EXHIBIT 10.1
PG&E CORPORATION
OFFICER SEVERANCE POLICY
(As Amended Effective as of July 21, 1999)
1. Purpose
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This is the controlling and definitive statement of the
Officer Severance Policy of PG&E Corporation
("Policy"). Since Officers are employed at the will of
PG&E Corporation and its subsidiaries ("Corporation"),
their employment with the Corporation may be terminated
at any time, with or without cause. The Policy, which
was first adopted effective November 1, 1998, provides
Officers of the Corporation in Officer Compensation
Bands I through V with severance benefits if their
employment is terminated.1/ Severance benefits for
officers not covered by this Policy will be provided
under policies or programs developed by the appropriate
lines of business in consultation with and the approval
by the Senior Human Resources Officer of the
Corporation.
The purpose of the Policy is to attract and retain
senior management by defining terms and conditions for
severance benefits, to provide severance benefits that
are part of a competitive total compensation package,
to provide consistent treatment for all terminated
officers, and to minimize potential litigation costs
associated with Officer termination of employment.
2. Termination of Employment Not Following a Change in
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Control or Potential Change in Control
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(a) Corporation's Obligations. If the Corporation
exercises its right to terminate an Officer's employment
without cause and such termination does not entitle Officer
to payments under Section 3, the Corporation shall give the
Officer thirty (30) days' advance written notice or pay in
lieu thereof. Except as provided in
Section 2(b) below, in consideration of the Officer's
agreement to the obligations described in Section 2(c) below
and to the arbitration provisions described in
Section 12 below, Corporation shall also provide the
following payments and benefits to Officer:
(1) The Corporation shall pay Officer a severance payment,
equal to (x) two, for Officers in Officer Bands I, II or III
or (y) one and one-half, for Officers in Officer Bands IV or
V times (the "Severance Multiple") the sum of the Officer's
annual base compensation and the Officer's Short-Term
Incentive Plan target award at the time of his or her
termination, to be paid in a lump sum. Annual base
compensation shall mean the
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1/ Severance benefits for Officers who are currently covered
by an employment agreement will continue to be provided
solely under such agreements until their expiration at
which time this Policy will become effective for such
Officers.
Officer's monthly base pay for the month in which the
Officer is given notice of termination, multiplied by 12.
If Officer is a participant in the Corporation's Defined
Benefit Supplemental Executive Retirement Plan ("SERP"),
Officer may elect to convert any portion of the amount
described in the preceding sentence to provide for
additional years of service and/or additional
years to Officer's age for purposes of calculating a benefit
under the SERP. The value of any amount so converted shall
be calculated using the same actuarial factors used in
calculating benefits under the Retirement Plan for Employees
of Pacific Gas and Electric Company. Any payments made
hereunder shall be less applicable taxes;
(2) If Officer is a participant in the SERP and if the
additional age resulting from a conversion under Section
2(a)(1) does not result in an age of 55 or greater, Officer
may elect to begin receiving an immediately payable SERP
benefit. If Officer elects to receive an immediately
payable SERP benefit, the Administrator shall use an
interest rate and actuarial factors which the Administrator,
in its sole discretion, has determined are appropriate to
reflect the true economic value to the Corporation of
providing an immediately payable SERP benefit;
(3) The incentive awards granted to Officer under the
Corporation's Long-Term Incentive Program which have not yet
vested as of the date of termination will continue to vest
over a period of years or portion thereof equal to the
Severance Multiple after the date of termination as if the
Officer had remained employed for such period. For vested
stock options as of the date of termination, the Officer
shall have the right to exercise such stock options at any
time within their respective terms or within
five years after termination, whichever is shorter. For
stock options that vest during a period of years or portion
thereof equal to the Severance Multiple, the Officer shall
have the right to exercise such options at any time within
five years after termination. Awards under the Performance
Unit Plan shall continue to vest and be payable during a
period of years or portion thereof equal to the Severance
Multiple. Any unvested Performance Unit Plan awards
remaining at the end of such period shall be forfeited;
(4) For Officers in Officer Bands I, II or III, two thirds
of the unvested Company stock units in the Officer's account
in the Corporation's Deferred Compensation Plan for Officers
which were awarded in connection with the Executive Stock
Ownership Program requirements ("SISOPs") shall vest upon
the Officer's termination, and one third shall be forfeited.
For Officers in Officer Bands IV and V, one third of any
unvested SISOPs shall vest upon the Officer's termination,
and two thirds shall be forfeited. Unvested stock units
attributable to SISOPs which becomes vested under this
provision shall be distributed to Officer in accordance with
the Deferred Compensation Plan after such stock units vest;
(5) For a period of years or portion thereof equal to the
Severance Multiple, the Corporation shall pay the Officer's
COBRA premiums;
(6) If Officer is terminated after serving consecutively
for six months in a fiscal year, Officer shall be entitled
to receive a prorated bonus under the Corporation's Short-
Term Incentive Plan, at the time such bonus would otherwise
be paid, if any;
(7) To the extent not theretofore paid or provided, the
Corporation shall timely pay or provide to the Officer any
other amounts or benefits required to be paid or provided or
which the Officer is eligible to receive under any plan,
contract or agreement of the Corporation and its affiliated
companies; and
(8) Such career transition services as the Corporation's
Senior Human Resources Officer shall determine is
appropriate.
(b) Remedies. The Executive Officer shall be entitled to
recover damages for late or nonpayment of amounts which the
Corporation is obligated to pay hereunder. The Executive
Officer shall also be entitled to seek specific performance
of the Corporation's obligations and any other applicable
equitable or injunctive relief.
(c) Section 2(a) shall not apply in the event that the
Corporation terminates an Officer's employment "for cause."
Except as used in Section 3 of this Policy, "for cause"
means that the Corporation, acting in good faith based upon
information then known to it, determines that the Officer
has engaged in, committed, or is responsible for (1) serious
misconduct, gross negligence, theft, or fraud against the
Corporation; (2) refusal or unwillingness to perform his
duties; (3) inappropriate conduct in violation of
Corporation's equal employment opportunity policy; (4)
conduct which reflects adversely upon, or making any remarks
disparaging of, the Corporation, its Board of Directors,
Officers, or employees, or its affiliates or subsidiaries;
(5) insubordination; (6) any willful act that is likely to
have the effect of injuring the reputation, business, or
business relationship of the Corporation or its subsidiaries
or affiliates; (7) violation of any fiduciary duty; or (8)
breach of any duty of loyalty; or (9) any breach of the
restrictive covenants contained in Subsection 2(c) below.
Upon termination "for cause," the Corporation shall have no
liability to the Officer other than for accrued salary,
vacation benefits, and any vested rights the Officer may
have under the Corporation's benefit and compensation plans
under the general terms and conditions of the applicable
plan.
(d) Obligations of Officer
(1) Release of Claims. The Corporation shall
have no obligation to commence the payment of
the amounts and benefits described in
Section 2(a) until the latter of (1) the
delivery by Officer to the
Corporation a fully executed comprehensive general
release of any and all known or unknown claims that
he or she may have against the Corporation
and a covenant not to sue in the form
prescribed by the Administrator, and (2) the
expiration of any revocation period
associated with the release to which the
Officer may be entitled under law.
(2) Covenant Not to Compete. (i) During the
period of Officer's employment with the
Corporation or its subsidiaries and for a
period of years or portion thereof equal to
the Severance Multiple thereafter (the
"Restricted Period"), Officer shall not, in
any county within the State of California or
in any city, county or area outside the State
of California within the United States or in
the countries of Canada or Mexico, directly
or indirectly, whether as partner, employee,
consultant, creditor, shareholder, or other
similar capacity, promote, participate, or
engage in any activity or other business
competitive with the Corporation's business
or that of any of its subsidiaries or
affiliates, without the prior written consent
of the Corporation's Chief Executive Officer.
Notwithstanding the foregoing, Officer may
have an interest in any public company
engaged in a competitive business so long as
Officer does not own more than 2 percent of
any class of securities of such company,
Officer is not employed by and does not
consult with, or becomes a director of, or
otherwise engage in any activities for, such
competing company.
(ii) The Corporation and its subsidiaries
presently conduct their businesses within
each county in the State of California and in
areas outside California that are located
within the United States, and it is
anticipated that the Corporation and its
subsidiaries will also be conducting business
within the countries of Canada and Mexico.
Such covenants are necessary and reasonable
in order to protect the Corporation and its
subsidiaries in the conduct of their
businesses. To the extent that the foregoing
covenant or any provision of this Section
2(c)(2)(ii) shall be deemed illegal or
unenforceable by a court or other tribunal of
competent jurisdiction with respect to (i)
any geographic area, (ii) any part of the
time period covered by such covenant, (iii)
any activity or capacity covered by such
covenant, or (iv) any other term or provision
of such covenant, such determination shall
not affect such covenant with respect to any
other geographic area, time period, activity
or other term or provision covered by or
included in such covenant.
(3) Soliciting Corporation Customers and
Employees. During the Restricted Period,
Officer shall not, directly or indirectly,
solicit or contact any customer or any
prospective customer of the Corporation for
any commercial pursuit that could be
reasonably construed to be in competition
with the Corporation, or induce, or attempt
to induce, any employees, agents or
consultants of or to the Corporation or any
of its
subsidiaries or affiliates to do
anything from which Officer is restricted by
reason of this covenant nor shall Officer,
directly or indirectly, offer or aid to
others to offer employment to, or interfere
or attempt to interfere with any employment,
consulting or agency relationship with, any
employees, agents or consultants of the
Corporation, its subsidiaries and affiliates,
who received compensation of $75,000 or more
during the preceding
six (6) months, to work for any business
competitive with any business of the
Corporation, its subsidiaries or affiliates.
(4) Confidentiality. Officer shall not at any
time (including after termination of
employment) divulge to others, use to the
detriment of the Corporation, or use in any
business competitive with any business of the
Corporation, any trade secret, confidential
or privileged information obtained during his
employment with the Corporation, without
first obtaining the written consent of the
Corporation's Chief Executive Officer. This
paragraph covers but is not limited to
discoveries, inventions (except as otherwise
provided by California law), improvements,
and writings, belonging to or relating to the
affairs of the Corporation or of any of its
subsidiaries or affiliates, or any marketing
systems, customer lists or other marketing
data. Officer shall, upon termination of
employment for any reason, deliver to the
Corporation all data, records and
communications, and all drawings, models,
prototypes or similar visual or conceptual
presentations of any type, and all copies or
duplicates thereof, relating to all matters
contemplated by this paragraph.
(5) Assistance in Legal Proceedings. During the
Restricted Period, Officer shall, upon
reasonable notice from the Corporation,
furnish information and proper assistance
(including testimony and document production)
to the Corporation as may be reasonably
required by the Corporation in connection
with any legal, administrative or regulatory
proceeding in which it or any of its
subsidiaries or affiliates is, or may become,
a party, or in connection with any filing or
similar obligation of the Corporation imposed
by any taxing, administrative or regulatory
authority having jurisdiction, provided,
however, that the Corporation shall pay all
reasonable expenses incurred by Officer in
complying with this paragraph.
(6) Remedies. Upon Officer's failure to comply
with the provisions of this Section 2(c), the
Corporation shall have the right to
immediately terminate any unpaid amounts or
benefits described in Section 2(a) to
Officer. In the event of such termination, the
Corporation shall have no further obligations
under this Policy and shall be entitled to
recover damages. In the event of an
Officer's breach or threatened breach of any
of the covenants set forth in this Section
2(c), the Corporation shall also be entitled
to specific performance by Officer of any
such covenant and any other applicable
equitable or injunctive relief.
3. Termination of Employment Following a Change in Control
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or Potential Change in Control
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(a) If an Executive Officer's employment by the Corporation
or any subsidiary or successor of the Corporation shall be
subject to an Involuntary Termination within the Covered
Period, then the provisions of this Section 3 instead of
Section 2 shall govern the obligations of the Corporation as
to the payments and benefits it shall provide to the
Executive Officer. In the event that Executive Officer's
employment with the Corporation or an employing subsidiary
is terminated under circumstances which would not entitle
Executive Officer to payments under this Section 3,
Executive Officer shall only receive such benefits to which
he is entitled under Section 2, if any. In no event shall
Executive Officer be entitled to receive termination
benefits under both this Section 3 and Section 2.
All the terms used in this Section 3 shall have the
following meanings:
(1) "Affiliate" shall mean any entity which owns or
controls, is owned or is under common ownership or control
with, the Corporation.
(2) "Cause" shall mean (i) the willful and continued
failure of the Executive Officer to perform substantially
the Executive Officer's duties with the Corporation or one
of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to
the Executive Officer by the Board of Directors or the Chief
Executive Officer of the Corporation which specifically
identifies the manner in which the Board of Directors or
Chief Executive Officer believes that the Executive Officer
has not substantially performed the Executive Officer's
duties; or (ii) the willful engaging by the Executive
Officer in illegal conduct or gross misconduct which is
materially demonstrably injurious to the Corporation.
For purposes of the provision, no act or
failure to act, on the part of the Executive
Officer, shall be considered "willful" unless
it is done, or omitted to be done, by the
Executive Officer in bad faith or without
reasonable belief that the Executive
Officer's action or omission was in the best
interests of the Corporation. Any act, or
failure to act, based upon authority given
pursuant to a resolution duly adopted by the
Board of Directors or upon the instructions
of the Chief Executive Officer or a senior
officer of the Corporation or based upon the
advice of counsel for the Corporation shall
be conclusively presumed to be done, or
omitted to be done, by the Executive Officer
in good faith and in the best interests of
the Corporation. The cessation of employment
of the Executive Officer shall not be deemed
to be for Cause unless and until there shall
have been delivered to the Executive Officer
a copy of a resolution duly adopted by the
affirmative vote of not less than three-
quarters of the entire
membership of the Board of Directors at a meeting
of the Board of Directors called and held for such
purpose (after reasonable notice is provided to the
Executive Officer and the Executive Officer
is given an opportunity, together with
counsel, to be heard before the Board of
Directors), finding that, in the good faith
opinion of the Board of Directors, the
Executive Officer is guilty of the conduct
described in subparagraph (i) or (ii) above,
and specifying the particulars thereof in
detail.
(3) "Change in Control" shall be deemed to have occurred
if:
(a) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the 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 Corporation representing 20
percent or more of the combined voting power of
the Corporation's then outstanding securities;
(b) during any two consecutive years,
individuals who at the beginning of such a period
constitute the Board of Directors of the
Corporation cease for any reason to constitute at
least a majority of the Board of Directors of the
Corporation, unless the election or the nomination
for election by the shareholders of the
Corporation, of each new Director was approved by
a vote of at least two-thirds (2/3) of the
Directors then still in office who were Directors
at the beginning of the period; or
(c) the shareholders of the Corporation
shall have approved (i) any consolidation or
merger of the Corporation other than a merger or
consolidation which would result in the voting
securities of the Corporation outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity or any parent of such surviving entity) at
least 70 percent of the Combined Voting Power of
the Corporation, such surviving entity or the
parent of such surviving entity outstanding
immediately after such 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.
(4) "Change in Control Date" shall mean the date on which a
Change in Control occurs.
(5) "Combined Voting Power" shall mean the combined voting
power of the Corporation's or other relevant entity's then
outstanding voting securities.
(6) "Covered Period" shall mean the period commencing with
the Change in Control Date and terminating two (2) years
following said commencement; provided, however, that if a
Change in Control occurs and Executive Officer's employment
with the Corporation or the employing subsidiary is subject
to an Involuntary Termination before the Change in Control
Date but on or after a Potential Change in Control Date, and
if it is reasonably demonstrated by the Executive Officer
that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a
Change in Control, or (ii) otherwise arose in connection
with or in anticipation of a Change in Control, then the
Covered Period shall mean, as applied to Executive Officer,
the two-year period beginning on the date immediately before
the Potential Change in Control Date. In the case of
termination of employment following a Potential Change in
Control Date, references in the definition of "Good Reason"
to conditions in effect immediately prior to a Change in
Control shall be deemed to mean conditions in effect
immediately prior to Executive Officer's termination.
(7) "Disability" shall mean the absence of the Executive
Officer from the Executive Officer's duties with the
Corporation or the employing subsidiary on a full-time basis
for 180 consecutive business days as a result of incapacity
due to physical or mental illness which is determined to be
total and permanent by a physician selected by the
Corporation or its insurers and acceptable to the Executive
Officer or the Executive Officer's legal representative.
(8) "Executive Officer" shall mean officers of the
Corporation at the level of Senior Vice President and above.
(9) "Good Reason" shall mean any one or more of the
following which takes place within the Covered Period:
a) An adverse change in Executive Officer's
status or position(s) as in effect immediately
before a Change in Control or Potential Change in
Control, including, without limitation, the
assignment to the Executive Officer of any duties
inconsistent in any respect with the Executive
Officer's position (including status, offices,
titles and reporting requirements, including
reporting requirements under Section 16 of the
Securities Exchange Act of 1934), authority,
duties or responsibilities prior to a Change in
Control or Potential Change in Control, or any
other action by the Corporation which results in
the diminution in such position, authority, duties
or responsibilities prior to a Change in Control
or Potential Change in
Control, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Corporation
promptly after receipt of notice thereof given by the
Executive Officer;
b) Executive Officer's base salary is
reduced from that provided to him immediately
before the Change in Control Date or as the same
may be increased from time to time thereafter,
unless such reduction is part of an
across-the-board reduction for all similarly
situated executives, including executives of the
other party to the transaction that results in the
Change in Control;
c) Executive Officer's eligibility to
participate in bonus, stock option, incentive
award and other compensation plans which provide
opportunities to receive compensation is
diminished from that provided to him immediately
before the Change in Control Date, unless
substantially equal benefits are provided to
Executive Officer under comparable compensation
plans, or unless such reduction is part of an
across-the-board reduction for all similarly
situated executives, including executives of the
other party to the transaction that results in the
Change in Control;
d) The aggregate projected value of
Executive Officer's employee benefits (including
but not limited to supplemental and excess
retirement programs, medical, dental, life
insurance and long-term disability plans) and
perquisites is diminished from that provided to
him immediately before the Change in Control Date,
unless such reduction is part of an
across-the-board reduction for all similarly
situated executives, including executives of the
other party to the transaction that results in the
Change in Control;
e) A change in Executive Officer's
principal place of employment by Corporation
(including its subsidiaries) to a location more
than thirty-five miles from Executive Officer's
principal place of employment immediately before
the Change in Control Date;
f) A reasonable determination by the Board
of Directors that, as a result of a Change in
Control and a change in circumstances thereafter
significantly affecting his position, he is unable
to exercise the authorities, powers, function or
duties attached to his position immediately before
the Change in Control Date;
g) The failure of the Corporation to obtain
the assumption of this Policy by any successor
contemplated in Section 7, hereof; or
h) The material failure of the Corporation
to fulfill its obligations under this Policy, to
the extent not remedied in a reasonable period of
time after the Corporation's receipt of written
notice from Executive Officer specifying the
material failure by the Corporation.
(10) "Involuntary Termination" shall mean a termination (i)
by the Corporation without Cause, or (ii) by Executive
Officer following Good Reason; provided, however, the term
"Involuntary Termination" shall not include termination of
Executive Officer's employment due to Executive Officer's
death, Disability, or voluntary retirement.
(11) "Potential Change in Control" shall mean the earliest
to occur of (i) the date on which the Corporation executes
an agreement or letter of intent, where the consummation of
the transaction described therein would result in the
occurrence of a Change in Control, (ii) the date on which
the Board of Directors approves a transaction or series of
transactions, the consummation of which would result in a
Change in Control, or (iii) the date on which a tender offer
for the Corporation's voting stock is publicly announced,
the completion of which would result in a Change in Control;
provided, however, that if such Potential Change in Control
terminates by its terms, such transaction shall no longer
constitute a Potential Change in Control.
(12) "Potential Change in Control Date" shall mean the date
on which a Potential Change in Control occurs.
(13) "Reference Salary" shall mean the greater of (i) the
annual rate of Executive Officer's base salary from the
Corporation or the employing subsidiary in effect
immediately before the date of Executive Officer's
Involuntary Termination, or (ii) the annual rate of
Executive Officer's base salary from the Corporation or the
employing subsidiary in effect immediately before the Change
in Control Date.
(14) "Termination Date" shall be the date specified in the
written notice of termination of Executive Officer's
employment given by either party in accordance with Section
3(b) of this Policy.
(b) Notice of Termination. During the Covered Period, in
the event that the Corporation (including an employing
subsidiary) or Executive Officer terminates Executive
Officer's employment with the Corporation or employing
subsidiary, the party terminating employment shall give
written notice of termination to the other party, specifying
the Termination Date and the specific termination provision
in this Section 3 that is relied upon, if any, and setting
forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive
Officer's employment under the provision so indicated.
The Termination Date shall be determined as follows: (i) if
Executive Officer's employment is terminated for Disability,
thirty (30) days after a Notice of Termination is given
(provided that Executive Officer shall not have returned to
the full-time performance of Executive Officer's duties
during such 30-day period); (ii) if Executive Officer's
employment is terminated by the Corporation in an
Involuntary Termination, five days after the date the Notice
of Termination is received by Executive Officer; and (iii)
(as defined in this Section 3) if Executive Officer's
employment is terminated by the Corporation for Cause, the
date specified in the Notice of Termination, provided, that
the events or circumstances cited by the Board of Directors
as constituting Cause are not cured by Executive Officer
during any cure period that may be offered by the Board of
Directors. The Date of Termination for a resignation of
employment other than for Good Reason shall be the date set
forth in the applicable notice, which shall be no earlier
than ten (10) days after the date such notice is received by
the Corporation, unless waived by the Corporation.
During the Covered Period, a notice of termination given by
Executive Officer for Good Reason shall be given within
three (3) months after occurrence of the event on which
Executive Officer bases his notice of termination and shall
provide a Termination Date not more than sixty (60) days
after the notice of termination is given to the Corporation.
(c) Corporation's Obligations. If Executive Officer's
employment by the Corporation or any subsidiary or successor
of the Corporation shall be subject to an Involuntary
Termination within the Covered Period, then the Corporation
shall provide Executive Officer the following benefits:
(1) The Corporation shall pay to the Executive Officer a
lump sum in cash within thirty (30) days after the
Termination Date:
a) the sum of (1) any earned but unpaid
base salary through the Termination Date at the
rate in effect at the time of the notice of
termination to the extent not theretofore paid;
(2) the Executive Officer's target bonus under the
Short-Term Incentive Plan of the Corporation, an
Affiliate, or a predecessor, for the fiscal year
in which the Termination Date occurs (the "Target
Bonus"); and (3) any accrued but unpaid vacation
pay, in each case to the extent not theretofore
paid; and
b) the amount equal to the product of (1) three and
(2) the sum of (x) the Reference Salary and (y) the Target
Bonus.
(2) Remedies. The Executive Officer shall be entitled to
recover damages for late or nonpayment of amounts which the
Corporation is obligated to pay hereunder. The Executive
Officer shall also be entitled to seek specific
performance of the Corporation's obligations and any
other applicable equitable or injunctive relief.
(d) Adjustment for Excise Taxes. If any portion of the
payments to the Executive Officer under this Section 3 or
under any other plan, program, or arrangement maintained by
the Corporation (a "Payment") would be subject to the excise
tax levied under Section 4999 of the Internal Revenue Code
("Code"), or any interest or penalties are incurred by
Executive Officer with respect to such excise tax (such
excise tax together with such interest and penalties are
referred to herein as the "Excise Tax"), then the
Corporation shall make an additional payment to Executive
Officer (a "Tax Restoration Payment") in an amount such that
after payment by the Executive Officer of all taxes
(including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Tax Restoration
Payment, the Executive Officer retains an amount of the Tax
Restoration Payment equal to the Excise Tax imposed upon the
Payments. The payment of a Tax Restoration Payment under
this Section 3 shall not be conditioned upon the Executive
Officer's termination of employment.
All determinations and calculations required to be
made under this Section 3(d) shall be made by
Deloitte & Touche (the "Accounting Firm"), which
shall provide its determination (the
"Determination"), together with detailed
supporting calculations regarding the amount of
any Tax Restoration Payment and any other relevant
matter, both to the Corporation and the Executive
Officer within five (5) days of the termination of
the Executive Officer's employment, if applicable,
or such earlier time as is requested by the
Corporation or the Executive Officer (if the
Executive Officer reasonably believes that any of
the Payments may be subject to Excise Tax). If
the Accounting Firm determines that no Excise Tax
is payable by the Executive Officer, it shall
furnish the Executive Officer with a written
statement that such Accounting Firm has concluded
that no Excise Tax is payable (including the
reasons therefor) and that the Executive Officer
has substantial authority not to report any Excise
Tax on the Executive Officer's federal income tax
return. If a Tax Restoration Payment is
determined to be payable, it shall be paid to the
Executive Officer within five (5) days after the
Determination is delivered to the Corporation or
the Executive Officer. Any determination by the
Accounting Firm shall be binding upon the
Corporation and the Executive Officer, absent
manifest error.
As a result of uncertainty in the application of
Section 4999 of the Code at the time of the
initial determination by the Accounting Firm
hereunder, it is possible that Tax Restoration
Payments not made by the Corporation should have
been made ("Underpayment") or that Tax Restoration
Payments will have been made by the Corporation
which should not have been made ("Overpayment").
In either such event, the Accounting Firm shall
determine the amount of the Underpayment or
Overpayment that has occurred. In the case of an
Underpayment, the amount of
such Underpayment shall be promptly paid by the Corporation
to or for the benefit of the Executive Officer. In the
case of an Overpayment, the Executive Officer
shall, at the direction and expense of the
Corporation, take such steps as are reasonably
necessary (including the filing of returns and
claims for refund), follow reasonable instructions
from, and procedures established by, the
Corporation, and otherwise reasonably cooperate
with the Corporation to correct such Overpayment,
provided, however, that (i) the Executive Officer
shall in no event be obligated to return to the
Corporation an amount greater than the net after-
tax portion of the Overpayment that the Executive
Officer has retained or has recovered as a refund
from the applicable taxing authorities, and (ii)
this provision shall be interpreted in a manner
consistent with the intent of the Tax Restoration
Payment paragraph above, which is to make the
Executive Officer whole, on an after-tax basis,
from the application of Excise Tax, it being
understood that the correction of an Overpayment
may result in the Executive Officer's repaying to
the Corporation an amount that is less than the
Overpayment.
4. Administration
--------------
The Policy shall be administered by the Senior Human
Resources Officer of the Corporation ("Administrator"),
who shall have the authority to interpret the Policy
and make and revise such rules as may be reasonably
necessary to administer the Policy. The Administrator
shall have the duty and responsibility of maintaining
records, making the requisite calculations, securing
Officer releases, and disbursing payments hereunder.
The Administrator's interpretations, determinations,
rules, and calculations shall be final and binding on
all persons and parties concerned.
5. No Mitigation
-------------
Payment of the amounts and benefits under Section 2(a)
and Section 3 (except as otherwise provided in Section
2(a)(4)) shall not be subject to offset, counterclaim,
recoupment, defense or other claim, right or action
which the Corporation may have and shall not be subject
to a requirement that Officer mitigate or attempt to
mitigate damages resulting from Officer's termination
of employment.
6. Amendment and Termination
-------------------------
The Corporation, acting through its Nominating and
Compensation Committee, reserves the right to amend or
terminate the Policy at any time; provided, however,
that any amendment which would reduce the aggregate
level of benefits, or terminate the Policy, shall not
become effective prior to the third anniversary of the
Corporation giving notice to Officers of such amendment
or termination.
7. Successors
----------
The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the
business or assets of the Corporation expressly to
assume and to agree to perform its obligations under
this Policy in the same manner and to the same extent
that the Corporation would be required to perform such
obligations if no such succession had taken place;
provided, however, that no such assumption shall
relieve the Corporation of its obligations hereunder.
As used herein, the "Corporation" shall mean the
Corporation as hereinbefore defined and any successor
to its business and/or assets as aforesaid which
assumes and agrees to perform its obligations by
operation or law or otherwise.
This Policy shall inure to the benefit of and be
binding upon the Officer (and Officer's personal
representatives and heirs), Corporation and its
successors and assigns, and any such successor or
assignee shall be deemed substituted for the
Corporation under the terms of this Policy for all
purposes. As used herein, "successor" and "assignee"
shall include any person, firm, corporation or other
business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires
the stock of the Corporation or to which the
Corporation assigns this Policy by operation of law or
otherwise. If Officer should die while any amount
would still be payable to Officer hereunder if Officer
had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance
with this Policy to Officer's devisee, legatee or other
designee, or if there is no such designee, to Officer's
estate.
8. Nonassignability of Benefits
----------------------------
The payments under this Policy or the right to receive
future payments under this Policy may not be
anticipated, alienated, pledged, encumbered, or subject
to any charge or legal process, and if any attempt is
made to do so, or a person eligible for payments
becomes bankrupt, the payments under the Policy of the
person affected may be terminated by the Administrator
who, in his or her sole discretion, may cause the same
to be held if applied for the benefit of one or more of
the dependents of such person or make any other
disposition of such benefits that he or she deems
appropriate.
9. Nonguarantee of Employment
--------------------------
Officers covered by the Policy are at-will employees,
and nothing contained in this Policy shall be construed
as a contract of employment between the Officer and the
Corporation (or, where applicable, a subsidiary or
affiliate of the Corporation), or as a right of the
Officer to continued employment, or to remain as an
Officer, or as a limitation on the right of the
Corporation (or a subsidiary or affiliate of the
Corporation) to discharge Officer at any time, with or
without cause.
10. Benefits Unfunded and Unsecured
-------------------------------
The payments under this Policy are unfunded, and the
interest under this Policy of any Officer and such
Officer's right to receive payments under this Policy
shall be an unsecured claim against the general assets
of the Corporation.
11. Applicable Law
--------------
All questions pertaining to the construction, validity,
and effect of the Policy shall be determined in
accordance with the laws of the United States and, to
the extent not preempted by such laws, by the laws of
the state of California.
12. Arbitration
-----------
With the exception of any request for specific
performance, injunctive or other equitable relief, any
dispute or controversy of any kind arising out of or
related to this Policy, Officer's employment with the
Corporation (or with the employing subsidiary), the
termination thereof or any claims for benefits shall be
resolved exclusively by final and binding arbitration
in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then in effect.
Provided, however, that in making their determination,
the arbitrators shall be limited to accepting the
position of the Officer or the position of the
Corporation, as the case may be. The only claims not
covered by this Section 12 are claims for benefits
under workers' compensation or unemployment insurance
laws; such claims will be resolved under those laws.
The place of arbitration shall be San Francisco,
California. Parties may be represented by legal
counsel at the arbitration but must bear their own fees
for such representation. The prevailing party in any
dispute or controversy covered by this Section 12, or
with respect to any request for specific performance,
injunctive or other equitable relief, shall be entitled
to recover, in addition to any other available remedies
specified in this Policy, all litigation expenses and
costs, including any arbitrator or administrative or
filing fees and reasonable attorneys' fees. Both the
Officer and the Corporation specifically waive any
right to a jury trial on any dispute or controversy
covered by this Section 12. Judgment may be entered on
the arbitrators' award in any court of competent
jurisdiction.