ex1056.htm


    Exhibit
10.56                          


    


    PG&E
CORPORATION

    OFFICER
SEVERANCE POLICY

    (As
Amended Effective as of January 1, 2009)

     

    1.           Purpose.  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 (“Corporation”) or a
participating employer (“Employer”), their
employment may be terminated at any time, with or without cause.  A
list of Employers is attached hereto as Appendix A.  The Policy, which
was first adopted effective November 1, 1998, provides Officers of the
Corporation and Employers in Officer Compensation Bands I through V (“Officers”) 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 with the approval by
the Senior Human Resources Officer of the Corporation.  For the
avoidance of doubt, the revisions made to this Policy relating to Code Section
409A (defined below), apply to all Officers including those that may be covered
under prior provisions of the Policy as required by Section 6
hereof.

     

    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 Control or Potential Change in
Control.

     

    (a)           Corporation or Employer’s
Obligations.  If the Corporation or an Employer exercises its
right to terminate an Officer’s employment without cause and such termination
does not entitle Officer to payments under Section 3, the Officer shall be given
thirty (30) days’ advance written notice or pay in lieu thereof (which shall be
paid in a lump sum together with the payment described in Section 2(a)(1)
below).  Except as provided in Section 2(b) below, in consideration of
the Officer’s agreement to the obligations described in Section 2(d) below and
to the arbitration provisions described in Section 12 below, the following
payments and benefits shall also be provided to Officer following Officer’s
separation from service (within the meaning of Code Section 409A):2

     

    (1)           A
lump sum severance payment equal to:  1/12 (the sum of the Officer’s
annual base compensation and the Officer’s Short-Term Incentive Plan target
award at the time. 

      

    

    
       

    

    
      	
              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.  If an
      employee becomes a covered Officer under this Policy as a result of a
      promotion, if such Officer was then covered by a severance arrangement
      subject to Section 409A of the Internal Revenue Code of 1986 (“Code
      Section 409A”), the severance benefits under this Policy provided to such
      person shall comply with the time and form of payment provisions of such
      prior severance arrangement, to the extent required by Code Section
      409A.

            


    

     

      
      
        	
                2

              	
                Any payments made hereunder shall
      be less applicable
taxes.

              


      

    

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

       

      of his or
her termination) times (the number of months that Officer was employed by the
Corporation or the Employer (“Severance
Multiple”)); provided, however, that the Severance Multiple shall be no
less than 6, nor more than 24 for Officers in Officer Bands I, II, III, or more
than 18 for Officers in Officer Bands IV or V.  Annual base
compensation shall mean the Officer’s monthly base pay for the month in which
the Officer is given notice of termination, multiplied by 12.  The
payment described in this Section 2(a)(1) shall be made in a single lump sum as
soon as practicable following the date the release of claims described in
Section 2(d)(1) becomes effective, provided that payment shall in no event be
made later than the 15th day of the third month
following the later of the end of the calendar year or the
Corporation’s taxable year in which the Officer’s separation from service
occurs.

    

     

    (2)           Except
as otherwise set forth in the applicable award agreement or as otherwise
required by applicable law, the equity-based 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 months equal
to the Severance Multiple after the date of termination as if the Officer had
remained employed for such period.  Except as otherwise set forth in
the applicable award agreement, 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.  Except as otherwise set forth in the applicable
award agreement, for stock options that vest during a period of months equal to
the Severance Multiple, the Officer shall have the right to exercise such
options at any time within five years after termination, subject to the term of the
options.  Except as otherwise set forth in the applicable award
agreement, any unvested equity-based incentive awards remaining at the end of
such period shall be forfeited;

     

    (3)           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 become
vested under this provision shall be distributed to Officer in accordance with
the Deferred Compensation Plan after such stock units vest;

     

    (4)           For
a period of up to 18 months, the Officer’s COBRA premiums (with such payment
subject to taxation if required or advisable to avoid violating the
nondiscrimination requirements of Code Section 105(h)), if any;

     

    (5)           If
Officer is terminated after serving consecutively for six months in a fiscal
year, Officer shall be entitled to receive a prorated bonus under any short-term
incentive plan in which such Officer participates, at the time such bonus, if any, would otherwise be paid (but in any event
no later than the 15th day of the third month following the later of the
end of the calendar year or the Corporation’s taxable year in which the
Officer’s separation from service occurs or in which the right to such payment
otherwise ceases to be subject to a substantial risk of forfeiture for purposes
of Code Section 409A);

     

    
      
        
        

      

      
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    (6)           To
the extent not theretofore paid or provided, the Officer shall be paid or
provided with 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 or Employer;

     

    (7)           Such
career transition services as the Corporation’s Senior Human Resources Officer
shall determine is appropriate (if any), provided that payment of such services
will only be made to the extent the Officer actually incurs an expense and then
only to the extent incurred and paid within the time limit set forth in Treasury
Regulation Section 1.409A-1(b)(9)(v)(E).  Any such services, to the
extent they are not exempt under Treasury Regulation Section
1.409A-1(b)(9)(v)(A) or (D), shall be structured to comply with the requirements
of Treasuary Regulation Section 1.409A-3(i)(1)(iv) and, if applicable, shall be
subject to the six-month delay described in Code Section 409A(a)(2)(B)(i). 

     

    (8)           All
acts required of the Employer under the Policy may be performed by the
Corporation for itself and the Employer, and the costs of the Policy may be
equitably apportioned by the Administrator among the Corporation and the other
Employers.  The Corporation shall be responsible for making payments
and providing benefits pursuant to this Policy for Officers employed by the
Corporation.  Whenever the Employer is permitted or required under the
terms of the Policy to do or perform any act, matter or thing, it shall be done
and performed by any Officer or employee of the Employer who is thereunto duly
authorized by the board of directors of the Employer.  Each Employer
shall be responsible for making payments and providing benefits pursuant to the
Policy on behalf of its Officers or for reimbursing the Corporation for the cost
of such payments or benefits, as determined by the Corporation in its sole
discretion.  In the event the respective Employer fails to make such
payment or reimbursement, an Officer’s (or other payee’s) sole recourse shall be
against the respective Employer, and not against the Corporation;

     

    (b)           Remedies.  An
Officer shall be entitled to recover damages for late or nonpayment of amounts
to which the Officer is entitled hereunder.  The Officer shall also be
entitled to seek specific performance of the obligations and any other
applicable equitable or injunctive relief.

     

    (c)           Section
2(a) shall not apply in the event that an Officer’s employment is terminated
“for cause.”  Except as used in Section 3 of this Policy, “for cause”
means that the Corporation, in the case of an Officer employed by the
Corporation, or Employer in the case of an Officer employed by an Employer,
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 and/or an
Employer; (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 Section 2(d)
below.  Upon termination “for cause,” the Corporation, its Board of
Directors, Officers, or employees, or its affiliates or subsidiaries shall have
no liability to the Officer other than for accrued salary, 

     

    
      
        
        

      

      
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      vacation
benefits, and any vested rights the Officer may have under the benefit and
compensation plans in which the Officer participates and under the general terms
and conditions of the applicable plan.

    

     

    (d)           Obligations of
Officer.

     

    (1)           Release of
Claims.  There shall be 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, its Board of Directors, Officers, or employees, or its
affiliates or subsidiaries and a covenant not to sue in the form prescribed by
the Administrator, and (2) the expiration of any revocation period set forth in
the release.  The Corporation shall promptly furnish such release to
Officer in connection with the Officer’s separation from service, and such
release must be executed by Officer and become effective during the period set
forth in the release as a condition to Officer receiving the payments and
benefits described in Section 2(a).

     

    (2)           Covenant Not to
Compete.  (i) During the period of Officer’s employment with
the Corporation or its subsidiaries and for a period of months 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.

     

    a.           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(d)(2)a 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 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 or its subsidiaries or affiliates for any commercial
pursuit that could

     

    
      
        
        

      

      
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      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 its subsidiaries or
affiliates, or use in any business competitive with any business of the
Corporation or its subsidiaries or affiliates any trade secret, confidential or
privileged information obtained during his employment with the Corporation or
its subsidiaries or affiliates, 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 within 60 days after Officer incurs such
expenses.

     

    (6)           Remedies.  Upon
Officer’s failure to comply with the provisions of this Section 2(d), 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(d), 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 or Potential Change in
Control.

     

    (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 

     

    
      
        
        

      

      
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      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 

     

    
      
        
        

      

      
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      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.           any
consolidation or merger of the Corporation shall have been consummated 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; or

     

    d.           the
shareholders of the Corporation shall have approved (i)  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
(ii) 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.

     

    (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.

     

    
      
        
        

      

      
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    (8)           “Executive Officer”
shall mean officers of the Corporation at the level of Senior Vice President and
above and the principal executive officer of each Employer.

     

    (9)           “Good Reason” shall
mean any one or more of the following which takes place within the Covered
Period:

     

    a.           A
material diminution in the Executive Officer’s base compensation;

    


    b.           A
material diminution in the Executive Officer’s authority, duties, or
responsibilities;

    


    c.           A
material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Executive Officer is required to report, including a
requirement that the Executive Officer report to a corporate officer or employee
instead of reporting directly to the Board of Directors of the Corporation (in
the case of an Executive Officer reporting to such Board of
Directors);

    


    d.           A
material diminution in the budget over which the Executive Officer retains
authority;

    


    e.           A
material change in the geographic location at which the Executive Officer must
perform the services; or

    


    f.           Any
other action or inaction that constitutes a material breach by the Corporation
of this Policy;

    


    provided,
however, that the Executive Officer must provide notice to the Corporation of
the existence of the applicable condition described in this Section 3(a)(9)
within 90 days of the initial existence of the condition, upon the notice of
which the Corporation shall have 30 days during which it may remedy the
condition and, if remedied, Good Reason shall not exist.

    


    (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.

     

    
      
        
        

      

      
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    (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 Employer, 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, thirty days after the date the Notice
of Termination is received by Executive Officer (provided that the Corporation
may provide Officer with pay in lieu of notice, which shall be paid in a
lump sum together with the payment described in Section 3(c)(1) below); and
(iii) if Executive Officer’s employment is terminated by the Corporation for
Cause (as defined in this Section 3), 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 90 days after occurrence of the event on which
Executive Officer bases his notice of termination and shall provide a
Termination Date of thirty (30) days after the notice of termination is given to
the Corporation (provided that the Corporation may provide Officer with pay in
lieu of notice, which shall be paid in a lump sum together with the payment
described in Section 3(c)(1) below).

     

    (c)           Corporation’s
Obligations.  If Executive Officer separates from service due
to an Involuntary Termination within the Covered Period, then the Corporation
shall provide Executive Officer the following benefits:

     

    
      
        
        

      

      
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    (1)           The
Corporation shall pay to the Executive Officer a lump sum in cash within thirty
(30) days after the Executive Officer’s separation from service:

     

    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)           The
vesting of any benefits conditioned upon continued future employment shall
accelerate in full upon the Executive Officer’s separation from service and
shall be delivered or paid in accordance with the terms thereof.

     

    (3)           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 

     

    
      
        
        

      

      
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    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.

    


    All Tax Restoration Payments shall be paid no later than the calendar year
next following the calendar year in which the Executive Officer remits the
related taxes.

    


    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 Section2(a) and
Section 3 (except as otherwise provided in Section 2(a)(5)) shall not be subject
to offset, counterclaim, recoupment, defense or other claim, right or action
which the Corporation or an Employer 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 

     

    
      
        
        

      

      
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    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.

     

    
      
        
        

      

      
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    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.  Such expenses, costs and fees, if payable to
Officer, shall be paid  within 60 days after they are
incurred.  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.

     

    13.           Reimbursements
and In-Kind Benefits.  Notwithstanding any other provision of this
Policy, all reimbursements and in-kind benefits provided under this Policy shall
be made or provided in accordance with the requirements of Code Section 409A,
including, where applicable, the requirement that (i) the amount of expenses
eligible for reimbursement and the provision of benefits in kind during a
calendar year shall not affect the expenses eligible for reimbursement or the
provision of in-kind benefits in any other calendar year; (ii) the reimbursement
for an eligible expense will be made on or before the last day of the calendar
year following the calendar year in which the expense is incurred (or by such
earlier time set forth in this Policy); (iii) the right to reimbursement or
right to in-kind benefit is not subject to liquidation or exchange for another
benefit; and (iv) each reimbursement payment or provision of in-kind benefit
shall be one of a series of separate payments (and each shall be construed as a
separate identified payment) for purposes of Code Section 409A.

     

    14.           Separate
Payments.  Each payment and benefit under this Policy shall be a
“separate payment” for purposes of Code Section 409A.

     

    

      
        
          
             

          

           


        

        
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    IN WITNESS WHEREOF, PG&E
Corporation has caused this Plan to be executed by its Senior Vice President,
Human Resources, at the direction of the Chief Executive Officer, on December
31, 2008.

    
      	
            	 	PG&E
      CORPORATION
	 	 	 
	 	 	 
	                                                        	 By:  
      	JOHN
      R. SIMON
	
               
      

            	 	
              John
      R. Simon

              Senior
      Vice President, Human Resources

            


    

     

     

    
      
        
          
             

             

          

           


        

        
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    APPENDIX
A

     

    PARTICIPATING
EMPLOYERS

     

    


    PG&E
Corporation

    Pacific
Gas and Electric Company

    PG&E
Corporation Support Services, Inc.