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Exhibit 10.39    
    

 
 

PG&E CORPORATION
  OFFICER GRANTOR TRUST AGREEMENT    
    

        This Officer Grantor Trust Agreement (the "Trust Agreement") is made this 1st day of April 1998, by and between PG&E
CORPORATION ("the Company") and WACHOVIA BANK, N.A. ("the Trustee"). 

Recitals  

	(a)
	WHEREAS,
the Company has adopted the nonqualified deferred compensation Plans and Agreements (the "Arrangements") as listed in Attachment I;

	(b)
	WHEREAS,
the Company has incurred or expects to incur liability under the terms of such Arrangements with respect to the individuals participating in such Arrangements (the
"Participants and Beneficiaries");

	(c)
	WHEREAS,
the Company hereby establishes a Trust (the "Trust") and shall contribute to the Trust assets that shall be held therein, subject to the claims of the Company's creditors in
the event of the Company's Insolvency, as herein defined, until paid to Participants and their Beneficiaries in such manner and at such times as specified in the Arrangements and in this Trust
Agreement;

	(d)
	WHEREAS,
it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Arrangements as an unfunded plan maintained
for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; and

	(e)
	WHEREAS,
it is the intention of the Company to make contributions to the Trust to provide itself with a source of funds (the "Fund") to assist it in satisfying its Liabilities under
the Arrangements. 

        NOW,
THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: 

Section 1. Establishment of The Trust  

	(a)
	The
Trust is intended to be a Grantor Trust, of which the Company is the Grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended, and shall be construed accordingly.

	(b)
	The
Company shall be considered a Grantor for the purposes of the Trust.

	(c)
	The
Trust hereby established shall be irrevocable.

	(d)
	The
Company hereby deposits with the Trustee in the Trust One Thousand Dollars and Zero Cents ($1,000.00) which shall become the principal of the Trust to be held, administered and
disposed of by the Trustee as provided in this Trust Agreement.

	(e)
	The
principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of
Participants and general creditors as herein set forth. Participants and their Beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Arrangements and this Trust Agreement shall be unsecured contractual rights of Participants and their Beneficiaries against the Company. Any assets held by the Trust will be
subject to the claims of the general creditors of the Company under federal and state law in the event the Company is Insolvent, as defined in Section 3(a) herein. 

 
	(f)
	The
Company, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property acceptable to the Trustee in the Trust to augment the
principal to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. Prior to a Change of Control, neither the Trustee nor any Participant or Beneficiary shall have
any right to compel additional deposits.

	(g)
	Upon
a Change of Control, the Company shall, as soon as possible, but in no event longer than thirty (30) days following the occurrence of a Change of Control, as defined
herein, make an irrevocable contribution to the Trust in an amount that is sufficient to fund the Trust in an amount equal to no less than 100% but no more than 120% of the amount necessary to pay
each Participant or Beneficiary the benefits to which Participants or their Beneficiaries would be entitled pursuant to the terms of the Arrangements as of the date on which the Change of Control
occurred. The Company shall also fund an expense reserve for the Trustee in the amount of $225,000.00. 

Section 2. Payments Participants and Their Beneficiaries  

	(a)
	Prior
to a Change of Control, distributions from the Trust shall be made by the Trustee to Participants and Beneficiaries at the direction of the Company. The entitlement of a
Participant or his or her Beneficiaries to benefits under the Arrangements shall be determined by the Company or such party or professional administrator as it shall designate under the Arrangements
as the Company's agent, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Arrangements.

	(b)
	The
Company may make payment of benefits directly to Participants or their Beneficiaries as they become due under the terms of the Arrangements. The Company shall notify the Trustee
of its decision to make payment of benefits directly prior to the time amounts are payable to Participants or their Beneficiaries. In addition, if the principal of the Trust, and any earnings thereon,
are not sufficient to make payments of benefits in accordance with the terms of the Arrangements, the Company shall make the balance of each such payment as it falls due in accordance with the
Arrangements. The Trustee shall notify the Company where principal and earnings are not sufficient. Nothing in this Agreement shall relieve the Company of its liabilities to pay benefits due under the
Arrangements except to the extent such liabilities are met by application of assets of the Trust.

	(c)
	After
a Change of Control, the Company shall continue to make the determination of benefits due to Participants or their Beneficiaries and shall provide the Trustee with a schedule of
benefits due. The Trustee shall pay benefits due in accordance with such schedule; provided however, a Participant or their Beneficiaries may make application to the Trustee for an independent
decision as to the amount or form of their benefits due under the Arrangements. In making any determination required or permitted to be made by the Trustee under this Section, the Trustee shall, in
each such case, reach its own independent determination, in its absolute and sole discretion, as to the Participant's or Beneficiary's entitlement to a payment hereunder. In making its determination,
the Trustee may consult with and make such inquiries of such persons, including the Participant or Beneficiary, the Company, legal counsel, actuaries or other persons, as the Trustee may reasonably
deem necessary. Any reasonable costs incurred by the Trustee in arriving at its determination shall be reimbursed by the Company and, to the extent not paid by the Company within a reasonable time,
shall be charged to the Trust. The Company waives any right to contest any amount paid over by the Trustee hereunder pursuant to a good faith determination made by the Trustee notwithstanding any
claim by or on behalf of the Company (absent a manifest abuse of discretion by the Trustee) that such payments should not be made. 

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	(d)
	The
Trustee agrees that it will not itself institute any action at law or at equity, whether in the nature of an accounting, interpleading action, request for a declaratory judgment
or otherwise, requesting a court or administrative or quasi-judicial body to make the determination required to be made by the Trustee under this Section 2 in the place and stead of the
Trustee. The Trustee may institute an action to collect a contribution due the Trust following a Change of Control or in the event that the Trust should ever experience a short-fall in the
amount of assets necessary to make payments pursuant to the terms of the Arrangements.

	(e)
	In
the event any Participant or his or her Beneficiary is determined to be subject to federal income tax on any amount to the credit of his or her account under any Arrangement prior
to the time of payment hereunder, whether or not due to the establishment of or contributions to this Trust, a portion of such taxable amount equal to the federal, state and local taxes (excluding any
interest or penalties) owed on such taxable amount, shall be distributed by the Trustee as soon thereafter as practicable to such Participant or Beneficiary. The Company shall promptly reimburse the
Trust for any such distribution in an amount certified by the Trustee to be needed for the Participant's benefits. For these purposes, a Participant or Beneficiary shall be deemed to pay state and
local taxes at the highest marginal rate of taxation in the state in which the Participant resides or is employed (or both) where a tax is imposed and federal income taxes at the highest marginal rate
of taxation, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Such distributions shall be at the direction of the Company or
the Trustee, or upon proper application of the Participant or Beneficiary; provided that the actual amount of the distribution shall be determined by the Company prior to a Change of Control and the
Trustee following a Change of Control. An amount to the credit of a Participant's Account shall be determined to be subject to federal income tax upon the earliest of: (a) a final determination
by the United States Internal Revenue Service addressed to the Participant or his Beneficiary which is not appealed to the courts; (b) a final determination by the United States Tax Court or
any other federal court affirming any such determination by the Internal Revenue Service; or (c) an opinion by the Company's tax counsel, addressed to the Company and the Trustee, to the effect
that by reason of Treasury Regulations, amendments to the Internal Revenue Code, published Internal Revenue Service rulings, court decisions or other substantial precedent, amounts to the credit of
Participants hereunder are subject to federal income tax prior to payment. The Company may undertake at its sole expense to defend any tax claims described herein which are asserted by the Internal
Revenue Service against any Participant or Beneficiary, including attorney fees and cost of appeal, and shall have the sole authority to determine whether or not to appeal any determination made by
the Service or by a lower court. The Company also agrees to reimburse any Participant or Beneficiary for any interest or penalties in respect of tax claims hereunder upon receipt of documentation of
same. Any distributions from the Fund to a Participant or Beneficiary under this Section 2(e) shall be applied in accordance with the provisions of the Arrangement to reduce the Company
liabilities to such Participant and/or Beneficiary under the Arrangement with such reductions to be made on a pro-rata basis over the term of benefit payments under the Arrangement;
provided, however, that in no event shall any Participant, Beneficiary or estate of any Participant or Beneficiary have any obligation to return all or any part of such distribution to the Company if
such distribution exceeds benefits payable under an Arrangement. Any reduction in accordance with the foregoing sentence and the Arrangements shall be determined by the Company prior to a Change of
Control. Following a Change of Control, the Company shall continue to make such determination subject to the right of a Participant to petition the Trustee under Section 2(c). 

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Section 3. Trustee Responsibility Regarding Payments To The Trust Beneficiary When The Company Is Insolvent  

	(a)
	The
Trustee shall cease payment of benefits to Participants and their Beneficiaries if the Company is Insolvent. The Company shall be considered "Insolvent" for purposes of this Trust
Agreement if (i) the Company is unable to pay its debts as they become due, or (ii) the Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

	(b)
	At
all times during the continuance of this Trust, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as
set forth below.

	(1)
	The
Board of Directors and the Chief Executive Officer of the Company shall have the duty to inform the Trustee in writing that the Company is Insolvent. If a person claiming to be a
creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or their Beneficiaries.

	(2)
	Unless
the Trustee has actual knowledge that the Company is Insolvent, or has received notice from the Company or a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a determination concerning the Company's solvency.

	(3)
	If
at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Participants or their Beneficiaries and shall hold the assets of the
Trust for the benefit of the Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Participants or their Beneficiaries to pursue their rights as general
creditors of the Company with respect to benefits due under the Arrangements or otherwise.

	(4)
	The
Trustee shall resume the payment of benefits to Participants or their Beneficiaries in accordance with Section 2 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent (or is no longer Insolvent).

	(c)
	Provided
that there are sufficient assets, if the Trustee discontinues the payment of benefits from the    Trust pursuant to Section 3(b) hereof and subsequently
resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Participants or their Beneficiaries under the terms of the Arrangements
for the period of such discontinuance, less the aggregate amount of any payments made to Participants or their Beneficiaries by the Company in lieu of the payments provided for hereunder curing any
such period of discontinuance. 

Section 4. Payments if a Short-Fall of The Trust Assets Occurs  

	(a)
	If
there are not sufficient assets for the payment of benefits pursuant to Section 2 or Section 3(c) hereof and the Company does not otherwise make such payments within
a reasonable time after demand from the Trustee, the Trustee shall make payment of benefits from the Trust to the Participants or their Beneficiaries in the following order of priority:

	(1)
	retired
Participants and their Beneficiaries;

	(2)
	vested
Participants over the age of 55 who were terminated within two years following a Change of Control and their Beneficiaries; 

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	(3)
	vested
active Participants over the age of 55 and their Beneficiaries;

	(4)
	any
other vested active Participants and their Beneficiaries;

	(5)
	vested
former Participants and their Beneficiaries; and

	(6)
	non-vested
Participants and their Beneficiaries

	(b)
	Within
each category set forth under Section 4(a), payments shall be prioritized in the following order:

	(c)
	Upon
receipt of a contribution from the Company necessary to make up for a short-fall in the payments due, the Trustee shall resume payments to all the Participants and
Beneficiaries under the Arrangements. Following a Change of Control, the Trustee shall have the right to compel a contribution to the Trust from the Company to make-up for any
short-fall. 

Section 5. Payments to the Company  

        Except as provided in Sections 3, 8, and 14 hereof, the Company shall have no right or power to direct the Trustee to return to the Company or to divert to others
any of the Trust assets before all payment of benefits have been made to Participants and their Beneficiaries pursuant to the terms of the Arrangements. 

Section 6. Investment Authority  

	(a)
	The
Trustee shall not be liable in discharging its duties hereunder, including without limitation its duty to invest and reinvest the Fund, if it acts for the exclusive benefit of the
Participants and their Beneficiaries, in good faith and as a prudent person would act in accomplishing a similar task and in accordance with the terms of this Trust Agreement and any applicable
federal or state laws, rules or regulations.

	(b)
	Subject
to investment guidelines agreed to in writing from time to time by the Company and the Trustee prior to a Change of Control, the Trustee shall have the power in investing and
reinvesting the Fund in its sole discretion:

	(1)
	To
invest and reinvest in any readily marketable common and preferred stocks, bonds, notes, debentures (including convertible stocks and securities but not including any stock or
security of other than a de minimus amount held in a collective or mutual fund), certificates of deposit or demand or time deposits (including any such deposits with the Trustee) and shares of
investment companies and mutual funds, without being limited to the classes or property in which the Trustees are authorized to invest by any law or any rule of court of any state and without regard
to the proportion any such property may bear to the entire amount of the Fund;

	(2)
	To
commingle for investment purposes all or any portion of the Fund with assets of any other similar trust or trusts established by the Company with the Trustee for the purpose of
safeguarding deferred compensation or retirement income benefits of its employees and/or directors;

	(3)
	To
retain any property at any time received by the Trustee;

	(4)
	To
sell or exchange any property held by it at public or private sale, for cash or on credit, to grant and exercise options for the purchase or exchange thereof, to exercise all
conversion or subscription rights pertaining to any such property and to enter into any covenant or agreement to purchase any property in the future; 

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	(5)
	To
participate in any plan of reorganization, consolidation, merger, combination, liquidation or other similar plan relating to property held by it and to consent to or oppose any
such plan or any action thereunder or any contract, lease, mortgage, purchase, sale or other action by any person;

	(6)
	To
deposit any property held by it with any protective, reorganization or similar committee, to delegate discretionary power thereto, and to pay part of the expenses and compensation
thereof any assessments levied with respect to any such property to deposited;

	(7)
	To
extend the time of payment of any obligation held by it;

	(8)
	To
hold uninvested any moneys received by it, without liability for interest thereon, but only in anticipation of payments due for investments, reinvestments, expenses or
disbursements;

	(9)
	To
exercise all voting or other rights with respect to any property held by it and to grant proxies, discretionary or otherwise;

	(10)
	For
the purposes of the Trust, to borrow money from others, to issue its promissory note or notes therefor, and to secure the repayment thereof by pledging any property held by it;

	(11)
	To
employ suitable contractors and counsel, who may be counsel to the Company or to the Trustee, and to pay their reasonable expenses and compensation from the Fund to the extent not
paid by the Company;

	(12)
	To
register investments in its own name or in the name of a nominee; to hold any investment in bearer form; and to combine certificates representing securities with certificates of
the same issue held by it in other fiduciary capacities or to deposit or to arrange for the deposit of such securities with any depository, even though, when so deposited, such securities may be held
in the name of the nominee of such depository with other securities deposited therewith by other persons, or to deposit or to arrange for the deposit of any securities issued or guaranteed by the
United States government, or any agency or instrumentality thereof, including securities evidenced by book entries rather than by certificates, with the United States Department of the Treasury or a
Federal Reserve Bank, even though, when so deposited, such securities may not be held separate from securities deposited therein by other persons; provided, however, that no securities held in the
Fund shall be deposited with the United States Department of the Treasury or a Federal Reserve Bank or other depository in the same account as any individual property of the Trustee, and provided,
further, that the books and records of the Trustee shall at all times show that all such securities are part of the Trust Fund;

	(13)
	To
settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust, respectively, to commence or defend suits or legal proceedings to
protect any interest of the Trust, and to represent the Trust in all suits or legal proceedings in any court or before any other body or tribunal; provided, however, that the Trustee shall not be
required to take any such action unless it shall have been indemnified by the Company to its reasonable satisfaction against liability or expenses it might incur therefrom;

	(14)
	To
hold and retain policies of life insurance, annuity contracts, and other property of any kind which policies are contributed to the Trust by the Company or any subsidiary of the
Company or are purchased by the Trustee;

	(15)
	To
hold any other class of assets which may be contributed by the Company and that is deemed reasonable by the Trustee, unless expressly prohibited herein;

	(16)
	To
loan any securities at any time held by it to brokers or dealers upon such security as may be deemed advisable, and during the terms of any such loan to permit the loaned
securities to be transferred into the name of and voted by the borrower or others; and 

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	(17)
	Generally,
to do all acts, whether or not expressly authorized, that the Trustee may deem necessary or desirable for the protection of the Fund.

	(c)
	Prior
to a Change of Control, the Company shall have the right, subject to this Section to direct the Trustee with respect to investments.

	(1)
	The
Company may at any time direct the Trustee to segregate all or a portion of the Fund in a separate investment account or accounts and may appoint one or more investment managers
and/or an Investment Committee established by the Company as described in Section 6(d) hereof to direct the investment and reinvestment of each such investment account or accounts. In such
event, the Company shall notify the Trustee of the appointment of each such investment manager and/or Investment Committee. No such investment manager shall be related, directly or indirectly, to the
Company, but members of the Investment Committee may be employees of the Company.

	(2)
	Thereafter,
the Trustee shall make every sale or investment with respect to such investment account as directed in writing by the investment manager or Investment Committee. It shall
be the duty of the Trustee to act strictly in accordance with each direction. The Trustee shall be under no duty to question any such direction of the investment manager or Investment Committee, to
review any securities or other property held in such investment account or accounts acquired by it pursuant to such directions or to make any recommendations to the investment managers or Investment
Committee with respect to such securities or other property.

	(3)
	Notwithstanding
the foregoing, the Trustee, without obtaining prior approval or direction from an investment manager or Investment Committee, shall invest cash balances held by it
from time to time in short term cash equivalents including, but not limited to, through the medium of any short term common, collective or commingled trust fund established and maintained by the
Trustee subject to the instrument establishing such trust fund, U.S. Treasury Bills, commercial paper (including such forms of commercial paper as may be available through the Trustee's Trust
Department), certificates of deposit (including certificates issued by the Trustee in its separate corporate capacity), and similar type securities, with a maturity not to exceed one year; and,
furthermore, sell such short term investments as may be necessary to carry out the instructions of an investment manager or Investment Committee regarding more permanent type investment and directed
distributions.

	(4)
	The
Trustee shall neither be liable nor responsible for any loss resulting to the Fund by reason of any sale or purchase of an investment directed by an investment manager or
Investment Committee nor by reason of the failure to take any action with respect to any investment which was acquired pursuant to any such direction in the absence of further directions of such
investment manager or Investment Committee.

	(5)
	Notwithstanding
anything in this Agreement to the contrary, the Trustee shall be indemnified and saved harmless by the Company from and against any and all personal liability to which
the Trustee may be subjected by carrying out any directions of an investment manager or Investment Committee issued pursuant hereto or for failure to act in the absence of directions of the investment
manager or Investment Committee including all expenses reasonably incurred in its defense in the event the Company fails to provide such defense; provided, however, the Trustee shall not be so
indemnified if it participates knowingly in, or knowingly undertakes to conceal, an act or omission of an investment manager or Investment Committee, having actual knowledge that such act or omission
is a breach of a fiduciary duty; provided further, however, that the Trustee shall not be deemed to have knowingly participated in or knowingly undertaken to conceal an act or omission of an
investment manager or Investment Committee with knowledge that such act or omission was a breach of 

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fiduciary
duty by merely complying with directions of an investment manager or Investment Committee or for failure to act in the absence of directions of an investment manager or Investment Committee.
The Trustee may rely upon any order, certificate, notice, direction or other documentary confirmation purporting to have been issued by the investment manager or Investment Committee which the Trustee
believes to be genuine and to have been issued by the investment manager or Investment Committee. The Trustee shall not be charged with knowledge of the termination of the appointment of any
investment manager or Investment Committee until it receives written notice thereof from the Company. 

	(d)
	Prior
to a Change of Control, the Board of Directors of the Company may appoint an Investment Committee to direct the investment of the Fund. The Investment Committee may exercise any
powers relating to the investment of Trust assets as described in Sections 6 and 7 hereof. The Investment Committee shall exercise its authority by an affirmative action of a majority of members
constituting the Investment Committee, expressed from time to time by a vote at a meeting of the Investment Committee, or in an action in writing signed by all members without a meeting. Prior to a
Change of Control, the Board of Directors of the Company shall have the right to remove and to replace any member of the Investment Committee at any time by notice in writing to that member. Following
a Change of Control, the Company shall have no authority to remove or replace members of the Investment Committee, and any vacancy in the membership of the Investment Committee, created by
resignation, disability, death or otherwise, shall be filled by the vote of a majority of the members of the Investment Committee then in office. Following a Change of Control, the Investment
Committee may, on its own initiative, acquire fiduciary insurance for the benefit of its members at the Company's expense. If for any reason, the Company does not pay the premiums for such insurance,
the Trustee shall pay such premiums out of the Trust assets and seek reimbursement from the Company.

	(e)
	Following
a Change of Control, unless there is then in existence an Investment Committee as described in Section 6(d) above, the Trustee shall have the sole and absolute
discretion in the management of the Trust assets and shall have all the powers set forth under Section 6(b). In investing the Trust assets, the Trustee shall consider:

	(1)
	the
needs of the Arrangements;

	(2)
	the
need for matching of the Trust assets with the liabilities of the Arrangements; and

	(3)
	the
duty of the Trustee to act solely in the best interests of the Participants and their Beneficiaries.

	(f)
	The
Trustee shall have the right, in its sole discretion, to delegate its investment responsibility to an investment manager who may be an affiliate the Trustee. In the event the
Trustee shall exercise this right, the Trustee shall remain, at all times responsible for the acts of an investment manager. The Trustee shall have the right to purchase an insurance policy or an
annuity to fund the benefits of the Arrangements.

	(g)
	The
Company shall have the right at any time, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right
is exercisable by the Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. 

Section 7. Insurance Contracts  

	(a)
	To
the extent that the Trustee is directed by the Company prior to a Change of Control or by the Investment Committee after a Change of Control to invest part or all of the Trust Fund
in insurance contracts, the type and amount thereof shall be specified by the Company. The Trustee shall be under no duty to make inquiry as to the propriety of the type or amount so specified. 

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	(b)
	Each
insurance contract issued shall provide that the Trustee shall be the owner thereof with the power to exercise all rights, privileges, options and elections granted by or
permitted under such contract or under the rules of the insurer. The exercise by the Trustee of any incidents of ownership under any contract shall, prior to a Change of Control, be subject to the
direction of the Company. After a Change of Control, the Trustee shall have all such rights to the extent an Investment Committee had not been established.

	(c)
	The
Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other
than to a successor Trustee, or to loan to any person the proceeds of any borrowing against an insurance policy held in the Trust Fund.

	(d)
	No
insurer shall be deemed to be a party to the Trust and an insurer's obligations shall be measured and determined solely by the terms of contracts and other agreements executed by
the insurer. 

Section 8. Disposition of Income  

	(a)
	Prior
to a Change of Control, all income received by the Trust, net of expenses and taxes, may be returned to the Company or accumulated and reinvested within the Trust at the
direction of the Company. In addition, if, at any time prior to a Change of Control, the value of assets held in the Trust exceeds 100 percent of the amount necessary to pay each Participant or
Beneficiary the benefits to which Participants or their Beneficiaries would be entitled pursuant to the terms of the Arrangements as of the date on which the determination is made, the Trustee shall
return the excess to the Company at the Company's written request.

	(b)
	Following
a Change of Control, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested within the Trust. 

Section 9. Accounting by The Trustee  

        The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such
specific records as shall be agreed upon in writing between the Company and the Trustee within forty-five (45) days following the close of each calendar year and within
forty-five (45) days after the removal or resignation of the Trustee. The Trustee shall deliver to the Company a written account of its administration of the Trust during such year
or during the period from the close of the last preceding year to the date of such removal or resignation setting forth all investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. The Company may approve such account by
an instrument in writing delivered to the Trustee. In the absence of the Company's filing with the Trustee objections to any such account within ninety (90) days after its receipt, the Company
shall be deemed to have so approved such account. In such case, or upon the written approval by the Company of any such account, the Trustee shall, to the extent permitted by law, be discharged from
all liability to the Company for its acts or failures to act described by such account. The foregoing, however, shall not preclude the Trustee from having its accounting settled by a court of
competent jurisdiction. The Trustee shall be entitled to hold and to commingle the assets of the Trust in one Fund for investment purposes but at the direction of the Company prior to a Change of
Control, the Trustee shall create one or more sub-accounts. 

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Section 10. Responsibility of The Trustee  

	(a)
	The
Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like character and with like aims, provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a
direction, request or approval given by the Company which is contemplated by, and in conformity with, the terms of the Arrangements or this Trust and is given in writing by the Company. In the event
of a dispute between the Company and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute, subject, however to Section 2(d) hereof.

	(b)
	The
Company hereby indemnifies the Trustee against losses, liabilities, claims, costs and expenses in connection with the administration of the Trust, unless resulting from the
negligence or misconduct of Trustee. To the extent the Company fails to make any payment on account of an indemnity provided in this paragraph 10(b), in a reasonably timely manner, the Trustee
may obtain payment from the Trust. If the Trustee undertakes or defends any litigation arising in connection with this Trust or to protect a Participant's or Beneficiary's rights under the
Arrangements, the Company agrees to indemnify the Trustee against the Trustee's costs, reasonable expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating
thereto and to be primarily liable for such payments. If the Company does not pay such costs, expenses and liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust.

	(c)
	Prior
to a Change of Control, the Trustee may consult with legal counsel (who may also be counsel for the Company generally) with respect to any of its duties or obligations
hereunder. Following a Change of Control the Trustee shall select independent legal counsel and may consult with counsel or other persons with respect to its duties and with respect to the rights of
Participants or their Beneficiaries under the Arrangements.

	(d)
	The
Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations
hereunder and may rely on any determinations made by such agents and information provided to it by the Company.

	(e)
	The
Trustee shall have, without exclusion, all powers conferred on the Trustee by applicable law, unless expressly provided otherwise herein.

	(f)
	Notwithstanding
any powers granted to the Trustee pursuant to this Trust Agreement or to applicable law, the Trustee shall not have any power that could give this Trust the objective
of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the
Internal Revenue Code. 

Section 11. Compensation and Expenses of The Trustee  

        The Trustee's compensation shall be as agreed in writing from time to time by the Company and the Trustee. The Company shall pay all administrative expenses and
the Trustee's fees and shall promptly reimburse the Trustee for any fees and expenses of its agents. If not so paid, the fees and expenses shall be paid from the Trust. 

Section 12. Resignation and Removal of The Trustee  

	(a)
	Prior
to a Change of Control, the Trustee may resign at any time by written notice to the Company, which shall be effective sixty (60) days after receipt of such notice unless
the Company and the Trustee agree otherwise. Following a Change of Control, the Trustee may resign only after the appointment of a successor Trustee. 

10

 
	(b)
	The
Trustee may be removed by the Company on sixty days (60) days notice or upon shorter notice accepted by the Trustee prior to a Change of Control. Subsequent to a Change of
Control, the Trustee may only be removed by the Company with the consent of a majority of the Participants.

	(c)
	If
the Trustee resigns within two years after a Change of Control, as defined herein, the Company, or if the Company fails to act within a reasonable period of time following such
resignation, the Trustee shall apply to a court of competent jurisdiction for the appointment of a successor trustee or for instructions.

	(d)
	Upon
resignation or removal of the Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be
completed within sixty (60) days after receipt of notice of resignation, removal or transfer, unless the Company extends the time limit.

	(e)
	If
the Trustee resigns or is removed, a successor shall be appointed by the Company, in accordance with Section 13 hereof, by the effective date of resignation or removal under
paragraph(s) (a) or (b) of this section. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for
instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. 

Section l3. Appointment of Successor  

	(a)
	If
the Trustee resigns or is removed in accordance with Section 12 hereof, the Company may appoint, subject to Section 12, any third party national banking association
with a market capitalization exceeding $100,000,000 to replace the Trustee upon resignation or removal. The successor Trustee shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust. The former Trustee shall execute any instrument necessary or reasonably requested by the Company or the successor Trustee to evidence the transfer.

	(b)
	The
successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Section 8 and 9 hereof. The
successor Trustee shall not be responsible for and the Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee
or from any other past event, or any condition existing at the time it becomes successor Trustee. 

Section 14. Amendment or Termination  

	(a)
	This
Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of
the Arrangements or shall make the Trust revocable after it has become irrevocable in accordance with Section 1 hereof.

	(b)
	The
Trust shall not terminate until the date on which Participants and their Beneficiaries have received all of the benefits due to them under the terms and conditions of the
Arrangements. Upon termination of the Trust, the Trust assets shall be returned to the Company.

	(c)
	Upon
written approval of all Participants or Beneficiaries entitled to payment of benefits pursuant to the terms of the Arrangements, the Company may terminate this Trust prior to the
time all benefit payments under the Arrangements have been made. All assets in the Trust at termination shall be returned to the Company.

	(d)
	This
Trust Agreement may not be amended or terminated by the Company for two (2) years following a Change of Control without the written consent of a majority of the
Participants. 

11

 

Section 15. Change of Control  

	(a)
	A
"Change of Control" shall be deemed to have occurred if:

	(1)
	any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, but excluding any benefit plan for employees or any trustee, agent or other
fiduciary for any such plan acting in such person's capacity as such fiduciary), directly or indirectly, becomes the beneficial owner of securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company's then outstanding securities;

	(2)
	during
any two consecutive years, individuals who at the beginning of such a period constitute the Board of Directors of the Company cease for any reason to constitute at least a
majority of the Board of Directors of the Company, unless the election, or the nomination for election by the shareholders of the Company, of each new Director was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office who were Directors at the beginning of the period; or

	(3)
	the
Company has executed and delivered a definitive agreement which would require the consummation of (i) any consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which shares of common stock are converted into cash, securities or other property, other than a merger of the Company in which the holders of
the common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, (ii) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company, or (iii) any plan or proposal for the liquidation or
dissolution of the Company.

	(4)
	the
shareholders of the Company shall have approved (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or
pursuant to which shares of common stock are converted into cash, securities or other property, other than a merger of the Company in which the holders of the common stock immediately prior to the
merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, (ii) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the Company, or (iii) any plan or proposal for the liquidation or dissolution of the Company. 

Notwithstanding
the foregoing, the phrase "Change of Control" shall not apply to any reorganization or merger initiated voluntarily by the Company in which the Company is the continuing surviving
entity. 

        For
purposes of this Section 15(a), the Board of Directors of the Company, by a majority vote, shall have the power to determine on the basis of information known to them
(a) the number of shares beneficially owned by any person, entity or group; (b) whether there exists an agreement, arrangement or understanding with another as to matters referred to in
this Section 15(a); and (c) such other matters with respect to which a determination is necessary under this Section 15(a). 

	(b)
	The
General Counsel of the Company shall have the specific authority to determine whether a Change of Control has transpired under the guidance of this Section 15(a) and shall
be required to give the Trustee notice of a Change of Control. The Trustee shall be entitled to rely upon such notice, but if the Trustee receives notice of a Change of Control from another source,
the Trustee shall make its own independent determination. 

12

 

Section 16. Miscellaneous  

	(a)
	Any
provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.

	(b)
	The
Company hereby represents and warrants that all of the Arrangements have been established, maintained and administered in accordance with all applicable laws, including without
limitation, ERISA. The Company hereby indemnifies and agrees to hold the Trustee harmless from all liabilities, including attorney's fees, relating to or arising out of the establishment, maintenance
and administration of the Arrangements. To the extent the Company does not pay any of such liabilities in a reasonably timely manner, the Trustee may obtain payment from the Trust.

	(c)
	Benefits
payable to Participants and their Beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or equitable process.

	(d)
	This
Trust Agreement shall be governed by and construed in accordance with the laws of North Carolina. 

        IN WITNESS WHEREOF, this Grantor Trust Agreement has been executed on behalf of the parties hereto on the day and year first above
written. 

	PG&E CORPORATION	 	WACHOVIA BANK, N.A.
	

By:	

Bruce R. Worthington
	
 	

By:	
 	

Joe O. Long

	Name:	Bruce R. Worthington	 	Name:	 	Joe O. Long
	Its:	Senior Vice President and General Counsel	 	Its:	 	Senior Vice President
	Chairperson, Employee Benefit Committee	 	 	 	 
	
ATTEST:	
 	

ATTEST:
	

By:	

Linda Y.H. Cheng
	
 	

By:	
 	

John N. Smith

	 	Linda Y.H. Cheng	 	 	 	John N. Smith
	Its:	Assistant Corporate Secretary	 	Its:	 	Assistant Secretary

13

 
 

Attachment I

 
 

PG&E CORPORATION OFFICER GRANTOR TRUST AGREEMENT
  NONQUALIFIED BENEFIT PLANS COVERED    
    

	•
	Pacific
Gas and Electric Company Supplemental Executive Retirement Plan (SERP)

	•
	Pacific
Gas and Electric Company Retirement Excess Benefit Plan

	•
	PG&E
Corporation Deferred Compensation Plan for Officers

	•
	PG&E
Corporation Supplemental Executive Retirement Plan (SERP) 

QuickLinks

Exhibit 10.39

PG&E CORPORATION OFFICER GRANTOR TRUST AGREEMENT

Attachment I

PG&E CORPORATION OFFICER GRANTOR TRUST AGREEMENT NONQUALIFIED BENEFIT PLANS COVEREDQuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.40    
    

 
 

Indemnification    
    

 
 

RESOLUTION OF THE
  BOARD OF DIRECTORS OF
  PG&E CORPORATION    
    

December 18, 1996  

        WHEREAS, the Articles of Incorporation of this corporation permit indemnification of corporate agents in excess of the indemnification provisions of
Section 317 of the California Corporations Code; 

        NOW,
THEREFORE, BE IT RESOLVED THAT: 

        1.    Indemnification of Directors and Officers    

        Each
person who was or is a party or is threatened to be made a party to, or who is involved in any threatened, pending, or completed action, suit, or proceeding, formal or informal,
whether brought in the name of this corporation (the "Corporation") or otherwise, and whether of a civil, criminal, administrative, or investigative nature (hereinafter a "proceeding"), by reason of
the fact that he or
she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the
Corporation (as determined by a committee composed of the General Counsel and the Corporate Secretary) as a director, officer, employee, or agent of another corporation or of a partnership, joint
venture, trust, or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is an alleged action or inaction in an official capacity or in any
other capacity while serving as a director or officer, shall, subject to the terms of any agreement between the Corporation and such a person, be indemnified and held harmless by the Corporation to
the fullest extent permissible under California law and the Corporation's Articles of Incorporation, against all costs, charges, expenses, liabilities, and losses (including, without limitation,
attorneys' fees, judgments, fines, ERISA excise taxes, or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors, and administrators; provided, however, that
(a) the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof)
was authorized by the Board of the Corporation, (b) the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (hereinafter a "third party
proceeding") (or part thereof) other than a proceeding by or in the name of the Corporation to procure a judgment in its favor (hereinafter a "derivative proceeding") only if any settlement of such a
proceeding is approved in writing by the Corporation, and (c) no such person shall be indemnified: 

	(i)
	Except
to the extent that the aggregate of losses to be indemnified exceeds the amount of such losses for which the director or officer is paid pursuant to any
directors' or officers' liability insurance policy maintained by the Corporation;

	(ii)
	On
account of any suit on which judgment is rendered against such person for an accounting of profits made from the purchase or sale by such person of securities of the
Corporation pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto;

	(iii)
	If
a court of competent jurisdiction finally determines that any indemnification hereunder is unlawful;

	(iv)
	For
acts or omissions involving intentional misconduct or knowing and culpable violation of law; 

 

	(v)
	For
acts or omissions that the director or officer believes to be contrary to the best interests of the Corporation or its shareholders, or that involve the absence of
good faith on the part of the director or officer;

	(vi)
	For
any transaction from which the director or officer derived an improper personal benefit;

	(vii)
	For
acts or omissions that show a reckless disregard for the director's or officer's duty to the Corporation or its shareholders in circumstances in which the director
or officer was aware, or should have been aware, in the ordinary course of performing his or her duties, of a risk of serious injury to the Corporation or its shareholders;

	(viii)
	For
acts or omissions that constitute an unexcused pattern of inattention that amount to an abdication of the director's or officer's duties to the Corporation or its
shareholders;

	(ix)
	For
costs, charges, expenses, liabilities, and losses arising under Section 310 or 316 of the California Corporations Code (the "Code"); or

	(x)
	As
to circumstances in which indemnity is expressly prohibited by Section 317 of the Code; 

provided,
however, that the exclusions set forth in clauses (iv) through (x) above shall apply only to indemnification for acts, omissions, or transactions involving breach of duty to
the Corporation and its shareholders. The General Counsel or the Board of Directors of the Corporation shall make the determination as to whether any of the exclusions set forth in clauses
(iv) through (x) above applies in a particular case; 

        2.    Indemnification as a Contract Right    

        The
indemnification rights set forth in this resolution with respect to directors and officers of the Corporation shall be a contract right and shall include the right to be paid by the
Corporation expenses actually and reasonably incurred in defending any proceeding in advance of its final disposition; provided that such advances be conditioned upon delivery to the Corporation of an
undertaking, by or on behalf of the director or officer, to repay all amounts to the Corporation if it shall be ultimately determined that such person is not entitled to be indemnified; 

        3.    Indemnification of Employees and Agents    

        A
person who was or is a party or is threatened to be made a party to or is involved in any proceeding by reason of the fact that he or she is or was an employee or agent of the
Corporation (other than a director or officer) or is or was serving at the request of the Corporation as an employee or agent of another enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is an alleged action or inaction while serving as an employee or agent, may, subject to the terms of any agreement between the Corporation and such person,
be indemnified and held harmless by the Corporation to the fullest extent permissible under California law and the Corporation's Articles of Incorporation, against all costs, charges, expenses,
liabilities, and losses (including, without limitation, attorneys' fees, judgments, fines, ERISA excise taxes, or penalties and amounts paid or to be paid in settlement), reasonably and actually
incurred or suffered by such person in connection therewith (hereinafter "indemnifiable losses"). The immediately preceding sentence is not intended to be and shall not be considered to confer a
contract right on any employee or agent (other than directors and officers) of the Corporation. 

        The
Corporation may also advance to an employee or agent referenced in this paragraph expenses reasonably and actually incurred or suffered in defending any proceeding, or may agree to
provide prospective indemnification of any such person against indemnifiable losses in any third party proceeding prior to the final disposition of such proceeding; provided, however, that
(a) the Corporation may make such advances in any proceeding or agree to provide such indemnification to any such employee or agent in any third party proceeding prior to the final disposition
of such proceeding only if an investigation is conducted with respect to the circumstances of the conduct at 

2

 

issue
and it is determined by a committee composed of the President, the General Counsel, and the Chief Financial Officer or by any person designated by such committee, based on the results of such
investigation, that such person is entitled to indemnification because he or she is or was involved in such proceeding, or is threatened to be involved in such proceeding, as a direct consequence of
(i) the discharge of such person's duties as an employee or agent of the Corporation, or (ii) such person's obedience to the directions of the Corporation, even though unlawful, unless
such person, at the time of obeying such directions, believed them to be unlawful, (b) notwithstanding any determination by such committee or its designee that any such employee or agent is
entitled to any advance or indemnification pursuant to clause (a) above, the Corporation shall have the right to discontinue any advance to such person and to terminate any oral or written
agreement to provide prospective indemnification to such person in the event that it is subsequently determined by the committee or its designee that such person is not entitled to be indemnified
under California law, and (c) any advance to any such employee or agent shall be conditioned upon delivery to the Corporation of an undertaking, by or on behalf of such person, to repay all
amounts to the Corporation if it shall ultimately be determined that such person is not entitled to be indemnified; 

        4.    Right of Directors and Officers to Bring Suit    

        If
a claim by a director or officer under this resolution is not paid in full by the Corporation within 90 days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall also be entitled to be paid
the expense of prosecuting the claim. Neither the failure of the Corporation (including its Board, independent legal counsel, or its shareholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is permissible in the circumstances because he or she has met the applicable standard of conduct, if any, nor an actual determination
by the Corporation before the commencement of such action that the claimant had not met any applicable standard of conduct, shall be a defense to the action or create a presumption for the purpose of
an action that the claimant has not met the applicable standard of conduct; 

        5.    Non-Exclusivity of Rights    

        The
right to indemnification provided by this resolution shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, bylaw, agreement,
vote of shareholders or disinterested directors, or otherwise; 

        6.    Expenses as a Witness    

        To
the extent that any director, officer, employee, or agent of the Corporation is by reason of such position, or position with another entity at the request of the Corporation, a
witness in any action, suit, or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred by him or her on his or her behalf in connection therewith; 

        7.    Indemnity Agreements    

        The
Corporation may enter into agreements with any director, officer, employee, or agent of the Corporation providing for indemnification to the fullest extent permissible under
California law and the Corporation's Articles of Incorporation; 

        8.    Separability    

        Each
and every paragraph, sentence, term, and provision of this resolution is separate and distinct, so that if any paragraph, sentence, term, or provision hereof shall be held to be
invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of any other paragraph, sentence, term, or provision hereof. To the extent
required, any paragraph, sentence, term, or provision of this resolution may be modified by a court of competent jurisdiction to preserve its validity and to provide the claimant with, subject to the
limitations set forth 

3

 

in
this resolution and any agreement between the Corporation and claimant, the broadest indemnification permitted under applicable law; 

        BE
IT FURTHER RESOLVED that this resolution shall apply to all proceedings based on any action or omission occurring on or after November 17, 1995; and 

        BE
IT FURTHER RESOLVED that any repeal or amendment of this resolution shall have prospective effect only, and shall not adversely affect any rights of indemnification of a director or
officer existing at the time of such repeal or amendment with respect to any action or omission occurring prior to such repeal or amendment, and, further, shall not apply to any proceeding,
irrespective of when the proceeding is initiated, arising from the service of such director or officer which occurred prior to such repeal or amendment. 

4

        I,
LINDA Y.H. CHENG, do hereby certify that I am Vice President and Corporate Secretary of PG&E CORPORATION, a corporation organized and existing under the laws of the State of
California; that the above and foregoing is a full, true, and correct copy of a resolution which was duly adopted by the Board of Directors of said corporation at a meeting of said Board which was
duly and regularly called and held at the office of said corporation on December 18, 1996; and that this resolution has never been amended, revoked, or repealed, but is still in full force and
effect. 

        WITNESS
my hand and the seal of said corporation hereunto affixed this 26th day of January, 2005. 

	

 	
 	

/s/  LINDA Y.H. CHENG      
 Linda Y.H. Cheng

Vice President and Corporate Secretary

PG&E CORPORATION
	C O R P O R A T E

S E A L	 	 

QuickLinks

Exhibit 10.40

Indemnification

RESOLUTION OF THE BOARD OF DIRECTORS OF PG&E CORPORATION

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