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WEIL, GOTSHAL & MANGES LLP

Stephen Karotkin (pro hac vice)

(stephen.karotkin@weil.com)

Ray C. Schrock, P.C. (pro hac vice)

(ray.schrock@weil.com)

Jessica Liou (pro hac vice)

(jessica.liou@weil.com) 

Matthew Goren (pro hac vice)

(matthew.goren@weil.com)

767 Fifth Avenue

New York, NY 10153-0119

Tel: 212 310 8000

Fax: 212 310 8007

KELLER & BENVENUTTI LLP

Tobias S. Keller (#151445)

(tkeller@kellerbenvenutti.com)

Jane Kim (#298192)

(jkim@kellerbenvenutti.com)

650 California Street, Suite 1900

San Francisco, CA 94108

Tel: 415 496 6723

Fax: 650 636 9251

Attorneys for Debtors

and Debtors in Possession

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

- and -

PACIFIC GAS AND ELECTRIC 

COMPANY,

Debtors.

Bankruptcy Case 

No. 19-30088 (DM)

Chapter 11

(Lead Case)

(Jointly Administered) 

MOTION OF DEBTORS PURSUANT TO 

11 U.S.C. §§ 105(a), 363(b), AND 503(c) FOR 

ENTRY OF AN ORDER (I) APPROVING 

DEBTORS’ INCENTIVE PROGRAM FOR 

CERTAIN KEY EMPLOYEES AND (II) 

GRANTING RELATED RELIEF

Date: July 24, 2019

Time: 9:30 a.m. (Pacific Time)

Place: United States Bankruptcy Court

Courtroom 17, 16th Floor

San Francisco, CA 94102

☐Affects PG&E Corporation 

☐Affects Pacific Gas and Electric Company 

☒Affects both Debtors

* All papers shall be filed in the Lead Case, 

No. 19-30088 (DM).

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PG&E Corporation (“PG&E Corp.”) and Pacific Gas and Electric Company (the “Utility”), as 

debtors and debtors in possession (collectively, “PG&E” or the “Debtors”) in the above-captioned 

chapter 11 cases (the “Chapter 11 Cases”), hereby submit this Motion (the “Motion”), pursuant to 

sections 105(a), 363(b), and 503(c) of title 11 of the United States Code (the “Bankruptcy Code”), and

Rule 6004 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) for entry of an order 

(I) approving an incentive program for certain key executive officers and (II) granting related relief. In 

support of this Motion, the Debtors respectfully submit the Declarations of John Lowe (the “Lowe

Declaration”) and of Douglas J. Friske (the “Friske Declaration”), filed contemporaneously herewith.

A proposed form of order granting the relief requested herein is annexed hereto as Exhibit A 

(the “Proposed Order”).

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TABLE OF CONTENTS

I. JURISDICTION ..................................................................................................................6

II. BACKGROUND .................................................................................................................6

III. PRELIMINARY STATEMENT .........................................................................................7

IV. THE KEIP............................................................................................................................9

A. Development of the KEIP........................................................................................9

B. Summary of the KEIP............................................................................................11

V. BASIS FOR RELIEF REQUESTED.................................................................................14

A. The KEIP is a Performance-Based Incentive Plan ................................................15

B. The KEIP Satisfies Section 503(c)(3) of the Bankruptcy Code ............................17

C. Implementation of the KEIP Is a Valid Exercise of the Debtors’ Business 

Judgment under Section 363(b)(1) of the Bankruptcy Code .................................21

VI. REQUEST FOR BANKRUPTCY RULE 6004(H) WAIVER..........................................22

VII. NOTICE.............................................................................................................................22

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TABLE OF AUTHORITIES

Page(s)

Cases

In re Alpha Natural Resources, Inc.,

546 B.R. 348 (Bankr. E.D. Va. 2016)......................................................................................... 16, 21

Berg & Berg Enters., LLC v. Boyle,

178 Cal. App. 4th 1020 (2009) ......................................................................................................... 22

In re Borders Grp., Inc.,

453 B.R. ............................................................................................................................................ 18

Comm. of Asbestos-Related Litigants v. Johns-Manville Corp. (In re Johns-Manville 

Corp.),

60 B.R. 612 (Bankr. S.D.N.Y. 1986)................................................................................................ 21

In re Dana Corp.,

358 B.R. 567 (Bankr. S.D.N.Y. 2006)............................................................................ 15, 16, 18, 19

F.D.I.C. v. Castetter,

184 F.3d 1040 (9th Cir. 1999) .......................................................................................................... 21

In re Global Home Prods., LLC,

369 B.R. 778 (Bankr. D. Del. 2007)................................................................................................. 16

In re Hawker Beechcraft, Inc.,

479 B.R. 308 (Bankr. S.D.N.Y. 2012).............................................................................................. 17

In re Ionosphere Clubs, Inc.,

98 B.R. 174 (Bankr. S.D.N.Y. 1989)................................................................................................ 21

In re Musicland Holding Corp.,

No. 06-10064 (SMB) (Bankr. S.D.N.Y. Feb. 1, 2006)..................................................................... 16

Official Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated 

Res., Inc.),

147 B.R. 650 (S.D.N.Y. 1992).......................................................................................................... 21

In re Residential Capital, LLC,

491 B.R. 73 (Bankr. S.D.N.Y. 2013)................................................................................................ 18

Scouler & Co., LLC v. Schwartz,

No. 11-CV-06377 NC, 2012 WL 1502762 (N.D. Cal. Apr. 23, 2012) ............................................ 22

In re Velo Holdings Inc.,

472 B.R. (Bankr. S.D.N.Y. 2012)..................................................................................................... 18

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Statutes

11 U.S.C. § 105......................................................................................................................................... 2

11 U.S.C. § 363......................................................................................................................... 2, 8, 18, 21

11 U.S.C. § 503............................................................................................................. 2, 8, 15, 16, 17, 18

11 U.S.C. § 1107(a) and 1108................................................................................................................... 7

28 U.S.C. § 157......................................................................................................................................... 7

28 U.S.C. § 1334....................................................................................................................................... 7

28 U.S.C. § 1408....................................................................................................................................... 7

28 U.S.C. § 1409....................................................................................................................................... 7

Other Authorities

Bankruptcy Rule 2002 ............................................................................................................................ 22

Bankruptcy Rule 5011-1(a)....................................................................................................................... 7

Bankruptcy Rule 6004(h).................................................................................................................... 2, 22

Bankruptcy Rule 1015(b).......................................................................................................................... 7

Order Referring Bankruptcy Cases and Proceedings to Bankruptcy Judges, General 

Order 24.............................................................................................................................................. 7

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MEMORANDUM OF POINTS AND AUTHORITIES

I. JURISDICTION

This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 1334, the 

Order Referring Bankruptcy Cases and Proceedings to Bankruptcy Judges, General Order 24

(N.D. Cal.), and Rule 5011-1(a) of the Bankruptcy Local Rules for the United States District for the 

Northern District of California (the “Bankruptcy Local Rules”). This is a core proceeding pursuant to 

28 U.S.C. § 157(b). Venue is proper before the Court pursuant to 28 U.S.C. §§ 1408 and 1409.

II. BACKGROUND

PG&E Corp. was incorporated in 1995 and is a holding company whose primary operating 

subsidiary is the Utility, a public utility operating in northern and central California. See Amended 

Declaration of Jason P. Wells in Support of First Day Motions and Related Relief [Docket No. 263] (the 

“Wells Declaration”). The Utility was incorporated in 1905 and PG&E Corp. became the holding 

company of the Utility in 1997. The Utility provides natural gas and utility services to roughly 16 million 

customers and the Debtors together employ approximately 24,000 regular employees, approximately 20 

of whom are employed by PG&E Corp. Id. 

On January 29, 2019 (the “Petition Date”), the Debtors commenced with the Court the Chapter 

11 Cases. The Debtors continue to operate their businesses and manage their properties as debtors in 

possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.

On February 12, 2019, the Acting United States Trustee for Region 3 (the “U.S. Trustee”) 

appointed a nine-member Official Committee of Unsecured Creditors (the “Creditors Committee”). 

On February 13, 2019, the U.S. Trustee appointed an eleven-member Official Committee of Tort 

Claimants (the “Tort Claimants Committee”).

The Debtors’ Chapter 11 Cases are being jointly administered for procedural purposes only 

pursuant to Rule 1015(b) of the Bankruptcy Rules. 

Additional information regarding the circumstances leading to the commencement of the Chapter 

11 Cases and information regarding the Debtors’ businesses and capital structure is set forth in the 

Wells Declaration.

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III. PRELIMINARY STATEMENT

Critical to the Debtors’ safe and reliable operation of their business and the maximization of 

enterprise value for all their economic stakeholders, including the wildfire claimants, is the ability to 

appropriately incentivize their employees, to meet and exceed safety, financial, and operational targets

through the opportunity to earn market compensation. To ensure that the key members of the Debtors’ 

executive officer team are properly incentivized in this regard, the Debtors, with the assistance of their 

advisors, have developed a key employee incentive program (the “KEIP”) whose participants currently 

consist of 12 senior executive officers (excluding the Chief Executive Officer) 1 (collectively, the “KEIP 

Participants”). The KEIP is designed to ensure that key members of the Debtors’ executive officer 

team are properly incentivized to meet and exceed safety, financial, and operational targets through the 

opportunity to earn market compensation. Notably, to place a greater emphasis on safety, the newlyconstituted Compensation Committee of the Board of Directors of PG&E Corp. (the “Compensation 

Committee”) determined that the KEIP Awards should be subject to a downward modifier if the Debtors 

fail to meet the threshold or target performance metric most closely aligned with wildfire safety. 

The KEIP Participants are vital to the Debtors’ safety, operations, and revenue generating 

capacity. For that reason, providing appropriate incentives is essential not only to providing safe and 

reliable service, but also to maximizing value and to the success of these reorganization cases. The 

Debtors established the metrics for the KEIP by considering, among other things, the Debtors’ safety, 

financial, and operational goals, with an emphasis on safety, to ensure that the metrics are challenging 

and drive enhanced performance by the KEIP Participants. In considering these objectives, the Debtors 

looked to the Debtors’ 2019 short-term incentive program approved by this Court on April 29, 2019 (the 

“2019 STIP”) to establish the appropriate metrics.

2

 

 1 The Debtors are seeking approval of the Chief Executive Officer’s compensation arrangement in a 

separate motion to be filed with this Court.

2 See Order Pursuant to 11 U.S.C. §§ 2015(a), 363, and 503(c) (I) Approving Short-Term Incentive 

Plan and (II) Granting Related Relief [Docket No. 1751].

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Consistent with the 2019 STIP, the KEIP is entirely incentive-based, conditioning the cash and 

equity portion of the awards (the equity portion being in the form of performance-based restricted stock 

units (“PRSUs”)) granted under the incentive program (the “KEIP Awards”) on the Debtors meeting 

carefully designed safety, financial and operational metrics (collectively the “Performance Metrics”), 

which are described in further detail below. Like the 2019 STIP, the proposed KEIP heavily prioritizes 

safety performance metrics by giving them a 65% weighting. 

Significantly, as described below, because the KEIP applies to the Debtors’ most senior officers, 

the KEIP places increased emphasis on the Public Safety Index metric, which is directly related to the 

Debtors’ implementation of their Wildfire Mitigation Plan. If the Debtors do not achieve the threshold 

level for the Public Safety Index metric, the full KEIP Awards will be reduced by 50%. If the Debtors 

achieve the threshold level, but do not achieve the target level, the KEIP Awards will be reduced by 

25%. And again, because the KEIP applies to the Debtors’ senior officers, awards, if any, are made only 

at the end of the annual performance period and not quarterly as is the case with the 2019 STIP.

As with the 2019 STIP, financial performance metrics are given a 25% weighting and customerrelated performance metrics are given a 10% weighting.3

 As with the 2019 STIP, the KEIP Awards can 

be completely eliminated for any reason, whether performance targets are met or not, in the discretion 

of the Board of Directors of PG&E Corp. (the “Board”) or Compensation Committee.

4

 And, as with 

the 2019 STIP, such discretion applies either to the entire program or on an individual participant basis. 

It also is important to note that implementation of the KEIP will provide the KEIP Participants with the 

opportunity to achieve a market rate of compensation, but only if the incentive targets are achieved. 

Accordingly, the Debtors believe that the KEIP’s design and scope is reasonable, with a clear focus on 

 3 For more information on the Performance Metrics and payout levels, see the testimony of John Lowe,

Senior Director of Total Rewards of the Utility. Hr’g Tr. April 23, 2019; Notice Regarding Filing of 

Documents Used During Oral Testimony at Hearing on STIP Motion; Corrected Declaration of 

Dinyar Mistry in support of Corrected Motion for Entry of Order Approving Short-Term Incentive 

Plan [Docket No. 806]; and Corrected Declaration of Douglas J. Friske in support of Motion for 

Entry of An Order (I) Approving Short-Term Incentive Plan and (II) Granting Related Relief [Docket 

No. 807].

4 The Compensation Committee has the discretion to approve the payout of all KEIP Awards for the 

KEIP Participants that report directly to the CEO. The full Board has the discretion to approve the 

payout of all KEIP Awards for those KEIP Participants that report directly to the Board.

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safety and other incentives that will promote a successful reorganization consistent with the intent and 

purpose of chapter 11, and that its implementation reflects a sound exercise of the Debtors’ business 

judgment. 

IV. THE KEIP

A. Development of the KEIP

The Debtors, together with their advisors, and the Compensation Committee of the Board 

consisting of three independent directors, developed and formulated the KEIP. In selecting the pool of 

KEIP Participants, the Debtors identified their most senior officers whose performance would have the 

greatest impact on the Debtors’ operations, safety, and the administration of these Chapter 11 Cases. 

The KEIP Participants are largely responsible for the Debtors’ ongoing day-to-day operations and 

guiding the Debtors’ overall business strategy. The KEIP Participants, individually and collectively, 

have the decision-making capacity and authority to materially influence the Debtors’ safety, financial,

and operational performance, ensuring safe and reliable service, and that the value of the Debtors’ 

business enterprise will be maximized for the benefit of all economic stakeholders. More importantly, 

the KEIP Participants are the individuals with the ultimate responsibility for overseeing the Debtors’ 

safety initiatives and implementation and compliance with the Debtors’ Wildfire Mitigation Plan. 

Additionally, the KEIP Participants have the added responsibility of fulfilling chapter 11 obligations, 

including, satisfying additional reporting obligations, developing and implementing reorganization 

strategy, spear-heading the chapter 11 plan formulation and negotiation process, participating in Court 

hearings and meetings with stakeholders, and performing other administrative and operational 

obligations.

The Debtors developed and formulated the KEIP to be consistent with the Debtors’ customary

prepetition incentive programs, with an increased focus on safety and wildfire prevention. The Debtors’ 

customary incentive programs are a basic element of each executive’s general market-based 

compensation package. Historically, the Debtors have maintained a STIP as well as an equity-based 

long-term incentive plan (“LTIP”) that covered, among certain other employees, the KEIP Participants. 

Since the filing of these Chapter 11 Cases, the Debtors have suspended all LTIP equity grants to 

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employees under the existing LTIP and did not include KEIP Participants (other than Mr. Welsch and 

Mr. Christopher who were recently promoted) in the 2019 STIP.

5 Accordingly, at this time, the KEIP 

Participants do not have any incentive-based element to their compensation structure, thereby resulting 

in their current compensation being substantially below market. And, as the Court is aware, no STIP 

payments were made to any employees for the 2018 fiscal year.

In fact, as noted in the Friske Declaration, if the Debtors do not receive approval from the Court 

for the KEIP, total direct compensation for the KEIP Participants will only reflect current base salaries. 

When base salaries only (absent a KEIP opportunity) are compared to the competitive market target total

direct compensation data, the aggregate target total direct compensation for the 12 KEIP Participants 

falls significantly below the 25th percentile and even more significantly below the 50th percentile of the 

market.

The target awards for the KEIP have been determined based on the historical STIP and LTIP 

target award values to provide the opportunity for the KEIP Participants to achieve market-based 

compensation for the 2019 fiscal year. Specifically, the target awards for the KEIP are based on 100% 

of the 2019 target STIP percentage opportunity for each participant plus 75% of the percentage 

opportunity of the 2019 target LTIP award for each participant, as approved by the Compensation 

Committee in December 2018, in each case subject to adjustment based on the Public Safety Index

(“PSI”) modifier (as described below).

6

 The Debtors have reduced the value associated with the 

approved 2019 target LTIP award to account for, among other things, the cash component of the 

aggregate award (50%) and the shorter vesting period of the PRSU component.

7

 At the recommendation 

 5 Mr. Welsch and Mr. Christopher, who were recently promoted to SVP and Chief Nuclear Officer and 

VP, Gas Operations respectively, each participated in the 2019 STIP prior to their promotions. As a 

result of their promotions, they will no longer participate in the 2019 STIP and will be eligible to 

receive KEIP Awards on a prorated basis as of the effective date of their promotions.

6 The targets for the 2019 STIP and 2019 LTIP programs were approved by the Compensation 

Committee prior to the filing of these Chapter 11 Cases. The KEIP Participants do not currently

participate in the 2019 STIP, and the 2019 LTIP was not implemented.

7 Under the 2019 LTIP plan that was not implemented, the share-based awards consisting of restricted 

stock units, performance shares, and stock options typically had vesting periods lasting three years and 

generally represented more than 50% of the value of an employee’s incentive-based compensation. 

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of Willis Towers Watson (“WTW”), KEIP Awards will be paid 50% in cash and 50% in the delivery of 

PRSUs with the option of the Board or Compensation Committee, as applicable, to pay the value of the 

PRSU component in cash valued at the stock trading price at the time the award is made. In addition, 

the Compensation Committee consulted with Pay Governance (“PG”), an independent compensation 

consultant, to review the overall design of the awards and Performance Metrics of the KEIP.

In designing the KEIP, the Debtors worked closely with WTW, a compensation consulting firm 

with significant experience designing compensation programs for organizations undergoing a 

restructuring. WTW undertook a comprehensive analysis of the KEIP, comparing it to programs of 

similar companies, including those that sought relief under chapter 11, evaluating the timing of 

payments, incentive targets, award amounts and opportunities, total program costs and other design 

elements. WTW also reviewed the terms and provisions of the KEIP to confirm that its design is marketbased and within the range of similar programs in the industry. As set forth in the Friske Declaration, 

the KEIP’s design is reasonable when compared to the Debtors’ peer group and consistent with market 

practice.

On June 14, 2019, the Compensation Committee approved the KEIP. Notably, the Compensation 

Committee consists exclusively of outside directors, none of whom are participants in the KEIP. The 

Compensation Committee determined that the KEIP was necessary to appropriately incentivize and align 

the KEIP Participants’ goals and performance with those of the Debtors and the approximately 10,000 

other employees participating in the 2019 STIP, including a particular emphasis on safety, and to provide 

the KEIP Participants with the opportunity to achieve a market rate of compensation, but only if the 

KEIP performance goals are achieved.

B. Summary of the KEIP

The following is a summary of the key terms of the KEIP:

1. KEIP Participants: Twelve senior executive officers, John Simon (EVP, Law, Strategy 

and Policy); Jason Wells (EVP and Chief Financial Officer); Janet Loduca (SVP and 

General Counsel); Melvin Christopher (VP, Gas Operations); Michael Lewis (SVP, 

Electric Operations; Julie Kane (SVP, Chief Ethics & Compliance Officer, & Deputy 

General Counsel); Dinyar Mistry (SVP, Human Resources, Shared Services and Chief 

Diversity Officer); Loraine Giammona (SVP and Chief Customer Officer); Fong Wan 

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(SVP, Energy Policy & Procurement); Kathleen Kay (SVP and Chief Information 

Officer); James Welsch (SVP and Chief Nuclear Officer); and David Thomason (VP, 

CFO Utility and Controller).

2. Total Program Cost: The aggregate value of the KEIP Awards at grant range from 

$5,465,500 at threshold performance, $10,931,000 at target performance, and 

$16,396,500 at maximum performance. The potential awards consist of 50% cash and 

50% PRSUs, with the PRSU value at settlement subject to market fluctuation of PG&E 

Corp.’s common stock from the date of the grant to the date the PRSUs are settled.8 

Accordingly, the actual value of earned awards may be above or below the threshold, 

target or maximum specified at grant as a result of the common stock price at settlement.

3. Performance Period: January 1, 2019 through December 31, 2019 (the “Performance 

Period”). 

4. Form of KEIP Awards: Incentive compensation will consist of (i) 50% cash, and (ii) 

50% PRSUs. 

5. Timing of KEIP Award Issuance and Payout: Any cash component of the KEIP 

Awards, if earned, shall be paid in the first quarter of 2020. The PRSUs will be granted 

as soon as practicable after the Court’s entry of an Order approving the KEIP on a date 

in compliance with the Debtors’ Equity Grant Date Policy and, if earned and vested, will 

be settled in the first quarter of 2020. Any payout of cash or shares shall occur only after 

the certification of the Performance Metrics has occurred. The Company has the option 

of settling the PRSU component in cash.

6. Performance Metrics and Weighting:

a) Safety Metrics (inclusive of all safety-related Performance Metrics) 

(Weight: 65%):

(i) Nuclear Reliability and Safety Indicator (Weight: 5%): 

Measures nuclear power generation and safety based on 

performance indicators for nuclear power generation developed by 

the nuclear industry and applied to all U.S. nuclear power plants.

(ii) Public Safety Index (Weight: 25%): This metric includes two 

equally weighted sub-metrics: 

o Enhanced Vegetation Management (“EVM”): EVM 

measures how many circuit miles of vegetation have been 

cleared under the EVM program within high-fire risk areas.

o System Hardening: System hardening measures completed 

circuit miles within high-fire risk areas such as the updating or 

undergrounding of overhead circuitry.

(iii) First-Time ILI Miles (Weight: 10%): Measures the number of 

miles of natural gas transmission pipelines that were successfully 

 8 The total values do not take into account (i) any reduction that would be made as a result of the 

application of the PSI modifier and (ii) any awards potentially offered to Additional KEIP Participants.

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inspected for the first time following the introduction of inspection 

tools (sensors) within the pipelines.

(iv) Asset Records Duration Index (Weight: 10%): Tracks the 

average number of days required to complete appropriate 

documentation of electric and gas construction projects.

(v) Serious Injuries and Fatalities Corrective Actions Index 

(15%): Measures the quality (as determined by an independent 

safety expert) and timeliness of corrective actions implemented in 

response to employee and contractor serious injuries and fatalities 

events.

b) Customer Satisfaction (Weight: 10%): Measures the number of 

customer complaints escalated to the CPUC. 

c) Financial Performance (Weight: 25%): Earnings from Operations 

(“EFO”): Measures financial performance from ongoing core operations 

calculated as net income adjusted for income or expenses associated with 

events or circumstances outside of ongoing core operations. 

7. Award Payout Levels: KEIP Participants are eligible to receive:  Below Threshold KEIP Performance: If threshold performance is not achieved, 

there is no award. 

 Threshold KEIP Performance: 50% of the Target KEIP Award is earned if the 

Debtors meet but do not exceed the threshold performance levels.

 Target KEIP Performance: 100% of the Target KEIP Award is earned if the 

Debtors achieve, but do not exceed target performance levels.

 Maximum KEIP Performance: 150% of Target KEIP Awards is earned if the 

Debtors meet maximum performance levels.

Notwithstanding the foregoing, if the aggregate score for the PSI metric (a) is below 

threshold level, the KEIP Awards that otherwise would be made shall be reduced by 50%; 

or (b) is at or above threshold level but below target level, the KEIP Awards that 

otherwise would be made shall be reduced by 25%. 

8. Computing Payout Levels: KEIP Awards between (i) threshold and target and (ii) target 

and maximum will be interpolated on a linear basis.

9. Public Safety Index Modifier: As set forth above, a PSI modifier of -25% and -50% will 

be applied if the PSI metric does not reach target or threshold levels respectively. The 

PSI metric measures the electric operations safety component of the safety metric (25% 

of the 65% overall safety metric) and is most closely aligned with wildfire safety. 

Accordingly, if for the Performance Period, the aggregate score for the PSI metric is 

below threshold, the total payout for participant’s 2019 KEIP Awards across all 

components will be reduced by 50% If, for the Performance Period, the aggregate score 

for the PSI metric is at or above threshold but below target, the total payout for the 

participant’s 2019 KEIP Awards across all components will be reduced by 25%. 

10. Eligibility to Receive KEIP Award Payout upon Termination: Each KEIP Participant 

shall only be eligible to receive a KEIP Award payout if such participant is employed by 

the Debtors as of the end of the Performance Period; provided, however, that if a KEIP 

Participant is terminated without cause or without “good reason” or similar standard, or 

upon disability, retirement or death, such KEIP Participant will remain eligible to receive 

a prorated share of the KEIP Award based on the percentage of time the KEIP Participant 

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remained employed during the Performance Period as if such participant was still 

employed at the end of the Performance Period. In addition, all KEIP Awards are subject 

to claw-back under PG&E Corp.’s Executive Incentive Compensation Recoupment 

Policy.

11. Replacement of KEIP Participants: In the event that a KEIP Participant’s employment 

with the Debtors ends during the Performance Period, and the Debtors determine that an 

appropriate replacement should be made, either by external hire or by promotion from 

within, the new executive shall be eligible to receive a prorated share of the applicable 

KEIP Award based on the Performance Period for which they are employed; provided, 

however, that in no event shall the KEIP Award available to such new executive exceed 

the maximum award available to the departed executive, less any amounts paid to such 

departed executive. 

12. Additional KEIP Participants: The Debtors shall have the ability to provide KEIP 

Awards for up to two (2) additional KEIP Participants in 2019, whether hired externally 

or promoted from within, whose job role and responsibilities would have qualified such 

executive to participate in the KEIP if they had held such position at the time of the 

KEIP’s approval. The KEIP Awards available to such additional participants shall be 

determined in a manner consistent with the manner in which awards were determined for 

the initial KEIP Participants and shall not exceed in the aggregate a maximum value of 

$4,000,000. 

The foregoing results in the following estimated award amounts: 9

Incumbent Position

Base

Salary

(All amounts are in 000s)

FY2019 Threshold KEIP $ 

Value

FY2019

Target KEIP

$ Value

FY2019

Maximum KEIP

$ Value

Simon, John EVP, Law, Strategy, & Policy $695 $917 $1,834 $2,751

Wells, Jason EVP and Chief Financial Officer $630 $892.5 $1,785 $2,678

Loduca, Janet SVP and General Counsel $575 $651.5 $1,303 $1,954

Christopher, Melvin VP, Gas Operations $307 $226.5 $453 $680

Welsch, James SVP and Chief Nuclear Officer $545 $407.5 $815 $1,222

Lewis, Michael SVP, Electric Operations $450 $379 $758 $1,136

Kane, Julie SVP, Chief Ethics & Compliance 

Officer & Deputy GC $473 $385.5 $771 $1,157

Mistry, Dinyar SVP, HR, Shared Services & 

Chief Diversity Officer $565 $413.5 $827 $1,240

Giammona, Loraine SVP and Chief Customer Officer $505 $395.5 $791 $1,186

Wan, Fong SVP, Energy Policy & 

Procurement $414 $368 $736 $1,104

Kay, Kathleen SVP and Chief Information 

Officer $415 $254 $508 $761

Thomason, David VP, CFO Utility and Controller $325 $176.5 $353 $529

Total $5,899 $5,466 $10,931 $16,397

V. BASIS FOR RELIEF REQUESTED

The relief requested in this Motion should be approved for several reasons. First, the KEIP is 

 9 These amounts are rounded and do not take into account (i) any reduction that would be made as a 

result of the application of the PSI modifier and (ii) any awards potentially offered to Additional KEIP 

Participants.

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incentive-based and aligns executive compensation with performance-based metrics previously 

approved in these Chapter 11 Cases and which are heavily weighted to safety. Second, the KEIP fully 

complies with the requirements of section 503 of the Bankruptcy Code and constitutes a sound exercise 

of the Debtors’ business judgment. Further, the KEIP Awards are reasonable in light of market practice, 

and provide the KEIP Participants with the opportunity, if performance metrics are achieved, to realize 

a market rate of compensation. 

A. The KEIP is a Performance-Based Incentive Plan 

Section 503(c)(1) of the Bankruptcy Code, which limits the Debtors’ ability to award retention 

payments to insiders, is not applicable to the evaluation of the KEIP. By its plain language, section 

503(c)(1) pertains solely to retention payments to insiders. See, e.g., In re Dana Corp., 358 B.R. 567, 

576 (Bankr. S.D.N.Y. 2006) (applying section 503(c)(3) of the Bankruptcy Code to evaluate 

management incentive plan in absence of applicability of section 503(c)(1)); In re Musicland Holding 

Corp., No. 06-10064 (SMB) (Bankr. S.D.N.Y. Feb. 1, 2006) (finding that incentive-based compensation 

under management incentive plan did not violate section 503(c) of the Bankruptcy Code); In re Alpha 

Natural Resources, Inc., 546 B.R. 348, 355-56 (Bankr. E.D. Va. 2016) (“[T]he analysis under § 503(c)

changes when a debtor purports to make a payment not to retain an insider, but primarily to incentivize 

the insider to achieve certain goals, and] [o]n its face, § 503(c)(1) does not apply to the KEIP because 

the payments thereunder are incentive and not purely retentive.”).

The KEIP, is incentive-based. It is expressly designed to reward KEIP Participants for 

performance, and not for retention purposes. See Dana, 358 B.R. at 575 (applying section 503(c)(3) of 

the Bankruptcy Code to evaluate management incentive plan in absence of applicability of section 

503(c)(1) of the Bankruptcy Code). The KEIP provides for payments to certain critical executives only

on the successful achievement of targeted safety, financial, and operational metrics. The KEIP has been 

carefully crafted to align the KEIP Participants’ performance with key company goals, including wildfire 

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prevention, that will both maximize safety and enhance value for all of the Debtors’ economic 

stakeholders. 

Additionally, although the KEIP has not been designed with the goal of retaining KEIP 

Participants, the fact that the KEIP may encourage the KEIP Participants to remain employed with the 

Debtors throughout the chapter 11 cases does not bar implementation of the KEIP because it does not 

convert the KEIP into a retention plan. See In re Global Home Prods., LLC, 369 B.R. 778, 786 (Bankr. 

D. Del. 2007) (noting that, “the fact that . . . all compensation has a retention element [did] not reduce 

the Court’s conviction [that the debtor’s primary goal in approving the incentive plans] was to create 

value by motivating performance”). Indeed, all successful incentive programs necessarily have the 

indirect benefit of incentivizing an employee to remain with the company. See In re Alpha Natural 

Resources, Inc., 546 B.R. at 356 (“[A] KEIP that merely has some retentive effect should not be analyzed 

under § 503(c)(1).”). As set forth above, awards under the KEIP are purely performance-based and, 

additionally, there is no guarantee whatsoever that the KEIP Participants will receive any awards at the 

end of the Performance Period, even if the targets are achieved. The KEIP is plainly not a “pay to stay”

plan within the purview of section 503(c)(1). 

Moreover, the KEIP Performance Metrics are not easily achievable or “layups”. Cf. In re Hawker 

Beechcraft, Inc., 479 B.R. 308, 313 (Bankr. S.D.N.Y. 2012). The Performance Metrics are similar to 

those approved by this Court in connection with the 2019 STIP, where the Court considered the layup 

argument, and were carefully developed to take into account the Debtors’ existing circumstances and 

needs, principally safety, financial performance, and customer satisfaction. The Debtors developed the 

Performance Metrics to incorporate certain independent benchmarks directly related to wildfire safety 

and regulatory compliance. For example, the Nuclear Safety and Reliability Indicator metric is based 

on an industry-wide standard that measures a nuclear power plant’s safety and reliability. The Serious 

Injuries and Fatalities Corrective Actions Index metric is based on the assessment of an independent 

safety expert who is responsible for reviewing all corrective actions. The applicability of the PSI metric 

is based on the Utility’s Wildfire Mitigation Plan and is subject to revision if the California Public 

Utilities Commission requires changes. Moreover, as indicated above, the KEIP includes an added 

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condition that automatically reduces the aggregate awards if either threshold or target performance is not 

achieved with respect to the PSI metric, thereby further demonstrating that achieving a KEIP award is 

hardly a layup. 

The metrics used in the KEIP are intended to be challenging yet achievable.10 The Debtors have 

only achieved their target STIP metrics in five of the past nine years and have never achieved a maximum 

score, providing further evidence that historically the Debtors have not established metrics that are easily 

achievable. By its design, the KEIP is a true incentive plan not only because of the Performance Metrics, 

but also because awards are not guaranteed. Rather, as with the 2019 STIP, the KEIP is an “at-risk” 

plan, which provides no guaranty of payment, but is comprised of weighted metrics, each designed 

specifically to motivate these executives to achieve the Debtors’ safety, financial, and operational goals, 

and with complete final discretion left with the Compensation Committee and Board, as applicable.

In light of the foregoing, the Debtors submit that section 503(c)(1) of the Bankruptcy Code does 

not apply to the KEIP.

B. The KEIP Satisfies Section 503(c)(3) of the Bankruptcy Code

Section 503(c)(3) of the Bankruptcy Code permits payments to a debtor’s employees outside the 

ordinary course of business if such payments are justified by “the facts and circumstances of the case.” 

11 U.S.C. § 503(c)(3). Courts have concluded that whether payments to employees are justified by the 

“facts and circumstances” of a case is to be determined by application of the same business judgment 

standard utilized under section 363(b) of the Bankruptcy Code. See In re Velo Holdings Inc., 472 B.R. 

at 209 (Bankr. S.D.N.Y. 2012) (“[The] ‘facts and circumstances’ language of section 503(c)(3) creates 

a standard no different than the business judgment standard under section 363(b).”); In re Dana Corp., 

358 B.R. at 576–77 (describing six factors that courts may consider when determining whether the 

structure of a compensation proposal meets the “sound business judgment test” in accordance with 

section 503(c)(3) of the Bankruptcy Code). Accordingly, the determination of whether the KEIP is 

 10 See testimony of John Lowe, Hr’g Tr. April 23, 2019, 23: 3-21; 26:8-27:8; and 43:5-7. 

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justified by the facts and circumstances of the case and the analysis of whether the approval of such plan 

is a sound exercise of the debtor’s business judgment under section 363(b) are the same.

Courts have generally utilized the Dana factors when determining if the structure of a 

compensation proposal and the process for its development meet the business judgment test. See, e.g., 

In re Residential Capital, LLC, 491 B.R. 73, 84–85 (Bankr. S.D.N.Y. 2013) (applying the Dana factors 

to the debtors’ retention plan for non-insiders and approving the plan as an exercise of sound business 

judgment); In re Borders Grp., Inc., 453 B.R. at 473–74 (same). In Dana, the Bankruptcy Court set 

forth the following factors for evaluating whether a debtor has satisfied the “sound business judgment” 

test for purposes of the approval of a compensation plan under section 503(c)(3) of the Bankruptcy Code:

• Is there a reasonable relationship between the plan proposed and the results to be 

obtained, i.e., will the key employee stay for as long as it takes for the debtor to reorganize 

or market its assets, or, in the case of a performance incentive, is the plan calculated to 

achieve the desired performance?

• Is the cost of the plan reasonable in the context of the debtor’s assets, liabilities and 

earning potential? 

• Is the scope of the plan fair and reasonable; does it apply to all employees; does it 

discriminate unfairly? 

• Is the plan or proposal consistent with industry standards? 

• What were the due diligence efforts of the debtor in investigating the need for a plan; 

analyzing which key employees need to be incentivized; what is available; what is 

generally applicable in a particular industry? 

• Did the debtor receive independent counsel in performing due diligence and in creating 

and authorizing the incentive compensation?

In re Dana Corp., 358 B.R. at 576–77. 

As set forth below, to the extent applicable, all of these factors are satisfied as to the KEIP.

First, in light of the Debtors’ current circumstances, the KEIP was carefully tailored to drive 

performance to achieve critical safety, financial, and operational objectives. The Debtors, in consultation 

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with their advisors, designed the KEIP to motivate and reward KEIP Participants who will have the 

greatest influence upon safety, compliance with the Debtors’ Wildfire Mitigation Plan and, ultimately 

the successful resolution of these Chapter 11 Cases. The Performance Metrics were established as 

appropriate industry metrics that focus the KEIP Participants’ efforts on items that are critical to the 

Debtors in these challenging times with a principal focus on safety. As stated, if the Debtors fail to meet 

the performance goals under the KEIP, the KEIP Participants will not be entitled to receive any 

payments.

Second, the KEIP falls within the range of competitive practice relative to company size and 

incentive structure and design of peer companies. As discussed above, WTW engaged in a

benchmarking analysis to assist the Debtors with the design of the KEIP. WTW analyzed 21 companies 

with revenues greater than $1 billion that recently implemented KEIPs in chapter 11 (collectively, the 

“Restructuring Peers”). WTW determined that the KEIP is within the range of reasonableness when 

compared to KEIPs implemented by the Restructuring Peers.

In addition, as reflected in the Friske Declaration, WTW developed competitive target total direct 

compensation benchmarks from various data sources depending on position responsibilities that were 

confirmed with the Debtor’s Human Resources department. Data sources used in WTW’s analysis 

include: 1) proxy data from a sample of 19 peer companies (“Peer Companies”) approved by the 

Compensation Committee, published survey compensation data for the Peer Companies, published 

survey data for the broader energy services industry, and published survey data for general industry 

companies. WTW matched the Debtors’ KEIP Participants to Peer Companies’ proxy data (where 

available), and to published survey benchmarks at the Peer Companies, companies in the energy services 

industry, and/or general industry companies based on its understanding of each participant’s job duties 

and responsibilities within the Debtors’ organization. 

As stated in the Friske Declaration, WTW compared the Debtors’ proposed target and maximum 

total direct compensation (reflecting base salary, target and maximum KEIP opportunities) for the KEIP 

Participants to market rates of pay. When compared to the market data, the aggregate target total direct 

compensation for the 12 KEIP Participants falls between the 25th percentile and 50th percentile of the 

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market. At maximum performance, the aggregate maximum total direct compensation for the 12 KEIP 

Participants falls between the 50th percentile and the 75th percentile of the market. Accordingly, the 

costs of the KEIP are reasonable and well-justified given the size of the Debtors’ businesses and the 

value that achievement of the Performance Metrics would bring to their estates.

Third, the scope of the KEIP is fair and reasonable. As noted herein, the KEIP is limited to the 

Debtors’ 12 most senior executives, excluding the CEO, who will be the persons not only driving 

performance but also effectively guiding the Debtors through the chapter 11 process and to achieve their 

safety, financial, and operational goals. Furthermore, the Compensation Committee or the Board, as 

applicable, retains complete discretion to determine that any earned award should not be paid for any 

reason whatsoever. Additionally, the KEIP does not discriminate unfairly – the 2019 STIP applies to 

approximately 10,000 of the Debtors’ other employees providing a similar opportunity to achieve 

market-based compensation. 

Fourth, as discussed in the Friske Declaration, the KEIP comports with industry standards with 

respect to design and overall cost, including who is eligible to participate, the amount and type of awards, 

and the Performance Metrics.

Fifth, the KEIP was designed with the advice and in consultation with, among others, PG, the 

Debtors’ independent compensation consultant, and WTW. As noted above, WTW engaged in industry 

benchmarking analyses and provided advice in the formulation of the program taking into account the 

Debtors’ current circumstances and the ongoing administration of the Chapter 11 Cases.

Sixth, as referenced above, the KEIP is the product of due diligence with the input of the Debtors’ 

professional advisors. 

As noted above and in the Friske Declaration, if the Debtors do not receive approval from the 

Court for the KEIP, total direct compensation for the KEIP Participants will only reflect current base 

salaries. When base salaries only (absent a KEIP opportunity) are compared to the competitive market 

target total direct compensation data, the aggregate target total direct compensation for the 12 KEIP 

Participants falls significantly below the 25th percentile and even more significantly below the 50th 

percentile of the market.

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The need for the KEIP is self-evident. In order to effectively operate and maximize the value of 

a business enterprise, appropriate incentive compensation programs must be provided. This serves to 

align senior management with the Debtors’ key goals and motivates performance that, in this case, will 

ensure a keen focus on safety and drive value. It is also important to note that the KEIP will provide 

KEIP Participants with the opportunity, solely through performance, to achieve market-based 

compensation in a manner that will inure to the benefit of all of the Debtors’ economic stakeholders and 

facilitate the successful conclusion of these Chapter 11 Cases.

C. Implementation of the KEIP Is a Valid Exercise of the Debtors’ Business 

Judgment under Section 363(b)(1) of the Bankruptcy Code

To the extent applicable, the KEIP should also be approved under section 363(b)(1) of the 

Bankruptcy Code. See Alpha, 546 B.R. at 356 (“Incentive payments under a KEIP are governed by the 

more general provisions of § 363(b)(1) . . . .”).

Section 363(b)(1) of the Bankruptcy Code provides, in relevant part, that “[t]he [debtor], after 

notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of 

the estate[.]” 11 U.S.C. § 363(b)(1). Under section 363 of the Bankruptcy Code, a Court may authorize 

a debtor to enter into transactions outside the ordinary course of business where a sound business purpose 

exists for doing so. See In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989). The 

business judgment rule is satisfied where “the directors of a corporation acted on an informed basis, in 

good faith and in the honest belief that the action taken was in the best interests of the company.” See, 

e.g., Official Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.), 

147 B.R. 650, 656 (S.D.N.Y. 1992) (quoting Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985)); see 

also F.D.I.C. v. Castetter, 184 F.3d 1040, 1043 (9th Cir. 1999) (the business judgment rule “requires 

directors to perform their duties in good faith and as an ordinarily prudent person in a like circumstance 

would”). “Where the debtor articulates a reasonable basis for its business decisions (as distinct from a 

decision made arbitrarily or capriciously), courts will generally not entertain objections to the debtor’s 

conduct.” Comm. of Asbestos-Related Litigants v. Johns-Manville Corp. (In re Johns-Manville Corp.), 

60 B.R. 612, 616 (Bankr. S.D.N.Y. 1986). Courts construing California corporate law have consistently 

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declined to interfere with corporate decisions absent a showing of bad faith, self-interest, or gross 

negligence, and have upheld a board’s decisions as long as such decisions were made in good faith. 

Scouler & Co., LLC v. Schwartz, No. 11-CV-06377 NC, 2012 WL 1502762, at *4 (N.D. Cal. Apr. 23, 

2012); Berg & Berg Enters., LLC v. Boyle, 178 Cal. App. 4th 1020, 1046 (2009). 

As demonstrated above, implementation of the KEIP is a proper exercise of the Debtors’ business 

judgment and is in the best interests of the Debtors and their economic stakeholders. In addition, the 

KEIP utilizes similar safety, financial, and operational metrics as those provided for in the 2019 STIP, 

with an incremental emphasis on safety applicable to the most senior officers of the Debtors. The 

Debtors understand that these objectives must remain the key focus for KEIP Participants and,

accordingly, have structured the KEIP to prioritize them. Accordingly, the Debtors request that the Court 

find that adoption of the KEIP is a sound exercise of the Debtors’ business judgment and the facts and 

circumstances of the Chapter 11 Cases warrant approval of the KEIP. 

VI. REQUEST FOR BANKRUPTCY RULE 6004(h) WAIVER

To implement proper incentives, it is important the KEIP become effective promptly. Thus, the 

Debtors request a waiver of the 14-day stay (to the extent such stay applies) of an order authorizing the 

use, sale, or lease of property outside the ordinary course of business under Bankruptcy Rule 6004(h). 

Accordingly, the Debtors request that the Court find that ample cause exists to grant a waiver of 

Bankruptcy Rule 6004(h) and waive the stay to the extent it applies.

VII. NOTICE

Notice of this Motion will be provided to (i) the Office of the United States Trustee for Region 

17 (Attn: Andrew R. Vara, Esq. and Timothy Laffredi, Esq.); (ii) counsel to the Creditors Committee; 

(iii) counsel to the Tort Claimants Committee; (iv) Counsel to the Engineers and Scientists of California 

Local 20; (v) the Securities and Exchange Commission; (vi) the Internal Revenue Service; (vii) the 

Office of the California Attorney General; (viii) the California Public Utilities Commission; (ix) the 

Nuclear Regulatory Commission; (x) the Federal Energy Regulatory Commission; (xi) the Office of the 

United States Attorney for the Northern District of California; (xii) counsel for the agent under the 

Debtors’ debtor in possession financing facility; and (xiii) those persons who have formally appeared in 

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these Chapter 11 Cases and requested service pursuant to Bankruptcy Rule 2002. The Debtors 

respectfully submit that no further notice is required. No previous request for the relief sought herein 

has been made by the Debtors to this or any other Court.

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WHEREFORE the Debtors respectfully request entry of an order granting (i) the relief requested 

herein as a sound exercise of the Debtors’ business judgment and in the best interests of their estates, 

creditors, shareholders, and all other parties interests, and (ii) such other and further relief as the Court 

may deem just and appropriate.

Dated: June 19, 2019

WEIL, GOTSHAL & MANGES LLP

KELLER & BENVENUTTI LLP

By: /s/ Stephen Karotkin

Stephen Karotkin

Attorneys for Debtors

and Debtors in Possession

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