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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): October 14, 1996
-----------------
Exact name of
Commission Registrant IRS Employer
File as specified State of Identification
Number in its charter Incorporation Number
- ---------- -------------- -------------- --------------
1-11439 ENOVA CORPORATION California 33-0643023
1-3779 SAN DIEGO GAS &
ELECTRIC COMPANY California 95-1184800
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101 ASH STREET, SAN DIEGO, CALIFORNIA 92101
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(Address of principal executive offices) (Zip Code)
(619) 696-2000
Registrant's telephone number, including area code-----------------------
- -------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
FORM 8-K
Item 5. Other Events
On October 14, 1996, Enova Corporation and Pacific
Enterprises jointly issued a press release, announcing an
agreement for the combination of the two companies. The
release is attached as Exhibit 99.1 and is incorporated
herein by reference.
As a result of the combination, which was unanimously
approved by the Boards of Directors of both companies, (i)
each outstanding share of common stock of Enova Corporation
will be converted into one share of common stock of the new
company, (ii) each outstanding share of common stock of
Pacific Enterprises will be converted into 1.5038 shares of
the new company's common stock and (iii) the preferred stock
and preference stock of Pacific Enterprises; San Diego Gas &
Electric, Enova Corporation's operating utility subsidiary;
and Southern California Gas Company, Pacific Enterprises'
operating utility subsidiary, will remain outstanding.
Consummation of the combination is conditional upon, among
other things, the approvals of each company's shareholders,
the California Public Utilities Commission and various other
regulatory bodies. The name of the new company will be
announced at a later date.
Completion of the combination is expected by the end of
1997. Richard Farman, president and chief operating officer
of Pacific Enterprises, will be the chairman and CEO of the
new company and Stephen Baum, president and CEO of Enova,
will be vice-chairman, president and chief operating officer
of the new company. Mr. Baum will become CEO of the new
company within two years of the combination's effective date
and will add the title of chairman by September 2000, when
Mr. Farman retires. Warren Mitchell, president of Southern
California Gas Company, will become president and the
principal executive officer of the combined companies'
regulated operations and Donald Felsinger, president of San
Diego Gas & Electric, will become president and the
principal executive officer of the combined companies'
unregulated operations. Effective with consummation of the
combination, these four individuals' employment will be
subject to employment contracts, copies of which are
attached as Exhibits 10.2-10.5 and are incorporated herein
by reference. Thomas Page, Chairman of Enova and of San
Diego Gas & Electric, will retire at the end of December
1997, and Willis Wood, Chairman and CEO of Pacific
Enterprises, will retire upon completion of the transaction.
The descriptions of the combination agreement and the
employment agreements set forth above do not purport to be
complete and are qualified in there entirety by the
provisions of the combination agreement and the employment
agreements. The combination agreement is attached as
Exhibit 10.1 and its terms are incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
10.1 Agreement and Plan of Merger and Reorganization, dated
as of October 12, 1996, among Enova Corporation,
Pacific Enterprises, Mineral Energy Company, G Mineral
Energy Sub and B Mineral Energy Sub.
10.2 Employment contract, dated as of October 12, 1996
between Mineral Energy Company and Stephen L. Baum.
10.3 Employment contract, dated as of October 12, 1996
between Mineral Energy Company and Richard D. Farman.
10.4 Employment contract, dated as of October 12, 1996
between Mineral Energy Company and Donald E. Felsinger.
10.5 Employment contract, dated as of October 12, 1996
between Mineral Energy Company and Warren I. Mitchell.
99.1 Press release dated October 14, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENOVA CORPORATION
and
SAN DIEGO GAS & ELECTRIC COMPANY
(Registrants)
Date: October 15, 1996 By: /s/ F.H. Ault
---------------- --------------------------
F.H. Ault
Vice President and Controller
Exhibit 10.1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
ENOVA CORPORATION,
PACIFIC ENTERPRISES,
MINERAL ENERGY COMPANY,
G MINERAL ENERGY SUB
AND
B MINERAL ENERGY SUB
DATED AS OF OCTOBER 12, 1996
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION, dated as of October 12, 1996 (this
"Agreement"), among Enova Corporation, a California
corporation ("Enova"; provided, however, that references
in Article IV hereof to "Enova" prior to January 1, 1996
shall be deemed references to San Diego Gas & Electric, a
California corporation and, since January 1, 1996, a
wholly owned subsidiary of Enova ("Enova Sub")), Pacific
Enterprises, a California corporation ("Pacific"), Mineral
Energy Company, a California corporation, 50% of whose
outstanding capital stock is owned by Enova and 50% of
whose outstanding capital stock is owned by Pacific (the
"Company"), G Mineral Energy Sub, a California corporation
and wholly owned subsidiary of the Company ("Newco Enova
Sub"), and B Mineral Energy Sub , a California corporation
and wholly owned subsidiary of the Company ("Newco Pacific
Sub"),
W I T N E S S E T H:
WHEREAS, Enova and Pacific have each determined that, to
promote the best interests of its shareholders and
employees and those customers and communities served by
its utility subsidiaries, it wishes to compete
aggressively in the rapidly evolving energy marketplace
and that it may best do so through a combination with the
other party, and therefore Pacific and Enova have each
determined to engage in a business combination as peer
firms in a strategic merger of equals and, accordingly,
have formed the Company to participate in such business
combination;
WHEREAS, in furtherance thereof the
respective Boards of Directors of Enova, Pacific, the
Company, Newco Enova Sub and Newco Pacific Sub have
approved the consummation of the reorganization provided
for in this Agreement, pursuant to which Newco Enova Sub
and Newco Pacific Sub will merge with and into Enova and
Pacific, respectively, all in accordance with the
California General Corporation Law (the "California Law")
and on the terms and conditions set forth in this
Agreement (such transactions are referred to herein
individually as the "Enova Merger" and the "Pacific
Merger", respectively, and collectively as the "Mergers"),
as a result of which the common shareholders of Enova and
Pacific will together own all of the outstanding shares of
common stock of the Company (which will, in turn, own all
of the outstanding shares of common stock of Pacific and
Enova) and each share of each other class of capital stock
of Enova and Pacific shall be unaffected and remain
outstanding;
WHEREAS, Pacific and Enova contemplate forming a joint
venture (the "Energy Marketing Joint Venture") to pursue
natural gas and electricity marketing opportunities and
provide energy management and related energy services,
which joint venture will be governed by an agreement
containing substantially the terms set forth in Exhibit A
hereto (the "Energy Marketing Joint Venture Agreement");
WHEREAS, for federal income tax purposes, it is intended
that the Mergers shall collectively qualify as a
transaction described in Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that
the shareholders of Enova and Pacific will recognize no
gain or loss for federal income tax purposes as a result
of the consummation of the Mergers, except with respect to
any cash received; and
WHEREAS, for accounting purposes, it is intended that the
transactions contemplated hereby shall be accounted for as
a pooling of interests under United States generally
accepted accounting principles applied on a consistent
basis ("GAAP");
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGERS
SECTION 1.01. The Mergers. Upon the terms
and subject to the conditions of this Agreement:
(a)At the Enova Effective Time, Newco Enova
Sub shall be merged with and into Enova (the "Enova
Merger") in accordance with California Law. Enova shall
be the surviving corporation in the Enova Merger and shall
continue its corporate existence under the laws of the
State of California. As a result of the Enova Merger,
Enova shall become a subsidiary of the Company. The
effects and the consequences of the Enova Merger shall be
as set forth in Section 1.03(a).
(b)At the Pacific Effective Time, Newco
Pacific Sub shall be merged with and into Pacific (the
"Pacific Merger") in accordance with California Law.
Pacific shall be the surviving corporation in the Pacific
Merger and shall continue its corporate existence under
the laws of the State of California. As a result of the
Pacific Merger, Pacific shall become a subsidiary of the
Company. The effects and the consequences of the Pacific
Merger shall be as set forth in Section 1.03(b).
SECTION 1.02. Effective Time of the
Mergers; Closing. (a) On the Closing Date, (i) with
respect to the Enova Merger, the parties thereto shall
file the merger agreement in substantially the form
attached as Exhibit 1.02(a)(i) with the Secretary of State
of the State of California in such form as required by,
and executed in accordance with the relevant provisions
of, California Law (the "Enova Merger Agreement"), and
(ii) with respect to the Pacific Merger, the parties
thereto shall file the merger agreement in substantially
the form attached as Exhibit 1.02(a)(ii) with the
Secretary of State of the State of California, in such
form as required by, and executed in accordance with the
relevant provisions of, California Law (the "Pacific
Merger Agreement"). The Enova Merger shall become
effective at the time specified in the Enova Merger
Agreement (the "Enova Effective Time"), and the Pacific
Merger shall become effective at the time specified in the
Pacific Merger Agreement (the "Pacific Effective Time").
The effective time specified in the Enova Merger Agreement
shall also be the effective time specified in the Pacific
Merger Agreement. The term "Effective Time" shall mean
the time and date of the Pacific Effective Time.
(b)The closing (the "Closing") of the
Mergers shall take place at the offices of Shearman &
Sterling, 777 South Figueroa Street, 34th Floor, Los
Angeles, California 90017-5418 at 10:00 A.M., local time,
on the second business day immediately following the date
on which the last of the conditions set forth in Article
VII hereof is fulfilled or waived, or at such other time
and date and place as Pacific and Enova shall mutually
agree (the "Closing Date").
SECTION 1.03. Effects of the Mergers. (a)
At the Enova Effective Time, (i) the Articles of
Incorporation of Enova, as in effect immediately prior to
the Enova Effective Time, shall be the Articles of
Incorporation of Enova as the surviving corporation in the
Enova Merger until thereafter amended as provided by law
and such Articles of Incorporation, and (ii) the Bylaws of
Enova, as in effect immediately prior to the Enova
Effective Time, shall be the Bylaws of Enova as the
surviving corporation in the Enova Merger, until
thereafter amended as provided by law, the Articles of
Incorporation of the surviving corporation and such
Bylaws. Subject to the foregoing, the additional effects
of the Enova Merger shall be as provided in the applicable
provisions of California Law.
(b)At the Pacific Effective Time, (i) the
Articles of Incorporation of Pacific, as in effect
immediately prior to the Pacific Effective Time, shall be
the Articles of Incorporation of Pacific as the surviving
corporation in the Pacific Merger until thereafter amended
as provided by law and such Articles of Incorporation, and
(ii) the Bylaws of Pacific, as in effect immediately prior
to the Pacific Effective Time shall be the Bylaws of
Pacific as the surviving corporation in the Pacific
Merger, until thereafter amended as provided by law, the
Articles of Incorporation of the surviving corporation and
such Bylaws. Subject to the foregoing, the additional
effects of the Pacific Merger shall be as provided in the
applicable provisions of California Law.
(c)The parties shall take all appropriate
action so that at the Effective Time, (i) the Articles of
Incorporation of the Company shall be in such form as
shall mutually be agreed to by Pacific and Enova prior to
the Effective Time, and (ii) the Bylaws of the Company
shall be in such form as shall mutually be agreed to by
Pacific and Enova prior to the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities.
(a) At the Enova Effective Time, by virtue of the Enova
Merger and without any action on the part of any holder of
any capital stock of Enova or Newco Enova Sub:
(i)Cancellation of Certain
Enova Common Stock. Each share of Common Stock, no
par value, of Enova (the "Enova Common Stock") that is
owned by subsidiaries of Enova or by Pacific, the
Company or any of their subsidiaries shall be cancelled
and cease to exist.
(ii)Conversion of Enova Common Stock. Each issued and
outstanding share of Enova Common Stock (other than shares
cancelled pursuant to Section 2.01(a)(i) and Enova
Dissenting Shares) shall be converted into the right to
receive 1.00 (the "Enova Ratio") fully paid and non-
assessable share of Common Stock, no par value, of the
Company (the "Company Common Stock"). Upon such
conversion, each holder of a certificate formerly
representing any such shares shall cease to have any
rights with respect thereto, except the right to receive
the shares of Company Common Stock to be issued in
consideration therefor upon the surrender of such
certificate in accordance with Section 2.02.
(iii)Conversion of Newco
Enova Sub Common Stock. The aggregate of all shares of
the capital stock of Newco Enova Sub issued and
outstanding immediately prior to the Enova Effective Time
shall be converted into the right to receive that number
of shares of Enova Common Stock which shall be equivalent
to the aggregate number of shares of Enova Common Stock
outstanding immediately prior to the Enova Effective
Time.
(b)At the Pacific Effective Time, by virtue
of the Pacific Merger and without any action on the part
of any holder of any capital stock of Pacific or Newco
Pacific Sub:
(i)Cancellation of Certain Pacific Common Stock. Each
share of Common Stock of Pacific (the "Pacific Common
Stock"), including any associated right (the "Pacific
Right") to receive or purchase shares of the capital stock
of Pacific pursuant to the terms of a Rights Agreement,
dated as of March 7, 1989 between Pacific and Chemical
Bank, as successor Rights Agent thereunder (the "Pacific
Rights Agreement"), that is owned by subsidiaries of
Pacific or by Enova, the Company or any of their
subsidiaries shall be cancelled and cease to exist. All
references in this Agreement to Pacific Common Stock
shall be deemed to include the associated Pacific Rights.
(ii)Conversion of Pacific Common Stock. Each issued and
outstanding share of Pacific Common Stock (other than
shares cancelled pursuant to Section 2.01(b)(i) and
Pacific Dissenting Shares) shall be converted into the
right to receive 1.5038 (the "Pacific Ratio", and
together with the Enova Ratio, the "Exchange Ratios")
shares of fully paid and non-assessable shares of Company
Common Stock. Upon such conversion, each holder of a
certificate formerly representing any such shares shall
cease to have any rights with respect thereto, except the
right to receive the shares of Company Common Stock to be
issued in consideration therefor upon the surrender of
such certificate in accordance with Section 2.02.
(iii)Conversion of Newco Pacific Sub Common Stock. The
aggregate of all shares of the capital stock of Newco
Pacific Sub issued and outstanding immediately prior to
the Pacific Effective Time shall be converted into the
right to receive that number of shares of Pacific Common
Stock which shall be equivalent to the aggregate number
of shares of Pacific Common Stock outstanding immediately
prior to the Pacific Effective Time. (iv)Pacific
Preferred Stock to Remain Unchanged. All issued and
outstanding shares of Class A Preferred Stock of Pacific
(the "Pacific Class A Preferred Stock") and of Preferred
Stock of Pacific (the "Pacific Preferred Stock") shall be
unchanged and shall remain outstanding after the Pacific
Merger.
(c)At the Effective Time, by virtue of the Mergers and
without any action on the part of any holder of any
capital stock of Enova, Pacific or the Company, each share
of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall be cancelled, and no
consideration shall be delivered in exchange therefor.
SECTION 2.02. Exchange of Certificates.
(a)Deposit with Exchange Agent. As soon as
practicable after the Effective Time, the Company shall
deposit with such bank or trust company mutually agreeable
to Pacific and Enova (the "Exchange Agent"), certificates
representing shares of Company Common Stock required to
effect the exchanges referred to in Sections 2.01(a)(ii)
and (b)(ii).
(b)Exchange Procedures. As soon as
practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time
represented outstanding shares of Enova Common Stock or
Pacific Common Stock (the "Certificates") that were
converted (the "Converted Shares") into the right to
receive shares of Company Common Stock (the "Company
Shares") pursuant to Section 2.01, (i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates
shall pass, only upon actual delivery of the Certificates
to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange
for certificates representing Company Shares. Upon
surrender of a Certificate to the Exchange Agent for
cancellation (or to such other agent or agents as may be
appointed by agreement of Pacific and Enova), together
with a duly executed letter of transmittal and such other
documents as the Exchange Agent shall require, the holder
of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number
of whole Company Shares which such holder has the right to
receive pursuant to the provisions of this Article II. In
the event of a transfer of ownership of Converted Shares
which is not registered in the transfer records of Enova
or Pacific, as the case may be, a certificate representing
the proper number of Company Shares may be issued to a
transferee if the Certificate representing such Converted
Shares is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such
transfer and by evidence satisfactory to the Exchange
Agent that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section
2.02, each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive
upon such surrender the certificate representing Company
Shares and cash in lieu of any fractional shares of
Company Common Stock ("Merger Consideration") as
contemplated by this Section 2.02.
(c)Distributions with Respect to
Unexchanged Shares. No dividends or other distributions
declared or made after the Effective Time with respect to
Company Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered
Certificate with respect to the Company Shares represented
thereby and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section
2.02(d) until the holder of record of such Certificate
shall surrender such Certificate. Subject to the effect
of unclaimed property, escheat and other applicable laws,
following surrender of any such Certificate, there shall
be paid to the record holder of the certificates
representing whole Company Shares issued in exchange
therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a
fractional share of Company Common Stock to which such
holder is entitled pursuant to Section 2.02(d) and the
amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with
respect to such whole Company Shares and (ii) at the
appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time
but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole Company
Shares, as the case may be.
(d)No Fractional Securities.
Notwithstanding any other provision of this Agreement, no
certificates or scrip representing fractional shares of
Company Common Stock shall be issued upon the surrender
for exchange of Certificates and such fractional shares
shall not entitle the owner thereof to vote or to any
other rights of a holder of Company Common Stock. Each
holder of a fractional share interest shall be paid an
amount in cash representing such holder's proportionate
interest in the net proceeds from the sale by the Exchange
Agent on behalf of all such holders of the aggregate of
the fractions of shares of Company Common Stock that would
otherwise be issued to such holders ("Excess Shares").
The sale of the Excess Shares by the Exchange Agent shall
be executed on the New York Stock Exchange, Inc. (the
"NYSE") through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable.
Until the net proceeds of such sale or sales have been
distributed to the former holders of Pacific Common Stock
and Enova Common Stock, the Company will cause the
Exchange Agent to hold such proceeds in trust for the
holders of such fractional share interests (the "Shares
Trust"). The Company shall pay all commissions, transfer
taxes and other out-of-pocket transaction costs, including
the expenses and compensation of the Exchange Agent,
incurred in connection with such sale of the Excess
Shares. The Exchange Agent shall determine the portion of
the Shares Trust to which each former holder of Pacific
Common Stock or Enova Common Stock shall be entitled, if
any, by multiplying the amount of the aggregate net
proceeds comprising the Shares Trust by a fraction the
numerator of which is the amount of the fractional shares
of Company Common Stock to which such former holder of
Pacific Common Stock or Enova Common Stock is entitled and
the denominator of which is the aggregate amount of
fractional share interests to which all holders of Company
Common Stock are entitled. As soon as practicable after
the determination of the amount of cash, if any, to be
paid to former holders of Pacific Common Stock and Enova
Common Stock in lieu of any fractional shares of Company
Common Stock interests, the Exchange Agent shall make
available such amounts to such former holders of Pacific
Common Stock and Enova Common Stock without interest.
(e)Closing of Transfer Books. From and
after the Enova Effective Time or the Pacific Effective
Time, as the case may be, the stock transfer books of
Enova and Pacific shall be closed and no transfer of any
capital stock of Enova or Pacific shall thereafter be
made. If, after the Effective Time, Certificates are
presented to the Company, they shall be cancelled and
exchanged for certificates representing the appropriate
Company Shares as provided in Section 2.02.
(f)Termination of Exchange Agent. Any
certificates representing Company Shares deposited with
the Exchange Agent pursuant to Section 2.02(a) and not
exchanged within one year after the Effective Time
pursuant to this Section 2.02 shall be returned by the
Exchange Agent to the Company, which shall thereafter act
as Exchange Agent. All funds held by the Exchange Agent
for payment to the holders of unsurrendered Certificates
and unclaimed at the end of one year from the Effective
Time shall be returned to the Company, after which time
any holder of unsurrendered Certificates shall look as a
general creditor only to the Company for payment of such
funds to which such holder may be due, subject to
applicable law. The Company shall not be liable to any
person for such shares or funds delivered to a public
official pursuant to any applicable unclaimed property,
escheat or similar law.
SECTION 2.03. Dissenting Shares. (a)
Notwithstanding any provision of this Agreement to the
contrary, any shares of capital stock of Pacific or Enova
held by a holder who has exercised dissenters' rights for
such shares in accordance with California Law and who, as
of the Effective Time, has not effectively withdrawn or
lost such dissenters' rights ("Pacific Dissenting Shares"
or "Enova Dissenting Shares", as the case may be, and
collectively "Dissenting Shares"), shall not be converted
into or represent a right to receive Company Common Stock
in the Pacific Merger (in the case of Pacific Dissenting
Shares) or in the Enova Merger (in the case of Enova
Dissenting Shares), but the holder thereof shall only be
entitled to such rights as are granted by California Law.
(b)Notwithstanding the provisions of subsection (a), if
any holder of Dissenting Shares shall effectively withdraw
or lose (through failure to perfect or otherwise) his
dissenters' rights, then, as of the later of the Pacific
Effective Time or the Enova Effective Time, as applicable,
or the occurrence of such event, such holder's shares
shall automatically be converted into and represent only
the right to receive the applicable Merger Consideration,
without interest thereon, upon surrender of the
certificate or certificates representing such Dissenting
Shares.
(c)Enova shall give Pacific and Pacific
shall give Enova (i) prompt notice of any written demands
received pursuant to Section 1301 of California Law,
withdrawals of such demands, and any other instruments
served pursuant to California Law and received thereby and
(ii) the opportunity to participate in all negotiations
and proceedings with respect to such demands. Neither
Pacific nor Enova shall, except with the prior written
consent of the other, voluntarily make any payment with
respect to any such demands or offer to settle or settle
any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PACIFIC
Pacific represents and warrants to Enova as
follows:
SECTION 3.01. Organization and
Qualification. Except as set forth in Section 3.01 of the
Pacific Disclosure Schedule, each of Pacific and its
subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its state
of incorporation, has all requisite power and authority,
and has been duly authorized by all necessary approvals
and orders, to own, lease and operate its assets and
properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its assets and
properties makes such qualification necessary other than
in such jurisdictions where the failure to be so qualified
and in good standing will not, when taken together with
all other such failures, have a material adverse effect on
the operations, properties, assets, financial condition or
the results of operations of Pacific and its subsidiaries
taken as a whole or on the consummation of the
transactions contemplated by this Agreement (any such
material adverse effect being hereinafter referred to as a
"Pacific Material Adverse Effect") or a material adverse
effect on the ability of the Energy Marketing Joint
Venture to achieve the business objectives contemplated by
the Summary of Terms attached as Exhibit A (any such
material adverse effect being hereinafter referred to as a
"Joint Venture Material Adverse Effect").
SECTION 3.02.
Subsidiaries. Section 3.02 of the Pacific Disclosure
Schedule sets forth a description as of the date hereof of
all subsidiaries and joint ventures of Pacific, including
the name of each such entity and Pacific's interest
therein, and, as to each subsidiary or joint venture
identified as a "Material Pacific Entity" in Section 3.02
of the Pacific Disclosure Schedule, a brief description of
the principal line or lines of business conducted by each
such entity. Except as set forth in Section 3.02 of the
Pacific Disclosure Schedule, none of such entities is a
"public utility company", a "holding company", a
"subsidiary company" or an "affiliate" of any public
utility company within the meaning of Section 2(a)(5),
2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act"),
respectively, or a "public utility" within the meaning of
Section 201(e) of the Federal Power Act (the "Power Act").
Except as set forth in Section 3.02 of the Pacific
Disclosure Schedule, all of the issued and outstanding
shares of capital stock of each subsidiary of Pacific are
validly issued, fully paid, nonassessable and free of
preemptive rights, are owned directly or indirectly by
Pacific free and clear of any liens, claims, encumbrances,
security interests, equities, charges and options of any
nature whatsoever ("Encumbrances") and there are no
outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange
under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of its capital stock or obligating it to
grant, extend or enter into any such agreement or
commitment.
SECTION 3.03. Capitalization.
(a)Pacific. The authorized capital stock
of Pacific consists of (i) 600,000,000 shares of Pacific
Common Stock, (ii) 5,000,000 shares of Pacific Class A
Preferred Stock and (iii) 10,000,000 shares of Pacific
Preferred Stock. As of the close of business on September
30, 1996, there were issued and outstanding (i) 85,034,885
shares of Pacific Common Stock, (ii) no shares of Pacific
Class A Preferred Stock and (iii) 800,253 shares of
Pacific Preferred Stock consisting of 300,000 shares of a
series of $4.50 dividend preferred stock, 100,000 shares
of a series of $4.40 dividend preferred stock, 200,000
shares of a series of $4.75 dividend preferred stock,
200,000 shares of a series of $4.36 dividend preferred
stock and 253 shares of a series of $4.75 dividend
preferred stock (convertible on or before October 31,
1996). All of the issued and outstanding shares of the
capital stock of Pacific are validly issued, fully paid,
nonassessable and free of preemptive rights. Except as
set forth in Section 3.03(a) of the Pacific Disclosure
Schedule, as of the date hereof, there are no outstanding
subscriptions, options, calls, contracts, voting trusts,
proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including
any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating
Pacific or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of Pacific or obligating
Pacific or any of its subsidiaries to grant, extend or
enter into any such agreement or commitment, other than
under the Pacific Rights Agreement.
(b)Pacific Sub. The authorized capital stock of
Southern California Gas Company, a California corporation
all of whose issued and outstanding common stock is owned
by Pacific ("Pacific Sub"), consists of (i) 100,000,000
shares of common stock, no par value (the "Pacific Sub
Common Stock"), and (ii) shares of preferred and
preference stock (collectively the "Pacific Sub Preferred
Stock") consisting of (A) 160,000 shares of Preferred
Stock, par value $25 each (the "Pacific Sub $25
Preferred"), (B) 840,000 shares of Preferred Stock, Series
A, par value $25 each (the "Pacific Sub Series A
Preferred"), (C) 5,000,000 shares of Series Preferred
Stock, no par value (the "Pacific Sub Series Preferred"),
and (D) 5,000,000 shares of Preference Stock (the "Pacific
Sub Preference Stock"). As of the close of business on
September 30, 1996, there were issued and outstanding
91,300,000 shares of Pacific Sub Common Stock, 79,011
shares of Pacific Sub $25 Preferred, 783,036 shares of
Pacific Sub Series A Preferred, 3,000,000 shares of
Pacific Sub Series Preferred and no shares of Pacific Sub
Preference Stock. All of the issued and outstanding
shares of the capital stock of Pacific Sub are validly
issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in Section 3.03(b) of the
Pacific Disclosure Schedule, as of the date hereof, there
are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange
under any outstanding security, instrument or other
agreement, obligating Pacific or any of its subsidiaries
to issue, deliver or sell, or cause to be issued,
delivered or sold, the capital stock of Pacific Sub or
obligating Pacific or any of its subsidiaries to grant,
extend or enter into any such agreement or commitment.
SECTION 3.04. Authority; Non-
Contravention; Statutory Approvals; Compliance.
(a)Authority. Pacific has all requisite power and
authority to enter into this Agreement and the Energy
Marketing Joint Venture Agreement and, subject to the
applicable Pacific Shareholders' Approval and the
applicable Pacific Required Statutory Approvals, to
consummate the transactions contemplated hereby or
thereby. The execution and delivery of this Agreement and
the Energy Marketing Joint Venture Agreement and the
consummation by Pacific of the transactions contemplated
hereby and thereby have been duly authorized by all
necessary corporate action on the part of Pacific, subject
in the case of this Agreement to obtaining the applicable
Pacific Shareholders' Approval. This Agreement has been,
and the Energy Marketing Joint Venture Agreement upon
execution and delivery will be, duly and validly executed
and delivered by Pacific and, assuming the due
authorization, execution and delivery hereof and thereof
by Enova, the Company, Newco Enova Sub and Newco Pacific
Sub, as the case may be, constitutes or will constitute
the valid and binding obligation of Pacific enforceable
against it in accordance with its terms.
(b)Non-Contravention. Except as set forth
in Section 3.04(b) of the Pacific Disclosure Schedule, the
execution and delivery of this Agreement and the Energy
Marketing Joint Venture Agreement by Pacific do not, and
the consummation of the transactions contemplated hereby
or thereby will not (with or without notice or lapse of
time or both), violate, conflict with, or result in a
breach of any provision of, or constitute a default under,
or result in the termination of, or accelerate the
performance required by, or result in a right of
termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under, or
result in the creation of any Encumbrance upon any of the
properties or assets (any such violation, conflict,
breach, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation") of Pacific
or any of its subsidiaries or joint ventures pursuant to
any provisions of (i) the articles of incorporation, by-
laws or similar governing documents of Pacific or any of
its subsidiaries or joint ventures, (ii) subject to
obtaining the Pacific Required Statutory Approvals and the
receipt of the Pacific Shareholders' Approval, any
statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any
Governmental Authority applicable to Pacific or any of its
subsidiaries or joint ventures or any of their respective
properties or assets or (iii) subject to obtaining the
third-party consents set forth in Section 3.04(b) of the
Pacific Disclosure Schedule (the "Pacific Required
Consents"), any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any
kind to which Pacific or any of its subsidiaries or joint
ventures is now a party or by which it or any of its
properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such Violations
that would not, in the aggregate, have a Pacific Material
Adverse Effect or a Joint Venture Material Adverse Effect.
(c)Statutory Approvals. Except as set
forth in Section 3.04(c) of the Pacific Disclosure
Schedule, no declaration, filing or registration with, or
notice to or authorization, consent or approval of, any
court, governmental or regulatory body (including a stock
exchange or other self-regulatory body) or authority,
domestic or foreign (each, a "Governmental Authority") is
necessary for (i) the execution and delivery of this
Agreement or the Energy Marketing Joint Venture Agreement
by Pacific or the consummation by Pacific of the
transactions contemplated hereby or thereby, the failure
to obtain, make or give which would have, in the
aggregate, a Pacific Material Adverse Effect or a Joint
Venture Material Adverse Effect, and (ii) the execution
and delivery of this Agreement by the Company or the
consummation by the Company of the transactions
contemplated hereby, the failure to obtain, make or give
which would have, in the aggregate, a material adverse
effect on the operations, properties, assets, financial
condition or the results of operations of the Company and
its prospective subsidiaries taken as a whole or on the
consummation of the transactions contemplated by this
Agreement (collectively, the "Pacific Required Statutory
Approvals", it being understood that references in this
Agreement to "obtaining" such Pacific Required Statutory
Approvals shall mean making such declarations, filings or
registrations; giving such notice; obtaining such consents
or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law).
(d)Compliance. Except as set forth in
Section 3.04(d) of the Pacific Disclosure Schedule or in
Section 3.11 of the Pacific Disclosure Schedule, or as
disclosed in the Pacific SEC Reports, neither Pacific nor
any of its subsidiaries nor, to the knowledge of Pacific,
any of its joint ventures, is in violation of or is under
investigation with respect to, or has been given notice or
been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable environmental law,
ordinance or regulation) of any Governmental Authority,
except for violations which, in the aggregate do not, and
could not reasonably be expected to, have a Pacific
Material Adverse Effect or a Joint Venture Material
Adverse Effect. Except as set forth in Section 3.04(d) of
the Pacific Disclosure Schedule or in Section 3.11 of the
Pacific Disclosure Schedule, Pacific and each of its
subsidiaries and joint ventures have all permits,
licenses, franchises and other governmental
authorizations, consents and approvals necessary to
conduct their businesses as presently conducted, except
those which the failure to obtain would not, in the
aggregate, have a Pacific Material Adverse Effect or a
Joint Venture Material Adverse Effect.
SECTION 3.05. Reports and Financial
Statements. The filings required to be made by Pacific
and its subsidiaries under the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), the
California Public Utilities Act, the Power Act, the
Natural Gas Act (the "Gas Act") or the 1935 Act have been
filed with the Securities and Exchange Commission (the
"SEC"), the California Public Utilities Commission (the
"CPUC") or the Federal Energy Regulatory Commission (the
"FERC"), as the case may be, including all forms,
statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements
appertaining thereto, and Pacific has complied in all
material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder.
Pacific has made available to Enova a true and complete
copy of each report, schedule, registration statement and
definitive proxy statement filed by Pacific with the SEC
since January 1, 1994 (as such documents have since the
time of their filing been amended, the "Pacific SEC
Reports"). As of their respective dates, the Pacific SEC
Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be
stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated
financial statements and unaudited interim financial
statements of Pacific included in the Pacific SEC Reports
(collectively, the "Pacific Financial Statements") have
been prepared in accordance with GAAP (except as may be
indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q
of the SEC) and fairly present the financial position of
Pacific as of the dates thereof and the results of its
operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial
statements, to normal, recurring audit adjustments. True,
accurate and complete copies of the Articles of
Incorporation and Bylaws of Pacific, as in effect on the
date hereof, have previously been made available to Enova.
SECTION 3.06. Absence of Certain Changes
or Events; Absence of Undisclosed Liabilities.
(a) Except as set forth in the Pacific SEC Reports or
Section 3.06 of the Pacific Disclosure Schedule, from
January 1, 1996 through the date hereof each of Pacific
and its subsidiaries and joint ventures has conducted its
business only in the ordinary course of business
consistent with past practice and there has not been, and
no fact or condition exists which could reasonably be
expected to have, a Pacific Material Adverse Effect or a
Joint Venture Material Adverse Effect.
(b)Neither Pacific nor any of its
subsidiaries has any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated
corporate balance sheet, except liabilities, obligations
or contingencies that are accrued or reserved against in
the consolidated financial statements of Pacific or
reflected in the notes thereto for the year ended December
31, 1995, or which were incurred after December 31, 1995
in the ordinary course of business and would not, in the
aggregate, have a Pacific Material Adverse Effect or a
Joint Venture Material Adverse Effect.
SECTION 3.07. Litigation. Except as
disclosed in the Pacific SEC Reports or as set forth in
Section 3.07 of the Pacific Disclosure Schedule or in
Section 3.11 of the Pacific Disclosure Schedule, (i) there
are as of the date hereof no claims, suits, actions or
proceedings, pending or, to the knowledge of Pacific,
threatened, nor are there, to the knowledge of Pacific,
any investigations or reviews pending or threatened
against, relating to or affecting Pacific or any of its
subsidiaries or joint ventures, (ii) there have not been
any developments since June 30, 1996 with respect to such
disclosed claims, suits, actions, proceedings,
investigations or reviews and (iii) there are no
judgments, decrees, injunctions, rules or orders of any
court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable
to Pacific or any of its subsidiaries or joint ventures,
which, when taken together with any other nondisclosures
described in clauses (i), (ii) or (iii), could reasonably
be expected to have a Pacific Material Adverse Effect or a
Joint Venture Material Adverse Effect.
SECTION 3.08. Registration Statement and
Proxy Statement. None of the information supplied or to
be supplied by or on behalf of Pacific for inclusion or
incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by the
Company in connection with the issuance of shares of
Company Common Stock in the Mergers (the "Registration
Statement") will, at the time the Registration Statement
is filed with the SEC and at the time it becomes effective
under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading and (ii) the joint proxy
statement in definitive form relating to the meetings of
Pacific and Enova shareholders to be held in connection
with the Mergers (the "Proxy Statement") will, at the date
mailed to shareholders of Pacific and Enova and at the
times of the meetings of shareholders to be held in
connection with the Mergers, contain any untrue statement
of a material fact or omit to state any material fact
required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they are made, not misleading. The
Registration Statement and the Proxy Statement will comply
as to form in all material respects with the provisions of
the Securities Act and the Exchange Act, respectively, and
the rules and regulations thereunder.
SECTION 3.09. Tax Matters.
"Taxes", as used in this Agreement, means any U.S.
federal, state, county, local or foreign taxes, charges,
fees, levies, or other assessments, including, without
limitation, all net income, gross income, sales and use,
ad valorem, transfer, gains, profits, excise, franchise,
real and personal property, gross receipt, capital stock,
production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed
by any governmental entity, and includes any interest and
penalties (civil or criminal) on or additions to any such
taxes and any expenses incurred in connection with the
determination, settlement or litigation of any Tax
liability. "Tax Return", as used in this Agreement, means
a report, return or other information required to be
supplied to any governmental entity with respect to Taxes
including, where permitted or required, combined or
consolidated returns.
(a)Filing of Timely Tax Returns. Except as
set forth in Section 3.09(a) of the Pacific Disclosure
Schedule, Pacific and each of its subsidiaries have filed
(or there has been filed on their behalf) all Tax Returns
required to be filed by each of them under applicable law.
All Tax Returns were in all material respects (and, as to
Tax Returns not filed as of the date hereof, will be)
true, complete and correct and filed on a timely basis.
(b)Payment of Taxes. Pacific and each of
its subsidiaries have, within the time and in the manner
prescribed by law, paid (and until the Closing Date will
pay within the time and in the manner prescribed by law)
all Taxes that are currently due and payable except for
those contested in good faith and for which adequate
reserves have been taken.
(c) Tax Reserves. Pacific and its
subsidiaries have established (and until the Closing Date
will maintain) on their books and records reserves
adequate to pay all Taxes, all deficiencies in Taxes
asserted or proposed against Pacific or its subsidiaries
and reserves for deferred income taxes in accordance with
GAAP.
(d) Tax Liens. There are no Tax liens upon
the assets of Pacific or any of its subsidiaries except
liens for Taxes not yet due.
(e) Withholding Taxes. Pacific and each of
its subsidiaries have complied (and until the Closing Date
will comply) in all respects with the provisions of the
Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and
reporting requirements under Sections 1441 through 1464,
3401 through 3406, and 6041 and 6049 of the Code, as well
as similar provisions under any other laws, and have,
within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper
governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax
Returns. Except as set forth in Section 3.09(f) of the
Pacific Disclosure Schedule, neither Pacific nor any of
its subsidiaries has requested any extension of time
within which to file any Tax Return, which Tax Return has
not since been filed.
(g)Waivers of Statute of Limitations. Except as set forth
in Section 3.09(g) of the Pacific Disclosure Schedule,
neither Pacific nor any of its subsidiaries has executed
any outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect
to any Taxes or Tax Returns.
(h)Expiration of Statute of Limitations.
Except as set forth in Section 3.09(h) of the Pacific
Disclosure Schedule, the statute of limitations for the
assessment of all federal income and California franchise
Taxes has expired for all related Tax Returns of Pacific
and each of its subsidiaries or those Tax Returns have
been examined by the appropriate taxing authorities for
all periods through the date hereof, and no deficiency for
any such Taxes has been proposed, asserted or assessed
against Pacific or any of its subsidiaries that has not
been resolved and paid in full.
(i)Audit, Administrative and Court
Proceedings. Except as set forth in Section 3.09(i) of
the Pacific Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns
of Pacific or any of its subsidiaries, and neither Pacific
nor any of its subsidiaries has any knowledge of any
threatened action, audit or administrative or court
proceeding with respect to any such Taxes or Tax Returns.
(j)Powers of Attorney. Except as set forth
in Section 3.09(j) of the Pacific Disclosure Schedule, no
power of attorney currently in force has been granted by
Pacific or any of its subsidiaries concerning any Tax
matter.
(k)Tax Rulings. Except as set forth in
Section 3.09(k) of the Pacific Disclosure Schedule,
neither Pacific nor any of its subsidiaries has received a
Tax Ruling or entered into a Closing Agreement with any
taxing authority that would have a continuing adverse
effect after the Closing Date. "Tax Ruling", as used in
this Agreement, shall mean a written ruling of a taxing
authority relating to Taxes. "Closing Agreement", as used
in this Agreement, shall mean a written and legally
binding agreement with a taxing authority relating to
Taxes.
(l)Availability of Tax Returns. Pacific
and its subsidiaries have made available to Enova complete
and accurate copies of (i) all Tax Returns, and any
amendments thereto, filed by Pacific or any of its
subsidiaries, (ii) all audit reports received from any
taxing authority relating to any Tax Return filed by
Pacific or any of its subsidiaries and (iii) any Closing
Agreements entered into by Pacific or any of its
subsidiaries with any taxingauthority.
(m)Tax Sharing Agreements. Except as set
forth in Section 3.09(m) of the Pacific Disclosure
Schedule, no agreements relating to allocating or sharing
of Taxes exist between or among Pacific and any of its
subsidiaries.
(n)Code Section 341(f). Neither Pacific nor
any of its subsidiaries has filed (or will file prior to
the Closing) a consent pursuant to Section 341(f) of the
Code or has agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as
that term is defined in Section 341(f)(4) of the Code)
owned by Pacific or any of its subsidiaries.
(o)Code Section 168. No property of
Pacific or any of its subsidiaries is property that
Pacific or any such subsidiary or any party to this
transaction is or will be required to treat as being owned
by another person pursuant to the provisions of Section
168(f)(8) of the Code (as in effect prior to its amendment
by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code.
(p)Code Section 481 Adjustments. Except as
set forth in Section 3.09(p) of the Pacific Disclosure
Schedule and except for adjustments that in the aggregate
could not reasonably be expected to have a Pacific
Material Adverse Effect, neither Pacific nor any of its
subsidiaries is required to include in income any
adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method
initiated by Pacific or any of its subsidiaries, and to
the best of the knowledge of Pacific, the Internal Revenue
Service (the "IRS") has not proposed any such adjustment
or change in accounting method.
(q)Code Sections 6661 and 6662. All
transactions that could give rise to an understatement of
federal income tax (within the meaning of Section 6661 of
the Code for Tax Returns the due date for which was on or
before December 31, 1989 and within the meaning of Section
6662 of the Code for Tax Returns the due date for which
was after December 31, 1989) that could reasonably be
expected to result in a Pacific Material Adverse Effect
have been adequately disclosed (or, with respect to Tax
Returns filed following the Closing, will be adequately
disclosed) on the Tax Returns of Pacific and its
subsidiaries in accordance with Section 6661(b)(2)(B) of
the Code for Tax Returns the due date for which was on or
before to December 31, 1989, and in accordance with
Section 6662(d)(2)(B) of the Code for Tax Returns the due
date for which was after December 31, 1989.
(r)NOLs. As of the date hereof, Pacific
and its subsidiaries had net operating loss carryovers
available to offset future income as set forth in Section
3.09(r) of the Pacific Disclosure Schedule. Section
3.09(r) of the Pacific Disclosure Schedule sets forth the
amount of and year of expiration of each company's net
operating loss carryovers.
(s)Credit Carryover. As of the date
hereof, Pacific and its subsidiaries had tax credit
carryovers available to offset future tax liability as set
forth in Section 3.09(s) of the Pacific Disclosure
Schedule. Section 3.09(s) of the Pacific Disclosure
Schedule sets forth the amount and year of expiration of
each company's tax credit carryovers.
(t)Code Section 338 Elections. Except as
set forth in Section 3.09(t) of the Pacific Disclosure
Schedule, no election under Section 338 of the Code (or
any predecessor provision) has been made by or with
respect to Pacific or any of its subsidiaries or any of
their respective assets or properties.
(u)Acquisition Indebtedness. Except as set
forth in Section 3.09(u) of the Pacific Disclosure
Schedule, no indebtedness of Pacific or any of its
subsidiaries is "corporate acquisition indebtedness"
within the meaning of Section 279(b) of the Code.
(v)Intercompany Transactions. Except as
set forth in Section 3.09(v) of the Pacific Disclosure
Schedule, neither Pacific nor any of its subsidiaries has
engaged in any intercompany transactions within the
meaning of Section 1.1502-13 of the Treasury Regulations
for which any income remains unrecognized as of the close
of the last taxable year prior to the Closing Date.
(w)Code Section 280G. Except as set forth
in Section 3.09(w) of the Pacific Disclosure Schedule,
neither Pacific nor any of its subsidiaries is a party to
any agreement, contract, or arrangement that could result,
on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Section
280G of the Code.
SECTION 3.10. Employee Matters; ERISA.
(a)Benefit Plans. Section 3.10(a) of the
Pacific Disclosure Schedule contains a true and complete
list of each material employee benefit plan, program or
arrangement currently sponsored, maintained or contributed
to by Pacific or any of its subsidiaries for the benefit
of employees, former employees or directors and their
beneficiaries in respect of services provided to any such
entity, including, but not limited to, any employee
benefit plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and any material employment,
consulting, non-compete, severance or change in control
agreement (collectively, the "Pacific Benefit Plans").
For the purposes of this Section 3.10 only, the term
"Pacific" shall be deemed to include predecessors thereof.
(b)Contributions. Except as set forth in
Section 3.10(b) of the Pacific Disclosure Schedule, all
material contributions and other payments required to be
made by Pacific or any of its subsidiaries to any Pacific
Benefit Plan (or to any person pursuant to the terms
thereof) have been made or the amount of such payment or
contribution obligation has been reflected in the Pacific
Financial Statements.
(c)Qualification; Compliance. Except as
set forth in Section 3.10(c) of the Pacific Disclosure
Schedule, each of the Pacific Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the
Code has been determined by the IRS to be so qualified,
and, to the best knowledge of Pacific, no circumstances
exist that are reasonably expected by Pacific to result in
the revocation of any such determination. Pacific is in
compliance in all material respects with, and each Pacific
Benefit Plan is and has been operated in all material
respects in compliance with, all applicable laws, rules
and regulations governing such plan, including, without
limitation, ERISA and the Code. Each Pacific Benefit Plan
intended to provide for the deferral of income, the
reduction of salary or other compensation, or to afford
other income tax benefits, complies with the requirements
of the applicable provisions of the Code or other laws,
rules and regulations required to provide such income tax
benefits.
(d)Liabilities. With respect to the
Pacific Benefit Plans individually and in the aggregate,
no event has occurred, and, to the best knowledge of
Pacific, there exists no condition or set of circumstances
that could subject Pacific or any of its subsidiaries to
any liability arising under the Code, ERISA or any other
applicable law (including, without limitation, any
liability to any such plan or the Pension Benefit Guaranty
Corporation (the "PBGC")), or under any indemnity
agreement to which Pacific is a party, which liability,
excluding liability for benefit claims or PBGC premiums
and funding obligations payable in the ordinary course,
could reasonably be expected to have a Pacific Material
Adverse Effect.
(e)Welfare Plans. Except as set forth in
Section 3.10(e) of the Pacific
Disclosure Schedule, none of the Pacific Benefit Plans
that are "welfare plans", within the
meaning of Section 3(1) of ERISA, provides for any retiree
benefits other than coverage
mandated by applicable law or benefits the full cost of
which is borne by the retiree.
(f)Documents Made Available. Pacific has
made available to Enova a true and correct copy of each
collective bargaining agreement to which Pacific or any of
its subsidiaries is a party or under which Pacific or any
of its subsidiaries has obligations and, with respect to
each Pacific Benefit Plan, (i) such plan and summary plan
description, (ii) the most recent annual report filed with
the IRS, (iii) each related trust agreement, insurance
contract, service provider or investment management
agreement (including all amendments to each such
document), (iv) the most recent determination of the IRS
with respect to the qualified status of such plan and (v)
the most recent actuarial report or valuation.
(g)Payments Resulting from Mergers. Except
as set forth in Section 3.10(g) of the Pacific Disclosure
Schedule or specifically provided for herein, neither
Pacific nor any of its subsidiaries is a party to any
plan, agreement or arrangement pursuant to the terms of
which the consummation or announcement of any transaction
contemplated by this Agreement will (either alone or in
connection with the occurrence of any additional or
further acts or events) result in any (A) payment (whether
of severance pay or otherwise) becoming due from Pacific
or any of its subsidiaries to any officer, employee,
former employee or director thereof or to a trustee under
any "rabbi trust" or similar arrangement, or (B) benefit
under any Pacific Benefit Plan being established or
becoming accelerated, or immediately vested or payable.
(h)Labor Agreements. As of the date
hereof, except as set forth in Section 3.10(h) of the
Pacific Disclosure Schedule, neither Pacific nor any of
its subsidiaries is a party to any collective bargaining
agreement or other labor agreement with any union or labor
organization. To the best knowledge of Pacific, as of the
date hereof, except as set forth in Section 3.10(h) of the
Pacific Disclosure Schedule, there is no current union
representation question involving employees of Pacific or
any of its subsidiaries, nor does Pacific know of any
activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any
such employees. Except as set forth in the Pacific SEC
Reports or in Section 3.10(h) of the Pacific Disclosure
Schedule, (i) there is no unfair labor practice,
employment discrimination or other complaint against
Pacific pending, or to the best knowledge of Pacific,
threatened, which has or could reasonably be expected to
have, a Pacific Material Adverse Effect, (ii) there is no
strike, dispute, slowdown, work stoppage or lockout
pending, or to the best knowledge of Pacific, threatened,
against or involving Pacific or any of its subsidiaries
which has or could reasonably be expected to have a
Pacific Material Adverse Effect and (iii) there is no
proceeding, claim, suit, action or governmental
investigation pending or, to the best knowledge of
Pacific, threatened, in respect of which any director,
officer, employee or agent of Pacific or any of its
subsidiaries is or may be entitled to claim
indemnification from Pacific pursuant to their respective
articles of incorporation or bylaws or as provided in the
Indemnification Agreements listed in Section 3.10(h) of
the Pacific Disclosure Schedule.
SECTION 3.11. Environmental Protection.
(a)Compliance. Except as set forth in the
Pacific SEC Reports, except as set forth in Section
3.11(a) of the Pacific Disclosure Schedule and except
where the failure to be in compliance could not reasonably
be expected to have a Pacific Material Adverse Effect, (i)
each of Pacific and its subsidiaries is in compliance with
all applicable Environmental Laws and (ii) neither Pacific
nor any of its subsidiaries has received any written
communication, from any person or Governmental Authority
that alleges that Pacific or any of its subsidiaries is
not in such compliance with applicable Environmental Laws.
(b)Environmental Permits. Except as set
forth in the Pacific SEC Reports or as set forth in
Section 3.11(b) of the Pacific Disclosure Schedule, each
of Pacific and its subsidiaries has obtained or has
applied for all environmental, health and safety permits
and governmental authorizations (collectively, the
"Environmental Permits") necessary for the construction of
their facilities or the conduct of their operations, and
all such permits are in good standing or, where
applicable, a renewal application has been timely filed
and is pending agency approval, and Pacific and its
subsidiaries are in material compliance with all terms and
conditions of the Environmental Permits, except where the
failure to obtain or be in compliance with such
Environmental Permit could not reasonably be expected to
have a Pacific Material Adverse Effect.
(c)Environmental Claims. Except as set
forth in the Pacific SEC Reports or as set forth in
Section 3.11(c) of the Pacific Disclosure Schedule, to the
best knowledge of Pacific, there is no Environmental Claim
pending (i) against Pacific or any of its subsidiaries or
joint ventures, (ii) against any person or entity whose
liability for any Environmental Claim Pacific or any of
its subsidiaries or joint ventures has retained or assumed
contractually or (iii) against any real or personal
property or operations which Pacific or any of its
subsidiaries or joint ventures owns, leases or manages, in
whole or in part, which, if adversely determined, could
reasonably be expected to have, in the aggregate, a
Pacific Material Adverse Effect.
(d)Releases. Except as set forth in the
Pacific SEC Reports or as set forth in Section 3.11(c) or
Section 3.11(d) of the Pacific Disclosure Schedule,
Pacific has no knowledge of any Releases of any Hazardous
Material that would be reasonably likely to form the basis
of any Environmental Claim against Pacific or any of its
subsidiaries or joint ventures, or against any person or
entity whose liability for any Environmental Claim Pacific
or any of its subsidiaries or joint ventures has retained
or assumed contractually, which could reasonably be
expected to have, in the aggregate, a Pacific Material
Adverse Effect.
(e)Predecessors. Except as set forth in
the Pacific SEC Reports or as set forth in Section 3.11(e)
of the Pacific Disclosure Schedule, Pacific has no
knowledge, with respect to any predecessor of Pacific or
any subsidiary or joint venture of Pacific, of any
Environmental Claim pending or threatened, or of any
Release of Hazardous Materials that would be reasonably
likely to form the basis of any Environmental Claim, which
could reasonably be expected to have a Pacific Material
Adverse Effect.
(f)Disclosure. To Pacific's best
knowledge, Pacific has disclosed to Enova all material
facts which Pacific reasonably believes form the basis of
a Pacific Material Adverse Effect arising from (i) the
cost of Pacific pollution control equipment currently
required or known to be required in the future; (ii)
current Pacific remediation costs or Pacific remediation
costs known to be required in the future; or (iii) any
other environmental matter affecting Pacific.
(g)Cost Estimates. To Pacific's best
knowledge, no environmental matter set forth in the
Pacific SEC Reports or the Pacific Disclosure Schedule
could reasonably be expected to exceed the cost estimates
provided in the Pacific SEC Reports by an amount that
individually or in the aggregate could reasonably be
expected to have a Pacific Material Adverse Effect.
(h)Certain Definitions. As used in this
Agreement:
(i)"Environmental Claim"
means any and all written administrative, regulatory or
judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or
notices of noncompliance or violation by any person or
entity (including any Governmental Authority) alleging
potential liability (including, without limitation,
potential liability for enforcement, investigatory costs,
cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of,
based on or resulting from (A) the presence, or Release or
threatened Release into the environment, of any Hazardous
Materials at any location, whether or not owned,
operated, leased or managed by Pacific or any of its
subsidiaries or joint ventures (for purposes of this
Section 3.11), or by Enova or any of its subsidiaries or
joint ventures (for purposes of Section 4.11); (B)
circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or (C) any
and all claims by any third party seeking damages,
contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the
presence or Release of any Hazardous Materials.
(ii)"Environmental Laws" means all federal, state, local
laws, rules and regulations relating to pollution or
protection of human health or the environment (including,
without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata),
including, without limitation, laws and regulations
relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(iii)"Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in
any form that is or could become friable, urea
formaldehyde foam insulation, and transformers or other
equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBs"); (B) any chemicals,
materials or substances which are now defined as or
included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar
import, under any Environmental Law; and (C) any other
chemical, material, substance or waste, exposure to which
is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which Pacific or
any of its subsidiaries or joint ventures operates (for
purposes of this Section 3.11) or in which Enova or any
of its subsidiaries or joint ventures operates (for
purposes of Section 4.11). (iv)"Release" means any
release, spill, emission, leaking, injection, deposit,
disposal, discharge, dispersal, leaching or migration into
the atmosphere, soil, surface water, groundwater or
property.
SECTION 3.12. Regulation as a Utility.
Pacific Sub is regulated as a public utility by the State
of California and by no other state. Except as set forth
in Section 3.12 of the Pacific Disclosure Schedule,
neither Pacific nor any "subsidiary company" or
"affiliate" of Pacific is subject to regulation as a
public utility or public service company (or similar
designation) by any other state in the United States or
any foreign country. As used in this Section 3.12 and in
Section 4.12, the terms "subsidiary company" and
"affiliate" shall have the respective meanings ascribed to
them in the 1935 Act. Pacific is an exempt holding
company under Section 3(a)(1) of the 1935 Act. Section
3.12 of the Pacific Disclosure Schedule sets forth each
"affiliate" and each "subsidiary company" of Pacific which
may be deemed to be a "public utility company" or a
"holding company" within the meaning of the 1935 Act.
SECTION 3.13. Vote Required. The approval
of the Pacific Merger by the affirmative vote of (i) a
majority of the votes entitled to be cast by all holders
of Pacific Common Stock and (ii) a majority of the votes
entitled to be cast by all holders of Pacific Common Stock
and Pacific Preferred Stock, voting together as a single
class (the "Pacific Shareholders' Approval"), are the only
votes of the holders of any class or series of the capital
stock of Pacific required to approve this Agreement, the
Mergers and the other transactions contemplated hereby.
No vote of shareholders of Pacific is required to approve
the Energy Marketing Joint Venture Agreement.
SECTION 3.14. Accounting Matters. Neither
Pacific nor, to its best knowledge, any of its affiliates
has taken or agreed to take any action that would prevent
the Company from accounting for the transactions to be
effected pursuant to Articles I and II of this Agreement
as a pooling of interests in accordance with GAAP and
applicable SEC regulations.
SECTION 3.15. Opinions of Financial
Advisors. Pacific has received the opinion of each of
Barr Devlin & Co. Incorporated ("Barr Devlin") and Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch"), dated October 11, 1996, to the effect that, as of
such date, the Pacific Ratio is fair from a financial
point of view to the holders of Pacific Common Stock.
SECTION 3.16. Insurance. Except as set
forth on Section 3.16 of the Pacific Disclosure Schedule,
each of Pacific and its subsidiaries is, and has been
continuously since January 1, 1993, insured with
financially responsible insurers in such amounts and
against such risks and losses as are customary for
companies conducting the business as conducted by Pacific
and its subsidiaries during such time period. Except as
set forth on Schedule 3.16 of the Pacific Disclosure
Schedule, neither Pacific nor its subsidiaries has
received any notice of cancellation or termination with
respect to any material insurance policy of Pacific or its
subsidiaries. The insurance policies of Pacific and each
of its subsidiaries are valid and enforceable policies in
all material respects.
SECTION 3.17. Pacific Rights Agreement.
Pacific has delivered to Enova a true and complete copy of
the Pacific Rights Agreement as in effect on the date
hereof. Pacific has taken all necessary action to amend
the Pacific Rights Agreement so that neither the execution
of this Agreement nor the consummation of the Mergers will
(a) cause the Pacific Rights to become exercisable, (b)
cause Enova or the Company to become an Acquiring Person
(as such term is defined in the Pacific Rights Agreement)
or (c) give rise to a Distribution Date, a Stock
Acquisition Date, a Section 7(a)(iii) Event or a Section
13 Event (as each term is defined in the Pacific Rights
Agreement).
SECTION 3.18. Brokers. No broker, finder or investment
banker (other than Barr Devlin and Merrill Lynch) is
entitled to any brokerage, finder's or other fee or
commission in connection with the Mergers based upon
arrangements made by or on behalf of Pacific. Pacific has
heretofore furnished to Enova a complete and correct copy
of all agreements between Pacific and Merrill Lynch or
Barr Devlin pursuant to which such firm would be entitled
to any payment relating to the Mergers.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ENOVA
Enova represents and warrants to Pacific as
follows:
SECTION 4.01. Organization and
Qualification. Each of Enova and its subsidiaries is a
corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, has
all requisite power and authority, and has been duly
authorized by all necessary approvals and orders, to own,
lease and operate its assets and properties and to carry
on its business as it is now being conducted, and is duly
qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes
such qualification necessary other than in such
jurisdictions where the failure to be so qualified and in
good standing will not, when taken together with all other
such failures, have a material adverse effect on the
operations, properties, assets, financial condition or the
results of operations of Enova and its subsidiaries taken
as a whole or on the consummation of the transactions
contemplated by this Agreement (any such material adverse
effect being hereinafter referred to as a "Enova Material
Adverse Effect") or a Joint Venture Material Adverse
Effect.
SECTION 4.02. Subsidiaries. Section 4.02
of the Enova Disclosure Schedule sets forth a description
as of the date hereof of all subsidiaries and joint
ventures of Enova, including the name of each such entity
and Enova's interest therein, and, as to each subsidiary
or joint venture identified as a "Material Enova Entity"
in Section 4.02 of the Enova Disclosure Schedule, a brief
description of the principal line or lines of business
conducted by each such entity. Except as set forth in
Section 4.02 of the Enova Disclosure Schedule, none of
such entities is a "public utility company", a "holding
company", a "subsidiary company" or an "affiliate" of any
public-utility company within the meaning of Section
2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the 1935 Act,
respectively, or a "public utility" within the meaning of
Section 201(e) of the Power Act. Except as set forth in
Section 4.02 of the Enova Disclosure Schedule, all of the
issued and outstanding shares of capital stock of each
subsidiary of Enova are validly issued, fully paid,
nonassessable and free of preemptive rights, are owned
directly or indirectly by Enova free and clear of any
Encumbrances and there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or
exchange under any outstanding security, instrument or
other agreement, obligating any such subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold,
additional shares of its capital stock or obligating it to
grant, extend or enter into any such agreement or
commitment.
SECTION 4.03. Capitalization.
(a)Enova. The authorized capital stock of
Enova consists of 300,000,000 shares of Enova Common Stock
and 30,000,000 shares of Preferred Stock, no par value, of
Enova ("Enova Preferred Stock"). As of the close of
business on September 30, 1996, (i) 116,583,358 shares of
Enova Common Stock and (ii) no shares of Enova Preferred
Stock were issued and outstanding. All of the issued and
outstanding shares of the capital stock of Enova are
validly issued, fully paid, nonassessable and free of
preemptive rights. Except as set forth in Section 4.03(a)
of the Enova Disclosure Schedule, as of the date hereof,
there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange
under any outstanding security, instrument or other
agreement, obligating Enova or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of the capital stock of Enova
or obligating Enova or any of its subsidiaries to grant,
extend or enter into any such agreement or commitment.
(b)Enova Sub. The authorized capital stock
of Enova Sub consists of (i) 255,000,000 shares of common
stock, no par value, of Enova Sub ("Enova Sub Common
Stock"), (ii) 1,375,000 shares of preferred stock, par
value $20 per share, of Enova Sub (the "Enova Sub Par
Value $20 Preferred Stock"), and (iii) 10,000,000 shares
of preference stock, no par value, of Enova Sub (the
"Enova Sub No Par Preference Stock"). As of the close of
business on September 30, 1996, there were issued and
outstanding (i) 116,583,358 shares of Enova Sub Common
Stock, (ii) 1,373,770 shares of Enova Sub Par Value $20
Preferred Stock consisting of 375,000 shares of the 5%
Series, 300,000 shares of the 4.50% Series, 325,000 shares
of the 4.40% Series and 373,770 shares of the 4.60%
Series, 1995, and (iii) 3,190,000 shares of Enova Sub No
Par Preference Stock consisting of 150,000 shares of the
$7.20 Series, 1,400,000 shares of the $1.70 Series,
640,000 shares of the $1.82 Series and 1,000,000 shares of
the $1.7625 Series. All of the issued and outstanding
shares of the capital stock of Enova Sub are validly
issued, fully paid, nonassessable and free of preemptive
rights. Except as set forth in Section 4.03(b) of the
Enova Disclosure Schedule, as of the date hereof, there
are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange
under any outstanding security, instrument or other
agreement, obligating Enova or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered
or sold, the capital stock of Enova Sub or obligating
Enova or any of its subsidiaries to grant, extend or enter
into any such agreement or commitment.
SECTION 4.04.
Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a)Authority. Enova has all requisite
power and authority to enter into this Agreement and the
Energy Marketing Joint Venture Agreement and, subject to
the applicable Enova Shareholders' Approval and the
applicable Enova Required Statutory Approvals, to
consummate the transactions contemplated hereby or
thereby. The execution and delivery of this Agreement and
the Energy Marketing Joint Venture Agreement and the
consummation by Enova of the transactions contemplated
hereby and thereby have been duly authorized by all
necessary corporate action on the part of Enova, subject
in the case of this Agreement to obtaining of the
applicable Enova Shareholders' Approval. This Agreement
has been, and the Energy Marketing Joint Venture Agreement
upon execution and delivery will be, duly and validly
executed and delivered by Enova and, assuming the due
authorization, execution and delivery hereof and thereof
by Pacific, the Company, Newco Enova Sub and Newco Pacific
Sub, as the case may be, constitutes or will constitute
the valid and binding obligation of Enova enforceable
against it in accordance with its terms.
(b)Non-Contravention. Except as set forth
in Section 4.04(b) of the Enova Disclosure Schedule, the
execution and delivery of this Agreement and the Energy
Marketing Joint Venture Agreement by Enova do not, and the
consummation of the transactions contemplated hereby or
thereby will not (with or without notice or lapse of time
or both), violate, conflict with, or result in a breach of
any provision of, or constitute a default under, or result
in any Violation by Enova or any of its subsidiaries or
joint ventures pursuant to any provisions of (i) the
articles of incorporation or by-laws or similar governing
documents of Enova or any of its subsidiaries or joint
ventures, (ii) subject to obtaining the Enova Required
Statutory Approvals and the receipt of the Enova
Shareholders' Approval, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ,
permit or license of any Governmental Authority applicable
to Enova or any of its subsidiaries or joint ventures or
any of their respective properties or assets, or (iii)
subject to obtaining the third-party consents set forth in
Section 4.04(b) of the Enova Disclosure Schedule (the
"Enova Required Consents"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument,
obligation or agreement of any kind to which Enova or any
of its subsidiaries or joint ventures is now a party or by
which it or any of its properties or assets may be bound
or affected, excluding from the foregoing clauses (ii) and
(iii) such Violations that would not, in the aggregate,
have a Enova Material Adverse Effect or a Joint Venture
Material Adverse Effect.
(c)Statutory Approvals. Except as set
forth in Section 4.04(c) of the Enova Disclosure Schedule,
no declaration, filing or registration with, or notice to
or authorization, consent or approval of, any Governmental
Authority is necessary for (i) the execution and delivery
of this Agreement or the Energy Marketing Joint Venture
Agreement by Enova or the consummation by Enova of the
transactions contemplated hereby or thereby, the failure
to obtain, make or give which would have, in the
aggregate, a Enova Material Adverse Effect or a Joint
Venture Material Adverse Effect, and (ii) the execution
and delivery of this Agreement by the Company or the
consummation by the Company of the transactions
contemplated hereby, the failure to obtain, make or give
which would have, in the aggregate, a material adverse
effect on the operations, properties, assets, financial
condition or the results of operations of the Company and
its prospective subsidiaries taken as a whole or on the
consummation of the transactions contemplated by this
Agreement (collectively, the "Enova Required Statutory
Approvals", it being understood that references in this
Agreement to "obtaining" such Enova Required Statutory
Approvals shall mean making such declarations, filings or
registrations; giving such notice; obtaining such consents
or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law).
(d)Compliance. Except as set forth in
Section 4.04(d) of the Enova Disclosure Schedule or in
Section 4.11 of the Enova Disclosure Schedule or as
disclosed in the Enova SEC Reports, neither Enova nor any
of its subsidiaries nor, to the knowledge of Enova, any of
its joint ventures, is in violation of or is under
investigation with respect to or has been given notice or
been charged with any violation of, any law, statute,
order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable environmental law,
ordinance or regulation) of any Governmental Authority,
except for violations which, in the aggregate do not, and
could not reasonably be expected to have a Enova Material
Adverse Effect or a Joint Venture Material Adverse Effect.
Except as set forth in Section 4.04(d) of the Enova
Disclosure Schedule or in Section 4.11 of the Enova
Disclosure Schedule, Enova and each of its subsidiaries
and joint ventures have all permits, licenses, franchises
and other governmental authorizations, consents and
approvals necessary to conduct their businesses as
presently conducted, except those which the failure to
obtain would not, in the aggregate, have a Enova Material
Adverse Effect or a Joint Venture Material Adverse Effect.
SECTION 4.05. Reports and Financial
Statements. The filings required to be made by Enova and
its subsidiaries under the Securities Act, the Exchange
Act, the California Public Utilities Act, the Power Act,
the Gas Act, the Atomic Energy Act of 1954, as amended
(the "Atomic Energy Act"), or the 1935 Act have been filed
with the SEC, the CPUC, the Nuclear Regulatory Commission
(the "NRC") or the FERC, as the case may be, including all
forms, statements, reports, agreements (oral or written)
and all documents, exhibits, amendments and supplements
appertaining thereto, and Enova has complied in all
material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder.
Enova has made available to Pacific a true and complete
copy of each report, schedule, registration statement and
definitive proxy statement filed by Enova with the SEC
since January 1, 1994 (as such documents have since the
time of their filing been amended, the "Enova SEC
Reports"). As of their respective dates, the Enova SEC
Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be
stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated
financial statements and unaudited interim financial
statements of Enova included in the Enova SEC Reports
(collectively, the "Enova Financial Statements") have been
prepared in accordance with GAAP (except as may be
indicated therein or in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q
of the SEC) and fairly present the financial position of
Enova as of the dates thereof and the results of its
operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial
statements, to normal recurring audit adjustments. True,
accurate and complete copies of the Articles of
Incorporation and Bylaws of Enova as in effect on the date
hereof, are included (or incorporated by reference) in the
Enova SEC Reports.
SECTION 4.06. Absence of Certain Changes
or Events; Absence of Undisclosed Liabilities. (a)
Except as set forth in the Enova SEC Reports or Section
4.06 of the Enova Disclosure Schedule, from January 1,
1996 through the date hereof each of Enova and its
subsidiaries and joint ventures has conducted its business
only in the ordinary course of business consistent with
past practice and there has not been, and no fact or
condition exists which could reasonably be expected to
have, a Enova Material Adverse Effect or a Joint Venture
Material Adverse Effect.
(b)Neither Enova nor any of its
subsidiaries has any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated
corporate balance sheet, except liabilities, obligations
or contingencies that are accrued or reserved against in
the consolidated financial statements of Enova or
reflected in the notes thereto for the year ended December
31, 1995, or which were incurred after December 31, 1995
in the ordinary course of business and would not, in the
aggregate, have a Enova Material Adverse Effect or a Joint
Venture Material Adverse Effect.
SECTION 4.07. Litigation. Except as
disclosed in the Enova SEC Reports or as set forth in
Section 4.11 of the Enova Disclosure Schedule or in
Section 4.07 of the Enova Disclosure Schedule, (i) there
are as of the date hereof no claims, suits, actions or
proceedings, pending or, to the knowledge of Enova,
threatened, nor are there, to the knowledge of Enova, any
investigations or reviews pending or threatened against,
relating to or affecting Enova or any of its subsidiaries
or joint ventures, (ii) there have not been any
developments since June 30, 1996 with respect to such
disclosed claims, suits, actions, proceedings,
investigations or reviews and (iii) there are no
judgments, decrees, injunctions, rules or orders of any
court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable
to Enova or any of its subsidiaries or joint ventures,
which, when taken together with any other nondisclosures
described in clause (i), (ii) or (iii), could reasonably
be expected to have a Enova Material Adverse Effect or a
Joint Venture Material Adverse Effect .
SECTION 4.08. Registration Statement and
Proxy Statement. None of the information supplied or to
be supplied by or on behalf of Enova for inclusion or
incorporation by reference in (i) the Registration
Statement will, at the time the Registration Statement is
filed with the SEC and at the time it becomes effective
under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy
Statement will, at the date mailed to shareholders of
Pacific and Enova and at the times of the meetings of such
shareholders to be held in connection with the Mergers,
contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading. The Registration Statement and the Proxy
Statement will comply as to form in all material respects
with the provisions of the Securities Act and the Exchange
Act, respectively, and the rules and regulations
thereunder.
SECTION 4.09. Tax Matters.
(a)Filing of Timely Tax Returns. Enova and
each of its subsidiaries have filed (or there has been
filed on their behalf) all Tax Returns required to be
filed by each of them under applicable law. All Tax
Returns were in all material respects (and, as to Tax
Returns not filed as of the date hereof, will be) true,
complete and correct and filed on a timely basis.
(b)Payment of Taxes. Enova and each of its
subsidiaries have, within the time and in the manner
prescribed by law, paid (and until the Closing Date will
pay within the time and in the manner prescribed by law)
all Taxes that are currently due and payable except for
those contested in good faith and for which adequate
reserves have been taken.
(c)Tax Reserves. Enova and its
subsidiaries have established (and until the Closing Date
will maintain) on their books and records reserves
adequate to pay all Taxes, all deficiencies in Taxes
asserted or proposed against Enova or its subsidiaries and
reserves for deferred income taxes in accordance with
GAAP.
(d) Tax Liens. There are no Tax liens upon
the assets of Enova or any of its subsidiaries except
liens for Taxes not yet due.
(e)Withholding Taxes. Enova and each of
its subsidiaries have complied (and until the Closing Date
will comply) in all respects with the provisions of the
Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and
reporting requirements under Sections 1441 through 1464,
3401 through 3406, and 6041 and 6049 of the Code, as well
as similar provisions under any other laws, and have,
within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper
governmental authorities all amounts required.
(f)Extensions of Time for Filing Tax
Returns. Except as set forth in Section 4.09(f) of the
Enova Disclosure Schedule, neither Enova nor any of its
subsidiaries has requested any extension of time within
which to file any Tax Return, which Tax Return has not
since been filed.
(g)Waivers of Statute
of Limitations. Except as set forth in Section 4.09(g) of
the Enova Disclosure Schedule, neither Enova nor any of
its subsidiaries has executed any outstanding waivers or
comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax
Returns.
(h)Expiration of Statute of Limitations.
Except as set forth in Section 4.09(h) of the Enova
Disclosure Schedule, the statute of limitations for the
assessment of all federal income and California franchise
Taxes has expired for all related Tax Returns of Enova and
each of its subsidiaries or those Tax Returns have been
examined by the appropriate taxing authorities for all
periods through the date hereof, and no deficiency for any
such Taxes has been proposed, asserted or assessed against
Enova or any of its subsidiaries that has not been
resolved and paid in full.
(i)Audit, Administrative and Court
Proceedings. Except as set forth in Section 4.09(i) of
the Enova Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns
of Enova or any of its subsidiaries, and neither Enova nor
any of its subsidiaries has any knowledge of any
threatened action, audit or administrative or court
proceeding with respect to any such Taxes or Tax Returns.
(j)Powers of Attorney. Except as set forth
in Section 4.09(j) of the Enova Disclosure Schedule, no
power of attorney currently in force has been granted by
Enova or any of its subsidiaries concerning any Tax
matter.
(k)Tax Rulings. Except as set forth in
Section 4.09(k) of the Enova Disclosure Schedule, neither
Enova nor any of its subsidiaries has received a Tax
Ruling or entered into a Closing Agreement with any taxing
authority that would have a continuing adverse effect
after the Closing Date.
(l)Availability of Tax Returns. Enova and
its subsidiaries have made available to Pacific complete
and accurate copies of (i) all Tax Returns, and any
amendments thereto, filed by Enova or any of its
subsidiaries, (ii) all audit reports received from any
taxing authority relating to any Tax Return filed by Enova
or any of its subsidiaries and (iii) any Closing
Agreements entered into by Enova or any of its
subsidiaries with any taxing authority.
(m)Tax Sharing Agreements. Except as set
forth in Section 4.09(m) of the Enova Disclosure Schedule,
no agreements relating to allocating or sharing of Taxes
exist between or among Enova and any of its subsidiaries.
(n)Code Section 341(f). Neither Enova nor
any of its subsidiaries has filed (or will file prior to
the Closing) a consent pursuant to Section 341(f) of the
Code or has agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as
that term is defined in Section 341(f)(4) of the Code)
owned by Enova or any of its subsidiaries.
(o)Code Section 168. No property of Enova
or any of its subsidiaries is property that Enova or any
such subsidiary or any party to this transaction is or
will be required to treat as being owned by another person
pursuant to the provisions of Section 168(f)(8) of the
Code (as in effect prior to its amendment by the Tax
Reform Act of 1986) or is "tax-exempt use property" within
the meaning of Section 168 of the Code.
(p)Code Section 481 Adjustments. Other
than adjustments that in the aggregate could not
reasonably be expected to have a Enova Material Adverse
Effect, neither Enova nor any of its subsidiaries is
required to include in income any adjustment pursuant to
Section 481(a) of the Code by reason of a voluntary change
in accounting method initiated by Enova or any of its
subsidiaries, and to the best of the knowledge of Enova,
the IRS has not proposed any such adjustment or change in
accounting method.
(q)Code Sections 6661 and 6662. All
transactions that could give rise to an understatement of
federal income tax (within the meaning of Section 6661 of
the Code for Tax Returns the due date for which was on or
before December 31, 1989, and within the meaning of
Section 6662 of the Code for Tax Returns the due date for
which was after December 31, 1989) that could reasonably
be expected to result in a Enova Material Adverse Effect
have been adequately disclosed (or, with respect to Tax
Returns filed following the Closing, will be adequately
disclosed) on the Tax Returns of Enova and its
subsidiaries in accordance with Section 6661(b)(2)(B) of
the Code for Tax Returns the due date for which was on or
before December 31, 1989, and in accordance with Section
6662(d)(2)(B) of the Code for Tax Returns the due date for
which was after December 31, 1989.
(r)NOLs. As of the date hereof, Enova and
its subsidiaries had net operating loss carryovers
available to offset future income as set forth in Section
4.09(r) of the Enova Disclosure Schedule. Section 4.09(r)
of the Enova Disclosure Schedule sets forth the amount of
and year of expiration of each company's net operating
loss carryovers.
(s) Credit Carryover. As of the date
hereof, Enova and its subsidiaries had tax credit
carryovers available to offset future tax liability as set
forth in Section 4.09(s) of the Enova Disclosure Schedule.
Section 4.09(s) of the Enova Disclosure Schedule sets
forth the amount and year of expiration of each company's
tax credit carryovers.
(t)Code Section 338 Elections. Except as
set forth in Section 4.09(t) of the Enova Disclosure
Schedule, no election under Section 338 of the Code (or
any predecessor provision) has been made by or with
respect to Enova or any of its subsidiaries or any of
their respective assets or properties.
(u)Acquisition Indebtedness. Except as set
forth in Section 4.09(u) of the Enova Disclosure Schedule,
no indebtedness of Enova or any of its subsidiaries is
"corporate acquisition indebtedness" within the meaning of
Section 279(b) of the Code.
(v)Intercompany Transactions. Except as
set forth in Section 4.09(v) of the Enova Disclosure
Schedule, neither Enova nor any of its subsidiaries has
engaged in any intercompany transactions within the
meaning of Section 1.1502-13 of the Treasury Regulations
for which any income remains unrecognized as of the close
of the last taxable year prior to the Closing Date.
(w)Code Section 280G. Except as set forth
in Section 4.09(w) of the Enova Disclosure Schedule,
neither Enova nor any of its subsidiaries is a party to
any agreement, contract, or arrangement that could result,
on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of the
Section 280G of the Code.
SECTION 4.10. Employee Matters; ERISA.
(a)Benefit Plans. Section 4.10(a) of the
Enova Disclosure Schedule contains a true and complete
list of each material employee benefit plan, program or
arrangement currently sponsored, maintained or contributed
to by Enova or any of its subsidiaries for the benefit of
employees, former employees or directors and their
beneficiaries in respect of services provided to any such
entity, including, but not limited to, any employee
benefit plans within the meaning of Section 3(3) of ERISA
and any material employment, consulting, non-compete,
severance or change in control agreement (collectively,
the "Enova Benefit Plans"). For the purposes of this
Section 4.10, the term "Enova" shall be deemed to include
predecessors thereof.
(b)Contributions. Except as set forth in
Section 4.10(b) of the Enova Disclosure Schedule, all
material contributions and other payments required to be
made by Enova or any of its subsidiaries to any Enova
Benefit Plan (or to any person pursuant to the terms
thereof) have been made or the amount of such payment or
contribution obligation has been reflected in the Enova
Financial Statements.
(c)Qualification; Compliance. Each of the
Enova Benefit Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined
by the IRS to be so qualified, and, to the best knowledge
of Enova, no circumstances exist that are reasonably
expected by Enova to result in the revocation of any such
determination. Enova is in compliance in all material
respects with, and each Enova Benefit Plan is and has been
operated in all material respects in compliance with, all
applicable laws, rules and regulations governing such
plan, including, without limitation, ERISA and the Code.
Each Enova Benefit Plan intended to provide for the
deferral of income, the reduction of salary or other
compensation or to afford other income tax benefits
complies with the requirements of the applicable
provisions of the Code or other laws, rules and
regulations required to provide such income tax benefits.
(d)Liabilities. With respect to the Enova
Benefit Plans individually and in the aggregate, no event
has occurred, and, to the best knowledge of Enova, there
exists no condition or set of circumstances that could
subject Enova or any of its subsidiaries to any liability
arising under the Code, ERISA or any other applicable law
(including, without limitation, any liability to any such
plan or the PBGC), or under any indemnity agreement to
which Enova is a party, which liability, excluding
liability for benefit claims, PBGC premiums and funding
obligations payable in the ordinary course could
reasonably be expected to have a Enova Material Adverse
Effect.
(e)Welfare Plans. Except as set forth in
Section 4.10(e) of the Enova Disclosure Schedule, none of
the Enova Benefit Plans that are "welfare plans", within
the meaning of Section 3(1) of ERISA, provides for any
retiree benefits other than coverage mandated by
applicable law or benefits the full cost of which is borne
by the retiree.
(f)Documents Made Available. Enova has
made available to Pacific a true and correct copy of each
collective bargaining agreement to which Enova or any of
its subsidiaries is a party or under which Enova or any of
its subsidiaries has obligations, and with respect to each
Enova Benefit Plan, (i) such plan and summary plan
description, (ii) the most recent annual report filed with
the IRS, (iii) each related trust agreement, insurance
contract, service provider or investment management
agreement (including all amendments to each such
document), (iv) the most recent determination of the IRS
with respect to the qualified status of such plan, and (v)
the most recent actuarial report or valuation.
(g)Payments Resulting from Mergers. Except
as set forth in Section 4.10(g) of the Enova Disclosure
Schedule or specifically provided for herein, neither
Enova nor any of its subsidiaries is a party to any plan,
agreement or arrangement pursuant to the terms of which
the consummation or announcement of any transaction
contemplated by this Agreement will (either alone or in
connection with the occurrence of any additional or
further acts or events) result in any (A) payment (whether
of severance pay or otherwise) becoming due from Enova or
any of its subsidiaries to any officer, employee, former
employee or director thereof or to a trustee under any
"rabbi trust" or similar arrangement, or (B) benefit under
any Enova Benefit Plan being established or becoming
accelerated, or immediately vested or payable.
(h)Labor Agreements. As of the date
hereof, except as set forth in Section 4.10(h) of the
Enova Disclosure Schedule, neither Enova nor any of its
subsidiaries is a party to any collective bargaining
agreement or other labor agreement with any union or labor
organization. To the best knowledge of Enova, as of the
date hereof, there is no current union representation
question involving employees of Enova or any of its
subsidiaries, nor does Enova know of any activity or
proceeding of any labor organization (or representative
thereof) or employee group to organize any such employees.
Except as set forth in the Enova SEC Reports or in Section
4.10(h) of the Enova Disclosure Schedule, (i) there is no
unfair labor practice, employment discrimination or other
complaint against Enova pending, or to the best knowledge
of Enova, threatened, which has or could reasonably be
expected to have a Enova Material Adverse Effect, (ii)
there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the best knowledge of Enova,
threatened, against or involving Enova or any of its
subsidiaries which has or could reasonably be expected to
have, a Enova Material Adverse Effect and (iii) there is
no proceeding, claim, suit, action or governmental
investigation pending or, to the best knowledge of Enova,
threatened, in respect of which any director, officer,
employee or agent of Enova or any of its subsidiaries is
or may be entitled to claim indemnification from Enova
pursuant to their respective articles of incorporation or
by-laws or as provided in the Indemnification Agreements
listed in Section 4.10(h) of the Enova Disclosure
Schedule.
SECTION 4.11. Environmental Protection.
(a)Compliance. Except as set forth in the
Enova SEC Reports, except as set forth in Section 4.11(a)
of the Enova Disclosure Schedule and except where the
failure to be in compliance could not reasonably be
expected to have a Enova Material Adverse Effect, (i) each
of Enova and its subsidiaries is in compliance with all
applicable Environmental Laws, and (ii) neither Enova nor
any of its subsidiaries has received any written
communication from any person or Governmental Authority
that alleges that Enova or any of its subsidiaries is not
in such compliance with applicable Environmental Laws.
(b)Environmental Permits. Except as set
forth in the Enova SEC Reports or as set forth in Section
4.11(b) of the Enova Disclosure Schedule, each of Enova
and its subsidiaries has obtained or has applied for all
Environmental Permits necessary for the construction of
their facilities or the conduct of their operations, and
all such permits are in good standing or, where
applicable, a renewal application has been timely filed
and is pending agency approval, and Enova and its
subsidiaries are in material compliance with all terms and
conditions of the Environmental Permits, except where the
failure to obtain or be in compliance with the
Environmental Permit could not reasonably be expected to
have a Enova Material Adverse Effect.
(c)Environmental Claims. Except as set
forth in the Enova SEC Reports or as set forth in Section
4.11(c) of the Enova Disclosure Schedule, to the best
knowledge of Enova, there is no Environmental Claim
pending (i) against Enova or any of its subsidiaries or
joint ventures, (ii) against any person or entity whose
liability for any Environmental Claim Enova or any of its
subsidiaries or joint ventures has retained or assumed
contractually, or (iii) against any real or personal
property or operations which Enova or any of its
subsidiaries or joint ventures owns, leases or manages, in
whole or in part, which if adversely determined, could
reasonably be expected to have in the aggregate a Enova
Material Adverse Effect.
(d)Releases. Except as
set forth in the Enova SEC Reports or as set forth in
Section 4.11(c) or Section 4.11(d) of the Enova Disclosure
Schedule, Enova has no knowledge of any Releases of any
Hazardous Material that would be reasonably likely to form
the basis of any Environmental Claim against Enova or any
of its subsidiaries or joint ventures, or against any
person or entity whose liability for any Environmental
Claim Enova or any of its subsidiaries or joint ventures
has retained or assumed contractually, which could
reasonably be expected to have, in the aggregate, a Enova
Material Adverse Effect.
(e)Predecessors. Except as set forth in
the Enova SEC Reports or as set forth in Section 4.11(e)
of the Enova Disclosure Schedule, Enova has no knowledge,
with respect to any predecessor of Enova or any subsidiary
or joint venture of Enova, of any Environmental Claim
pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the
basis of any Environmental Claim, which could reasonably
be expected to have a Enova Material Adverse Effect.
(f)Disclosure. To Enova's best knowledge,
Enova has disclosed to Pacific all material facts which
Enova reasonably believes form the basis of a Enova
Material Adverse Effect arising from (i) the cost of Enova
pollution control equipment currently required or known to
be required in the future; (ii) current Enova remediation
costs or Enova remediation costs known to be required in
the future; or (iii) any other environmental matter
affecting Enova.
(g)Cost Estimates. To Enova's best
knowledge, no environmental matter set forth in the Enova
SEC Reports or the Enova Disclosure Schedule could be
reasonably expected to exceed the cost estimates provided
in the Enova SEC Reports by an amount that individually or
in the aggregate could reasonably be expected to have a
Enova Material Adverse Effect.
SECTION 4.12. Regulation as a Utility.
Enova Sub is regulated as a public utility by the State of
California and by no other state. Except as set forth in
Section 4.12 of the Enova Disclosure Schedule, neither
Enova nor any "subsidiary company" or "affiliate" of Enova
is subject to regulation as a public utility or public
service company (or similar designation) by any other
state in the United States or any foreign country. Enova
is an exempt holding company under Section 3(a)(1) of the
1935 Act. Section 4.12 of the Enova Disclosure Schedule
sets forth each "affiliate" and each "subsidiary company"
of Enova which may be deemed to be a "public utility
company" or a "holding company" within the meaning of the
1935 Act.
SECTION 4.13. Nuclear Operations. Except
as set forth in Section 4.13 of the Enova Disclosure
Schedule, to the best knowledge of Enova, the operations
of the San Onofre Nuclear Generating Stations ("SONGS")
are and have at all times been conducted in material
compliance with applicable health, safety, regulatory and
other legal requirements. To the best knowledge of Enova,
SONGS maintains emergency plans designed to respond to an
unplanned release therefrom of radioactive materials into
the environment and liability insurance to the extent
required by law, which is consistent with Enova's view of
the risks inherent in the operation of a nuclear power
facility. To the best knowledge of Enova, plans for the
decommissioning of each of the SONGS facilities and for
the short-term storage of spent nuclear fuel conform with
the requirements of applicable regulatory or other legal
requirement, and such plans have at all times been funded
to the extent required by law, which is consistent with
Enova's reasonable budget projections for such plans.
SECTION 4.14. Vote Required. The approval
of the Enova Merger by the affirmative vote of a majority
of the votes entitled to be cast by all holders of Enova
Common Stock (the "Enova Shareholders' Approval") is the
only vote of the holders of any class or series of the
capital stock of Enova required to approve this Agreement,
the Mergers and the other transactions contemplated
hereby. No vote of shareholders of Enova is required to
approve the Energy Marketing Joint Venture Agreement.
SECTION 4.15. Accounting Matters. Neither
Enova nor, to its best knowledge, any of its affiliates
has taken or agreed to take any action that would prevent
the Company from accounting for the transactions to be
effected pursuant to Articles I and II of this Agreement
as a pooling of interests in accordance with GAAP and
applicable SEC regulations.
SECTION 4.16. Opinion of Financial
Advisor. Enova has received the opinion of Morgan Stanley
& Co. Incorporated ("Morgan Stanley"), dated October 12,
1996, to the effect that, as of such date the Enova
Exchange Ratio is fair to the holders of Enova Common
Stock.
SECTION 4.17. Insurance. Except as set
forth on Section 4.17 of the Enova Disclosure Schedule,
each of Enova and its subsidiaries is, and has been
continuously since January 1, 1993, insured with
financially responsible insurers in such amounts and
against such risks and losses as are customary for
companies conducting the business as conducted by Enova
and its subsidiaries during such time period. Except as
set forth on Schedule 4.17 of the Enova Disclosure
Schedule, neither Enova nor its subsidiaries has received
any notice of cancellation or termination with respect to
any material insurance policy of Enova or its
subsidiaries. The insurance policies of Enova and each of
its subsidiaries are valid and enforceable policies in all
material respects.
SECTION 4.18. Ownership of Pacific Common
Stock. Enova does not "beneficially own" (as such term is
defined in the Pacific Rights Agreement) any shares of
Pacific Common Stock.
SECTION 4.19. Brokers. No broker, finder
or investment banker (other than Morgan Stanley) is
entitled to any brokerage, finder's or other fee or
commission in connection with the Mergers based upon
arrangements made by or on behalf of Enova. Enova has
heretofore furnished to Pacific a complete and correct
copy of all agreements between Enova and Morgan Stanley
pursuant to which such firm would be entitled to any
payment relating to the Mergers.
SECTION 4.20. Tax-Exempt Status. Except
as described in Section 4.20(a) of the Enova Disclosure
Schedule, the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
will not jeopardize the tax-exempt status of the
outstanding revenue bonds of Enova or its subsidiaries
used to finance electric facilities under Section 142(a)
of the Code or under Section 103(b)(4)(E) of the Internal
Revenue Code of 1954, as amended, prior to the Tax Reform
Act of 1986 (the "Bonds"). Except as described in Section
4.20(b) of the Enova Disclosure Schedule, the execution
and delivery of the Energy Marketing Joint Venture
Agreement and the consummation of the transactions
contemplated thereby will not jeopardize the tax-exempt
status of the Bonds. As of the date hereof, except as set
forth in Section 4.20(c) of the Enova Disclosure Schedule,
Enova is not aware of any pending or enacted law, rule,
regulation, administrative order or court decision that
upon its implementation would jeopardize such tax-exempt
status.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGERS
SECTION 5.01. Conduct of Business Pending
the Mergers. Pacific and Enova have each determined to
enter into the transactions contemplated hereby in order
to compete as aggressively as possible in the rapidly
evolving energy marketplace. Consistent with their mutual
objectives Pacific and Enova each intend to pursue,
jointly or independently, strategic opportunities that may
arise between the date of this Agreement and the Effective
Time in accordance with the terms of this Article V.
Consistent with the foregoing, but for the purpose of
assuring that strategic opportunities are pursued that are
consistent with each party's objectives, after the date
hereof and prior to the Effective Time or earlier
termination of this Agreement, Pacific and Enova each
agrees as to itself and its subsidiaries, except (x) as
expressly contemplated or permitted in this Agreement or
the Energy Marketing Joint Venture Agreement, (y) to the
extent required by rule, regulation statute or other law
in connection with California Assembly Bill 1890 (Public
Utilities: electrical restructuring) or in connection
with the CPUC and the FERC industry restructuring
proceedings, and (z) to the extent the other parties
hereto shall otherwise consent in writing, to the
following:
(a)Ordinary Course of Business. Each party
hereto shall, and shall cause its respective subsidiaries
to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same
manner as heretofore conducted and use all commercially
reasonable efforts to preserve intact their present
business organizations and goodwill, preserve the goodwill
and relationships with customers, suppliers and others
having business dealings with them and, subject to prudent
management of workforce needs and ongoing programs
currently in force, keep available the services of their
present officers and employees. Except as set forth in
Section 5.01(a) of the Pacific Disclosure Schedule or the
Enova Disclosure Schedule, respectively, no party shall,
nor shall any party permit any of its subsidiaries to,
enter into a new line of business, or make any change in
the line of business it engages in as of the date hereof
involving any material investment of assets or resources
or any material exposure to liability or loss, in the case
of Pacific, to Pacific and its subsidiaries taken as a
whole, and in the case of Enova, to Enova and its
subsidiaries taken as a whole.
(b)Dividends. No party shall, nor shall
any party permit any of its subsidiaries to (i) declare or
pay any dividends on or make other distributions in
respect of any of their capital stock other than to such
party or its wholly-owned subsidiaries and other than
dividends required to be paid on any series of Pacific
Preferred Stock, Pacific Sub Preferred Stock, Enova Sub
Preferred Stock or Califia Company preferred stock in
accordance with the respective terms thereof, regular
quarterly dividends on Pacific Common Stock with usual
record and payment dates not during any fiscal year in
excess of 110% of the dividends for the prior fiscal year
and regular quarterly dividends on Enova Common Stock with
usual record and payment dates not during any fiscal year
in excess of 110% of the dividends for the prior fiscal
year; (ii) split, combine or reclassify any of their
capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu
of, or in substitution for, shares of its capital stock,
except as otherwise provided in this Section 5.01; or
(iii) redeem, repurchase or otherwise acquire any shares
of their capital stock, other than (A) redemptions,
purchases or acquisitions required by the respective terms
of any series of Pacific Preferred Stock, Pacific Sub
Preferred Stock or Enova Sub Preferred Stock, (B) in
connection with refunding of Pacific Preferred Stock,
Pacific Sub Preferred Stock or Enova Sub Preferred Stock
with preferred stock or debt at a lower cost of funds or
in connection with intercompany purchases of capital
stock, (C) in connection with employee benefit plans, (D)
by Pacific, subject to paragraph (l) below, the repurchase
of up to 4,250,000 shares of Pacific Common Stock and the
expenditure of up to $50,000,000 for the redemption,
repurchase or other acquisition of shares of Pacific
Preferred Stock and Pacific Sub Preferred Stock and (E) by
Enova, subject to paragraph (1) below, the repurchase of
up to 4,250,000 shares of Enova Common Stock and the
expenditure of up to $50,000,000 for the redemption,
repurchase or other acquisition of shares of Enova Sub
Preferred Stock or Califia preferred stock. The last
record date of each of Pacific and Enova on or prior to
the Effective Time which relates to a regular quarterly
dividend on Pacific Common Stock or Enova Common Stock, as
the case may be, shall be the same date and be other than
the Effective Time.
(c)Issuance of Securities. No party shall,
nor shall any party permit any of its subsidiaries to,
issue, agree to issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of
their capital stock of any class or any securities
convertible into or exchangeable for, or any rights,
warrants or options to acquire, any such shares or
convertible or exchangeable securities, other than: (i)
intercompany issuances of capital stock, (ii) issuances in
connection with transactions contemplated by paragraph (e)
or paragraph (h) below, (iii) in the case of Pacific and
its subsidiaries (x) of Pacific Rights issued pursuant to
the Pacific Rights Agreement in form and substance
reasonably satisfactory to Enova, provided that the
Pacific Rights Agreement will be amended to provide that
the consummation of the transactions contemplated by this
Agreement will not result in the triggering of any rights
or entitlements of Pacific shareholders under such Pacific
Rights Agreement; (y) in connection with refunding
existing Pacific Preferred Stock and Pacific Sub Preferred
Stock (or Pacific Preferred Stock and Pacific Sub
Preferred Stock retired after January 1, 1996 and prior to
the date hereof and not subsequently refunded) with
preferred stock or preference stock or debt at a lower
cost of funds; and (z) subject to Section 5.01(i), shares
of Pacific Common Stock to be issued pursuant to employee
benefit plants, stock option and other incentive
compensation plans, director plans and stock purchase and
dividend reinvestment plans; (iv) in the case of Enova and
its subsidiaries (x) in connection with refunding of
existing Enova Sub Preferred Stock (or Enova Sub Preferred
Stock retired after January 1, 1996 and prior to the date
hereof and not subsequently refunded) with preferred stock
or debt at a lower cost of funds; (y) subject to Section
5.01(i), shares of Enova Common Stock pursuant to employee
benefit plans, stock option and other incentive
compensation plans, director plans and stock purchase and
dividend reinvestment plans or (z) rights issued pursuant
to a shareholders rights plan of Enova (if the provisions
of such rights plan comport with terms analogous to those
of Section 3.17 (substituting Pacific for Enova therein)
and are customary for shareholder rights plans); and (v)
the issuance of capital stock under the Pacific Rights
Agreement if required by the respective terms thereof.
The parties shall promptly furnish to each other such
information as may be reasonably requested including
financial information and take such action as may be
reasonably necessary and otherwise fully cooperate with
each other in the preparation of any registration
statement under the Securities Act and other documents
necessary in connection with issuance of securities as
contemplated by this Section 5.01(c), subject to obtaining
customary indemnities.
(d)Charter Documents. Except as set forth
in Section 5.01(d) of the Pacific Disclosure Schedule or
the Enova Disclosure Schedule, no party shall amend or
propose to amend its respective articles of incorporation
or by-laws, except as contemplated herein.
(e)No Acquisitions. Except as set forth in
Section 5.01(e) of the Pacific Disclosure Schedule or the
Enova Disclosure Schedule, and except for acquisitions by
a party and its subsidiaries of less than $10 million in
any transaction or series of related transactions, no
party shall, nor shall any party permit any of its
subsidiaries to, acquire, or publicly propose to acquire,
or agree to acquire, by merger or consolidation with, or
by purchase or otherwise, a substantial equity interest in
or a substantial portion of the assets of, any business or
any corporation, partnership, association or other
business organization or division thereof or otherwise
acquire or agree to acquire a material amount of assets,
other than in the ordinary course of business consistent
with past practice.
(f)Capital Expenditures (including Emission
Allowances). Except as set forth in Section 5.01(f) of
the Pacific Disclosure Schedule or the Enova Disclosure
Schedule or as required by law, no party shall, nor shall
any party permit any of its subsidiaries to, (i) make
capital expenditures in excess of $20 million over the
amount budgeted by such party for capital expenditures on
the date hereof (as reflected on the capital expenditure
budgets previously provided by such party to the other)
through the Effective Time or (ii) enter into written
commitments with respect to sulfur dioxide emission
allowances as provided for by the Clean Air Act Amendments
of 1990, in excess of $100,000.
(g)No Dispositions. Except (i) as set
forth in Section 5.01(g) of the Pacific Disclosure
Schedule or the Enova Disclosure Schedule and (ii) for
dispositions by a party and its affiliates of less than
$10 million in any transaction or series of related
transactions, no party shall, nor shall any party permit
any of its subsidiaries to, sell, lease, license, encumber
or otherwise dispose of, any of its assets, other than
dispositions in the ordinary course of their business
consistent with past practice.
(h)Indebtedness. Except (i) as set forth
in Section 5.01(h) of the Basalt Disclosure Schedule or
the Granite Disclosure Schedule, (ii) as contemplated by
this Agreement, (iii) as budgeted by Enova Financial, Inc.
on the date hereof through December 31, 1997 or (iv) as
required by any order, law or regulation of any
Governmental Authority, no party shall, nor shall any
party permit any of its subsidiaries to, incur or
guarantee any indebtedness (including any debt borrowed or
guaranteed or otherwise assumed, including, without
limitation, the issuance of debt securities or warrants or
rights to acquire debt) other than (u) guarantees in favor
of wholly owned subsidiaries of Pacific or Enova in
connection with the conduct of the business of such wholly
owned subsidiaries; (v) short-term indebtedness in the
ordinary course of business consistent with past practice
(such as the issuance of commercial paper or the use of
existing credit facilities); (w) long-term indebtedness
not aggregating more than $100,000,000 in the case of
either party and its subsidiaries; (x) in connection with
the refunding of Pacific Preferred Stock, Pacific Sub
Preferred Stock or Enova Sub Preferred Stock as permitted
in Section 5.01(b); (y) in connection with the refunding
of existing indebtedness at maturity or at a lower cost of
funds or indebtedness retired after January 1, 1996 and
prior to the date hereof and not subsequently refunded; or
(z) refinancing of industrial development bonds for which
Enova is unable to obtain an opinion of outside counsel as
to the continuing tax-exempt status of such industrial
development bonds.
(i)Compensation, Benefits. Except (i) as
set forth in Section 5.01(i) of the Pacific Disclosure
Schedule or the Enova Disclosure Schedule, (ii) as may be
required by applicable law or (iii) as expressly
contemplated by this Agreement, no party shall, nor shall
any party permit any of its subsidiaries to, (A) enter
into, adopt or amend or increase the amount or accelerate
the payment or vesting of any benefit or amount payable,
or grant any discretionary awards or benefits, under, any
employee benefit plan or other contract, agreement,
commitment, arrangement, plan or policy maintained by,
contributed to or entered into by such party or any of its
subsidiaries, or increase, or enter into any contract,
agreement, commitment or arrangement to increase in any
manner, the compensation or fringe benefits, or otherwise
to extend, expand or enhance the engagement, employment or
any related rights, of any director, officer or other
employee of such party or any of its subsidiaries, except
for normal promotion and compensation increases, hiring
and discretionary award grants in the ordinary course of
business consistent with past practice that, in the
aggregate, do not result in a material increase in
benefits or compensation expense to such party or any of
its subsidiaries or (B) enter into or amend any
employment, severance, special pay arrangement with
respect to termination of employment or other similar
contract, agreement or arrangement with any director or
officer other than in the ordinary course of business
consistent with past practice.
(j)1935 Act. No party shall, nor shall any
party permit any of its subsidiaries, except as required
or contemplated by this Agreement, to engage in any
activities which would cause a change in its status, or
that of its subsidiaries, under the 1935 Act, or that
would impair the ability of Pacific or Enova,
respectively, to claim an exemption as of right under Rule
2 of the 1935 Act prior to the Mergers, or that would
impair the ability of the Company to claim an exemption as
of right under Rule 2 of the 1935 Act following the
Mergers, other than the application to the SEC under the
1935 Act contemplated by this Agreement for approval to
the extent required of the transactions contemplated
hereby.
(k)Accounting. No party shall, nor shall
any party permit any of its subsidiaries to, make any
changes in their accounting methods, except as required by
law,
rule, regulation or GAAP.
(l)Pooling. No party shall, nor shall any
party permit any of its subsidiaries to, take any actions
which would, or would be reasonably likely to, prevent the
Company from accounting for the transactions to be
effected pursuant to Articles I and II of this Agreement
as a pooling of interests in accordance with GAAP and
applicable SEC regulations.
(m)Tax-Free Status. No party shall, nor
shall any party permit any of its subsidiaries to, take
any actions which would, or would be reasonably likely to,
adversely affect the status of the Mergers as tax-free
transactions (except as to dissenters' rights and
fractional shares) under Sections 351 of the Code.
(n)Affiliate Transactions. Except as set
forth in Section 5.01(n) of the Pacific Disclosure
Schedule or the Enova Disclosure Schedule and except with
respect to agreements or arrangements entered into between
a party and its wholly owned subsidiaries or between
wholly owned subsidiaries of a party (it being agreed
that, for purposes of this Section 5.01(n), Pacific Sub
shall be deemed to be a wholly owned subsidiary of Pacific
and Enova Sub shall be deemed to be a wholly owned
subsidiary of Enova), no party shall, nor shall any party
permit any of its subsidiaries to, enter into any
agreement or arrangement with any of their respective
affiliates on terms to such party or its subsidiaries
materially less favorable than could reasonably be
expected to have been obtained with an unaffiliated third
party on an arm's length basis.
(o)Cooperation, Notification. Each party shall, and
shall cause its subsidiaries to, (i) confer on a regular
and frequent basis with one or more representatives of the
other party to discuss material operational matters and
the general status of its ongoing operations (including,
without limitation, the status of the matters set forth in
Section 5.01(e) of the Pacific Disclosure Schedule and the
Enova Disclosure Schedule); (ii) promptly notify the other
party of any significant changes in its properties,
assets, financial condition or results of operations;
(iii) advise the other party of any change or event which
has had or, could reasonably be expected to result in, a
Pacific Material Adverse Effect or a Enova Material
Adverse Effect, as the case may be, or a Joint Venture
Material Adverse Effect; and (iv) promptly provide the
other party with copies of all material filings made by
such party or any of its subsidiaries with any state or
federal court, administrative agency, commission or other
Governmental Authority in connection with this Agreement
and the transactions contemplated hereby.
(p)Regulatory Matters. Except as set forth
in Section 5.01(p) of the Pacific Disclosure Schedule or
the Enova Disclosure Schedule, except with regard to those
specific geographic regions where the parties provide
overlapping service, and except for filings contemplated
by the applications filed in FERC Docket Nos. EC96-19-000,
EL96-48- 000 and ER96-1663-000 and CPUC A.96-06-029, each
party shall, and shall cause its subsidiaries to, discuss
with the other party any material changes in its or its
subsidiaries' material rates or charges (other than pass-
through fuel and gas rates or charges), standards of
service or accounting from those in effect on the date
hereof and consult with the other party prior to making
any filing (or any amendment thereto), or effecting any
agreement, commitment, arrangement or consent, whether
written or oral, formal or informal, with respect thereto.
(q)Third-Party Consents. Pacific shall,
and shall cause its subsidiaries to, use all commercially
reasonable efforts to obtain all Pacific Required
Consents. Pacific shall promptly notify Enova of any
failure or prospective failure to obtain any such consents
and, if requested by Enova, shall provide copies of all
Pacific Required Consents obtained by Pacific to Enova.
Enova shall, and shall cause its subsidiaries to, use all
commercially reasonable efforts to obtain all Enova
Required Consents. Enova shall promptly notify Pacific of
any failure or prospective failure to obtain any such
consents and, if requested by Pacific, shall provide
copies of all Enova Required Consents obtained by Enova to
Pacific.
(r)No Breach, Etc. No party shall, nor
shall any party permit any of its subsidiaries to, take
any action that would or is reasonably likely to result in
a material breach of any provision of this Agreement or in
any of its representations and warranties set forth in
this Agreement being untrue on and as of the Closing Date.
(s)Company Actions. Enova and Pacific
shall cause the Company to take only those actions, from
the date hereof until the Effective Time, that are
required or contemplated by this Agreement to be so taken
by the Company, including, without limitation, the
declaration, filing or registration with, or notice to or
authorization, consent or approval of, any Governmental
Authority, as set forth in Section 3.04(b) of the Pacific
Disclosure Schedule, Section 3.04(c) of the Pacific
Disclosure Schedule, Section 4.04(b) of the Enova
Disclosure Schedule and Section 4.04(c) of the Enova
Disclosure Schedule.
SECTION 5.02. Transition and Strategic
Opportunity Committees. (a) Transition Committee. A
committee comprised of Stephen L. Baum, President and
Chief Executive Officer of Enova, Donald E. Felsinger,
President and Chief Executive Officer of Enova Sub,
Richard D. Farman, President and Chief Operating Officer
of Pacific, and Warren Mitchell, President of Pacific Sub
(the "Transition Committee") has been established as of
the date of this Agreement to examine various alternatives
regarding the manner in which to best organize, manage and
integrate the business of the Company after the Effective
Time. Stephen L. Baum, the President and Chief Executive
Officer of Enova, shall chair the Transition Committee and
coordinate the day-to-day activities of the Transition
Committee with the concurrence of Richard D. Farman, the
President and Chief Operating Officer of Pacific. From
time to time, the Transition Committee shall report its
findings to the Board of Directors of each of Pacific and
Enova. After the date that each of the Pacific
Shareholders' Approval and the Enova Shareholders'
Approval has been obtained and prior to the Effective
Time, Richard D. Farman, President and Chief Operating
Officer of Pacific, shall attend meetings of Enova's Board
of Directors and Stephen L. Baum, President and Chief
Executive Officer of Enova, shall attend meetings of
Pacific's Board of Directors as they deem appropriate in
consultation with each other and to the extent permitted
by applicable law.
(b)Strategic Opportunity Committee. A
committee comprised of Willis B. Wood, Jr., the Chairman
and Chief Executive Officer of Pacific, Richard D. Farman,
the President and Chief Operating Officer of Pacific,
Stephen L. Baum, the President and Chief Executive Officer
of Enova, and Donald E. Felsinger, the Chief Executive
Officer of Enova Sub, (the "Strategic Opportunity
Committee") also has been established to facilitate the
parties' ability to pursue strategic opportunities that
would otherwise violate Sections 5.01 (a), (c), (e), (f),
(g), (h) or (k) (a "New Opportunity") in a manner
consistent with both the objectives of this Agreement and
the parties' desires to compete as aggressively as
possible in the rapidly evolving energy marketplace. If
the Strategic Opportunity Committee unanimously approves
the pursuit of a New Opportunity by Pacific or Enova or
the two parties acting jointly (no member of the Strategic
Opportunity Committee to unreasonably withhold such
approval), then the pursuit of such New Opportunity shall
not be deemed a breach of such party's or parties'
obligations under Section 5.01. The approval of the
pursuit of a New Opportunity by the Strategic Opportunity
Committee as provided herein shall be evidenced in
writing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Access to
Information; Confidentiality. (a) Upon reasonable notice
and subject to restrictions contained in confidentiality
agreements to which such party is subject (from which such
party shall use reasonable efforts to be released),
Pacific and Enova each shall (and shall cause each of
their subsidiaries to) afford to the officers, employees,
accountants, counsel, financial advisors and other
representatives of the other (collectively,
"Representatives"), reasonable access, during the period
prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such
period, Pacific and Enova each shall (and shall cause each
of their subsidiaries to) furnish promptly to the other
(i) all information concerning its business, properties,
directors, subsidiaries, officers, shareholders, personnel
and such other matters as such other party may reasonably
request and (ii) a copy of each material report, schedule
and other document filed or received by it or any of its
subsidiaries pursuant to the requirements of the FERC or
the CPUC and a copy of each report, schedule and other
document filed or received by it or any of its
subsidiaries pursuant to the requirements of federal or
state securities laws or filed with the SEC, the
Department of Justice, the Federal Trade Commission, the
NRC, or any other federal, state or local regulatory
agency or commission, and each party shall make available
to the other party the appropriate individuals (including
attorneys, accountants and other professionals) for
discussion of such party's business, properties, tax
situation and personnel as the other party may reasonably
request.
(b)Each party shall, and shall cause its
subsidiaries and Representatives to, keep such information
confidential in accordance with the terms of the
Confidentiality Agreement, dated April 4, 1996, between
Pacific and Enova (the "Confidentiality Agreement").
SECTION 6.02. Registration Statement;
Joint Proxy Statement.
(a)Preparation and Filing. The parties
will prepare and file with the SEC as soon as reasonably
practicable after the date hereof the Registration
Statement and the Proxy Statement (together, the "Joint
Proxy/Registration Statement"). The parties hereto shall
each use reasonable efforts to cause the Registration
Statement to be declared effective under the Securities
Act as promptly as practicable after such filing. Each
party hereto shall also take such action as may be
reasonably required to cause the shares of Company Common
Stock issuable in connection with the Mergers to be
registered or to obtain an exemption from registration
under applicable state "blue sky" or securities laws;
provided, however, that no party shall be required to
register or qualify as a foreign corporation or to take
other action which would subject it to service of process
in any jurisdiction where it will not be, following the
Mergers, so subject. Each of the parties hereto shall
furnish all information concerning itself which is
required or customary for inclusion in the Joint
Proxy/Registration Statement. The parties shall use their
best efforts to cause the shares of Company Common Stock
issuable in the Mergers to be approved for listing on the
NYSE upon official notice of issuance. The information
provided by any party hereto for use in the Joint
Proxy/Registration Statement shall be true and correct in
all material respects without omission of any material
fact which is required to make such information not false
or misleading. No representation, covenant or agreement
is made by any party hereto with respect to information
supplied by any other party for inclusion in the Joint
Proxy Statement/Registration Statement.
(b)Amendments and Supplements. No
amendment or supplement to the Proxy Statement or the
Registration Statement will be made without the approval
of all parties. Each party will advise the others,
promptly after it receives notice thereof, of the time
when the Registration Statement has become effective or
any supplement or amendment has been filed, the issuance
of any stop order, the suspension, if applicable, of the
qualification of such party's common stock for sale in any
jurisdiction, or any request by the SEC for amendment of
the Proxy Statement or the Registration Statement or
comments thereon and responses thereto or requests by the
SEC for additional information.
(c)Letter of Enova's Accountants. Enova
shall use best efforts to cause to be delivered to the
Company, Pacific, Newco Enova Sub and Newco Pacific Sub a
letter of Deloitte Touche LLP, dated a date within two
business days before the date of the Joint
Proxy/Registration Statement, and addressed to the
Company, Pacific, Newco Enova Sub and Newco Pacific Sub,
in form and substance reasonably satisfactory to the
Company and Pacific and customary in scope and substance
for "cold comfort" letters delivered by independent public
accountants in connection with registration statements on
Form S-4.
(d)Letter of Pacific's Accountants.
Pacific shall use best efforts to cause to be delivered to
the Company, Enova, Newco Enova Sub and Newco Pacific Sub
a letter of Deloitte Touche LLP, dated a date within two
business days before the date of the Joint
Proxy/Registration Statement, and addressed to the
Company, Enova, Newco Enova Sub and Newco Pacific Sub in
form and substance satisfactory to the Company and Enova
and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in
connection with registration statements on Form S-4.
SECTION 6.03. Regulatory Matters.
(a)HSR Filings. Each party hereto shall
file or cause to be filed with the Federal Trade
Commission and the Department of Justice any notifications
required to be filed by their respective "ultimate parent"
companies under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and
the rules and regulations promulgated thereunder with
respect to the transactions contemplated hereby. Such
parties will use all commercially reasonable efforts to
make such filings promptly and to respond promptly to any
requests for additional information made by either of such
agencies.
(b)Other Regulatory Approvals. Each party
hereto shall cooperate and use its best efforts to
promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions,
filings and other documents, and to use all commercially
reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all Governmental
Authorities necessary or advisable to (i) consummate the
transactions contemplated by this Agreement, including,
without limitation, the Enova Required Statutory Approvals
and the Pacific Required Statutory Approvals; and (ii)
allow the Energy Marketing Joint Venture and, at and after
the Effective Time, the Company's subsidiaries, to market
and sell electricity and natural gas and related products
and services as contemplated by the Summary of Terms
attached as Exhibit A or, after the execution thereof, the
Energy Marketing Joint Venture Agreement (the "Energy
Marketing Required Statutory Approvals"), such
commercially reasonable efforts to include, in the case of
Pacific, the filing of a notice of cancellation of any
rate schedule or tariffs applicable to sales of
electricity by Pacific, or by any affiliate of Pacific,
that are subject to the jurisdiction of the FERC under the
Power Act, provided that such notice of cancellation shall
be filed concurrently with, and the cancellation requested
therein shall be subject to the grant of, the request for
approval of the Energy Marketing Required Statutory
Approvals. Enova shall have the right to review and
approve in advance all characterizations of the
information relating to Enova, on the one hand, and
Pacific shall have the right to review and approve in
advance all characterizations of the information relating
to Pacific, on the other hand, in either case, which
appear in any filing made in connection with the
transactions contemplated by this Agreement or the
Mergers. Enova and Pacific agree that they will consult
with each other with respect to the obtaining of all such
necessary permits, consents, approvals and authorizations
of Governmental Authorities. Pacific and Enova shall
jointly assist the Company in its efforts to obtain any
necessary approvals from any Governmental Authority.
SECTION 6.04. Shareholder Approvals.
(a)Approval of Pacific Shareholders.
Subject to the terms of Section 6.04(d), Pacific shall, as
soon as reasonably practicable after the date hereof, (i)
take all steps necessary duly to call, give notice of,
convene and hold a special meeting of its shareholders
(the "Pacific Special Meeting") for the purpose of
securing the Pacific Shareholders' Approval, (ii)
distribute to its shareholders the Joint Proxy Statement
in accordance with applicable Federal and state law and
with its articles of incorporation and by-laws, (iii)
subject to the fiduciary duties of its board of directors,
recommend to its shareholders the approval of the Pacific
Merger, this Agreement and the transactions contemplated
hereby and (iv) cooperate and consult with Enova with
respect to each of the foregoing matters.
(b)Approval of Enova Shareholders. Subject
to the terms of Section 6.04(d), Enova shall, as soon as
reasonably practicable after the date hereof, (i) take all
steps necessary to call, give notice of, convene and hold
a special meeting of its shareholders (the "Enova Special
Meeting" and, together with the Pacific Special Meeting,
the "Special Meeting") for the purpose of securing the
Enova Shareholders' Approval, (ii) distribute to its
shareholders the Joint Proxy Statement in accordance with
applicable Federal and state law and its articles of
incorporation, (iii) subject to the fiduciary duties of
the board of directors of Enova, recommend to its
shareholders the approval of the Enova Merger, this
Agreement and the transactions contemplated hereby and
(iv) cooperate and consult with Pacific with respect to
each of the foregoing matters.
(c)Meeting Dates. Pacific and Enova shall
use their reasonable best efforts to hold the Special
Meetings on the same date and at the same time on such
date.
(d)Fairness Opinions. It shall be a
condition to Pacific's obligation to distribute the Joint
Proxy/Registration Statement to its shareholders and to
hold the Pacific Special Meeting that the opinions of Barr
Devlin and Merrill Lynch referred to in Section 3.15 shall
have been reaffirmed as of the date of the Joint
Proxy/Registration Statement and shall not have been
withdrawn on or prior to the date of the Pacific Special
Meeting. It shall be a condition to Enova's obligation to
distribute the Joint Proxy/Registration Statement to its
shareholders and to hold the Enova Special Meeting that
the opinion of Morgan Stanley referred to in Section 4.16
shall have been reaffirmed as of the date of the Joint
Proxy/Registration Statement and shall not have been
withdrawn on or prior to the date of the Enova Special
Meeting.
SECTION 6.05. Directors' and Officers'
Indemnification.
(a)Indemnification. To the extent, if any,
not provided by an existing right of indemnification or
other agreement or policy, from and after the Effective
Time, the Company shall, to the fullest extent not
prohibited by applicable law, indemnify, defend and hold
harmless each person who is now, or has been at any time
prior to the date hereof, or who becomes prior to the
Effective Time, an officer or director of any of the
parties hereto or any of their subsidiaries (each an
"Indemnified Party" and collectively, the "Indemnified
Parties") against all losses, expenses (including
reasonable attorney's fees), claims, damages or
liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement arising
out of actions or omissions occurring at or prior to the
Effective Time (whether or not asserted or claimed prior
to, at or after the Effective Time) that are in whole or
in part based on, or arising out of the fact that such
person is or was a director or officer of such party or
based on or arising out of or pertaining to the
transactions contemplated by this Agreement. In the event
of any such loss, expense, claim, damage or liability
(whether or not arising before the Effective Time), (i)
the Company shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to the Company, promptly
after statements therefor are received and otherwise
advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred,
in either case to the extent not prohibited by California
Law (which consent shall not be unreasonably withheld),
(ii) the Company will cooperate in the defense of any such
matter and (iii) any determination required to be made
with respect to whether an Indemnified Party's conduct
complies with the standards set forth under California law
and the Company's Articles of Incorporation or By-Laws
shall be made by independent counsel mutually acceptable
to the Company and the Indemnified Party; provided,
however, that the Company shall not be liable for any
settlement effected without its written consent (which
consent shall not be unreasonably withheld). The
Indemnified Parties as a group may retain only one law
firm with respect to each related matter except to the
extent there is, in the sole opinion of counsel to an
Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue
between positions of any two or more Indemnified Parties.
(b)Insurance. For a period of six years
after the Effective Time, the Company shall cause to be
maintained in effect the policies of directors' and
officers' liability insurance maintained by Pacific and
Enova; provided, however, that in no event shall the
Company be required to expend in any one year an amount in
excess of 200% of the annual premiums currently paid by
Enova and Pacific for such insurance; and provided further
that if the annual premiums of such insurance coverage
exceed such amount, the Company shall be obligated to
obtain a policy with the greatest coverage available for a
cost not exceeding such amount.
(c)Successors. Neither the Company nor any
of its successors or assigns shall (i) consolidate with or
merge into any other person so as not to be the continuing
or surviving corporation or entity of such consolidation
or merger or (ii) transfer all or substantially all of its
properties and assets to any person unless, in either such
case, proper provisions shall be made so that the
successors and assigns of the Company shall assume the
obligations set forth in this Section 6.05.
(d)Survival of Indemnification. To the
fullest extent not prohibited by law, from and after the
Effective Time, all rights to indemnification as of the
date hereof in favor of the employees, agents, directors
or officers of Pacific, Enova and their respective
subsidiaries with respect to their activities as such
prior to the Effective Time, as provided in their
respective Articles of Incorporation or By-laws, in effect
on the date thereof or otherwise in effect on the date
hereof, shall survive the Mergers and shall continue in
full force and effect for a period of not less than six
years from the Effective Time.
(e)Indemnification Agreements. Enova,
Pacific and the Company shall honor and fulfill in all
respects the obligations of Enova and Pacific pursuant to
indemnification agreements with Enova's and Pacific's
officers and directors existing at the Effective Time.
SECTION 6.06. Disclosure Schedules. On or
before the date hereof, (i) Pacific shall deliver to Enova
a schedule (the "Pacific Disclosure Schedule"), which
shall be accompanied by a certificate signed by the chief
financial officer of Pacific stating the Disclosure
Schedule is being delivered pursuant to this Section
6.06(i) and (ii) Enova shall deliver to Pacific a schedule
(the "Enova Disclosure Schedule"), which shall be
accompanied by a certificate signed by the chief financial
officer of Enova stating the Enova Disclosure Schedule is
being delivered pursuant to this Section 6.06(ii). The
Pacific Disclosure Schedule and the Enova Disclosure
Schedule are collectively referred to herein as the
"Disclosure Schedules". The Disclosure Schedules, when so
delivered, shall be deemed to constitute an integral part
of this Agreement and to modify the respective
representations, warranties, covenants or agreements of
the parties hereto contained herein to the extent that
such representations, warranties, covenants or agreements
expressly refer to the Disclosure Schedules. Anything to
the contrary contained herein or in the Disclosure
Schedules notwithstanding, any and all statements,
representations, warranties or disclosures set forth in
the Disclosure Schedules delivered on or before the date
hereof shall be deemed to have been made on and as of the
date hereof. From time to time prior to the Closing, the
parties shall promptly supplement or amend the Disclosure
Schedules with respect to any matter, condition or
occurrence hereafter arising which, if existing or
occurring at the date of this Agreement, would have been
required to be set forth or described in the Disclosure
Schedules. No supplement or amendment shall be deemed to
cure any breach of any representation or warranty made in
this Agreement or have any effect for the purpose of
determining satisfaction of the conditions set forth in
Section 7.02(b) or Section 7.03(b).
SECTION 6.07. Public Announcements.
Subject to each party's disclosure obligations imposed by
law, Enova and Pacific will cooperate with each other in
the development and distribution of all news releases and
other public information disclosures with respect to this
Agreement or any of the transactions contemplated hereby
and shall not issue any such public announcement or
statement without the consent of the other party (which
consent shall not be unreasonably withheld).
SECTION 6.08. Rule 145 Affiliates.
Pacific shall identify in a letter to Enova, and Enova
shall identify in a letter to Pacific, all persons who
are, at the Closing Date, "affiliates" of Pacific and
Enova, respectively, as such term is used in Rule 145
under the Securities Act. Pacific and Enova shall use
their respective best efforts to cause their respective
affiliates to deliver to the Company on or prior to the
Closing Date a written agreement substantially in the form
attached as Exhibit 6.08 (each, an "Affiliate Agreement").
SECTION 6.09. Employee Agreements and
Workforce Matters.
(a)Certain Employee Agreements. Subject to
Section 6.10 and Section 6.15, the Company and its
subsidiaries shall honor, without modification, all
contracts, agreements, collective bargaining agreements
and commitments of the parties prior to the date hereof
which apply to any current or former employee or current
or former director of the parties hereto; provided,
however, that this undertaking is not intended to prevent
the Company from enforcing such contracts, agreements,
collective bargaining agreements and commitments in
accordance with their terms, including, without
limitation, any reserved right to amend, modify, suspend,
revoke or terminate any such contract, agreement,
collective bargaining agreement or commitment.
(b)Workforce Matters. Subject to the terms
of any applicable collective bargaining agreements, for a
period of three years following the Effective Time, any
reductions in workforce in respect of employees of the
Company shall be made on a fair and equitable basis, in
light of the circumstances and the objectives to be
achieved, giving consideration to previous work history,
job experience, and qualifications, without regard to
whether employment was with Pacific or its subsidiaries or
Enova or its subsidiaries, and any employees whose
employment is terminated or jobs are eliminated by the
Company or any of its subsidiaries during such period
shall be entitled to participate on a fair and equitable
basis in the job opportunity and employment placement
programs offered by the Company or any of its
subsidiaries.
SECTION 6.10. Employee Benefit Plans.
(a)Maintenance of Pacific and Enova Benefit
Plans. Each of the Pacific Benefit Plans and Enova
Benefit Plans in effect as of the Effective Time, except
as provided in Section 6.10(b) and Section 6.11, shall be
maintained in effect with respect to the employees or
former employees of Pacific and any of its subsidiaries,
on the one hand, and of Enova and any of its subsidiaries,
on the other hand, respectively, who are covered by any
such benefit plan immediately prior to the Closing Date
until the Company otherwise determines after the Effective
Time; provided, however, that nothing herein contained
shall limit any reserved right contained in any such
Pacific Benefit Plan or Enova Benefit Plan to amend,
modify, suspend, revoke or terminate any such plan. Any
person hired by the Company or any of its subsidiaries
after the Closing Date who was not employed by any party
hereto or its subsidiaries immediately prior to the
Closing Date shall be eligible to participate in such
benefit plans maintained, or contributed to, by the
subsidiary, division or operation by which such person is
employed, provided that such person meets the eligibility
requirements of the applicable plan.
(b)Incentive Compensation Plans. Prior to
the Effective Time, a committee will be formed for the
purposes of developing short- and long-term incentive
compensation arrangements for the Company which are to be
implemented after the Effective Time and making the
appropriate adjustments, if any, to the performance goals,
target awards and any other relevant criteria under the
incentive compensation plans of Pacific and Enova that are
in effect as of the Effective Time to take the Mergers
into account. In addition, such committee shall conduct a
review of Enova's and Pacific's respective benefit plans
following the signing of this Agreement in order to
coordinate the provision of benefits after the Effective
Time and to eliminate duplicative benefits, including,
without limitation, through the establishment by the
Company of replacement benefit plans (the "Company
Replacement Plans"). Each participant in any Pacific
Benefit Plan or Enova Benefit Plan that is replaced by a
Company Replacement Plan shall receive credit for purposes
of eligibility to participate, vesting, benefit accrual
and eligibility to receive benefits under any Company
Replacement Plan for service credited for the
corresponding purpose under such benefit plan; provided,
however, that such crediting of service shall not operate
to duplicate any benefit to any such participant or the
funding for any such benefit.
(c)Separate Plans. Pacific and Enova each
agrees that even in the event that the Pacific and Pacific
Sub pension plan shares a common or master trust with the
Enova and Enova Sub pension plan and even if Enova and
Pacific provide identical benefits the plans shall remain
legally separate whereby the assets of one plan cannot be
applied to the liabilities of the other plan.
SECTION 6.11. Stock Option and Other Stock
Plans.
(a) Amendment of Stock Option Plans and
Agreements. (i) Prior to the Effective Time, Pacific
shall use its reasonable best efforts to cause each
individual award agreement entered into under the Pacific
Employee Stock Option Plan, the Pacific Stock Incentive
Plan and the Pacific 1979 Stock Option Plan to be amended
so as to eliminate the rights of the award recipients
thereunder to receive cash in exchange for such award upon
a Change in Control (as such term is defined in such
plans) that are triggered, directly or indirectly, in
whole or in part, by the Mergers or any transaction or
event consummated or occurring in connection therewith.
(ii)Effective as of the Effective Time,
Pacific shall amend the Pacific Employee Stock Option
Plan, the Pacific Stock Incentive Plan and the Pacific
1979 Stock Option Plan and Enova shall amend the 1986
Long-Term Incentive Plan (as amended and restated
effective April 25, 1995) and each of Pacific and Enova
shall amend each underlying award agreement to provide
that each outstanding award with respect to shares of
Pacific Common Stock and Enova Common Stock, respectively
(each, a "Stock Award"), along with any tandem stock
appreciation right, shall constitute an award with respect
shares of Company Common Stock, on the same terms and
conditions as were applicable under such Stock Award,
based on the same number of shares of the Company Common
Stock as the holder of such Stock Award would have been
entitled to receive pursuant to the Mergers in accordance
with Article II had such holder exercised such award in
full immediately prior to the Effective Time. The number
of shares, the award price, and the terms and conditions
of exercise of such award, shall be determined in a manner
that preserves both (i) the aggregate gain (or loss) on
the Stock Award immediately prior to the Effective Time
and (ii) the ratio of the exercise price per share subject
to the Stock Award to the fair market value (determined
immediately prior to the Effective Time) per share subject
to such award; provided, however, that in the case of any
option to which Section 421 of the Code applies by reason
of its qualification under any of Sections 422-424 of the
Code, option price, the number of shares purchasable
pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to
comply with Section 424(a) of the Code. Prior to the
Effective Time, each of Pacific and Enova shall take such
actions, including using its reasonable best efforts to
obtain the consent of the awardees, as may be necessary to
carry out the substitution and exchange contemplated in
this Section 6.11(a). At the Effective Time, the Company
shall assume each award agreement relating to a Stock
Award, each as amended as previously provided. As soon as
practicable after the Effective Time, the Company shall
deliver to the holders of Stock Awards appropriate notices
setting forth such holders' rights pursuant to the Company
stock incentive plan and each underlying award agreement,
each as assumed by the Company.
(b)Company Action. With respect to any
other Pacific Benefit Plan, Enova Benefit Plan or benefit
plan of the Company under which the delivery of Pacific
Common Stock, Enova Common Stock or Company Common Stock,
as the case may be, is required upon payment of benefits,
grant of awards or exercise of options (the "Stock
Plans"), the Company shall take all corporate action
necessary or appropriate to (i) obtain shareholder
approval with respect to such plan to the extent such
approval is required for purposes of the Code or other
applicable law, or to enable such plan to comply with Rule
16b-3 promulgated under the Exchange Act, (ii) reserve for
issuance under such plan or otherwise provide a sufficient
number of shares of Company Common Stock for delivery upon
payment of benefits, grant of awards or exercise of
options under such plan and (iii) as soon as practicable
after the Effective Time, file registration statements on
Form S-3 or Form S-8, as the case may be (or any successor
or other appropriate forms), with respect to the shares of
Company Common Stock subject to such plan to the extent
such registration statement is required under applicable
law, and the Company shall use its best efforts to
maintain the effectiveness of such registration statements
(and maintain the current status of the prospectuses
contained therein) for so long as such benefits and grants
remain payable and such options remain outstanding. With
respect to those individuals who subsequent to the Mergers
will be subject to the reporting requirements under
Section 16(a) of the Exchange Act, the Company shall
administer the Stock Plans, where applicable, in a manner
that complies with Rule 16b-3 promulgated under the
Exchange Act.
SECTION 6.12. No Solicitations. No party
hereto shall, and each such party shall cause its
subsidiaries not to, permit any of its Representatives to,
and shall use its best efforts to cause such persons not
to, directly or indirectly: initiate, solicit or
encourage, or take any action to facilitate the making of
any offer or proposal which constitutes or is reasonably
likely to lead to any Acquisition Proposal (as defined
below), or, in the event of an unsolicited Acquisition
Proposal, except prior to the receipt of the Enova
Shareholders' Approval and of the Pacific Shareholders'
Approval to the extent the Board of Directors of the party
receiving such unsolicited Acquisition Proposal determines
in good faith after consultation with outside counsel that
such action is reasonably necessary for such Board of
Directors to act in a manner consistent with its fiduciary
duties under applicable law, engage in negotiations or
provide any confidential information or data to any person
relating to any Acquisition Proposal. Each party hereto
shall notify the other party orally and in writing of any
such inquiries, offers or proposals, within 48 hours of
the receipt thereof, shall keep the other party informed
of the status of any such inquiry, offer or proposal, and
shall give the other party three days' advance notice of
any agreement to be entered into with or any information
to be supplied to any person making such inquiry, offer or
proposal. Each party hereto shall immediately cease and
cause to be terminated all existing discussions and
negotiations, if any, with any parties conducted
heretofore with respect to any Acquisition Proposal. As
used in this Section 6.12, "Acquisition Proposal" shall
mean any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving any
party or any of its material subsidiaries, or any proposal
or offer (in each case, whether or not in writing and
whether or not delivered to the shareholders of a party
generally) to acquire in any manner, directly or
indirectly, a substantial equity interest in, or a
substantial portion of the assets of any party or any of
its material subsidiaries, other than any of the foregoing
transactions among the parties hereto or pursuant to the
transactions contemplated by this Agreement. Nothing
contained herein shall prohibit a party from taking and
disclosing to its shareholders a position contemplated by
Rule 14e-2(a) under the Exchange Act with respect to a
Acquisition Proposal by means of a tender offer.
SECTION 6.13. Company Board of Directors.
Enova's and Pacific's Boards of Directors will take such
action as may be necessary to cause the Board of Directors
of the Company at the Effective Time to be constituted of
an equal number of directors designated by each of Enova
and Pacific. Among the directors of the Company at the
Effective Time shall be Richard D. Farman, President and
Chief Operating Officer of Pacific, who shall be
designated by Pacific, and Stephen L. Baum, President and
Chief Executive Officer of Enova, who shall be designated
by Enova. Neither Pacific nor Enova shall designate any
other officer as a director of the Company at the
Effective Time. The initial designation of such directors
among the three classes of the Board of Directors of the
Company shall be agreed among the parties, the designees
of each party to be divided as equally as is feasible
among such classes; provided, however, that if, prior to
the Effective Time, any of such designees shall decline or
be unable to serve, the party which designated such person
shall designate another person to serve in such person's
stead. Enova's and Pacific's Boards of Directors will
also take such action as may be necessary to cause the
committees of the Board of Directors of the Company at the
Effective Time to be constituted of an equal number of
directors of the Company designated by Enova and Pacific.
SECTION 6.14. Company Officers. At the
Effective Time, pursuant to and in accordance with the
terms hereof and of the employment contracts referred to
in Section 6.15, Richard D. Farman, President and Chief
Operating Officer of Pacific, shall become Chairman of the
Board and Chief Executive Officer of the Company, and
Stephen L. Baum, President and Chief Executive Officer of
Enova, shall become Vice-Chairman, President and Chief
Operating Officer of the Company. If either of such
persons is unable or unwilling to hold such offices for
the period set forth in his employment contract, his
successor shall be selected by the Board of Directors of
the Company in accordance with its Bylaws. The Chairman
of the Board and Chief Executive Officer and the President
and Chief Operating Officer of the Company shall comprise
the Office of the Chairman of the Company to which all
other officers of the Company and, after the Effective
Time, the Chief Executive Officers of Pacific, Pacific
Sub, Enova and Enova Sub shall report. Richard D. Farman,
President and Chief Operating Officer of Pacific, and
Stephen L. Baum, President and Chief Executive Officer of
Enova, shall unanimously recommend to the Board of
Directors of the Company candidates to serve as the
officers of the Company who are not otherwise designated
by this Agreement. Such officers shall be appointed by
the Board of Directors of the Company in accordance with
its By-Laws.
SECTION 6.15. Employment Contracts. The
Company shall on the date hereof enter into four
employment contracts in the forms set forth in Exhibit
6.15.
SECTION 6.16. Post-Merger Operations.
Following the Effective Time, the Company shall conduct
its operations in accordance with the following:
(a)Principal Corporate
Offices. The Company and Enova Sub shall maintain their
principal corporate offices in San Diego and Pacific Sub
shall maintain its principal corporate offices in Los
Angeles.
(b)Maintenance of Enova Sub and Pacific
Sub. Pacific Sub, on the one hand, and Enova Sub, on the
other hand, shall continue their separate corporate
existences, operating under the names of "Southern
California Gas Company" and "San Diego Gas & Electric",
respectively.
(c)Charities. After the Effective Time,
the Company shall provide charitable contributions and
community support within the service areas of the parties
and each of their respective subsidiaries at levels
substantially comparable to the levels of charitable
contributions and community support provided by the
parties and their respective subsidiaries within their
service areas within the two-year period immediately prior
to the Effective Time.
SECTION 6.17. Expenses. Subject to
Section 8.03, all costs and expenses incurred in
connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring
such expenses, except that those expenses incurred in
connection with printing the Joint Proxy Statement and the
Registration Statement, as well as the filing fees
relating thereto, and any such filing fees for
applications to the FERC, the CPUC, the NRC or the SEC
shall be shared equally by Enova, on the one hand, and
Pacific, on the other.
SECTION 6.18. Energy Marketing Joint
Venture. As promptly as practicable following the date
hereof, each of Pacific and Enova shall use their best
efforts to negotiate the terms of, and enter into, the
Energy Marketing Joint Venture Agreement, which agreement
shall contain substantially the terms contemplated by the
Summary of Terms attached as Exhibit A.
ARTICLE VII
CONDITIONS TO THE MERGERS
SECTION 7.01. Conditions to the
Obligations of Each Party. The respective obligations of
each party to effect the Mergers shall be subject to the
satisfaction on or prior to the Closing Date of the
following conditions, except, to the extent permitted by
applicable law, that such conditions may be waived in
writing pursuant to Section 9.05 by the joint action of
the parties hereto:
(a)Shareholder Approvals. The Pacific
Shareholders' Approval and the Enova Shareholders'
Approval shall have been obtained.
(b)No Injunction. No
temporary restraining order or preliminary or permanent
injunction or other order by any federal or state court
preventing consummation of the Mergers shall have been
issued and continuing in effect, and the Mergers and the
other transactions contemplated hereby shall not have been
prohibited under any applicable federal
or state law or regulation.
(c)Registration Statement. The
Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and
no stop order suspending such effectiveness shall have
been issued and remain in effect.
(d)Listing of Shares. The shares of
Company Common Stock issuable in the Mergers pursuant to
Article II shall have been approved for listing on the
NYSE upon official notice of issuance.
(e)Statutory Approvals. The Enova Required
Statutory Approvals and the Pacific Required Statutory
Approvals shall have been obtained at or prior to the
Effective Time, such approvals shall have become Final
Orders and neither such Final Orders nor any order, law or
regulation of any Governmental Authority imposes terms or
conditions which, in the aggregate, could reasonably be
expected to have a material adverse effect on (i) the
ability of the Energy Marketing Joint Venture to achieve
the business objectives contemplated by the Summary of
Terms attached as Exhibit A or (ii) the operations,
properties, assets or financial condition or results of
operations of the Company and its prospective subsidiaries
taken as a whole or which would be materially inconsistent
with the agreements of the parties contained herein. A
"Final Order" means action by the relevant regulatory
authority which has not been reversed, stayed, enjoined,
set aside, annulled or suspended, with respect to which
any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has
expired, and as to which all conditions to the
consummation of such transactions prescribed by law,
regulation or order have been satisfied.
(f)HSR Act. All applicable waiting periods
under the HSR Act shall have
expired.
(g)Pooling. Each of Enova and Pacific
shall have received a letter of its independent public
accountants, dated the Closing Date, in form and substance
reasonably satisfactory to Pacific and Enova, stating that
the transactions effected pursuant to Articles I and II of
this Agreement will qualify as a pooling of interests
transaction under GAAP and applicable SEC regulations.
SECTION 7.02. Conditions to the
Obligations of Pacific. The obligation of Pacific to
effect the Pacific Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by Pacific
in writing pursuant to Section 9.05:
(a)Performance of Obligations of Enova. Enova will have
performed in all material respects its agreements and
covenants contained in or contemplated by this Agreement
required to be performed by it at or prior to the
Effective Time.
(b)Representations and Warranties. The
representations and warranties of Enova set forth in this
Agreement shall be true and correct in all material
respects as of the date hereof (representations and
warranties made as of a specified date which shall be true
and correct as of such date) and as of the Closing Date as
if made on and as of the Closing Date, except as otherwise
contemplated by this Agreement.
(c)Closing Certificates. Pacific shall
have received a certificate signed by an executive officer
of Enova, dated the Closing Date, to the effect that, to
the best of each such officer's knowledge, the conditions
set forth in Section 7.02(a) and Section 7.02(b) have been
satisfied.
(d)Enova Material Adverse Effect. No Enova
Material Adverse Effect shall have occurred and there
shall exist no fact or circumstance which could reasonably
be expected to have a material adverse effect on the
operations, properties, assets, financial condition,
results of operations or prospects of Enova and its
subsidiaries taken as a whole or on the consummation of
the transactions contemplated by this Agreement or the
ability of the Energy Marketing Joint Venture to achieve
the business objectives contemplated by the Summary of
Terms attached as Exhibit A.
(e)Tax Opinion. Pacific shall have
received an opinion of Skadden, Arps, Slate, Meagher &
Flom, in form and substance satisfactory to Pacific, dated
the Closing Date, to the effect that the Enova Merger,
taken together with the Pacific Merger, will be treated as
an exchange under Section 351 of the Code.
(f)Enova Required Consents. The Enova
Required Consents the failure of which to obtain would
have a Enova Material Adverse Effect or a Joint Venture
Material Adverse Effect shall have been obtained.
SECTION 7.03. Conditions to the
Obligations of Enova. The obligations of Enova to effect
the Enova Merger shall be further subject to the
satisfaction, prior to the Closing Date, of the following
conditions, except as may be waived by Enova in writing
pursuant to Section 9.05:
(a)Performance of Obligations of Pacific.
Pacific will have performed in all material respects its
agreements and covenants contained in or contemplated by
this Agreement required to be performed at or prior to the
Effective Time.
(b)Representations and Warranties. The
representations and warranties of Pacific set forth in
this Agreement shall be true and correct in all material
respects as of the date hereof (representations and
warranties made as of a specified date which shall be true
and correct as of such date) and as of the Closing Date as
if made on and as of the Closing Date, except as otherwise
contemplated by this Agreement.
(c)Closing Certificates. Enova shall have
received certificates signed by the chief executive
officer and chief financial officer of Pacific, dated the
Closing Date, to the effect that, to the best of such
officer's knowledge, the conditions set forth in Section
7.03(a) and Section 7.03(b) have been satisfied.
(d)Pacific Material Adverse Effect. No
Pacific Material Adverse Effect shall have occurred and
there shall exist no fact or circumstance which could
reasonably be expected to have a material adverse effect
on the operations, properties, assets, financial
condition, results of operations or prospects of Pacific
and its subsidiaries taken as a whole or on the
consummation of the transactions contemplated by this
Agreement or the ability of the Energy Marketing Joint
Venture to achieve the business objectives contemplated by
the Summary of Terms attached as Exhibit A.
(e)Tax Opinion. Enova shall have received
an opinion of Shearman & Sterling, in form and substance
satisfactory to Enova, dated the Closing Date, to the
effect that the Enova Merger, taken together with the
Pacific Merger, will be treated as an exchange under
Section 351 of the Code.
(f)Pacific Required Consents. The Pacific
Required Consents the failure of which to obtain would
have a Pacific Material Adverse Effect or a Joint Venture
Material Adverse Effect shall have been obtained.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement
may be terminated at any time prior to the Closing Date,
whether before or after approval by the shareholders of
the respective parties hereto contemplated by this
Agreement:
(a) by mutual written consent of the Boards
of Directors of Enova and Pacific;
(b)by Pacific or Enova, by written notice
to the other, if the Effective Time shall not have
occurred on or before April 30, 1998; provided, however,
that the right to terminate the Agreement under this
Section 8.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the
Effective Time to occur on or before this date;
(c)by Pacific or Enova, by written
notice to the other, if, either the Enova Shareholders'
Approval or the Pacific Shareholders' Approval, or both,
shall not have been obtained on or before June 30, 1997;
provided, however, the right to terminate this Agreement
under this Section 8.01(c) shall not be available to any
party whose failure to fulfill any obligations under this
Agreement has been the cause of, or resulted in, the
failure of either of such approvals to have been obtained
on or before such date;
(d)by Pacific or Enova, if any state or
federal law, order, rule or regulation is adopted or
issued, which has the effect, as supported by the written
opinion of outside counsel for such party, of prohibiting
the Pacific Merger or the Enova Merger, or by any party
hereto, if any court of competent jurisdiction in the
United States or any State shall have issued an order,
judgement or decree permanently restraining, enjoining or
otherwise prohibiting the Pacific Merger or the Enova
Merger, and such order, judgement or decree shall have
become final and nonappealable;
(e)by Enova, by written notice to Pacific,
if there shall have been any material breach of any
material representation or warranty, or any material
breach of any covenant or agreement of Pacific hereunder
and such breach shall not have been remedied within 60
days after receipt by Pacific of notice in writing from
Enova, specifying the nature of such breach and requesting
that it be remedied;
(f)by Pacific, by written notice to Enova,
if there shall have been any material breach of any
material representation or warranty, or any material
breach of any covenant or agreement of Enova hereunder and
such breach shall not have been remedied within 60 days
after receipt by Enova of notice in writing from Pacific,
specifying the nature of such breach and requesting that
it be remedied;
(g)by Enova, by written notice to Pacific,
if, prior to the Pacific Special Meeting, the Board of
Directors of Pacific or any committee thereof (i) shall
withdraw or modify in any manner adverse to Enova its
approval or recommendation of this Agreement or the
Pacific Merger, (ii) shall approve or recommend any
Acquisition Proposal by a party other than Enova or any of
its affiliates, or (iii) shall resolve to take any of the
actions specified in clause (i) or (ii);
(h)by Pacific, by written notice to Enova,
if, prior to the Enova Special Meeting, the Board of
Directors of Enova or any committee thereof (i) shall
withdraw or modify in any manner adverse to Pacific its
approval or recommendation of this Agreement or the Enova
Merger, (ii) shall approve or recommend any Acquisition
Proposal by a party other than Pacific or any of its
affiliates, or (iii) shall resolve to take any of the
actions specified in clause (i) or (ii);
(i)by Enova at any time prior to the Enova
Special Meeting, upon two days' prior notice to Pacific,
if, as a result of an Acquisition Proposal by a party
other than Pacific or any of its affiliates, the Board of
Directors of Enova determines in good faith after
consultation with outside counsel (and after giving effect
to all concessions which may be offered by Pacific
pursuant to the proviso set forth below) that acceptance
of the Acquisition Proposal is reasonably necessary for
such Board of Directors to act in a manner consistent with
its fiduciary duties under applicable law; provided,
however, prior to any such termination, Enova shall, and
shall cause its respective financial and legal advisors
to, negotiate with Pacific to make such adjustments in the
terms and conditions of this Agreement as would enable
Enova to proceed with the transactions contemplated herein
on such adjusted terms; or
(j)by Pacific at any time prior to the
Pacific Special Meeting, upon two days' prior notice to
Pacific, if, as a result of an Acquisition Proposal by a
party other than Enova or any of its affiliates, the Board
of Directors of Pacific determines in good faith after
consultation with outside counsel (and after giving effect
to all concessions which may be offered by Enova pursuant
to the proviso set forth below) that acceptance of the
Acquisition Proposal is reasonably necessary for such
Board of Directors to act in a manner consistent with its
fiduciary duties under applicable law; provided, however,
prior to any such termination, Pacific shall, and shall
cause its respective financial and legal advisors to,
negotiate with Enova to make such adjustments in the terms
and conditions of this Agreement as would enable Pacific
to proceed with the transactions contemplated herein on
such adjusted terms.
SECTION 8.02. Effect of Termination. In
the event of termination of this Agreement by either Enova
or Pacific pursuant to Section 8.01, there shall be no
liability on the part of either Enova or Pacific or their
respective officers or directors hereunder, except (a)
Sections 6.01(b), 6.17 and 8.03 shall survive the
termination and (b) nothing herein shall relieve any party
from liability for any willful breach hereof.
SECTION 8.03. Fees and Expenses.
(a)Expense Reimbursement by Enova. If this
Agreement is terminated pursuant to (i) Section 8.01(c) as
a result of the Enova Shareholders' Approval not being
obtained and on or prior to the date of the Enova Special
Meeting Enova has been the subject of a publicly announced
Acquisition Proposal, (ii) Section 8.01(f), (iii) Section
8.01(h) or (iv) Section 8.01(i), then Enova, shall
promptly (but not later than five business days after
receipt or delivery of notice of such termination, as
applicable) pay to Pacific cash in an amount equal to the
greater of (x) $3 million or (y) the lesser of (A) all
documented out-of- pocket expenses and fees incurred by
Pacific (including, without limitation, fees and expenses
payable to all legal, accounting, financial, public
relations and other professional advisers) arising out of,
in connection with or related to this Agreement and the
Energy Marketing Joint Venture Agreement and the
transactions contemplated herein and therein and (B) $5
million, in the case of termination on or before February
12, 1997, or $10 million in the case of termination after
February 12, 1997 (the "Pacific Out-of-Pocket Expenses");
provided, however, that if this Agreement is terminated by
Pacific pursuant to Section 8.01(f) as a result of a
willful breach by Enova, Pacific may pursue any remedies
available to it at law or in equity and shall, in addition
to the Pacific Out-of-Pocket Expenses, be entitled to
retain such additional amounts as Pacific may be entitled
to receive at law or in equity.
(b)Expense Reimbursement by Pacific. If
this Agreement is terminated pursuant to (i) Section
8.01(c) as a result of the Pacific Shareholders' Approval
not being obtained and on or prior to the date of the
Pacific Special Meeting Pacific has been the subject of a
publicly announced Acquisition Proposal, (ii) Section
8.01(e), (iii) Section 8.01(g) or (iv) Section 8.01(j),
then Pacific, shall promptly (but not later than five
business days after receipt or delivery of notice of such
termination, as applicable), pay to Enova cash in an
amount equal to the greater of (x) $3 million or (y) the
lesser of (A) all documented out-of-pocket expenses and
fees incurred by Enova (including, without limitation,
fees and expenses payable to all legal, accounting,
financial, public relations and other professional
advisers) arising out of, in connection with or related to
this Agreement and the Energy Marketing Joint Venture
Agreement and the transactions contemplated herein and
therein and (B) $5 million in the case of termination on
or before February 12, 1997, or $10 million in the case of
termination after February 12, 1997 (the "Enova Out-of-
Pocket Expenses"); provided, however, that if this
Agreement is terminated by Enova pursuant to Section
8.01(e) as a result of a willful breach by Pacific, Enova
may pursue any remedies available to it at law or in
equity and shall, in addition to the Enova Out-of-Pocket
Expenses, be entitled to retain such additional amounts as
Enova may be entitled to receive at law or in equity.
(c)Enova Termination Fee. If (i) this
Agreement is terminated pursuant to (1) Section 8.01(c) as
a result of the Enova Shareholders' Approval not being
obtained and on or prior to the date of the Enova Special
Meeting Enova has been the subject of a publicly announced
Acquisition Proposal, (2) Section 8.01(h) or (3) Section
8.01(i) and (ii) within one year of any such termination
described in clause (i) above, Enova or any of its
material subsidiaries accepts a written offer to
consummate or consummates an Acquisition Proposal, then
Enova, will, upon the earlier of such acceptance or
consummation, pay to Pacific a termination fee equal to
$72 million in cash.
(d)Pacific Termination Fee. If (i) this
Agreement is terminated pursuant to (1) Section 8.01(c) as
a result of the Pacific Shareholders' Approval not being
obtained and on or prior to the date of the Pacific
Special Meeting Pacific has been the subject of a publicly
announced Acquisition Proposal, (2) Section 8.01(g) or (3)
Section 8.01(j) and (ii) within one year of any such
termination described in clause (i) above, Pacific or any
of its material subsidiaries accepts a written offer to
consummate or consummates an Acquisition Proposal, then
Pacific, will, upon the earlier of such acceptance or
consummation, pay to Enova a termination fee equal to $72
million in cash.
(e)Expenses. The parties agree that the
agreements contained in this Section 8.03 are an integral
part of the transactions contemplated by the Agreement and
constitute liquidated damages and not a penalty. If one
party fails to promptly pay to the other any fee due
hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection
with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee from the
date such fee was required to be paid at a rate per annum
equal at all times to 2% per annum above the rate per
annum that is the publicly announced prime rate of
Citibank, N.A.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of
Representations, Warranties and Agreements. Except as
otherwise provided in this Section 9.01, the
representations, warranties and agreements of each party
hereto shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of
any other party hereto, any person controlling any such
party or any of their officers or directors, whether prior
to or after the execution of this Agreement. The
representations, warranties and agreements in this
Agreement shall terminate at the Effective Time or upon
the termination of this Agreement pursuant to Section
8.01, as the case may be, except that the agreements set
forth in Articles I and II and Sections 6.05, 6.09, 6.10,
6.11, 6.13, 6.14, 6.15 and 6.16 shall survive the
Effective Time indefinitely.
SECTION 9.02. Notices. All notices and
other communications given or made pursuant hereto shall
be in writing and shall be deemed to have been duly given
or made as of the date delivered, mailed or transmitted,
and shall be effective upon receipt, if delivered
personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties
at the following addresses (or at such other address for a
party as shall be specified by like change of address) or
sent by electronic transmission, with confirmation
received, to the telecopy number specified below:
(a)If to Enova:
Enova Corporation
101 Ash Street
San Diego, California 92112
Telecopier No.: (619) 696-4611
Attention: Stephen L. Baum
With copies to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 848-7179
Attention:David W. Heleniak, Esq.
and
Shearman & Sterling
555 California Street
San Francisco, California 94104
Telecopier No.: (415) 616-1199
Attention:Michael J. Kennedy, Esq.
(b)If to Pacific:
Pacific Enterprises
555 W. 5th Street
Los Angeles, California 90013
Telecopier No.: (213) 244-8292
Attention:Willis B. Wood, Jr.
Richard D. Farman
With copies to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopier No. (212) 735-2000
Attention:Peter Allan Atkins, Esq.
Sheldon Adler, Esq.
SECTION 9.03. Certain Definitions. For
purposes of this Agreement, the term:
(a)"affiliates" means a person that
directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
including, without limitation, any partnership or joint
venture in which the person (either alone, or through or
together with any other subsidiary) has, directly or
indirectly, an interest of 5% or more;
(b)"beneficial owner" with respect to any
shares, means a person who shall be deemed to be the
beneficial owner of such shares (i) which such person or
any of its affiliates or associates beneficially owns,
directly or indirectly, (ii) which such person or any of
its affiliates or associates (as such term is defined in
Rule 12b-2 of the Exchange Act) has, directly or
indirectly, (A) the right to acquire (whether such right
is exercisable immediately or subject only to the passage
of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding or (iii) which are
beneficially owned, directly or indirectly, by any other
persons with whom such person or any of its affiliates or
person with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing
of any shares;
(c)"business day" means any day other than
a day on which banks in San Diego or Los Angeles are
required or authorized to be closed;
(d)"control" (including the terms
"controlled by" and "under common control with") means the
possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of
the management or policies of a person, whether through
the ownership of stock, as trustee or executor, by
contract or credit arrangement or otherwise;
(e)"joint venture" of a person means any
corporation or other entity (including partnerships and
other business associations and joint ventures) in which
such person or one or more of its subsidiaries owns an
equity interest that is less than a majority of any class
of the outstanding voting securities or equity, other than
equity interests held for passive investment purposes
which are less than 5% of any class of the outstanding
voting securities or equity of any such entity;
(f)"knowledge" of any person means the
actual knowledge of the executive officers of such person
and each subsidiary of such person.
(g)"person" means an individual,
corporation, partnership, association, trust,
unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
(h)"subsidiary" or "subsidiaries" of any
person means any corporation, partnership, joint venture
or other legal entity of which such person (either alone
or through or together with any other subsidiary) owns,
directly or indirectly, more than 50% of the stock or
other equity interests the holders of which are generally
entitled to vote for the election of the board of
directors or other governing body of such corporation or
other legal entity.
SECTION 9.04. Amendment. This Agreement
may be amended by the parties hereto by action taken by or
on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that,
after approval hereof by the shareholders of Enova and
Pacific, no amendment may be made which by law requires
further approval by such shareholders. This Agreement may
not be amended except by an instrument in writing signed
by the parties hereto.
SECTION 9.05. Waiver. At any time prior
to the Effective Time, any party hereto may (a) extend the
time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any of the agreements
or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in
writing signed by the party or parties to be bound
thereby.
SECTION 9.06. Headings. The headings
contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.07. Severability. If any term
or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such
determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely
as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 9.08. Entire Agreement. This
Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement and
supersedes all prior agreements and undertakings (other
than the Confidentiality Agreement), both written and
oral, among the parties, or any of them, with respect to
the subject matter hereof and, except as otherwise
expressly provided herein, is not intended to confer upon
any other person any rights or remedies hereunder.
SECTION 9.09. Assignment. This Agreement
shall not be assigned by operation of law or otherwise.
SECTION 9.10. Parties in Interest. This
Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall
confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this
Agreement, other than Section 6.05 (which is intended to
be for the benefit of the Indemnified Parties and may be
enforced by such Indemnified Parties). Notwithstanding
the foregoing and any other provision of this Agreement,
and in addition to any other required action of the Board
of Directors of the Company (a) a majority of the
directors (or their successors) serving on the Board of
Directors of the Company who are designated by Pacific
pursuant to Section 6.13 shall be entitled during the
three year period commencing at the Effective Time (the
"Three Year Period") to enforce the provision of Sections
6.05, 6.09, 6.10, 6.11, 6.13, 6.14, 6.15 and 6.16 on
behalf of the Pacific officers, directors and employees,
as the case may be, and (b) a majority of the directors
(or their successors) serving on the Board of Directors of
the Company who are designated by Enova pursuant to
Section 6.13 shall be entitled during the Three Year
Period to enforce the provisions of Sections 6.05, 6.09,
6.10, 6.11, 6.13, 6.14, 6.15 and 6.16 on behalf of the
Enova officers, directors and employees, as the case may
be. Such directors' right and remedies under the
preceding sentence are cumulative and are in addition to
any other rights and remedies they may have at law or in
equity, but in no event shall this Section 9.10 be deemed
to impose any additional duties on any such directors.
The Company shall pay, at the time they are incurred, all
costs, fees and expenses of such directors incurred in
connection with the assertion of any rights on behalf of
the persons set forth above pursuant to this Section.
SECTION 9.11. Failure or Indulgence Not
Waiver; Remedies Cumulative. No failure or delay on the
part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a
waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor shall
any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right.
All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 9.12. Governing Law. This
Agreement shall governed by, and construed in accordance
with, the laws of the State of California.
SECTION 9.13. Counterparts. This
Agreement may be executed in one or more counterparts, and
by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an
original but all of which taken together shall constitute
one and the same agreement.
SECTION 9.14. WAIVER OF JURY TRIAL. EACH
OF Enova, Pacific, THE COMPANY, NEWCO Enova SUB AND NEWCO
Pacific SUB HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED
UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 9.15. Further Assurances. Each
party will execute such further documents and instruments
and take such further actions as may reasonably be
requested by any other party in order to consummate the
transactions contemplated by this Agreement and the Energy
Marketing Joint Venture Agreement in accordance with the
terms hereof and thereof.
IN WITNESS WHEREOF, Enova, Pacific, the
Company, Newco Enova Sub and Newco Pacific Sub have caused
this Agreement to be executed as of the date first written
above by their respective officers thereunto duly
authorized.
ENOVA CORPORATION
By: /s/ Stephen L. Baum
--------------------
Name: Stephen L. Baum
Title: President & Chief Executive Officer
PACIFIC ENTERPRISES
By: /s/ Willis B. Wood
---------------------------
Name: Willis B. Wood
Title:Chairman & Chief Executive Officer
MINERAL ENERGY COMPANY
By: /s/ KEVIN C. SAGARA
-----------------------
Name: Kevin C. Sagara
Title:President
G MINERAL ENERGY SUB
By: /s/ KEVIN C. SAGARA
-----------------------
Name: Kevin C. Sagara
Title: President
B MINERAL ENERGY SUB
By:/s/ GARY KYLE
-----------------
Name: Gary Kyle
Title: President
TABLE OF CONTENTS
ARTICLE I
THE MERGERS
SECTION 1.01. The Mergers 2
SECTION 1.02. Effective Time of the Mergers; Closing 2
SECTION 1.03. Effects of the Mergers 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities 4
SECTION 2.02. Exchange of Certificates 5
SECTION 2.03. Dissenting Shares 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PACIFIC
SECTION 3.01. Organization and Qualification 8
SECTION 3.02. Subsidiaries 9
SECTION 3.03. Capitalization 9
SECTION 3.04. Authority; Non-Contravention;
Statutory Approvals; Compliance 10
SECTION 3.05. Reports and Financial Statements 12
SECTION 3.06. Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities 12
SECTION 3.07. Litigation 13
SECTION 3.08. Registration Statement and
Proxy Statement 13
SECTION 3.09. Tax Matters 14
SECTION 3.10. Employee Matters; ERISA 17
SECTION 3.11. Environmental Protection 19
SECTION 3.12. Regulation as a Utility 21
SECTION 3.13. Vote Required 22
SECTION 3.14. Accounting Matters 22
SECTION 3.15. Opinions of Financial Advisors 22
SECTION 3.16. Insurance 22
SECTION 3.17. Pacific Rights Agreement 22
SECTION 3.18. Brokers 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ENOVA
SECTION 4.01. Organization and Qualification 23
SECTION 4.02. Subsidiaries 23
SECTION 4.03. Capitalization 24
SECTION 4.04. Authority; Non-Contravention;
Statutory Approvals; Compliance 25
SECTION 4.05. Reports and Financial Statements 26
SECTION 4.06. Absence of Certain Changes
or Events; Absence of Undisclosed Liabilities 27
SECTION 4.07. Litigation 27
SECTION 4.08. Registration
Statement and Proxy Statement 27
SECTION 4.09. Tax Matters 28
SECTION 4.10. Employee Matters; ERISA 31
SECTION 4.11. Environmental Protection 33
SECTION 4.12. Regulation as a Utility 34
SECTION 4.13. Nuclear Operations 34
SECTION 4.14. Vote Required 35
SECTION 4.15. Accounting Matters 35
SECTION 4.16. Opinion of Financial Advisor 35
SECTION 4.17. Insurance 35
SECTION 4.18. Ownership of Pacific Common
Stock 35
SECTION 4.19. Brokers 35
SECTION 4.20. Tax-Exempt Status 36
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGERS
SECTION 5.01. Conduct of Business Pending the Mergers 36
SECTION 5.02. Transition and Strategic Opportunity Committees
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Access to Information; Confidentiality 43
SECTION 6.02. Registration Statement; Joint Proxy
Statement 43
SECTION 6.03. Regulatory Matters 44
SECTION 6.04. Shareholder Approvals 45
SECTION 6.05. Directors' and Officers' Indemnification 46
SECTION 6.06. Disclosure Schedules 47
SECTION 6.07. Public Announcements 48
SECTION 6.08. Rule 145 Affiliates 48
SECTION 6.09. Employee Agreements
and Workforce Matters 48
SECTION 6.10. Employee Benefit Plans 49
SECTION 6.11. Stock Option and Other
Stock Plans 50
SECTION 6.12. No Solicitations 51
SECTION 6.13. Company Board of Directors 52
SECTION 6.14. Company Officers 52
SECTION 6.15. Employment Contracts 52
SECTION 6.16. Post-Merger Operations 52
SECTION 6.17. Expenses 53
SECTION 6.18. Energy Marketing Joint Venture 53
ARTICLE VII
CONDITIONS TO THE MERGERS
SECTION 7.01. Conditions to the Obligations
of Each Party 53
SECTION 7.02. Conditions to the
Obligations of Pacific 54
SECTION 7.03. Conditions to
the Obligations of Enova 55
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination 56
SECTION 8.03. Fees and Expenses 58
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations,
Warranties and Agreements 60
SECTION 9.02. Notices 60
SECTION 9.03. Certain Definitions 61
SECTION 9.04. Amendment 62
SECTION 9.05. Waiver 62
SECTION 9.06. Headings 63
SECTION 9.07. Severability 63
SECTION 9.08. Entire Agreement 63
SECTION 9.09. Assignment 63
SECTION 9.10. Parties in Interest 63
SECTION 9.11. Failure or Indulgence Not Waiver;
Remedies Cumulative 64
SECTION 9.12. Governing Law 64
SECTION 9.13. Counterparts 64
SECTION 9.14. WAIVER OF JURY TRIAL 64
SECTION 9.15. Further Assurances 64
EXHIBITS
Exhibit A Summary of Terms of Energy Marketing Joint
Venture
Exhibit 1.02(a)(i)Enova Merger Agreement
Exhibit 1.02(a)(ii)Pacific Merger Agreement
Exhibit 6.08 Form of Affiliate Agreement
Exhibit 6.15 Form of Employment Contracts
INDEX OF DEFINED TERMS
Term Page
1935 Act 9
Acquisition Proposal 53
affiliate 22
Affiliate Agreement 50
affiliates 64
Agreement 1
Atomic Energy Act 27
Barr Devlin 23
beneficial owner 64
Bonds 37
business day 64
California Law 1
Certificates 5
Closing Agreement 16
Closing 3
Closing Date 3
Code 2
Company 1
Company Common Stock 4
Company Replacement Plans 51
Company Shares 6
Confidentiality Agreement 45
control 64
controlled by 64
Converted Shares 6
CPUC 12
Disclosure Schedules 49
Dissenting Shares 8
Effective Time 3
Encumbrances 9
Energy Marketing Joint Venture 1
Energy Marketing Joint Venture Agreement 1
Energy Marketing Required Statutory Approvals 46
Enova 1
Enova Benefit Plans 32
Enova Common Stock 4
Enova Disclosure Schedule 49
Enova Dissenting Shares 8
Enova Effective Time 3
Enova Financial Statements 28
Enova Material Adverse Effect 24
Enova Merger 1, 2
Enova Merger Agreement 2
Enova Out-of-Pocket Expenses 61
Enova Preferred Stock 25
Enova Ratio 4
Enova Required Consents 26
Enova Required Statutory Approvals 27
Enova SEC Reports 28
Enova Shareholders' Approval 36
Enova Special Meeting 47
Enova Sub 1
Enova Sub Common Stock 25
Enova Sub Par Value $20 Preferred Stock 25
Enova Sub No Par Preference Stock 25
Environmental Claim 21
Environmental Laws 22
Environmental Permits 20
ERISA 18
Excess Shares 7
Exchange 5
FERC 12
Final Order 56
GAAP 2
Gas Act 12
Governmental Authority 12
Hazardous Materials 22
HSR Act 46
Indemnified Parties 48
Indemnified Party 48
IRS 17
Joint Proxy/Registration Statement 45
joint venture 64
Joint Venture Material Adverse Effect 9
knowledge 65
Merger Consideration 6
Mergers 1
Merrill Lynch 23
Morgan Stanley 37
New Opportunity 44
Newco Enova Sub 1
Newco Pacific Sub 1
NRC 27
NYSE 7
Pacific 1
Pacific Benefit Plans 18
Pacific Class A Preferred Stock 5
Pacific Common Stock 4
Pacific Disclosure Schedule 49
Pacific Dissenting Shares 8
Pacific Effective Time 3
Pacific Financial Statements 13
Pacific Material Adverse Effect 9
Pacific Merger 1, 2
Pacific Merger Agreement 3
Pacific Out-of-Pocket Expenses 61
Pacific Preferred Stock 5
Pacific Ratio 5
Pacific Required Consents 11
Pacific Required Statutory Approvals 12
Pacific Right 4
Pacific Rights Agreement 4
Pacific SEC Reports 13
Pacific Shareholders' Approval 23
Pacific Special Meeting 47
Pacific Sub 10
Pacific Sub Common Stock 10
Pacific Sub Preference Stock 10
Pacific Sub Preferred Stock 10
Pacific Sub Series A Preferred 10
Pacific Sub Series Preferred 10
Pacific Sub $25 Preferred 10
PBGC 19
PCBs 22
person 65
Power Act 12
Proxy Statement 14
Registration Statement 14
Release 22
Representatives 44
SEC 12
Securities Act 12
Shares Trust 7
SONGS 36
Special Meeting 47
Stock Award 52
Stock Plans 52
Strategic Opportunity Committee 44
subsidiary or subsidiaries 65
subsidiary company 22
Tax Return 14
Tax Ruling 16
Taxes 14
Three Year Period 66
Transition Committee 44
under common control with 64
Violation 11
Exhibit 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made and entered into
as of the 12th day of October, 1996, by and between Mineral
Energy Company (the "Company"), a California corporation,
and Stephen L. Baum (the "Executive");
WHEREAS, the Executive is currently serving as President
and Chief Executive Officer of Enova, Inc., a California
corporation ("Enova"), and the Company desires to secure the
continued employment of the Executive in accordance
herewith;
WHEREAS, pursuant to the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of October 12, 1996,
among, inter alia, Enova, Pacific Enterprises, a California
corporation ("Pacific Enterprises"), and the Company, the
parties thereto have agreed to a merger (the "Merger")
pursuant to the terms thereof;
WHEREAS, the Executive is willing to commit himself to be
employed by the Company on the terms and conditions herein
set forth and thus to forego opportunities elsewhere; and
WHEREAS, the parties desire to enter into this Agreement,
as of the Effective Date (as hereinafter defined), setting
forth the terms and conditions for the employment
relationship of the Executive with the Company during the
Employment Period (as hereinafter defined),
NOW, THEREFORE, IN CONSIDERATION of the mutual premises,
covenants and agreements set forth below, it is hereby
agreed as follows:
1. Employment and Term.
(a) Employment. The Company agrees to employ the
Executive, and the Executive agrees to be employed by the
Company, in accordance with the terms and provisions of this
Agreement during the term thereof (as described below).
(b) Term. The term of the Executive's employment under
this Agreement shall commence (the "Effective Date") as of
the closing date (the "Closing Date") of the Merger, as
described in the Merger Agreement, and shall continue until
the earlier of the Executive's Mandatory Retirement Age (as
defined herein) or the fifth anniversary of the Effective
Date (such term being referred to hereinafter as the
"Employment Period"); provided, however, that commencing on
the fourth anniversary of the Effective Date (and each
anniversary of the Effective Date thereafter) the term of
this Agreement shall automatically be extended for one
additional year, unless, prior to such date, the Company or
the Executive shall give written notice to the other party
that it or he, as the case may be, does not wish to so
extend this Agreement; and further provided, however, that
if the Merger Agreement is terminated, then, at the time of
such termination, this Agreement shall be deemed cancelled
and of no force or effect and the Executive shall continue
to be subject to such agreements and arrangements that were
in effect prior to the Closing Date. As a condition to the
Merger, the parties hereto agree that the Company shall be
responsible for all of the premises, covenants and
agreements set forth in this Agreement.
(c) Mandatory Retirement. In no event shall the term of
the Executive's employment hereunder extend beyond the end
of the month in which the Executive's 65th birthday occurs
(the "Mandatory Retirement Age").
2. Duties and Powers of Executive.
(a) Position.
(i) Period A. During the period commencing on the
Effective Date and ending on the earlier of September 1,
2000 or the second anniversary of the Effective Date
("Period A"), the Executive shall serve as the Vice Chairman
of the Board of Directors of the Company (the "Board"),
President and Chief Operating Officer of the Company with
such authority, duties and responsibilities with respect to
such position as set forth below in subsection(b) hereof.
In this capacity, the Executive shall be a member of the
office of
the Chairman (which shall be an office held jointly by the
Executive and the Chief Executive Officer/Chairman of the
Board) ("Office of the Chairman")and shall report only to
the Chief Executive Officer/Chairman of the Board. The
presidents and principal executive officers of the Company's
regulated and nonregulated businesses and the senior-most
person in charge of each of the Company's policy units shall
report directly to the Office of the Chairman.
(ii) Period B. During the period, if any, commencing on
the second anniversary of the Effective Date and ending on
September 1, 2000("Period B"), the Executive shall be
nominated to the position of, and if elected shall serve as,
the Vice Chairman of the Board, Chief Executive Officer and
President of the Company with such authority, duties and
responsibilities with respect to such position as set forth
below. In this capacity, the Executive shall report only to
the Board. The presidents and chief executive officers of
the Company's regulated and nonregulated businesses and the
senior-most person in charge of each of the Company's policy
units shall report directly to the Executive.
(iii) Period C. During the period, if any, commencing
September 1, 2000 and ending on the expiration date of the
Agreement ("Period C"),the Executive shall be nominated to
the position of, and if elected shall serve as, Chairman,
Chief Executive Officer and President of the Company with
such authority, duties and responsibilities with respect to
such position as set forth below. In this capacity, the
Executive shall report only to the Board. The presidents and
chief executive officers of the Company's regulated and
nonregulated businesses and the senior-most person in charge
of each of the Company's policy units shall report directly
to the Executive.
(b) Duties.
(i) Chief Executive Officer. The duties of the Chief
Executive Officer of the Company shall include but not be
limited to directing the overall business, affairs and
operations of the Company, through its officers, all of whom
shall report directly or indirectly to the Office of the
Chairman or, if there is no Office of the Chairman, to the
Chief Executive Officer. (ii) Chief Operating Officer.
The duties of the Chief Operating Officer of the Company
shall include, but not be limited to, directing the day-to-
day business, affairs and operations of the Company, under
the supervision of the Chief Executive Officer and (to the
extent the Chief Executive Officer is not also the
President) the President. (iii) President. The duties of
the President of the Company shall include, but not be
limited to, assisting the Chief Executive Officer (to the
extent the President is not also the Chief Executive
Officer) in directing the overall business, affairs and
operations of the Company. (iv) Chairman of the Board.
The Chairman of the Board shall be a director and shall
preside at meetings of the Board and meetings of the
shareholders. The Chairman shall be responsible for Board
and shareholder governance and shall have such duties and
responsibilities as are customarily assigned to such
positions. (v) Vice Chairman of the Board. The Vice
Chairman of the Board shall be a director and, in the
absence of the Chairman, shall preside at meetings of the
Board and meetings of shareholders. The Vice Chairman shall
assist the Chairman in his responsibility for Board and
shareholder governance and shall have such duties as are
customarily assigned to such position.
(c) Board Membership. The Executive shall be a member
of the Board on the first day of the Employment Period, and
the Board shall propose the Executive for re-election to the
Board throughout the Employment Period.
(d) Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to which
the Executive is entitled, the Executive shall devote full
attention and time during normal business hours to the
business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive under this Agreement, use the Executive's best
efforts to carry out such responsibilities faithfully and
efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry,
civic or charitable boards or committees, so long as such
activities do not interfere with the performance of the
Executive's responsibilities as an employee of the Company
in accordance with this Agreement.
3. Compensation.
It is the Board's intention to provide the Executive with
compensation opportunities that, in total, are at a level
that is consistent with that provided by comparable
companies to executives of similar levels of responsibility,
expertise and corporate and individual performance as
determined by the compensation committee of the Board. In
this regard, the Executive shall receive the following
compensation for his services hereunder to the Company:
(a) Base Salary. During the Employment Period, the
Executive's annual base salary ("Annual Base Salary") shall
be payable in accordance with The Company's general payroll
practices. During Period A, the Executive's Annual Base
Salary shall in no event be less than $645,000. During
Period B and Period C, if The Executive is elected to the
position of Chief Executive Officer, the Executive's Annual
Base Salary shall in no event be less than the annual base
salary of the Executive's predecessor as Chief Executive
Officer of the Company. Subject to Section 4(d)(ii), the
Board in its discretion may from time to time direct such
upward adjustments in the Executive's Annual Base Salary as
the Board deems to be necessary or desirable, including,
without limitation, adjustments in order to reflect in-
creases in the cost of living and the Executive's
performance. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation of the Company
under this Agreement.
(b) Incentive Compensation. Subject to Section
4(d)(ii), during the Employment Period, the Executive shall
participate in annual incentive compensation plans and long-
term incentive compensation plans of the Company and, to the
extent appropriate, the Company's subsidiaries (which
long-term incentive compensation plans may include plans
offering stock options, restricted stock and other long-term
incentive compensation and all such annual and long-term
plans to be hereinafter referred to as the "Incentive
Compensation Plans") and will be granted awards thereunder
providing him with the opportunity to earn, on a year-by-
year basis, annual and long-term incentive compensation (the
"Incentive Compensation Awards")at least equal (in terms of
target, maximum and minimum awards expressed as a percentage
of Annual Base Salary) to the greater of the Executive's
opportunities that were in effect prior to the Effective
Date and the awards granted to the Chief Executive Officer
of the Company under the Incentive Compensation Plans during
Period A. Any equity awards granted to the Executive may be
granted, at the Executive' selection, to trusts established
for the benefit of members of the Executive's family. With
respect to incentive compensation awards granted prior to
the Effective Date, the Executive shall be entitled to
retain such awards in accordance with their terms, which
shall be appropriately adjusted as a result of the Merger.
(c) Retirement and Welfare Benefit Plans. In addition
to the benefits provided under Section 3(b), during the
Employment Period and so long as the Executive is employed
by the Company, he shall be eligible to participate in all
other savings, retirement and welfare plans, practices,
policies and programs applicable generally to employees
and/or senior executive officers of the Company and its
domestic subsidiaries, except with respect to any benefits
under any plan, practice, policy or program to which the
Executive has waived his rights in writing. To the extent
that benefits payable or provided to the Executive under
such plans are materially less favorable on a benefit by
benefit basis than the benefits that would have been payable
or provided to the Executive under comparable Enova tax-
qualified retirement plans, executive retirement plans,
split dollar and other executive life insurance arrangements
in which the Executive was a participant (based on the terms
of such plans as of the Effective Date), the Executive shall
be entitled to benefits pursuant to the terms of this
Agreement equal to the excess of the benefits provided under
the applicable Enova plans over the benefits provided under
the comparable Company plans.
(d) Expenses. The Company shall reimburse the Executive
for all expenses, including those for travel and
entertainment, properly incurred by him in the performance
of his duties hereunder in accordance with policies
established from time to time by the Board.
(e) Fringe Benefits and Perquisites. During the
Employment Period and so long as the Executive is employed
by the Company, he shall be entitled to receive fringe
benefits and perquisites in accordance with the plans,
practices, pro-grams and policies of the Company and, to the
extent appropriate, the Company's subsidiaries from time to
time in effect, commensurate with his position.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate upon the Executive's death or, at the
election of the Board or the Executive, by reason of
Disability (as herein defined) during the Employment Period;
provided, however, that the Board may not terminate the
Executive's employment hereunder by reason of Disability
unless at the time of such termination there is no
reasonable expectation that the Executive will return to
work within the next ninety (90) day period. For purposes
of this Agreement, disability ("Disability") shall have the
same meaning as set forth in the Enova long-term disability
plan or its successor.
(b) By the Company for Cause. The Company may terminate
the Executive's employment during the Employment Period for
Cause (as herein defined). For purposes of this Agreement,
"Cause" shall mean (i) the willful and continued failure by
the Executive to substantially perform the Executive's
duties with the Company (other than any such failure
resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 4(d))or (ii) the
Executive's commission of one or more acts of moral
turpitude that constitute a violation of applicable law
(including but not limited to a felony) which have or result
in an adverse effect on the Company, monetarily or otherwise
or one or more significant acts of dishonesty. For purposes
of clause (i) of this definition, no act, or failure to act,
on the Executive's part shall be deemed "willful" unless
done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that the Executive's
act, or failure to act, was in the best interest of the
Company.
(c) By the Company without Cause. Notwithstanding any
other provision of this Agreement, the Company may terminate
the Executive's employment other than by a termination for
Cause during the Employment Period, but only upon the
affirmative vote of three-fourths (3/4) of the membership of
the Board.
(d) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for
Good Reason (as herein defined). For purposes of this
Agreement, "Good Reason" shall mean the occurrence without
the written consent of the Executive of any one of the
following acts by the Company, or failures by the Company to
act, unless such act or failure to act is corrected prior to
the Date of Termination (as hereinafter defined) specified
in the Notice of Termination (as hereinafter defined) given
in respect thereof:
(i) an adverse change in the Executive's title, authority,
duties, responsibilities or reporting lines as specified in
Section 2(a) and 2(b)of this Agreement; (ii) a reduction
by the Company in (A) the Executive's Annual Base Salary as
in effect on the date hereof or as the same may be in-
creased from time to time or (B) the Executive's aggregate
annualized compensation and benefits opportunities, except,
in the case of both (A) and (B), for across-the-board
reductions similarly affecting all executives (both of the
Company and of any Person (as hereinafter defined) then in
control of the Company) whose compensation is directly
determined by the compensation committee of the Board (and
the compensation committee of the board of directors of any
Person then in control of the Company); provided that, the
exception for across-the-board reductions shall not apply
following a Change in Control (as hereinafter defined);
(iii) the relocation of the Executive's principal place of
employment to a location away from the Company's
headquarters or a substantial increase in the Executive's
business travel obligations outside of the Southern
California area as of the Effective Date, other than any
such increase that (A) arises in connection with
extraordinary business activities of the Company and (B) is
understood not to be part of the Executive's regular duties
with the Company; (iv) the failure by the Company to pay
to the Executive any portion of the Executive's current
compensation and benefits or to pay to the Executive any
portion of an installment of deferred compensation under any
deferred compensation program of the Company within thirty
(30) days of the date such compensation is due; (v) the
failure by the shareholders to elect the Executive to the
Board during the Employment Period; (vi) the failure by
the Board to elect the Executive to the positions of Vice
Chairman of the Board, President and Chief Executive Officer
during Period B, or Chairman of the Board, President and
Chief Executive Officer during Period C; (vii) any
purported termination of the Executive's employment that is
not effected pursuant to a Notice of Termination satisfying
the requirements of Section 4(f); for purposes of this
Agreement, no such purported termination shall be effective;
(viii) the failure by the Company to obtain a satisfactory
agreement from any successor of the Company requiring such
successor to assume and agree to perform the Company's
obligations under this Agreement, as contemplated in Section
11; or (ix) the failure by the Company to comply with any
material provision of this Agreement. Following a Change
in Control (as hereinafter defined), the Executive's
determination that an act or failure to act constitutes Good
Reason shall be presumed to be valid unless such
determination is deemed to be unreasonable by an arbitrator.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason hereunder.
(e)Change in Control. Change in Control shall mean the
occurrence of any of the following events: (i)Any Person
is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates other
than in connection with the acquisition by the Company or
its affiliates of a business) representing twenty percent
(20%) or more of the combined voting power of the Company's
then outstanding securities; or (ii) The following
individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who, on
the date hereof, constitute the Board and any new director
(other than a director whose initial assumption of office is
in connection with an actual or threatened election contest,
including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for
election by the Company's shareholders was approved or
recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved or recommended; or
(iii) There is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company
with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or
any subsidiary of the Company, at least sixty percent (60%)
of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation,
or(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the beneficial owner, directly
or indirectly, of securities of the Company (not including
in the securities beneficially owned by such Person any
securities acquired directly from the Company or its
affiliates other than in connection with the acquisition by
the Company or its affiliates of a business) representing
twenty percent (20%) or more of the combined voting power of
the Company's then outstanding securities; or (iv) The
shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least sixty percent (60%) of the combined voting power of
the voting securities of which are owned by shareholders of
the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
"Person" shall have the meaning given in section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act"), as
modified and used in sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or
any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or any of its affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of
such securities,(iv) a corporation owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, or(v) a person or group as used in
Rule 13d-1(b) under the Exchange Act. "Beneficial Owner"
shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
Notwithstanding the foregoing, any event or transaction
which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for
purposes of this Agreement if, in connection with the
Transaction, the Executive participates as an equity
investor in the acquiring entity or any of its affiliates
(the "Acquiror"). For purposes of the preceding sentence,
the Executive shall not be deemed to have participated as an
equity investor in the Acquiror by virtue of (i) obtaining
beneficial ownership of any equity interest in the Acquiror
as a result of the grant to the Executive of an incentive
compensation award under one or more incentive plans of the
Acquiror (including, but not limited to, the conversion in
connection with the Transaction of incentive compensation
awards of the Company into incentive compensation awards of
the Acquiror), on terms and conditions substantially
equivalent to those applicable to other executives of the
Company immediately prior to the Transaction, after taking
into account normal differences attributable to job
responsibilities, title and the like, (ii) obtaining
beneficial ownership of any equity interest in the Acquiror
on terms and conditions substantially equivalent to those
obtained in the Transaction by all other shareholders of the
Company, or (iii) obtaining beneficial ownership of any
equity interest in the Acquiror in a manner unrelated to a
Transaction.
(f) Notice of Termination. During the Employment
Period, any purported termination of the Executive's
employment (other than by reason of death)shall be
communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with Section
12(b). For purposes of this Agreement, a "Notice of
Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied
upon, if any, and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-
fourths (3/4) of the entire membership of the Board at a
meeting of the Board that was called and held no more than
ninety (90)days after the date the Board had knowledge of
the most recent act or omission giving rise to such breach
for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for
the Executive, together with the Executive's counsel, to be
heard before the Board and, if possible, to cure the breach
that was the basis for the Notice of Termination for Cause)
finding that, in the good faith opinion of the Board, the
Executive was guilty of conduct set forth in clause (i)or
(ii) of the definition of Cause herein, and specifying the
particulars thereof in detail. Unless the Board determines
otherwise, a Notice of Termination by the Executive alleging
a termination for Good Reason must be made within 180 days
of the act or failure to act that the Executive alleges to
constitute Good Reason.
(g) Date of Termination. "Date of Termination," with
respect to any purported termination of the Executive's
employment during the Employment Period, shall mean the date
specified in the Notice of Termination (which, in the case
of a termination by the Company, for reasons other than
Cause, shall not be less than thirty (30) days and, in the
case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days), from
the date such Notice of Termination is given).
5. Obligations of the Company Upon Termination.
(a) Termination Other Than for Cause, Death or
Disability. During the Employment Period, if the Company
shall terminate the Executive's employment(other than for
Cause, death or Disability) or the Executive shall terminate
his employment for Good Reason (termination in any such case
being referred to as "Termination") the Company shall pay to
the Executive the amounts, and provide the Executive with
the benefits, described in this Section 5 (hereinafter
referred to as the "Severance Payments"). Subject to
Section 5(g), the amounts specified in this Section 5(a)
shall be paid within thirty (30) days after the Date of
Termination.
(i) Lump Sum Payment. In lieu of any further payments
of Annual Base Salary or annual Incentive Compensation
Awards to the Executive for periods subsequent to the Date
of Termination, the Company shall pay to the Executive a
lump sum amount in cash equal to the product of (X) the sum
of (A) the Executive's Annual Base Salary and (B) the
greater of the Executive's target bonus for the year of
termination or the average of the three(3) years' highest
gross bonus awards, not necessarily consecutive, paid by the
Company (or its predecessor) to the Executive in the five
(5) years preceding the year of termination and (Y) the
number of years remaining in the Employment Period
(including fractional years), but in no event less than two
(2);provided, however, that in the event of a Termination
following a Change in Control such multiplier shall not be
less than three (3).
(ii) Accrued Obligations. The Company shall pay the
Executive a lump sum amount in cash equal to the sum of (A)
the Executive's Annual Base Salary through the Date of
Termination to the extent not thereto-fore paid, (B) an
amount equal to any annual Incentive Compensation Awards
earned with respect to fiscal years ended prior to the year
that includes the Date of Termination to the extent not
theretofore paid and (C) an amount equal to the target
amount payable under any annual Incentive Compensation
Awards for the fiscal year that includes the Date of
Termination or, if greater, the average of the three (3)
years' highest gross bonus awards, not necessarily
consecutive, paid by the Company (or its predecessor) to the
Executive in the five (5) years preceding the year of
Termination multiplied by a fraction the numerator of which
shall be the number of days from the beginning of such
fiscal year to and including the Date of Termination and the
denominator of which shall be 365, in each case to the
extent not theretofore paid. (The amounts specified in
clauses (A), (B) and (C) shall be hereinafter referred to as
the "Accrued Obligations.")
(iii) Deferred Compensation. In the event of a
Termination following a Change in Control, the Company shall
pay the Executive a lump sum payment in an amount equal to
any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon).
(iv) Pension Supplement. The Company shall provide the
Executive with such additional years of age and service
credit for purposes of the calculation of retirement
benefits under the Enova Supplemental Executive Retirement
Plan (the "Enova SERP") as if he had remained employed for
the remainder of the Employment Period, but in no event less
than two (2) years, provided, however, that there shall be
no reduction under the Enova SERP for early retirement as
set forth in paragraph 4.a.ii of the Enova SERP, except for
the early retirement reduction factor determined in
accordance with the table in Section 5.4 of the San Diego
Gas & Electric Company Pension Plan, as adopted by Enova
(the "Pension Plan"); and provided, further, however, that
in the event of a Termination following a Change in Control,
the Company shall pay the Executive a lump sum payment in an
amount equal to the benefits under the Enova SERP as
described in paragraph 2.c of the Enova SERP, less the value
calculated consistently with paragraph 4.b of the SERP of
the Executive's entitlement under the Pension Plan, such
payment to be calculated and paid without regard to the
limitation described in the Enova SERP relating to Section
280G of the Code and with such additional years of age and
service credit as if he had remained employed for the
remainder of the Employment Period, but in no event less
than two (2) years; and in either case The Executive's
termination shall be a "Qualifying Termination" as defined
in the Split Dollar Life Insurance Agreement entered into
between the Executive and Enova, and where necessary the
Company shall take such steps, including the payment of
additional premiums, as may be necessary so that the cash
value of the policy as of the Date of Termination shall
reflect the additional age and service credit.
(v) Accelerated Vesting and Payment of Long-Term
Incentive Awards. All equity-based long-term Incentive
Compensation Awards held by the Executive under any long-
term Incentive Compensation Plan maintained by the Company
or any affiliate shall immediately vest and become
exercisable as of the Date of Termination, to be exercised
in accordance with the terms of the applicable plan and
award agreement; provided, however, that any such awards
granted on or after the Effective Date shall remain
outstanding and exercisable until the earlier of (A)
eighteen (18) months following the Date of Termination or
(B) the expiration of the original term of such award (it
being understood that all awards granted prior to the
Effective Date shall remain outstanding and exercisable for
a period that is no less than that provided for in the
applicable agreement in effect as of the date of grant), and
the Company shall pay to the Executive, with respect to all
cash-based, long-term Incentive Compensation Awards made to
the Executive that are outstanding under any long-term
Incentive Compensation Plan maintained by the Company or any
affiliate an amount equal to the target amount payable under
such long-term Incentive Compensation Awards multiplied by a
fraction, the numerator of which shall be the number of days
from the beginning of the award cycle to and including the
Date of Termination, and the denominator of which shall be
the number of days in the cycle as originally granted.
(vi) Continuation of Welfare Benefits. For (A) the
remainder of the Employment Period, but in no event less
than a period of two (2) years or (B) until the Executive is
eligible for retiree medical benefits, whichever is longer,
immediately following the Date of Termination, the Company
shall arrange to provide the Executive and his dependents
with life, disability, accident and health insurance
benefits substantially similar to those provided to the
Executive and his dependents immediately prior to the Date
of Termination, provided, however, that if the Executive
becomes employed with another employer and is eligible to
receive life, disability, accident and health insurance
benefits under another employer-provided plan, the benefits
under the Company's plans shall be secondary to those
provided under such other plan during such applicable period
of eligibility, and further provided, however, that in the
event of a termination following a Change in Control such
period shall not be less than the number of years until the
Executive reaches normal retirement age as defined under the
Enova tax-qualified plans.
(b) Termination by the Company for Cause or by the
Executive Other than for Good Reason. Subject to the
provisions of Section 6 of this Agreement, if the
Executive's employment shall be terminated for Cause during
the Employment Period, or if the Executive terminates
employment during the Employment Period other than for Good
Reason, the Company shall have no further obligations to The
Executive under this Agreement other than the Accrued
Obligations.
(c) Termination due to Death or Disability. If the
Executive's employment shall terminate by reason of death or
Disability, the Company shall pay the Executive or his
estate, as the case may be, the Accrued Obligations and,
solely in the case of termination by reason of Disability,
the Pension Supplement. Such payments shall be in addition
to those rights and benefits to which the Executive or his
estate may be entitled under the relevant Company plans or
programs.
(d) Code Section 280G.
(i) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received
or to be received by the Executive (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with (A) the Company, (B) any Person (as defined
in Section 4(e)) whose actions result in a Change in Control
or (C) any Person affiliated with the Company or such
Person) (all such payments and benefits, including the
Severance Payments, being hereinafter called "Total
Payments")would not be deductible (in whole or part) by the
Company, an affiliate or Person making such payment or
providing such benefit as a result of section 280G of the
Code, then, to the extent necessary to make such portion of
the Total Payments deductible (and after taking into account
any reduction in the Total Payments provided by reason of
section 280G of the Code in such other plan, arrangement or
agreement), the cash Severance Payments shall first be
reduced (if necessary, to zero), and all other Severance
Payments shall thereafter be reduced (if necessary, to
zero); provided, however, that the Executive may elect to
have the noncash Severance Payments reduced (or eliminated)
prior to any reduction of the cash Severance Payments.
(ii) For purposes of this limitation, (A) no portion of
the Total Payments the receipt or enjoyment of which the
Executive shall have waived at such time and in such manner
as not to constitute a "payment" within the meaning of
section 280G(b) of the Code shall be taken into account, (B)
no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel ("Tax Counsel")
reasonably acceptable to the Executive and selected by the
Company's accounting firm which (or, in the case of a
payment following a Change in Control the accounting firm
that was, immediately prior to the Change in Control, the
Company's independent auditor) (the "Auditor"),does not
constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code, (C) the Severance
Payments shall be reduced only to the extent necessary so
that the Total Payments (other than those referred to in
clause (A) or(B)) in their entirety constitute reasonable
compensation for services actually rendered within the
meaning of section 280G(b)(4)(B) of the Code or are
otherwise not subject to disallowance as deductions by
reason of section 280G of the Code, in the opinion of Tax
Counsel, and (D) the value of any noncash benefit or any
deferred payment or benefit included in the Total Payments
shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
(e) Consulting and Non-Competition. If the Total
Payments are subject to reduction in accordance with the
above provisions of Section 5(d), the Executive shall have
the option, to be exercised within ten (10) days after
receipt of notice of such reduction from the Company, to
enter into a consulting and non-competition agreement with
the Company (the "Consulting and Non-Competition
Agreement"), which shall (1) provide the Executive with
payments and benefits, payable over the term of the
agreement, the present value of which in the aggregate is
equal to or greater than the present value (determined by
applying a discount rate equal to the interest rate provided
in section 1274(b)(2)(B) of the Code) of the balance of the
payments and benefits otherwise payable to the Executive
without regard to the provisions of Section 5(d), (2)
require the Executive to make his services available to the
Company for no more than twenty (20) hours per month and (3)
last for a period of not more than two (2) years (unless the
Executive consents to a longer period).
(f) Gross-Up Payment. In the event that the Executive
receives a notice from the Internal Revenue Service to the
effect that the amounts payable under the Consulting and
Non-Competition Agreement would be subject (in whole or
part)to the tax (the "Excise Tax") imposed under section
4999 of the Code, within thirty(30) days after the date the
Chairman of the Board receives a copy of such notice the
Company shall pay to the Executive such additional amounts
(the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment,
shall be equal to the Total Payments. For purposes of
determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the
highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the
Executive's residence on the date on which the Gross-Up
Payment is calculated for purposes of this section, net of
the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. In
the event that the Excise Tax is subsequently determined to
be less than the amount taken into account hereunder, the
Executive shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable
to such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid by
the Executive to the extent that such repayment results in a
reduction in Excise Tax and/or a federal, state or local
income tax deduction) plus interest on the amount of such
repayment at the rate provided in section 1274(b)(2)(B) of
the Code. In the event that the Excise Taxis determined to
exceed the amount taken into account hereunder (including by
reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect
to the Total Payments.
(g) Release. Notwithstanding anything herein to the
contrary, the Company's obligation to make the payments
provided for in this Section 5 is expressly made subject to
and conditioned upon (i) the Executive's prior execution of
a release substantially in the form attached hereto as
Exhibit A within forty-five (45)days after the applicable
Date of Termination and (ii) the Executive's non-revocation
of such release in accordance with the terms thereof.
6. Nonexclusivity of Rights.
Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the
Company and for which the Executive may qualify (except with
respect to any benefit to which the Executive has waived his
rights in writing), nor shall anything herein limit or
otherwise affect such rights as the Executive may have under
any other contract or agreement entered into after the
Effective Date with the Company. Amounts which are vested
benefits or which the Executive is otherwise entitled to
receive under any benefit, plan, policy, practice or program
of, or any contract or agreement entered into with, the
Company shall be payable in accordance with such benefit,
plan, policy, practice or program or contract or agreement
except as explicitly modified by this Agreement.
7. Full Settlement; Mitigation.
The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or
others, provided that nothing herein shall preclude the
Company from separately pursuing recovery from the Executive
based on any such claim. In no event shall the Executive be
obligated to seek other employment or take any other action
by way of mitigation of the amounts (including amounts for
damages for breach) payable to the Executive under any of
the provisions of this Agreement and such amounts shall not
be reduced whether or not the Executive obtains other
employment.
8. Arbitration.
Any dispute about the validity, interpretation, effect or
alleged violation of this Agreement (an "arbitrable
dispute") must be submitted to confidential arbitration in
San Diego, California. Arbitration shall take place before
an experienced employment arbitrator licensed to practice
law in such state and selected in accordance with the Model
Employment Arbitration Procedures of the American
Arbitration Association. Arbitration shall be the exclusive
remedy of any arbitrable dispute. Should any party to this
Agreement pursue any arbitrable dispute by any method other
than arbitration, the other party shall be entitled to
recover from the party initiating the use of such method all
damages, costs, expenses and attorneys' fees incurred as a
result of the use of such method. Notwithstanding anything
herein to the contrary, nothing in this Agreement shall
purport to waive or in any way limit the right of any party
to seek to enforce any judgment or decision on an arbitrable
dispute in a court of competent jurisdiction.
9. Confidentiality.
The Executive acknowledges that in the course of his
employment with the Company, he has acquired non-public
privileged or confidential information and trade secrets
concerning the operations, future plans and methods of doing
business("Proprietary Information") of the Company, its
subsidiaries and affiliates; and the Executive agrees that
it would be extremely damaging to the Company, its
subsidiaries and affiliates if such Proprietary Information
were disclosed to a competitor of the Company, its
subsidiaries and affiliates or to any other person or
corporation. The Executive understands and agrees that all
Proprietary Information has been divulged to the Executive
in confidence and further understands and agrees to keep all
Proprietary Information secret and confidential (except for
such information which is or becomes publicly available
other than as a result of a breach by the Executive of this
provision) without limitation in time. In view of the
nature of the Executive's employment and the Proprietary
Information the Executive has acquired during the course of
such employment, the Executive likewise agrees that the
Company, its subsidiaries and affiliates would be
irreparably harmed by any disclosure of Proprietary
Information in violation of the terms of this paragraph and
that the Company, its subsidiaries and affiliates shall
therefore be entitled to preliminary and/or permanent
injunctive relief prohibiting the Executive from engaging in
any activity or threatened activity in violation of the
terms of this paragraph and to any other relief available to
them. Inquiries regarding whether specific information
constitutes Proprietary Information shall be directed to the
Board provided, that the Company shall not unreasonably
classify information as Proprietary Information.
10. Non-Solicitation of Employees.
The Executive recognizes that he possesses and will
possess confidential information about other employees of
the Company, its subsidiaries and affiliates relating to
their education, experience, skills, abilities, compensation
and benefits, and inter-personal relationships with
customers of the Company, its subsidiaries and affiliates.
The Executive recognizes that the information he possesses
and will possess about these other employees is not
generally known, is of substantial value tothe Company, its
subsidiaries and affiliates in developing their business and
in securing and retaining customers, and has been and will
be acquired by him because of his business position with the
Company, its subsidiaries and affiliates. The Executive
agrees that, during the Employment Period and for a period
of one (1) year thereafter, he will not, directly or
indirectly, solicit or recruit any employee of the Company,
its subsidiaries or affiliates for the purpose of being
employed by him or by any competitor of the Company, its
subsidiaries or affiliates on whose behalf he is acting as
an agent, representative or employee and that he will not
convey any such confidential information or trade secrets
about other employees of the Company, its subsidiaries and
affiliates to any other person; provided, however, that it
shall not constitute a solicitation or recruitment of
employment in violation of this paragraph to discuss
employment opportunities with any employee of the Company,
its subsidiaries or affiliates who has either first
contacted the Executive or regarding whose employment the
Executive has discussed with and received the written
approval of the Chairman of the Board prior to making such
solicitation or recruitment. In view of the nature of the
Executive's employment with the Company, the Executive
likewise agrees that the Company, its subsidiaries and
affiliates would be irreparably harmed by any solicitation
or recruitment in violation of the terms of this paragraph
and that the Company, its subsidiaries and affiliates shall
therefore be entitled to preliminary and/or permanent
injunctive relief prohibiting the Executive from engaging in
any activity or threatened activity in violation of the
terms of this paragraph and to any other relief available to
them.
11. Legal Fees.
The Company shall pay to the Executive all legal fees and
expenses(including but not limited to fees and expenses in
connection with any arbitration)incurred by the Executive in
disputing in good faith any issue arising under this
Agreement relating to the termination of the Executive's
employment or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement, but in each
case only to the extent the arbitrator or court determines
that the Executive had a reasonable basis for such claim.
12. Successors.
(a) Assignment by Executive. This Agreement is personal
to the Executive and without the prior written consent of
the Company shall not be assign-able by the Executive
otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) Successors and Assigns of Company. This Agreement
shall inure to the benefit of and be binding upon the
Company, its successors and assigns.
(c) Assumption. The Company shall require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its
businesses and/or assets as aforesaid that assumes and
agrees to perform this Agreement by operation of law or
otherwise.
13. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California, without reference to its principles of conflict
of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended, modified, repealed, waived,
extended or discharged except by an agreement in writing
signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or
discharge is sought. No person, other than pursuant to a
resolution of the Board or a committee thereof, shall have
authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of
this Agreement or anything in reference thereto.
(b) Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed,
in either case, tothe Company's headquarters or to such
other address as either party shall have furnished to the
other in writing in accordance herewith. Notices and
communications shall be effective when actually received by
the addressee. (c) Severability. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement.
(d) Taxes. The Company may withhold from any amounts
payable under this Agreement such federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision hereof
or any other provision of this Agreement or the failure to
assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant
to Section 4 of this Agreement, or the right of the Company
to terminate the Executive's employment for Cause pursuant
to Section 4 of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or
right of this Agreement.
(f) Entire Agreement. This instrument contains the
entire agreement of the Executive, the Company or any
predecessor or subsidiary thereof with respect to the
subject matter hereof, and all promises, representations,
understandings, arrangements and prior agreements are merged
herein and superseded hereby including, but not limited to,
that certain employment agreement dated September 18, 1996
between the Executive and Enova. Notwithstanding the
foregoing, the provisions of any employee benefit or
compensation plan, program or arrangement applicable to the
Executive, including that certain Incentive Bonus Agreement,
entered into between the Executive and Enova, shall remain
in effect, except as expressly otherwise provided herein.
IN WITNESS WHEREOF, the Executive and, pursuant to due
authorization from its Board of Directors, the Company have
caused this Agreement to be executed as of the day and year
first above written.
MINERAL ENERGY COMPANY
__________________________
Kevin C. Sagara
President
__________________________
Stephen L. Baum
EXHIBIT A
GENERAL RELEASE
This GENERAL RELEASE (the "Agreement"), dated _______, is
made by and between ___________________, a California
corporation (the "Company") and _____________ ("you" or
"your").
WHEREAS, you and the Company have previously entered into
that certain Employment Agreement dated _____________, 1996
(the "Employment Agreement"); and
WHEREAS, Section 5 of the Employment Agreement provides
for the payment of severance benefits in the event of the
termination of your employment under certain circumstances,
subject to and conditioned upon your execution and non-
revocation of a general release of claims by you against the
Company and its subsidiaries and affiliates.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, you and the Company
hereby agree as follows:
ONE: Your signing of this Agreement confirms that your
employment with the Company shall terminate at the close of
business on ___________,or earlier upon our mutual
agreement.
TWO: As a material inducement for the payment of
benefits under Section 5 of that certain Employment
Agreement between you and the Company, and except as
otherwise provided in this Agreement, you and the Company
hereby irrevocably and unconditionally release, acquit and
forever discharge the other from any and all Claims either
may have against the other. For purposes of his Agreement
and the preceding sentence, the words "Releasee" or
"Releasees"
and "Claim" or "Claims," shall have the meanings set forth
below:
(a)The words "Releasee" or "Releasees" shall refer to the
you and to the Company and each of the Company's owners,
stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys,
advisors, parent companies, divisions, subsidiaries,
affiliates(and agents, directors, officers, employees,
representatives, attorneys and advisors of such parent
companies, divisions, subsidiaries and affiliates), and all
persons acting by, through, under or in concert with any of
them.
(b)The words "Claim" or "Claims" shall refer to any
charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses,
debts and expenses (including attorneys' fees and costs
actually incurred)of any nature whatsoever, known or
unknown, suspected or unsuspected, which you or the Company
now, in the past or, except as limited by law or regulation
such as the Age Discrimination in Employment Act (ADEA), in
the future may have, own or hold against any of the
Releasees; provided, however, that the word "Claim" or
"Claims" shall not refer to any charges, complaints, claims,
liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses
(including attorneys' fees and costs actually incurred)
arising under [identify severance, employee benefits, stock
option and other agreements containing duties, rights
obligations etc. of either party that are to remain
operative]. Claims released pursuant to this Agreement by
you and the Company include, but are not limited to, rights
arising out of alleged violations of any contracts, express
or implied, any tort, any claim that you failed to perform
or negligently performed or breached your duties during
employment at the Company, any legal restrictions on the
Company's right to terminate employees or any federal, state
or other governmental statute, regulation, or ordinance,
including, without limitation: (1) Title VII of the Civil
Rights Act of l964 (race, color, religion, sex and national
origin discrimination); (2) 42 U.S.C Sec 1981
(discrimination); (3) 29 U.S.C. Sec 621-634(age
discrimination); (4) 29 U.S.C. Sec 206(d)(l) (equal pay);
(5) 42 U.S.C. Sec 12101, et seq. (disability); (6) the
California Constitution, Article I, Section
8(discrimination); (7) the California Fair Employment and
Housing Act (discrimination, including race, color, national
origin, ancestry, physical handicap, medical condition,
marital status, religion, sex or age); (8) California Labor
Code Section 1102.1 (sexual orientation discrimination); (9)
Executive Order 11246(race, color, religion, sex and
national origin discrimination); (10) Executive Order 11141
(age discrimination); (11) Sec 503 and 504 of the
Rehabilitation Act of 1973 (handicap discrimination); (12)
The Worker Adjustment and Retraining Act (WARN Act); (13)
the California Labor Code (wages, hours, working conditions,
benefits and other matters); (14) the Fair Labor Standards
Act (wages, hours, working conditions and other matters);
the Federal Employee Polygraph Protection Act (prohibits
employer from requiring employee to take polygraph test as
condition of employment); and (15) any federal, state or
other governmental statute, regulation or ordinance which is
similar to any of the statutes de-scribed in clauses (1)
through (14).
THREE: You and the Company expressly waive and
relinquish all rights and benefits afforded by any statute
(including but not limited to Section 1542 of the Civil Code
of the State of California) which limits the effect of are
lease with respect to unknown claims. You and the Company
do so under-standing and acknowledging the significance of
the release of unknown claims and the waiver of statutory
protection against a release of unknown claims(including but
not limited to Section 1542). Section 1542 of the Civil
Code of the State of California states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Thus, notwithstanding the provisions of Section 1542 or of
any similar statute, and for the purpose of implementing a
full and complete release and discharge of the Releasees,
you and the Company expressly acknowledge that this
Agreement is intended to include in its effect, without
limitation, all Claims which are known and all Claims which
you or the Company do not know or suspect to exist in your
or the Company's favor at the time of execution of this
Agreement and that this Agreement contemplates the
extinguishment of all such Claims.
FOUR: The parties acknowledge that they might hereafter
discover facts different from, or in addition to, those they
now know or believe to be rue with respect to a Claim or
Claims released herein, and they expressly agree to assume
the risk of possible discovery of additional or different
facts, and agree that this Agreement shall be and remain
effective, in all respects, regardless of such additional or
different discovered facts.
FIVE: You hereby represent and acknowledge that you have
not filed any Claim of any kind against the Company or
others released in this Agreement. You further hereby
expressly agree never to initiate against the Company or
others released in this Agreement any administrative
proceeding, lawsuit or any other legal or equitable
proceeding of any kind asserting any Claims that are
released in this Agreement.
The Company hereby represents and acknowledges that it
has not filed any Claim of any kind against you or others
released in this Agreement. The Company further hereby
expressly agrees never to initiate against you or others
released in this Agreement any administrative proceeding,
lawsuit or any other legal or equitable proceeding of any
kind asserting any Claims that are released in this
Agreement.
SIX: You hereby represent and agree that you have not
assigned or transferred, or attempted to have assigned or
transfer, to any person or entity, any of the Claims that
you are releasing in this Agreement.
The Company hereby represents and agrees that it has not
assigned or transferred, or attempted to have assigned or
transfer, to any person or entity, any of the Claims that it
is releasing in this Agreement.
SEVEN: As a further material inducement to the Company
to enter into this Agreement, you hereby agree to indemnify
and hold each of the Releasees harmless from all loss,
costs, damages, or expenses, including without limitation,
attorneys' fees incurred by Releasees, arising out of any
breach of this Agreement by you or the fact that any
representation made in this Agreement by you was false when
made.
EIGHT: You and the Company represent and acknowledge
that, in executing this Agreement, neither is relying upon
any representation or statement not set forth in this
Agreement or the Severance Agreement.
NINE: (a)This Agreement shall not in any way be
construed as an admission by the Company that it has acted
wrongfully with respect to you or any other person, or that
you have any rights whatsoever against the Company, and the
Company specifically disclaims any liability to or wrongful
acts against you or any other person, on the part of itself,
its employees or its agents. This Agreement shall not in
any way be construed as an admission by you that you have
acted wrongfully with respect to the Company, or that you
failed to perform your duties or negligently performed or
breached your duties, or that the Company had good cause to
terminate your employment. (b)If you are a party or are
threatened to be made a party to any proceeding by reason of
the fact that you were an officer [or director] of the
Company, the Company shall indemnify you against any
expenses(including reasonable attorney fees provided that
counsel has been approved by the Company prior to
retention), judgments, fines, settlements, and other amounts
actually or reasonably incurred by you in connection with
that proceeding, provided that you acted in good faith and
in a manner you reasonably believed to be in the best
interest of the Company. The limitations of California
Corporations Code Section 317 shall apply to this assurance
of indemnification. (c) You agree to cooperate with the
Company and its designated attorneys, representatives and
agents in connection with any actual or threatened judicial,
administrative or other legal or equitable proceeding in
which the Company is or may be become involved. Upon
reasonable notice, you agree to meet with and provide to the
Company or its designated attorneys, representatives or
agents all information and knowledge you have relating to
the subject matter of any such proceeding.
TEN: This Agreement is made and entered into in
California. This Agreement shall in all respects be
interpreted, enforced and governed by and under the laws of
the State of California. Any dispute about the validity,
interpretation, effect or alleged violation of this
Agreement (an "arbitrable dispute") must be submitted to
arbitration in [Los Angeles][San Diego], California.
Arbitration shall take place before an experienced
employment arbitrator licensed to practice law in such state
and selected in accordance with the Model Employment
Arbitration Procedures of the American Arbitration
Association. Arbitration shall be the exclusive remedy for
any arbitrable dispute. The arbitrator in any arbitrable
dispute shall not have authority to modify or change the
Agreement in any respect. You and the Company shall each be
responsible for payment of one-half the amount of the
arbitrator's fee(s). Should any party to this Agreement
institute any legal action or administrative proceeding
against the other with respect to any Claim waived by this
Agreement or pursue any arbitrable dispute by any method
other than arbitration, the prevailing party shall be
entitled to recover from the initiating party all damages,
costs, expenses and attorneys' fees incurred as a result of
that action. The arbitrator's decision and/or award will be
fully enforceable and subject to an entry of judgment by the
Superior Court of the State of California for the County of
[Los Angeles][San Diego].
ELEVEN: Both you and the Company understand that this
Agreement is final and binding eight days after its
execution and return. Should you nevertheless attempt to
challenge the enforceability of this Agreement as provided
in Paragraph TEN or, in violation of that Paragraph, through
litigation, as a further limitation on any right to make
such a challenge, you shall initially tender to the Company,
by certified check delivered to the Company, all monies
received pursuant to Section 5 of the Employment Agreement,
plus interest, and invite the Company to retain such monies
and agree with you to cancel this Agreement and void the
Company's obligations under Section 5 of the Employment
Agreement. In the event the Company accepts this offer, the
Company shall retain such monies and this Agreement shall be
canceled and the Company shall have no obligation under
Section 5 of the Employment Agreement. In the event the
Company does not accept such offer, the Company shall so
notify you, and shall place such monies in an interest-
bearing escrow account pending resolution of the dispute
between you and the Company as to whether or not this
Agreement and the Company's obligations under Section 5 of
the Employment Agreement shall be set aside and/or otherwise
rendered voidable or unenforceable. Additionally, any
consulting agreement then in effect between you and The
Company shall be immediately rescinded with no requirement
of notice.
TWELVE: Any notices required to be given under this
Agreement shall be delivered either personally or by first
class United States mail, postage prepaid, addressed to the
respective parties as follows:
To Company: [TO COME]
Attn: [TO COME]
To You:
___________________
___________________
___________________
THIRTEEN: You understand and acknowledge that you have
been given a period of 45 days to review and consider this
Agreement (as well as statistical data on the persons
eligible for similar benefits) before signing it and may use
as much of this 45-day period as you wish prior to signing.
You are encouraged, at your personal expense, to consult
with an attorney before signing this Agreement. You
understand and acknowledge that whether or not you do so is
your decision. You may revoke this Agreement within seven
days of signing it. If you wish to revoke, the Company's
Vice President, Human Resources must receive written notice
from you no later than the close of business on the seventh
day after you have signed the Agreement. If revoked, this
Agreement shall not be effective and enforceable and you
will not receive payments or benefits under Section 5 of the
Employment Agreement.
FOURTEEN: This Agreement constitutes the entire
Agreement of the parties hereto and supersedes any and all
other Agreements (except the Employment Agreement) with
respect to the subject matter of this Agreement, whether
written or oral, between you and the Company. All
modifications and amendments to this Agreement must be in
writing and signed by the parties.
FIFTEEN: Each party agrees, without further
consideration, to sign or cause to be signed, and to deliver
to the other party, any other documents and to take any
other action as may be necessary to fulfill the obligations
under this Agreement.
SIXTEEN: If any provision of this Agreement or the
application thereof is held invalid, the invalidity shall
not affect other provisions or applications of the Agreement
which can be given effect without the invalid provisions or
application; and to this end the provisions of this
Agreement are declared to be severable.
SEVENTEEN: This Agreement may be executed in
counterparts.
I have read the foregoing General Release and I accept and
agree to the provisions it contains and hereby execute it
voluntarily and with full under-standing of its
consequences. I am aware it includes a release of all known
or unknown claims.
DATED:____________________
_____________________________
DATED:____________________
_____________________________
You acknowledge that you first received this Agreement on
[date].
___________________________
Exhibit 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made and entered into
as of the 12th day of October, 1996, by and between Mineral
Energy Company (the "Company"), a California corporation,
and Richard D. Farman (the "Executive");
WHEREAS, the Executive is currently serving as President
and Chief Operating Officer of Pacific Enterprises, a
California corporation ("Pacific Enterprises"), and the
Company desires to secure the continued employment of the
Executive in accordance herewith;
WHEREAS, pursuant to the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of October 12, 1996,
among, inter alia, Pacific Enterprises, Enova, Inc., a
California corporation ("Enova"), and the Company, the
parties thereto have agreed to a merger (the "Merger")
pursuant to the terms thereof;
WHEREAS, the Executive is willing to commit himself to
be employed by the Company on the terms and conditions
herein set forth and thus to forego opportunities
elsewhere; and
WHEREAS, the parties desire to enter into this
Agreement, as of the Effective Date (as hereinafter
defined), setting forth the terms and conditions for the
employment relationship of the Executive with the Company
during the Employment Period (as hereinafter defined).
NOW, THEREFORE, IN CONSIDERATION of the mutual premises,
covenants and agreements set forth below, it is hereby
agreed as follows: 1. Employment and Term.
(a) Employment. The Company agrees to employ the
Executive, and the Executive agrees to be employed by the
Company, in accordance with the terms and provisions of
this Agreement during the term thereof (as described
below).
(b) Term. The term of the Executive's employment under
this Agreement shall commence (the "Effective Date") as of
the closing date (the "Closing Date") of the Merger, as
described in the Merger Agreement, and shall continue until
the earlier of the Executive's Mandatory Retirement Age (as
defined herein) or the fifth anniversary of the Effective
Date (such term being referred to hereinafter as the
"Employment Period"); provided, however, that commencing on
the fourth anniversary of the Effective Date (and each
anniversary of the Effective Date thereafter) the term of
this Agreement shall automatically be extended for one
additional year, unless, prior to such date, the Company or
the Executive shall give written notice to the other party
that it or he, as the case may be, does not wish to so
extend this Agreement; and further provided, however, that
if the Merger Agreement is terminated, then, at the time of
such termination, this Agreement shall be deemed cancelled
and of no force or effect and the Executive shall continue
to be subject to such agreements and arrangements that were
in effect prior to the Closing Date. As a condition to the
Merger, the parties hereto agree that the Company shall be
responsible for all of the premises, covenants and
agreements set forth in this Agreement.
(c) Mandatory Retirement. In no event shall the term
of the Executive's employment hereunder extend beyond the
end of the month in which the Executive's 65th birthday
occurs (the "Mandatory Retirement Age").
2. Duties and Powers of Executive.
(a) Position.
(i) Period A. During the period commencing on the
Effective Date and ending on the earlier of September 1,
2000 or the second anniversary of the Effective Date
("Period A"), the Executive shall serve as the Chairman of
the Board of Directors of the Company (the "Board") and
Chief Executive Officer of the Company with such authority,
duties and responsibilities with respect to such position
as set forth below in subsection (b) hereof. In this
capacity, the Executive shall be a member of the office of
the Chairman(which shall be an office held jointly by the
Executive and the President, Chief Operating Officer and
Vice Chairman of the Board) ("Office of the Chair-man") and
shall report only to the Board. The presidents and
principal executive officers of the Company's regulated and
nonregulated businesses and the senior-most person in
charge of each of the Company's policy units shall report
directly to the Office of the Chairman. (ii) Period B.
During the period, if any, commencing on the second
anniversary of the Effective Date and ending on September
1, 2000("Period B"), the Executive shall be nominated to
the position of, and if elected shall serve as, the
Chairman of the Board with such authority, duties and
responsibilities with respect to such position as set forth
below.
(b) Duties. (i) Chief Executive Officer. The duties
of the Chief Executive Officer of the Company shall include
but not be limited to directing the overall business,
affairs and operations of the Company, through its
officers, all of whom shall report directly or indirectly
to the Office of the Chairman. (ii) Chairman of the
Board. The Chairman of the Board shall be a director and
shall preside at meetings of the Board and meetings of the
share-holders. The Chairman shall be responsible for Board
and shareholder governance and shall have such duties and
responsibilities as are customarily assigned to such
positions.
(c) Board Membership. The Executive shall be a member
of the Board on the first day of the Employment Period, and
the Board shall propose the Executive for re-election to
the Board throughout the Employment Period.
(d) Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to which
the Executive is entitled, the Executive shall devote full
attention and time during normal business hours to the
business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive under this Agreement, use the Executive's best
efforts to carry out such responsibilities faithfully and
efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate,
industry, civic or charitable boards or committees, so long
as such activities do not interfere with the performance of
the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
3. Compensation.
It is the Board's intention to provide the Executive
with compensation opportunities that, in total, are at a
level that is consistent with that provided by comparable
companies to executives of similar levels of
responsibility, expertise and corporate and individual
performance as determined by the compensation committee of
the Board. In this regard, the Executive shall receive the
following compensation for his services hereunder to the
Company:
(a) Base Salary. During the Employment Period, the
Executive's annual base salary ("Annual Base Salary") shall
be no less than $760,000 and shall be payable in accordance
with the Company's general payroll practices. Subject to
Section 4(e)(ii), the Board in its discretion may from time
to time direct such upward adjustments in the Executive's
Annual Base Salary as the Board deems to be necessary or
desirable, including, without limitation, adjustments in
order to reflect in-creases in the cost of living and the
Executive's performance. Any increase in Annual Base
Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement.
(b) Incentive Compensation. Subject to Section
4(e)(ii), during the Employment Period, the Executive shall
participate in annual incentive compensation plans and
long-term incentive compensation plans of the Company and,
to the extent appropriate, the Company's subsidiaries
(which long-term incentive compensation plans may include
plans offering stock options, restricted stock and other
long-term incentive compensation and all such annual and
long-term plans to be hereinafter referred to as the
"Incentive Compensation Plans") and will be granted (i) on
a year-by-year basis, annual compensation providing the
Executive with an annual bonus opportunity of not less than
60% of his Annual Base Salary at target and 120% of his
Annual Base Salary at maximum, and (ii) long-term incentive
compensation (collectively referred to as "Incentive
Compensation Awards"). Any equity awards granted to the
Executive may be granted, at the Executive's election, to
trusts established for the benefit of members of the
Executive's family. With respect to incentive compensation
awards granted prior to the Effective Date, the Executive
shall be entitled to retain such awards in accordance with
their terms, which shall be appropriately adjusted as a
result of the Merger.
(c) Retirement and Welfare Benefit Plans. In addition
to the benefits provided under Section 3(b), during the
Employment Period and so long as the Executive is employed
by the Company, he shall be eligible to participate in all
other savings, retirement and welfare plans, practices,
policies and programs applicable generally to employees
and/or senior executive officers of the Company and its
domestic subsidiaries, except with respect to any benefits
under any plan, practice, policy or program to which the
Executive has waived his rights in writing. To the extent
that benefits payable or provided to the Executive under
such plans are materially less favorable on a benefit by
benefit basis than the benefits that would have been
payable or provided to the Executive under comparable
Pacific Enterprises tax-qualified retirement plans,
executive retirement plans, executive medical plans and
life insurance arrangements in which the Executive was a
participant (based on the terms of such plans as of the
Effective Date), the Executive shall be entitled to
benefits pursuant to the terms of this Agreement equal to
the excess of the benefits provided under the applicable
Pacific Enterprises plans over the benefits provided under
the comparable Company plans.
(d) Expenses. The Company shall reimburse the
Executive for all expenses, including those for travel and
entertainment, properly incurred by him in the performance
of his duties hereunder in accordance with policies
established from time to time by the Board.
(e) Fringe Benefits and Perquisites. During the
Employment Period and so long as the Executive is employed
by the Company, he shall be entitled to receive fringe
benefits and perquisites in accordance with the plans,
practices, pro-grams and policies of the Company and, to
the extent appropriate, the Company's subsidiaries from
time to time in effect, commensurate with his position.
4. Termination of Employment.
(a) Death. The Executive's employment shall terminate
upon the Executive's death.
(b) Disability. The Executive's active employment
shall terminate at the election of the Board or the
Executive by reason of Disability (as herein defined)during
the Employment Period; provided, however, that the Board
may not terminate the Executive's active employment
hereunder by reason of Disability unless at the time of
such termination there is no reasonable expectation that
the Executive will return to full time responsibilities
hereunder within the next ninety (90) day period. For
purposes of the Agreement, disability ("Disability") shall
have the same meaning as set forth in the Pacific
Enterprises long-term disability plan or its successor.
Upon such termination Executive shall continue as a
participant under the Pacific Enterprises long-term
disability plan or its successor and under the disability
provisions of Pacific Enterprises' supplemental executive
retirement plan or its successor until Executive reaches
mandatory retirement age, elects to commence retirement
benefits, becomes employed or ceases to have a Disability.
(c) By the Company for Cause. The Company may
terminate the Executive's employment during the Employment
Period for Cause (as herein defined). For purposes of this
Agreement, "Cause" shall mean (i) the willful and continued
failure by the Executive to substantially perform the
Executive's duties with the Company (other than any such
failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to
Section 4(d))or (ii) the Executive's commission of one or
more acts of moral turpitude that constitute a violation of
applicable law (including but not limited to a felony)
which have or result in an adverse effect on the Company,
monetarily or otherwise or one or more significant acts of
dishonesty. For purposes of clause (i) of this definition,
no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the
best interest of the Company.
(d) By the Company without Cause. Notwithstanding any
other provision of this Agreement, the Company may
terminate the Executive's employment other than by a
termination for Cause during the Employment Period, but
only upon the affirmative vote of three-fourths (3/4) of
the membership of the Board.
(e) By the Executive for Good Reason. The Executive may
terminate his employment during the Employment Period for
Good Reason (as herein defined). For purposes of this
Agreement, "Good Reason" shall mean the occurrence without
the written consent of the Executive of any one of the
following acts by the Company, or failures by the Company
to act, unless such act or failure to act is corrected
prior to the Date of Termination (as hereinafter defined)
specified in the Notice of Termination (as hereinafter
defined) given in respect thereof: (i) an adverse change
in the Executive's title, authority, duties,
responsibilities or reporting lines as specified in Section
2(a) and 2(b)of this Agreement; (ii) a reduction by the
Company in (A) the Executive's Annual Base Salary as in
effect on the date hereof or as the same may be increased
from time to time or (B) the Executive's aggregate
annualized compensation and benefits opportunities, except,
in the case of both (A) and (B), for across-the-board
reductions similarly affecting all executives (both of the
Company and of any Person (as hereinafter defined) then in
control of the Company) whose compensation is directly
determined by the compensation committee of the Board(and
the compensation committee of the board of directors of any
Person then in control of the Company); provided that, the
exception for across-the-board reductions shall not apply
following a Change in Control (as hereinafter defined);
(iii) the relocation of the Executive's principal place of
employment to a location away from his principal place of
employment as of the Effective Date, a substantial increase
in the Executive's business travel obligations outside of
the Southern California area as of the Effective Date,
other than any such increase that (A) arises in connection
with extraordinary business activities of the Company and
(B) is understood not to be part of the Executive's regular
duties with the Company; (iv) the failure by the Company
to pay to the Executive any portion of the Executive's
current compensation and benefits or to pay to the
Executive any portion of an installment of deferred
compensation under any deferred compensation program of the
Company within thirty (30) days of the date such
compensation is due; (v) the failure by the shareholders
to elect the Executive to the Board during the Employment
Period; (vi) the failure by the Board to elect the
Executive to the position of Chairman of the Board during
Period B; (vii) any purported termination of the
Executive's employment that is not effected pursuant to a
Notice of Termination satisfying the requirements of
Section 4(f); for purposes of this Agreement, no such
purported termination shall be effective; (viii) the
failure by the Company to obtain a satisfactory agreement
from any successor of the Company requiring such successor
to assume and agree to perform the Company's obligations
under this Agreement, as contemplated in Section 11; or
(ix) the failure by the Company to comply with any
material provision of this Agreement.
Following a Change in Control (as hereinafter defined),
the Executive's determination that an act or failure to act
constitutes Good Reason shall be presumed to be valid
unless such determination is deemed to be unreasonable by
an arbitrator. The Executive's right to terminate the
Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good
Reason hereunder.
(f) Change in Control. Change in Control shall mean
the occurrence of any of the following events: (i)Any
Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any
securities acquired directly from the Company or its
affiliates other than in connection with the acquisition by
the Company or its affiliates of a business) representing
twenty percent (20%) or more of the combined voting power
of the Company's then outstanding securities; or (ii)
The following individuals cease for any reason to
constitute a majority of the number of directors then
serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the election
of directors of the Company) whose appointment or election
by the Board or nomination for election by the Company's
shareholders was approved or recommended by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors on the date hereof or
whose appointment, election or nomination for election was
previously so approved or recommended; or (iii) There
is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any
other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or any subsidiary of the Company, at least sixty
percent (60%) of the combined voting power of the
securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation, or(B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly, of securities of
the Company (not including in the securities beneficially
owned by such Person any securities acquired directly from
the Company or its affiliates other than in connection with
the acquisition by the Company or its affiliates of a
business) representing twenty percent (20%) or more of the
combined voting power of the Company's then outstanding
securities; or (iv) The shareholders of the Company
approve a plan of complete liquidation or dissolution of
the Company or there is consummated an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of
the Company's assets to an entity, at least sixty percent
(60%) of the combined voting power of the voting securities
of which are owned by shareholders of the Company in
substantially the same proportions as their ownership of
the Company immediately prior to such sale. "Person"
shall have the meaning given in section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act"), as
modified and used in sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or
any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or any of its affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of
such securities, (iv) a corporation owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, or(v) a person or group as used in
Rule 13d-1(b) under the Exchange Act. "Beneficial Owner"
shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.
Notwithstanding the foregoing, any event or transaction
which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for
purposes of this Agreement if, in connection with the
Transaction, the Executive participates as an equity
investor in the acquiring entity or any of its affiliates
(the "Acquiror"). For purposes of the preceding sentence,
the Executive shall not be deemed to have participated as
an equity investor in the Acquiror by virtue of (i)
obtaining beneficial ownership of any equity interest in
the Acquiror as a result of the grant to the Executive of
an incentive compensation award under one or more incentive
plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive
compensation awards of the Company into incentive
compensation awards of the Acquiror), on terms and
conditions substantially equivalent to those applicable to
other executives of the Company immediately prior to the
Transaction, after taking into account normal differences
attributable to job responsibilities, title and the like,
(ii) obtaining beneficial ownership of any equity interest
in the Acquiror on terms and conditions substantially
equivalent to those obtained in the Transaction by all
other shareholders of the Company, or (iii) obtaining
beneficial ownership of any equity interest in the Acquiror
in a manner unrelated to a Transaction.
(g) Notice of Termination. During the Employment
Period, any purported termination of the Executive's
employment (other than by reason of death)shall be
communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with
Section 12(b). For purposes of this Agreement, a "Notice
of Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied
upon, if any, and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the entire membership of the Board
at a meeting of the Board that was called and held no more
than ninety (90)days after the date the Board had knowledge
of the most recent act or omission giving rise to such
breach for the purpose of considering such termination
(after reasonable notice to the Executive and an
opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board and, if
possible, to cure the breach that was the basis for the
Notice of Termination for Cause) finding that, in the good
faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i)or (ii) of the definition of
Cause herein, and specifying the particulars thereof in
detail. Unless the Board determines otherwise, a Notice of
Termination by the Executive alleging a termination for
Good Reason must be made within 180 days of the act or
failure to act that the Executive alleges to constitute
Good Reason.
(h) Date of Termination. "Date of Termination," with
respect to any purported termination of the Executive's
employment during the Employment Period, shall mean the
date specified in the Notice of Termination (which, in the
case of a termination by the Company for reasons other than
Cause, shall not be less than thirty(30) days and, in the
case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days), from
the date such Notice of Termination is given.
5. Obligations of the Company Upon Termination.
(a) Termination Other Than for Cause, Death or
Disability. During the Employment Period, if the Company
shall terminate the Executive's employment(other than for
Cause, death or Disability) or the Executive shall
terminate his employment for Good Reason (termination in
any such case being referred to as "Termination"), the
Company shall pay to the Executive the amounts, and provide
the Executive with the benefits, described in this Section
5 (hereinafter referred to as the "Severance Payments").
Subject to Section 5(g), the amounts specified in this
Section 5(a) shall be paid within thirty (30) days after
the Date of Termination. (i) Lump Sum Payment. In lieu
of any further payments of Annual Base Salary or annual
Incentive Compensation Awards to the Executive for periods
subsequent to the Date of Termination, the Company shall
pay to the Executive a lump sum amount in cash equal to the
product of (X) the sum of (A) the Executive's Annual Base
Salary and (B) the greater of the Executive's target bonus
for the year of termination or the average of the three(3)
years' highest gross bonus awards, not necessarily
consecutive, paid by the Company (or its predecessor) to
the Executive in the five (5) years preceding the year of
termination and (Y) two (2); provided, however, that in the
event of a Termination following a Change in Control, such
multiplier shall be three(3). (ii) Accrued Obligations.
The Company shall pay the Executive a lump sum amount in
cash equal to the sum of (A) the Executive's Annual Base
Salary through the Date of Termination to the extent not
thereto-fore paid, (B) an amount equal to any annual
Incentive Compensation Awards earned with respect to fiscal
years ended prior to the year that includes the Date of
Termination to the extent not theretofore paid, and (C) an
amount equivalent to the target amount payable under any
annual Incentive Compensation Awards for the fiscal year
that includes the Date of Termination or if greater, the
average of the three (3) years' highest gross bonus awards,
not necessarily consecutive, paid by the Company (or its
predecessor) to the Executive in the five (5) years
preceding the year of Termination multiplied by a fraction
the numerator of which shall be the number of days from the
beginning of such fiscal year to and including the Date of
Termination and the denominator of which shall be 365, in
each case to the extent not theretofore paid. (The amounts
specified in clauses (A), (B) and (C) shall be hereinafter
referred to as the "Accrued Obligations.") (iii)
Deferred Compensation. In the event of a Termination
following a Change in Control, the Company shall pay the
Executive a lump sum payment in an amount equal to any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon). (iv)
Pension Supplement. The Company shall pay the Executive a
lump sum payment (the "Pension Supplement") in an amount
equal to the present value (as determined in accordance
with the terms of Pacific Enterprises' supplemental
executive retirement plan) of the benefits to which the
Executive would be entitled under the Company's defined
benefit pension and retirement plans (the "Pension and
Retirement Plans") if he had continued working for the
Company for an additional two (2) years, and had increased
his age by two (2) years as of the Date of Termination but
not beyond the Mandatory Retirement Age; provided, however,
that in the event of a Termination following a Change in
Control, such number of years shall be three (3)but not
beyond the Mandatory Retirement Age. (v) Accelerated
Vesting and Payment of Long-Term Incentive Awards. All
equity-based, long-term Incentive Compensation Awards held
by the Executive under any long- term Incentive
Compensation Plan maintained by the Company or any
affiliate shall immediately vest and become exercisable as
of the Date of Termination, to be exercised in accordance
with the terms of the applicable plan and award agreement;
provided, however, that any such awards granted on or after
the Effective Date shall remain outstanding and exercisable
until the earlier of (A) eighteen (18) months following the
Date of Termination or (B) the expiration of the original
term of such award (it being understood that all awards
granted prior to the Effective Date shall remain
outstanding and exercisable for a period that is no less
than that provided for in the applicable agreement in
effect as of the date of grant), and the Company shall pay
to the Executive, with respect to all cash-based, long-term
Incentive Compensation Awards made to the Executive that
are outstanding under any long-term Incentive Compensation
Plan maintained by the Company or any affiliate an amount
equal to the target amount payable under such long-term
Incentive Compensation Awards multiplied by a fraction, the
numerator of which shall be the number of days from the
beginning of the award cycle to and including the Date of
Termination, and the denominator of which shall be the
number of days in the cycle as originally granted; and
(vi) Continuation of Welfare Benefits. For a period of
two (2)years or until the Executive is eligible for retiree
medical benefits, whichever is longer, immediately
following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents with
life, disability, accident and health insurance benefits
substantially similar to those provided to the Executive
and his dependents immediately prior to the Date of
Termination, provided, however, that in no event shall the
Executive be entitled to receive disability benefits under
the Pacific Enterprises long-term disability plan or
Pacific Enterprises' supplemental executive retirement plan
after the Executive has become eligible to commence receipt
of retirement benefits under Pacific Enterprises
supplemental executive retirement plan, and provided,
further, that if the Executive becomes employed with
another employer and is eligible to receive life,
disability, accident and health insurance benefits under
another employer-provided plan, the benefits under the
Company's plans shall be secondary to those provided under
such other plan during such applicable period of
eligibility, and further provided, however, that in the
event of a termination following a Change in Control such
period shall not be less than three (3) years.
(b) Termination by the Company for Cause or by the
Executive Other than for Good Reason. Subject to the
provisions of Section 6 of this Agreement, if the
Executive's employment shall be terminated for Cause during
the Employment Period, or if the Executive terminates
employment during the Employment Period other than for Good
Reason, the Company shall have no further obligations to
The Executive under this Agreement other than the Accrued
Obligations.
(c) Termination due to Death or Disability.
If the Executive's employment shall terminate by reason
of death or Disability, the Company shall pay The Executive
or his estate, as the case may be, the Accrued Obligations
and, solely in the case of termination by reason of
Disability, the Pension Supplement. Such payments shall be
in addition to those rights and benefits to which the
Executive or his estate may be entitled under the relevant
Company plans or programs.
(d) Code Section 280G.
(i) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit
received or to be received by the Executive (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with (A) the Company, (B) any
Person (as defined in Section 4(e)) whose actions result in
a Change in Control or (C) any Person affiliated with the
Company or such Person) (all such payments and benefits,
including the Severance Payments, being hereinafter called
"Total Payments")would not be deductible (in whole or part)
by the Company, an affiliate or Person making such payment
or providing such benefit as a result of section 280G of
the Code, then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking
into account any reduction in the Total Payments provided
by reason of section 280G of the Code in such other plan,
arrangement or agreement), the cash Severance Payments
shall first be reduced (if necessary, to zero), and all
other Severance Payments shall thereafter be reduced (if
necessary, to zero); provided, however, that the Executive
may elect to have the noncash Severance Payments reduced
(or eliminated) prior to any reduction of the cash
Severance Payments. (ii) For purposes of this
limitation, (A) no portion of the Total Payments the
receipt or enjoyment of which the Executive shall have
waived at such time and in such manner as not to constitute
a "payment" within the meaning of section 280G(b) of the
Code shall be taken into account, (B) no portion of the
Total Payments shall be taken into account which, in the
opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the Company's
accounting firm which (or, in the case of a payment
following a Change in Control the accounting firm that was,
immediately prior to the Change in Control, the Company's
independent auditor) (the "Auditor"),does not constitute a
"parachute payment" within the meaning of section
280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (C) the Severance Payments shall
be reduced only to the extent necessary so that the Total
Payments (other than those referred to in clause (A) or(B))
in their entirety constitute reasonable compensation for
services actually rendered within the meaning of section
280G(b)(4)(B) of the Code or are otherwise not subject to
disallowance as deductions by reason of section 280G of the
Code, in the opinion of Tax Counsel, and (D) the value of
any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the
Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(e) Consulting and Non-Competition.
If the Total Payments are subject to reduction in
accordance with the above provisions of Section 5(d), the
Executive shall have the option, to be exercised within ten
(10) days after receipt of notice of such reduction from
the Company, to enter into a consulting and non-competition
agreement with the Company (the Consulting and Non-
Competition Agreement"), which shall (1) provide the
Executive with payments and benefits, payable over the term
of the agreement, the present value of which in the
aggregate is equal to or greater than the present value
(determined by applying a discount rate equal to the
interest rate provided in section 1274(b)(2)(B) of the
Code) of the balance of the payments and benefits otherwise
payable to the Executive without regard to the provisions
of Section 5(d), (2) require the Executive to make his
services available to the Company for no more than twenty
(20) hours per month and (3) last for a period of not more
than two (2) years (unless the Executive consents to a
longer period).
(f) Gross-Up Payment.
In the event that the Executive receives a notice from the
Internal Revenue Service to the effect that the amounts
payable under the Consulting and Non-Competition Agreement
would be subject (in whole or part)to the tax (the "Excise
Tax") imposed under section 4999 of the Code, within
thirty(30) days after the date the Chairman of the Board
receives a copy of such notice the Company shall pay to the
Executive such additional amounts (the "Gross-Up Payment")
such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Total Payments and any
federal, state and local income and employment taxes and
Excise Tax upon the Gross-Up Payment, shall be equal to the
Total Payments. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay
federal income tax at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and
locality of the Executive's residence on the date on which
the Gross-Up Payment is calculated for purposes of this
section, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state
and local taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken
into account hereunder, the Executive shall repay to the
Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-
Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income tax imposed on the
Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise
Tax and/or a federal, state or local income tax deduction)
plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Taxis determined to exceed the amount
taken into account hereunder (including by reason of any
payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with
respect to the Total Payments.
(g) Release. Notwithstanding anything herein to the
contrary, the Company's obligation to make the payments
provided for in this Section 5 is expressly made subject to
and conditioned upon (i) the Executive's prior execution of
a release substantially in the form attached hereto as
Exhibit A within forty-five (45)days after the applicable
Date of Termination and (ii) the Executive's non-revocation
of such release in accordance with the terms thereof.
6. Nonexclusivity of Rights.
Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by the
Company and for which the Executive may qualify (except
with respect to any benefit to which the Executive has
waived his rights in writing), nor shall anything herein
limit or otherwise affect such rights as the Executive may
have under any other contract or agreement entered into
after the Effective Date with the Company. Amounts which
are vested benefits or which the Executive is otherwise
entitled to receive under any benefit, plan, policy,
practice or program of, or any contract or agreement
entered into with, the Company shall be payable in
accordance with such benefit, plan, policy, practice or
program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Mitigation.
The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or
others, provided that nothing herein shall preclude the
Company from separately pursuing recovery from the
Executive based on any such claim. In no event shall the
Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts (including
amounts for damages for breach) payable to the Executive
under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Executive
obtains other employment.
8. Arbitration.
Any dispute about the validity, interpretation, effect or
alleged violation of this Agreement (an "arbitrable
dispute") must be submitted to confidential arbitration in
Los Angeles, California. Arbitration shall take place
before an experienced employment arbitrator licensed to
practice law in such state and selected in accordance with
the Model Employment Arbitration Procedures of the American
Arbitration Association. Arbitration shall be the
exclusive remedy of any arbitrable dispute. Should any
party to this Agreement pursue any arbitrable dispute by
any method other than arbitration, the other party shall be
entitled to recover from the party initiating the use of
such method all damages, costs, expenses and attorneys'
fees incurred as a result of the use of such method.
Notwithstanding anything herein to the contrary, nothing in
this Agreement shall purport to waive or in any way limit
the right of any party to seek to enforce any judgment or
decision on an arbitrable dispute in a court of competent
jurisdiction.
9. Confidentiality.
The Executive acknowledges that in the course of his
employment with the Company he has acquired non-public
privileged or confidential information and trade secrets
concerning the operations, future plans and methods of
doing business("Proprietary Information") of the Company,
its subsidiaries and affiliates; and the Executive agrees
that it would be extremely damaging to the Company, its
subsidiaries and affiliates if such Proprietary Information
were disclosed to a competitor of the Company, its
subsidiaries and affiliates or to any other person or
corporation. The Executive understands and agrees that all
Proprietary Information has been divulged to the Executive
in confidence and further understands and agrees to keep
all Proprietary Information secret and confidential (except
for such information which is or becomes publicly available
other than as a result of a breach by the Executive of this
provision) without limitation in time. In view of the
nature of the Executive's employment and the Proprietary
Information the Executive has acquired during the course of
such employment, the Executive likewise agrees that the
Company, its subsidiaries and affiliates would be
irreparably harmed by any disclosure of Proprietary
Information in violation of the terms of this paragraph and
that the Company, its subsidiaries and affiliates shall
therefore be entitled to preliminary and/or permanent
injunctive relief prohibiting the Executive from engaging
in any activity or threatened activity in violation of the
terms of this paragraph and to any other relief available
to them. Inquiries regarding whether specific information
constitutes Proprietary Information shall be directed to
the Board, provided that the Company shall not unreasonably
classify information as Proprietary Information.
10. Non-Solicitation of Employees.
The Executive recognizes that he possesses and will
possess confidential information about other employees of
the Company, its subsidiaries and affiliates relating to
their education, experience, skills, abilities,
compensation and benefits, and interpersonal relationships
with customers of the Company, its subsidiaries and
affiliates. The Executive recognizes that the information
he possesses and will possess about these other employees
is not generally known, is of substantial value to the
Company, its subsidiaries and affiliates in developing
their business and in securing and retaining customers, and
has been and will be acquired by him because of his
business position with the Company, its subsidiaries and
affiliates. The Executive agrees that, during the
Employment Period and for a period of one (1) year
thereafter, he will not, directly or indirectly, solicit or
recruit any employee of the Company, its subsidiaries or
affiliates for the purpose of being employed by him or by
any competitor of the Company, its subsidiaries or
affiliates on whose behalf he is acting as an agent,
representative or employee and that he will not convey any
such confidential information or trade secrets about other
employees of the Company, its subsidiaries and affiliates
to any other person; provided, however, that it shall not
constitute a solicitation or recruitment of employment in
violation of this paragraph to discuss employment
opportunities with any employee of the Company, its
subsidiaries or affiliates who has either first contacted
the Executive or regarding whose employment the Executive
has discussed with and received the written approval of the
Chairman of the Board prior to making such solicitation or
recruitment. In view of the nature of the Executive's
employment with the Company, the Executive likewise agrees
that the Company, its subsidiaries and affiliates would be
irreparably harmed by any solicitation or recruitment in
violation of the terms of this paragraph and that the
Company, its subsidiaries and affiliates shall therefore be
entitled to preliminary and/or permanent injunctive relief
prohibiting the Executive from engaging in any activity or
threatened activity in violation of the terms of this
paragraph and to any other relief available to them.
11. Legal Fees.
The Company shall pay to the Executive all legal fees and
expenses (including but not limited to fees and expenses in
connection with any arbitration) incurred by the Executive
in disputing in good faith any issue arising under this
Agreement relating to the termination of the Executive's
employment or in seeking in good faith to obtain or enforce
any benefit or right provided by this Agreement, but in
each case only to the extent the arbitrator or court
determines that the Executive had a reasonable basis for
such claim.
12. Successors.
(a) Assignment by Executive. This Agreement is
personal to the Executive and without the prior written
consent of the Company shall not be assign-able by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal
representatives.
(b) Successors and Assigns of Company. This Agreement
shall inure to the benefit of and be binding upon the
Company, its successors and assigns.
(c) Assumption. The Company shall require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its
businesses and/or assets as aforesaid that assumes and
agrees to perform this Agreement by operation of law or
otherwise.
13. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California, without reference to its principles of conflict
of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect.
This Agreement may not be amended, modified, repealed,
waived, extended or discharged except by an agreement in
writing signed by the party against whom enforcement of
such amendment, modification, repeal, waiver, extension or
discharge is sought. No person, other than pursuant to a
resolution of the Board or a committee thereof, shall have
authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any provision of
this Agreement or anything in reference thereto.
(b) Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed,
in either case, to the principal corporate offices of
Pacific Enterprises or to such other address as either
party shall have furnished to the other in writing in
accordance herewith. Notices and communications shall be
effective when actually received by the addressee.
(c) Severability. The invalidity or unenforceability
of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement.
(d) Taxes. The Company may withhold from any amounts
payable under this Agreement such federal, state or local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision hereof
or any other provision of this Agreement or the failure to
assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant
to Section 4(d) of this Agreement, or the right of the
Company to terminate the Executive's employment for Cause
pursuant to Section 4(b) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) Entire Agreement. This instrument contains the
entire agreement of the Executive, the Company or any
predecessor or subsidiary thereof with respect to the
subject matter hereof, and all promises, representations,
understandings, arrangements and prior agreements are
merged herein and superseded hereby including, but not
limited to, that certain Severance Agreement, dated October
11, 1996, between the Executive and Pacific Enterprises.
Notwithstanding the foregoing, the provisions of any
employee benefit or compensation plan, program or
arrangement applicable to the Executive, including that
certain Incentive Bonus Agreement, entered into between the
Executive and Pacific Enterprises, shall remain in effect,
except as expressly otherwise provided herein.
IN WITNESS WHEREOF, the Executive and, pursuant to due
authorization from its Board of Directors, the Company have
caused this Agreement to be executed as of the day and year
first above written.
MINERAL ENERGY COMPANY
__________________________
Kevin C. Sagara
President
__________________________
Richard D. Farman
EXHIBIT A
GENERAL RELEASE
This GENERAL RELEASE (the "Agreement"), dated _______, is
made by and between ___________________, a California
corporation (the "Company") and _____________ ("you" or
"your").
WHEREAS, you and the Company have previously entered into
that certain Employment Agreement dated _____________, 1996
(the "Employment Agreement"); and
WHEREAS, Section 5 of the Employment Agreement provides
for the payment of severance benefits in the event of the
termination of your employment under certain circumstances,
subject to and conditioned upon your execution and non-
revocation of a general release of claims by you against the
Company and its subsidiaries and affiliates.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, you and the Company
hereby agree as follows:
ONE: Your signing of this Agreement confirms that your
employment with the Company shall terminate at the close of
business on ___________,or earlier upon our mutual
agreement.
TWO: As a material inducement for the payment of
benefits under Section 5 of that certain Employment
Agreement between you and the Company, and except as
otherwise provided in this Agreement, you and the Company
hereby irrevocably and unconditionally release, acquit and
forever discharge the other from any and all Claims either
may have against the other. For purposes of his Agreement
and the preceding sentence, the words "Releasee" or
"Releasees"
and "Claim" or "Claims," shall have the meanings set forth
below:
(a)The words "Releasee" or "Releasees" shall refer to the
you and to the Company and each of the Company's owners,
stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys,
advisors, parent companies, divisions, subsidiaries,
affiliates(and agents, directors, officers, employees,
representatives, attorneys and advisors of such parent
companies, divisions, subsidiaries and affiliates), and all
persons acting by, through, under or in concert with any of
them.
(b)The words "Claim" or "Claims" shall refer to any
charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses,
debts and expenses (including attorneys' fees and costs
actually incurred)of any nature whatsoever, known or
unknown, suspected or unsuspected, which you or the Company
now, in the past or, except as limited by law or regulation
such as the Age Discrimination in Employment Act (ADEA), in
the future may have, own or hold against any of the
Releasees; provided, however, that the word "Claim" or
"Claims" shall not refer to any charges, complaints, claims,
liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses
(including attorneys' fees and costs actually incurred)
arising under [identify severance, employee benefits, stock
option and other agreements containing duties, rights
obligations etc. of either party that are to remain
operative]. Claims released pursuant to this Agreement by
you and the Company include, but are not limited to, rights
arising out of alleged violations of any contracts, express
or implied, any tort, any claim that you failed to perform
or negligently performed or breached your duties during
employment at the Company, any legal restrictions on the
Company's right to terminate employees or any federal, state
or other governmental statute, regulation, or ordinance,
including, without limitation: (1) Title VII of the Civil
Rights Act of l964 (race, color, religion, sex and national
origin discrimination); (2) 42 U.S.C Sec 1981
(discrimination); (3) 29 U.S.C. Sec 621-634(age
discrimination); (4) 29 U.S.C. Sec 206(d)(l) (equal pay);
(5) 42 U.S.C. Sec 12101, et seq. (disability); (6) the
California Constitution, Article I, Section
8(discrimination); (7) the California Fair Employment and
Housing Act (discrimination, including race, color, national
origin, ancestry, physical handicap, medical condition,
marital status, religion, sex or age); (8) California Labor
Code Section 1102.1 (sexual orientation discrimination); (9)
Executive Order 11246(race, color, religion, sex and
national origin discrimination); (10) Executive Order 11141
(age discrimination); (11) Sec 503 and 504 of the
Rehabilitation Act of 1973 (handicap discrimination); (12)
The Worker Adjustment and Retraining Act (WARN Act); (13)
the California Labor Code (wages, hours, working conditions,
benefits and other matters); (14) the Fair Labor Standards
Act (wages, hours, working conditions and other matters);
the Federal Employee Polygraph Protection Act (prohibits
employer from requiring employee to take polygraph test as
condition of employment); and (15) any federal, state or
other governmental statute, regulation or ordinance which is
similar to any of the statutes de-scribed in clauses (1)
through (14).
THREE: You and the Company expressly waive and
relinquish all rights and benefits afforded by any statute
(including but not limited to Section 1542 of the Civil Code
of the State of California) which limits the effect of are
lease with respect to unknown claims. You and the Company
do so under-standing and acknowledging the significance of
the release of unknown claims and the waiver of statutory
protection against a release of unknown claims(including but
not limited to Section 1542). Section 1542 of the Civil
Code of the State of California states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Thus, notwithstanding the provisions of Section 1542 or of
any similar statute, and for the purpose of implementing a
full and complete release and discharge of the Releasees,
you and the Company expressly acknowledge that this
Agreement is intended to include in its effect, without
limitation, all Claims which are known and all Claims which
you or the Company do not know or suspect to exist in your
or the Company's favor at the time of execution of this
Agreement and that this Agreement contemplates the
extinguishment of all such Claims.
FOUR: The parties acknowledge that they might hereafter
discover facts different from, or in addition to, those they
now know or believe to be rue with respect to a Claim or
Claims released herein, and they expressly agree to assume
the risk of possible discovery of additional or different
facts, and agree that this Agreement shall be and remain
effective, in all respects, regardless of such additional or
different discovered facts.
FIVE: You hereby represent and acknowledge that you have
not filed any Claim of any kind against the Company or
others released in this Agreement. You further hereby
expressly agree never to initiate against the Company or
others released in this Agreement any administrative
proceeding, lawsuit or any other legal or equitable
proceeding of any kind asserting any Claims that are
released in this Agreement.
The Company hereby represents and acknowledges that it
has not filed any Claim of any kind against you or others
released in this Agreement. The Company further hereby
expressly agrees never to initiate against you or others
released in this Agreement any administrative proceeding,
lawsuit or any other legal or equitable proceeding of any
kind asserting any Claims that are released in this
Agreement.
SIX: You hereby represent and agree that you have not
assigned or transferred, or attempted to have assigned or
transfer, to any person or entity, any of the Claims that
you are releasing in this Agreement.
The Company hereby represents and agrees that it has not
assigned or transferred, or attempted to have assigned or
transfer, to any person or entity, any of the Claims that it
is releasing in this Agreement.
SEVEN: As a further material inducement to the Company
to enter into this Agreement, you hereby agree to indemnify
and hold each of the Releasees harmless from all loss,
costs, damages, or expenses, including without limitation,
attorneys' fees incurred by Releasees, arising out of any
breach of this Agreement by you or the fact that any
representation made in this Agreement by you was false when
made.
EIGHT: You and the Company represent and acknowledge
that, in executing this Agreement, neither is relying upon
any representation or statement not set forth in this
Agreement or the Severance Agreement.
NINE: (a)This Agreement shall not in any way be
construed as an admission by the Company that it has acted
wrongfully with respect to you or any other person, or that
you have any rights whatsoever against the Company, and the
Company specifically disclaims any liability to or wrongful
acts against you or any other person, on the part of itself,
its employees or its agents. This Agreement shall not in
any way be construed as an admission by you that you have
acted wrongfully with respect to the Company, or that you
failed to perform your duties or negligently performed or
breached your duties, or that the Company had good cause to
terminate your employment. (b)If you are a party or are
threatened to be made a party to any proceeding by reason of
the fact that you were an officer [or director] of the
Company, the Company shall indemnify you against any
expenses(including reasonable attorney fees provided that
counsel has been approved by the Company prior to
retention), judgments, fines, settlements, and other amounts
actually or reasonably incurred by you in connection with
that proceeding, provided that you acted in good faith and
in a manner you reasonably believed to be in the best
interest of the Company. The limitations of California
Corporations Code Section 317 shall apply to this assurance
of indemnification. (c) You agree to cooperate with the
Company and its designated attorneys, representatives and
agents in connection with any actual or threatened judicial,
administrative or other legal or equitable proceeding in
which the Company is or may be become involved. Upon
reasonable notice, you agree to meet with and provide to the
Company or its designated attorneys, representatives or
agents all information and knowledge you have relating to
the subject matter of any such proceeding.
TEN: This Agreement is made and entered into in
California. This Agreement shall in all respects be
interpreted, enforced and governed by and under the laws of
the State of California. Any dispute about the validity,
interpretation, effect or alleged violation of this
Agreement (an "arbitrable dispute") must be submitted to
arbitration in [Los Angeles][San Diego], California.
Arbitration shall take place before an experienced
employment arbitrator licensed to practice law in such state
and selected in accordance with the Model Employment
Arbitration Procedures of the American Arbitration
Association. Arbitration shall be the exclusive remedy for
any arbitrable dispute. The arbitrator in any arbitrable
dispute shall not have authority to modify or change the
Agreement in any respect. You and the Company shall each be
responsible for payment of one-half the amount of the
arbitrator's fee(s). Should any party to this Agreement
institute any legal action or administrative proceeding
against the other with respect to any Claim waived by this
Agreement or pursue any arbitrable dispute by any method
other than arbitration, the prevailing party shall be
entitled to recover from the initiating party all damages,
costs, expenses and attorneys' fees incurred as a result of
that action. The arbitrator's decision and/or award will be
fully enforceable and subject to an entry of judgment by the
Superior Court of the State of California for the County of
[Los Angeles][San Diego].
ELEVEN: Both you and the Company understand that this
Agreement is final and binding eight days after its
execution and return. Should you nevertheless attempt to
challenge the enforceability of this Agreement as provided
in Paragraph TEN or, in violation of that Paragraph, through
litigation, as a further limitation on any right to make
such a challenge, you shall initially tender to the Company,
by certified check delivered to the Company, all monies
received pursuant to Section 5 of the Employment Agreement,
plus interest, and invite the Company to retain such monies
and agree with you to cancel this Agreement and void the
Company's obligations under Section 5 of the Employment
Agreement. In the event the Company accepts this offer, the
Company shall retain such monies and this Agreement shall be
canceled and the Company shall have no obligation under
Section 5 of the Employment Agreement. In the event the
Company does not accept such offer, the Company shall so
notify you, and shall place such monies in an interest-
bearing escrow account pending resolution of the dispute
between you and the Company as to whether or not this
Agreement and the Company's obligations under Section 5 of
the Employment Agreement shall be set aside and/or otherwise
rendered voidable or unenforceable. Additionally, any
consulting agreement then in effect between you and The
Company shall be immediately rescinded with no requirement
of notice.
TWELVE: Any notices required to be given under this
Agreement shall be delivered either personally or by first
class United States mail, postage prepaid, addressed to the
respective parties as follows:
To Company: [TO COME]
Attn: [TO COME]
To You:
___________________
___________________
___________________
THIRTEEN: You understand and acknowledge that you have
been given a period of 45 days to review and consider this
Agreement (as well as statistical data on the persons
eligible for similar benefits) before signing it and may use
as much of this 45-day period as you wish prior to signing.
You are encouraged, at your personal expense, to consult
with an attorney before signing this Agreement. You
understand and acknowledge that whether or not you do so is
your decision. You may revoke this Agreement within seven
days of signing it. If you wish to revoke, the Company's
Vice President, Human Resources must receive written notice
from you no later than the close of business on the seventh
day after you have signed the Agreement. If revoked, this
Agreement shall not be effective and enforceable and you
will not receive payments or benefits under Section 5 of the
Employment Agreement.
FOURTEEN: This Agreement constitutes the entire
Agreement of the parties hereto and supersedes any and all
other Agreements (except the Employment Agreement) with
respect to the subject matter of this Agreement, whether
written or oral, between you and the Company. All
modifications and amendments to this Agreement must be in
writing and signed by the parties.
FIFTEEN: Each party agrees, without further
consideration, to sign or cause to be signed, and to deliver
to the other party, any other documents and to take any
other action as may be necessary to fulfill the obligations
under this Agreement.
SIXTEEN: If any provision of this Agreement or the
application thereof is held invalid, the invalidity shall
not affect other provisions or applications of the Agreement
which can be given effect without the invalid provisions or
application; and to this end the provisions of this
Agreement are declared to be severable.
SEVENTEEN: This Agreement may be executed in
counterparts.
I have read the foregoing General Release and I accept and
agree to the provisions it contains and hereby execute it
voluntarily and with full under-standing of its
consequences. I am aware it includes a release of all known
or unknown claims.
DATED:____________________
_____________________________
DATED:____________________
_____________________________
You acknowledge that you first received this Agreement on
[date].
___________________________
Exhibit 10.4
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made and entered
into as of the 12th day of October, 1996, by and
between Mineral Energy Company (the
"Company"), a California corporation, and Donald E.
Felsinger (the "Executive");
WHEREAS, the Executive is currently serving as
President and Chief Executive Officer of San Diego Gas
& Electric Company and Executive Vice President of
Enova, a California corporation ("Enova"), and the
Company desires to secure the continued employment of
the Executive in accordance herewith;
WHEREAS, pursuant to the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of October 12, 1996,
among, inter alia, Enova, Pacific Enterprises, a
California corporation ("Pacific Enterprises") and the
Company, the parties thereto have agreed to a merger
(the "Merger") pursuant to the terms thereof;
WHEREAS, the Executive is willing to commit himself
to be employed by the Company on the terms and
conditions herein set forth and thus to forego
opportunities elsewhere; and
WHEREAS, the parties desire to enter into this
Agreement, as of the Effective Date (as hereinafter
defined), setting forth the terms and conditions for
the employment relationship of the Executive with the
Company during the Employment Period (as hereinafter
defined).
NOW, THEREFORE, IN CONSIDERATION of the mutual
premises, covenants and agreements set forth below, it
is hereby agreed as follows:
1. Employment and Term.
(a) Employment. The Company agrees to employ the
Executive, and the Executive agrees to be employed by
the Company, in accordance with the terms and
provisions of this Agreement during the term thereof
(as described below).
(b) Term. The term of the Executive's employment
under this Agreement shall commence (the "Effective
Date") as of the closing date (the "Closing Date") of
the Merger as described in the Merger Agreement and
shall continue until the earlier of the Executive's
Mandatory Retirement Age (as defined herein) or the
fifth anniversary of the Effective Date (such term
being referred to hereinafter as the "Employment
Period"); provided, however, that commencing on the
fourth anniversary of the Effective Date (and each
anniversary of the Effective Date thereafter), the term
of this Agreement shall automatically be extended for
one additional year, unless, prior to such date, the
Company or the Executive shall give written notice to
the other party that it or he, as the case may be, does
not wish to so extend this Agreement; and further
provided, however, that if the Merger Agreement is
terminated, then, at the time of such termination, this
Agreement shall be deemed cancelled and of no force or
effect and the Executive shall continue to be subject
to such agreements and arrangements that were in effect
prior to the Closing Date of the Merger. As a
condition to the Merger, the parties hereto agree that
the Company shall be responsible for all of the
premises, covenants and agreements set forth in this
Agreement.
(c)Mandatory Retirement. In no event shall the term
of the Executive's employment hereunder extend beyond
the end of the month in which the Executive's 65th
birthday occurs (the "Mandatory Retirement Age").
2. Duties and Powers of Executive.
(a) Position. During the period commencing on the
Effective Date the Executive shall serve as President
and Principal Executive Officer of the businesses of
the Company and its subsidiaries that are not
economically regulated by the California Public
Utilities Commission (the "Unregulated Subsidiaries")
with such authority, duties and responsibilities with
respect to such position as set forth in subsection (b)
hereof. In this capacity, the Executive shall report
to the Office of the Chairman or if the Office of the
Chairman does not exist, the Chief Executive Officer of
the Company. The titles, authority, duties and
responsibilities set forth in subsection (b) hereof may
be changed from time to time but only with the mutual
written agreement of the Executive and the Company.
(b)Duties of the President and Principal Executive
Officer. The duties of the President and Principal
Executive Officer of the Company's Unregulated
Subsidiaries shall include but not be limited to
directing the overall business, affairs and operations
of the Company's Unregulated Subsidiaries, through the
officers of such subsidiaries, all of whom shall report
directly or indirectly to the Executive.
(c) Attention. During the Employment Period, and
excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive shall
devote full attention and time during normal business
hours to the business and affairs of the Company and,
to the extent necessary to discharge the
responsibilities assigned to the Executive under this
Agreement, use the Executive's best efforts to carry
out such responsibilities faithfully and efficiently.
It shall not be considered a violation of the foregoing
for the Executive to serve on corporate, industry,
civic or charitable boards or committees, so long as
such activities do not interfere with the performance
of the Executive's responsibilities as an employee of
the Company in accordance with this Agreement.
3. Compensation.
It is the Board's intention to provide the Executive
with compensation opportunities that, in total, are at
a level that is consistent with that provided by
comparable companies to executives of similar levels of
responsibility, expertise and corporate and individual
performance as determined by the compensation committee
of the Board. In this regard, the Executive shall
receive the following compensation for his services
hereunder to the Company:
(a) Base Salary. During the Employment Period, the
Executive's annual base salary ("Annual Base Salary")
shall in no event be no less than $440,000 and shall be
payable in accordance with the Company's general
payroll practices. Subject to Section 4(d)(ii), the
Board in its discretion may from time to time direct
such upward adjustments in the Executive's Annual Base
Salary as the Board deems to be necessary or desirable,
including, without limitation, adjustments in order to
reflect increases in the cost of living and the
Executive's performance. Any increase in Annual Base
Salary shall not serve to limit or reduce any other
obligation of the Company under this Agreement.
(b) Incentive Compensation. Subject to Section
4(d)(ii), during the Employment Period, the Executive
shall participate in annual incentive compensation
plans and long-term incentive compensation plans of the
Company and, to the extent appropriate, the Company's
Subsidiaries (which long-term incentive compensation
plans may include plans offering stock options,
restricted stock and other long-term incentive
compensation and all such annual and long-term plans to
be hereinafter referred to as the "Incentive
Compensation Plans") and will be granted awards
thereunder providing him with the opportunity to earn,
on a year-by-year basis, annual and long-term incentive
compensation (the "Incentive Compensation Awards")at
least equal (in terms of target, maximum and minimum
awards expressed as a percentage of Annual Base Salary)
to the Executive's opportunities that were in effect
prior to the Effective Date. Any equity awards granted
to the Executive may be granted, at the Executive's
election, to trusts established for the benefit of
members of the Executive's family. With respect to
incentive compensation awards granted prior to the
Effective Date, the Executive shall be entitled to
retain such awards in accordance with their terms,
which shall be appropriately adjusted as a result of
the Merger.
(c) Retirement and Welfare Benefit Plans. In
addition to the benefits provided under Section 3(b),
during the Employment Period and so long as the
Executive is employed by the Company, he shall be
eligible to participate in all other savings,
retirement and welfare plans, practices, policies and
programs applicable generally to employees and/or
senior executive officers of the Company and its
domestic subsidiaries, except with respect to any
benefits under any plan, practice, policy or program to
which the Executive has waived his rights in writing.
To the extent that benefits payable or provided to the
Executive under such plans are materially less
favorable on a benefit by benefit basis than the
benefits that would have been payable or provided to
the Executive under comparable Enova tax-qualified
retirement plans, executive retirement plans, split
dollar and other life insurance arrangements in which
the Executive was a participant (based on the terms of
such plans as of the Effective Date), the Executive
shall be entitled to benefits pursuant to the terms of
this Agreement equal to the excess of the benefits
provided under the applicable Enova plans over the
benefits provided under the comparable Company plans.
(d) Expenses. The Company shall reimburse the
Executive for all expenses, including those for travel
and entertainment, properly incurred by him in the
performance of his duties hereunder in accordance with
policies established from time to time by the Board.
(e) Fringe Benefits and Perquisites. During the
Employment Period and so long as the Executive is
employed by the Company, he shall be entitled to
receive fringe benefits and perquisites in accordance
with the plans, practices, pro-grams and policies of
the Company and, to the extent appropriate, the
Company's subsidiaries from time to time in effect,
commensurate with his position.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate upon the Executive's death or, at the
election of the Board or the Executive, by reason of
Disability (as herein defined) during the Employment
Period; provided, however, that the Board may not
terminate the Executive's employment hereunder by
reason of Disability unless at the time of such
termination there is no reasonable expectation that the
Executive will return to work within the next ninety
(90) day period. For purposes of this Agreement,
disability ("Disability") shall have the same meaning
as set forth in the Enova long-term disability plan or
its successor.
(b) By the Company for Cause. The Company may
terminate the Executive's employment during the
Employment Period for Cause (as herein defined). For
purposes of this Agreement, "Cause" shall mean (i) the
willful and continued failure by the Executive to
substantially perform the Executive's duties with the
Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental
illness or any such actual or anticipated failure after
the issuance of a Notice of Termination for Good Reason
by the Executive pursuant to Section 4(d))or (ii) the
Executive's commission of one or more acts of moral
turpitude that constitute a violation of applicable law
(including but not limited to a felony) which have or
result in an adverse effect on the Company, monetarily
or otherwise or one or more significant acts of
dishonesty . For purposes of clause (i) of this
definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done,
or omitted to be done, by the Executive not in good
faith and without reasonable belief that the
Executive's act, or failure to act, was in the best
interest of the Company.
(c) By the Company without Cause. Notwithstanding
any other provision of this Agreement, the Company may
terminate the Executive's employment other than by a
termination for Cause during the Employment Period, but
only upon the affirmative vote of three-fourths (3/4)
of the membership of the Board.
(d) By the Executive for Good Reason. The Executive
may terminate his employment during the Employment
Period for Good Reason (as herein defined). For
purposes of this Agreement, "Good Reason" shall mean
the occurrence without the written consent of the
Executive of any one of the following acts by the
Company, or failures by the Company to act, unless such
act or failure to act is corrected prior to the Date of
Termination (as hereinafter defined) specified in the
Notice of Termination (as hereinafter defined) given in
respect thereof:
(i) an adverse change in the Executive's title,
authority, duties, responsibilities or reporting lines
as specified in Sections 2(a) and 2(b) of this
Agreement;
(ii) a reduction by the Company in (A) the
Executive's Annual Base Salary as in effect on the date
hereof or as the same may be in-creased from time to
time or (B) the Executive's aggregate annualized
compensation and benefits opportunities, except, in the
case of both (A) and (B), for across-the-board
reductions similarly affecting all executives (both of
the Company and of any Person (as hereinafter defined)
then in control of the Company) whose compensation is
directly determined by the compensation committee of
the Board (and the compensation committee of the board
of directors of any Person then in control of the
Company); provided that, the exception for across-the-
board reductions shall not apply following a Change in
Control (as hereinafter defined);
(iii) the relocation of the Executive's principal
place of employment to a location away from the
Company's headquarters or a substantial increase in the
Executive's business travel obligations outside of the
Southern California area as of the Effective Date,
other than any such increase that (A) arises in
connection with extraordinary business activities of
the Company and (B) is understood not to be part of the
Executive's regular duties with the Company; (iv) the
failure by the Company to pay to the Executive any
portion of the Executive's current compensation and
benefits or to pay to the Executive any portion of an
installment of deferred compensation under any deferred
compensation program of the Company within thirty (30)
days of the date such compensation is due;
(v) any purported termination of the Executive's
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section
4(f); for purposes of this Agreement, no such purported
termination shall be effective;
(vi) the failure by the Company to obtain a
satisfactory agreement from any successor of the
Company requiring such successor to assume and agree to
perform the Company's obligations under this Agreement,
as contemplated in Section 11; or
(vii) the failure by the Company to comply with any
material provision of this Agreement.
Following a Change in Control (as hereinafter
defined), the Executive's determination that an act or
failure to act constitutes Good Reason shall be
presumed to be valid unless such determination is
deemed to be unreasonable by an arbitrator. The
Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental
illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good
Reason hereunder.
(e)Change in Control.
Change in Control shall mean the occurrence of any of
the following events:
(i)Any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by
such Person any securities acquired directly from the
Company or its affiliates other than in connection with
the acquisition by the Company or its affiliates of a
business) representing twenty percent(20%) or more of
the combined voting power of the Company's then
outstanding securities; or
(ii) The following individuals cease for any reason
to constitute a majority of the number of directors
then serving: individuals who, on the date hereof,
constitute the Board and any new director (other than a
director whose initial assumption of office is in
connection with an actual or threatened election
contest, including but not limited to a consent
solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board
or nomination for election by the Company's share-
holders was approved or recommended by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors on the date hereof or
whose appointment, election or nomination for election
was previously so approved or recommended; or
(iii) There is consummated a merger or consolidation
of the Company or any direct or indirect subsidiary of
the Company with any other corporation, other than (A)
a merger or consolidation which would result in the
voting securities of the Company outstanding
immediately prior to such merger or consolidation
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity or any parent
thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any subsidiary
of the Company, at least sixty percent (60%) of the
combined voting power of the securities of the Company
or such surviving entity or any parent thereof
outstanding immediately after such merger or
consolidation, or(B) a merger or consolidation effected
to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes
the beneficial owner, directly or indirectly, of
securities of the Company (not including in the
securities beneficially owned by such Person any
securities acquired directly from the Company or its
affiliates other than in connection with the
acquisition by the Company or its affiliates of a
business) representing twenty percent (20%) or more of
the combined voting power of the Company's then
outstanding securities; or
(iv) The shareholders of the Company approve a plan
of complete liquidation or dissolution of the Company
or there is consummated an agreement for the sale or
disposition by the Company of all or substantially all
of the Company's assets, other than a sale or
disposition by the Company of all or substantially all
of the Company's assets to an entity, at least sixty
percent (60%) of the combined voting power of the
voting securities of which are owned by shareholders of
the Company in substantially the same proportions as
their ownership of the Company immediately prior to
such sale.
"Person" shall have the meaning given in Section
3(a)(9) of the Securities Exchange Act of 1934 (the
"Exchange Act"), as modified and used in Sections 13(d)
and 14(d) thereof, except that such term shall not
include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of
its affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such
securities,(iv) a corporation owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership
of stock of the Company, or(v) a person or group as
used in Rule 13d-1(b) under the Exchange Act.
"Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
Notwithstanding the foregoing, any event or
transaction which would otherwise constitute a Change
in Control (a "Transaction") shall not constitute a
Change in Control for purposes of this Agreement if, in
connection with the Transaction, the Executive
participates as an equity investor in the acquiring
entity or any of its affiliates (the "Acquiror"). For
purposes of the preceding sentence, the Executive shall
not be deemed to have participated as an equity
investor in the Acquiror by virtue of (i) obtaining
beneficial ownership of any equity interest in the
Acquiror as a result of the grant to the Executive of
an incentive compensation award under one or more
incentive plans of the Acquiror (including, but not
limited to, the conversion in connection with the
Transaction of incentive compensation awards of the
Company into incentive compensation awards of the
Acquiror), on terms and conditions substantially
equivalent to those applicable to other executives of
the Company immediately prior to the Transaction, after
taking into account normal differences attributable to
job responsibilities, title and the like, (ii)
obtaining beneficial ownership of any equity interest
in the Acquiror on terms and conditions substantially
equivalent to those obtained in the Transaction by all
other shareholders of the Company, or (iii) obtaining
beneficial ownership of any equity interest in the
Acquiror in a manner unrelated to a Transaction.
(f) Notice of Termination. During the Employment
Period, any purported termination of the Executive's
employment (other than by reason of death)shall be
communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance
with Section 12(b). For purposes of this Agreement, a
"Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this
Agreement relied upon, if any, and shall set forth in
reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's
employment under the provision so indicated. Further,
a Notice of Termination for Cause is required to
include a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths (3/4)
of the entire membership of the Board at a meeting of
the Board that was called and held no more than ninety
(90)days after the date the Board had knowledge of the
most recent act or omission giving rise to such breach
for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity
for the Executive, together with the Executive's
counsel, to be heard before the Board and, if possible,
to cure the breach that was the basis for the Notice of
Termination for Cause) finding that, in the good faith
opinion of the Board, the Executive was guilty of
conduct set forth in clause (i)or (ii) of the
definition of Cause herein, and specifying the
particulars thereof in detail. Unless the Board
determines otherwise, a Notice of Termination by the
Executive alleging a termination for Good Reason must
be made within 180 days of the act or failure to act
that the Executive alleges to constitute Good Reason.
(g) Date of Termination. "Date of Termination," with
respect to any purported termination of the Executive's
employment during the Employment Period, shall mean the
date specified in the Notice of Termination (which, in
the case of a termination by the Company, shall not be
less than thirty (30) days for reasons other than cause
and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than
sixty (60) days) from the date such Notice of
Termination is given.
5. Obligations of the Company Upon Termination.
(a) Termination Other Than for Cause, Death or
Disability. During the Employment Period, if the
Company shall terminate the Executive's
employment(other than for Cause, death or Disability)
or the Executive shall terminate his employment for
Good Reason (termination in any such case being
referred to as "Termination") the Company shall pay to
the Executive amounts, and provide the Executive with
the benefits, described in this Section 5 (hereinafter
referred to as the "Severance Payments"). Subject to
Section 5(g), the amounts specified in this Section
5(a) shall be paid within thirty (30) days after the
Date of Termination.
(i) Lump Sum Payment. In lieu of any further
payments of Annual Base Salary or annual Incentive
Compensation Awards to the Executive for periods
subsequent to the Date of Termination, the Company
shall pay to the Executive a lump sum amount in cash
equal to the product of (X) the sum of (A) the
Executive's Annual Base Salary and (B) the greater of
the Executive's target bonus for the year of
termination or the average of the three(3) years'
highest gross bonus awards, not necessarily
consecutive, paid by the Company (or its predecessor)
to the Executive in the five (5) years preceding the
year of termination and (Y) the number of years
remaining in the Employment Period (including
fractional years) but in no event less than two
(2),provided, however, that in the event of a
Termination following a Change in Control such
multiplier shall not be less than three (3).
(ii) Accrued Obligations. The Company shall pay the
Executive a lump sum amount in cash equal to the sum of
(A) the Executive's Annual Base Salary through the Date
of Termination to the extent not thereto-fore paid, (B)
an amount equivalent to any annual Incentive
Compensation Awards earned with respect to fiscal years
ended prior to the year that includes the Date of
Termination to the extent not theretofore paid, and (C)
an amount equivalent to the target amount payable under
any annual Incentive Compensation Awards for the fiscal
year that includes the Date of Termination or, if
greater, the average of the three (3) years' highest
gross bonus awards, not necessarily consecutive, paid
by the Company (or its predecessor) to the Executive in
the five (5) years preceding the year of Termination
multiplied by a fraction the numerator of which shall
be the number of days from the beginning of such fiscal
year to and including the Date of Termination and the
denominator of which shall be 365, in each case to the
extent not theretofore paid. (The amounts specified in
clauses (A), (B) and (C) shall be hereinafter referred
to as the "Accrued Obligations.")
(iii) Deferred Compensation. In the event of a
Termination following a Change in Control, the Company
shall pay the Executive a lump sum payment in an amount
equal to any compensation previously deferred by the
Executive (together with any accrued interest or
earnings thereon).
(iv) Pension Supplement. The Company shall provide
the Executive with such additional years of age and
service credit for purposes of the calculation of
retirement benefits under the Enova Supplemental
Executive Retirement Plan (the "Enova SERP") as if he
had remained employed for the remainder of the
Employment Period, but in no event less than two (2)
years, provided, however, that (A) if the Executive has
not yet then attained age 53 at the time the credit for
age and service is given, he will be credited with the
additional amount of age credit as if he had attained
age 55 and (B) there shall be no reduction under the
Enova SERP for early retirement as set forth in
Paragraph 4.a.ii of the Enova SERP, except for the
early retirement reduction factor as determined in
accordance with the table in Section 5.4 of the San
Diego Gas & Electric Company Pension Plan, as adopted
by Enova (the "Pension Plan"), which factors shall be
applied to the Executive's age and years of service
after he is credited with the additional age and
service described above; and provided, further,
however, that in the event of a Termination following a
Change in Control, the Company shall pay the Executive
a lump sum payment in an amount equal to the benefits
under the Enova SERP as described in paragraph 2.c of
the Enova SERP, less the value calculated consistently
with paragraph 4.b of the SERP of the Executive's
entitlement under the Pension Plan, such payment to be
calculated and paid without regard to the limitation
described in the Enova SERP relating to Section 280G of
the Code and with such additional years of age and
service credit as if he had remained employed for the
remainder of the Employment Period, but in no event
less than two (2)years, provided that if he has not
then attained age 53 at the time the credit forage and
service is given, he will be credited with the
additional amount of age credit as if he had attained
age 55; and in either case the Executive's termination
shall be a "Qualifying Termination" as defined in the
Split Dollar Life Insurance Agreement entered into
between the Executive and Enova, and where necessary
the Company shall take such steps, including the
payment of additional premiums, as may be necessary so
that the cash value of the policy as of the Date of
Termination shall reflect the additional age and
service credit.
(v) Accelerated Vesting and Payment of Long-Term
Incentive Awards. All equity-based long-term Incentive
Compensation Awards held by the Executive under any
long- term Incentive Compensation Plan maintained by
the Company or any affiliate shall immediately vest and
become exercisable as of the Date of Termination, to be
exercised in accordance with the terms of the
applicable plan and award agreement; provided, however,
that any such awards granted on or after the Effective
Date shall remain outstanding and exercisable until the
earlier of (A) eighteen (18) months following the Date
of Termination or (B) the expiration of the original
term of such award (it being understood that all awards
granted prior to the Effective Date shall remain
outstanding and exercisable for a period that is no
less than that provided for in the applicable agreement
in effect as of the date of grant), and the Company
shall pay to the Executive, with respect to all cash-
based, long-term Incentive Compensation Awards made to
the Executive that are outstanding under any long-term
Incentive Compensation Plan maintained by the Company
or any affiliate an amount equal to the target amount
payable under such long-term Incentive Compensation
Awards multiplied by a fraction, the numerator of which
shall be the number of days from the beginning of the
award cycle to and including the Date of Termination,
and the denominator of which shall be the number of
days in the cycle as originally granted.
(vi) Continuation of Welfare Benefits. For (A) the
remainder of the Employment Period, but in no event
less than a period of two (2) years or (B) until the
Executive is eligible for retiree medical benefits,
whichever is longer, immediately following the Date of
Termination, the Company shall arrange to provide the
Executive and his dependents with life, disability,
accident and health insurance benefits substantially
similar to those provided to the Executive and his
dependents immediately prior to the Date of
Termination, provided, however, that if the Executive
becomes employed with another employer and is eligible
to receive life, disability, accident and health
insurance benefits under another employer-provided
plan, the benefits under the Company's plans shall be
secondary to those provided under such other plan
during such applicable period of eligibility, and
further provided, however, that in the event of a
Termination following a Change in Control such period
shall not be less than the number of years until the
Executive reaches normal retirement age as defined
under the Enova tax-qualified plans.
(b) Termination by the Company for Cause or by the
Executive Other than for Good Reason. Subject to the
provisions of Section 6 of this Agreement, if the
Executive's employment shall be terminated for Cause
during the Employment Period, or if the Executive
terminates employment during the Employment Period
other than for Good Reason, the Company shall have no
further obligations to The Executive under this
Agreement other than the Accrued Obligations.
(c) Termination due to Death or Disability. If the
Executive's employment shall terminate by reason of
death or Disability, the Company shall pay The
Executive or his estate, as the case may be, the
Accrued Obligations and, solely in the case of
Termination by reason of Disability, the Pension
Supplement. Such payments shall be in addition to
those rights and benefits to which the Executive or his
estate may be entitled under the relevant Company plans
or programs.
(d) Code Section 280G.
(i) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit
received or to be received by the Executive (whether
pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with (A) the Company,
(B) any Person (as defined in Section 4(e)) whose
actions result in a Change in Control or (C) any Person
affiliated with the Company or such Person) (all such
payments and benefits, including the Severance
Payments, being hereinafter called "Total
Payments")would not be deductible (in whole or part) by
the Company, an affiliate or Person making such payment
or providing such benefit as a result of section 280G
of the Code, then, to the extent necessary to make such
portion of the Total Payments deductible (and after
taking into account any reduction in the Total Payments
provided by reason of section 280G of the Code in such
other plan, arrangement or agreement), the cash
Severance Payments shall first be reduced (if
necessary, to zero), and all other Severance Payments
shall thereafter be reduced (if necessary, to zero);
provided, however, that the Executive may elect to have
the noncash Severance Payments reduced (or eliminated)
prior to any reduction of the cash Severance Payments.
(ii) For purposes of this limitation, (A) no portion
of the Total Payments the receipt or enjoyment of which
the Executive shall have waived at such time and in
such manner as not to constitute a "payment" within the
meaning of section 280G(b) of the Code shall be taken
into account, (B) no portion of the Total Payments
shall be taken into account which, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to
the Executive and selected by the Company's accounting
firm which (or, in the case of a payment following a
Change in Control the accounting firm that was,
immediately prior to the Change in Control, the
Company's independent auditor) (the "Auditor"),does not
constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of
section 280G(b)(4)(A) of the Code, (C) the Severance
Payments shall be reduced only to the extent necessary
so that the Total Payments (other than those referred
to in clause (A) or(B)) in their entirety constitute
reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4)(B) of the Code
or are otherwise not subject to disallowance as
deductions by reason of section 280G of the Code, in
the opinion of Tax Counsel, and (D) the value of any
noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by
the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.
(e) Consulting and Non-Competition. If the Total
Payments are subject to reduction in accordance with
the above provisions of Section 5(d), the Executive
shall have the option, to be exercised within ten (10)
days after receipt of notice of such reduction from the
Company, to enter into a consulting and non-competition
agreement with the Company (the "Consulting and Non-
Competition Agreement"), which shall (1) provide the
Executive with payments and benefits, payable over the
term of the agreement, the present value of which in
the aggregate is equal to or greater than the present
value (determined by applying a discount rate equal to
the interest rate provided in section 1274(b)(2)(B) of
the Code) of the balance of the payments and benefits
otherwise payable to the Executive without regard to
the provisions of Section 5(d), (2) require the
Executive to make his services available to the Company
for no more than twenty (20) hours per month and (3)
last for a period of not more than two (2) years
(unless the Executive consents to a longer period).
(f) Gross-Up Payment. In the event that the
Executive receives a notice from the Internal Revenue
Service to the effect that the amounts payable under
the Consulting and Non-Competition Agreement would be
subject (in whole or part)to the tax (the "Excise Tax")
imposed under section 4999 of the Code, within
thirty(30) days after the date the Chairman of the
Board receives a copy of such notice the Company shall
pay to the Executive such additional amounts (the
"Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on
the Total Payments and any federal, state and local
income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Total Payments.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal
income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation
in the state and locality of the Executive's residence
on the date on which the Gross-Up Payment is calculated
for purposes of this section, net of the maximum
reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
In the event that the Excise Tax is subsequently
determined to be less than the amount taken into
account hereunder, the Executive shall repay to the
Company, at the time that the amount of such reduction
in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus
that portion of the Gross-Up Payment attributable to
the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in
a reduction in Excise Tax and/or a federal, state or
local income tax deduction) plus interest on the amount
of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the
Excise Taxis determined to exceed the amount taken into
account hereunder (including by reason of any payment
the existence or amount of which cannot be determined
at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such
excess (plus any interest, penalties or additions
payable by the Executive with respect to such excess)
at the time that the amount of such excess is finally
determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning
the existence or amount of liability for Excise Tax
with respect to the Total Payments.
(g) Release. Notwithstanding anything herein to the
contrary, the Company's obligation to make the payments
provided for in this Section 5 is expressly made
subject to and conditioned upon (i) the Executive's
prior execution of a release substantially in the form
attached hereto as Exhibit A within forty-five (45)days
after the applicable Date of Termination and (ii) the
Executive's non-revocation of such release in
accordance with the terms thereof.
6. Nonexclusivity of Rights.
Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any
benefit, plan, program, policy or practice provided by
the Company and for which the Executive may qualify
(except with respect to any benefit to which the
Executive has waived his rights in writing), nor shall
anything herein limit or otherwise affect such rights
as the Executive may have under any other contract or
agreement entered into after the Effective Date with
the Company. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive
under any benefit, plan, policy, practice or program
of, or any contract or agreement entered into with, the
Company shall be payable in accordance with such
benefit, plan, policy, practice or program or contract
or agreement except as explicitly modified by this
Agreement.
7. Full Settlement; Mitigation.
The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform
its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have
against the Executive or others, provided that nothing
herein shall preclude the Company from separately
pursuing recovery from the Executive based on any such
claim. In no event shall the Executive be obligated to
seek other employment or take any other action by way
of mitigation of the amounts (including amounts for
damages for breach) payable to the Executive under any
of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive
obtains other employment.
8. Arbitration.
Any dispute about the validity, interpretation, effect
or alleged violation of this Agreement (an "arbitrable
dispute") must be submitted to confidential arbitration
in San Diego, California. Arbitration shall take place
before an experienced employment arbitrator licensed to
practice law in such state and selected in accordance
with the Model Employment Arbitration Procedures of the
American Arbitration Association. Arbitration shall be
the exclusive remedy of any arbitrable dispute. Should
any party to this Agreement pursue any arbitrable
dispute by any method other than arbitration, the other
party shall be entitled to recover from the party
initiating the use of such method all damages, costs,
expenses and attorneys' fees incurred as a result of
the use of such method. Notwithstanding anything
herein to the contrary, nothing in this Agreement shall
purport to waive or in any way limit the right of any
party to seek to enforce any judgment or decision on an
arbitrable dispute in a court of competent
jurisdiction.
9. Confidentiality.
The Executive acknowledges that in the course of his
employment with the Company he has acquired non-public
privileged or confidential information and trade
secrets concerning the operations, future plans and
methods of doing business("Proprietary Information") of
the Company, its subsidiaries and affiliates; and the
Executive agrees that it would be extremely damaging to
the Company, its subsidiaries and affiliates if such
Proprietary Information were disclosed to a competitor
of the Company, its subsidiaries and affiliates or to
any other person or corporation. The Executive
understands and agrees that all Proprietary Information
has been divulged to the Executive in confidence and
further understands and agrees to keep all Proprietary
Information secret and confidential (except for such
information which is or becomes publicly available
other than as a result of a breach by the Executive of
this provision) without limitation in time. In view of
the nature of the Executive's employment and the
Proprietary Information the Executive has acquired
during the course of such employment, the Executive
likewise agrees that the Company, its subsidiaries and
affiliates would be irreparably harmed by any
disclosure of Proprietary Information in violation of
the terms of this paragraph and that the Company, its
subsidiaries and affiliates shall therefore be entitled
to preliminary and/or permanent injunctive relief
prohibiting the Executive from engaging in any activity
or threatened activity in violation of the terms of
this paragraph and to any other relief available to
them. Inquiries regarding whether specific information
constitutes Proprietary Information shall be directed
to the Company's Senior Vice President, Public
Policy(or, if such position is vacant, the Company's
Chief Executive Officer), provided, that the Company
shall not unreasonably classify information as
Proprietary Information.
10. Non-Solicitation of Employees.
The Executive recognizes that he possesses and will
possess confidential information about other employees
of the Company, its subsidiaries and affiliates
relating to their education, experience, skills,
abilities, compensation and benefits, and inter-
personal relationships with customers of the Company,
its subsidiaries and affiliates. The Executive
recognizes that the information he possesses and will
possess about these other employees is not generally
known, is of substantial value to the Company, its
subsidiaries and affiliates in developing their
business and in securing and retaining customers, and
has been and will be acquired by him because of his
business position with the Company, its subsidiaries
and affiliates. The Executive agrees that, during the
Employment Period and for a period of one (1) year
thereafter, he will not, directly or indirectly,
solicit or recruit any employee of the Company, its
subsidiaries or affiliates for the purpose of being
employed by him or by any competitor of the Company,
its subsidiaries or affiliates on whose behalf he is
acting as an agent, representative or employee and that
he will not convey any such confidential information or
trade secrets about other employees of the Company, its
subsidiaries and affiliates to any other person;
provided, however, that it shall not constitute a
solicitation or recruitment of employment in violation
of this paragraph to discuss employment opportunities
with any employee of the Company, its subsidiaries or
affiliates who has either first contacted the Executive
or regarding whose employment the Executive has
discussed with and received the written approval of the
Company's Vice President, Human Resources (or, if such
position is vacant, the Company's Chief Executive
Officer), prior to making such solicitation or
recruitment. In view of the nature of the Executive's
employment with the Company, the Executive likewise
agrees that the Company, its subsidiaries and
affiliates would be irreparably harmed by any
solicitation or recruitment in violation of the terms
of this paragraph and that the Company, its
subsidiaries and affiliates shall therefore be entitled
to preliminary and/or permanent injunctive relief
prohibiting the Executive from engaging in any activity
or threatened activity in violation of the terms of
this paragraph and to any other relief available to
them.
11. Legal Fees.
The Company shall pay to the Executive all legal fees
and expenses(including but not limited to fees and
expenses in connection with any arbitration)incurred by
the Executive in disputing in good faith any issue
arising under this Agreement relating to the
termination of the Executive's employment or in seeking
in good faith to obtain or enforce any benefit or right
provided by this Agreement, but in each case only to
the extent the arbitrator or court determines that the
Executive had a reasonable basis for such claim.
12. Successors.
(a) Assignment by Executive. This Agreement is
personal to The Executive and without the prior written
consent of the Company shall not be assign-able by the
Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(b) Successors and Assigns of Company. This
Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns. (c)
Assumption. The Company shall require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company
would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its businesses and/or assets as aforesaid
that assumes and agrees to perform this Agreement by
operation of law or otherwise.
13. Miscellaneous.
(a) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the
State of California, without reference to its
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and
shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or
discharged except by an agreement in writing signed by
the party against whom enforcement of such amendment,
modification, repeal, waiver, extension or discharge is
sought. No person, other than pursuant to a resolution
of the Board or a committee thereof, shall have
authority on behalf of the Company to agree to amend,
modify, repeal, waive, extend or discharge any
provision of this Agreement or anything in reference
thereto.
(b) Notices. All notices and other communications
hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or
certified mail, return receipt requested, postage
prepaid, addressed, in either case, to the Company's
headquarters or to such other address as either party
shall have furnished to the other in writing in
accordance herewith. Notices and communications shall
be effective when actually received by the addressee.
(c) Severability. The invalidity or unenforceability
of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement.
(d) Taxes. The Company may withhold from any
amounts payable under this Agreement such federal,
state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) No Waiver. The Executive's or the Company's
failure to insist upon strict compliance with any
provision hereof or any other provision of this
Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to
Section 4(d) of this Agreement, or the right of the
Company to terminate the Executive's employment for
Cause pursuant to Section 4(b) of this Agreement shall
not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
(f) Entire Agreement. This instrument contains the
entire agreement of the Executive, the Company or any
predecessor or subsidiary thereof with respect to the
subject matter hereof, and all promises,
representations, understandings, arrangements and prior
agreements are merged herein and superseded hereby
including, but not limited to, that certain employment
agreement dated September 18, 1996 between the
Executive and Enova. Notwithstanding the foregoing,
the provisions of any employee benefit or compensation
plan, program or arrangement applicable to the
Executive, including that certain Incentive Bonus
Agreement, entered into between the Executive and
Enova, shall remain in effect, except as expressly
otherwise provided herein.
IN WITNESS WHEREOF, the Executive and, pursuant to
due authorization from its Board of Directors, the
Company have caused this Agreement to be executed as of
the day and year first above written.
MINERAL ENERGY COMPANY
__________________________
Kevin C. Sagara
President
__________________________
Donald E. Felsinger
EXHIBIT A
GENERAL RELEASE
This GENERAL RELEASE (the "Agreement"), dated _______,
is made by and between ___________________, a
California corporation (the "Company") and
_____________ ("you" or "your").
WHEREAS, you and the Company have previously entered
into that certain Employment Agreement dated
_____________, 1996 (the "Employment Agreement"); and
WHEREAS, Section 5 of the Employment Agreement
provides for the payment of severance benefits in the
event of the termination of your employment under
certain circumstances, subject to and conditioned upon
your execution and non-revocation of a general release
of claims by you against the Company and its
subsidiaries and affiliates.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, you and the
Company hereby agree as follows:
ONE: Your signing of this Agreement confirms that
your employment with the Company shall terminate at the
close of business on ___________,or earlier upon our
mutual agreement.
TWO: As a material inducement for the payment of
benefits under Section 5 of that certain Employment
Agreement between you and the Company, and except as
otherwise provided in this Agreement, you and the
Company hereby irrevocably and unconditionally release,
acquit and forever discharge the other from any and all
Claims either may have against the other. For purposes
of his Agreement and the preceding sentence, the words
"Releasee" or "Releasees"
and "Claim" or "Claims," shall have the meanings set
forth below:
(a)The words "Releasee" or "Releasees" shall refer
to the you and to the Company and each of the Company's
owners, stockholders, predecessors, successors,
assigns, agents, directors, officers, employees,
representatives, attorneys, advisors, parent companies,
divisions, subsidiaries, affiliates(and agents,
directors, officers, employees, representatives,
attorneys and advisors of such parent companies,
divisions, subsidiaries and affiliates), and all
persons acting by, through, under or in concert with
any of them.
(b)The words "Claim" or "Claims" shall refer to any
charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs,
losses, debts and expenses (including attorneys' fees
and costs actually incurred)of any nature whatsoever,
known or unknown, suspected or unsuspected, which you
or the Company now, in the past or, except as limited
by law or regulation such as the Age Discrimination in
Employment Act (ADEA), in the future may have, own or
hold against any of the Releasees; provided, however,
that the word "Claim" or "Claims" shall not refer to
any charges, complaints, claims, liabilities,
obligations, promises, agreements, controversies,
damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including
attorneys' fees and costs actually incurred) arising
under [identify severance, employee benefits, stock
option and other agreements containing duties, rights
obligations etc. of either party that are to remain
operative]. Claims released pursuant to this Agreement
by you and the Company include, but are not limited to,
rights arising out of alleged violations of any
contracts, express or implied, any tort, any claim that
you failed to perform or negligently performed or
breached your duties during employment at the Company,
any legal restrictions on the Company's right to
terminate employees or any federal, state or other
governmental statute, regulation, or ordinance,
including, without limitation: (1) Title VII of the
Civil Rights Act of l964 (race, color, religion, sex
and national origin discrimination); (2) 42 U.S.C Sec
1981 (discrimination); (3) 29 U.S.C. Sec 621-634(age
discrimination); (4) 29 U.S.C. Sec 206(d)(l) (equal
pay); (5) 42 U.S.C. Sec 12101, et seq. (disability);
(6) the California Constitution, Article I, Section
8(discrimination); (7) the California Fair Employment
and Housing Act (discrimination, including race, color,
national origin, ancestry, physical handicap, medical
condition, marital status, religion, sex or age); (8)
California Labor Code Section 1102.1 (sexual
orientation discrimination); (9) Executive Order
11246(race, color, religion, sex and national origin
discrimination); (10) Executive Order 11141 (age
discrimination); (11) Sec 503 and 504 of the
Rehabilitation Act of 1973 (handicap discrimination);
(12) The Worker Adjustment and Retraining Act (WARN
Act); (13) the California Labor Code (wages, hours,
working conditions, benefits and other matters); (14)
the Fair Labor Standards Act (wages, hours, working
conditions and other matters); the Federal Employee
Polygraph Protection Act (prohibits employer from
requiring employee to take polygraph test as condition
of employment); and (15) any federal, state or other
governmental statute, regulation or ordinance which is
similar to any of the statutes de-scribed in clauses
(1) through (14).
THREE: You and the Company expressly waive and
relinquish all rights and benefits afforded by any
statute (including but not limited to Section 1542 of
the Civil Code of the State of California) which limits
the effect of are lease with respect to unknown claims.
You and the Company do so under-standing and
acknowledging the significance of the release of
unknown claims and the waiver of statutory protection
against a release of unknown claims(including but not
limited to Section 1542). Section 1542 of the Civil
Code of the State of California states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH
THE DEBTOR."
Thus, notwithstanding the provisions of Section 1542 or
of any similar statute, and for the purpose of
implementing a full and complete release and discharge
of the Releasees, you and the Company expressly
acknowledge that this Agreement is intended to include
in its effect, without limitation, all Claims which are
known and all Claims which you or the Company do not
know or suspect to exist in your or the Company's favor
at the time of execution of this Agreement and that
this Agreement contemplates the extinguishment of all
such Claims.
FOUR: The parties acknowledge that they might
hereafter discover facts different from, or in addition
to, those they now know or believe to be rue with
respect to a Claim or Claims released herein, and they
expressly agree to assume the risk of possible
discovery of additional or different facts, and agree
that this Agreement shall be and remain effective, in
all respects, regardless of such additional or
different discovered facts.
FIVE: You hereby represent and acknowledge that you
have not filed any Claim of any kind against the
Company or others released in this Agreement. You
further hereby expressly agree never to initiate
against the Company or others released in this
Agreement any administrative proceeding, lawsuit or any
other legal or equitable proceeding of any kind
asserting any Claims that are released in this
Agreement.
The Company hereby represents and acknowledges that
it has not filed any Claim of any kind against you or
others released in this Agreement. The Company further
hereby expressly agrees never to initiate against you
or others released in this Agreement any administrative
proceeding, lawsuit or any other legal or equitable
proceeding of any kind asserting any Claims that are
released in this Agreement.
SIX: You hereby represent and agree that you have
not assigned or transferred, or attempted to have
assigned or transfer, to any person or entity, any of
the Claims that you are releasing in this Agreement.
The Company hereby represents and agrees that it has
not assigned or transferred, or attempted to have
assigned or transfer, to any person or entity, any of
the Claims that it is releasing in this Agreement.
SEVEN: As a further material inducement to the
Company to enter into this Agreement, you hereby agree
to indemnify and hold each of the Releasees harmless
from all loss, costs, damages, or expenses, including
without limitation, attorneys' fees incurred by
Releasees, arising out of any breach of this Agreement
by you or the fact that any representation made in this
Agreement by you was false when made.
EIGHT: You and the Company represent and
acknowledge that, in executing this Agreement, neither
is relying upon any representation or statement not set
forth in this Agreement or the Severance Agreement.
NINE: (a)This Agreement shall not in any way be
construed as an admission by the Company that it has
acted wrongfully with respect to you or any other
person, or that you have any rights whatsoever against
the Company, and the Company specifically disclaims any
liability to or wrongful acts against you or any other
person, on the part of itself, its employees or its
agents. This Agreement shall not in any way be
construed as an admission by you that you have acted
wrongfully with respect to the Company, or that you
failed to perform your duties or negligently performed
or breached your duties, or that the Company had good
cause to terminate your employment. (b)If you are a
party or are threatened to be made a party to any
proceeding by reason of the fact that you were an
officer [or director] of the Company, the Company shall
indemnify you against any expenses(including reasonable
attorney fees provided that counsel has been approved
by the Company prior to retention), judgments, fines,
settlements, and other amounts actually or reasonably
incurred by you in connection with that proceeding,
provided that you acted in good faith and in a manner
you reasonably believed to be in the best interest of
the Company. The limitations of California
Corporations Code Section 317 shall apply to this
assurance of indemnification. (c) You agree to
cooperate with the Company and its designated
attorneys, representatives and agents in connection
with any actual or threatened judicial, administrative
or other legal or equitable proceeding in which the
Company is or may be become involved. Upon reasonable
notice, you agree to meet with and provide to the
Company or its designated attorneys, representatives or
agents all information and knowledge you have relating
to the subject matter of any such proceeding.
TEN: This Agreement is made and entered into in
California. This Agreement shall in all respects be
interpreted, enforced and governed by and under the
laws of the State of California. Any dispute about the
validity, interpretation, effect or alleged violation
of this Agreement (an "arbitrable dispute") must be
submitted to arbitration in [Los Angeles][San Diego],
California. Arbitration shall take place before an
experienced employment arbitrator licensed to practice
law in such state and selected in accordance with the
Model Employment Arbitration Procedures of the American
Arbitration Association. Arbitration shall be the
exclusive remedy for any arbitrable dispute. The
arbitrator in any arbitrable dispute shall not have
authority to modify or change the Agreement in any
respect. You and the Company shall each be responsible
for payment of one-half the amount of the arbitrator's
fee(s). Should any party to this Agreement institute
any legal action or administrative proceeding against
the other with respect to any Claim waived by this
Agreement or pursue any arbitrable dispute by any
method other than arbitration, the prevailing party
shall be entitled to recover from the initiating party
all damages, costs, expenses and attorneys' fees
incurred as a result of that action. The arbitrator's
decision and/or award will be fully enforceable and
subject to an entry of judgment by the Superior Court
of the State of California for the County of [Los
Angeles][San Diego].
ELEVEN: Both you and the Company understand that
this Agreement is final and binding eight days after
its execution and return. Should you nevertheless
attempt to challenge the enforceability of this
Agreement as provided in Paragraph TEN or, in violation
of that Paragraph, through litigation, as a further
limitation on any right to make such a challenge, you
shall initially tender to the Company, by certified
check delivered to the Company, all monies received
pursuant to Section 5 of the Employment Agreement, plus
interest, and invite the Company to retain such monies
and agree with you to cancel this Agreement and void
the Company's obligations under Section 5 of the
Employment Agreement. In the event the Company accepts
this offer, the Company shall retain such monies and
this Agreement shall be canceled and the Company shall
have no obligation under Section 5 of the Employment
Agreement. In the event the Company does not accept
such offer, the Company shall so notify you, and shall
place such monies in an interest-bearing escrow account
pending resolution of the dispute between you and the
Company as to whether or not this Agreement and the
Company's obligations under Section 5 of the Employment
Agreement shall be set aside and/or otherwise rendered
voidable or unenforceable. Additionally, any
consulting agreement then in effect between you and The
Company shall be immediately rescinded with no
requirement of notice.
TWELVE: Any notices required to be given under this
Agreement shall be delivered either personally or by
first class United States mail, postage prepaid,
addressed to the respective parties as follows:
To Company: [TO COME]
Attn: [TO COME]
To You:
___________________
___________________
___________________
THIRTEEN: You understand and acknowledge that you
have been given a period of 45 days to review and
consider this Agreement (as well as statistical data on
the persons eligible for similar benefits) before
signing it and may use as much of this 45-day period as
you wish prior to signing. You are encouraged, at your
personal expense, to consult with an attorney before
signing this Agreement. You understand and acknowledge
that whether or not you do so is your decision. You
may revoke this Agreement within seven days of signing
it. If you wish to revoke, the Company's Vice
President, Human Resources must receive written notice
from you no later than the close of business on the
seventh day after you have signed the Agreement. If
revoked, this Agreement shall not be effective and
enforceable and you will not receive payments or
benefits under Section 5 of the Employment Agreement.
FOURTEEN: This Agreement constitutes the entire
Agreement of the parties hereto and supersedes any and
all other Agreements (except the Employment Agreement)
with respect to the subject matter of this Agreement,
whether written or oral, between you and the Company.
All modifications and amendments to this Agreement must
be in writing and signed by the parties.
FIFTEEN: Each party agrees, without further
consideration, to sign or cause to be signed, and to
deliver to the other party, any other documents and to
take any other action as may be necessary to fulfill
the obligations under this Agreement.
SIXTEEN: If any provision of this Agreement or the
application thereof is held invalid, the invalidity
shall not affect other provisions or applications of
the Agreement which can be given effect without the
invalid provisions or application; and to this end the
provisions of this Agreement are declared to be
severable.
SEVENTEEN: This Agreement may be executed in
counterparts.
I have read the foregoing General Release and I accept
and agree to the provisions it contains and hereby
execute it voluntarily and with full under-standing of
its consequences. I am aware it includes a release of
all known or unknown claims.
DATED:____________________
_____________________________
DATED:____________________
_____________________________
You acknowledge that you first received this
Agreement on [date].
___________________________
Exhibit 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made
and entered into as of the 12th day of October, 1996, by
and between Mineral Energy Company (the "Company"), a
California corporation, and Warren I. Mitchell (the
"Executive");
WHEREAS, the Executive is currently
serving as President of Southern California Gas Company, a
California corporation and a subsidiary of Pacific Enter-
prises, a California corporation ("Pacific Enterprises"),
and the Company desires to secure the continued employment
of the Executive in accordance herewith;
WHEREAS, pursuant to the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of
October 12, 1996, among, inter alia, Pacific Enterprises,
Enova, Inc., a California corporation ("Enova") and the
Company, the parties thereto have agreed to a merger (the
"Merger") pursuant to the terms thereof;
WHEREAS, the Executive is willing to
commit himself to be employed by the Company on the terms
and conditions herein set forth and thus to forego
opportunities elsewhere; and
WHEREAS, the parties desire to enter
into this Agreement, as of the Effective Date (as
hereinafter defined), setting forth the terms and
conditions for the employment relationship of the Executive
with the Company during the Employment Period (as
hereinafter defined).
NOW, THEREFORE, IN CONSIDERATION of the
mutual premises, covenants and agreements set forth below,
it is hereby agreed as follows:
1. Employment and Term.
(a) Employment. The Company agrees to employ the
Executive, and the Executive agrees to be employed by the
Company, in accordance with the terms and provisions of
this Agreement during the term thereof (as described
below).
(b) Term. The term of the Executive's employment under
this Agreement shall commence (the "Effective Date") as of
the closing date (the "Closing Date") of the Merger as
described in the Merger Agreement and shall continue until
the earlier of the Executive's Mandatory Retirement Age (as
defined herein) or the fifth anniversary of the Effective
Date (such term being referred to hereinafter as the
"Employment Period"); provided, however, that commencing on
the fourth anniversary of the Effective Date (and each
anniversary of the Effective Date thereafter), the term of
this Agreement shall automatically be extended for one
additional year, unless, prior to such date, the Company or
the Executive shall give written notice to the other party
that it or he, as the case may be, does not wish to so
extend this Agreement; and further provided, however, that
if the Merger Agreement is terminated, then, at the time of
such termination, this Agreement shall be deemed canceled
and of no force or effect and the Executive shall continue
to be subject to such agreements and arrangements that were
in effect prior to the Closing Date of the Merger. As a
condition to the Merger, the parties hereto agree that the
Company shall be responsible for all of the premises,
covenants and agreements set forth in this Agreement.
(c)Mandatory Retirement. In no event shall the term of the
Executive's employment hereunder extend beyond the end of
the month in which the Executive's 65th birthday occurs
(the "Mandatory Retirement Age").
2. Duties and Powers of Executive.
(a) Position. During the period commencing on the Effective
Date the Executive shall serve as President and Principal
Executive Officer of the businesses of the Company and its
subsidiaries that are economically regulated by the
California Public Utilities Commission (the "Regulated
Subsidiaries") with such authority, duties and
responsibilities with respect to such position as set forth
in subsection (b) hereof. In this capacity, the Executive
shall report to the Office of the Chairman or if the Office
of the Chairman does not exist, the Chief Executive Officer
of the Company. The titles, authority, duties and
responsibilities set forth in subsection (b) hereof may be
changed from time to time but only with the mutual written
agreement of the Executive and the Company.
(b)Duties of the President and Principal Executive
Officer. The duties of the President and Principal
Executive Officer of the Company's Regulated Subsidiaries
shall include but not be limited to directing the overall
business, affairs and operations of the Company's Regulated
Subsidiaries, through the officers of such subsidiaries,
all of whom shall report directly or indirectly to the
Executive.
(c) Attention. During the Employment Period, and excluding
any periods of vacation and sick leave to which the
Executive is entitled, the Executive shall devote full
attention and time during normal business hours to the
business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive under this Agreement, use the Executive's best
efforts to carry out such responsibilities faithfully and
efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate,
industry, civic or charitable boards or committees, so long
as such activities do not interfere with the performance of
the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
3. Compensation.
It is the Board's intention to provide the Executive with
compensation opportunities that, in total, are at a level
that is consistent with that provided by comparable
companies to executives of similar levels of
responsibility, expertise and corporate and individual
performance as determined by the compensation committee of
the Board. In this regard, the Executive shall receive the
following compensation for his services hereunder to the
Company:
(a) Base Salary. During the Employment Period, the
Executive's annual base salary ("Annual Base Salary") shall
in no event be no less than $440,000 and shall be payable
in accordance with the Company's general payroll practices.
Subject to Section 4(e)(ii), the Board in its discretion
may from time to time direct such upward adjustments in the
Executive's Annual Base Salary as the Board deems to be
necessary or desirable, including, without limitation,
adjustments in order to reflect increases in the cost of
living and the Executive's performance. Any increase in
Annual Base Salary shall not serve to limit or reduce any
other obligation of the Company under this Agreement.
(b) Incentive Compensation. Subject to
Section 4(e)(ii), during the Employment Period, the
Executive shall participate in annual incentive
compensation plans and long-term incentive compensation
plans of the Company and, to the extent appropriate, the
Company's Subsidiaries (which long-term incentive
compensation plans may include plans offering stock
options, restricted stock and other long-term incentive
compensation and all such annual and long-term plans to be
hereinafter referred to as the "Incentive Compensation
Plans") and will be granted awards thereunder providing him
with the opportunity to earn, on a year-by-year basis,
annual and long-term incentive compensation (the "Incentive
Compensation Awards") at least equal (in terms of target,
maximum and minimum awards expressed as a percentage of
Annual Base Salary) to the Executive's opportunities that
were in effect prior to the Effective Date. Any equity
awards granted to the Executive may be granted, at the
Executive's election, to trusts established for the benefit
of members of the Executive's family. With respect to
incentive compensation awards granted prior to the
Effective Date, the Executive shall be entitled to retain
such awards in accordance with their terms, which shall be
appropriately adjusted as a result of the Merger.
(c) Retirement and Welfare Benefit Plans. In addition to
the benefits provided under Section 3(b), during the
Employment Period and so long as the Executive is employed
by the Company, he shall be eligible to participate in all
other savings, retirement and welfare plans, practices,
policies and programs applicable generally to employees
and/or senior executive officers of the Company and its
domestic subsidiaries, except with respect to any benefits
under any plan, practice, policy or program to which the
Executive has waived his rights in writing. To the extent
that benefits payable or provided to the Executive under
such plans are materially less favorable on a benefit by
benefit basis than the benefits that would have been
payable or provided to the Executive under comparable
Pacific Enterprises tax-qualified retirement plans,
executive retirement plans, executive medical plans and
life insurance arrangements in which the Executive was a
participant (based on the terms of such plans as of the
Effective Date), the Executive shall be entitled to
benefits pursuant to the terms of this Agreement equal to
the excess of the benefits provided under the applicable
Pacific Enterprises plans over the benefits provided under
the comparable Company plans.
(d) Expenses. The Company shall
reimburse the Executive for all expenses, including those
for travel and entertainment, properly incurred by him in
the performance of his duties hereunder in accordance with
policies established from time to time by the Board.
(e) Fringe Benefits and Perquisites.
During the Employment Period and so long as the Executive
is employed by the Company, he shall be entitled to receive
fringe benefits and perquisites in accordance with the
plans, practices, pro- grams and policies of the Company
and, to the extent appropriate, the Company's subsidiaries
from time to time in effect, commensurate with his
position.
4. Termination of Employment.
(a) Death. The Executive's employment
shall terminate upon the Executive's death.
(b) Disability. The Executive's active
employment shall terminate at the election of the Board or
the Executive by reason of Disability (as herein defined)
during the Employment Period; provided, however, that the
Board may not terminate the Executive's active employment
hereunder by reason of Disability unless at the time of
such termination there is no reasonable expectation that
the Executive will return to full time responsibilities
hereunder within the next ninety (90) day period. For
purposes of the Agreement, disability ("Disability") shall
have the same meaning as set forth in the Pacific
Enterprises long-term disability plan or its successor.
Upon such termination Executive shall continue as a
participant under the Pacific Enterprises long-term
disability plan or its successor and under the disability
provisions of Pacific Enterprises' supplemental executive
retirement plan or its successor until Executive reaches
mandatory retirement age, elects to commence retirement
benefits, becomes employed or ceases to have a Disability.
(c) By the Company for Cause. The
Company may terminate the Executive's employment during the
Employment Period for Cause (as herein defined). For
purposes of this Agreement, "Cause" shall mean (i) the
willful and continued failure by the Executive to
substantially perform the Executive's duties with the
Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or
any such actual or anticipated failure after the issuance
of a Notice of Termination for Good Reason by the Executive
pursuant to Section 4(d)) or (ii) the Executive's
commission of one or more acts of moral turpitude that
constitute a violation of applicable law (including but not
limited to a felony) which have or result in an adverse
effect on the Company, monetarily or otherwise or one or
more significant acts of dishonesty. For purposes of clause
(i) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
(d) By the Company without Cause.
Notwithstanding any other provision of this Agreement, the
Company may terminate the Executive's employment other than
by a termination for Cause during the Employment Period,
but only upon the affirmative vote of three-fourths (3/4)
of the membership of the Board.
(e) By the Executive for Good Reason.
The Executive may terminate his employment during the
Employment Period for Good Reason (as herein defined). For
purposes of this Agreement, "Good Reason" shall mean the
occurrence without the written consent of the Executive of
any one of the following acts by the Company, or failures
by the Company to act, unless such act or failure to act is
corrected prior to the Date of Termination (as hereinafter
defined) specified in the Notice of Termination (as
hereinafter defined) given in respect thereof: (i) an
adverse change in the Executive's title, authority, duties,
responsibilities or reporting lines as specified in
Sections 2(a) and 2(b) of this Agreement; (ii) a
reduction by the Company in (A) the Executive's Annual Base
Salary as in effect on the date hereof or as the same may
be in- creased from time to time or (B) the Executive's
aggregate annualized compensation and benefits
opportunities, except, in the case of both (A) and (B), for
across-the-board reductions similarly affecting all
executives (both of the Company and of any Person (as
hereinafter defined) then in control of the Company) whose
compensation is directly determined by the compensation
committee of the Board (and the compensation committee of
the board of directors of any Person then in control of the
Company); provided that, the exception for across-the-board
reductions shall not apply following a Change in Control
(as hereinafter defined); (iii) the Company's
requiring the Executive to be based anywhere other than
the principal place of business of the Regulated Subsidiar-
ies (or permitted relocation thereof); or a substantial
increase in the Executive's business travel obligations
outside of the Southern California area as of the
Effective Date, other than any such increase that (A)
arises in connection with extraordinary business
activities of the Company and (B) is understood not to be
part of the Executive's regular duties with the Company;
(iv) the failure by the Company to pay to the Executive
any portion of the Executive's current compensation and
benefits or to pay to the Executive any portion of an
installment of deferred compensation under any deferred
compensation program of the Company within thirty (30) days
of the date such compensation is due; (v) any
purported termination of the Executive's employment that is
not effected pursuant to a Notice of Termination satisfying
the requirements of Section 4(f); for purposes of this
Agreement, no such purported termination shall be
effective; (vi) the failure by the Company to obtain a
satisfactory agreement from any successor of the Company
requiring such successor to assume and agree to perform
the Company's obligations under this Agreement, as
contemplated in Section 11; or (vii) the failure by the
Company to comply with any material provision of this
Agreement.
Following a Change in Control (as hereinafter defined), the
Executive's determination that an act or failure to act
constitutes Good Reason shall be presumed to be valid
unless such determination is deemed to be unreasonable by
an arbitrator. The Executive's right to terminate the
Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall
not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good
Reason hereunder.
(f)Change in Control.
Change in Control shall mean the occurrence of any of
the following events:
(i)Any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such
Person any securities acquired directly from the Company
or its affiliates other than in connection with the
acquisition by the Company or its affiliates of a
business) representing twenty percent (20%) or more of
the combined voting power of the Company's then outstand-
ing securities; or (ii) The following individuals
cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director
(other than a director whose initial assumption of office
is in connection with an actual or threatened election
contest, including but not limited to a consent
solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or
nomination for election by the Company's shareholders was
approved or recommended by a vote of at least two-thirds
(2/3) of the directors then still in office who either
were directors on the date hereof or whose appointment,
election or nomination for election was previously so
approved or recommended; or (iii) There is consummated a
merger or consolidation of the Company or any direct or
indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan
of the Company or any subsidiary of the Company, at least
sixty percent (60%) of the combined voting power of the
securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation effected
to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the
beneficial owner, directly or indirectly, of securities of
the Company (not including in the securities beneficially
owned by such Person any securities acquired directly
from the Company or its affiliates other than in connection
with the acquisition by the Company or its affiliates of
a business) representing twenty percent (20%) or more of
the combined voting power of the Company's then
outstanding securities; or (iv) The shareholders of the
Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets, other than
a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least sixty percent (60%) of the combined voting power of
the voting securities of which are owned by shareholders
of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such
sale.
"Person" shall have the meaning given in section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act"),
as modified and used in sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or
any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or any of its affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of
such securities, (iv) a corporation owned, directly or
indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of
stock of the Company, or (v) a person or group as used in
Rule 13d-1(b) under the Exchange Act.
"Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
Notwithstanding the foregoing, any event or transaction
which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for
purposes of this Agreement if, in connection with the
Transaction, the Executive participates as an equity
investor in the acquiring entity or any of its affiliates
(the "Acquiror"). For purposes of the preceding sentence,
the Executive shall not be deemed to have participated as
an equity investor in the Acquiror by virtue of (i)
obtaining beneficial ownership of any equity interest in
the Acquiror as a result of the grant to the Executive of
an incentive compensation award under one or more incentive
plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive
compensation awards of the Company into incentive
compensation awards of the Acquiror), on terms and
conditions substantially equivalent to those applicable to
other executives of the Company immediately prior to the
Transaction, after taking into account normal differences
attributable to job responsibilities, title and the like,
(ii) obtaining beneficial ownership of any equity interest
in the Acquiror on terms and conditions substantially
equivalent to those obtained in the Transaction by all
other shareholders of the Company, or (iii) obtaining
beneficial ownership of any equity interest in the Acquiror
in a manner unrelated to a Transaction.
(g) Notice of Termination. During the Employment Period,
any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by
written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 12(b). For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice that shall indicate the specific termination
provision in this Agreement relied upon, if any, and shall
set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
Further, a Notice of Termination for Cause is required to
include a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths (3/4) of
the entire membership of the Board at a meeting of the
Board that was called and held no more than ninety (90)
days after the date the Board had knowledge of the most
recent act or omission giving rise to such breach for the
purpose of considering such termination (after reasonable
notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be
heard before the Board and, if possible, to cure the breach
that was the basis for the Notice of Termination for Cause)
finding that, in the good faith opinion of the Board, the
Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the
particulars thereof in detail. Unless the Board determines
otherwise, a Notice of Termination by the Executive
alleging a termination for Good Reason must be made within
180 days of the act or failure to act that the Executive
alleges to constitute Good Reason.
(h) Date of Termination. "Date of Termination," with
respect to any purported termination of the Executive's
employment during the Employment Period, shall mean the
date specified in the Notice of Termination (which, in the
case of a termination by the Company, shall not be less
than thirty (30) days for reasons other than cause and, in
the case of a termination by the Executive, shall not be
less than fifteen (15) days nor more than sixty (60) days)
from the date such Notice of Termination is given.
5. Obligations of the Company Upon Termination.
(a) Termination Other Than for Cause, Death
or Disability. During the Employment Period, if the Company
shall terminate the Executive's employment (other than for
Cause, death or Disability) or the Executive shall
terminate his employment for Good Reason (termination in
any such case being referred to as "Termination") the
Company shall pay to the Executive amounts, and provide the
Executive with the benefits, described in this Section 5
(hereinafter referred to as the "Severance Payments").
Subject to Section 5(g), the amounts specified in this
Section 5(a) shall be paid within thirty (30) days after
the Date of Termination. (i) Lump Sum Payment. In lieu of
any further payments of Annual Base Salary or annual
Incentive Compensation Awards to the Executive for periods
subsequent to the Date of Termination, the Company shall
pay to the Executive a lump sum amount in cash equal to
the product of (X) the sum of (A) the Executive's Annual
Base Salary and (B) the greater of the Executive's target
bonus for the year of termination or the average of the
three (3) years' highest gross bonus awards, not
necessarily consecutive, paid by the Company (or its
predecessor) to the Executive in the five (5) years
preceding the year of termination and (Y) two (2),
provided, however, that in the event of a Termination
following a Change in Control such multiplier shall be
three (3). (ii) Accrued Obligations. The Company shall
pay the Executive a lump sum amount in cash equal to the
sum of (A) the Executive's Annual Base Salary through the
Date of Termination to the extent not thereto- fore paid,
(B) an amount equivalent to any annual Incentive
Compensation Awards earned with respect to fiscal years
ended prior to the year that includes the Date of
Termination to the extent not theretofore paid, and (C) an
amount equivalent to the target amount payable under any
annual Incentive Compensation Awards for the fiscal year
that includes the Date of Termination or, if greater, the
average of the three (3) years' highest gross bonus awards,
not necessarily consecutive, paid by the Company (or its
predecessor) to the Executive in the five (5) years
preceding the year of Termination multiplied by a
fraction the numerator of which shall be the number of days
from the beginning of such fiscal year to and including the
Date of Termination and the denominator of which shall be
365, in each case to the extent not theretofore paid.
(The amounts specified in clauses (A), (B) and (C) shall be
hereinafter referred to as the "Accrued Obligations.")
(iii) Deferred Compensation. In the event of a Termination
following a Change in Control, the Company shall pay the
Executive a lump sum payment in an amount equal to any
compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon).
(iv) Pension Supplement. The Company shall pay the
Executive a lump sum payment (the "Pension Supplement") in
an amount equal to the present value (as determined in
accordance with the terms of Pacific Enterprises'
supplemental executive retirement plan) of the benefits to
which the Executive would be entitled under the Company's
defined benefit pension and retirement plans (the
"Pension and Retirement Plans") if he had continued
working for the Company for an additional two (2) years,
and had increased his age by two (2) years as of the Date
of Termination but not beyond the Mandatory Retirement
Age; provided, however, that in the event of a Termi-
nation following a Change in Control, such number of years
shall be three (3) but not beyond the Mandatory
Retirement Age. (v) Accelerated Vesting and Payment of
Long-Term Incentive Awards. All equity-based, long-term
Incentive Compensation Awards held by the Executive under
any long- term Incentive Compensation Plan maintained by
the Company or any affiliate shall immediately vest and
become exercisable as of the Date of Termination, to be
exercised in accordance with the terms of the applicable
plan and award agreement; provided, however, that any such
awards granted on or after the Effective Date shall remain
outstanding and exercisable until the earlier of (A)
eighteen (18) months following the Date of Termination or
(B) the expiration of the original term of such award (it
being understood that all awards granted prior to the
Effective Date shall remain outstanding and exercisable
for a period that is no less than that provided for in
the applicable agreement in effect as of the date of
grant), and the Company shall pay to the Executive, with
respect to all cash-based, long-term Incentive
Compensation Awards made to the Executive that are
outstanding under any long-term Incentive Compensation Plan
maintained by the Company or any affiliate an amount
equal to the target amount payable under such long-term
Incentive Compensation Awards multiplied by a fraction, the
numerator of which shall be the number of days from the
beginning of the award cycle to and including the Date of
Termination, and the denominator of which shall be the
number of days in the cycle as originally granted; and(vi)
Continuation of Welfare Benefits. For a period of two (2)
years or until the Executive is eligible for retiree
medical benefits, whichever is longer, immediately
following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents with
life, disability, accident and health insurance benefits
substantially similar to those provided to the Executive
and his dependents immediately prior to the Date of
Termination, provided, however, that in no event shall the
Executive be entitled to receive disability benefits under
the Pacific Enterprises long-term disability plan or
Pacific Enterprises' supplemental executive retirement plan
after the Executive has become eligible to commence receipt
of retirement benefits under Pacific Enterprises'
supplemental executive retirement plan, and provided,
further, that if the Executive becomes employed with
another employer and is eligible to receive life,
disability, accident and health insurance benefits under
another employer-provided plan, the benefits under the
Company's plans shall be secondary to those provided under
such other plan during such applicable period of
eligibility, and further provided, however, that in the
event of a Termination following a Change in Control such
period shall not be less than three (3) years.
(b) Termination by the Company for Cause or
by the Executive Other Than for Good Reason. Subject to the
provisions of Section 6 of this Agreement, if the
Executive's employment shall be terminated for Cause during
the Employment Period, or if the Executive terminates
employment during the Employment Period other than for Good
Reason, the Company shall have no further obligations to
the Executive under this Agreement other than the Accrued
Obligations.
(c) Termination Due to Death or Disability.
If the Executive's employment shall terminate by reason of
death or Disability, the Company shall pay the Executive or
his estate, as the case may be, the Accrued Obligations
and, solely in the case of termination by reason of
disability, the Pension Supplement. Such payments shall be
in addition to those rights and benefits to which the
Executive or his estate may be entitled under the relevant
Company plans or programs.
(d) Code Section 280G.
(i) Notwithstanding any other
provisions of this Agreement, in the event that any payment
or benefit received or to be received by the Executive
(whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with (A) the Company,
(B) any Person (as defined in Section 4(e)) whose actions
result in a Change in Control or (C) any Person affiliated
with the Company or such Person) (all such payments and
benefits, including the Severance Payments, being
hereinafter called "Total Payments") would not be
deductible (in whole or part) by the Company, an affiliate
or Person making such payment or providing such benefit as
a result of section 280G of the Code, then, to the extent
necessary to make such portion of the Total Payments
deductible (and after taking into account any reduction in
the Total Payments provided by reason of section 280G of
the Code in such other plan, arrangement or agreement), the
cash Severance Payments shall first be reduced (if
necessary, to zero), and all other Severance Payments shall
thereafter be reduced (if necessary, to zero); provided,
however, that the Executive may elect to have the noncash
Severance Payments reduced (or eliminated) prior to any
reduction of the cash Severance Payments.
(ii) For purposes of this
limitation, (A) no portion of the Total Payments the
receipt or enjoyment of which the Executive shall have
waived at such time and in such manner as not to constitute
a "payment" within the meaning of section 280G(b) of the
Code shall be taken into account, (B) no portion of the
Total Payments shall be taken into account which, in the
opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the Company's
accounting firm which (or, in the case of a payment
following a Change in Control the accounting firm that was,
immediately prior to the Change in Control, the Company's
independent auditor) (the "Auditor"), does not constitute a
"parachute payment" within the meaning of section
280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (C) the Severance Payments shall
be reduced only to the extent necessary so that the Total
Payments (other than those referred to in clause (A) or
(B)) in their entirety constitute reasonable compensation
for services actually rendered within the meaning of
section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of section
280G of the Code, in the opinion of Tax Counsel, and (D)
the value of any noncash benefit or any deferred payment or
benefit included in the Total Payments shall be determined
by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.
(e) Consulting and Non-Competition. If the Total Payments
are subject to reduction in accordance with the above
provisions of Section 5(d), the Executive shall have the
option, to be exercised within ten (10) days after receipt
of notice of such reduction from the Company, to enter into
a consulting and non- competition agreement with the
Company (the "Consulting and Non-Competition Agreement"),
which shall (1) provide the Executive with payments and
benefits, payable over the term of the agreement, the
present value of which in the aggregate is equal to or
greater than the present value (determined by applying a
discount rate equal to the interest rate provided in
section 1274(b)(2)(B) of the Code) of the balance of the
payments and benefits otherwise payable to the Executive
without regard to the provisions of Section 5(d), (2)
require the Executive to make his services available to the
Company for no more than twenty (20) hours per month and
(3) last for a period of not more than two (2) years
(unless the Executive consents to a longer period).
(f) Gross-Up Payment. In the event that the
Executive receives a notice from the Internal Revenue
Service to the effect that the amounts payable under the
Consulting and Non-Competition Agreement would be subject
(in whole or part) to the tax (the "Excise Tax") imposed
under section 4999 of the Code, within thirty (30) days
after the date the Chairman of the Board receives a copy of
such notice the Company shall pay to the Executive such
additional amounts (the "Gross-Up Payment") such that the
net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax upon
the Gross-Up Payment, shall be equal to the Total Payments.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment
is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality
of the Executive's residence on the date on which the
Gross-Up Payment is calculated for purposes of this
section, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state
and local taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken
into account hereunder, the Executive shall repay to the
Company, at the time that the amount of such reduction in
Excise Tax is finally determined, the portion of the Gross-
Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income tax imposed on the
Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise
Tax and/or a federal, state or local income tax deduction)
plus interest on the amount of such repayment at the rate
provided in section 1274(b)(2)(B) of the Code. In the event
that the Excise Tax is determined to exceed the amount
taken into account hereunder (including by reason of any
payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such
excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with
any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with
respect to the Total Payments.
(g) Release. Notwithstanding anything
herein to the contrary, the Company's obligation to make
the payments provided for in this Section 5 is expressly
made subject to and conditioned upon (i) the Executive's
prior execution of a release substantially in the form
attached hereto as Exhibit A within forty-five (45) days
after the applicable Date of Termination and (ii) the
Executive's non-revocation of such release in accordance
with the terms thereof.
6. Nonexclusivity of Rights.
Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in
any benefit, plan, program, policy or practice provided by
the Company and for which the Executive may qualify (except
with respect to any benefit to which the Executive has
waived his rights in writing), nor shall anything herein
limit or otherwise affect such rights as the Executive may
have under any other contract or agreement entered into
after the Effective Date with the Company. Amounts which
are vested benefits or which the Executive is otherwise
entitled to receive under any benefit, plan, policy,
practice or program of, or any contract or agreement
entered into with, the Company shall be payable in
accordance with such benefit, plan, policy, practice or
program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Mitigation.
The Company's obligation to make the
payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against
the Executive or others, provided that nothing herein shall
preclude the Company from separately pursuing recovery from
the Executive based on any such claim. In no event shall
the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts
(including amounts for damages for breach) payable to the
Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Execu-
tive obtains other employment.
8. Arbitration.
Any dispute about the validity,
interpretation, effect or alleged violation of this
Agreement (an "arbitrable dispute") must be submitted to
confidential arbitration in Los Angeles, California.
Arbitration shall take place before an experienced
employment arbitrator licensed to practice law in such
state and selected in accordance with the Model Employment
Arbitration Procedures of the American Arbitration
Association. Arbitration shall be the exclusive remedy of
any arbitrable dispute. Should any party to this Agreement
pursue any arbitrable dispute by any method other than
arbitration, the other party shall be entitled to recover
from the party initiating the use of such method all
damages, costs, expenses and attorneys' fees incurred as a
result of the use of such method. Notwithstanding anything
herein to the contrary, nothing in this Agreement shall
purport to waive or in any way limit the right of any party
to seek to enforce any judgment or decision on an
arbitrable dispute in a court of competent jurisdiction.
9. Confidentiality.
The Executive acknowledges that in the
course of his employment with the Company he has acquired
non-public privileged or confidential information and trade
secrets concerning the operations, future plans and methods
of doing business ("Proprietary Information") of the
Company, its subsidiaries and affiliates; and the
Executive agrees that it would be extremely damaging to the
Company, its subsidiaries and affiliates if such
Proprietary Information were disclosed to a competitor of
the Company, its subsidiaries and affiliates or to any
other person or corporation. The Executive understands and
agrees that all Proprietary Information has been divulged
to the Executive in confidence and further understands and
agrees to keep all Proprietary Information secret and
confidential (except for such information which is or
becomes publicly available other than as a result of a
breach by the Executive of this provision) without
limitation in time. In view of the nature of the
Executive's employment and the Proprietary Information the
Executive has acquired during the course of such
employment, the Executive likewise agrees that the Company,
its subsidiaries and affiliates would be irreparably harmed
by any disclosure of Proprietary Information in violation
of the terms of this paragraph and that the Company, its
subsidiaries and affiliates shall therefore be entitled to
preliminary and/or permanent injunctive relief prohibiting
the Executive from engaging in any activity or threatened
activity in violation of the terms of this paragraph and to
any other relief available to them. Inquiries regarding
whether specific information constitutes Proprietary
Information shall be directed to the Company's Senior Vice
President, Public Policy (or, if such position is vacant,
the Company's Chief Executive Officer), provided, that the
Company shall not unreasonably classify information as
Proprietary Information.
10. Non-Solicitation of Employees.
The Executive recognizes that he possesses
and will possess confidential information about other
employees of the Company, its subsidiaries and affiliates
relating to their education, experience, skills, abilities,
compensation and benefits, and inter-personal relationships
with customers of the Company, its subsidiaries and
affiliates. The Executive recognizes that the information
he possesses and will possess about these other employees
is not generally known, is of substantial value to the
Company, its subsidiaries and affiliates in developing
their business and in securing and retaining customers, and
has been and will be acquired by him because of his
business position with the Company, its subsidiaries and
affiliates. The Executive agrees that, during the
Employment Period and for a period of one (1) year
thereafter, he will not, directly or indirectly, solicit or
recruit any employee of the Company, its subsidiaries or
affiliates for the purpose of being employed by him or by
any competitor of the Company, its subsidiaries or
affiliates on whose behalf he is acting as an agent,
representative or employee and that he will not convey any
such confidential information or trade secrets about other
employees of the Company, its subsidiaries and affiliates
to any other person; provided, however, that it shall not
constitute a solicitation or recruitment of employment in
violation of this paragraph to discuss employment
opportunities with any employee of the Company, its
subsidiaries or affiliates who has either first contacted
the Executive or regarding whose employment the Executive
has discussed with and received the written approval of the
Company's Vice President, Human Resources (or, if such
position is vacant, the Company's Chief Executive Officer),
prior to making such solicitation or recruitment. In view
of the nature of the Executive's employment with the
Company, the Executive likewise agrees that the Company,
its subsidiaries and affiliates would be irreparably harmed
by any solicitation or recruitment in violation of the
terms of this paragraph and that the Company, its
subsidiaries and affiliates shall therefore be entitled to
preliminary and/or permanent injunctive relief prohibiting
the Executive from engaging in any activity or threatened
activity in violation of the terms of this paragraph and to
any other relief available to them.
11. Legal Fees.
The Company shall pay to the Executive all
legal fees and expenses (including but not limited to fees
and expenses in connection with any arbitration) incurred
by the Executive in disputing in good faith any issue
arising under this Agreement relating to the termination of
the Executive's employment or in seeking in good faith to
obtain or enforce any benefit or right provided by this
Agreement, but in each case only to the extent the
arbitrator or court determines that the Executive had a
reasonable basis for such claim.
12. Successors.
(a) Assignment by Executive. This Agreement
is personal to the Executive and without the prior written
consent of the Company shall not be assign- able by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal
representatives.
(b) Successors and Assigns of Company. This
Agreement shall inure to the benefit of and be binding upon
the Company, its successors and assigns.
(c) Assumption. The Company shall require
any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substan-
tially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would
be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its
businesses and/or assets as aforesaid that assumes and
agrees to perform this Agreement by operation of law or
otherwise.
13. Miscellaneous.
(a) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of
the State of California, without reference to its
principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended,
modified, repealed, waived, extended or discharged except
by an agreement in writing signed by the party against whom
enforcement of such amendment, modification, repeal,
waiver, extension or discharge is sought. No person, other
than pursuant to a resolution of the Board or a committee
thereof, shall have authority on behalf of the Company to
agree to amend, modify, repeal, waive, extend or discharge
any provision of this Agreement or anything in reference
thereto.
(b) Notices. All notices and other
communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage
prepaid, addressed, in either case, to the principal
corporate offices of Pacific Enterprises or to such other
address as either party shall have furnished to the other
in writing in accordance herewith. Notices and
communications shall be effective when actually received by
the addressee.
(c) Severability. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement.
(d) Taxes. The Company may withhold from
any amounts payable under this Agreement such federal,
state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) No Waiver. The Executive's or the
Company's failure to insist upon strict compliance with any
provision hereof or any other provision of this Agreement
or the failure to assert any right the Executive or the
Company may have hereunder, including, without limitation,
the right of the Executive to terminate employment for Good
Reason pursuant to Section 4(d) of this Agreement, or the
right of the Company to terminate the Executive's
employment for Cause pursuant to Section 4(b) of this
Agreement shall not be deemed to be a waiver of such
provision or right or any other provision or right of this
Agreement.
(f) Entire Agreement. This instrument
contains the entire agreement of the Executive, the Company
or any predecessor or subsidiary thereof with respect to
the subject matter hereof, and all promises,
representations, understandings, arrangements and prior
agreements are merged herein and superseded hereby includ-
ing, but not limited to, that certain Severance Agreement,
dated October 11, 1996, between the Executive and Pacific
Enterprises. Notwithstanding the foregoing, the provisions
of any employee benefit or compensation plan, program or
arrangement applicable to the Executive, including that
certain Incentive Bonus Agreement, entered into between the
Executive and Pacific Enterprises, shall remain in effect,
except as expressly otherwise provided herein.
IN WITNESS WHEREOF, the Executive and,
pursuant to due authorization from its Board of Directors,
the Company have caused this Agreement to be executed as of
the day and year first above written. MINERAL ENERGY
COMPANY
__________________________
Kevin C. Sagara
President
__________________________
Warren I. Mitchell
EXHIBIT A
GENERAL RELEASE
This GENERAL RELEASE (the "Agreement"), dated _______, is
made by and between ___________________, a California
corporation (the "Company") and _____________ ("you" or
"your").
WHEREAS, you and the Company have previously entered into
that certain Employment Agreement dated _____________, 1996
(the "Employment Agreement"); and
WHEREAS, Section 5 of the Employment Agreement provides
for the payment of severance benefits in the event of the
termination of your employment under certain circumstances,
subject to and conditioned upon your execution and non-
revocation of a general release of claims by you against the
Company and its subsidiaries and affiliates.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, you and the Company
hereby agree as follows:
ONE: Your signing of this Agreement confirms that your
employment with the Company shall terminate at the close of
business on ___________,or earlier upon our mutual
agreement.
TWO: As a material inducement for the payment of
benefits under Section 5 of that certain Employment
Agreement between you and the Company, and except as
otherwise provided in this Agreement, you and the Company
hereby irrevocably and unconditionally release, acquit and
forever discharge the other from any and all Claims either
may have against the other. For purposes of his Agreement
and the preceding sentence, the words "Releasee" or
"Releasees"
and "Claim" or "Claims," shall have the meanings set forth
below:
(a)The words "Releasee" or "Releasees" shall refer to the
you and to the Company and each of the Company's owners,
stockholders, predecessors, successors, assigns, agents,
directors, officers, employees, representatives, attorneys,
advisors, parent companies, divisions, subsidiaries,
affiliates(and agents, directors, officers, employees,
representatives, attorneys and advisors of such parent
companies, divisions, subsidiaries and affiliates), and all
persons acting by, through, under or in concert with any of
them.
(b)The words "Claim" or "Claims" shall refer to any
charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses,
debts and expenses (including attorneys' fees and costs
actually incurred)of any nature whatsoever, known or
unknown, suspected or unsuspected, which you or the Company
now, in the past or, except as limited by law or regulation
such as the Age Discrimination in Employment Act (ADEA), in
the future may have, own or hold against any of the
Releasees; provided, however, that the word "Claim" or
"Claims" shall not refer to any charges, complaints, claims,
liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits,
rights, demands, costs, losses, debts and expenses
(including attorneys' fees and costs actually incurred)
arising under [identify severance, employee benefits, stock
option and other agreements containing duties, rights
obligations etc. of either party that are to remain
operative]. Claims released pursuant to this Agreement by
you and the Company include, but are not limited to, rights
arising out of alleged violations of any contracts, express
or implied, any tort, any claim that you failed to perform
or negligently performed or breached your duties during
employment at the Company, any legal restrictions on the
Company's right to terminate employees or any federal, state
or other governmental statute, regulation, or ordinance,
including, without limitation: (1) Title VII of the Civil
Rights Act of l964 (race, color, religion, sex and national
origin discrimination); (2) 42 U.S.C Sec 1981
(discrimination); (3) 29 U.S.C. Sec 621-634(age
discrimination); (4) 29 U.S.C. Sec 206(d)(l) (equal pay);
(5) 42 U.S.C. Sec 12101, et seq. (disability); (6) the
California Constitution, Article I, Section
8(discrimination); (7) the California Fair Employment and
Housing Act (discrimination, including race, color, national
origin, ancestry, physical handicap, medical condition,
marital status, religion, sex or age); (8) California Labor
Code Section 1102.1 (sexual orientation discrimination); (9)
Executive Order 11246(race, color, religion, sex and
national origin discrimination); (10) Executive Order 11141
(age discrimination); (11) Sec 503 and 504 of the
Rehabilitation Act of 1973 (handicap discrimination); (12)
The Worker Adjustment and Retraining Act (WARN Act); (13)
the California Labor Code (wages, hours, working conditions,
benefits and other matters); (14) the Fair Labor Standards
Act (wages, hours, working conditions and other matters);
the Federal Employee Polygraph Protection Act (prohibits
employer from requiring employee to take polygraph test as
condition of employment); and (15) any federal, state or
other governmental statute, regulation or ordinance which is
similar to any of the statutes de-scribed in clauses (1)
through (14).
THREE: You and the Company expressly waive and
relinquish all rights and benefits afforded by any statute
(including but not limited to Section 1542 of the Civil Code
of the State of California) which limits the effect of are
lease with respect to unknown claims. You and the Company
do so under-standing and acknowledging the significance of
the release of unknown claims and the waiver of statutory
protection against a release of unknown claims(including but
not limited to Section 1542). Section 1542 of the Civil
Code of the State of California states as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."
Thus, notwithstanding the provisions of Section 1542 or of
any similar statute, and for the purpose of implementing a
full and complete release and discharge of the Releasees,
you and the Company expressly acknowledge that this
Agreement is intended to include in its effect, without
limitation, all Claims which are known and all Claims which
you or the Company do not know or suspect to exist in your
or the Company's favor at the time of execution of this
Agreement and that this Agreement contemplates the
extinguishment of all such Claims.
FOUR: The parties acknowledge that they might hereafter
discover facts different from, or in addition to, those they
now know or believe to be rue with respect to a Claim or
Claims released herein, and they expressly agree to assume
the risk of possible discovery of additional or different
facts, and agree that this Agreement shall be and remain
effective, in all respects, regardless of such additional or
different discovered facts.
FIVE: You hereby represent and acknowledge that you have
not filed any Claim of any kind against the Company or
others released in this Agreement. You further hereby
expressly agree never to initiate against the Company or
others released in this Agreement any administrative
proceeding, lawsuit or any other legal or equitable
proceeding of any kind asserting any Claims that are
released in this Agreement.
The Company hereby represents and acknowledges that it
has not filed any Claim of any kind against you or others
released in this Agreement. The Company further hereby
expressly agrees never to initiate against you or others
released in this Agreement any administrative proceeding,
lawsuit or any other legal or equitable proceeding of any
kind asserting any Claims that are released in this
Agreement.
SIX: You hereby represent and agree that you have not
assigned or transferred, or attempted to have assigned or
transfer, to any person or entity, any of the Claims that
you are releasing in this Agreement.
The Company hereby represents and agrees that it has not
assigned or transferred, or attempted to have assigned or
transfer, to any person or entity, any of the Claims that it
is releasing in this Agreement.
SEVEN: As a further material inducement to the Company
to enter into this Agreement, you hereby agree to indemnify
and hold each of the Releasees harmless from all loss,
costs, damages, or expenses, including without limitation,
attorneys' fees incurred by Releasees, arising out of any
breach of this Agreement by you or the fact that any
representation made in this Agreement by you was false when
made.
EIGHT: You and the Company represent and acknowledge
that, in executing this Agreement, neither is relying upon
any representation or statement not set forth in this
Agreement or the Severance Agreement.
NINE: (a)This Agreement shall not in any way be
construed as an admission by the Company that it has acted
wrongfully with respect to you or any other person, or that
you have any rights whatsoever against the Company, and the
Company specifically disclaims any liability to or wrongful
acts against you or any other person, on the part of itself,
its employees or its agents. This Agreement shall not in
any way be construed as an admission by you that you have
acted wrongfully with respect to the Company, or that you
failed to perform your duties or negligently performed or
breached your duties, or that the Company had good cause to
terminate your employment. (b)If you are a party or are
threatened to be made a party to any proceeding by reason of
the fact that you were an officer [or director] of the
Company, the Company shall indemnify you against any
expenses(including reasonable attorney fees provided that
counsel has been approved by the Company prior to
retention), judgments, fines, settlements, and other amounts
actually or reasonably incurred by you in connection with
that proceeding, provided that you acted in good faith and
in a manner you reasonably believed to be in the best
interest of the Company. The limitations of California
Corporations Code Section 317 shall apply to this assurance
of indemnification. (c) You agree to cooperate with the
Company and its designated attorneys, representatives and
agents in connection with any actual or threatened judicial,
administrative or other legal or equitable proceeding in
which the Company is or may be become involved. Upon
reasonable notice, you agree to meet with and provide to the
Company or its designated attorneys, representatives or
agents all information and knowledge you have relating to
the subject matter of any such proceeding.
TEN: This Agreement is made and entered into in
California. This Agreement shall in all respects be
interpreted, enforced and governed by and under the laws of
the State of California. Any dispute about the validity,
interpretation, effect or alleged violation of this
Agreement (an "arbitrable dispute") must be submitted to
arbitration in [Los Angeles][San Diego], California.
Arbitration shall take place before an experienced
employment arbitrator licensed to practice law in such state
and selected in accordance with the Model Employment
Arbitration Procedures of the American Arbitration
Association. Arbitration shall be the exclusive remedy for
any arbitrable dispute. The arbitrator in any arbitrable
dispute shall not have authority to modify or change the
Agreement in any respect. You and the Company shall each be
responsible for payment of one-half the amount of the
arbitrator's fee(s). Should any party to this Agreement
institute any legal action or administrative proceeding
against the other with respect to any Claim waived by this
Agreement or pursue any arbitrable dispute by any method
other than arbitration, the prevailing party shall be
entitled to recover from the initiating party all damages,
costs, expenses and attorneys' fees incurred as a result of
that action. The arbitrator's decision and/or award will be
fully enforceable and subject to an entry of judgment by the
Superior Court of the State of California for the County of
[Los Angeles][San Diego].
ELEVEN: Both you and the Company understand that this
Agreement is final and binding eight days after its
execution and return. Should you nevertheless attempt to
challenge the enforceability of this Agreement as provided
in Paragraph TEN or, in violation of that Paragraph, through
litigation, as a further limitation on any right to make
such a challenge, you shall initially tender to the Company,
by certified check delivered to the Company, all monies
received pursuant to Section 5 of the Employment Agreement,
plus interest, and invite the Company to retain such monies
and agree with you to cancel this Agreement and void the
Company's obligations under Section 5 of the Employment
Agreement. In the event the Company accepts this offer, the
Company shall retain such monies and this Agreement shall be
canceled and the Company shall have no obligation under
Section 5 of the Employment Agreement. In the event the
Company does not accept such offer, the Company shall so
notify you, and shall place such monies in an interest-
bearing escrow account pending resolution of the dispute
between you and the Company as to whether or not this
Agreement and the Company's obligations under Section 5 of
the Employment Agreement shall be set aside and/or otherwise
rendered voidable or unenforceable. Additionally, any
consulting agreement then in effect between you and The
Company shall be immediately rescinded with no requirement
of notice.
TWELVE: Any notices required to be given under this
Agreement shall be delivered either personally or by first
class United States mail, postage prepaid, addressed to the
respective parties as follows:
To Company: [TO COME]
Attn: [TO COME]
To You:
___________________
___________________
___________________
THIRTEEN: You understand and acknowledge that you have
been given a period of 45 days to review and consider this
Agreement (as well as statistical data on the persons
eligible for similar benefits) before signing it and may use
as much of this 45-day period as you wish prior to signing.
You are encouraged, at your personal expense, to consult
with an attorney before signing this Agreement. You
understand and acknowledge that whether or not you do so is
your decision. You may revoke this Agreement within seven
days of signing it. If you wish to revoke, the Company's
Vice President, Human Resources must receive written notice
from you no later than the close of business on the seventh
day after you have signed the Agreement. If revoked, this
Agreement shall not be effective and enforceable and you
will not receive payments or benefits under Section 5 of the
Employment Agreement.
FOURTEEN: This Agreement constitutes the entire
Agreement of the parties hereto and supersedes any and all
other Agreements (except the Employment Agreement) with
respect to the subject matter of this Agreement, whether
written or oral, between you and the Company. All
modifications and amendments to this Agreement must be in
writing and signed by the parties.
FIFTEEN: Each party agrees, without further
consideration, to sign or cause to be signed, and to deliver
to the other party, any other documents and to take any
other action as may be necessary to fulfill the obligations
under this Agreement.
SIXTEEN: If any provision of this Agreement or the
application thereof is held invalid, the invalidity shall
not affect other provisions or applications of the Agreement
which can be given effect without the invalid provisions or
application; and to this end the provisions of this
Agreement are declared to be severable.
SEVENTEEN: This Agreement may be executed in
counterparts.
I have read the foregoing General Release and I accept and
agree to the provisions it contains and hereby execute it
voluntarily and with full under-standing of its
consequences. I am aware it includes a release of all known
or unknown claims.
DATED:____________________
_____________________________
DATED:____________________
_____________________________
You acknowledge that you first received this Agreement on
[date].
___________________________
Exhibit 99.1 For more information contact: ENOVA CORPORATION - Doug Kline or Pat Riddle: (619) 696-4292 After-hours pager: (619) 526-9555 Internet: http://www.enova.com PACIFIC ENTERPRISES - Jeri Love: (213) 244- ENOVA CORPORATION AND PACIFIC ENTERPRISES ANNOUNCE STRATEGIC COMBINATION OF EQUALS - -- Combination to Benefit Shareholders and Customers of Both Companies -- - -- Combination Builds on Increasing Competitive Environment in Energy and Energy-Related Services in California Marketplace -- - -- New Company a "Natural Outgrowth" of California Energy Industry Restructuring -- SAN DIEGO AND LOS ANGELES, Oct. 14, 1996 -- Enova Corporation and Pacific Enterprises today jointly announced an agreement, which both Boards have unanimously approved, for the combination of the two companies. This strategic combination will combine Pacific Enterprises, the parent of Southern California Gas Company, the largest natural gas distribution company in the United States, with Enova Corporation, the parent company of San Diego Gas & Electric, the investor-owned utility with the lowest rates in the State of California. The new company, to be headquartered in San Diego, will have a combined market value of $5.2 billion. Thomas A. Page, Chairman of Enova Corporation, and Willis B. Wood, Chairman and Chief Executive Officer of Pacific Enterprises, said, "We are very excited about the company we are creating. The strategic combination of Pacific Enterprises and Enova Corporation grows naturally from the deregulation and electric industry restructuring that is reshaping the energy industry in California as well as throughout the nation. Our shareholders, communities and customers we serve will all benefit from this combination. This transaction strategically joins two excellent companies of similar market capitalization, with similar visions of the future of the industry, and with highly complementary operations that are geographically contiguous. The new combined company will pursue unregulated businesses that will focus on providing customers with new energy products and services in the competitive marketplace arising from deregulation. This will strengthen California's economy and spur the move to an increasingly competitive energy industry." Pacific Enterprises shareholders will receive 1.5038 shares of the new parent company's common stock for each share of Pacific Enterprises common stock they own, and Enova Corporation shareholders will receive 1.0 share of the new parent company's common stock for each share of Enova Corporation common stock. The combination will not amend any other class of capital stock of Pacific Enterprises or Enova Corporation, or their subsidiaries. The exchange of shares for both Pacific Enterprises and Enova Corporation shareholders is expected to be tax free, and the transaction will be a pooling of interests for accounting purposes. Enova Corporation and Pacific Enterprises expect to set the new company's dividend at the rate of $1.56 per share, which is currently the dividend paid to Enova Corporation shareholders. Pacific Enterprises and Enova Corporation expect their combination to produce cost savings of approximately $1.2 billion over the next 10 years through synergies and economies of scale. The cost savings will be derived mainly from combining and reducing management and administrative functions of both companies. Shareholders and customers will share the benefits of these savings. The new company will have approximately 6 million utility customers -- the largest number of customers of any investor-owned energy utility in the United States -- with the size and scope to position the new company to be a prominent competitor in the emerging and increasingly competitive unregulated energy services business. Pacific Enterprises brings substantial gas expertise to complement the gas expertise of Enova Corporation, and Enova Corporation brings electric business knowledge to the combination. The new company also will be financially stronger. It will have significant operating cash flows and a solidly capitalized balance sheet. These will enable it to be very competitive in pursuing new business opportunities in energy services. Headquarters for the new company will be located in San Diego. Pacific Enterprises' operating subsidiaries, including Southern California Gas Company, and Enova Corporation's operating subsidiaries, including San Diego Gas & Electric, will continue to operate under their existing names. The headquarters of the Southern California Gas Company will stay in Los Angeles and the headquarters of San Diego Gas & Electric will stay in San Diego. The new parent company will combine the high-quality management of Pacific Enterprises and Enova Corporation. Richard D. Farman, President and Chief Operating Officer of Pacific Enterprises, will become Chairman and Chief Executive Officer; and Stephen L. Baum, President and Chief Executive Officer of Enova Corporation, will become Vice Chairman, President and Chief Operating Officer. Baum will become CEO two years after the effective date of the merger, and will add the title of Chairman by September 2000, when Farman retires. Baum will chair a transition committee and coordinate its activities with the concurrence of Farman. Warren Mitchell, President of Southern California Gas Company, will become President and the principal executive officer of the new company's regulated operations; and Donald E. Felsinger, President and CEO of San Diego Gas & Electric, will become President and the principal executive officer of the unregulated businesses, both reporting to the new Office of the Chairman which will consist of Farman and Baum. Thomas A. Page, Chairman of Enova Corporation, will retire at the end of December 1997, and Willis B. Wood, Chairman and Chief Executive Officer of Pacific Enterprises, will retire upon completion of the transaction. The Board of the new company, which will include Farman and Baum, will have an equal number of outside directors from both companies. The combination, which is subject to regulatory approvals and the approvals of the shareholders of both Enova Corporation and Pacific Enterprises, is expected to close by the end of 1997, consistent with the California Public Utilities Commission's implementation of electric industry restructuring in January 1998. In order to prepare for competition as soon as possible, Pacific Enterprises and Enova Corporation intend to form a new joint venture that will use their combined skills, capabilities and resources to provide integrated energy and energy- related products and services to select market segments. Headquarters of the joint venture will be located in Los Angeles. Farman said, "The State of California will be a particular beneficiary of our merger. The new California company will be more competitive. Utility customers will directly benefit through lower costs. The combination of the cost- management expertise and service-quality-related skills of the two companies will strengthen the combined enterprise and benefit customers and shareholders alike. The new company will be a vigorous competitor with the two giant utilities in the state and their unregulated affiliates, as well as with out-of-state utilities and energy providers. Our new, stronger company will ultimately provide new jobs for California in our growth-oriented unregulated businesses." "Companies that will succeed in the future energy industry are those that will be able to deliver energy and energy- related services in whichever form customers prefer, at the most competitive prices. Through this transaction, we will create an enterprise that can develop and market new products and services, while our utility customers will continue to do business with San Diego Gas & Electric Company and Southern California Gas Company, which they already know and trust. Our companies have achieved an outstanding record of customer satisfaction and will continue to maintain a strong commitment to safety and excellent customer service," said Baum. On a pro forma basis, the new company will have a relatively balanced revenue base from its operations, with about 60% of its revenue from gas operations, about 35% from electric operations, with the rest coming from other operations. In addition to the cost savings realized by the utility subsidiaries, significant incremental revenues for the new company are expected to result from plans of the unregulated segment to market competitive products and services in California, and grow nationally and internationally. Baum said, "Shareholders of both companies will benefit from the long-term growth opportunities and from substantial cost savings that the combined entity will enjoy. We believe that Enova Corporation shareholders will find the new company's enhanced long-term growth potential particularly attractive, while Pacific Enterprises' shareholders will also benefit from an increase in their dividend." "Individually, Pacific Enterprises and Enova Corporation are financially strong companies with a history of innovation and customer focus, and a strong commitment to workforce diversity, minority procurement and support of the communities they serve," said Farman. "Together, we will be even stronger in all these areas. We look forward to becoming a leading energy company as our industry increasingly moves towards deregulation both regionally and nationally. Both companies have begun to offer energy- related services in out-of-state markets, and in the international arena, Pacific Enterprises has utility investments in Argentina and the two companies are partners in new energy-distribution ventures in Mexico. Our new joint venture will further our combined efforts and shared vision." Pacific Enterprises (NYSE:PET) is a Los Angeles-based energy services company whose principal subsidiary is Southern California Gas Company, the nation's largest natural gas distribution utility. Founded 110 years ago in San Francisco as the Pacific Lighting Corporation, Pacific Enterprises originally marketed gas lighting. Over the years, the company acquired several small gas utility systems in Southern California, gradually combining them into Southern California Gas Company. More recently, the company strategically realigned its operations in 1995 to focus its people and resources more closely on customer needs to become a more effective competitor in the utility/energy marketplace. With over 4.7 million meters in 535 communities, Southern California Gas Company's service territory covers 23,000 square miles, and a population of 17 million. It is the largest of Pacific Enterprises' subsidiaries, which include Pacific Enterprises International, and Energy Management Services. Pacific Enterprises has interests in interstate and offshore natural gas pipelines, international utility operations, electricity generation through alternative energy sources and centralized heating and cooling operations for large building complexes. Pacific Enterprises has $2.3 billion in revenues, a market capitalization of $2.7 billion, and $4.8 billion in total assets. Enova Corporation (NYSE:ENA), based in San Diego, is a leading energy management company providing electricity, gas and value-added products and services, with $1.87 billion in revenues, $4.7 billion in assets and 3,900 employees. Enova Corporation is the parent company of San Diego Gas & Electric (SDG&E) and six other U.S.-based subsidiaries -- Enova Energy, Enova International, Enova Technologies, Enova Financial, Califia and Pacific Diversified Capital. SDG&E accounted for 97 percent of Enova Corporation's 1995 revenues. SDG&E is an operating public utility that provides regulated electric service to 1.2 million customers in San Diego and southern Orange Counties, and regulated gas service to 700,000 customers in San Diego County. The SDG&E service area encompasses 4,100 square miles, covering two counties and 25 cities. SDG&E purchases 62 percent of its power from other producers and generates the rest from its two fossil- fuel plants in Carlsbad, Calif., and Chula Vista, Calif., and the San Onofre Nuclear Generating Station (SONGS) in San Clemente, Calif., in which SDG&E owns a 20-percent stake. SDG&E is the 37th largest electric and gas utility in the nation in total revenues and the 20th largest in total customers. Enova Corporation is the largest public company in San Diego in terms of both total revenues and net income. ###