter the 11-DIGIT CONTROL NUMBER located in the
lower-right portion of this voting instruction form.
--------------
VOTE BY MAIL
--------------
1. Mark, sign, and date the voting instruction card.
2. Detach the voting instruction card (the top portion of this page) and
mail it promptly in the accompanying POSTAGE-PAID envelope.
FOR SHARES IN YOUR PLAN ACCOUNT, VOTING INSTRUCTIONS SUBMITTED OVER
THE INTERNET, BY TELEPHONE, OR BY MAIL MUST BE RECEIVED BY
THE TRUSTEE BYTrustee by 4:00 P.M.p.m., EASTERN TIME, ON SUNDAY,
APRIL 16, 2000. VOTING INSTRUCTIONS RECEIVED
AFTER THAT TIME WILL NOT BE COUNTED.
(SEE REVERSE SIDE FOR ADDITIONAL INFORMATION)
Eastern daylight time, on Monday, April 15, 2002.
Voting instructions received after that time will not be counted.
(See reverse side for additional information.)