PG&E CORPORATION
OFFICER GRANTOR TRUST AGREEMENT
This Officer Grantor Trust Agreement (the "Trust Agreement")
is made this 1st day of April 1998, by and between PG&E
CORPORATION ("the Company") and WACHOVIA BANK, N.A. ("the
Trustee").
Recitals
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(a) WHEREAS, the Company has adopted the nonqualified
deferred compensation Plans and Agreements (the
"Arrangements") as listed in Attachment I;
(b) WHEREAS, the Company has incurred or expects to incur
liability under the terms of such Arrangements with
respect to the individuals participating in such
Arrangements (the "Participants and Beneficiaries");
(c) WHEREAS, the Company hereby establishes a Trust (the
"Trust") and shall contribute to the Trust assets that
shall be held therein, subject to the claims of the
Company's creditors in the event of the Company's
Insolvency, as herein defined, until paid to
Participants and their Beneficiaries in such manner and
at such times as specified in the Arrangements and in
this Trust Agreement;
(d) WHEREAS, it is the intention of the parties that this
Trust shall constitute an unfunded arrangement and
shall not affect the status of the Arrangements as an
unfunded plan maintained for the purpose of providing
deferred compensation for a select group of management
or highly compensated employees for purposes of Title I
of the Employee Retirement Income Security Act of 1974;
and
(e) WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a
source of funds (the "Fund") to assist it in satisfying
its Liabilities under the Arrangements.
NOW, THEREFORE, the parties do hereby establish the Trust
and agree that the Trust shall be comprised, held and
disposed of as follows:
Section 1. Establishment of The Trust
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(a) The Trust is intended to be a Grantor Trust, of which
the Company is the Grantor, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A
of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
(b) The Company shall be considered a Grantor for the
purposes of the Trust.
(c) The Trust hereby established shall be irrevocable.
(d) The Company hereby deposits with the Trustee in the
Trust One Thousand Dollars and Zero Cents ($1,000.00)
which shall become the principal of the Trust to be
held, administered and disposed of by the Trustee as
provided in this Trust Agreement.
(e) The principal of the Trust, and any earnings thereon
shall be held separate and apart from other funds of
the Company and shall be used exclusively for the uses
and purposes of Participants and general creditors as
herein set forth. Participants and their Beneficiaries
shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any
rights created under the Arrangements and this Trust
Agreement shall be unsecured contractual rights of
Participants and their Beneficiaries against the
Company. Any assets held by the Trust will be subject
to the claims of the general creditors of the Company
under federal and state law in the event the Company is
Insolvent, as defined in Section 3(a) herein.
(f) The Company, in its sole discretion, may at any time,
or from time to time, make additional deposits of cash
or other property acceptable to the Trustee in the
Trust to augment the principal to be held, administered
and disposed of by the Trustee as provided in this
Trust Agreement. Prior to a Change of Control, neither
the Trustee nor any Participant or Beneficiary shall
have any right to compel additional deposits.
(g) Upon a Change of Control, the Company shall, as soon as
possible, but in no event longer than thirty (30) days
following the occurrence of a Change of Control, as
defined herein, make an irrevocable contribution to the
Trust in an amount that is sufficient to fund the Trust
in an amount equal to no less than 100% but no more
than 120% of the amount necessary to pay each
Participant or Beneficiary the benefits to which
Participants or their Beneficiaries would be entitled
pursuant to the terms of the Arrangements as of the
date on which the Change of Control occurred. The
Company shall also fund an expense reserve for the
Trustee in the amount of $225,000.00.
Section 2. Payments Participants and Their Beneficiaries
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(a) Prior to a Change of Control, distributions from the
Trust shall be made by the Trustee to Participants and
Beneficiaries at the direction of the Company. The
entitlement of a Participant or his or her
Beneficiaries to benefits under the Arrangements shall
be determined by the Company or such party or
professional administrator as it shall designate under
the Arrangements as the Company's agent, and any claim
for such benefits shall be considered and reviewed
under the procedures set out in the Arrangements.
(b) The Company may make payment of benefits directly to
Participants or their Beneficiaries as they become due
under the terms of the Arrangements. The Company shall
notify the Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable
to Participants or their Beneficiaries. In addition, if
the principal of the Trust, and any earnings thereon,
are not sufficient to make payments of benefits in
accordance with the terms of the Arrangements, the
Company shall make the balance of each such payment as
it falls due in accordance with the Arrangements. The
Trustee shall notify the Company where principal and
earnings are not sufficient. Nothing in this Agreement
shall relieve the Company of its liabilities to pay
benefits due under the Arrangements except to the
extent such liabilities are met by application of
assets of the Trust.
(c) After a Change of Control, the Company shall continue
to make the determination of benefits due to
Participants or their Beneficiaries and shall provide
the Trustee with a schedule of benefits due. The
Trustee shall pay benefits due in accordance with such
schedule; provided however, a Participant or their
Beneficiaries may make application to the Trustee for
an independent decision as to the amount or form of
their benefits due under the Arrangements. In making
any determination required or permitted to be made by
the Trustee under this Section, the Trustee shall, in
each such case, reach its own independent
determination, in its absolute and sole discretion, as
to the Participant's or Beneficiary's entitlement to a
payment hereunder. In making its determination, the
Trustee may consult with and make such inquiries of
such persons, including the Participant or Beneficiary,
the Company, legal counsel, actuaries or other persons,
as the Trustee may reasonably deem necessary. Any
reasonable costs incurred by the Trustee in arriving at
its determination shall be reimbursed by the Company
and, to the extent not paid by the Company within a
reasonable time, shall be charged to the Trust. The
Company waives any right to contest any amount paid
over by the Trustee hereunder pursuant to a good faith
determination made by the Trustee notwithstanding any
claim by or on behalf of the Company (absent a manifest
abuse of discretion by the Trustee) that such payments
should not be made.
(d) The Trustee agrees that it will not itself institute
any action at law or at equity, whether in the nature
of an accounting, interpleading action, request for a
declaratory judgment or otherwise, requesting a court
or administrative or quasi-judicial body to make the
determination required to be made by the Trustee under
this Section 2 in the place and stead of the Trustee.
The Trustee may institute an action to collect a
contribution due the Trust following a Change of
Control or in the event that the Trust should ever
experience a short-fall in the amount of assets
necessary to make payments pursuant to the terms of the
Arrangements.
(e) In the event any Participant or his or her Beneficiary
is determined to be subject to federal income tax on
any amount to the credit of his or her account under
any Arrangement prior to the time of payment hereunder,
whether or not due to the establishment of or
contributions to this Trust, a portion of such taxable
amount equal to the federal, state and local taxes
(excluding any interest or penalties) owed on such
taxable amount, shall be distributed by the Trustee as
soon thereafter as practicable to such Participant or
Beneficiary. The Company shall promptly reimburse the
Trust for any such distribution in an amount certified
by the Trustee to be needed for the Participant's
benefits. For these purposes, a Participant or
Beneficiary shall be deemed to pay state and local
taxes at the highest marginal rate of taxation in the
state in which the Participant resides or is employed
(or both) where a tax is imposed and federal income
taxes at the highest marginal rate of taxation, net of
the maximum reduction in federal income taxes which
could be obtained from deduction of such state and
local taxes. Such distributions shall be at the
direction of the Company or the Trustee, or upon proper
application of the Participant or Beneficiary; provided
that the actual amount of the distribution shall be
determined by the Company prior to a Change of Control
and the Trustee following a Change of Control. An
amount to the credit of a Participant's Account shall
be determined to be subject to federal income tax upon
the earliest of: (a) a final determination by the
United States Internal Revenue Service addressed to the
Participant or his Beneficiary which is not appealed to
the courts; (b) a final determination by the United
States Tax Court or any other federal court affirming
any such determination by the Internal Revenue Service;
or (c) an opinion by the Company's tax counsel,
addressed to the Company and the Trustee, to the effect
that by reason of Treasury Regulations, amendments to
the Internal Revenue Code, published Internal Revenue
Service rulings, court decisions or other substantial
precedent, amounts to the credit of Participants
hereunder are subject to federal income tax prior to
payment. The Company may undertake at its sole expense
to defend any tax claims described herein which are
asserted by the Internal Revenue Service against any
Participant or Beneficiary, including attorney fees and
cost of appeal, and shall have the sole authority to
determine whether or not to appeal any determination
made by the Service or by a lower court. The Company
also agrees to reimburse any Participant or Beneficiary
for any interest or penalties in respect of tax claims
hereunder upon receipt of documentation of same. Any
distributions from the Fund to a Participant or
Beneficiary under this Section 2(e) shall be applied in
accordance with the provisions of the Arrangement to
reduce the Company liabilities to such Participant
and/or Beneficiary under the Arrangement with such
reductions to be made on a pro-rata basis over the term
of benefit payments under the Arrangement; provided,
however, that in no event shall any Participant,
Beneficiary or estate of any Participant or Beneficiary
have any obligation to return all or any part of such
distribution to the Company if such distribution
exceeds benefits payable under an Arrangement. Any
reduction in accordance with the foregoing sentence and
the Arrangements shall be determined by the Company
prior to a Change of Control. Following a Change of
Control, the Company shall continue to make such
determination subject to the right of a Participant to
petition the Trustee under Section 2(c).
Section 3. Trustee Responsibility Regarding
Payments To The Trust Beneficiary When The
Company Is Insolvent
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(a) The Trustee shall cease payment of benefits to
Participants and their Beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent"
for purposes of this Trust Agreement if (i) the Company
is unable to pay its debts as they become due, or (ii)
the Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, the
principal and income of the Trust shall be subject to
claims of general creditors of the Company under
federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive
Officer of the Company shall have the duty to
inform the Trustee in writing that the Company is
Insolvent. If a person claiming to be a creditor
of the Company alleges in writing to the Trustee
that the Company has become Insolvent, the Trustee
shall determine whether the Company is Insolvent
and, pending such determination, the Trustee shall
discontinue payment of benefits to Participants or
their Beneficiaries.
(2) Unless the Trustee has actual knowledge that the
Company is Insolvent, or has received notice from
the Company or a person claiming to be a creditor
alleging that the Company is Insolvent, the
Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all
events rely on such evidence concerning the
Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a
reasonable basis for making a determination
concerning the Company's solvency.
(3) If at any time the Trustee has determined that the
Company is Insolvent, the Trustee shall
discontinue payments to Participants or their
Beneficiaries and shall hold the assets of the
Trust for the benefit of the Company's general
creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Participants or
their Beneficiaries to pursue their rights as
general creditors of the Company with respect to
benefits due under the Arrangements or otherwise.
(4) The Trustee shall resume the payment of benefits
to Participants or their Beneficiaries in
accordance with Section 2 of this Trust Agreement
only after the Trustee has determined that the
Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the
Trust pursuant to Section 3(b) hereof and subsequently
resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of
all payments due to Participants or their Beneficiaries
under the terms of the Arrangements for the period of
such discontinuance, less the aggregate amount of any
payments made to Participants or their Beneficiaries by
the Company in lieu of the payments provided for
hereunder curing any such period of discontinuance.
Section 4. Payments if a Short-Fall of The Trust
Assets Occurs
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(a) If there are not sufficient assets for the payment of
benefits pursuant to Section 2 or Section 3(c) hereof
and the Company does not otherwise make such payments
within a reasonable time after demand from the Trustee,
the Trustee shall make payment of benefits from the
Trust to the Participants or their Beneficiaries in the
following order of priority:
(1) retired Participants and their Beneficiaries;
(2) vested Participants over the age of 55 who were
terminated within two years following a Change of
Control and their Beneficiaries;
(3) vested active Participants over the age of 55 and
their Beneficiaries;
(4) any other vested active Participants and their
Beneficiaries;
(5) vested former Participants and their
Beneficiaries; and
(6) non-vested Participants and their Beneficiaries
(b) Within each category set forth under Section 4(a),
payments shall be prioritized in the following order:
(c) Upon receipt of a contribution from the Company
necessary to make up for a short-fall in the payments
due, the Trustee shall resume payments to all the
Participants and Beneficiaries under the Arrangements.
Following a Change of Control, the Trustee shall have
the right to compel a contribution to the Trust from
the Company to make-up for any short-fall.
Section 5. Payments to the Company
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Except as provided in Sections 3, 8, and 14 hereof, the
Company shall have no right or power to direct the Trustee
to return to the Company or to divert to others any of the
Trust assets before all payment of benefits have been made
to Participants and their Beneficiaries pursuant to the
terms of the Arrangements.
Section 6. Investment Authority
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(a) The Trustee shall not be liable in discharging its
duties hereunder, including without limitation its duty
to invest and reinvest the Fund, if it acts for the
exclusive benefit of the Participants and their
Beneficiaries, in good faith and as a prudent person
would act in accomplishing a similar task and in
accordance with the terms of this Trust Agreement and
any applicable federal or state laws, rules or
regulations.
(b) Subject to investment guidelines agreed to in writing
from time to time by the Company and the Trustee prior
to a Change of Control, the Trustee shall have the
power in investing and reinvesting the Fund in its sole
discretion:
(1) To invest and reinvest in any readily marketable
common and preferred stocks, bonds, notes,
debentures (including convertible stocks and
securities but not including any stock or security
of other than a de minimus amount held in a
collective or mutual fund), certificates of
deposit or demand or time deposits (including any
such deposits with the Trustee) and shares of
investment companies and mutual funds, without
being limited to the classes or property in which
the Trustees are authorized to invest by any law
or any rule of court of any state and without
regard to the proportion any such property may
bear to the entire amount of the Fund;
(2) To commingle for investment purposes all or any
portion of the Fund with assets of any other
similar trust or trusts established by the Company
with the Trustee for the purpose of safeguarding
deferred compensation or retirement income
benefits of its employees and/or directors;
(3) To retain any property at any time received by the
Trustee;
(4) To sell or exchange any property held by it at
public or private sale, for cash or on credit, to
grant and exercise options for the purchase or
exchange thereof, to exercise all conversion or
subscription rights pertaining to any such
property and to enter into any covenant or
agreement to purchase any property in the future;
(5) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or
other similar plan relating to property held by it
and to consent to or oppose any such plan or any
action thereunder or any contract, lease,
mortgage, purchase, sale or other action by any
person;
(6) To deposit any property held by it with any
protective, reorganization or similar committee,
to delegate discretionary power thereto, and to
pay part of the expenses and compensation thereof
any assessments levied with respect to any such
property to deposited;
(7) To extend the time of payment of any obligation
held by it;
(8) To hold uninvested any moneys received by it,
without liability for interest thereon, but only
in anticipation of payments due for investments,
reinvestments, expenses or disbursements;
(9) To exercise all voting or other rights with
respect to any property held by it and to grant
proxies, discretionary or otherwise;
(10) For the purposes of the Trust, to borrow money
from others, to issue its promissory note or notes
therefor, and to secure the repayment thereof by
pledging any property held by it;
(11) To employ suitable contractors and counsel, who
may be counsel to the Company or to the Trustee,
and to pay their reasonable expenses and
compensation from the Fund to the extent not paid
by the Company;
(12) To register investments in its own name or in the
name of a nominee; to hold any investment in
bearer form; and to combine certificates
representing securities with certificates of the
same issue held by it in other fiduciary
capacities or to deposit or to arrange for the
deposit of such securities with any depository,
even though, when so deposited, such securities
may be held in the name of the nominee of such
depository with other securities deposited
therewith by other persons, or to deposit or to
arrange for the deposit of any securities issued
or guaranteed by the United States government, or
any agency or instrumentality thereof, including
securities evidenced by book entries rather than
by certificates, with the United States Department
of the Treasury or a Federal Reserve Bank, even
though, when so deposited, such securities may not
be held separate from securities deposited therein
by other persons; provided, however, that no
securities held in the Fund shall be deposited
with the United States Department of the Treasury
or a Federal Reserve Bank or other depository in
the same account as any individual property of the
Trustee, and provided, further, that the books and
records of the Trustee shall at all times show
that all such securities are part of the Trust
Fund;
(13) To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from
the Trust, respectively, to commence or defend
suits or legal proceedings to protect any interest
of the Trust, and to represent the Trust in all
suits or legal proceedings in any court or before
any other body or tribunal; provided, however,
that the Trustee shall not be required to take any
such action unless it shall have been indemnified
by the Company to its reasonable satisfaction
against liability or expenses it might incur
therefrom;
(14) To hold and retain policies of life insurance,
annuity contracts, and other property of any kind
which policies are contributed to the Trust by the
Company or any subsidiary of the Company or are
purchased by the Trustee;
(15) To hold any other class of assets which may be
contributed by the Company and that is deemed
reasonable by the Trustee, unless expressly
prohibited herein;
(16) To loan any securities at any time held by it to
brokers or dealers upon such security as may be
deemed advisable, and during the terms of any such
loan to permit the loaned securities to be
transferred into the name of and voted by the
borrower or others; and
(17) Generally, to do all acts, whether or not
expressly authorized, that the Trustee may deem
necessary or desirable for the protection of the
Fund.
(c) Prior to a Change of Control, the Company shall have
the right, subject to this Section to direct the
Trustee with respect to investments.
(1) The Company may at any time direct the Trustee to
segregate all or a portion of the Fund in a
separate investment account or accounts and may
appoint one or more investment managers and/or an
Investment Committee established by the Company as
described in Section 6(d) hereof to direct the
investment and reinvestment of each such
investment account or accounts. In such event, the
Company shall notify the Trustee of the
appointment of each such investment manager and/or
Investment Committee. No such investment manager
shall be related, directly or indirectly, to the
Company, but members of the Investment Committee
may be employees of the Company.
(2) Thereafter, the Trustee shall make every sale or
investment with respect to such investment account
as directed in writing by the investment manager
or Investment Committee. It shall be the duty of
the Trustee to act strictly in accordance with
each direction. The Trustee shall be under no duty
to question any such direction of the investment
manager or Investment Committee, to review any
securities or other property held in such
investment account or accounts acquired by it
pursuant to such directions or to make any
recommendations to the investment managers or
Investment Committee with respect to such
securities or other property.
(3) Notwithstanding the foregoing, the Trustee,
without obtaining prior approval or direction from
an investment manager or Investment Committee,
shall invest cash balances held by it from time to
time in short term cash equivalents including, but
not limited to, through the medium of any short
term common, collective or commingled trust fund
established and maintained by the Trustee subject
to the instrument establishing such trust fund,
U.S. Treasury Bills, commercial paper (including
such forms of commercial paper as may be available
through the Trustee's Trust Department),
certificates of deposit (including certificates
issued by the Trustee in its separate corporate
capacity), and similar type securities, with a
maturity not to exceed one year; and, furthermore,
sell such short term investments as may be
necessary to carry out the instructions of an
investment manager or Investment Committee
regarding more permanent type investment and
directed distributions.
(4) The Trustee shall neither be liable nor
responsible for any loss resulting to the Fund by
reason of any sale or purchase of an investment
directed by an investment manager or Investment
Committee nor by reason of the failure to take any
action with respect to any investment which was
acquired pursuant to any such direction in the
absence of further directions of such investment
manager or Investment Committee.
(5) Notwithstanding anything in this Agreement to the
contrary, the Trustee shall be indemnified and saved
harmless by the Company from and against any and all
personal liability to which the Trustee may be subjected by
carrying out any directions of an investment manager or
Investment Committee issued pursuant hereto or for failure
to act in the absence of directions of the investment
manager or Investment Committee including all expenses
reasonably incurred in its defense in the event the Company
fails to provide such defense; provided, however, the
Trustee shall not be so indemnified if it participates
knowingly in, or knowingly undertakes to conceal, an act or
omission of an investment manager or Investment Committee,
having actual knowledge that such act or omission is a
breach of a fiduciary duty; provided further, however, that
the Trustee shall not be deemed to have knowingly
participated in or knowingly undertaken to conceal an act or
omission of an investment manager or Investment Committee
with knowledge that such act or omission was a breach of
fiduciary duty by merely complying with directions of an
investment manager or Investment Committee or for failure to
act in the absence of directions of an investment manager or
Investment Committee. The Trustee may rely upon any order,
certificate, notice, direction or other documentary
confirmation purporting to have been issued by the
investment manager or Investment Committee which the Trustee
believes to be genuine and to have been issued by the
investment manager or Investment Committee. The Trustee
shall not be charged with knowledge of the termination of
the appointment of any investment manager or Investment
Committee until it receives written notice thereof from the
Company.
(d) Prior to a Change of Control, the Board of Directors of
the Company may appoint an Investment Committee to
direct the investment of the Fund. The Investment
Committee may exercise any powers relating to the
investment of Trust assets as described in Sections 6
and 7 hereof. The Investment Committee shall exercise
its authority by an affirmative action of a majority of
members constituting the Investment Committee,
expressed from time to time by a vote at a meeting of
the Investment Committee, or in an action in writing
signed by all members without a meeting. Prior to a
Change of Control, the Board of Directors of the
Company shall have the right to remove and to replace
any member of the Investment Committee at any time by
notice in writing to that member. Following a Change
of Control, the Company shall have no authority to
remove or replace members of the Investment Committee,
and any vacancy in the membership of the Investment
Committee, created by resignation, disability, death or
otherwise, shall be filled by the vote of a majority of
the members of the Investment Committee then in office.
Following a Change of Control, the Investment Committee
may, on its own initiative, acquire fiduciary insurance
for the benefit of its members at the Company's
expense. If for any reason, the Company does not pay
the premiums for such insurance, the Trustee shall pay
such premiums out of the Trust assets and seek
reimbursement from the Company.
(e) Following a Change of Control, unless there is then in
existence an Investment Committee as described in
Section 6(d) above, the Trustee shall have the sole and
absolute discretion in the management of the Trust
assets and shall have all the powers set forth under
Section 6(b). In investing the Trust assets, the
Trustee shall consider:
(1) the needs of the Arrangements;
(2) the need for matching of the Trust assets with the
liabilities of the Arrangements; and
(3) the duty of the Trustee to act solely in the best
interests of the Participants and their
Beneficiaries.
(f) The Trustee shall have the right, in its sole
discretion, to delegate its investment responsibility
to an investment manager who may be an affiliate the
Trustee. In the event the Trustee shall exercise this
right, the Trustee shall remain, at all times
responsible for the acts of an investment manager. The
Trustee shall have the right to purchase an insurance
policy or an annuity to fund the benefits of the
Arrangements.
(g) The Company shall have the right at any time, and from
time to time in its sole discretion, to substitute
assets of equal fair market value for any asset held by
the Trust. This right is exercisable by the Company in
a nonfiduciary capacity without the approval or consent
of any person in a fiduciary capacity.
Section 7. Insurance Contracts
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(a) To the extent that the Trustee is directed by the
Company prior to a Change of Control or by the
Investment Committee after a Change of Control to
invest part or all of the Trust Fund in insurance
contracts, the type and amount thereof shall be
specified by the Company. The Trustee shall be under no
duty to make inquiry as to the propriety of the type or
amount so specified.
(b) Each insurance contract issued shall provide that the
Trustee shall be the owner thereof with the power to
exercise all rights, privileges, options and elections
granted by or permitted under such contract or under
the rules of the insurer. The exercise by the Trustee
of any incidents of ownership under any contract shall,
prior to a Change of Control, be subject to the
direction of the Company. After a Change of Control,
the Trustee shall have all such rights to the extent an
Investment Committee had not been established.
(c) The Trustee shall have no power to name a beneficiary
of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or
to loan to any person the proceeds of any borrowing
against an insurance policy held in the Trust Fund.
(d) No insurer shall be deemed to be a party to the Trust
and an insurer's obligations shall be measured and
determined solely by the terms of contracts and other
agreements executed by the insurer.
Section 8. Disposition of Income
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(a) Prior to a Change of Control, all income received by
the Trust, net of expenses and taxes, may be returned
to the Company or accumulated and reinvested within the
Trust at the direction of the Company. In addition,
if, at any time prior to a Change of Control, the value
of assets held in the Trust exceeds 100 percent of the
amount necessary to pay each Participant or Beneficiary
the benefits to which Participants or their
Beneficiaries would be entitled pursuant to the terms
of the Arrangements as of the date on which the
determination is made, the Trustee shall return the
excess to the Company at the Company's written request.
(b) Following a Change of Control, all income received by
the Trust, net of expenses and taxes, shall be
accumulated and reinvested within the Trust.
Section 9. Accounting by The Trustee
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The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other
transactions required to be made, including such specific
records as shall be agreed upon in writing between the
Company and the Trustee within forty-five (45) days
following the close of each calendar year and within
forty-five (45) days after the removal or resignation of the
Trustee. The Trustee shall deliver to the Company a written
account of its administration of the Trust during such year
or during the period from the close of the last preceding
year to the date of such removal or resignation setting
forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all
securities and investments purchased and sold with the cost
or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the
end of such year or as of the date of such removal or
resignation, as the case may be. The Company may approve
such account by an instrument in writing delivered to the
Trustee. In the absence of the Company's filing with the
Trustee objections to any such account within ninety (90)
days after its receipt, the Company shall be deemed to have
so approved such account. In such case, or upon the written
approval by the Company of any such account, the Trustee
shall, to the extent permitted by law, be discharged from
all liability to the Company for its acts or failures to act
described by such account. The foregoing, however, shall not
preclude the Trustee from having its accounting settled by a
court of competent jurisdiction. The Trustee shall be
entitled to hold and to commingle the assets of the Trust in
one Fund for investment purposes but at the direction of the
Company prior to a Change of Control, the Trustee shall
create one or more sub-accounts.
Section 10. Responsibility of The Trustee
-----------------------------
(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing
that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of
an enterprise of a like character and with like aims,
provided, however, that the Trustee shall incur no
liability to any person for any action taken pursuant
to a direction, request or approval given by the
Company which is contemplated by, and in conformity
with, the terms of the Arrangements or this Trust and
is given in writing by the Company. In the event of a
dispute between the Company and a party, the Trustee
may apply to a court of competent jurisdiction to
resolve the dispute, subject, however to Section 2(d)
hereof.
(b) The Company hereby indemnifies the Trustee against
losses, liabilities, claims, costs and expenses in
connection with the administration of the Trust, unless
resulting from the negligence or misconduct of Trustee.
To the extent the Company fails to make any payment on
account of an indemnity provided in this paragraph
10(b), in a reasonably timely manner, the Trustee may
obtain payment from the Trust. If the Trustee
undertakes or defends any litigation arising in
connection with this Trust or to protect a
Participant's or Beneficiary's rights under the
Arrangements, the Company agrees to indemnify the
Trustee against the Trustee's costs, reasonable
expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating
thereto and to be primarily liable for such payments.
If the Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, the Trustee
may obtain payment from the Trust.
(c) Prior to a Change of Control, the Trustee may consult
with legal counsel (who may also be counsel for the
Company generally) with respect to any of its duties or
obligations hereunder. Following a Change of Control
the Trustee shall select independent legal counsel and
may consult with counsel or other persons with respect
to its duties and with respect to the rights of
Participants or their Beneficiaries under the
Arrangements.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other
professionals to assist it in performing any of its
duties or obligations hereunder and may rely on any
determinations made by such agents and information
provided to it by the Company.
(e) The Trustee shall have, without exclusion, all powers
conferred on the Trustee by applicable law, unless
expressly provided otherwise herein.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law,
the Trustee shall not have any power that could give
this Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of
section 301.7701-2 of the Procedure and Administrative
Regulations promulgated pursuant to the Internal
Revenue Code.
Section 11. Compensation and Expenses of The Trustee
----------------------------------------
The Trustee's compensation shall be as agreed in writing
from time to time by the Company and the Trustee. The
Company shall pay all administrative expenses and the
Trustee's fees and shall promptly reimburse the Trustee for
any fees and expenses of its agents. If not so paid, the
fees and expenses shall be paid from the Trust.
Section 12. Resignation and Removal of The Trustee
--------------------------------------
(a) Prior to a Change of Control, the Trustee may resign at
any time by written notice to the Company, which shall
be effective sixty (60) days after receipt of such
notice unless the Company and the Trustee agree
otherwise. Following a Change of Control, the Trustee
may resign only after the appointment of a successor
Trustee.
(b) The Trustee may be removed by the Company on sixty days
(60) days notice or upon shorter notice accepted by the
Trustee prior to a Change of Control. Subsequent to a
Change of Control, the Trustee may only be removed by
the Company with the consent of a majority of the
Participants.
(c) If the Trustee resigns within two years after a Change
of Control, as defined herein, the Company, or if the
Company fails to act within a reasonable period of time
following such resignation, the Trustee shall apply to
a court of competent jurisdiction for the appointment
of a successor trustee or for instructions.
(d) Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall
subsequently be transferred to the successor Trustee.
The transfer shall be completed within sixty (60) days
after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit.
(e) If the Trustee resigns or is removed, a successor shall
be appointed by the Company, in accordance with Section
13 hereof, by the effective date of resignation or
removal under paragraph(s) (a) or (b) of this section.
If no such appointment has been made, the Trustee may
apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All
expenses of the Trustee in connection with the
proceeding shall be allowed as administrative expenses
of the Trust.
Section l3. Appointment of Successor
------------------------
(a) If the Trustee resigns or is removed in accordance with
Section 12 hereof, the Company may appoint, subject to
Section 12, any third party national banking
association with a market capitalization exceeding
$100,000,000 to replace the Trustee upon resignation or
removal. The successor Trustee shall have all of the
rights and powers of the former Trustee, including
ownership rights in the Trust. The former Trustee shall
execute any instrument necessary or reasonably
requested by the Company or the successor Trustee to
evidence the transfer.
(b) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of
existing Trust assets, subject to Section 8 and 9
hereof. The successor Trustee shall not be responsible
for and the Company shall indemnify and defend the
successor Trustee from any claim or liability resulting
from any action or inaction of any prior Trustee or
from any other past event, or any condition existing at
the time it becomes successor Trustee.
Section 14. Amendment or Termination
------------------------
(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company.
Notwithstanding the foregoing, no such amendment shall
conflict with the terms of the Arrangements or shall
make the Trust revocable after it has become
irrevocable in accordance with Section 1 hereof.
(b) The Trust shall not terminate until the date on which
Participants and their Beneficiaries have received all
of the benefits due to them under the terms and
conditions of the Arrangements. Upon termination of
the Trust, the Trust assets shall be returned to the
Company.
(c) Upon written approval of all Participants or
Beneficiaries entitled to payment of benefits pursuant
to the terms of the Arrangements, the Company may
terminate this Trust prior to the time all benefit
payments under the Arrangements have been made. All
assets in the Trust at termination shall be returned to
the Company.
(d) This Trust Agreement may not be amended or terminated
by the Company for two (2) years following a Change of
Control without the written consent of a majority of
the Participants.
Section 15. Change of Control
-----------------
(a) A "Change of Control" shall be deemed to have occurred
if:
(1) any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, but
excluding any benefit plan for employees or any trustee,
agent or other fiduciary for any such plan acting in such
person's capacity as such fiduciary), directly or
indirectly, becomes the beneficial owner of securities of
the Company representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding
securities;
(2) during any two consecutive years, individuals who at
the beginning of such a period constitute the Board of
Directors of the Company cease for any reason to constitute
at least a majority of the Board of Directors of the
Company, unless the election, or the nomination for election
by the shareholders of the Company, of each new Director was
approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who were Directors at the
beginning of the period; or
(3) the Company has executed and delivered a definitive
agreement which would require the consummation of (i) any
consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant
to which shares of common stock are converted into cash,
securities or other property, other than a merger of the
Company in which the holders of the common stock immediately
prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after
the merger, (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 Company, or
(iii) any plan or proposal for the liquidation or
dissolution of the Company.
(4) the shareholders of the Company shall have approved
(i) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of common stock are converted into
cash, securities or other property, other than a merger of
the Company in which the holders of the common stock
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, (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 Company, or (iii) any plan or proposal for the
liquidation or dissolution of the Company.
Notwithstanding the foregoing, the phrase "Change of
Control" shall not apply to any reorganization or
merger initiated voluntarily by the Company in which
the Company is the continuing surviving entity.
For purposes of this Section 15(a), the Board of Directors
of the Company, by a majority vote, shall have the power to
determine on the basis of information known to them (a) the
number of shares beneficially owned by any person, entity or
group; (b) whether there exists an agreement, arrangement or
understanding with another as to matters referred to in this
Section 15(a); and (c) such other matters with respect to
which a determination is necessary under this Section 15(a).
(b) The General Counsel of the Company shall have the
specific authority to determine whether a Change of
Control has transpired under the guidance of this
Section 15(a) and shall be required to give the Trustee
notice of a Change of Control. The Trustee shall be
entitled to rely upon such notice, but if the Trustee
receives notice of a Change of Control from another
source, the Trustee shall make its own independent
determination.
Section 16. Miscellaneous
-------------
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such
prohibition, without invalidating the remaining
provisions hereof.
(b) The Company hereby represents and warrants that all of
the Arrangements have been established, maintained and
administered in accordance with all applicable laws,
including without limitation, ERISA. The Company hereby
indemnifies and agrees to hold the Trustee harmless
from all liabilities, including attorney's fees,
relating to or arising out of the establishment,
maintenance and administration of the Arrangements. To
the extent the Company does not pay any of such
liabilities in a reasonably timely manner, the Trustee
may obtain payment from the Trust.
(c) Benefits payable to Participants and their
Beneficiaries under this Trust Agreement may not be
anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal
or equitable process.
(d) This Trust Agreement shall be governed by and construed
in accordance with the laws of North Carolina.
IN WITNESS WHEREOF, this Grantor Trust Agreement has been
executed on behalf of the parties hereto on the day and year
first above written.
PG&E CORPORATION WACHOVIA BANK, N.A.
Bruce R. Worthington Joe O. Long
-------------------- ---------------
By: Bruce R. Worthington By: Joe O. Long
Name: Bruce R. Worthington Name: Joe O. Long
Its: Senior Vice President and Its: Senior Vice President
General Counsel
Chairperson, Employee Benefit Committee
ATTEST: ATTEST:
Linda Y. H. Cheng John N. Smith
------------------- ------------------
By: Linda Y. H. Cheng By: John N. Smith
Its: Assistant Corporate Its: Assistant Secretary
Secretary
Attachment I
------------
PG&E CORPORATION OFFICER GRANTOR TRUST AGREEMENT
NONQUALIFIED BENEFIT PLANS COVERED
- Pacific Gas and Electric Company Supplemental
Executive Retirement Plan (SERP)
- Pacific Gas and Electric Company Retirement Excess
Benefit Plan
- PG&E Corporation Deferred Compensation Plan for
Officers