|
||||||||||||
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|
||||||||||||
FORM 10-Q
|
||||||||||||
(Mark One)
|
||||||||||||
[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|||||||||||
For the quarterly period ended
|
March 31, 2013
|
|||||||||||
or
|
||||||||||||
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|||||||||||
For the transition period from
|
to
|
|||||||||||
Commission File No.
|
Exact Name of Registrants as Specified in their Charters, Address and Telephone Number
|
States of Incorporation
|
I.R.S. Employer
Identification Nos.
|
Former name, former address and former fiscal year, if changed since last report
|
||||||||
1-14201
|
SEMPRA ENERGY
|
California
|
33-0732627
|
No change
|
||||||||
101 Ash Street
|
||||||||||||
San Diego, California 92101
|
||||||||||||
(619)696-2000
|
||||||||||||
1-03779
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
California
|
95-1184800
|
No change
|
||||||||
8326 Century Park Court
|
||||||||||||
San Diego, California 92123
|
||||||||||||
(619)696-2000
|
||||||||||||
1-01402
|
SOUTHERN CALIFORNIA GAS COMPANY
|
California
|
95-1240705
|
No change
|
||||||||
555 West Fifth Street
|
||||||||||||
Los Angeles, California 90013
|
||||||||||||
(213)244-1200
|
||||||||||||
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
|
||||||||||||
Yes
|
X
|
No
|
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
|
||||||||||||
Sempra Energy
|
Yes
|
X
|
No
|
|||||||||
San Diego Gas & Electric Company
|
Yes
|
X
|
No
|
|||||||||
Southern California Gas Company
|
Yes
|
X
|
No
|
|||||||||
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
||||||||||||
Large
accelerated filer
|
Accelerated filer
|
Non-accelerated filer
|
Smaller reporting company
|
|||||||||
Sempra Energy
|
[ X ]
|
[ ]
|
[ ]
|
[ ]
|
||||||||
San Diego Gas & Electric Company
|
[ ]
|
[ ]
|
[ X ]
|
[ ]
|
||||||||
Southern California Gas Company
|
[ ]
|
[ ]
|
[ X ]
|
[ ]
|
||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
||||||||||||
Sempra Energy
|
Yes
|
No
|
X
|
|||||||||
San Diego Gas & Electric Company
|
Yes
|
No
|
X
|
|||||||||
Southern California Gas Company
|
Yes
|
No
|
X
|
|||||||||
Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.
|
||||||||||||
Common stock outstanding on April 29, 2013:
|
||||||||||||
Sempra Energy
|
243,577,278 shares
|
|||||||||||
San Diego Gas & Electric Company
|
Wholly owned by Enova Corporation, which is wholly owned by Sempra Energy
|
|||||||||||
Southern California Gas Company
|
Wholly owned by Pacific Enterprises, which is wholly owned by Sempra Energy
|
|||||||||||
SEMPRA ENERGY FORM 10-Q
SAN DIEGO GAS & ELECTRIC COMPANY FORM 10-Q
SOUTHERN CALIFORNIA GAS COMPANY FORM 10-Q
TABLE OF CONTENTS
|
||
Page
|
||
Information Regarding Forward-Looking Statements
|
4
|
|
PART I – FINANCIAL INFORMATION
|
||
Item 1.
|
Financial Statements
|
5
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
69
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
100
|
Item 4.
|
Controls and Procedures
|
101
|
PART II – OTHER INFORMATION
|
||
Item 1.
|
Legal Proceedings
|
102
|
Item 1A.
|
Risk Factors
|
102
|
Item 6.
|
Exhibits
|
102
|
Signatures
|
105
|
|
§
|
local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments;
|
§
|
actions and the timing of actions by the California Public Utilities Commission, California State Legislature, Federal Energy Regulatory Commission, U.S. Department of Energy, Nuclear Regulatory Commission, California Energy Commission, California Air Resources Board, and other regulatory, governmental and environmental bodies in the United States and other countries in which we operate;
|
§
|
capital markets conditions, including the availability of credit and the liquidity of our investments;
|
§
|
inflation, interest and exchange rates;
|
§
|
the impact of benchmark interest rates, generally Moody’s A-rated utility bond yields, on our California Utilities’ cost of capital;
|
§
|
the timing and success of business development efforts and construction, maintenance and capital projects, including risks inherent in the ability to obtain, and the timing of granting of, permits, licenses, certificates and other authorizations;
|
§
|
energy markets, including the timing and extent of changes and volatility in commodity prices;
|
§
|
the availability of electric power, natural gas and liquefied natural gas, including disruptions caused by failures in the North American transmission grid, pipeline explosions and equipment failures;
|
§
|
weather conditions, natural disasters, catastrophic accidents, and conservation efforts;
|
§
|
risks inherent in nuclear power generation and radioactive materials storage, including the catastrophic release of such materials, the disallowance of the recovery of the investment in or operating costs of the generation facility due to an extended outage, and increased regulatory oversight;
|
§
|
risks posed by decisions and actions of third parties who control the operations of investments in which we do not have a controlling interest;
|
§
|
wars, terrorist attacks and cybersecurity threats;
|
§
|
business, regulatory, environmental and legal decisions and requirements;
|
§
|
expropriation of assets by foreign governments and title and other property disputes;
|
§
|
the impact on reliability of SDG&E’s electric transmission and distribution system due to increased power supply from renewable energy sources;
|
§
|
the impact on competitive customer rates of the growth in distributed and local power generation and the corresponding decrease in demand for power delivered through our electric transmission and distribution system;
|
§
|
the inability or determination not to enter into long-term supply and sales agreements or long-term firm capacity agreements;
|
§
|
the resolution of litigation; and
|
§
|
other uncertainties, all of which are difficult to predict and many of which are beyond our control.
|
SEMPRA ENERGY
|
|||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||
(Dollars in millions, except per share amounts)
|
|||||
Three months ended March 31,
|
|||||
2013
|
2012
|
||||
(unaudited)
|
|||||
REVENUES
|
|||||
Utilities
|
$
|
2,334
|
$
|
2,091
|
|
Energy-related businesses
|
316
|
292
|
|||
Total revenues
|
2,650
|
2,383
|
|||
EXPENSES AND OTHER INCOME
|
|||||
Utilities:
|
|||||
Cost of natural gas
|
(556)
|
(431)
|
|||
Cost of electric fuel and purchased power
|
(447)
|
(388)
|
|||
Energy-related businesses:
|
|||||
Cost of natural gas, electric fuel and purchased power
|
(111)
|
(129)
|
|||
Other cost of sales
|
(48)
|
(33)
|
|||
Operation and maintenance
|
(724)
|
(671)
|
|||
Depreciation and amortization
|
(295)
|
(257)
|
|||
Franchise fees and other taxes
|
(106)
|
(96)
|
|||
Gain on sale of asset
|
74
|
―
|
|||
Equity earnings, before income tax
|
10
|
12
|
|||
Other income, net
|
37
|
75
|
|||
Interest income
|
6
|
5
|
|||
Interest expense
|
(138)
|
(113)
|
|||
Income before income taxes and equity earnings
|
|||||
of certain unconsolidated subsidiaries
|
352
|
357
|
|||
Income tax expense
|
(178)
|
(117)
|
|||
Equity earnings, net of income tax
|
4
|
11
|
|||
Net income
|
178
|
251
|
|||
Losses (earnings) attributable to noncontrolling interests
|
2
|
(13)
|
|||
Preferred dividends of subsidiaries
|
(2)
|
(2)
|
|||
Earnings
|
$
|
178
|
$
|
236
|
|
Basic earnings per common share
|
$
|
0.73
|
$
|
0.98
|
|
Weighted-average number of shares outstanding, basic (thousands)
|
243,294
|
240,566
|
|||
Diluted earnings per common share
|
$
|
0.72
|
$
|
0.97
|
|
Weighted-average number of shares outstanding, diluted (thousands)
|
247,534
|
243,761
|
|||
Dividends declared per share of common stock
|
$
|
0.63
|
$
|
0.60
|
|
See Notes to Condensed Consolidated Financial Statements.
|
SEMPRA ENERGY
|
||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
||||||||||||||
(Dollars in millions)
|
||||||||||||||
Three months ended March 31,
|
||||||||||||||
2013
|
2012
|
|||||||||||||
(unaudited)
|
||||||||||||||
Non-
|
Non-
|
|||||||||||||
Sempra
|
controlling
|
Sempra
|
controlling
|
|||||||||||
Energy
|
Interests
|
Total
|
Energy
|
Interests
|
Total
|
|||||||||
Net income (loss)
|
$
|
180
|
$
|
(2)
|
$
|
178
|
$
|
238
|
$
|
13
|
$
|
251
|
||
Other comprehensive income (loss), net of income tax:
|
||||||||||||||
Foreign currency translation adjustments
|
10
|
(4)
|
6
|
67
|
4
|
71
|
||||||||
Net actuarial gain
|
3
|
―
|
3
|
1
|
―
|
1
|
||||||||
Financial instruments
|
(14)
|
3
|
(11)
|
3
|
―
|
3
|
||||||||
Total other comprehensive income (loss)
|
(1)
|
(1)
|
(2)
|
71
|
4
|
75
|
||||||||
Total comprehensive income (loss)
|
179
|
(3)
|
176
|
309
|
17
|
326
|
||||||||
Preferred dividends of subsidiaries
|
(2)
|
―
|
(2)
|
(2)
|
―
|
(2)
|
||||||||
Total comprehensive income (loss), after preferred
|
||||||||||||||
dividends of subsidiaries
|
$
|
177
|
$
|
(3)
|
$
|
174
|
$
|
307
|
$
|
17
|
$
|
324
|
||
See Notes to Condensed Consolidated Financial Statements.
|
SEMPRA ENERGY
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
(Dollars in millions)
|
|||||
March 31,
|
December 31,
|
||||
2013
|
2012(1)
|
||||
(unaudited)
|
|||||
ASSETS
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
1,471
|
$
|
475
|
|
Restricted cash
|
57
|
46
|
|||
Trade accounts receivable, net
|
1,131
|
1,146
|
|||
Other accounts and notes receivable, net
|
198
|
153
|
|||
Income taxes receivable
|
73
|
56
|
|||
Deferred income taxes
|
28
|
148
|
|||
Inventories
|
270
|
408
|
|||
Regulatory balancing accounts – undercollected
|
411
|
395
|
|||
Regulatory assets
|
42
|
62
|
|||
Fixed-price contracts and other derivatives
|
88
|
95
|
|||
U.S. Treasury grants receivable
|
236
|
258
|
|||
Asset held for sale, power plant
|
―
|
296
|
|||
Other
|
118
|
157
|
|||
Total current assets
|
4,123
|
3,695
|
|||
Investments and other assets:
|
|||||
Restricted cash
|
19
|
22
|
|||
Regulatory assets arising from pension and other postretirement
|
|||||
benefit obligations
|
1,167
|
1,151
|
|||
Regulatory assets arising from wildfire litigation costs
|
360
|
364
|
|||
Other regulatory assets
|
1,233
|
1,227
|
|||
Nuclear decommissioning trusts
|
952
|
908
|
|||
Investments
|
1,519
|
1,516
|
|||
Goodwill
|
1,113
|
1,111
|
|||
Other intangible assets
|
434
|
436
|
|||
Sundry
|
895
|
878
|
|||
Total investments and other assets
|
7,692
|
7,613
|
|||
Property, plant and equipment:
|
|||||
Property, plant and equipment
|
34,011
|
33,528
|
|||
Less accumulated depreciation and amortization
|
(8,553)
|
(8,337)
|
|||
Property, plant and equipment, net ($459 and $466 at March 31, 2013 and
December 31, 2012, respectively, related to VIE)
|
25,458
|
25,191
|
|||
Total assets
|
$
|
37,273
|
$
|
36,499
|
|
(1)
|
Derived from audited financial statements.
|
||||
See Notes to Condensed Consolidated Financial Statements.
|
SEMPRA ENERGY
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
(Dollars in millions)
|
|||||
March 31,
|
December 31,
|
||||
2013
|
2012(1)
|
||||
(unaudited)
|
|||||
LIABILITIES AND EQUITY
|
|||||
Current liabilities:
|
|||||
Short-term debt
|
$
|
762
|
$
|
546
|
|
Accounts payable – trade
|
874
|
976
|
|||
Accounts payable – other
|
116
|
134
|
|||
Dividends and interest payable
|
323
|
266
|
|||
Accrued compensation and benefits
|
217
|
337
|
|||
Regulatory balancing accounts – overcollected
|
294
|
141
|
|||
Current portion of long-term debt
|
1,381
|
725
|
|||
Fixed-price contracts and other derivatives
|
71
|
77
|
|||
Customer deposits
|
142
|
143
|
|||
Reserve for wildfire litigation
|
221
|
305
|
|||
Other
|
788
|
608
|
|||
Total current liabilities
|
5,189
|
4,258
|
|||
Long-term debt ($332 and $335 at March 31, 2013 and December 31, 2012, respectively,
related to VIE)
|
10,680
|
11,621
|
|||
Deferred credits and other liabilities:
|
|||||
Customer advances for construction
|
139
|
144
|
|||
Pension and other postretirement benefit obligations, net of plan assets
|
1,466
|
1,456
|
|||
Deferred income taxes
|
2,248
|
2,100
|
|||
Deferred investment tax credits
|
46
|
46
|
|||
Regulatory liabilities arising from removal obligations
|
2,783
|
2,720
|
|||
Asset retirement obligations
|
2,056
|
2,033
|
|||
Fixed-price contracts and other derivatives
|
254
|
252
|
|||
Reserve for wildfire litigation
|
45
|
22
|
|||
Deferred credits and other
|
1,027
|
1,085
|
|||
Total deferred credits and other liabilities
|
10,064
|
9,858
|
|||
Contingently redeemable preferred stock of subsidiary
|
79
|
79
|
|||
Commitments and contingencies (Note 10)
|
|||||
Equity:
|
|||||
Preferred stock (50 million shares authorized; none issued)
|
―
|
―
|
|||
Common stock (750 million shares authorized; 244 million and 242 million shares
|
|||||
outstanding at March 31, 2013 and December 31, 2012, respectively; no par value)
|
2,334
|
2,217
|
|||
Retained earnings
|
8,466
|
8,441
|
|||
Accumulated other comprehensive income (loss)
|
(377)
|
(376)
|
|||
Total Sempra Energy shareholders’ equity
|
10,423
|
10,282
|
|||
Preferred stock of subsidiary
|
20
|
20
|
|||
Other noncontrolling interests
|
818
|
381
|
|||
Total equity
|
11,261
|
10,683
|
|||
Total liabilities and equity
|
$
|
37,273
|
$
|
36,499
|
|
(1)
|
Derived from audited financial statements.
|
||||
See Notes to Condensed Consolidated Financial Statements.
|
SEMPRA ENERGY
|
|||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|||||
(Dollars in millions)
|
|||||
Three months ended March 31,
|
|||||
2013
|
2012
|
||||
(unaudited)
|
|||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|||||
Net income
|
$
|
178
|
$
|
251
|
|
Adjustments to reconcile net income to net cash provided
|
|||||
by operating activities:
|
|||||
Depreciation and amortization
|
295
|
257
|
|||
Deferred income taxes and investment tax credits
|
252
|
31
|
|||
Gain on sale of asset
|
(74)
|
―
|
|||
Equity earnings
|
(14)
|
(23)
|
|||
Fixed-price contracts and other derivatives
|
17
|
(12)
|
|||
Other
|
6
|
14
|
|||
Net change in other working capital components
|
149
|
168
|
|||
Changes in other assets
|
17
|
12
|
|||
Changes in other liabilities
|
9
|
1
|
|||
Net cash provided by operating activities
|
835
|
699
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|||||
Expenditures for property, plant and equipment
|
(531)
|
(811)
|
|||
Expenditures for investments
|
(5)
|
(51)
|
|||
Proceeds from sale of asset
|
371
|
―
|
|||
Distributions from investments
|
15
|
8
|
|||
Purchases of nuclear decommissioning and other trust assets
|
(136)
|
(134)
|
|||
Proceeds from sales by nuclear decommissioning and other trusts
|
134
|
135
|
|||
Decrease in restricted cash
|
52
|
39
|
|||
Increase in restricted cash
|
(60)
|
(40)
|
|||
Other
|
(2)
|
(5)
|
|||
Net cash used in investing activities
|
(162)
|
(859)
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|||||
Common dividends paid
|
(145)
|
(115)
|
|||
Preferred dividends paid by subsidiaries
|
(2)
|
(2)
|
|||
Issuances of common stock
|
15
|
13
|
|||
Repurchases of common stock
|
(45)
|
(16)
|
|||
Issuances of debt (maturities greater than 90 days)
|
608
|
1,008
|
|||
Payments on debt (maturities greater than 90 days)
|
(645)
|
(347)
|
|||
Proceeds from sale of noncontrolling interests, net of $25 in offering costs
|
574
|
―
|
|||
Decrease in short-term debt, net
|
(43)
|
(224)
|
|||
Distributions to noncontrolling interests
|
(1)
|
(3)
|
|||
Other
|
4
|
(4)
|
|||
Net cash provided by financing activities
|
320
|
310
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
3
|
2
|
|||
Increase in cash and cash equivalents
|
996
|
152
|
|||
Cash and cash equivalents, January 1
|
475
|
252
|
|||
Cash and cash equivalents, March 31
|
$
|
1,471
|
$
|
404
|
|
See Notes to Condensed Consolidated Financial Statements.
|
SEMPRA ENERGY
|
|||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|||||
(Dollars in millions)
|
|||||
Three months ended March 31,
|
|||||
2013
|
2012
|
||||
(unaudited)
|
|||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|||||
Interest payments, net of amounts capitalized
|
$
|
87
|
$
|
62
|
|
Income tax payments, net of refunds
|
14
|
38
|
|||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
|
|||||
Accrued capital expenditures
|
$
|
275
|
$
|
336
|
|
U.S. Treasury grants receivable
|
(22)
|
17
|
|||
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
|
|||||
Dividends declared but not paid
|
$
|
160
|
$
|
151
|
|
See Notes to Condensed Consolidated Financial Statements.
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||
(Dollars in millions)
|
||||
Three months ended March 31,
|
||||
2013
|
2012
|
|||
(unaudited)
|
||||
Operating revenues
|
||||
Electric
|
$
|
772
|
$
|
671
|
Natural gas
|
167
|
163
|
||
Total operating revenues
|
939
|
834
|
||
Operating expenses
|
||||
Cost of electric fuel and purchased power
|
209
|
163
|
||
Cost of natural gas
|
76
|
67
|
||
Operation and maintenance
|
297
|
268
|
||
Depreciation and amortization
|
134
|
112
|
||
Franchise fees and other taxes
|
55
|
46
|
||
Total operating expenses
|
771
|
656
|
||
Operating income
|
168
|
178
|
||
Other income, net
|
11
|
30
|
||
Interest income
|
1
|
―
|
||
Interest expense
|
(48)
|
(36)
|
||
Income before income taxes
|
132
|
172
|
||
Income tax expense
|
(51)
|
(60)
|
||
Net income
|
81
|
112
|
||
Losses (earnings) attributable to noncontrolling interest
|
11
|
(6)
|
||
Earnings
|
92
|
106
|
||
Preferred dividend requirements
|
(1)
|
(1)
|
||
Earnings attributable to common shares
|
$
|
91
|
$
|
105
|
See Notes to Condensed Consolidated Financial Statements.
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
|||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|||||||||||||
(Dollars in millions)
|
|||||||||||||
Three months ended March 31,
|
|||||||||||||
2013
|
2012
|
||||||||||||
(unaudited)
|
|||||||||||||
Non-
|
Non-
|
||||||||||||
controlling
|
controlling
|
||||||||||||
SDG&E
|
Interest
|
Total
|
SDG&E
|
Interest
|
Total
|
||||||||
Net income (loss)
|
$
|
92
|
$
|
(11)
|
$
|
81
|
$
|
106
|
$
|
6
|
$
|
112
|
|
Other comprehensive income, net of income tax:
|
|||||||||||||
Financial instruments
|
―
|
3
|
3
|
―
|
―
|
―
|
|||||||
Total other comprehensive income
|
―
|
3
|
3
|
―
|
―
|
―
|
|||||||
Total comprehensive income (loss)
|
$
|
92
|
$
|
(8)
|
$
|
84
|
$
|
106
|
$
|
6
|
$
|
112
|
|
See Notes to Condensed Consolidated Financial Statements.
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
(Dollars in millions)
|
|||||
March 31,
|
December 31,
|
||||
2013
|
2012(1)
|
||||
(unaudited)
|
|||||
ASSETS
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
106
|
$
|
87
|
|
Restricted cash
|
15
|
10
|
|||
Accounts receivable – trade, net
|
259
|
252
|
|||
Accounts receivable – other, net
|
34
|
21
|
|||
Due from unconsolidated affiliates
|
1
|
39
|
|||
Income taxes receivable
|
―
|
35
|
|||
Deferred income taxes
|
12
|
―
|
|||
Inventories
|
81
|
82
|
|||
Regulatory balancing accounts, net
|
411
|
395
|
|||
Regulatory assets arising from fixed-price contracts and other derivatives
|
22
|
39
|
|||
Other regulatory assets
|
10
|
10
|
|||
Fixed-price contracts and other derivatives
|
45
|
41
|
|||
Other
|
43
|
76
|
|||
Total current assets
|
1,039
|
1,087
|
|||
Other assets:
|
|||||
Restricted cash
|
19
|
22
|
|||
Deferred taxes recoverable in rates
|
727
|
718
|
|||
Regulatory assets arising from fixed-price contracts and other derivatives
|
106
|
110
|
|||
Regulatory assets arising from pension and other postretirement
|
|||||
benefit obligations
|
307
|
303
|
|||
Regulatory assets arising from wildfire litigation costs
|
360
|
364
|
|||
Other regulatory assets
|
243
|
252
|
|||
Nuclear decommissioning trusts
|
952
|
908
|
|||
Sundry
|
143
|
117
|
|||
Total other assets
|
2,857
|
2,794
|
|||
Property, plant and equipment:
|
|||||
Property, plant and equipment
|
14,299
|
14,124
|
|||
Less accumulated depreciation and amortization
|
(3,343)
|
(3,261)
|
|||
Property, plant and equipment, net ($459 and $466 at March 31, 2013 and
December 31, 2012, respectively, related to VIE)
|
10,956
|
10,863
|
|||
Total assets
|
$
|
14,852
|
$
|
14,744
|
|
(1)
|
Derived from audited financial statements.
|
||||
See Notes to Condensed Consolidated Financial Statements.
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
(Dollars in millions)
|
|||||
March 31,
|
December 31,
|
||||
2013
|
2012(1)
|
||||
(unaudited)
|
|||||
LIABILITIES AND EQUITY
|
|||||
Current liabilities:
|
|||||
Accounts payable
|
$
|
239
|
$
|
300
|
|
Due to unconsolidated affiliates
|
35
|
19
|
|||
Income taxes payable
|
33
|
―
|
|||
Deferred income taxes
|
―
|
26
|
|||
Dividends and interest payable
|
55
|
36
|
|||
Accrued compensation and benefits
|
63
|
129
|
|||
Current portion of long-term debt
|
16
|
16
|
|||
Fixed-price contracts and other derivatives
|
47
|
56
|
|||
Customer deposits
|
58
|
60
|
|||
Construction deposits
|
51
|
51
|
|||
Reserve for wildfire litigation
|
221
|
305
|
|||
Other
|
170
|
106
|
|||
Total current liabilities
|
988
|
1,104
|
|||
Long-term debt ($332 and $335 at March 31, 2013 and December 31, 2012,
respectively, related to VIE)
|
4,289
|
4,292
|
|||
Deferred credits and other liabilities:
|
|||||
Customer advances for construction
|
18
|
17
|
|||
Pension and other postretirement benefit obligations, net of plan assets
|
345
|
340
|
|||
Deferred income taxes
|
1,714
|
1,636
|
|||
Deferred investment tax credits
|
26
|
25
|
|||
Regulatory liabilities arising from removal obligations
|
1,658
|
1,603
|
|||
Asset retirement obligations
|
744
|
733
|
|||
Fixed-price contracts and other derivatives
|
200
|
209
|
|||
Reserve for wildfire litigation
|
45
|
22
|
|||
Deferred credits and other
|
361
|
386
|
|||
Total deferred credits and other liabilities
|
5,111
|
4,971
|
|||
Contingently redeemable preferred stock
|
79
|
79
|
|||
Commitments and contingencies (Note 10)
|
|||||
Equity:
|
|||||
Common stock (255 million shares authorized; 117 million shares outstanding;
|
|||||
no par value)
|
1,338
|
1,338
|
|||
Retained earnings
|
2,986
|
2,895
|
|||
Accumulated other comprehensive income (loss)
|
(11)
|
(11)
|
|||
Total SDG&E shareholder's equity
|
4,313
|
4,222
|
|||
Noncontrolling interest
|
72
|
76
|
|||
Total equity
|
4,385
|
4,298
|
|||
Total liabilities and equity
|
$
|
14,852
|
$
|
14,744
|
|
(1)
|
Derived from audited financial statements.
|
||||
See Notes to Condensed Consolidated Financial Statements.
|
SAN DIEGO GAS & ELECTRIC COMPANY
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||
(Dollars in millions)
|
||||
Three months ended
March 31,
|
||||
2013
|
2012
|
|||
(unaudited)
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||
Net income
|
$
|
81
|
$
|
112
|
Adjustments to reconcile net income to net cash provided by
|
||||
operating activities:
|
||||
Depreciation and amortization
|
134
|
112
|
||
Deferred income taxes and investment tax credits
|
36
|
152
|
||
Fixed-price contracts and other derivatives
|
(2)
|
(3)
|
||
Other
|
5
|
(27)
|
||
Net change in other working capital components
|
(2)
|
(85)
|
||
Changes in other assets
|
4
|
8
|
||
Changes in other liabilities
|
8
|
(3)
|
||
Net cash provided by operating activities
|
264
|
266
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||
Expenditures for property, plant and equipment
|
(237)
|
(398)
|
||
Purchases of nuclear decommissioning trust assets
|
(135)
|
(133)
|
||
Proceeds from sales by nuclear decommissioning trusts
|
134
|
131
|
||
Decrease in restricted cash
|
17
|
37
|
||
Increase in restricted cash
|
(19)
|
(36)
|
||
Net cash used in investing activities
|
(240)
|
(399)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||
Preferred dividends paid
|
(1)
|
(1)
|
||
Issuance of long-term debt
|
―
|
249
|
||
Payments on long-term debt
|
(3)
|
(3)
|
||
Distributions to noncontrolling interests
|
(1)
|
―
|
||
Other
|
―
|
(2)
|
||
Net cash (used in) provided by financing activities
|
(5)
|
243
|
||
Increase in cash and cash equivalents
|
19
|
110
|
||
Cash and cash equivalents, January 1
|
87
|
29
|
||
Cash and cash equivalents, March 31
|
$
|
106
|
$
|
139
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
||||
Interest payments, net of amounts capitalized
|
$
|
28
|
$
|
17
|
Income tax refunds
|
―
|
62
|
||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
|
||||
Accrued capital expenditures
|
$
|
102
|
$
|
134
|
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
|
||||
Dividends declared but not paid
|
$
|
1
|
$
|
1
|
See Notes to Condensed Consolidated Financial Statements.
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||
(Dollars in millions)
|
||||
Three months ended March 31,
|
||||
2013
|
2012
|
|||
(unaudited)
|
||||
Operating revenues
|
$
|
983
|
$
|
880
|
Operating expenses
|
||||
Cost of natural gas
|
454
|
349
|
||
Operation and maintenance
|
306
|
289
|
||
Depreciation and amortization
|
100
|
87
|
||
Franchise fees and other taxes
|
40
|
36
|
||
Total operating expenses
|
900
|
761
|
||
Operating income
|
83
|
119
|
||
Other income, net
|
4
|
4
|
||
Interest expense
|
(17)
|
(17)
|
||
Income before income taxes
|
70
|
106
|
||
Income tax expense
|
(24)
|
(40)
|
||
Net income/Earnings attributable to common shares
|
$
|
46
|
$
|
66
|
See Notes to Condensed Consolidated Financial Statements.
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
|||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|||||
(Dollars in millions)
|
|||||
Three months ended March 31,
|
|||||
2013
|
2012
|
||||
(unaudited)
|
|||||
Net income
|
$
|
46
|
$
|
66
|
|
Total other comprehensive income, net of income tax
|
―
|
―
|
|||
Total comprehensive income
|
$
|
46
|
$
|
66
|
|
See Notes to Condensed Consolidated Financial Statements.
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
(Dollars in millions)
|
|||||
March 31,
|
December 31,
|
||||
2013
|
2012(1)
|
||||
(unaudited)
|
|||||
ASSETS
|
|||||
Current assets:
|
|||||
Cash and cash equivalents
|
$
|
72
|
$
|
83
|
|
Accounts receivable – trade, net
|
466
|
539
|
|||
Accounts receivable – other, net
|
94
|
51
|
|||
Due from unconsolidated affiliates
|
276
|
24
|
|||
Income taxes receivable
|
96
|
104
|
|||
Deferred income taxes
|
―
|
3
|
|||
Inventories
|
34
|
151
|
|||
Regulatory assets
|
4
|
4
|
|||
Other
|
26
|
35
|
|||
Total current assets
|
1,068
|
994
|
|||
Other assets:
|
|||||
Regulatory assets arising from pension and other postretirement
|
|||||
benefit obligations
|
848
|
835
|
|||
Other regulatory assets
|
155
|
148
|
|||
Sundry
|
79
|
77
|
|||
Total other assets
|
1,082
|
1,060
|
|||
Property, plant and equipment:
|
|||||
Property, plant and equipment
|
11,317
|
11,187
|
|||
Less accumulated depreciation and amortization
|
(4,244)
|
(4,170)
|
|||
Property, plant and equipment, net
|
7,073
|
7,017
|
|||
Total assets
|
$
|
9,223
|
$
|
9,071
|
|
(1)
|
Derived from audited financial statements.
|
||||
See Notes to Condensed Consolidated Financial Statements.
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
|||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||
(Dollars in millions)
|
|||||
March 31,
|
December 31,
|
||||
2013
|
2012(1)
|
||||
(unaudited)
|
|||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|||||
Current liabilities:
|
|||||
Accounts payable – trade
|
$
|
282
|
$
|
383
|
|
Accounts payable – other
|
70
|
82
|
|||
Due to unconsolidated affiliate
|
―
|
37
|
|||
Deferred income taxes
|
8
|
―
|
|||
Accrued compensation and benefits
|
94
|
116
|
|||
Regulatory balancing accounts, net
|
294
|
141
|
|||
Current portion of long-term debt
|
254
|
4
|
|||
Customer deposits
|
76
|
76
|
|||
Temporary LIFO liquidation
|
49
|
―
|
|||
Other
|
155
|
124
|
|||
Total current liabilities
|
1,282
|
963
|
|||
Long-term debt
|
1,159
|
1,409
|
|||
Deferred credits and other liabilities:
|
|||||
Customer advances for construction
|
106
|
111
|
|||
Pension and other postretirement benefit obligations, net of plan assets
|
867
|
855
|
|||
Deferred income taxes
|
897
|
881
|
|||
Deferred investment tax credits
|
20
|
20
|
|||
Regulatory liabilities arising from removal obligations
|
1,110
|
1,103
|
|||
Asset retirement obligations
|
1,247
|
1,238
|
|||
Deferred credits and other
|
254
|
256
|
|||
Total deferred credits and other liabilities
|
4,501
|
4,464
|
|||
Commitments and contingencies (Note 10)
|
|||||
Shareholders' equity:
|
|||||
Preferred stock
|
22
|
22
|
|||
Common stock (100 million shares authorized; 91 million shares outstanding;
|
|||||
no par value)
|
866
|
866
|
|||
Retained earnings
|
1,411
|
1,365
|
|||
Accumulated other comprehensive income (loss)
|
(18)
|
(18)
|
|||
Total shareholders' equity
|
2,281
|
2,235
|
|||
Total liabilities and shareholders' equity
|
$
|
9,223
|
$
|
9,071
|
|
(1)
|
Derived from audited financial statements.
|
||||
See Notes to Condensed Consolidated Financial Statements.
|
SOUTHERN CALIFORNIA GAS COMPANY AND SUBSIDIARIES
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||
(Dollars in millions)
|
||||
Three months ended March 31,
|
||||
2013
|
2012
|
|||
(unaudited)
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||
Net income
|
$
|
46
|
$
|
66
|
Adjustments to reconcile net income to net cash provided by
|
||||
operating activities:
|
||||
Depreciation and amortization
|
100
|
87
|
||
Deferred income taxes and investment tax credits
|
18
|
14
|
||
Other
|
―
|
(1)
|
||
Net change in other working capital components
|
250
|
280
|
||
Changes in other assets
|
3
|
3
|
||
Changes in other liabilities
|
(6)
|
―
|
||
Net cash provided by operating activities
|
411
|
449
|
||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||
Expenditures for property, plant and equipment
|
(179)
|
(165)
|
||
Increase in loans to affiliates, net
|
(243)
|
(200)
|
||
Net cash used in investing activities
|
(422)
|
(365)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||
Common dividends paid
|
―
|
(50)
|
||
Net cash used in financing activities
|
―
|
(50)
|
||
(Decrease) increase in cash and cash equivalents
|
(11)
|
34
|
||
Cash and cash equivalents, January 1
|
83
|
36
|
||
Cash and cash equivalents, March 31
|
$
|
72
|
$
|
70
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
||||
Interest payments, net of amounts capitalized
|
$
|
12
|
$
|
5
|
Income tax refunds, net
|
―
|
17
|
||
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES
|
||||
Accrued capital expenditures
|
$
|
76
|
$
|
64
|
See Notes to Condensed Consolidated Financial Statements.
|
§
|
San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas), which are separate, reportable segments;
|
§
|
Sempra International, which includes our Sempra South American Utilities and Sempra Mexico reportable segments; and
|
§
|
Sempra U.S. Gas & Power, which includes our Sempra Renewables and Sempra Natural Gas reportable segments.
|
INVENTORY BALANCES
|
|||||||||||||||||
(Dollars in millions)
|
|||||||||||||||||
Natural Gas
|
Liquefied Natural Gas
|
Materials and Supplies
|
Total
|
||||||||||||||
March 31, 2013
|
December 31, 2012
|
March 31, 2013
|
December 31, 2012
|
March 31, 2013
|
December 31, 2012
|
March 31, 2013
|
December 31, 2012
|
||||||||||
SDG&E
|
$
|
1
|
$
|
3
|
$
|
―
|
$
|
―
|
$
|
80
|
$
|
79
|
$
|
81
|
$
|
82
|
|
SoCalGas
|
8
|
128
|
―
|
―
|
26
|
23
|
34
|
151
|
|||||||||
Sempra South American
|
|||||||||||||||||
Utilities
|
―
|
―
|
―
|
―
|
38
|
34
|
38
|
34
|
|||||||||
Sempra Mexico
|
―
|
―
|
7
|
8
|
12
|
8
|
19
|
16
|
|||||||||
Sempra Renewables
|
―
|
―
|
―
|
―
|
3
|
3
|
3
|
3
|
|||||||||
Sempra Natural Gas
|
84
|
109
|
6
|
8
|
5
|
5
|
95
|
122
|
|||||||||
Sempra Energy Consolidated
|
$
|
93
|
$
|
240
|
$
|
13
|
$
|
16
|
$
|
164
|
$
|
152
|
$
|
270
|
$
|
408
|
|
GOODWILL
|
|||||||||
(Dollars in millions)
|
|||||||||
Sempra
|
|||||||||
South American
|
Sempra
|
Sempra
|
|||||||
Utilities
|
Mexico
|
Natural Gas
|
Total
|
||||||
Balance at December 31, 2012
|
$
|
1,014
|
$
|
25
|
$
|
72
|
$
|
1,111
|
|
Foreign currency translation(1)
|
2
|
―
|
―
|
2
|
|||||
Balance at March 31, 2013
|
$
|
1,016
|
$
|
25
|
$
|
72
|
$
|
1,113
|
|
(1)
|
We record the offset of this fluctuation to other comprehensive income.
|
§
|
the purpose and design of the VIE;
|
§
|
the nature of the VIE’s risks and the risks we absorb;
|
§
|
the power to direct activities that most significantly impact the economic performance of the VIE; and
|
§
|
the obligation to absorb losses or right to receive benefits that could be significant to the VIE.
|
AMOUNTS ASSOCIATED WITH OTAY MESA VIE
|
||||
(Dollars in millions)
|
||||
Three months ended March 31,
|
||||
2013
|
2012
|
|||
Operating revenues
|
||||
Electric
|
$
|
(1)
|
$
|
―
|
Natural gas
|
―
|
―
|
||
Total operating revenues
|
(1)
|
―
|
||
Operating expenses
|
||||
Cost of electric fuel and purchased power
|
(17)
|
(19)
|
||
Operation and maintenance
|
17
|
4
|
||
Depreciation and amortization
|
7
|
6
|
||
Total operating expenses
|
7
|
(9)
|
||
Operating (loss) income
|
(8)
|
9
|
||
Interest expense
|
(3)
|
(3)
|
||
(Loss) income before income taxes/Net (loss) income
|
(11)
|
6
|
||
Losses (earnings) attributable to noncontrolling interest
|
11
|
(6)
|
||
Earnings
|
$
|
―
|
$
|
―
|
NET PERIODIC BENEFIT COST – SEMPRA ENERGY CONSOLIDATED
|
||||||||
(Dollars in millions)
|
||||||||
Pension Benefits
|
Other Postretirement Benefits
|
|||||||
Three months ended March 31,
|
Three months ended March 31,
|
|||||||
2013
|
2012
|
2013
|
2012
|
|||||
Service cost
|
$
|
27
|
$
|
23
|
$
|
7
|
$
|
8
|
Interest cost
|
37
|
41
|
11
|
14
|
||||
Expected return on assets
|
(40)
|
(39)
|
(15)
|
(13)
|
||||
Amortization of:
|
||||||||
Prior service cost (credit)
|
1
|
1
|
(1)
|
―
|
||||
Actuarial loss
|
15
|
12
|
2
|
3
|
||||
Regulatory adjustment
|
(32)
|
(30)
|
2
|
3
|
||||
Total net periodic benefit cost
|
$
|
8
|
$
|
8
|
$
|
6
|
$
|
15
|
NET PERIODIC BENEFIT COST – SDG&E
|
||||||||
(Dollars in millions)
|
||||||||
Pension Benefits
|
Other Postretirement Benefits
|
|||||||
Three months ended March 31,
|
Three months ended March 31,
|
|||||||
2013
|
2012
|
2013
|
2012
|
|||||
Service cost
|
$
|
8
|
$
|
7
|
$
|
2
|
$
|
2
|
Interest cost
|
10
|
12
|
2
|
2
|
||||
Expected return on assets
|
(13)
|
(12)
|
(2)
|
(1)
|
||||
Amortization of:
|
||||||||
Prior service cost
|
―
|
―
|
1
|
1
|
||||
Actuarial loss
|
4
|
4
|
―
|
―
|
||||
Regulatory adjustment
|
(8)
|
(10)
|
―
|
―
|
||||
Total net periodic benefit cost
|
$
|
1
|
$
|
1
|
$
|
3
|
$
|
4
|
NET PERIODIC BENEFIT COST – SOCALGAS
|
||||||||
(Dollars in millions)
|
||||||||
Pension Benefits
|
Other Postretirement Benefits
|
|||||||
Three months ended March 31,
|
Three months ended March 31,
|
|||||||
2013
|
2012
|
2013
|
2012
|
|||||
Service cost
|
$
|
16
|
$
|
13
|
$
|
4
|
$
|
5
|
Interest cost
|
23
|
25
|
9
|
11
|
||||
Expected return on assets
|
(25)
|
(24)
|
(12)
|
(11)
|
||||
Amortization of:
|
||||||||
Prior service cost (credit)
|
1
|
1
|
(2)
|
(1)
|
||||
Actuarial loss
|
9
|
6
|
2
|
3
|
||||
Regulatory adjustment
|
(24)
|
(20)
|
2
|
3
|
||||
Total net periodic benefit cost
|
$
|
―
|
$
|
1
|
$
|
3
|
$
|
10
|
Sempra Energy
|
||||||
(Dollars in millions)
|
Consolidated
|
SDG&E
|
SoCalGas
|
|||
Contributions through March 31, 2013:
|
||||||
Pension plans
|
$
|
11
|
$
|
―
|
$
|
2
|
Other postretirement benefit plans
|
7
|
3
|
3
|
|||
Total expected contributions in 2013:
|
||||||
Pension plans
|
$
|
154
|
$
|
57
|
$
|
70
|
Other postretirement benefit plans
|
26
|
11
|
11
|
EARNINGS PER SHARE COMPUTATIONS
|
|||||
(Dollars in millions, except per share amounts; shares in thousands)
|
|||||
Three months ended March 31,
|
|||||
2013
|
2012
|
||||
Numerator:
|
|||||
Earnings/Income attributable to common shareholders
|
$
|
178
|
$
|
236
|
|
Denominator:
|
|||||
Weighted-average common shares outstanding for basic EPS
|
243,294
|
240,566
|
|||
Dilutive effect of stock options, restricted stock awards and restricted stock units
|
4,240
|
3,195
|
|||
Weighted-average common shares outstanding for diluted EPS
|
247,534
|
243,761
|
|||
|
|||||
Earnings per share:
|
|||||
Basic
|
$
|
0.73
|
$
|
0.98
|
|
Diluted
|
$
|
0.72
|
$
|
0.97
|
Four-Year Cumulative Total Shareholder Return Ranking versus S&P 500 Utilities Index(1)
|
Number of Sempra Energy Common Shares Received for Each Restricted Stock Unit(2)
|
|
75th Percentile or Above
|
1.5
|
|
50th Percentile
|
1
|
|
35th Percentile or Below
|
―
|
|
(1)
|
If Sempra Energy ranks at or above the 50th percentile compared to the S&P 500 Index, participants will receive a minimum of 1.0 share for each restricted stock unit.
|
|
(2)
|
Participants may also receive additional shares for dividend equivalents on shares subject to restricted stock units, which are reinvested to purchase additional units that become subject to the same vesting conditions as the restricted stock units to which the dividends relate.
|
CAPITALIZED FINANCING COSTS
|
||||
(Dollars in millions)
|
||||
Three months ended March 31,
|
||||
2013
|
2012
|
|||
Sempra Energy Consolidated:
|
||||
AFUDC related to debt
|
$
|
6
|
$
|
14
|
AFUDC related to equity
|
15
|
35
|
||
Other capitalized financing costs
|
5
|
11
|
||
Total Sempra Energy Consolidated
|
$
|
26
|
$
|
60
|
SDG&E:
|
||||
AFUDC related to debt
|
$
|
4
|
$
|
12
|
AFUDC related to equity
|
10
|
29
|
||
Total SDG&E
|
$
|
14
|
$
|
41
|
SoCalGas:
|
||||
AFUDC related to debt
|
$
|
2
|
$
|
2
|
AFUDC related to equity
|
5
|
6
|
||
Total SoCalGas
|
$
|
7
|
$
|
8
|
CHANGES IN COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (1)
|
|||||||||||
(Dollars in millions)
|
|||||||||||
Foreign
|
Total
|
||||||||||
Currency
|
Unamortized
|
Unamortized
|
Accumulated Other
|
||||||||
Translation
|
Net
|
Prior Service
|
Financial
|
Comprehensive
|
|||||||
Adjustments
|
Actuarial Loss
|
Credit
|
Instruments
|
Income (Loss)
|
|||||||
Sempra Energy Consolidated:
|
|||||||||||
Balance as of December 31, 2012
|
$
|
(240)
|
$
|
(102)
|
$
|
1
|
$
|
(35)
|
$
|
(376)
|
|
Other comprehensive income (loss) before
|
|||||||||||
reclassifications
|
10
|
―
|
―
|
(16)
|
(6)
|
||||||
Amounts reclassified from accumulated other
|
|||||||||||
comprehensive income
|
―
|
3
|
―
|
2
|
5
|
||||||
Net other comprehensive income (loss)
|
10
|
3
|
―
|
(14)
|
(1)
|
||||||
Balance as of March 31, 2013
|
$
|
(230)
|
$
|
(99)
|
$
|
1
|
$
|
(49)
|
$
|
(377)
|
|
(1)
|
All amounts are net of income tax, if subject to tax, and exclude noncontrolling interests.
|
RECLASSIFICATIONS FROM ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
|
||||||||||
(Dollars in millions)
|
||||||||||
Three months ended March 31, 2013
|
||||||||||
Amount reclassified
|
||||||||||
Details about accumulated
|
from accumulated other
|
Affected line item
|
||||||||
other comprehensive income components
|
comprehensive income (loss)
|
on Condensed Consolidated Statement of Operations
|
||||||||
Sempra Energy Consolidated:
|
||||||||||
Financial instruments:
|
||||||||||
Interest rate instruments
|
$
|
3
|
Interest Expense
|
|||||||
Interest rate instruments
|
2
|
Equity Earnings, Before Income Tax
|
||||||||
Total Before Income Tax
|
5
|
|||||||||
(1)
|
Income Tax Expense
|
|||||||||
Net of Income Tax
|
4
|
|||||||||
(2)
|
Earnings Attributable to Noncontrolling Interests
|
|||||||||
$
|
2
|
|||||||||
Amortization of defined benefit pension
|
||||||||||
and postretirement benefits items:
|
||||||||||
Actuarial loss
|
$
|
5
|
(1)
|
|||||||
(2)
|
Income Tax Expense
|
|||||||||
Net of Income Tax
|
$
|
3
|
||||||||
SDG&E:
|
||||||||||
Financial instruments:
|
||||||||||
Interest rate instruments
|
$
|
2
|
Interest Expense
|
|||||||
(2)
|
Earnings Attributable to Noncontrolling Interest
|
|||||||||
$
|
―
|
|||||||||
(1)
|
Amounts are included in the computation of net periodic benefit cost (see "Pension and Other Postretirement Benefits" above).
|
INCOME TAX EXPENSE (BENEFIT) ASSOCIATED WITH OTHER COMPREHENSIVE INCOME
|
|||||||||||||||
(Dollars in millions)
|
|||||||||||||||
Three months ended March 31,
|
|||||||||||||||
2013
|
2012
|
||||||||||||||
Sempra
|
Sempra
|
||||||||||||||
Energy
|
Energy
|
||||||||||||||
Share-
|
Non-
|
Share-
|
Non-
|
||||||||||||
holders'
|
controlling
|
Total
|
holders'
|
controlling
|
Total
|
||||||||||
Equity
|
Interests
|
Equity
|
Equity
|
Interests
|
Equity
|
||||||||||
Sempra Energy Consolidated:
|
|||||||||||||||
Other comprehensive income before
|
|||||||||||||||
reclassifications:
|
|||||||||||||||
Financial instruments
|
$
|
(7)
|
$
|
―
|
$
|
(7)
|
$
|
2
|
$
|
―
|
$
|
2
|
|||
Amounts reclassified from accumulated other
|
|||||||||||||||
comprehensive income:
|
|||||||||||||||
Pension and other postretirement benefits
|
$
|
2
|
$
|
―
|
$
|
2
|
$
|
1
|
$
|
―
|
$
|
1
|
|||
Financial instruments
|
1
|
―
|
1
|
1
|
―
|
1
|
SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTERESTS
|
||||||
(Dollars in millions)
|
||||||
Sempra
|
||||||
Energy
|
Non-
|
|||||
Shareholders’
|
controlling
|
Total
|
||||
Equity
|
Interests
|
Equity
|
||||
Balance at December 31, 2012
|
$
|
10,282
|
$
|
401
|
$
|
10,683
|
Comprehensive income (loss)
|
179
|
(3)
|
176
|
|||
Preferred dividends of subsidiaries
|
(2)
|
―
|
(2)
|
|||
Share-based compensation expense
|
10
|
―
|
10
|
|||
Common stock dividends declared
|
(153)
|
―
|
(153)
|
|||
Issuance of common stock
|
15
|
―
|
15
|
|||
Repurchase of common stock
|
(45)
|
―
|
(45)
|
|||
Tax benefit related to share-based compensation
|
2
|
―
|
2
|
|||
Sale of noncontrolling interests, net of offering costs
|
135
|
439
|
574
|
|||
Equity contributed by noncontrolling interest
|
―
|
4
|
4
|
|||
Distributions to noncontrolling interests
|
―
|
(3)
|
(3)
|
|||
Balance at March 31, 2013
|
$
|
10,423
|
$
|
838
|
$
|
11,261
|
Balance at December 31, 2011
|
$
|
9,775
|
$
|
403
|
$
|
10,178
|
Comprehensive income
|
309
|
17
|
326
|
|||
Preferred dividends of subsidiaries
|
(2)
|
―
|
(2)
|
|||
Share-based compensation expense
|
11
|
―
|
11
|
|||
Common stock dividends declared
|
(144)
|
―
|
(144)
|
|||
Issuance of common stock
|
13
|
―
|
13
|
|||
Repurchase of common stock
|
(16)
|
―
|
(16)
|
|||
Common stock released from ESOP
|
6
|
―
|
6
|
|||
Distributions to noncontrolling interests
|
―
|
(2)
|
(2)
|
|||
Balance at March 31, 2012
|
$
|
9,952
|
$
|
418
|
$
|
10,370
|
SHAREHOLDER’S EQUITY AND NONCONTROLLING INTEREST
|
||||||
(Dollars in millions)
|
||||||
SDG&E
|
Non-
|
|||||
Shareholder’s
|
controlling
|
Total
|
||||
Equity
|
Interest
|
Equity
|
||||
Balance at December 31, 2012
|
$
|
4,222
|
$
|
76
|
$
|
4,298
|
Comprehensive income (loss)
|
92
|
(8)
|
84
|
|||
Preferred stock dividends declared
|
(1)
|
―
|
(1)
|
|||
Equity contributed by noncontrolling interest
|
―
|
4
|
4
|
|||
Balance at March 31, 2013
|
$
|
4,313
|
$
|
72
|
$
|
4,385
|
Balance at December 31, 2011
|
$
|
3,739
|
$
|
102
|
$
|
3,841
|
Comprehensive income
|
106
|
6
|
112
|
|||
Preferred stock dividends declared
|
(1)
|
―
|
(1)
|
|||
Balance at March 31, 2012
|
$
|
3,844
|
$
|
108
|
$
|
3,952
|
OTHER NONCONTROLLING INTERESTS
|
|||||||
(Dollars in millions)
|
|||||||
Percent Ownership Held by Others
|
March 31, 2013
|
December 31, 2012
|
|||||
SDG&E:
|
|||||||
Otay Mesa VIE (at SDG&E)
|
100
|
%
|
$
|
72
|
$
|
76
|
|
Sempra South American Utilities:
|
|||||||
Chilquinta Energía subsidiaries
|
24.4 – 43.4
|
30
|
29
|
||||
Luz del Sur
|
20.2
|
237
|
236
|
||||
Tecsur
|
9.8
|
4
|
4
|
||||
Sempra Mexico:
|
|||||||
IEnova, S.A.B. de C.V.
|
18.9
|
439
|
―
|
||||
Sempra Natural Gas:
|
|||||||
Bay Gas Storage, Ltd.
|
9.1
|
20
|
20
|
||||
Liberty Gas Storage, LLC
|
25.0
|
15
|
15
|
||||
Southern Gas Transmission Company
|
49.0
|
1
|
1
|
||||
Total Sempra Energy
|
$
|
818
|
$
|
381
|
AMOUNTS DUE TO AND FROM AFFILIATES AT SDG&E AND SOCALGAS
|
||||||
(Dollars in millions)
|
||||||
March 31,
|
December 31,
|
|||||
2013
|
2012
|
|||||
SDG&E
|
||||||
Current:
|
||||||
Due from SoCalGas
|
$
|
―
|
$
|
37
|
||
Due from various affiliates
|
1
|
2
|
||||
$
|
1
|
$
|
39
|
|||
Due to Sempra Energy
|
$
|
24
|
$
|
19
|
||
Due to SoCalGas
|
11
|
―
|
||||
$
|
35
|
$
|
19
|
|||
Income taxes due (to) from Sempra Energy(1)
|
$
|
(7)
|
$
|
12
|
||
SoCalGas
|
||||||
Current:
|
||||||
Due from Sempra Energy
|
$
|
265
|
$
|
24
|
||
Due from SDG&E
|
11
|
―
|
||||
$
|
276
|
$
|
24
|
|||
Due to SDG&E
|
$
|
―
|
$
|
37
|
||
Income taxes due from Sempra Energy(1)
|
$
|
93
|
$
|
99
|
||
(1)
|
SDG&E and SoCalGas are included in the consolidated income tax return of Sempra Energy and are allocated income tax expense from Sempra Energy in an amount equal to that which would result from the companies’ having always filed a separate return.
|
REVENUES FROM UNCONSOLIDATED AFFILIATES AT SDG&E AND SOCALGAS
|
||||
(Dollars in millions)
|
||||
Three months ended March 31,
|
||||
2013
|
2012
|
|||
SDG&E
|
$
|
2
|
$
|
2
|
SoCalGas
|
15
|
15
|
OTHER INCOME, NET
|
|||||
(Dollars in millions)
|
|||||
Three months ended March 31,
|
|||||
2013
|
2012
|
||||
Sempra Energy Consolidated:
|
|||||
Allowance for equity funds used during construction
|
$
|
15
|
$
|
35
|
|
Investment gains(1)
|
10
|
19
|
|||
Gains on interest rate and foreign exchange instruments, net
|
7
|
11
|
|||
Regulatory interest, net(2)
|
1
|
1
|
|||
Sundry, net
|
4
|
9
|
|||
Total
|
$
|
37
|
$
|
75
|
|
SDG&E:
|
|||||
Allowance for equity funds used during construction
|
$
|
10
|
$
|
29
|
|
Regulatory interest, net(2)
|
1
|
1
|
|||
Total
|
$
|
11
|
$
|
30
|
|
SoCalGas:
|
|||||
Allowance for equity funds used during construction
|
$
|
5
|
$
|
6
|
|
Sundry, net
|
(1)
|
(2)
|
|||
Total
|
$
|
4
|
$
|
4
|
|
(1)
|
Represents investment gains on dedicated assets in support of our executive retirement and deferred compensation plans. These amounts are partially offset by corresponding changes in compensation expense related to the plans.
|
||||
(2)
|
Interest on regulatory balancing accounts.
|
INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
|
|||||||||||
(Dollars in millions)
|
|||||||||||
Three months ended March 31,
|
|||||||||||
2013
|
2012
|
||||||||||
Effective
|
Effective
|
||||||||||
Income Tax
|
Income
|
Income Tax
|
Income
|
||||||||
Expense
|
Tax Rate
|
Expense
|
Tax Rate
|
||||||||
Sempra Energy Consolidated
|
$
|
178
|
51
|
%
|
$
|
117
|
33
|
%
|
|||
SDG&E
|
51
|
39
|
60
|
35
|
|||||||
SoCalGas
|
24
|
34
|
40
|
38
|
§
|
$63 million income tax expense resulting from a corporate reorganization in connection with the IEnova stock offerings, which we discuss above in “Sale of Noncontrolling Interests;” offset by
|
§
|
lower income tax expense due to Mexican currency translation and inflation adjustments; and
|
§
|
income tax benefit in 2013 resulting from changes made in the second half of 2012 in the income tax treatment of certain repairs expenditures that are capitalized for financial statement purposes. The change in income tax treatment of certain repairs expenditures for electric transmission and distribution assets was made pursuant to an Internal Revenue Service (IRS) Revenue Procedure providing a safe harbor for deducting certain repairs expenditures from taxable income when incurred for tax years beginning on or after January 1, 2011. The change in income tax treatment of certain repairs expenditures for gas plant assets was made pursuant to an IRS Revenue Procedure which allows, under an Internal Revenue Code (IRC) section, for such expenditures to be deducted from taxable income when incurred.
|
§
|
the impact of Otay Mesa VIE, which we discuss below; and
|
§
|
lower exclusions from taxable income of the equity portion of AFUDC; offset by
|
§
|
income tax benefit in 2013 resulting from a change made in the third quarter of 2012 in the income tax treatment of certain repairs expenditures for electric transmission and distribution assets that are capitalized for financial statement purposes, as we discuss above for Sempra Energy Consolidated.
|
§
|
income tax benefit in 2013 resulting from a change made in the fourth quarter of 2012 in the income tax treatment of certain repairs expenditures for gas assets that are capitalized for financial statement purposes, as we discuss above for Sempra Energy Consolidated; offset by
|
§
|
higher book depreciation over income tax depreciation related to a certain portion of utility plant fixed assets; and
|
§
|
lower deductions for self-developed software costs.
|
§
|
repairs expenditures related to a certain portion of utility plant fixed assets
|
§
|
the equity portion of AFUDC
|
§
|
a portion of the cost of removal of utility plant assets
|
§
|
self-developed software expenditures
|
§
|
depreciation on a certain portion of utility plant fixed assets
|
§
|
The California Utilities use natural gas energy derivatives, on their customers’ behalf, with the objective of managing price risk and basis risks, and lowering natural gas costs. These derivatives include fixed price natural gas positions, options, and basis risk instruments, which are either exchange-traded or over-the-counter financial instruments. This activity is governed by risk management and transacting activity plans that have been filed with and approved by the CPUC. Natural gas derivative activities are recorded as commodity costs that are offset by regulatory account balances and are recovered in rates. Net commodity cost impacts on the Condensed Consolidated Statements of Operations are reflected in Cost of Electric Fuel and Purchased Power or in Cost of Natural Gas.
|
§
|
SDG&E is allocated and may purchase congestion revenue rights (CRRs), which serve to reduce the regional electricity price volatility risk that may result from local transmission capacity constraints. Unrealized gains and losses do not impact earnings, as they are offset by regulatory account balances. Realized gains and losses associated with CRRs are recorded in Cost of Electric Fuel and Purchased Power, which is recoverable in rates, on the Condensed Consolidated Statements of Operations.
|
§
|
Sempra Mexico and Sempra Natural Gas may use natural gas and electricity derivatives, as appropriate, to optimize the earnings of their assets which support the following businesses: liquefied natural gas (LNG), natural gas transportation, power generation, and Sempra Natural Gas’ storage. Gains and losses associated with undesignated derivatives are recognized in Energy-Related Businesses Revenues or in Cost of Natural Gas, Electric Fuel and Purchased Power on the Condensed Consolidated Statements of Operations. Certain of these derivatives may also be designated as cash flow hedges. Sempra Mexico also uses natural gas energy derivatives with the objective of managing price risk and lowering natural gas prices at its Mexican distribution operations. These derivatives, which are recorded as commodity costs that are offset by regulatory account balances and recovered in rates, are recognized in Cost of Natural Gas on the Condensed Consolidated Statements of Operations.
|
§
|
From time to time, our various businesses, including the California Utilities, may use other energy derivatives to hedge exposures such as the price of vehicle fuel.
|
NET ENERGY DERIVATIVE VOLUMES
|
|||||
Segment and Commodity
|
March 31, 2013
|
December 31, 2012
|
|||
California Utilities:
|
|||||
SDG&E:
|
|||||
Natural gas
|
25 million MMBtu
|
25 million MMBtu
|
(1)
|
||
Congestion revenue rights
|
26 million MWh
|
30 million MWh
|
(2)
|
||
SoCalGas - natural gas
|
2 million MMBtu
|
―
|
|||
Energy-Related Businesses:
|
|||||
Sempra Natural Gas:
|
|||||
Electric power
|
2 million MWh
|
1 million MWh
|
|||
Natural gas
|
27 million MMBtu
|
36 million MMBtu
|
|||
Sempra Mexico - natural gas
|
1 million MMBtu
|
1 million MMBtu
|
|||
(1)
|
Million British thermal units
|
||||
(2)
|
Megawatt hours
|
INTEREST RATE DERIVATIVES
|
|||||||
(Dollars in millions)
|
|||||||
March 31, 2013
|
December 31, 2012
|
||||||
Notional Debt
|
Maturities
|
Notional Debt
|
Maturities
|
||||
Sempra Energy Consolidated
|
|||||||
Cash flow hedges(1)
|
$
|
436
|
2013-2028
|
$
|
439
|
2013-2028
|
|
Fair value hedges
|
500
|
2013-2016
|
500
|
2013-2016
|
|||
SDG&E
|
|||||||
Cash flow hedge(1)
|
342
|
2019
|
345
|
2019
|
|||
(1)
|
Includes Otay Mesa VIE. All of SDG&E’s interest rate derivatives relate to Otay Mesa VIE.
|
DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||||||
(Dollars in millions)
|
|||||||||
March 31, 2013
|
|||||||||
Deferred
|
|||||||||
credits
|
|||||||||
Current
|
Current
|
and other
|
|||||||
assets:
|
liabilities:
|
liabilities:
|
|||||||
Fixed-price
|
Investments
|
Fixed-price
|
Fixed-price
|
||||||
contracts
|
and other
|
contracts
|
contracts
|
||||||
and other
|
assets:
|
and other
|
and other
|
||||||
derivatives(1)
|
Sundry
|
derivatives(2)
|
derivatives
|
||||||
Sempra Energy Consolidated:
|
|||||||||
Derivatives designated as hedging instruments:
|
|||||||||
Interest rate and foreign exchange instruments(3)
|
$
|
7
|
$
|
13
|
$
|
(19)
|
$
|
(76)
|
|
Derivatives not designated as hedging instruments:
|
|||||||||
Interest rate and foreign exchange instruments
|
8
|
37
|
(7)
|
(32)
|
|||||
Commodity contracts not subject to rate recovery:
|
76
|
15
|
(104)
|
(18)
|
|||||
Associated offsetting commodity contracts
|
(71)
|
(13)
|
71
|
13
|
|||||
Associated offsetting cash collateral
|
―
|
―
|
18
|
1
|
|||||
Commodity contracts subject to rate recovery:
|
30
|
34
|
(20)
|
(1)
|
|||||
Associated offsetting commodity contracts
|
(6)
|
―
|
6
|
―
|
|||||
Associated offsetting cash collateral
|
―
|
―
|
11
|
1
|
|||||
Net amounts presented on the balance sheet
|
44
|
86
|
(44)
|
(112)
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
not subject to rate recovery
|
20
|
―
|
―
|
―
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
subject to rate recovery
|
24
|
―
|
―
|
―
|
|||||
Total
|
$
|
88
|
$
|
86
|
$
|
(44)
|
$
|
(112)
|
|
SDG&E:
|
|||||||||
Derivatives designated as hedging instruments:
|
|||||||||
Interest rate instruments(3)
|
$
|
―
|
$
|
―
|
$
|
(17)
|
$
|
(58)
|
|
Derivatives not designated as hedging instruments:
|
|||||||||
Commodity contracts subject to rate recovery:
|
27
|
34
|
(18)
|
(1)
|
|||||
Associated offsetting commodity contracts
|
(5)
|
―
|
5
|
―
|
|||||
Associated offsetting cash collateral
|
―
|
―
|
10
|
1
|
|||||
Net amounts presented on the balance sheet
|
22
|
34
|
(20)
|
(58)
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
not subject to rate recovery(4)
|
1
|
―
|
―
|
―
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
subject to rate recovery
|
22
|
―
|
―
|
―
|
|||||
Total
|
$
|
45
|
$
|
34
|
$
|
(20)
|
$
|
(58)
|
|
SoCalGas:
|
|||||||||
Derivatives not designated as hedging instruments:
|
|||||||||
Commodity contracts subject to rate recovery:
|
$
|
3
|
$
|
―
|
$
|
(2)
|
$
|
―
|
|
Associated offsetting commodity contracts
|
(1)
|
―
|
1
|
―
|
|||||
Associated offsetting cash collateral
|
―
|
―
|
1
|
―
|
|||||
Net amounts presented on the balance sheet
|
2
|
―
|
―
|
―
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
not subject to rate recovery(4)
|
2
|
―
|
―
|
―
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
subject to rate recovery
|
2
|
―
|
―
|
―
|
|||||
Total
|
$
|
6
|
$
|
―
|
$
|
―
|
$
|
―
|
|
(1)
|
Included in Current Assets: Other for SoCalGas.
|
||||||||
(2)
|
Included in Current Liabilities: Other for SoCalGas.
|
||||||||
(3)
|
Includes Otay Mesa VIE. All of SDG&E’s amounts relate to Otay Mesa VIE.
|
||||||||
(4)
|
Includes cash collateral not offset related to a negligible amount of commodity contracts not subject to rate recovery.
|
||||||||
|
|||||||||
DERIVATIVE INSTRUMENTS ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||||||||
(Dollars in millions)
|
|||||||||
December 31, 2012
|
|||||||||
Deferred
|
|||||||||
credits
|
|||||||||
Current
|
Current
|
and other
|
|||||||
assets:
|
liabilities:
|
liabilities:
|
|||||||
Fixed-price
|
Investments
|
Fixed-price
|
Fixed-price
|
||||||
contracts
|
and other
|
contracts
|
contracts
|
||||||
and other
|
assets:
|
and other
|
and other
|
||||||
derivatives(1)
|
Sundry
|
derivatives(2)
|
derivatives
|
||||||
Sempra Energy Consolidated:
|
|||||||||
Derivatives designated as hedging instruments:
|
|||||||||
Interest rate instruments(3)
|
$
|
7
|
$
|
12
|
$
|
(19)
|
$
|
(64)
|
|
Commodity contracts not subject to rate recovery
|
1
|
―
|
―
|
―
|
|||||
Derivatives not designated as hedging instruments:
|
|||||||||
Interest rate instruments
|
8
|
40
|
(8)
|
(35)
|
|||||
Commodity contracts not subject to rate recovery:
|
117
|
15
|
(116)
|
(27)
|
|||||
Associated offsetting commodity contracts
|
(102)
|
(12)
|
102
|
12
|
|||||
Associated offsetting cash collateral
|
―
|
―
|
4
|
7
|
|||||
Commodity contracts subject to rate recovery:
|
30
|
35
|
(35)
|
(1)
|
|||||
Associated offsetting commodity contracts
|
(4)
|
―
|
4
|
―
|
|||||
Associated offsetting cash collateral
|
―
|
―
|
22
|
1
|
|||||
Net amounts presented on the balance sheet
|
57
|
90
|
(46)
|
(107)
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
not subject to rate recovery
|
22
|
―
|
―
|
―
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
subject to rate recovery
|
13
|
―
|
―
|
―
|
|||||
Total
|
$
|
92
|
$
|
90
|
$
|
(46)
|
$
|
(107)
|
|
SDG&E:
|
|||||||||
Derivatives designated as hedging instruments:
|
|||||||||
Interest rate instruments(3)
|
$
|
―
|
$
|
―
|
$
|
(17)
|
$
|
(64)
|
|
Derivatives not designated as hedging instruments:
|
|||||||||
Commodity contracts subject to rate recovery:
|
28
|
35
|
(33)
|
(1)
|
|||||
Associated offsetting commodity contracts
|
(3)
|
―
|
3
|
―
|
|||||
Associated offsetting cash collateral
|
―
|
―
|
22
|
1
|
|||||
Net amounts presented on the balance sheet
|
25
|
35
|
(25)
|
(64)
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
not subject to rate recovery(4)
|
1
|
―
|
―
|
―
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
subject to rate recovery
|
12
|
―
|
―
|
―
|
|||||
Total
|
$
|
38
|
$
|
35
|
$
|
(25)
|
$
|
(64)
|
|
SoCalGas:
|
|||||||||
Derivatives not designated as hedging instruments:
|
|||||||||
Commodity contracts subject to rate recovery:
|
$
|
2
|
$
|
―
|
$
|
(2)
|
$
|
―
|
|
Associated offsetting commodity contracts
|
(1)
|
―
|
1
|
―
|
|||||
Net amounts presented on the balance sheet
|
1
|
―
|
(1)
|
―
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
not subject to rate recovery(4)
|
2
|
―
|
―
|
―
|
|||||
Additional margin posted for commodity contracts
|
|||||||||
subject to rate recovery
|
1
|
―
|
―
|
―
|
|||||
Total
|
$
|
4
|
$
|
―
|
$
|
(1)
|
$
|
―
|
|
(1)
|
Included in Current Assets: Other for SoCalGas.
|
||||||||
(2)
|
Included in Current Liabilities: Other for SoCalGas.
|
||||||||
(3)
|
Includes Otay Mesa VIE. All of SDG&E’s amounts relate to Otay Mesa VIE.
|
||||||||
(4)
|
Includes cash collateral not offset related to a negligible amount of commodity contracts not subject to rate recovery.
|
FAIR VALUE HEDGE IMPACT ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||
(Dollars in millions)
|
||||||
Gain on derivatives recognized in earnings
|
||||||
Three months ended March 31,
|
||||||
Location
|
2013
|
2012
|
||||
Sempra Energy Consolidated:
|
||||||
Interest rate instruments
|
Interest Expense
|
$
|
2
|
$
|
2
|
|
Interest rate instruments
|
Other Income, Net
|
―
|
2
|
|||
Total(1)
|
$
|
2
|
$
|
4
|
||
(1)
|
There has been no hedge ineffectiveness on these swaps. Changes in the fair values of the interest rate swap agreements are exactly offset by changes in the fair value of the underlying long-term debt.
|
CASH FLOW HEDGE IMPACT ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||||||
(Dollars in millions)
|
|||||||||||
Pretax gain (loss) recognized
|
Gain (loss) reclassified from AOCI
|
||||||||||
in OCI (effective portion)
|
into earnings (effective portion)
|
||||||||||
Three months ended March 31,
|
Three months ended March 31,
|
||||||||||
2013
|
2012
|
Location
|
2013
|
2012
|
|||||||
Sempra Energy Consolidated:
|
|||||||||||
Interest rate and foreign
|
|||||||||||
exchange instruments(1)
|
$
|
(28)
|
$
|
3
|
Interest Expense
|
$
|
(3)
|
$
|
(1)
|
||
Equity Earnings,
|
|||||||||||
Interest rate instruments
|
1
|
1
|
Before Income Tax
|
(2)
|
(2)
|
||||||
Total
|
$
|
(27)
|
$
|
4
|
$
|
(5)
|
$
|
(3)
|
|||
SDG&E:
|
|||||||||||
Interest rate instruments(1)
|
$
|
1
|
$
|
―
|
Interest Expense
|
$
|
(2)
|
$
|
―
|
||
SoCalGas:
|
|||||||||||
Interest rate instruments
|
$
|
―
|
$
|
―
|
Interest Expense
|
$
|
―
|
$
|
(1)
|
||
(1)
|
Amounts include Otay Mesa VIE. All of SDG&E’s interest rate derivative activity relates to Otay Mesa VIE. There has been a negligible amount of ineffectiveness related to these swaps.
|
UNDESIGNATED DERIVATIVE IMPACT ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||
(Dollars in millions)
|
||||||
Gain (loss) on derivatives recognized in earnings
|
||||||
Three months ended March 31,
|
||||||
Location
|
2013
|
2012
|
||||
Sempra Energy Consolidated:
|
||||||
Interest rate and foreign exchange
|
||||||
instruments
|
Other Income, Net
|
$
|
7
|
$
|
11
|
|
Commodity contracts not subject
|
Revenues: Energy-Related
|
|||||
to rate recovery
|
Businesses
|
(20)
|
11
|
|||
Commodity contracts not subject
|
||||||
to rate recovery
|
Operation and Maintenance
|
―
|
1
|
|||
Commodity contracts subject
|
Cost of Electric Fuel
|
|||||
to rate recovery
|
and Purchased Power
|
9
|
(21)
|
|||
Total
|
$
|
(4)
|
$
|
2
|
||
SDG&E:
|
||||||
Commodity contracts subject
|
Cost of Electric Fuel
|
|||||
to rate recovery
|
and Purchased Power
|
$
|
9
|
$
|
(21)
|
|
SoCalGas:
|
||||||
Commodity contracts not subject
|
||||||
to rate recovery
|
Operation and Maintenance
|
$
|
―
|
$
|
1
|
§
|
Nuclear decommissioning trusts reflect the assets of SDG&E’s nuclear decommissioning trusts, excluding cash balances. A third party trustee values the trust assets using prices from a pricing service based on a market approach. We validate these prices by comparison to prices from other independent data sources. Equity and certain debt securities are valued using quoted prices listed on nationally recognized securities exchanges or based on closing prices reported in the active market in which the identical security is traded (Level 1). Other debt securities are valued based on yields that are currently available for comparable securities of issuers with similar credit ratings (Level 2).
|
§
|
We enter into commodity contracts and interest rate derivatives primarily as a means to manage price exposures. We primarily use a market approach with market participant assumptions to value these derivatives. Market participant assumptions include those about risk, and the risk inherent in the inputs to the valuation techniques. These inputs can be readily observable, market corroborated, or generally unobservable. We have exchange-traded derivatives that are valued based on quoted prices in active markets for the identical instruments (Level 1). We also may have other commodity derivatives that are valued using industry standard models that consider quoted forward prices for commodities, time value, current market and contractual prices for the underlying instruments, volatility factors, and other relevant economic measures (Level 2). All Level 3 recurring items are related to CRRs at SDG&E, as we discuss below under “Level 3 Information.” We record commodity derivative contracts that are subject to rate recovery as commodity costs that are offset by regulatory account balances and are recovered in rates.
|
§
|
Investments include marketable securities that we value using a market approach based on closing prices reported in the active market in which the identical security is traded (Level 1).
|
RECURRING FAIR VALUE MEASURES – SEMPRA ENERGY CONSOLIDATED
|
|||||||||||
(Dollars in millions)
|
|||||||||||
At fair value as of March 31, 2013
|
|||||||||||
Collateral
|
|||||||||||
Level 1
|
Level 2
|
Level 3
|
netted
|
Total
|
|||||||
Assets:
|
|||||||||||
Nuclear decommissioning trusts:
|
|||||||||||
Equity securities
|
$
|
569
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
569
|
|
Debt securities:
|
|||||||||||
Debt securities issued by the U.S. Treasury and other
|
|||||||||||
U.S. government corporations and agencies
|
106
|
71
|
―
|
―
|
177
|
||||||
Municipal bonds
|
―
|
64
|
―
|
―
|
64
|
||||||
Other securities
|
―
|
134
|
―
|
―
|
134
|
||||||
Total debt securities
|
106
|
269
|
―
|
―
|
375
|
||||||
Total nuclear decommissioning trusts(1)
|
675
|
269
|
―
|
―
|
944
|
||||||
Interest rate instruments
|
―
|
65
|
―
|
―
|
65
|
||||||
Commodity contracts subject to rate recovery
|
22
|
2
|
58
|
―
|
82
|
||||||
Commodity contracts not subject to rate recovery
|
15
|
12
|
―
|
―
|
27
|
||||||
Total
|
$
|
712
|
$
|
348
|
$
|
58
|
$
|
―
|
$
|
1,118
|
|
Liabilities:
|
|||||||||||
Interest rate and foreign exchange instruments
|
$
|
―
|
$
|
134
|
$
|
―
|
$
|
―
|
$
|
134
|
|
Commodity contracts subject to rate recovery
|
12
|
3
|
―
|
(12)
|
3
|
||||||
Commodity contracts not subject to rate recovery
|
15
|
23
|
―
|
(19)
|
19
|
||||||
Total
|
$
|
27
|
$
|
160
|
$
|
―
|
$
|
(31)
|
$
|
156
|
|
|
|||||||||||
At fair value as of December 31, 2012
|
|||||||||||
Collateral
|
|||||||||||
Level 1
|
Level 2
|
Level 3
|
netted
|
Total
|
|||||||
Assets:
|
|||||||||||
Nuclear decommissioning trusts:
|
|||||||||||
Equity securities
|
$
|
539
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
539
|
|
Debt securities:
|
|||||||||||
Debt securities issued by the U.S. Treasury and other
|
|||||||||||
U.S. government corporations and agencies
|
87
|
69
|
―
|
―
|
156
|
||||||
Municipal bonds
|
―
|
63
|
―
|
―
|
63
|
||||||
Other securities
|
―
|
130
|
―
|
―
|
130
|
||||||
Total debt securities
|
87
|
262
|
―
|
―
|
349
|
||||||
Total nuclear decommissioning trusts(1)
|
626
|
262
|
―
|
―
|
888
|
||||||
Interest rate instruments
|
―
|
68
|
―
|
―
|
68
|
||||||
Commodity contracts subject to rate recovery
|
13
|
―
|
61
|
―
|
74
|
||||||
Commodity contracts not subject to rate recovery
|
28
|
15
|
―
|
―
|
43
|
||||||
Investments
|
1
|
―
|
―
|
―
|
1
|
||||||
Total
|
$
|
668
|
$
|
345
|
$
|
61
|
$
|
―
|
$
|
1,074
|
|
Liabilities:
|
|||||||||||
Interest rate instruments
|
$
|
―
|
$
|
126
|
$
|
―
|
$
|
―
|
$
|
126
|
|
Commodity contracts subject to rate recovery
|
23
|
9
|
―
|
(23)
|
9
|
||||||
Commodity contracts not subject to rate recovery
|
6
|
23
|
―
|
(11)
|
18
|
||||||
Total
|
$
|
29
|
$
|
158
|
$
|
―
|
$
|
(34)
|
$
|
153
|
|
(1)
|
Excludes cash balances and cash equivalents.
|
RECURRING FAIR VALUE MEASURES – SDG&E
|
|||||||||||
(Dollars in millions)
|
|||||||||||
At fair value as of March 31, 2013
|
|||||||||||
Collateral
|
|||||||||||
Level 1
|
Level 2
|
Level 3
|
netted
|
Total
|
|||||||
Assets:
|
|||||||||||
Nuclear decommissioning trusts:
|
|||||||||||
Equity securities
|
$
|
569
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
569
|
|
Debt securities:
|
|||||||||||
Debt securities issued by the U.S. Treasury and other
|
|||||||||||
U.S. government corporations and agencies
|
106
|
71
|
―
|
―
|
177
|
||||||
Municipal bonds
|
―
|
64
|
―
|
―
|
64
|
||||||
Other securities
|
―
|
134
|
―
|
―
|
134
|
||||||
Total debt securities
|
106
|
269
|
―
|
―
|
375
|
||||||
Total nuclear decommissioning trusts(1)
|
675
|
269
|
―
|
―
|
944
|
||||||
Commodity contracts subject to rate recovery
|
20
|
―
|
58
|
―
|
78
|
||||||
Commodity contracts not subject to rate recovery
|
1
|
―
|
―
|
―
|
1
|
||||||
Total
|
$
|
696
|
$
|
269
|
$
|
58
|
$
|
―
|
$
|
1,023
|
|
Liabilities:
|
|||||||||||
Interest rate instruments
|
$
|
―
|
$
|
75
|
$
|
―
|
$
|
―
|
$
|
75
|
|
Commodity contracts subject to rate recovery
|
11
|
3
|
―
|
(11)
|
3
|
||||||
Total
|
$
|
11
|
$
|
78
|
$
|
―
|
$
|
(11)
|
$
|
78
|
|
|
At fair value as of December 31, 2012
|
||||||||||
Collateral
|
|||||||||||
Level 1
|
Level 2
|
Level 3
|
netted
|
Total
|
|||||||
Assets:
|
|||||||||||
Nuclear decommissioning trusts:
|
|||||||||||
Equity securities
|
$
|
539
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
539
|
|
Debt securities:
|
|||||||||||
Debt securities issued by the U.S. Treasury and other
|
|||||||||||
U.S. government corporations and agencies
|
87
|
69
|
―
|
―
|
156
|
||||||
Municipal bonds
|
―
|
63
|
―
|
―
|
63
|
||||||
Other securities
|
―
|
130
|
―
|
―
|
130
|
||||||
Total debt securities
|
87
|
262
|
―
|
―
|
349
|
||||||
Total nuclear decommissioning trusts(1)
|
626
|
262
|
―
|
―
|
888
|
||||||
Commodity contracts subject to rate recovery
|
12
|
―
|
61
|
―
|
73
|
||||||
Commodity contracts not subject to rate recovery
|
1
|
―
|
―
|
―
|
1
|
||||||
Total
|
$
|
639
|
$
|
262
|
$
|
61
|
$
|
―
|
$
|
962
|
|
Liabilities:
|
|||||||||||
Interest rate instruments
|
$
|
―
|
$
|
81
|
$
|
―
|
$
|
―
|
$
|
81
|
|
Commodity contracts subject to rate recovery
|
23
|
8
|
―
|
(23)
|
8
|
||||||
Total
|
$
|
23
|
$
|
89
|
$
|
―
|
$
|
(23)
|
$
|
89
|
|
(1)
|
Excludes cash balances and cash equivalents.
|
RECURRING FAIR VALUE MEASURES – SOCALGAS
|
||||||||||
(Dollars in millions)
|
||||||||||
At fair value as of March 31, 2013
|
||||||||||
Collateral
|
||||||||||
Level 1
|
Level 2
|
Level 3
|
netted
|
Total
|
||||||
Assets:
|
||||||||||
Commodity contracts subject to rate recovery
|
$
|
2
|
$
|
2
|
$
|
―
|
$
|
―
|
$
|
4
|
Commodity contracts not subject to rate recovery
|
2
|
―
|
―
|
―
|
2
|
|||||
Total
|
$
|
4
|
$
|
2
|
$
|
―
|
$
|
―
|
$
|
6
|
Liabilities:
|
||||||||||
Commodity contracts subject to rate recovery
|
$
|
1
|
$
|
―
|
$
|
―
|
$
|
(1)
|
$
|
―
|
Total
|
$
|
1
|
$
|
―
|
$
|
―
|
$
|
(1)
|
$
|
―
|
|
At fair value as of December 31, 2012
|
|||||||||
Collateral
|
||||||||||
Level 1
|
Level 2
|
Level 3
|
netted
|
Total
|
||||||
Assets:
|
||||||||||
Commodity contracts subject to rate recovery
|
$
|
1
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
1
|
Commodity contracts not subject to rate recovery
|
3
|
―
|
―
|
―
|
3
|
|||||
Total
|
$
|
4
|
$
|
―
|
$
|
―
|
$
|
―
|
$
|
4
|
Liabilities:
|
||||||||||
Commodity contracts subject to rate recovery
|
$
|
―
|
$
|
1
|
$
|
―
|
$
|
―
|
$
|
1
|
Total
|
$
|
―
|
$
|
1
|
$
|
―
|
$
|
―
|
$
|
1
|
LEVEL 3 RECONCILIATIONS
|
||||
(Dollars in millions)
|
||||
Three months ended March 31,
|
||||
2013
|
2012
|
|||
Balance as of January 1
|
$
|
61
|
$
|
23
|
Realized and unrealized (losses) gains
|
(1)
|
2
|
||
Allocated transmission instruments
|
―
|
1
|
||
Settlements
|
(2)
|
(5)
|
||
Balance as of March 31
|
$
|
58
|
$
|
21
|
Change in unrealized gains or losses relating to
|
||||
instruments still held at March 31
|
$
|
―
|
$
|
―
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
||||||||||||
(Dollars in millions)
|
||||||||||||
March 31, 2013
|
||||||||||||
Carrying
|
Fair Value
|
|||||||||||
Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Sempra Energy Consolidated:
|
||||||||||||
Total long-term debt(1)
|
$
|
11,889
|
$
|
―
|
$
|
12,389
|
$
|
954
|
$
|
13,343
|
||
Preferred stock of subsidiaries
|
99
|
―
|
108
|
―
|
108
|
|||||||
SDG&E:
|
||||||||||||
Total long-term debt(2)
|
$
|
4,133
|
$
|
―
|
$
|
4,368
|
$
|
342
|
$
|
4,710
|
||
Contingently redeemable preferred stock
|
79
|
―
|
85
|
―
|
85
|
|||||||
SoCalGas:
|
||||||||||||
Total long-term debt(3)
|
$
|
1,413
|
$
|
―
|
$
|
1,596
|
$
|
―
|
$
|
1,596
|
||
Preferred stock
|
22
|
―
|
25
|
―
|
25
|
|||||||
|
December 31, 2012
|
|||||||||||
Carrying
|
Fair Value
|
|||||||||||
Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Sempra Energy Consolidated:
|
||||||||||||
Investments in affordable housing partnerships(4)
|
$
|
12
|
$
|
―
|
$
|
―
|
$
|
36
|
$
|
36
|
||
Total long-term debt(1)
|
11,873
|
―
|
12,287
|
956
|
13,243
|
|||||||
Preferred stock of subsidiaries
|
99
|
―
|
107
|
―
|
107
|
|||||||
SDG&E:
|
||||||||||||
Total long-term debt(2)
|
$
|
4,135
|
$
|
―
|
$
|
4,243
|
$
|
345
|
$
|
4,588
|
||
Contingently redeemable preferred stock
|
79
|
―
|
85
|
―
|
85
|
|||||||
SoCalGas:
|
||||||||||||
Total long-term debt(3)
|
$
|
1,413
|
$
|
―
|
$
|
1,599
|
$
|
―
|
$
|
1,599
|
||
Preferred stock
|
22
|
―
|
24
|
―
|
24
|
|||||||
(1)
|
Before reductions for unamortized discount (net of premium) of $16 million at both March 31, 2013 and December 31, 2012, and excluding capital leases of $188 million at March 31, 2013 and $189 million at December 31, 2012, and commercial paper classified as long-term debt of $300 million at December 31, 2012. We discuss our long-term debt in Note 6 above and in Note 5 of the Notes to Consolidated Financial Statements in the Annual Report.
|
|||||||||||
(2)
|
Before reductions for unamortized discount of $12 million at both March 31, 2013 and December 31, 2012, and excluding capital leases of $184 million at March 31, 2013 and $185 million at December 31, 2012.
|
|||||||||||
(3)
|
Before reductions for unamortized discount of $4 million at both March 31, 2013 and December 31, 2012, and excluding capital leases of $4 million at both March 31, 2013 and December 31, 2012.
|
|||||||||||
(4)
|
Investments in affordable housing partnerships at Parent and Other.
|
NUCLEAR DECOMMISSIONING TRUSTS
|
|||||||||
(Dollars in millions)
|
|||||||||
Gross
|
Gross
|
Estimated
|
|||||||
Unrealized
|
Unrealized
|
Fair
|
|||||||
Cost
|
Gains
|
Losses
|
Value
|
||||||
As of March 31, 2013:
|
|||||||||
Debt securities:
|
|||||||||
Debt securities issued by the U.S. Treasury and other
|
|||||||||
U.S. government corporations and agencies(1)
|
$
|
170
|
$
|
8
|
$
|
(1)
|
$
|
177
|
|
Municipal bonds(2)
|
58
|
6
|
―
|
64
|
|||||
Other securities(3)
|
129
|
6
|
(1)
|
134
|
|||||
Total debt securities
|
357
|
20
|
(2)
|
375
|
|||||
Equity securities
|
238
|
333
|
(2)
|
569
|
|||||
Cash and cash equivalents
|
8
|
―
|
―
|
8
|
|||||
Total
|
$
|
603
|
$
|
353
|
$
|
(4)
|
$
|
952
|
|
As of December 31, 2012:
|
|||||||||
Debt securities:
|
|||||||||
Debt securities issued by the U.S. Treasury and other
|
|||||||||
U.S. government corporations and agencies
|
$
|
147
|
$
|
9
|
$
|
―
|
$
|
156
|
|
Municipal bonds
|
57
|
6
|
―
|
63
|
|||||
Other securities
|
121
|
10
|
(1)
|
130
|
|||||
Total debt securities
|
325
|
25
|
(1)
|
349
|
|||||
Equity securities
|
249
|
292
|
(2)
|
539
|
|||||
Cash and cash equivalents
|
20
|
―
|
―
|
20
|
|||||
Total
|
$
|
594
|
$
|
317
|
$
|
(3)
|
$
|
908
|
|
(1)
|
Maturity dates are 2013-2042
|
||||||||
(2)
|
Maturity dates are 2013-2111
|
||||||||
(3)
|
Maturity dates are 2013-2112
|
SALES OF SECURITIES
|
||||
(Dollars in millions)
|
||||
Three months ended March 31,
|
||||
2013
|
2012
|
|||
Proceeds from sales
|
$
|
134
|
$
|
129
|
Gross realized gains
|
5
|
4
|
||
Gross realized losses
|
(3)
|
―
|
SUMMARY OF SDG&E NET BOOK INVESTMENT AND RATE BASE INVESTMENT IN SONGS(1)
|
|||||||||
(Dollars in millions)
|
|||||||||
Unit 2
|
Unit 3
|
Common Plant
|
Total
|
||||||
Net book investment:
|
|||||||||
Net property, plant and equipment, including
|
|||||||||
construction work in progress
|
$
|
151
|
$
|
115
|
$
|
127
|
$
|
393
|
|
Materials and supplies
|
―
|
―
|
10
|
10
|
|||||
Nuclear fuel
|
―
|
―
|
116
|
116
|
|||||
Net book investment
|
$
|
151
|
$
|
115
|
$
|
253
|
$
|
519
|
|
Rate base investment
|
$
|
99
|
$
|
94
|
$
|
78
|
$
|
271
|
|
(1)
|
Excludes nuclear decommissioning-related assets and liabilities.
|
1.
|
SDG&E provides electric service to San Diego and southern Orange counties and natural gas service to San Diego County.
|
2.
|
SoCalGas is a natural gas distribution utility, serving customers throughout most of Southern California and part of central California.
|
3.
|
Sempra South American Utilities operates electric transmission and distribution utilities in Chile and Peru, and owns interests in utilities in Argentina. We are currently pursuing the sale of our interests in the Argentine utilities, which we discuss further in Note 4 above and in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report.
|
4.
|
Sempra Mexico develops, owns and operates, or holds interests in, natural gas transmission pipelines and propane and ethane systems, a natural gas distribution utility, electric generation facilities (including wind), a terminal for the import of LNG, and marketing operations for the purchase of LNG and the purchase and sale of natural gas in Mexico.
|
5.
|
Sempra Renewables develops, owns and operates, or holds interests in, wind and solar energy projects in Arizona, California, Colorado, Hawaii, Indiana, Kansas, Nevada and Pennsylvania to serve wholesale electricity markets in the United States.
|
6.
|
Sempra Natural Gas develops, owns and operates, or holds interests in, a natural gas-fired electric generation asset, natural gas pipelines and storage facilities, natural gas distribution utilities and a terminal for the import and export of LNG and sale of natural gas, all within the United States.
|
SEGMENT INFORMATION
|
|||||||||
(Dollars in millions)
|
|||||||||
Three months ended March 31,
|
|||||||||
2013
|
2012
|
||||||||
REVENUES
|
|||||||||
SDG&E
|
$
|
939
|
35
|
%
|
$
|
834
|
35
|
%
|
|
SoCalGas
|
983
|
37
|
880
|
37
|
|||||
Sempra South American Utilities
|
384
|
15
|
357
|
15
|
|||||
Sempra Mexico
|
168
|
6
|
136
|
6
|
|||||
Sempra Renewables
|
21
|
1
|
8
|
―
|
|||||
Sempra Natural Gas
|
253
|
10
|
269
|
11
|
|||||
Adjustments and eliminations
|
―
|
―
|
(1)
|
―
|
|||||
Intersegment revenues(1)
|
(98)
|
(4)
|
(100)
|
(4)
|
|||||
Total
|
$
|
2,650
|
100
|
%
|
$
|
2,383
|
100
|
%
|
|
INTEREST EXPENSE
|
|||||||||
SDG&E
|
$
|
48
|
$
|
36
|
|||||
SoCalGas
|
17
|
17
|
|||||||
Sempra South American Utilities
|
7
|
10
|
|||||||
Sempra Mexico
|
2
|
3
|
|||||||
Sempra Renewables
|
8
|
4
|
|||||||
Sempra Natural Gas
|
23
|
20
|
|||||||
All other
|
63
|
58
|
|||||||
Intercompany eliminations
|
(30)
|
(35)
|
|||||||
Total
|
$
|
138
|
$
|
113
|
|||||
INTEREST INCOME
|
|||||||||
SDG&E
|
$
|
1
|
$
|
―
|
|||||
Sempra South American Utilities
|
5
|
4
|
|||||||
Sempra Mexico
|
1
|
―
|
|||||||
Sempra Renewables
|
3
|
―
|
|||||||
Sempra Natural Gas
|
11
|
11
|
|||||||
All other
|
(1)
|
1
|
|||||||
Intercompany eliminations
|
(14)
|
(11)
|
|||||||
Total
|
$
|
6
|
$
|
5
|
|||||
DEPRECIATION AND AMORTIZATION
|
|||||||||
SDG&E
|
$
|
134
|
45
|
%
|
$
|
112
|
44
|
%
|
|
SoCalGas
|
100
|
34
|
87
|
34
|
|||||
Sempra South American Utilities
|
15
|
5
|
13
|
5
|
|||||
Sempra Mexico
|
16
|
5
|
16
|
6
|
|||||
Sempra Renewables
|
8
|
3
|
3
|
1
|
|||||
Sempra Natural Gas
|
20
|
7
|
23
|
9
|
|||||
All other
|
2
|
1
|
3
|
1
|
|||||
Total
|
$
|
295
|
100
|
%
|
$
|
257
|
100
|
%
|
|
INCOME TAX EXPENSE (BENEFIT)
|
|||||||||
SDG&E
|
$
|
51
|
$
|
60
|
|||||
SoCalGas
|
24
|
40
|
|||||||
Sempra South American Utilities
|
17
|
13
|
|||||||
Sempra Mexico
|
26
|
35
|
|||||||
Sempra Renewables
|
(8)
|
(17)
|
|||||||
Sempra Natural Gas
|
33
|
2
|
|||||||
All other
|
35
|
(16)
|
|||||||
Total
|
$
|
178
|
$
|
117
|
SEGMENT INFORMATION (Continued)
|
|||||||||
(Dollars in millions)
|
|||||||||
Three months ended March 31,
|
|||||||||
2013
|
2012
|
||||||||
EQUITY EARNINGS (LOSSES)
|
|||||||||
Earnings recorded before tax:
|
|||||||||
Sempra Renewables
|
$
|
1
|
$
|
1
|
|||||
Sempra Natural Gas
|
9
|
11
|
|||||||
Total
|
$
|
10
|
$
|
12
|
|||||
Earnings (losses) recorded net of tax:
|
|||||||||
Sempra South American Utilities
|
$
|
(7)
|
$
|
―
|
|||||
Sempra Mexico
|
11
|
11
|
|||||||
Total
|
$
|
4
|
$
|
11
|
|||||
EARNINGS (LOSSES)
|
|||||||||
SDG&E(2)
|
$
|
91
|
51
|
%
|
$
|
105
|
45
|
%
|
|
SoCalGas(2)
|
46
|
26
|
66
|
28
|
|||||
Sempra South American Utilities
|
37
|
21
|
40
|
17
|
|||||
Sempra Mexico
|
31
|
17
|
33
|
14
|
|||||
Sempra Renewables
|
4
|
2
|
10
|
4
|
|||||
Sempra Natural Gas
|
53
|
30
|
1
|
―
|
|||||
All other
|
(84)
|
(47)
|
(19)
|
(8)
|
|||||
Total
|
$
|
178
|
100
|
%
|
$
|
236
|
100
|
%
|
|
EXPENDITURES FOR PROPERTY PLANT & EQUIPMENT
|
|||||||||
SDG&E
|
$
|
237
|
45
|
%
|
$
|
398
|
49
|
%
|
|
SoCalGas
|
179
|
34
|
165
|
20
|
|||||
Sempra South American Utilities
|
22
|
4
|
19
|
2
|
|||||
Sempra Mexico
|
61
|
11
|
5
|
1
|
|||||
Sempra Renewables
|
6
|
1
|
201
|
25
|
|||||
Sempra Natural Gas
|
26
|
5
|
22
|
3
|
|||||
All other
|
―
|
―
|
1
|
―
|
|||||
Total
|
$
|
531
|
100
|
%
|
$
|
811
|
100
|
%
|
|
|
March 31, 2013
|
December 31, 2012
|
|||||||
ASSETS
|
|||||||||
SDG&E
|
$
|
14,852
|
40
|
%
|
$
|
14,744
|
40
|
%
|
|
SoCalGas
|
9,223
|
24
|
9,071
|
25
|
|||||
Sempra South American Utilities
|
3,669
|
10
|
3,310
|
9
|
|||||
Sempra Mexico
|
3,314
|
9
|
2,591
|
7
|
|||||
Sempra Renewables
|
2,194
|
6
|
2,439
|
7
|
|||||
Sempra Natural Gas
|
5,971
|
16
|
5,145
|
14
|
|||||
All other
|
762
|
2
|
818
|
2
|
|||||
Intersegment receivables
|
(2,712)
|
(7)
|
(1,619)
|
(4)
|
|||||
Total
|
$
|
37,273
|
100
|
%
|
$
|
36,499
|
100
|
%
|
|
INVESTMENTS IN EQUITY METHOD INVESTEES
|
|||||||||
Sempra Mexico
|
$
|
351
|
$
|
340
|
|||||
Sempra Renewables
|
601
|
592
|
|||||||
Sempra Natural Gas
|
348
|
361
|
|||||||
All other
|
126
|
134
|
|||||||
Total
|
$
|
1,426
|
$
|
1,427
|
|||||
(1)
|
Revenues for reportable segments include intersegment revenues of:
|
||||||||
$2 million, $15 million, $22 million and $59 million for the three months ended March 31, 2013 and $2 million, $15 million, $46 million and $37 million for the three months ended March 31, 2012 for SDG&E, SoCalGas, Sempra Mexico and Sempra Natural Gas, respectively.
|
|||||||||
(2)
|
After preferred dividends.
|
§
|
Sempra Energy and its consolidated entities
|
§
|
SDG&E
|
§
|
SoCalGas
|
CALIFORNIA UTILITIES
|
||
MARKET
|
SERVICE TERRITORY
|
|
SAN DIEGO GAS & ELECTRIC COMPANY (SDG&E)
A regulated public utility; infrastructure supports electric generation, transmission and distribution, and natural gas distribution
|
§ Provides electricity to 3.4 million consumers (1.4 million meters)
§ Provides natural gas to 3.1 million consumers (860,000 meters)
|
Serves the county of San Diego, California and an adjacent portion of southern Orange County covering 4,100 square miles
|
SOUTHERN CALIFORNIA GAS COMPANY (SOCALGAS)
A regulated public utility; infrastructure supports natural gas distribution, transmission and storage
|
§ Residential, commercial, industrial, utility electric generation and wholesale customers
§ Covers a population of 21.1 million (5.8 million meters)
|
Southern California and portions of central California (excluding San Diego County, the city of Long Beach and the desert area of San Bernardino County) covering 20,000 square miles
|
SEMPRA INTERNATIONAL
|
||
MARKET
|
GEOGRAPHIC REGION
|
|
SEMPRA SOUTH AMERICAN UTILITIES
Infrastructure supports electric transmission and distribution
|
§ Provides electricity to approximately 620,000 customers in Chile and more than 950,000 customers in Peru
|
§ Chile
§ Peru
|
SEMPRA MEXICO
Develops, owns and operates, or holds interests in:
§ natural gas transmission pipelines and propane and ethane systems
§ a natural gas distribution utility
§ electric generation facilities, including wind
§ a terminal for the importation of liquefied natural gas (LNG)
§ marketing operations for the purchase of LNG and the purchase and sale of natural gas
|
§ Natural gas
§ Wholesale electricity
§ Liquefied natural gas
|
§ Mexico
|
SEMPRA U.S. GAS & POWER
|
||
MARKET
|
GEOGRAPHIC REGION
|
|
SEMPRA RENEWABLES
Develops, owns, operates, or holds interests in renewable energy generation projects
|
§ Wholesale electricity
|
§ U.S.A.
|
SEMPRA NATURAL GAS
Develops, owns and operates, or holds interests in:
§ a natural gas-fired electric generation asset
§ natural gas pipelines and storage facilities
§ natural gas distribution utilities
§ a terminal in the U.S. for the import and export of LNG and sale of natural gas
§ marketing operations
|
§ Wholesale electricity
§ Natural gas
§ Liquefied natural gas
|
§ U.S.A.
|
§
|
Overall results of our operations and factors affecting those results
|
§
|
Our segment results
|
§
|
Significant changes in revenues, costs and earnings between periods
|
§
|
higher losses at Parent and Other primarily due to $63 million income tax expense resulting from a corporate reorganization in connection with the IEnova stock offerings; and
|
§
|
$34 million lower earnings at our California Utilities primarily as a result of recording revenue based on their 2011 authorized revenue requirements due to the delay in the issuance of a final decision in the General Rate Cases (GRC), as we discuss in Note 9 of the Notes to Condensed Consolidated Financial Statements herein; offset by
|
§
|
improved earnings at Sempra Natural Gas mainly as a result of a $44 million gain on the sale of one 625-megawatt (MW) block of its 1,250-MW Mesquite Power natural gas-fired power plant.
|
SEMPRA ENERGY EARNINGS (LOSSES) BY SEGMENT
|
|||||||||
(Dollars in millions)
|
|||||||||
Three months ended March 31,
|
|||||||||
2013
|
2012
|
||||||||
California Utilities:
|
|||||||||
SDG&E(1)
|
$
|
91
|
51
|
%
|
$
|
105
|
45
|
%
|
|
SoCalGas(1)
|
46
|
26
|
66
|
28
|
|||||
Sempra International:
|
|||||||||
Sempra South American Utilities
|
37
|
21
|
40
|
17
|
|||||
Sempra Mexico
|
31
|
17
|
33
|
14
|
|||||
Sempra U.S. Gas & Power:
|
|||||||||
Sempra Renewables
|
4
|
2
|
10
|
4
|
|||||
Sempra Natural Gas
|
53
|
30
|
1
|
―
|
|||||
Parent and other(2)
|
(84)
|
(47)
|
(19)
|
(8)
|
|||||
Earnings
|
$
|
178
|
100
|
%
|
$
|
236
|
100
|
%
|
|
(1)
|
After preferred dividends.
|
||||||||
(2)
|
Includes after-tax interest expense ($38 million and $34 million for the three months ended March 31, 2013 and 2012, respectively), intercompany eliminations recorded in consolidation and certain corporate costs.
|
EARNINGS BY SEGMENT – CALIFORNIA UTILITIES
|
(Dollars in millions)
|
§
|
$91 million in the three months ended March 31, 2013 ($92 million before preferred dividends)
|
§
|
$105 million in the three months ended March 31, 2012 ($106 million before preferred dividends)
|
§
|
$17 million primarily from higher depreciation and operation and maintenance expenses related to California Public Utilities Commission (CPUC)-regulated operations (excluding litigation and legal settlements) with no corresponding increase in the CPUC-authorized margin in 2013 or 2012 due to the delay in the 2012 General Rate Case (GRC) decision;
|
§
|
$7 million higher interest expense; and
|
§
|
$5 million lower CPUC-authorized rate of return established in the CPUC cost of capital proceeding effective as of January 1, 2013; offset by
|
§
|
$8 million reduction in 2013 income tax expense primarily due to a change made in the third quarter of 2012 in the income tax treatment of certain repairs expenditures for electric transmission and distribution assets that are capitalized for financial statement purposes, as we discuss below in “Income Taxes;”
|
§
|
$5 million higher earnings related to Sunrise Powerlink; and
|
§
|
$5 million higher electric transmission margin (excluding Sunrise Powerlink).
|
§
|
$46 million in the three months ended March 31, 2013 (both before and after preferred dividends)
|
§
|
$66 million in the three months ended March 31, 2012 (both before and after preferred dividends)
|
§
|
$15 million primarily from higher operation and maintenance and depreciation expenses related to CPUC-regulated operations with no corresponding increase in the CPUC-authorized margin in 2013 or 2012 due to the delay in the 2012 GRC decision;
|
§
|
$4 million regulatory award in 2012; and
|
§
|
$3 million lower CPUC-authorized rate of return established in the CPUC cost of capital proceeding effective as of January 1, 2013; offset by
|
§
|
$3 million from a lower effective tax rate, primarily from a change made in the fourth quarter of 2012 in the income tax treatment of certain repairs expenditures for gas assets that are capitalized for financial statement purposes, as we discuss below in “Income Taxes.”
|
EARNINGS BY SEGMENT – SEMPRA INTERNATIONAL
|
(Dollars in millions)
|
§
|
$37 million in the three months ended March 31, 2013
|
§
|
$40 million in the three months ended March 31, 2012
|
§
|
a $7 million impairment charge related to our investment in two Argentine natural gas utility holding companies; offset by
|
§
|
$3 million higher earnings from operations in 2013.
|
§
|
$31 million in the three months ended March 31, 2013
|
§
|
$33 million in the three months ended March 31, 2012
|
EARNINGS BY SEGMENT – SEMPRA U.S. GAS & POWER
|
(Dollars in millions)
|
§
|
$4 million in the three months ended March 31, 2013
|
§
|
$10 million in the three months ended March 31, 2012
|
§
|
$12 million lower deferred income tax benefits, including $5 million from Treasury Grant sequestration in 2013, related to higher investments in solar and wind generating assets in 2012; offset by
|
§
|
$6 million higher production tax credits from our wind assets.
|
§
|
$53 million in the three months ended March 31, 2013
|
§
|
$1 million in the three months ended March 31, 2012
|
§
|
$44 million gain on the sale of a 625-MW block of its Mesquite Power plant, net of related expenses; and
|
§
|
$9 million higher earnings from LNG, primarily due to timing of cargo marketing operations.
|
§
|
$84 million in the three months ended March 31, 2013
|
§
|
$19 million in the three months ended March 31, 2012
|
§
|
SDG&E
|
§
|
SoCalGas
|
§
|
Sempra Mexico’s Ecogas
|
§
|
Sempra Natural Gas’ Mobile Gas and Willmut Gas
|
§
|
SDG&E
|
§
|
Sempra South American Utilities’ Chilquinta Energía and Luz del Sur
|
UTILITIES REVENUES AND COST OF SALES
|
|||||
(Dollars in millions)
|
|||||
Three months ended March 31,
|
|||||
2013
|
2012
|
||||
Electric revenues:
|
|||||
SDG&E
|
$
|
772
|
$
|
671
|
|
Sempra South American Utilities
|
360
|
338
|
|||
Eliminations and adjustments
|
(1)
|
(1)
|
|||
Total
|
1,131
|
1,008
|
|||
Natural gas revenues:
|
|||||
SoCalGas
|
983
|
880
|
|||
SDG&E
|
167
|
163
|
|||
Sempra Mexico
|
27
|
23
|
|||
Sempra Natural Gas
|
42
|
32
|
|||
Eliminations and adjustments
|
(16)
|
(15)
|
|||
Total
|
1,203
|
1,083
|
|||
Total utilities revenues
|
$
|
2,334
|
$
|
2,091
|
|
Cost of electric fuel and purchased power:
|
|||||
SDG&E
|
$
|
209
|
$
|
163
|
|
Sempra South American Utilities
|
238
|
225
|
|||
Total
|
$
|
447
|
$
|
388
|
|
Cost of natural gas:
|
|||||
SoCalGas
|
$
|
454
|
$
|
349
|
|
SDG&E
|
76
|
67
|
|||
Sempra Mexico
|
16
|
13
|
|||
Sempra Natural Gas
|
14
|
7
|
|||
Eliminations and adjustments
|
(4)
|
(5)
|
|||
Total
|
$
|
556
|
$
|
431
|
§
|
$101 million increase at SDG&E, including:
|
§
|
$68 million higher authorized revenues from electric transmission, and
|
§
|
$46 million increase in cost of electric fuel and purchased power, offset by
|
§
|
$7 million lower CPUC-authorized rate of return established in the CPUC cost of capital proceeding effective as of January 1, 2013; and
|
§
|
$22 million increase at our South American utilities primarily due to higher volumes and foreign currency exchange rate effects at both Luz del Sur and Chilquinta Energía.
|
§
|
$46 million increase at SDG&E, including:
|
§
|
$27 million due to the cost of power purchased to replace power scheduled to be generated and delivered to SDG&E from SONGS, and
|
§
|
$19 million due to the incremental cost of renewable energy and other purchased power; and
|
§
|
$13 million increase at our South American utilities driven by higher volumes and foreign currency exchange rate effects at both Luz del Sur and Chilquinta Energía.
|
SDG&E
|
|||||||
ELECTRIC DISTRIBUTION AND TRANSMISSION
|
|||||||
(Volumes in millions of kilowatt-hours, dollars in millions)
|
|||||||
Three months ended March 31, 2013
|
Three months ended March 31, 2012
|
||||||
Customer class
|
Volumes
|
Revenue
|
Volumes
|
Revenue
|
|||
Residential
|
1,961
|
$
|
325
|
1,925
|
$
|
300
|
|
Commercial
|
1,588
|
231
|
1,655
|
220
|
|||
Industrial
|
454
|
55
|
484
|
54
|
|||
Direct access
|
835
|
31
|
752
|
32
|
|||
Street and highway lighting
|
21
|
3
|
25
|
3
|
|||
4,859
|
645
|
4,841
|
609
|
||||
Other revenues
|
100
|
48
|
|||||
Balancing accounts
|
27
|
14
|
|||||
Total(1)
|
$
|
772
|
$
|
671
|
|||
(1)
|
Includes sales to affiliates of $1 million in 2013 and $2 million in 2012.
|
§
|
$68 million higher authorized revenues from electric transmission including:
|
§
|
$45 million from placing the Sunrise Powerlink transmission line in service in June 2012, and
|
§
|
$23 million from increased investment in other transmission assets; and
|
§
|
$46 million increase in cost of electric fuel and purchased power including:
|
§
|
$27 million due to the cost of power purchased to replace power scheduled to be generated and delivered to SDG&E from SONGS, and
|
§
|
$19 million due to the incremental cost of renewable energy and other purchased power; offset by
|
§
|
$7 million lower CPUC-authorized rate of return established in the CPUC cost of capital proceeding effective as of January 1, 2013.
|
SDG&E
|
||||||||||
NATURAL GAS SALES AND TRANSPORTATION
|
||||||||||
(Volumes in billion cubic feet, dollars in millions)
|
||||||||||
Natural Gas Sales
|
Transportation
|
Total
|
||||||||
Customer class
|
Volumes
|
Revenue
|
Volumes
|
Revenue
|
Volumes
|
Revenue
|
||||
Three months ended March 31, 2013:
|
||||||||||
Residential
|
13
|
$
|
133
|
―
|
$
|
1
|
13
|
$
|
134
|
|
Commercial and industrial
|
5
|
30
|
2
|
3
|
7
|
33
|
||||
Electric generation plants
|
―
|
―
|
6
|
3
|
6
|
3
|
||||
18
|
$
|
163
|
8
|
$
|
7
|
26
|
170
|
|||
Other revenues
|
10
|
|||||||||
Balancing accounts
|
(13)
|
|||||||||
Total(1)
|
$
|
167
|
||||||||
Three months ended March 31, 2012:
|
||||||||||
Residential
|
12
|
$
|
112
|
―
|
$
|
―
|
12
|
$
|
112
|
|
Commercial and industrial
|
5
|
26
|
2
|
3
|
7
|
29
|
||||
Electric generation plants
|
―
|
―
|
8
|
2
|
8
|
2
|
||||
17
|
$
|
138
|
10
|
$
|
5
|
27
|
143
|
|||
Other revenues
|
11
|
|||||||||
Balancing accounts
|
9
|
|||||||||
Total
|
$
|
163
|
||||||||
(1)
|
Includes sales to affiliates of $1 million in 2013.
|
SOCALGAS
|
||||||||||
NATURAL GAS SALES AND TRANSPORTATION
|
||||||||||
(Volumes in billion cubic feet, dollars in millions)
|
||||||||||
Natural Gas Sales
|
Transportation
|
Total
|
||||||||
Customer class
|
Volumes
|
Revenue
|
Volumes
|
Revenue
|
Volumes
|
Revenue
|
||||
Three months ended March 31, 2013:
|
||||||||||
Residential
|
91
|
$
|
771
|
1
|
$
|
3
|
92
|
$
|
774
|
|
Commercial and industrial
|
31
|
203
|
72
|
60
|
103
|
263
|
||||
Electric generation plants
|
―
|
―
|
38
|
9
|
38
|
9
|
||||
Wholesale
|
―
|
―
|
49
|
7
|
49
|
7
|
||||
122
|
$
|
974
|
160
|
$
|
79
|
282
|
1,053
|
|||
Other revenues
|
26
|
|||||||||
Balancing accounts
|
(96)
|
|||||||||
Total(1)
|
$
|
983
|
||||||||
Three months ended March 31, 2012:
|
||||||||||
Residential
|
88
|
$
|
692
|
1
|
$
|
2
|
89
|
$
|
694
|
|
Commercial and industrial
|
29
|
185
|
69
|
62
|
98
|
247
|
||||
Electric generation plants
|
―
|
―
|
44
|
9
|
44
|
9
|
||||
Wholesale
|
―
|
―
|
47
|
7
|
47
|
7
|
||||
117
|
$
|
877
|
161
|
$
|
80
|
278
|
957
|
|||
Other revenues
|
27
|
|||||||||
Balancing accounts
|
(104)
|
|||||||||
Total(1)
|
$
|
880
|
||||||||
(1)
|
Includes sales to affiliates of $15 million in both 2013 and 2012.
|
OTHER UTILITIES
|
|||||||
NATURAL GAS AND ELECTRIC REVENUES
|
|||||||
(Dollars in millions)
|
|||||||
Three months ended March 31, 2013
|
Three months ended March 31, 2012
|
||||||
Volumes
|
Revenue
|
Volumes
|
Revenue
|
||||
Natural Gas Sales (billion cubic feet):
|
|||||||
Sempra Mexico — Ecogas
|
6
|
$
|
27
|
6
|
$
|
23
|
|
Sempra Natural Gas:
|
|||||||
Mobile Gas
|
11
|
34
|
12
|
32
|
|||
Willmut Gas(1)
|
1
|
8
|
―
|
―
|
|||
Total
|
18
|
$
|
69
|
18
|
$
|
55
|
|
Electric Sales (million kilowatt hours):
|
|||||||
Sempra South American Utilities:
|
|||||||
Luz del Sur
|
1,746
|
$
|
204
|
1,690
|
$
|
187
|
|
Chilquinta Energía
|
761
|
141
|
745
|
139
|
|||
2,507
|
345
|
2,435
|
326
|
||||
Other service revenues
|
15
|
12
|
|||||
Total
|
$
|
360
|
$
|
338
|
|||
(1)
|
We acquired Willmut Gas in May 2012.
|
ENERGY-RELATED BUSINESSES: REVENUES AND COST OF SALES
|
|||||
(Dollars in millions)
|
|||||
Three months ended March 31,
|
|||||
2013
|
2012
|
||||
Energy-related businesses revenues:
|
|||||
Sempra South American Utilities
|
$
|
24
|
$
|
19
|
|
Sempra Mexico
|
141
|
113
|
|||
Sempra Renewables
|
21
|
8
|
|||
Sempra Natural Gas
|
211
|
237
|
|||
Intersegment revenues, adjustments and eliminations(1)
|
(81)
|
(85)
|
|||
Total energy-related businesses revenues
|
$
|
316
|
$
|
292
|
|
Cost of natural gas, electric fuel and purchased power(2):
|
|||||
Sempra Mexico
|
$
|
59
|
$
|
41
|
|
Sempra Renewables
|
2
|
1
|
|||
Sempra Natural Gas(3)
|
130
|
171
|
|||
Adjustments and eliminations(1)(3)
|
(80)
|
(84)
|
|||
Total cost of natural gas, electric fuel
|
|||||
and purchased power
|
$
|
111
|
$
|
129
|
|
Other cost of sales(2):
|
|||||
Sempra South American Utilities
|
$
|
19
|
$
|
10
|
|
Sempra Mexico
|
9
|
1
|
|||
Sempra Natural Gas(3)
|
23
|
22
|
|||
Adjustments and eliminations(1)(3)
|
(3)
|
―
|
|||
Total other cost of sales
|
$
|
48
|
$
|
33
|
|
(1)
|
Includes eliminations of intercompany activity.
|
||||
(2)
|
Excludes depreciation and amortization, which are shown separately on the Condensed
|
||||
Consolidated Statements of Operations.
|
|||||
(3)
|
Prior year amounts have been reclassified to conform to the current year presentation.
|
§
|
$28 million increase at Sempra Mexico primarily due to higher prices and volumes for both natural gas and power; and
|
§
|
$13 million increase at Sempra Renewables mainly from revenues generated by our solar assets; offset by
|
§
|
$26 million decrease at Sempra Natural Gas primarily due to lower revenues as a result of the energy management agreement (EMA) with Sempra Mexico and lower power production at Mesquite Power, a portion of which was due to the sale of one 625-MW block of the natural gas-fired power plant, offset by increased natural gas revenues from its LNG operations as a result of higher natural gas prices and volumes.
|
§
|
$41 million decrease at Sempra Natural Gas primarily due to lower costs associated with the EMA with Sempra Mexico and lower natural gas costs and volumes as a result of lower power production at Mesquite Power, as discussed above, offset by increased natural gas costs from its LNG operations as a result of higher natural gas prices and volumes; offset by
|
§
|
$18 million increase at Sempra Mexico primarily due to higher natural gas prices and volumes.
|
§
|
$21 million higher other operation and maintenance costs; and
|
§
|
$13 million higher operation and maintenance expenses at Otay Mesa VIE; offset by
|
§
|
$6 million lower expenses incurred for activities and programs that are fully recovered in revenue (recoverable expenses).
|
§
|
$21 million higher other operation and maintenance costs; offset by
|
§
|
$4 million lower recoverable expenses.
|
§
|
$19 million decrease in equity-related AFUDC at SDG&E primarily due to completion of construction on the Sunrise Powerlink project in June 2012;
|
§
|
$9 million lower gains from investment activity related to our executive retirement and deferred compensation plans in 2013; and
|
§
|
$4 million lower gains on interest rate and foreign exchange instruments.
|
INCOME TAX EXPENSE AND EFFECTIVE INCOME TAX RATES
|
|||||||||||
(Dollars in millions)
|
|||||||||||
Three months ended March 31,
|
|||||||||||
2013
|
2012
|
||||||||||
Effective
|
Effective
|
||||||||||
Income Tax
|
Income
|
Income Tax
|
Income
|
||||||||
Expense
|
Tax Rate
|
Expense
|
Tax Rate
|
||||||||
Sempra Energy Consolidated
|
$
|
178
|
51
|
%
|
$
|
117
|
33
|
%
|
|||
SDG&E
|
51
|
39
|
60
|
35
|
|||||||
SoCalGas
|
24
|
34
|
40
|
38
|
§
|
$63 million income tax expense resulting from a corporate reorganization in connection with the IEnova stock offerings. We discuss the stock offerings further in Note 5 of the Notes to Condensed Consolidated Financial Statements herein; offset by
|
§
|
lower income tax expense due to Mexican currency translation and inflation adjustments; and
|
§
|
income tax benefit in 2013 resulting from changes made in the second half of 2012 in the income tax treatment of certain repairs expenditures that are capitalized for financial statement purposes. The change in income tax treatment of certain repairs expenditures for electric transmission and distribution assets was made pursuant to an Internal Revenue Service (IRS) Revenue Procedure providing a safe harbor for deducting certain repairs expenditures from taxable income when incurred for tax years beginning on or after January 1, 2011. The change in income tax treatment of certain repairs expenditures for gas plant assets was made pursuant to an IRS Revenue Procedure which allows, under an Internal Revenue Code (IRC) section, for such expenditures to be deducted from taxable income when incurred.
|
§
|
the impact of Otay Mesa VIE, which we discuss below; and
|
§
|
lower exclusions from taxable income of the equity portion of AFUDC; offset by
|
§
|
income tax benefit in 2013 resulting from a change made in the third quarter of 2012 in the income tax treatment of certain repairs expenditures for electric transmission and distribution assets that are capitalized for financial statement purposes, as we discuss above for Sempra Energy Consolidated.
|
§
|
income tax benefit in 2013 resulting from a change made in the fourth quarter of 2012 in the income tax treatment of certain repairs expenditures for gas assets that are capitalized for financial statement purposes, as we discuss above for Sempra Energy Consolidated; offset by
|
§
|
higher book depreciation over income tax depreciation related to a certain portion of utility plant fixed assets; and
|
§
|
lower deductions for self-developed software costs.
|
MEXICAN CURRENCY IMPACT ON INCOME TAXES AND RELATED ECONOMIC HEDGING ACTIVITY
|
||||||
(Dollars in millions)
|
||||||
Three months ended March 31,
|
||||||
2013
|
2012
|
|||||
Income tax expense on currency exchange
|
||||||
rate movement of monetary assets and liabilities
|
$
|
(2)
|
$
|
(9)
|
||
Translation of non-U.S. deferred income tax balances
|
(7)
|
(8)
|
||||
Income tax expense on inflation
|
(1)
|
(1)
|
||||
Total impact on income taxes
|
(10)
|
(18)
|
||||
After-tax gains on Mexican peso exchange rate
|
||||||
instruments (included in Other Income, Net)
|
4
|
6
|
||||
Net impacts on Sempra Energy Condensed
|
||||||
Consolidated Statements of Operations
|
$
|
(6)
|
$
|
(12)
|
§
|
losses attributable to noncontrolling interest of $11 million at Otay Mesa VIE in 2013 compared to earnings of $6 million in 2012; offset by
|
§
|
$1 million at Sempra Mexico in 2013 from earnings attributable to noncontrolling interest of IEnova. We discuss the stock offerings of IEnova in Note 5 of the Notes to Condensed Consolidated Financial Statements herein.
|
AVAILABLE FUNDS AT MARCH 31, 2013
|
|||||||
(Dollars in millions)
|
|||||||
Sempra Energy
|
|||||||
Consolidated
|
SDG&E
|
SoCalGas
|
|||||
Unrestricted cash and cash equivalents
|
$
|
1,471
|
$
|
106
|
$
|
72
|
|
Available unused credit(1)
|
3,352
|
658
|
658
|
||||
(1)
|
Borrowings on the shared line of credit at SDG&E and SoCalGas, discussed in Note 6 of the Notes to Condensed Consolidated Financial Statements herein, are limited to $658 million for each utility and a combined total of $877 million.
|
§
|
finance capital expenditures
|
§
|
meet liquidity requirements
|
§
|
fund shareholder dividends
|
§
|
fund new business acquisitions or start-ups
|
§
|
repay maturing long-term debt
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
||||||||
(Dollars in millions)
|
||||||||
2013
|
2013 Change
|
2012
|
||||||
Sempra Energy Consolidated
|
$
|
835
|
$
|
136
|
19
|
%
|
$
|
699
|
SDG&E
|
264
|
(2)
|
(1)
|
266
|
||||
SoCalGas
|
411
|
(38)
|
(8)
|
449
|
§
|
a $142 million higher net income, adjusted for noncash items included in earnings, in 2013 compared to 2012;
|
§
|
a $49 million increase in the seasonal liability related to temporary LIFO liquidation in 2013 compared to a $32 million decrease in 2012 at SoCalGas, as we discuss below; and
|
§
|
a $62 million decrease in settlement payments and associated legal fees in 2013 for wildfire claims at SDG&E; offset by
|
§
|
a $33 million increase in accounts receivable in 2013 compared to a $120 million decrease in 2012.
|
§
|
$92 million lower net income, adjusted for noncash items included in earnings, in 2013 compared to 2012 primarily due to lower deferred tax benefit due to partial reversal of the deferred tax asset from the utilization in 2013 of prior years’ net operating losses; offset by
|
§
|
a $62 million decrease in settlement payments and associated legal fees in 2013 for wildfire claims.
|
§
|
a $27 million decrease in accounts receivable in 2013 compared to a $110 million decrease in 2012; and
|
§
|
a $6 million decrease in income taxes receivable in 2013 compared to a $26 million decrease in 2012; offset by
|
§
|
a $49 million increase in the seasonal liability related to temporary LIFO liquidation in 2013 compared to a $32 million decrease in 2012, primarily due to changes in natural gas inventory value due to increased winter withdrawals. Temporary LIFO liquidation represents the difference between the carrying value of natural gas inventory withdrawn during the period (valued by last-in, first-out method) for delivery to customers and the projected costs of replacement of that inventory during injection months.
|
Other
|
||||
Pension
|
Postretirement
|
|||
(Dollars in millions)
|
Benefits
|
Benefits
|
||
Sempra Energy Consolidated
|
$
|
11
|
$
|
7
|
SDG&E
|
―
|
3
|
||
SoCalGas
|
2
|
3
|
CASH USED IN INVESTING ACTIVITIES
|
||||||||
(Dollars in millions)
|
||||||||
2013
|
2013 Change
|
2012
|
||||||
Sempra Energy Consolidated
|
$
|
(162)
|
$
|
(697)
|
(81)
|
%
|
$
|
(859)
|
SDG&E
|
(240)
|
(159)
|
(40)
|
(399)
|
||||
SoCalGas
|
(422)
|
57
|
16
|
(365)
|
§
|
$371 million of proceeds received from Sempra Natural Gas’ 2013 sale of a 625-MW block of its Mesquite Power plant;
|
§
|
a $280 million decrease in capital expenditures; and
|
§
|
$43 million invested in the Flat Ridge 2 Wind Farm in 2012.
|
§
|
a $43 million higher increase in the amount advanced to Sempra Energy in 2013 as compared to 2012; and
|
§
|
a $14 million increase in capital expenditures.
|
§
|
$2.5 billion at the California Utilities for capital projects and plant improvements ($1.5 billion at SDG&E and $1.0 billion at SoCalGas)
|
§
|
$800 million at our other subsidiaries for capital projects in Mexico and South America, and development of natural gas and renewable generation projects
|
§
|
$550 million for improvements to SDG&E’s natural gas and electric distribution systems
|
§
|
$300 million for SDG&E’s renewable energy projects
|
§
|
$300 million for improvements to SDG&E’s electric transmission systems
|
§
|
$290 million at SDG&E for substation expansions (transmission)
|
§
|
$80 million for SDG&E’s electric generation plants and equipment
|
§
|
$730 million for improvements to SoCalGas’ distribution and transmission systems, and for pipeline safety
|
§
|
$220 million for SoCalGas’ advanced metering infrastructure
|
§
|
$70 million for SoCalGas’ underground natural gas storage fields
|
§
|
approximately $150 million to $200 million for capital projects in South America (approximately $100 million to $150 million in Peru and approximately $50 million in Chile)
|
§
|
approximately $425 million to $475 million for capital projects in Mexico, including approximately $350 million for the development of natural gas pipeline projects developed solely by Sempra Mexico
|
§
|
approximately $330 million of expenditures for pipeline projects within our joint venture with PEMEX. We expect expenditures for projects done within the joint venture to be funded by the joint venture’s cash flows from operations without additional contributions from its partners
|
§
|
approximately $50 million for investment in the third phase of Copper Mountain Solar, a 250-MW solar project located near Boulder City, Nevada
|
§
|
approximately $100 million for development of natural gas projects, including approximately $50 million for natural gas storage at Bay Gas and Mississippi Hub
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|||||||
(Dollars in millions)
|
|||||||
2013
|
2013 Change
|
2012
|
|||||
Sempra Energy Consolidated
|
$
|
320
|
$
|
10
|
$
|
310
|
|
SDG&E
|
(5)
|
(248)
|
243
|
||||
SoCalGas
|
―
|
50
|
(50)
|
§
|
$574 million net proceeds received from the sale of noncontrolling interests at Sempra Mexico; and
|
§
|
$181 million lower decrease in short-term debt (a $43 million decrease in 2013 compared to $224 million in 2012); offset by
|
§
|
$400 million lower issuances of debt, primarily due to a decrease in issuances of long-term debt of $470 million ($408 million in 2013, compared to $878 million in 2012), offset by an increase in issuances of commercial paper with maturities greater than 90 days of $70 million ($200 million in 2013 compared to $130 million in 2012);
|
§
|
$298 million higher debt payments, including $386 million higher payments on long-term debt ($405 million in 2013, compared to $19 million in 2012), offset by $88 million lower payments of commercial paper with maturities greater than 90 days ($240 million in 2013, compared to $328 million in 2012); and
|
§
|
$30 million increase in common dividends paid primarily due to an increase in the dividend rate.
|
SUMMARY OF SDG&E NET BOOK INVESTMENT AND RATE BASE INVESTMENT IN SONGS(1)
|
|||||||||
(Dollars in millions)
|
|||||||||
Unit 2
|
Unit 3
|
Common Plant
|
Total
|
||||||
Net book investment:
|
|||||||||
Net property, plant and equipment, including
|
|||||||||
construction work in progress
|
$
|
151
|
$
|
115
|
$
|
127
|
$
|
393
|
|
Materials and supplies
|
―
|
―
|
10
|
10
|
|||||
Nuclear fuel
|
―
|
―
|
116
|
116
|
|||||
Net book investment
|
$
|
151
|
$
|
115
|
$
|
253
|
$
|
519
|
|
Rate base investment
|
$
|
99
|
$
|
94
|
$
|
78
|
$
|
271
|
|
(1)
|
Excludes nuclear decommissioning-related assets and liabilities.
|
§
|
Bay Gas, a facility located 40 miles north of Mobile, Alabama, that provides underground storage and delivery of natural gas. Sempra Natural Gas owns 91 percent of the project. It is the easternmost salt dome storage facility on the Gulf Coast, with direct service to the Florida market and markets across the Southeast, Mid-Atlantic and Northeast regions.
|
§
|
Mississippi Hub, located 45 miles southeast of Jackson, Mississippi, an underground salt dome natural gas storage project with access to shale basins of East Texas and Louisiana, traditional gulf supplies and LNG, with multiple interconnections to serve the Southeast and Northeast regions.
|
§
|
LA Storage, previously referred to as Liberty natural gas storage expansion, a salt cavern development project in Cameron Parish, Louisiana. Sempra Natural Gas owns 75 percent of the project and ProLiance Transportation LLC owns the remaining 25 percent. The project’s location provides access to several LNG facilities in the area.
|
Sempra Energy
|
||||||||||||
Consolidated
|
SDG&E
|
SoCalGas
|
||||||||||
Nominal
|
One-Year
|
Nominal
|
One-Year
|
Nominal
|
One-Year
|
|||||||
(Dollars in millions)
|
Debt
|
VaR(1)
|
Debt
|
VaR(1)
|
Debt
|
VaR(1)
|
||||||
At March 31, 2013:
|
||||||||||||
California Utilities fixed-rate
|
$
|
5,204
|
$
|
556
|
$
|
3,791
|
$
|
417
|
$
|
1,413
|
$
|
138
|
California Utilities variable-rate
|
342
|
13
|
342
|
13
|
―
|
―
|
||||||
All other, fixed-rate and variable-rate
|
6,324
|
308
|
―
|
―
|
―
|
―
|
||||||
At December 31, 2012:
|
||||||||||||
California Utilities fixed-rate
|
$
|
5,203
|
$
|
601
|
$
|
3,790
|
$
|
451
|
$
|
1,413
|
$
|
150
|
California Utilities variable-rate
|
345
|
14
|
345
|
14
|
―
|
―
|
||||||
All other, fixed-rate and variable-rate
|
6,306
|
302
|
―
|
―
|
―
|
―
|
||||||
(1) After the effects of interest rate swaps.
|
EXHIBIT 10 -- MATERIAL CONTRACTS
|
||
Sempra Energy / San Diego Gas & Electric Company
|
||
10.1
|
Severance Pay Agreement between Sempra Energy and Michael R. Niggli, dated February 18, 2013.
|
|
10.2
|
Severance Pay Agreement between Sempra Energy and James P. Avery, dated February 18, 2013.
|
|
10.3
|
Severance Pay Agreement between Sempra Energy and Lee Schavrien, dated February 18, 2013.
|
|
10.4
|
Severance Pay Agreement between Sempra Energy and Woodrow D. Smith, dated February 18, 2013.
|
|
Sempra Energy / Southern California Gas Company
|
||
10.5
|
Severance Pay Agreement between Sempra Energy and Erbin Keith, dated February 18, 2013.
|
|
EXHIBIT 12 -- STATEMENTS RE: COMPUTATION OF RATIOS
|
||
Sempra Energy
|
||
12.1
|
Sempra Energy Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
|
|
San Diego Gas & Electric Company
|
||
12.2
|
San Diego Gas & Electric Company Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
|
|
Southern California Gas Company
|
||
12.3
|
Southern California Gas Company Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends.
|
|
EXHIBIT 31 -- SECTION 302 CERTIFICATIONS
|
||
Sempra Energy
|
||
31.1
|
Statement of Sempra Energy’s Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
|
31.2
|
Statement of Sempra Energy’s Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
|
San Diego Gas & Electric Company
|
||
31.3
|
Statement of San Diego Gas & Electric Company’s Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
|
31.4
|
Statement of San Diego Gas & Electric Company’s Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
|
Southern California Gas Company
|
||
31.5
|
Statement of Southern California Gas Company’s Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
|
31.6
|
Statement of Southern California Gas Company’s Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934.
|
|
EXHIBIT 32 -- SECTION 906 CERTIFICATIONS
|
||
Sempra Energy
|
||
32.1
|
Statement of Sempra Energy’s Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.
|
|
32.2
|
Statement of Sempra Energy’s Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.
|
|
San Diego Gas & Electric Company
|
||
32.3
|
Statement of San Diego Gas & Electric Company’s Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.
|
|
32.4
|
Statement of San Diego Gas & Electric Company’s Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.
|
|
Southern California Gas Company
|
||
32.5
|
Statement of Southern California Gas Company’s Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350.
|
|
32.6
|
Statement of Southern California Gas Company’s Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350.
|
EXHIBIT 101 -- INTERACTIVE DATA FILE
|
|
Sempra Energy / San Diego Gas & Electric / Southern California Gas Company
|
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
SIGNATURES
|
|
Sempra Energy:
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
SEMPRA ENERGY,
(Registrant)
|
|
Date: May 2, 2013
|
By: /s/ Trevor I. Mihalik
|
Trevor I. Mihalik
Controller and Chief Accounting Officer
|
San Diego Gas & Electric Company:
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
SAN DIEGO GAS & ELECTRIC COMPANY,
(Registrant)
|
|
Date: May 2, 2013
|
By: /s/ Robert M. Schlax
|
Robert M. Schlax
Vice President, Controller, Chief Financial Officer and Chief Accounting Officer
|
Southern California Gas Company:
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
SOUTHERN CALIFORNIA GAS COMPANY,
(Registrant)
|
|
Date: May 2, 2013
|
By: /s/ Robert M. Schlax
|
Robert M. Schlax
Vice President, Controller, Chief Financial Officer and Chief Accounting Officer
|
Exhibit 10.1
SEMPRA ENERGY
SEVERANCE PAY AGREEMENT
THIS AGREEMENT (this Agreement), dated as of February 18, 2013 (the Effective Date), is made by and between SEMPRA ENERGY, a California corporation (Sempra Energy), and Michael R. Niggli (the Executive).
WHEREAS, the Executive is currently employed by Sempra Energy or a direct or indirect subsidiary of Sempra Energy (Sempra Energy and its subsidiaries are hereinafter collectively referred to as the Company) as President and Chief Operating Officer, San Diego Gas & Electric; and
WHEREAS, Sempra Energy and the Executive desire to enter into this Agreement; and
WHEREAS, the Board of Directors of Sempra Energy (the Board) has authorized this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and the Executive hereby agree as follows:
Section 1.
Definitions. For purposes of this Agreement, the following capitalized terms have the meanings set forth below:
Accounting Firm has the meaning assigned thereto in Section 8(d) hereof.
Accrued Obligations means the sum of (A) the Executives Annual Base Salary through the Date of Termination to the extent not theretofore 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, (C) any accrued and unpaid vacation, if any, and (D) reimbursement for unreimbursed business expenses, if any, properly incurred by the Executive in the performance of his duties in accordance with policies established from time to time by the Board, in each case to the extent not theretofore paid.
Affiliate has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.
Annual Base Salary means the Executives annual base salary from the Company.
Asset Purchaser has the meaning assigned thereto in Section 16(e).
Asset Sale has the meaning assigned thereto in Section 16(e).
Average Annual Bonus means the average of the annual bonuses from the Company earned by the Executive with respect to the three (3) fiscal years of the Company immediately preceding the Date of Termination (the Bonus Fiscal Years); provided, however, that, if the Executive was employed by the Company for less than three (3) Bonus Fiscal Years, Average Annual Bonus means the average of the annual bonuses (if any) from the Company earned by the Executive with respect to the Bonus Fiscal Years during which the Executive was employed by the Company; and, provided, further, that, if the Executive was not employed by the Company during any of the Bonus Fiscal Years, Average Annual Bonus means zero.
Cause means:
(a)
Prior to a Change in Control, (i) the willful failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives incapacity due to physical or mental illness, (ii) the grossly negligent performance of such obligations referenced in clause (i) of this definition, (iii) the Executives gross insubordination; and/or (iv) the Executives 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 subsection (a), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company.
(b)
From and after a Change in Control, (i) the willful and continued failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives 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 2 hereof) and/or (ii) the Executives 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 subsection (b), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed terminated for Cause pursuant to clause (i) of this subsection (b) unless and until the Executive shall have been provided with reasonable notice of and, if possible, a reasonable opportunity to cure the facts and circumstances claimed to provide a basis for termination of the Executives employment for Cause.
Change in Control shall be deemed to have occurred on the date that a change in the ownership of Sempra Energy, a change in the effective control of Sempra Energy, or a change in the ownership of a substantial portion of assets of Sempra Energy occurs (each, as defined in subsection (a) below), except as otherwise provided in subsections (b), (c) and (d) below:
(a)
(i)
a change in the ownership of Sempra Energy occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of Sempra Energy that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Sempra Energy,
(ii)
a change in the effective control of Sempra Energy occurs only on either of the following dates:
(A)
the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Sempra Energy possessing thirty percent (30%) or more of the total voting power of the stock of Sempra Energy, or
(B)
the date a majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of appointment or election, and
(iii)
a change in the ownership of a substantial portion of assets of Sempra Energy occurs on the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from Sempra Energy that have a total gross fair market value equal to or more than eighty-five percent (85%) of the total gross fair market value of all of the assets of Sempra Energy immediately before such acquisition or acquisitions.
(b)
A change in the ownership of Sempra Energy or a change in the effective control of Sempra Energy shall not occur under clause (a)(i) or (a)(ii) by reason of any of the following:
(i)
an acquisition of ownership of stock of Sempra Energy directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business,
(ii)
a merger or consolidation which would result in the voting securities of Sempra Energy 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, at least sixty percent (60%) of the combined voting power of the securities of Sempra Energy or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or
(iii)
a merger or consolidation effected to implement a recapitalization of Sempra Energy (or similar transaction) in which no Person is or becomes the Beneficial Owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Sempra Energy (not including the securities beneficially owned by such Person any securities acquired directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business) representing twenty percent (20%) or more of the combined voting power of Sempra Energys then outstanding securities.
(c)
A change in the ownership of a substantial portion of assets of Sempra Energy shall not occur under clause (a)(iii) by reason of a sale or disposition by Sempra Energy of the assets of Sempra Energy to an entity, at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by shareholders of Sempra Energy in substantially the same proportions as their ownership of Sempra Energy immediately prior to such sale.
(d)
This definition of Change in Control shall be limited to the definition of a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5). A Change in Control shall only occur if there is a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5) with respect to the Executive.
Change in Control Date means the date on which a Change in Control occurs.
Code means the Internal Revenue Code of 1986, as amended.
Compensation Committee means the compensation committee of the Board.
Consulting Payment has the meaning assigned thereto in Section 14(d) hereof.
Consulting Period has the meaning assigned thereto in Section 14(e) hereof.
Date of Termination has the meaning assigned thereto in Section 2(b) hereof.
Deferred Compensation Plan has the meaning assigned thereto in Section 4(f) hereof.
Disability has the meaning set forth in the Companys long-term disability plan or its successor; provided, however, that the Board may not terminate the Executives employment hereunder by reason of Disability unless (i) 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 and (ii) such termination is permitted by all applicable disability laws.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.
Excise Tax has the meaning assigned thereto in Section 8(a) hereof.
Good Reason means:
(a)
Prior to a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
the assignment to the Executive of any duties materially inconsistent with the range of duties and responsibilities appropriate to a senior Executive within the Company (such range determined by reference to past, current and reasonable practices within the Company);
(ii)
a material reduction in the Executives overall standing and responsibilities within the Company, but not including (A) a mere change in title or (B) a transfer within the Company, which, in the case of both (A) and (B), does not adversely affect the Executives overall status within the Company;
(iii)
a material reduction by the Company in the Executives aggregate annualized compensation and benefits opportunities, except for across-the-board reductions (or modifications of benefit plans) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
(b)
From and after a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
an adverse change in the Executives title, authority, duties, responsibilities or reporting lines as in effect immediately prior to the Change in Control;
(ii)
a reduction by the Company in the Executives aggregate annualized compensation opportunities, except for across-the-board reductions in base salaries, annual bonus opportunities or long-term incentive compensation opportunities of less than ten percent (10%) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive; or the failure by the Company to continue in effect any material benefit plan in which the Executive participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change in Control;
(iii)
the relocation of the Executives principal place of employment immediately prior to the Change in Control Date (the Principal Location) to a location which is both further away from the Executives residence and more than thirty (30) miles from such Principal Location, or the Companys requiring the Executive to be based anywhere other than such Principal Location (or permitted relocation thereof), or a substantial increase in the Executives 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 of limited duration and (B) is understood not to be part of the Executives regular duties with the Company;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
Following a Change in Control, the Executives 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 pursuant to the procedure described in Section 13 hereof. The Executives right to terminate the Executives employment for Good Reason shall not be affected by the Executives incapacity due to physical or mental illness. The Executives 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.
Incentive Compensation Awards means awards granted under Incentive Compensation Plans providing the Executive with the opportunity to earn, on a year-by-year basis, annual and long-term incentive compensation.
Incentive Compensation Plans means annual incentive compensation plans and long-term incentive compensation plans of the Company, which long-term incentive compensation plans may include plans offering stock options, restricted stock and other long-term incentive compensation.
Involuntary Termination means (a) the Executives Separation from Service by reason other than for Cause, death, or Disability, or Mandatory Retirement, or (b) the Executives Separation from Service by reason of resignation of employment for Good Reason.
JAMS Rules has the meaning assigned thereto in Section 13 hereof.
Mandatory Retirement means termination of employment pursuant to the Companys mandatory retirement policy.
Notice of Termination has the meaning assigned thereto in Section 2(a) hereof.
Payment has the meaning assigned thereto in Section 8(a) hereof.
Payment in Lieu of Notice has the meaning assigned thereto in Section 2(b) hereof.
Person has the meaning set forth in section 3(a)(9) of 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 Affiliates, (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) promulgated under the Exchange Act.
Post-Change in Control Severance Payment has the meaning assigned thereto in Section 5 hereof.
Pre-Change in Control Severance Payment has the meaning assigned thereto in Section 4 hereof.
Principal Location has the meaning assigned thereto in clause (b)(iii) of the definition of Good Reason, above.
Proprietary Information has the meaning assigned thereto in Section 14(a) hereof.
Pro Rata Bonus has the meaning assigned thereto in Section 5(b) hereof.
Release has the meaning assigned thereto in Section 4 hereof.
Section 409A Payments means any of the following: (a) the Payment in Lieu of Notice; (b) the Pre-Change in Control Severance Payment; (c) the Post-Change in Control Severance Payment; (d) the Pro Rata Bonus; (e) the Consulting Payment; (f) the payment under Section 5(c); (g) the financial planning services and the related payments provided under Sections 4(e) and 5(g); (h) the legal fees and expenses reimbursed under Section 15; and (i) any other payment that the Company determines in its sole discretion is subject to Section 409A of the Code as non-qualified deferred compensation.
Sempra Energy Control Group means Sempra Energy and all persons with whom Sempra Energy would be considered a single employer under Section 414(b) or 414(c) of the Code, as determined from time to time.
Separation from Service has the meaning set forth in Treasury Regulation Section 1.409A-1(h), with respect to the Service Recipient.
SERP has the meaning assigned thereto in Section 5(c) hereof.
Specified Employee shall be determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation 1.409A-1(i).
For purposes of this Agreement, references to any Treasury Regulation shall mean such Treasury Regulation as in effect on the date hereof.
Section 2.
Notice and Date of Termination.
(a)
Any termination of the Executives employment by the Company or by the Executive shall be communicated by a written notice of termination to the other party (the Notice of Termination). Where applicable, the Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated. 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.
(b)
The date of the Executives termination of employment with the Company (the Date of Termination) shall be determined as follows: (i) if the Executives Separation from Service is at the volition of the Company, the Date of Termination shall be the date specified in the Notice of Termination (which, in the case of a termination by the Company other than for Cause, shall not be less than two (2) weeks from the date such Notice of Termination is given unless the Company elects to pay the Executive, in addition to any other amounts payable hereunder, an amount (the Payment in Lieu of Notice) equal to two (2) weeks of the Executives Annual Base Salary in effect on the Date of Termination), and (ii) if the Executives Separation from Service is by the Executive for Good Reason, the Date of Termination shall be determined by the Executive and specified in the Notice of Termination, but shall not in any event be less than fifteen (15) days nor more than sixty (60) days after the date such Notice of Termination is given. The Payment in Lieu of Notice shall be paid on such date as is required by law, but no later than thirty (30) days after the date of the Executives Separation from Service; provided, however, that if the Executive is a Specified Employee on the date of his or her Separation from Service, such Payment in Lieu of Notice shall be paid as provided in Section 9 hereof.
Section 3.
Termination from the Board. Upon the termination of the Executives employment for any reason, the Executives membership on the Board, the board of directors of any of the Companys Affiliates, any committees of the Board and any committees of the board of directors of any of the Companys Affiliates, if applicable, shall be automatically terminated.
Section 4.
Severance Benefits upon Involuntary Termination Prior to Change in Control. Except as provided in Section 5(h) and Section 19(i) hereof, in the event of the Involuntary Termination of the Executive prior to a Change in Control, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Pre-Change in Control Severance Payment) equal to one-half (0.5) times the greater of: (X) 160% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. In addition to the Pre-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in subsections (a) through (e). The Company's obligation to pay the Pre-Change in Control Severance Payment or provide the benefits set forth in subsections (c), (d) and (e) are subject to and conditioned upon the Executive executing a release (the Release) of all claims substantially in the form attached hereto as Exhibit A within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Section 4(f), the Pre-Change in Control Severance Payment shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination; but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pre-Change in Control Severance Payment shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Pre-Change in Control Severance Payment and the financial planning services and the related payments provided under Section 4(e) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law.
(b)
Equity Based Compensation. The Executive shall retain all rights to any equity-based compensation awards to the extent set forth in the applicable plan and/or award agreement.
(c)
Welfare Benefits. Subject to Section 12 below, for a period of six (6) months following the date of the Involuntary Termination (and an additional twelve (12) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided with health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the date of the Involuntary Termination; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of the Involuntary Termination. Such benefits shall be provided through insurance maintained by the Company under the Companys benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(d)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of eighteen (18) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(e)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of eighteen (18) months following the Date of Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial planning services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv).
(f)
Deferral of Payments. The Executive shall have the right to elect to defer the Pre-Change in Control Severance Payment to be received by the Executive pursuant to this Section 4 under the terms and conditions of the Sempra Energy 2005 Deferred Compensation Plan (the Deferred Compensation Plan). Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 5.
Severance Benefits upon Involuntary Termination in Connection with and after Change in Control. Notwithstanding the provisions of Section 4 above, and except as provided in Section 19(i) hereof, in the event of the Involuntary Termination of the Executive on or within two (2) years following a Change in Control, in lieu of the payments described in Section 4 above, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Post-Change in Control Severance Payment) equal to the greater of: (X) 160% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or the Date of Termination, whichever is greater, and (Y) the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, plus the Executives Average Annual Bonus. In addition to the Post-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in subsections (a) through (g). The Company's obligation to pay the Post-Change in Control Severance Payment or provide the benefits set forth in subsections (b),(c), (d), (e), (f) and (g) are subject to and conditioned upon the Executive executing the Release within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Sections 5(h) and 5(i), the Post-Change in Control Severance Payment, the Pro Rata Bonus and the payments under Section 6(c) shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Post-Change in Control Severance Payment, Pro Rata Bonus and payments under Section 5(c) shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Post-Change in Control Severance Payment, the Pro Rata Bonus, the payment under Section 5(c) and the financial planning services and the related payments provided under Section 5(g) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law.
(b)
Pro Rata Bonus. The Company shall pay the Executive a lump sum amount in cash equal to: (i) the greater of: (X) 60% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, or (Y) the Executives Average Annual Bonus, multiplied by (ii) 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 equal to (the Pro Rata Bonus).
(c)
Pension Supplement. The Executive shall be entitled to receive a Supplemental Retirement Benefit under the Sempra Energy Supplemental Executive Retirement Plan, as in effect from time to time (SERP), determined in accordance with this Section 5(c), in the event that the Executive is a Participant (as defined in the SERP) as of the Date of Termination. Such Supplemental Retirement Benefit shall be determined by crediting the Executive with additional months of Service (if any) equal to the number of full calendar months from the Date of Termination to the date on which the Executive would have attained age 62. The Executive shall be entitled to receive such Supplemental Retirement Benefit without regard to whether the Executive has attained age 55 or completed five years of Service (as defined in the SERP) as of the Date of Termination. The Executive shall be treated as qualified for Retirement (as defined in the SERP) as of the Date of Termination, and the Executives Vesting Factor with respect to the Supplemental Retirement Benefit shall be 100%. The Executives Supplemental Retirement Benefit shall be calculated based on the Executives actual age as of the date of commencement of payment of such Supplemental Retirement Benefit (the SERP Distribution Date), and by applying the applicable early retirement factors under the SERP, if the Executive has not attained age 62 but has attained age 55 as of the SERP Distribution Date. If the Executive has not attained age 55 as of the SERP Distribution Date, the Executives Supplemental Retirement Benefit shall be calculated by applying the applicable early retirement factor under the SERP for age 55, and the Supplemental Retirement Benefit otherwise payable at age 55 shall be actuarially adjusted to the Executives actual age as of the SERP Distribution Date using the following actuarial assumptions: (i) the applicable mortality table promulgated by the Internal Revenue Service under Section 417(e)(3) of the Code, as in effect on the first day of the calendar year in which the SERP Distribution Date occurs, and (ii) the applicable interest rate promulgated by the Internal Revenue Service under Section 417(a)(3) of the Code for the November next preceding the first day of the calendar year in which the SERP Distribution Date occurs. The Executives Supplemental Retirement Benefit shall be determined in accordance with this Section 5(c), notwithstanding any contrary provisions of the SERP and, to the extent subject to Section 409A of the Code, shall be paid in accordance with Treasury Regulation Section 1.409A-3(c)(1). The Supplemental Retirement Benefit paid to or on behalf of the Executive in accordance with this Section 5(c) shall be in full satisfaction of any and all of the benefits payable to or on behalf of the Executive under the SERP.
(d)
Equity-Based Compensation. Notwithstanding the provisions of any applicable equity-compensation plan or award agreement to the contrary, all equity-based Incentive Compensation Awards (including, without limitation, stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance share awards, awards covered under Section 162(m) of the Code, and dividend equivalents) held by the Executive shall immediately vest and become exercisable or payable, as the case may be, as of the Date of Termination, to be exercised or paid, as the case may be, in accordance with the terms of the applicable Incentive Compensation Plan and Incentive Compensation Award agreement, and any restrictions on any such Incentive Compensation Awards shall automatically lapse; provided, however, that any such stock option or stock appreciation rights awards granted on or after June 26, 1998 shall remain outstanding and exercisable until the earlier of (A) the later of eighteen (18) months following the Date of Termination or the period specified in the applicable Incentive Compensation Award agreements or (B) the expiration of the original term of such Incentive Compensation Award (or, if earlier, the tenth anniversary of the original date of grant) (it being understood that all Incentive Compensation Awards granted prior to or after June 26, 1998 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).
(e)
Welfare Benefits. Subject to Section 12 below, for a period of twelve (12) months following the date of Involuntary Termination (and an additional twelve (12) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided 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 Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive. Such benefits shall be provided through insurance maintained by the Company under the Company benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(f)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of twenty-four (24) months following the date of Involuntary Termination (but in no event beyond the last day of the Executives second taxable year following the Executives taxable year in which the Involuntary Termination occurs), in the aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(g)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of twenty-four (24) months following the date of Involuntary Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Section 1.409A-3(i)(1)(iv).
(h)
Involuntary Termination in Connection with a Change in Control. Notwithstanding anything contained herein, in the event of an Involuntary Termination prior to a Change in Control, if the Involuntary Termination (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or in anticipation of such Change in Control, then the Executive shall, in lieu of the payments described in Section 4 hereof, be entitled to the Post-Change in Control Severance Payment and the additional benefits described in this Section 5 as if such Involuntary Termination had occurred within two (2) years following the Change in Control. The amounts specified in Section 5 that are to be paid under this Section 5(h) shall be reduced by any amount previously paid under Section 4. The amounts to be paid under this Section 5(h) shall be paid within sixty (60) days after the Change in Control Date of such Change in Control.
(i)
Deferral of Payments. The Executive shall have the right to elect to defer the Post-Change in Control Severance Payment and the Pro Rata Bonus to be received by the Executive pursuant to this Section 5 under the terms and conditions of the Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 6.
Severance Benefits upon Termination by the Company for Cause or by the Executive Other than for Good Reason. If the Executives employment shall be terminated for Cause, or if the Executive terminates employment other than for Good Reason, the Company shall have no further obligations to the Executive under this Agreement other than the Accrued Obligations and any amounts or benefits described in Section 10 hereof.
Section 7.
Severance Benefits upon Termination due to Death or Disability. If the Executive has a Separation from Service by reason of death or Disability, the Company shall pay the Executive or his estate, as the case may be, the Accrued Obligations and the Pro Rata Bonus (without regard to whether a Change in Control has occurred) and any amounts or benefits described in Section 10 hereof. 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. The Company's obligation to pay the Pro Rata Bonus is conditioned upon the Executive, the Executive's representative or the Executive's estate, as the case may be executing the Release within fifty (50) days after the date of Executive's Separation from Service and not revoking such Release in accordance with the terms thereof. The Accrued Obligations shall be paid within the time required by law and the Pro Rata Bonus shall be paid on such date as determined by the Company within sixty (60) days after the date of the Separation from Service but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pro Rata Bonus shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Separation from Service, the Pro Rata Bonus shall be paid as provided in Section 9 hereof.
Section 8.
Limitations on Payments by the Company.
(a)
Anything in this Agreement to the contrary notwithstanding and except as set forth in this Section 8 below, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise (the Payment) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, (the Excise Tax), then, subject to subsection (b), the Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall be reduced under this subsection (a) to the amount equal to the Reduced Payment. For such Payment payable under this Agreement, the Reduced Payment shall be the amount equal to the greatest portion of the Payment (which may be zero) that, if paid, would result in no portion of any Payment being subject to the Excise Tax.
(b)
The Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall not be reduced under subsection (a) if:
(i)
such reduction in such Payment is not sufficient to cause no portion of any Payment to be subject to the Excise Tax, or
(ii)
the Net After-Tax Unreduced Payments (as defined below) would equal or exceed one hundred and five percent (105%) of the Net After-Tax Reduced Payments (as defined below).
For purposes of determining the amount of any Reduced Payment under subsection (a), and the Net-After Tax Reduced Payments and the Net After-Tax Unreduced Payments, the Executive shall be considered to pay federal, state and local income and employment taxes at the Executives applicable marginal rates taking into consideration any reduction in federal income taxes which could be obtained from the deduction of state and local income taxes, and any reduction or disallowance of itemized deductions and personal exemptions under applicable tax law). The applicable federal, state and local income and employment taxes and the Excise Tax (to the extent applicable) are collectively referred to as the Taxes.
(c)
The following definitions shall apply for purposes of this Section 8:
(i)
Net After-Tax Reduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are reduced pursuant to subsection (a).
(ii)
Net After-Tax Unreduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are not reduced pursuant to subsection (a).
(iii)
Net After-Tax Basis shall mean, with respect to the Payments, either with or without reduction under subsection (a) (as applicable), the amount that would be retained by the Executive from such Payments after the payment of all Taxes.
(d)
All determinations required to be made under this Section 8 and the assumptions to be utilized in arriving at such determinations, shall be made by a nationally recognized accounting firm as may be agreed by the Company and the Executive (the Accounting Firm); provided, that the Accounting Firms determination shall be made based upon substantial authority within the meaning of Section 6662 of the Code. The Accounting Firm shall provide detailed supporting calculations to both the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. For purposes of determining whether and the extent to which the Payments will be subject to the Excise Tax, (i) no portion of the 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, (ii) no portion of the Payments shall be taken into account which, in the written opinion of the Accounting Firm, 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) and, in calculating the Excise Tax, no portion of such Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Payments shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
Section 9.
Delayed Distribution under Section 409A of the Code. If the Executive is a Specified Employee on the date of the Executives Involuntary Termination (or on the date of the Executives Separation from Service by reason of Disability), the Section 409A Payments, and any other payments or benefits under this Agreement subject to Section 409A of the Code, shall be delayed in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits shall be paid or distributed to the Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six-month period measured from the date of the Executives Separation from Service or (b) the date of the Executives death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 9 (excluding in-kind benefits) shall be paid in a lump sum payment to the Executive, plus interest thereon from the date of the Executives Involuntary Termination through the payment date at an annual rate equal to Moodys Rate. The Moodys Rate shall mean the average of the daily Moodys Corporate Bond Yield Average Monthly Average Corporates as published by Moodys Investors Service, Inc. (or any successor) for the month next preceding the Date of Termination. Any remaining payments due under the Agreement shall be paid as otherwise provided herein.
Section 10.
Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executives 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), including, without limitation, any and all indemnification arrangements in favor of the Executive (whether under agreements or under the Companys charter documents or otherwise), and insurance policies covering the Executive, 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. At all times during the Executives employment with the Company and thereafter, the Company shall provide (to the extent permissible under applicable law) the Executive with indemnification and D&O insurance insuring the Executive against insurable events which occur or have occurred while the Executive was a director or the Executive officer of the Company, on terms and conditions that are at least as generous as that then provided to any other current or former director or the Executive officer of the Company or any Affiliate. Such indemnification and D&O insurance shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(10).
Section 11.
Clawbacks. Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that if the Executive is required to forfeit or to make any repayment of any compensation or benefit(s) to the Company under the Sarbanes-Oxley Act of 2002 or pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other law, such forfeiture or repayment shall not constitute Good Reason.
Section 12.
Full Settlement; Mitigation. The Companys 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.
Section 13.
Dispute Resolution.
(a)
If any dispute arises between Executive and the Company, including, but not limited to, disputes relating to or arising out of this Agreement, any action relating to or arising out of my employment or its termination, and/or any disputes regarding the interpretation, enforceability, or validity of this Agreement (Arbitrable Dispute), Executive and the Company waive the right to resolve the dispute through litigation in a judicial forum and agree to resolve the Arbitrable Dispute through final and binding arbitration, except as prohibited by law. Arbitration shall be the exclusive remedy for any Arbitrable Dispute.
(b)
As to any Arbitrable Dispute, the Company and Executive waive any right to a jury trial or a court bench trial. The Company and Executive also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
(c)
Arbitration shall take place at the office of the Judicial Arbitration and Mediation Service (JAMS) (or, if Executive is employed outside of California, the American Arbitration Association (AAA)) nearest to the location where Executive last worked for the Company. Except to the extent it conflicts with the rules and procedures set forth in this Arbitration Agreement, arbitration shall be conducted in accordance with the JAMs Employment Arbitration Rules & Procedures (if Executive is employed outside of California, the AAA Employment Arbitration Rules & Mediation Procedures), copies of which are attached for my reference and available at www.jamsadr.com; tel: 800.352.5267 and www.adr.org; tel: 800.778.7879, before a single experienced, neutral employment arbitrator selected in accordance with those rules.
(d)
The Company will be responsible for paying any filing fee and the fees and costs of the arbitrator. Each party shall pay its own attorneys fees. However, if any party prevails on a statutory claim that authorizes an award of attorneys fees to the prevailing party, or if there is a written agreement providing for attorneys fees, the arbitrator may award reasonable attorneys fees to the prevailing party, applying the same standards a court would apply under the law applicable to the claim.
(e)
The arbitrator shall apply the Federal Rules of Evidence, shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party, and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator does not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action. The Company and Executive recognize that this Agreement arises out of or concerns interstate commerce and that the Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this Arbitration Agreement or any arbitration award.
(f)
EXECUTIVE ACKNOWLEDGES THAT BY ENTERING INTO THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT HE OR SHE MAY HAVE TO A TRIAL BY JURY.
Section 14.
Executives Covenants.
(a)
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 and its Affiliates; and the Executive agrees that it would be extremely damaging to the Company and its Affiliates if such Proprietary Information were disclosed to a competitor of the Company and its 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 or information the Executive is required by any governmental, administrative or court order to disclose) without limitation in time. In view of the nature of the Executives employment and the Proprietary Information the Executive has acquired during the course of such employment, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any disclosure of Proprietary Information in violation of the terms of this paragraph and that the Company and its 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 Companys Senior Vice President, Public Policy (or, if such position is vacant, the Companys then Chief Executive Officer); provided, that the Company shall not unreasonably classify information as Proprietary Information.
(b)
Non-Solicitation of Employees. The Executive recognizes that he possesses and will possess confidential information about other employees of the Company and its Affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customers of the Company and its 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 and its 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 and its Affiliates. The Executive agrees that at all times during the Executives employment with the Company and for a period of one (1) year thereafter, he will not, directly or indirectly, solicit or recruit any employee of the Company or its Affiliates for the purpose of being employed by him or by any competitor of the Company or its 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 and its 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 or its Affiliates who has either first contacted the Executive or regarding whose employment the Executive has discussed with and received the written approval of the Companys Vice President, Human Resources (or, if such position is vacant, the Companys then Chief Executive Officer), prior to making such solicitation or recruitment. In view of the nature of the Executives employment with the Company, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any solicitation or recruitment in violation of the terms of this paragraph and that the Company and its 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.
(c)
Survival of Provisions. The obligations contained in Section 14(a) and Section 14(b) above shall survive the termination of the Executives employment within the Company and shall be fully enforceable thereafter. If it is determined by a court of competent jurisdiction in any state that any restriction in Section 14(a) or Section 14(b) above is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.
(d)
Release; Lump Sum Payment. In the event of the Executives Involuntary Termination, if the Executive (i) reconfirms and agrees to abide by the covenants described in Section 14(a) and Section 14(b) above, (ii) executes the Release within fifty (50) days after the date of Involuntary Termination and does not revoke such Release in accordance with the terms thereof, and (iii) agrees to provide the consulting services described in Section 14(e) below, then in consideration for such covenants and consulting services, the Company shall pay the Executive, in one cash lump sum, an amount (the Consulting Payment) in cash equal to the greater of: (X) 160% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. Except as provided in this subsection, the Consulting Payment shall be paid on such date as is determined by the Company within the ten (10) day period commencing on the 60th day after the date of the Executives Involuntary Termination; provided, however, that if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Consulting Payment shall be paid as provided in Section 9 hereof. The Executive shall have the right to elect to defer the Consulting Payment under the terms and conditions of the Companys Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
(e)
Consulting. If the Executive agrees to the provisions of Section 14(d) above, then the Executive shall have the obligation to provide consulting services to the Company as an independent contractor, commencing on the Date of Termination and ending on the second anniversary of the Date of Termination (the Consulting Period). The Executive shall hold himself available at reasonable times and on reasonable notice to render such consulting services as may be so assigned to him by the Board or the Companys then Chief Executive Officer; provided, however, that unless the parties otherwise agree, the consulting services rendered by the Executive during the Consulting Period shall not exceed twenty (20) hours each month; and, provided, further, that the consulting services rendered by the Executive during the Consulting Period shall in no event exceed twenty percent (20%) of the average level of services performed by the Executive for the Company over the thirty-six (36) month period immediately preceding the Executives Separation from Service (or the full period of services to the Company, if the Executive has been providing services to the Company for less than thirty-six (36) months). The Company agrees to use its best efforts during the Consulting Period to secure the benefit of the Executives consulting services so as to minimize the interference with the Executives other activities, including requiring the performance of consulting services at the Companys offices only when such services may not be reasonably performed off-site by the Executive.
Section 15.
Legal Fees.
(a)
Reimbursement of Legal Fees. Subject to subsection (b), in the event of the Executives Separation from Service either (1) prior to a Change in Control, or (2) on or within two (2) years following a Change in Control, the Company shall reimburse the Executive for all legal fees and expenses (including but not limited to fees and expenses in connection with any arbitration) incurred by the Executive in disputing any issue arising under this Agreement relating to the Executives Separation from Service or in seeking to obtain or enforce any benefit or right provided by this Agreement.
(b)
Requirements for Reimbursement. The Company shall reimburse the Executives legal fees and expenses pursuant to subsection (a) above only to the extent the arbitrator or court determines the following: (i) the Executive disputed such issue, or sought to obtain or enforce such benefit or right, in good faith, (ii) the Executive had a reasonable basis for such claim, and (iii) in the case of subsection (a)(1) above, the Executive is the prevailing party. In addition, the Company shall reimburse such legal fees and expenses, only if such legal fees and expenses are incurred during the twenty (20) year period beginning on the date of the Executives Separation from Service. The legal fees and expenses paid to the Executive for any taxable year of the Executive shall not affect the legal fees and expenses paid to the Executive for any other taxable year of the Executive. The legal fees and expenses shall be paid to the Executive on or before the last day of the Executives taxable year following the taxable year in which the fees or expenses are incurred. The Executives right to reimbursement of legal fees and expenses shall not be subject to liquidation or exchange for any other benefit. Such right to reimbursement of legal fees and expenses shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv). If the Executive is a Specified Employee on the date of the Executives Separation from Service, such right to reimbursement of legal fees and expenses shall be paid as provided in Section 10 hereof.
Section 16.
Successors.
(a)
Assignment by the Executive. This Agreement is personal to the Executive and without the prior written consent of Sempra Energy shall not be assignable 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 Executives legal representatives.
(b)
Successors and Assigns of Sempra Energy. This Agreement shall inure to the benefit of and be binding upon Sempra Energy, its successors and assigns. Sempra Energy may not assign this Agreement to any person or entity (except for a successor described in Section 16(c), (d) or (e) below) without the Executives written consent.
(c)
Assumption. Sempra Energy 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 Sempra Energy to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities of this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement if no such succession had taken place, and Sempra Energy shall have no further obligations and liabilities under this Agreement. Upon such assumption, references to Sempra Energy in this Agreement shall be replaced with references to such successor.
(d)
Sale of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy that is a member of the Sempra Energy Control Group, (ii) Sempra Energy, directly or indirectly through one or more intermediaries, sells or otherwise disposes of such subsidiary, and (iii) such subsidiary ceases to be a member of the Sempra Energy Control Group, then if, on the date such subsidiary ceases to be a member of the Sempra Energy Control Group, the Executive continues in employment with such subsidiary and the Executive does not have a Separation from Service, Sempra Energy shall require such subsidiary or any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to such subsidiary, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if such subsidiary had not ceased to be part of the Sempra Energy Control Group, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to such subsidiary, or such successor or parent thereof, assuming this Agreement, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of such cessation.
(e)
Sale of Assets of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) such subsidiary sells or otherwise disposes of substantial assets of such subsidiary to an unrelated service recipient, as determined under Treasury Regulation Section 1.409A-1(f)(2)(ii) (the Asset Purchaser), in a transaction described in Treasury Regulation Section 1.409A-1(h)(4) (an Asset Sale), then if, on the date of such Asset Sale, the Executive becomes employed by the Asset Purchaser, Sempra Energy and the Asset Purchaser shall specify, in accordance with Treasury Regulation Section 1.409A-1(h)(4), that the Executive shall not be treated as having a Separation from Service, and Sempra Energy shall require such Asset Purchaser, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if the Asset Sale had not taken place, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to the Asset Purchaser or the parent thereof, as applicable, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of the Asset Sale.
Section 17.
Administration Prior to Change in Control. Prior to a Change in Control, the Compensation Committee shall have full and complete authority to construe and interpret the provisions of this Agreement, to determine an individuals entitlement to benefits under this Agreement, to make in its sole and absolute discretion all determinations contemplated under this Agreement, to investigate and make factual determinations necessary or advisable to administer or implement this Agreement, and to adopt such rules and procedures as it deems necessary or advisable for the administration or implementation of this Agreement. All determinations made under this Agreement by the Compensation Committee shall be final and binding on all interested persons. Prior to a Change in Control, the Compensation Committee may delegate responsibilities for the operation and administration of this Agreement to one or more officers or employees of the Company. The provisions of this Section 17 shall terminate and be of no further force and effect upon the occurrence of a Change in Control.
Section 18.
Section 409A of the Code.
(a)
Compliance with and Exemption from Section 409A of the Code. Certain payments and benefits payable under this Agreement (including, without limitation, the Section 409A Payments) are intended to comply with the requirements of Section 409A of the Code. Certain payments and benefits payable under this Agreement are intended to be exempt from the requirements of Section 409A of the Code. This Agreement shall be interpreted in accordance with the applicable requirements of, and exemptions from, Section 409A of the Code and the Treasury Regulations thereunder. To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder (subject to the transitional relief under Internal Revenue Service Notice 2005-1, the Proposed Regulations under Section 409A of the Code, Internal Revenue Service Notice 2006-79, Internal Revenue Service Notice 2007-78, Internal Revenue Service Notice 2007-86 and other applicable authority issued by the Internal Revenue Service). As provided in Internal Revenue Notice 2007-86, notwithstanding any other provision of this Agreement, with respect to an election or amendment to change a time or form of payment under this Agreement made on or after January 1, 2008 and on or before December 31, 2008, the election or amendment shall apply only with respect to payments that would not otherwise be payable in 2008, and shall not cause payments to be made in 2008 that would not otherwise be payable in 2008. If the Company and the Executive determine that any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, to the extent permitted under Section 409A of the Code, the Treasury Regulations thereunder and any applicable authority issued by the Internal Revenue Service, the Company and the Executive agree to amend this Agreement, or take such other actions as the Company and the Executive deem reasonably necessary or appropriate, to cause such compensation, benefits and other payments to comply with the requirements of Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, while providing compensation, benefits and other payments that are, in the aggregate, no less favorable than the compensation, benefits and other payments provided under this Agreement. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments to the extent such provision would cause a failure to comply, and such provision shall otherwise remain in full force and effect.
(b)
Deferral Elections. As provided in Sections 4(f), 5(i) and 14(d), the Executive may elect to defer the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment as follows. The Executives deferral election shall satisfy the requirements of Treasury Regulation Section 1.409A-2(b) and the terms and conditions of the Deferred Compensation Plan. Such deferral election shall designate the whole percentage (up to a maximum of 100%) of the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment to be deferred, shall be irrevocable when made, and shall not take effect until at least twelve (12) months after the date on which the election is made. Such deferral election shall provide that the amount deferred shall be deferred for a period of not less than five (5) years from the date the payment of the amount deferred would otherwise have been made, in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).
Section 19.
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 Companys 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 Executives or the Companys 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 1 hereof, or the right of the Company to terminate the Executives employment for Cause pursuant to Section 1 hereof 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; Exclusive Benefit; Supersession of Prior Agreement. This instrument contains the entire agreement of the Executive, the Company or any predecessor or subsidiary thereof with respect to any severance or termination pay. The Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and all other benefits provided hereunder shall be in lieu of any other severance payments to which the Executive is entitled under any other severance plan or program or arrangement sponsored by the Company, as well as pursuant to any individual employment or severance agreement that was entered into by the Executive and the Company, and, upon the Effective Date of this Agreement, all such plans, programs, arrangements and agreements are hereby automatically superseded and terminated.
(g)
No Right of Employment. Nothing in this Agreement shall be construed as giving the Executive any right to be retained in the employ of the Company or shall interfere in any way with the right of the Company to terminate the Executives employment at any time, with or without Cause.
(h)
Unfunded Obligation. The obligations under this Agreement shall be unfunded. Benefits payable under this Agreement shall be paid from the general assets of the Company. The Company shall have no obligation to establish any fund or to set aside any assets to provide benefits under this Agreement.
(i)
Termination upon Sale of Assets of Subsidiary. Notwithstanding anything contained herein, this Agreement shall automatically terminate and be of no further force and effect and no benefits shall be payable hereunder in the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) an Asset Sale (as defined in Section 16(e)) occurs (other than such a sale or disposition which is part of a transaction or series of transactions which would result in a Change in Control), and (iii) as a result of such Asset Sale, the Executive is offered employment by the Asset Purchaser in an executive position with reasonably comparable status, compensation, benefits and severance agreement (including the assumption of this Agreement in accordance with Section 16(e)) and which is consistent with the Executives experience and education, but the Executive declines to accept such offer and the Executive fails to become employed by the Asset Purchaser on the date of the Asset Sale.
(j)
Term. The term of this Agreement shall commence on the Effective Date and shall continue until the third (3rd) anniversary of the Effective Date; provided, however, that commencing on the second (2nd) anniversary of the Effective Date (and each anniversary of the Effective Date thereafter), the term of this Agreement shall automatically be extended for one (1) additional year, unless at least ninety (90) days 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. Notwithstanding the foregoing, if the Company gives such written notice to the Executive less than two (2) years after a Change in Control, the term of this Agreement shall be automatically extended until the later of (A) the date that is one (1) year after the anniversary of the Effective Date that follows such written notice or (B) the second (2nd) anniversary of the Change in Control Date.
(k)
Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
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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.
SEMPRA ENERGY
G. Joyce Rowland
Senior Vice President, Human Resources, Diversity and Inclusion
_____________________________________
Date
EXECUTIVE
Michael R. Niggli
President and Chief Operating Officer, San Diego Gas & Electric
_____________________________________
Date
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 Severance Pay Agreement dated ____________, 20___ (the Severance Pay Agreement); and
WHEREAS, your right to receive certain severance pay and benefits pursuant to the terms of Section 4 or Section 5, and Section 14 of the Severance Pay Agreement, as applicable, are 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 the severance and benefit under the Severance Pay Agreement, 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 this 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 you and to the Company and each of the Companys 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, 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, indemnification and D&O 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, claim, any claim that you failed to perform or negligently performed or breached your duties during employment at the Company, any legal restrictions on the Companys right to terminate employment relationships; and any federal, state or other governmental statute, regulation, or ordinance, governing the employment relationship including, without limitation, all state and federal laws and regulations prohibiting discrimination based on protected categories, and all state and federal laws and regulations prohibiting retaliation against employees for engaging in protected activity or legal off-duty conduct. This release does not extend to claims for workers compensation or other claims which by law may not be waived or released by this Agreement.
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 and analogous laws of other states) which limits the effect of a release with respect to unknown claims. You and the Company do so understanding 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 and analogous laws of other states). 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 OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER 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 Companys 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 true 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. You agree that you will not be entitled to any monetary recovery that may result from any agency action against the Company related to the Claims released by 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 the 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.
As a further material inducement to you to enter into this Agreement, the Company hereby agrees to indemnify and hold each of the Releasees harmless from all loss, costs, damages, or expenses, including without limitation, attorneys fees incurred by the Releasees, arising out of any breach of this Agreement by it or the fact that any representation made in this Agreement by it was knowingly 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 attorneys fees; provided, that counsel has been approved by the Company prior to retention, which approval shall not be unreasonably withheld), 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 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. The Company agrees to reimburse you for any reasonable costs you incur in providing such cooperation.
TEN: This Agreement is entered into in California and shall be governed by substantive California law, except as provided in this section. If any dispute arises between you and the Company, including but not limited to, disputes relating to this Agreement, or if you prosecute a claim you purported to release by means of this Agreement (Arbitrable Dispute), you and the Company agree to resolve that Arbitrable Dispute through final and binding arbitration under this section. You also agree to arbitrate any Arbitrable Dispute which also involves any other released party who offers or agrees to arbitrate the dispute under this section. Your agreement to arbitrate applies, for example, to disputes about the validity, interpretation, or effect of this Agreement or alleged violations of it, claims of discrimination under federal or state law, or other statutory violation claims.
As to any Arbitrable Dispute, you and the Company waive any right to a jury trial or a court bench trial. You and the Company also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
Arbitration shall take place in San Diego, California under the employment dispute resolution rules of the Judicial Arbitration and Mediation Service (JAMS), (or, if you are employed outside of California at the time of the termination of your employment, at the nearest location of the American Arbitration Association and in accordance with the AAA rules), before an experienced employment arbitrator selected in accordance with those rules. The arbitrator may not modify or change this Agreement in any way. The Company will be responsible for paying any filing fee and the fees and costs of the Arbitrator; provided, however, that if you are the party initiating the claim, you will contribute an amount equal to the filing fee to initiate a claim in the court of general jurisdiction in the state in which you are employed by the Company. Each party shall pay for its own costs and attorneys fees, if any. However if any party prevails on a statutory claim which affords the prevailing party attorneys fees and costs, or if there is a written agreement providing for attorneys fees and/or costs, the Arbitrator may award reasonable attorneys fees and/or costs to the prevailing party, applying the same standards a court would apply under the law applicable to the claim. The Arbitrator shall apply the Federal Rules of Evidence and shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this section or any arbitration award. The arbitrator will not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action.
To the extent that the Federal Arbitration Act is inapplicable, California law pertaining to arbitration agreements shall apply. Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. Except as prohibited by the ADEA, should you or the Company attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this section, the responding party will be entitled to recover from the initiating party all damages, expenses, and attorneys fees incurred as a result of this breach. This Section TEN supersedes any existing arbitration agreement between the Company and me as to any Arbitrable Dispute. Notwithstanding anything in this Section TEN to the contrary, a claim for benefits under an ERISA-covered plan shall not be an Arbitrable Dispute.
ELEVEN: Both you and the Company understand that this Agreement is final and binding eight (8) 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 Sections 4 or 5 of the Severance Pay Agreement, as applicable, plus interest, and invite the Company to retain such monies and agree with you to cancel this Agreement and void the Companys obligations under Section 14(d) of the Severance Pay 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 the Severance Pay 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 Companys obligations under the Severance Pay 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 forty-five (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 forty-five (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 (7) days of signing it. If you wish to revoke, the Companys Vice President, Human Resources must receive written notice from you no later than the close of business on the seventh (7th) 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 Sections 4 or 5, and Section 14 of the Severance Pay Agreement, as applicable.
FOURTEEN: This Agreement constitutes the entire agreement of the parties hereto and supersedes any and all other agreements (except the Severance Pay 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 understanding 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 10.2
SEMPRA ENERGY
SEVERANCE PAY AGREEMENT
THIS AGREEMENT (this Agreement), dated as of February 18, 2013 (the Effective Date), is made by and between SEMPRA ENERGY, a California corporation (Sempra Energy), and James P. Avery (the Executive).
WHEREAS, the Executive is currently employed by Sempra Energy or a direct or indirect subsidiary of Sempra Energy (Sempra Energy and its subsidiaries are hereinafter collectively referred to as the Company) as Senior Vice President, Power Supply; and
WHEREAS, Sempra Energy and the Executive desire to enter into this Agreement; and
WHEREAS, the Board of Directors of Sempra Energy (the Board) has authorized this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and the Executive hereby agree as follows:
Section 1.
Definitions. For purposes of this Agreement, the following capitalized terms have the meanings set forth below:
Accounting Firm has the meaning assigned thereto in Section 8(d) hereof.
Accrued Obligations means the sum of (A) the Executives Annual Base Salary through the Date of Termination to the extent not theretofore 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, (C) any accrued and unpaid vacation, if any, and (D) reimbursement for unreimbursed business expenses, if any, properly incurred by the Executive in the performance of his duties in accordance with policies established from time to time by the Board, in each case to the extent not theretofore paid.
Affiliate has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.
Annual Base Salary means the Executives annual base salary from the Company.
Asset Purchaser has the meaning assigned thereto in Section 16(e).
Asset Sale has the meaning assigned thereto in Section 16(e).
Average Annual Bonus means the average of the annual bonuses from the Company earned by the Executive with respect to the three (3) fiscal years of the Company immediately preceding the Date of Termination (the Bonus Fiscal Years); provided, however, that, if the Executive was employed by the Company for less than three (3) Bonus Fiscal Years, Average Annual Bonus means the average of the annual bonuses (if any) from the Company earned by the Executive with respect to the Bonus Fiscal Years during which the Executive was employed by the Company; and, provided, further, that, if the Executive was not employed by the Company during any of the Bonus Fiscal Years, Average Annual Bonus means zero.
Cause means:
(a)
Prior to a Change in Control, (i) the willful failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives incapacity due to physical or mental illness, (ii) the grossly negligent performance of such obligations referenced in clause (i) of this definition, (iii) the Executives gross insubordination; and/or (iv) the Executives 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 subsection (a), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company.
(b)
From and after a Change in Control, (i) the willful and continued failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives 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 2 hereof) and/or (ii) the Executives 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 subsection (b), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed terminated for Cause pursuant to clause (i) of this subsection (b) unless and until the Executive shall have been provided with reasonable notice of and, if possible, a reasonable opportunity to cure the facts and circumstances claimed to provide a basis for termination of the Executives employment for Cause.
Change in Control shall be deemed to have occurred on the date that a change in the ownership of Sempra Energy, a change in the effective control of Sempra Energy, or a change in the ownership of a substantial portion of assets of Sempra Energy occurs (each, as defined in subsection (a) below), except as otherwise provided in subsections (b), (c) and (d) below:
(a)
(i)
a change in the ownership of Sempra Energy occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of Sempra Energy that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Sempra Energy,
(ii)
a change in the effective control of Sempra Energy occurs only on either of the following dates:
(A)
the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Sempra Energy possessing thirty percent (30%) or more of the total voting power of the stock of Sempra Energy, or
(B)
the date a majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of appointment or election, and
(iii)
a change in the ownership of a substantial portion of assets of Sempra Energy occurs on the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from Sempra Energy that have a total gross fair market value equal to or more than eighty-five percent (85%) of the total gross fair market value of all of the assets of Sempra Energy immediately before such acquisition or acquisitions.
(b)
A change in the ownership of Sempra Energy or a change in the effective control of Sempra Energy shall not occur under clause (a)(i) or (a)(ii) by reason of any of the following:
(i)
an acquisition of ownership of stock of Sempra Energy directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business,
(ii)
a merger or consolidation which would result in the voting securities of Sempra Energy 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, at least sixty percent (60%) of the combined voting power of the securities of Sempra Energy or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or
(iii)
a merger or consolidation effected to implement a recapitalization of Sempra Energy (or similar transaction) in which no Person is or becomes the Beneficial Owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Sempra Energy (not including the securities beneficially owned by such Person any securities acquired directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business) representing twenty percent (20%) or more of the combined voting power of Sempra Energys then outstanding securities.
(c)
A change in the ownership of a substantial portion of assets of Sempra Energy shall not occur under clause (a)(iii) by reason of a sale or disposition by Sempra Energy of the assets of Sempra Energy to an entity, at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by shareholders of Sempra Energy in substantially the same proportions as their ownership of Sempra Energy immediately prior to such sale.
(d)
This definition of Change in Control shall be limited to the definition of a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5). A Change in Control shall only occur if there is a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5) with respect to the Executive.
Change in Control Date means the date on which a Change in Control occurs.
Code means the Internal Revenue Code of 1986, as amended.
Compensation Committee means the compensation committee of the Board.
Consulting Payment has the meaning assigned thereto in Section 14(d) hereof.
Consulting Period has the meaning assigned thereto in Section 14(e) hereof.
Date of Termination has the meaning assigned thereto in Section 2(b) hereof.
Deferred Compensation Plan has the meaning assigned thereto in Section 4(f) hereof.
Disability has the meaning set forth in the Companys long-term disability plan or its successor; provided, however, that the Board may not terminate the Executives employment hereunder by reason of Disability unless (i) 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 and (ii) such termination is permitted by all applicable disability laws.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.
Excise Tax has the meaning assigned thereto in Section 8(a) hereof.
Good Reason means:
(a)
Prior to a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
the assignment to the Executive of any duties materially inconsistent with the range of duties and responsibilities appropriate to a senior Executive within the Company (such range determined by reference to past, current and reasonable practices within the Company);
(ii)
a material reduction in the Executives overall standing and responsibilities within the Company, but not including (A) a mere change in title or (B) a transfer within the Company, which, in the case of both (A) and (B), does not adversely affect the Executives overall status within the Company;
(iii)
a material reduction by the Company in the Executives aggregate annualized compensation and benefits opportunities, except for across-the-board reductions (or modifications of benefit plans) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
(b)
From and after a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
an adverse change in the Executives title, authority, duties, responsibilities or reporting lines as in effect immediately prior to the Change in Control;
(ii)
a reduction by the Company in the Executives aggregate annualized compensation opportunities, except for across-the-board reductions in base salaries, annual bonus opportunities or long-term incentive compensation opportunities of less than ten percent (10%) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive; or the failure by the Company to continue in effect any material benefit plan in which the Executive participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change in Control;
(iii)
the relocation of the Executives principal place of employment immediately prior to the Change in Control Date (the Principal Location) to a location which is both further away from the Executives residence and more than thirty (30) miles from such Principal Location, or the Companys requiring the Executive to be based anywhere other than such Principal Location (or permitted relocation thereof), or a substantial increase in the Executives 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 of limited duration and (B) is understood not to be part of the Executives regular duties with the Company;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
Following a Change in Control, the Executives 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 pursuant to the procedure described in Section 13 hereof. The Executives right to terminate the Executives employment for Good Reason shall not be affected by the Executives incapacity due to physical or mental illness. The Executives 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.
Incentive Compensation Awards means awards granted under Incentive Compensation Plans providing the Executive with the opportunity to earn, on a year-by-year basis, annual and long-term incentive compensation.
Incentive Compensation Plans means annual incentive compensation plans and long-term incentive compensation plans of the Company, which long-term incentive compensation plans may include plans offering stock options, restricted stock and other long-term incentive compensation.
Involuntary Termination means (a) the Executives Separation from Service by reason other than for Cause, death, or Disability, or Mandatory Retirement, or (b) the Executives Separation from Service by reason of resignation of employment for Good Reason.
JAMS Rules has the meaning assigned thereto in Section 13 hereof.
Mandatory Retirement means termination of employment pursuant to the Companys mandatory retirement policy.
Notice of Termination has the meaning assigned thereto in Section 2(a) hereof.
Payment has the meaning assigned thereto in Section 8(a) hereof.
Payment in Lieu of Notice has the meaning assigned thereto in Section 2(b) hereof.
Person has the meaning set forth in section 3(a)(9) of 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 Affiliates, (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) promulgated under the Exchange Act.
Post-Change in Control Severance Payment has the meaning assigned thereto in Section 5 hereof.
Pre-Change in Control Severance Payment has the meaning assigned thereto in Section 4 hereof.
Principal Location has the meaning assigned thereto in clause (b)(iii) of the definition of Good Reason, above.
Proprietary Information has the meaning assigned thereto in Section 14(a) hereof.
Pro Rata Bonus has the meaning assigned thereto in Section 5(b) hereof.
Release has the meaning assigned thereto in Section 4 hereof.
Section 409A Payments means any of the following: (a) the Payment in Lieu of Notice; (b) the Pre-Change in Control Severance Payment; (c) the Post-Change in Control Severance Payment; (d) the Pro Rata Bonus; (e) the Consulting Payment; (f) the payment under Section 5(c); (g) the financial planning services and the related payments provided under Sections 4(e) and 5(g); (h) the legal fees and expenses reimbursed under Section 15; and (i) any other payment that the Company determines in its sole discretion is subject to Section 409A of the Code as non-qualified deferred compensation.
Sempra Energy Control Group means Sempra Energy and all persons with whom Sempra Energy would be considered a single employer under Section 414(b) or 414(c) of the Code, as determined from time to time.
Separation from Service has the meaning set forth in Treasury Regulation Section 1.409A-1(h), with respect to the Service Recipient.
SERP has the meaning assigned thereto in Section 5(c) hereof.
Specified Employee shall be determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation 1.409A-1(i).
For purposes of this Agreement, references to any Treasury Regulation shall mean such Treasury Regulation as in effect on the date hereof.
Section 2.
Notice and Date of Termination.
(a)
Any termination of the Executives employment by the Company or by the Executive shall be communicated by a written notice of termination to the other party (the Notice of Termination). Where applicable, the Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated. 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.
(b)
The date of the Executives termination of employment with the Company (the Date of Termination) shall be determined as follows: (i) if the Executives Separation from Service is at the volition of the Company, the Date of Termination shall be the date specified in the Notice of Termination (which, in the case of a termination by the Company other than for Cause, shall not be less than two (2) weeks from the date such Notice of Termination is given unless the Company elects to pay the Executive, in addition to any other amounts payable hereunder, an amount (the Payment in Lieu of Notice) equal to two (2) weeks of the Executives Annual Base Salary in effect on the Date of Termination), and (ii) if the Executives Separation from Service is by the Executive for Good Reason, the Date of Termination shall be determined by the Executive and specified in the Notice of Termination, but shall not in any event be less than fifteen (15) days nor more than sixty (60) days after the date such Notice of Termination is given. The Payment in Lieu of Notice shall be paid on such date as is required by law, but no later than thirty (30) days after the date of the Executives Separation from Service; provided, however, that if the Executive is a Specified Employee on the date of his or her Separation from Service, such Payment in Lieu of Notice shall be paid as provided in Section 9 hereof.
Section 3.
Termination from the Board. Upon the termination of the Executives employment for any reason, the Executives membership on the Board, the board of directors of any of the Companys Affiliates, any committees of the Board and any committees of the board of directors of any of the Companys Affiliates, if applicable, shall be automatically terminated.
Section 4.
Severance Benefits upon Involuntary Termination Prior to Change in Control. Except as provided in Section 5(h) and Section 19(i) hereof, in the event of the Involuntary Termination of the Executive prior to a Change in Control, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Pre-Change in Control Severance Payment) equal to one-half (0.5) times the greater of: (X) 150% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. In addition to the Pre-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in subsections (a) through (e). The Company's obligation to pay the Pre-Change in Control Severance Payment or provide the benefits set forth in subsections (c), (d) and (e) are subject to and conditioned upon the Executive executing a release (the Release) of all claims substantially in the form attached hereto as Exhibit A within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Section 4(f), the Pre-Change in Control Severance Payment shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination; but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pre-Change in Control Severance Payment shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Pre-Change in Control Severance Payment and the financial planning services and the related payments provided under Section 4(e) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law.
(b)
Equity Based Compensation. The Executive shall retain all rights to any equity-based compensation awards to the extent set forth in the applicable plan and/or award agreement.
(c)
Welfare Benefits. Subject to Section 12 below, for a period of six (6) months following the date of the Involuntary Termination (and an additional twelve (12) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided with health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the date of the Involuntary Termination; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of the Involuntary Termination. Such benefits shall be provided through insurance maintained by the Company under the Companys benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(d)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of eighteen (18) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(e)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of eighteen (18) months following the Date of Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial planning services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv).
(f)
Deferral of Payments. The Executive shall have the right to elect to defer the Pre-Change in Control Severance Payment to be received by the Executive pursuant to this Section 4 under the terms and conditions of the Sempra Energy 2005 Deferred Compensation Plan (the Deferred Compensation Plan). Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 5.
Severance Benefits upon Involuntary Termination in Connection with and after Change in Control. Notwithstanding the provisions of Section 4 above, and except as provided in Section 19(i) hereof, in the event of the Involuntary Termination of the Executive on or within two (2) years following a Change in Control, in lieu of the payments described in Section 4 above, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Post-Change in Control Severance Payment) equal to the greater of: (X) 150% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or the Date of Termination, whichever is greater, and (Y) the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, plus the Executives Average Annual Bonus. In addition to the Post-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in subsections (a) through (g). The Company's obligation to pay the Post-Change in Control Severance Payment or provide the benefits set forth in subsections (b),(c), (d), (e), (f) and (g) are subject to and conditioned upon the Executive executing the Release within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Sections 5(h) and 5(i), the Post-Change in Control Severance Payment, the Pro Rata Bonus and the payments under Section 6(c) shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Post-Change in Control Severance Payment, Pro Rata Bonus and payments under Section 5(c) shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Post-Change in Control Severance Payment, the Pro Rata Bonus, the payment under Section 5(c) and the financial planning services and the related payments provided under Section 5(g) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law.
(b)
Pro Rata Bonus. The Company shall pay the Executive a lump sum amount in cash equal to: (i) the greater of: (X) 50% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, or (Y) the Executives Average Annual Bonus, multiplied by (ii) 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 equal to (the Pro Rata Bonus).
(c)
Pension Supplement. The Executive shall be entitled to receive a Supplemental Retirement Benefit under the Sempra Energy Supplemental Executive Retirement Plan, as in effect from time to time (SERP), determined in accordance with this Section 5(c), in the event that the Executive is a Participant (as defined in the SERP) as of the Date of Termination. Such Supplemental Retirement Benefit shall be determined by crediting the Executive with additional months of Service (if any) equal to the number of full calendar months from the Date of Termination to the date on which the Executive would have attained age 62. The Executive shall be entitled to receive such Supplemental Retirement Benefit without regard to whether the Executive has attained age 55 or completed five years of Service (as defined in the SERP) as of the Date of Termination. The Executive shall be treated as qualified for Retirement (as defined in the SERP) as of the Date of Termination, and the Executives Vesting Factor with respect to the Supplemental Retirement Benefit shall be 100%. The Executives Supplemental Retirement Benefit shall be calculated based on the Executives actual age as of the date of commencement of payment of such Supplemental Retirement Benefit (the SERP Distribution Date), and by applying the applicable early retirement factors under the SERP, if the Executive has not attained age 62 but has attained age 55 as of the SERP Distribution Date. If the Executive has not attained age 55 as of the SERP Distribution Date, the Executives Supplemental Retirement Benefit shall be calculated by applying the applicable early retirement factor under the SERP for age 55, and the Supplemental Retirement Benefit otherwise payable at age 55 shall be actuarially adjusted to the Executives actual age as of the SERP Distribution Date using the following actuarial assumptions: (i) the applicable mortality table promulgated by the Internal Revenue Service under Section 417(e)(3) of the Code, as in effect on the first day of the calendar year in which the SERP Distribution Date occurs, and (ii) the applicable interest rate promulgated by the Internal Revenue Service under Section 417(a)(3) of the Code for the November next preceding the first day of the calendar year in which the SERP Distribution Date occurs. The Executives Supplemental Retirement Benefit shall be determined in accordance with this Section 5(c), notwithstanding any contrary provisions of the SERP and, to the extent subject to Section 409A of the Code, shall be paid in accordance with Treasury Regulation Section 1.409A-3(c)(1). The Supplemental Retirement Benefit paid to or on behalf of the Executive in accordance with this Section 5(c) shall be in full satisfaction of any and all of the benefits payable to or on behalf of the Executive under the SERP.
(d)
Equity-Based Compensation. Notwithstanding the provisions of any applicable equity-compensation plan or award agreement to the contrary, all equity-based Incentive Compensation Awards (including, without limitation, stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance share awards, awards covered under Section 162(m) of the Code, and dividend equivalents) held by the Executive shall immediately vest and become exercisable or payable, as the case may be, as of the Date of Termination, to be exercised or paid, as the case may be, in accordance with the terms of the applicable Incentive Compensation Plan and Incentive Compensation Award agreement, and any restrictions on any such Incentive Compensation Awards shall automatically lapse; provided, however, that any such stock option or stock appreciation rights awards granted on or after June 26, 1998 shall remain outstanding and exercisable until the earlier of (A) the later of eighteen (18) months following the Date of Termination or the period specified in the applicable Incentive Compensation Award agreements or (B) the expiration of the original term of such Incentive Compensation Award (or, if earlier, the tenth anniversary of the original date of grant) (it being understood that all Incentive Compensation Awards granted prior to or after June 26, 1998 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).
(e)
Welfare Benefits. Subject to Section 12 below, for a period of twelve (12) months following the date of Involuntary Termination (and an additional twelve (12) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided 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 Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive. Such benefits shall be provided through insurance maintained by the Company under the Company benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(f)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of twenty-four (24) months following the date of Involuntary Termination (but in no event beyond the last day of the Executives second taxable year following the Executives taxable year in which the Involuntary Termination occurs), in the aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(g)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of twenty-four (24) months following the date of Involuntary Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Section 1.409A-3(i)(1)(iv).
(h)
Involuntary Termination in Connection with a Change in Control. Notwithstanding anything contained herein, in the event of an Involuntary Termination prior to a Change in Control, if the Involuntary Termination (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or in anticipation of such Change in Control, then the Executive shall, in lieu of the payments described in Section 4 hereof, be entitled to the Post-Change in Control Severance Payment and the additional benefits described in this Section 5 as if such Involuntary Termination had occurred within two (2) years following the Change in Control. The amounts specified in Section 5 that are to be paid under this Section 5(h) shall be reduced by any amount previously paid under Section 4. The amounts to be paid under this Section 5(h) shall be paid within sixty (60) days after the Change in Control Date of such Change in Control.
(i)
Deferral of Payments. The Executive shall have the right to elect to defer the Post-Change in Control Severance Payment and the Pro Rata Bonus to be received by the Executive pursuant to this Section 5 under the terms and conditions of the Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 6.
Severance Benefits upon Termination by the Company for Cause or by the Executive Other than for Good Reason. If the Executives employment shall be terminated for Cause, or if the Executive terminates employment other than for Good Reason, the Company shall have no further obligations to the Executive under this Agreement other than the Accrued Obligations and any amounts or benefits described in Section 10 hereof.
Section 7.
Severance Benefits upon Termination due to Death or Disability. If the Executive has a Separation from Service by reason of death or Disability, the Company shall pay the Executive or his estate, as the case may be, the Accrued Obligations and the Pro Rata Bonus (without regard to whether a Change in Control has occurred) and any amounts or benefits described in Section 10 hereof. 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. The Company's obligation to pay the Pro Rata Bonus is conditioned upon the Executive, the Executive's representative or the Executive's estate, as the case may be executing the Release within fifty (50) days after the date of Executive's Separation from Service and not revoking such Release in accordance with the terms thereof. The Accrued Obligations shall be paid within the time required by law and the Pro Rata Bonus shall be paid on such date as determined by the Company within sixty (60) days after the date of the Separation from Service but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pro Rata Bonus shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Separation from Service, the Pro Rata Bonus shall be paid as provided in Section 9 hereof.
Section 8.
Limitations on Payments by the Company.
(a)
Anything in this Agreement to the contrary notwithstanding and except as set forth in this Section 8 below, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise (the Payment) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, (the Excise Tax), then, subject to subsection (b), the Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall be reduced under this subsection (a) to the amount equal to the Reduced Payment. For such Payment payable under this Agreement, the Reduced Payment shall be the amount equal to the greatest portion of the Payment (which may be zero) that, if paid, would result in no portion of any Payment being subject to the Excise Tax.
(b)
The Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall not be reduced under subsection (a) if:
(i)
such reduction in such Payment is not sufficient to cause no portion of any Payment to be subject to the Excise Tax, or
(ii)
the Net After-Tax Unreduced Payments (as defined below) would equal or exceed one hundred and five percent (105%) of the Net After-Tax Reduced Payments (as defined below).
For purposes of determining the amount of any Reduced Payment under subsection (a), and the Net-After Tax Reduced Payments and the Net After-Tax Unreduced Payments, the Executive shall be considered to pay federal, state and local income and employment taxes at the Executives applicable marginal rates taking into consideration any reduction in federal income taxes which could be obtained from the deduction of state and local income taxes, and any reduction or disallowance of itemized deductions and personal exemptions under applicable tax law). The applicable federal, state and local income and employment taxes and the Excise Tax (to the extent applicable) are collectively referred to as the Taxes.
(c)
The following definitions shall apply for purposes of this Section 8:
(i)
Net After-Tax Reduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are reduced pursuant to subsection (a).
(ii)
Net After-Tax Unreduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are not reduced pursuant to subsection (a).
(iii)
Net After-Tax Basis shall mean, with respect to the Payments, either with or without reduction under subsection (a) (as applicable), the amount that would be retained by the Executive from such Payments after the payment of all Taxes.
(d)
All determinations required to be made under this Section 8 and the assumptions to be utilized in arriving at such determinations, shall be made by a nationally recognized accounting firm as may be agreed by the Company and the Executive (the Accounting Firm); provided, that the Accounting Firms determination shall be made based upon substantial authority within the meaning of Section 6662 of the Code. The Accounting Firm shall provide detailed supporting calculations to both the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. For purposes of determining whether and the extent to which the Payments will be subject to the Excise Tax, (i) no portion of the 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, (ii) no portion of the Payments shall be taken into account which, in the written opinion of the Accounting Firm, 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) and, in calculating the Excise Tax, no portion of such Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Payments shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
Section 9.
Delayed Distribution under Section 409A of the Code. If the Executive is a Specified Employee on the date of the Executives Involuntary Termination (or on the date of the Executives Separation from Service by reason of Disability), the Section 409A Payments, and any other payments or benefits under this Agreement subject to Section 409A of the Code, shall be delayed in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits shall be paid or distributed to the Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six-month period measured from the date of the Executives Separation from Service or (b) the date of the Executives death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 9 (excluding in-kind benefits) shall be paid in a lump sum payment to the Executive, plus interest thereon from the date of the Executives Involuntary Termination through the payment date at an annual rate equal to Moodys Rate. The Moodys Rate shall mean the average of the daily Moodys Corporate Bond Yield Average Monthly Average Corporates as published by Moodys Investors Service, Inc. (or any successor) for the month next preceding the Date of Termination. Any remaining payments due under the Agreement shall be paid as otherwise provided herein.
Section 10.
Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executives 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), including, without limitation, any and all indemnification arrangements in favor of the Executive (whether under agreements or under the Companys charter documents or otherwise), and insurance policies covering the Executive, 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. At all times during the Executives employment with the Company and thereafter, the Company shall provide (to the extent permissible under applicable law) the Executive with indemnification and D&O insurance insuring the Executive against insurable events which occur or have occurred while the Executive was a director or the Executive officer of the Company, on terms and conditions that are at least as generous as that then provided to any other current or former director or the Executive officer of the Company or any Affiliate. Such indemnification and D&O insurance shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(10).
Section 11.
Clawbacks. Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that if the Executive is required to forfeit or to make any repayment of any compensation or benefit(s) to the Company under the Sarbanes-Oxley Act of 2002 or pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other law, such forfeiture or repayment shall not constitute Good Reason.
Section 12.
Full Settlement; Mitigation. The Companys 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.
Section 13.
Dispute Resolution.
(a)
If any dispute arises between Executive and the Company, including, but not limited to, disputes relating to or arising out of this Agreement, any action relating to or arising out of my employment or its termination, and/or any disputes regarding the interpretation, enforceability, or validity of this Agreement (Arbitrable Dispute), Executive and the Company waive the right to resolve the dispute through litigation in a judicial forum and agree to resolve the Arbitrable Dispute through final and binding arbitration, except as prohibited by law. Arbitration shall be the exclusive remedy for any Arbitrable Dispute.
(b)
As to any Arbitrable Dispute, the Company and Executive waive any right to a jury trial or a court bench trial. The Company and Executive also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
(c)
Arbitration shall take place at the office of the Judicial Arbitration and Mediation Service (JAMS) (or, if Executive is employed outside of California, the American Arbitration Association (AAA)) nearest to the location where Executive last worked for the Company. Except to the extent it conflicts with the rules and procedures set forth in this Arbitration Agreement, arbitration shall be conducted in accordance with the JAMs Employment Arbitration Rules & Procedures (if Executive is employed outside of California, the AAA Employment Arbitration Rules & Mediation Procedures), copies of which are attached for my reference and available at www.jamsadr.com; tel: 800.352.5267 and www.adr.org; tel: 800.778.7879, before a single experienced, neutral employment arbitrator selected in accordance with those rules.
(d)
The Company will be responsible for paying any filing fee and the fees and costs of the arbitrator. Each party shall pay its own attorneys fees. However, if any party prevails on a statutory claim that authorizes an award of attorneys fees to the prevailing party, or if there is a written agreement providing for attorneys fees, the arbitrator may award reasonable attorneys fees to the prevailing party, applying the same standards a court would apply under the law applicable to the claim.
(e)
The arbitrator shall apply the Federal Rules of Evidence, shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party, and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator does not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action. The Company and Executive recognize that this Agreement arises out of or concerns interstate commerce and that the Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this Arbitration Agreement or any arbitration award.
(f)
EXECUTIVE ACKNOWLEDGES THAT BY ENTERING INTO THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT HE OR SHE MAY HAVE TO A TRIAL BY JURY.
Section 14.
Executives Covenants.
(a)
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 and its Affiliates; and the Executive agrees that it would be extremely damaging to the Company and its Affiliates if such Proprietary Information were disclosed to a competitor of the Company and its 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 or information the Executive is required by any governmental, administrative or court order to disclose) without limitation in time. In view of the nature of the Executives employment and the Proprietary Information the Executive has acquired during the course of such employment, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any disclosure of Proprietary Information in violation of the terms of this paragraph and that the Company and its 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 Companys Senior Vice President, Public Policy (or, if such position is vacant, the Companys then Chief Executive Officer); provided, that the Company shall not unreasonably classify information as Proprietary Information.
(b)
Non-Solicitation of Employees. The Executive recognizes that he possesses and will possess confidential information about other employees of the Company and its Affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customers of the Company and its 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 and its 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 and its Affiliates. The Executive agrees that at all times during the Executives employment with the Company and for a period of one (1) year thereafter, he will not, directly or indirectly, solicit or recruit any employee of the Company or its Affiliates for the purpose of being employed by him or by any competitor of the Company or its 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 and its 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 or its Affiliates who has either first contacted the Executive or regarding whose employment the Executive has discussed with and received the written approval of the Companys Vice President, Human Resources (or, if such position is vacant, the Companys then Chief Executive Officer), prior to making such solicitation or recruitment. In view of the nature of the Executives employment with the Company, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any solicitation or recruitment in violation of the terms of this paragraph and that the Company and its 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.
(c)
Survival of Provisions. The obligations contained in Section 14(a) and Section 14(b) above shall survive the termination of the Executives employment within the Company and shall be fully enforceable thereafter. If it is determined by a court of competent jurisdiction in any state that any restriction in Section 14(a) or Section 14(b) above is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.
(d)
Release; Lump Sum Payment. In the event of the Executives Involuntary Termination, if the Executive (i) reconfirms and agrees to abide by the covenants described in Section 14(a) and Section 14(b) above, (ii) executes the Release within fifty (50) days after the date of Involuntary Termination and does not revoke such Release in accordance with the terms thereof, and (iii) agrees to provide the consulting services described in Section 14(e) below, then in consideration for such covenants and consulting services, the Company shall pay the Executive, in one cash lump sum, an amount (the Consulting Payment) in cash equal to the greater of: (X) 150% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. Except as provided in this subsection, the Consulting Payment shall be paid on such date as is determined by the Company within the ten (10) day period commencing on the 60th day after the date of the Executives Involuntary Termination; provided, however, that if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Consulting Payment shall be paid as provided in Section 9 hereof. The Executive shall have the right to elect to defer the Consulting Payment under the terms and conditions of the Companys Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
(e)
Consulting. If the Executive agrees to the provisions of Section 14(d) above, then the Executive shall have the obligation to provide consulting services to the Company as an independent contractor, commencing on the Date of Termination and ending on the second anniversary of the Date of Termination (the Consulting Period). The Executive shall hold himself available at reasonable times and on reasonable notice to render such consulting services as may be so assigned to him by the Board or the Companys then Chief Executive Officer; provided, however, that unless the parties otherwise agree, the consulting services rendered by the Executive during the Consulting Period shall not exceed twenty (20) hours each month; and, provided, further, that the consulting services rendered by the Executive during the Consulting Period shall in no event exceed twenty percent (20%) of the average level of services performed by the Executive for the Company over the thirty-six (36) month period immediately preceding the Executives Separation from Service (or the full period of services to the Company, if the Executive has been providing services to the Company for less than thirty-six (36) months). The Company agrees to use its best efforts during the Consulting Period to secure the benefit of the Executives consulting services so as to minimize the interference with the Executives other activities, including requiring the performance of consulting services at the Companys offices only when such services may not be reasonably performed off-site by the Executive.
Section 15.
Legal Fees.
(a)
Reimbursement of Legal Fees. Subject to subsection (b), in the event of the Executives Separation from Service either (1) prior to a Change in Control, or (2) on or within two (2) years following a Change in Control, the Company shall reimburse the Executive for all legal fees and expenses (including but not limited to fees and expenses in connection with any arbitration) incurred by the Executive in disputing any issue arising under this Agreement relating to the Executives Separation from Service or in seeking to obtain or enforce any benefit or right provided by this Agreement.
(b)
Requirements for Reimbursement. The Company shall reimburse the Executives legal fees and expenses pursuant to subsection (a) above only to the extent the arbitrator or court determines the following: (i) the Executive disputed such issue, or sought to obtain or enforce such benefit or right, in good faith, (ii) the Executive had a reasonable basis for such claim, and (iii) in the case of subsection (a)(1) above, the Executive is the prevailing party. In addition, the Company shall reimburse such legal fees and expenses, only if such legal fees and expenses are incurred during the twenty (20) year period beginning on the date of the Executives Separation from Service. The legal fees and expenses paid to the Executive for any taxable year of the Executive shall not affect the legal fees and expenses paid to the Executive for any other taxable year of the Executive. The legal fees and expenses shall be paid to the Executive on or before the last day of the Executives taxable year following the taxable year in which the fees or expenses are incurred. The Executives right to reimbursement of legal fees and expenses shall not be subject to liquidation or exchange for any other benefit. Such right to reimbursement of legal fees and expenses shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv). If the Executive is a Specified Employee on the date of the Executives Separation from Service, such right to reimbursement of legal fees and expenses shall be paid as provided in Section 10 hereof.
Section 16.
Successors.
(a)
Assignment by the Executive. This Agreement is personal to the Executive and without the prior written consent of Sempra Energy shall not be assignable 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 Executives legal representatives.
(b)
Successors and Assigns of Sempra Energy. This Agreement shall inure to the benefit of and be binding upon Sempra Energy, its successors and assigns. Sempra Energy may not assign this Agreement to any person or entity (except for a successor described in Section 16(c), (d) or (e) below) without the Executives written consent.
(c)
Assumption. Sempra Energy 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 Sempra Energy to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities of this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement if no such succession had taken place, and Sempra Energy shall have no further obligations and liabilities under this Agreement. Upon such assumption, references to Sempra Energy in this Agreement shall be replaced with references to such successor.
(d)
Sale of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy that is a member of the Sempra Energy Control Group, (ii) Sempra Energy, directly or indirectly through one or more intermediaries, sells or otherwise disposes of such subsidiary, and (iii) such subsidiary ceases to be a member of the Sempra Energy Control Group, then if, on the date such subsidiary ceases to be a member of the Sempra Energy Control Group, the Executive continues in employment with such subsidiary and the Executive does not have a Separation from Service, Sempra Energy shall require such subsidiary or any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to such subsidiary, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if such subsidiary had not ceased to be part of the Sempra Energy Control Group, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to such subsidiary, or such successor or parent thereof, assuming this Agreement, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of such cessation.
(e)
Sale of Assets of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) such subsidiary sells or otherwise disposes of substantial assets of such subsidiary to an unrelated service recipient, as determined under Treasury Regulation Section 1.409A-1(f)(2)(ii) (the Asset Purchaser), in a transaction described in Treasury Regulation Section 1.409A-1(h)(4) (an Asset Sale), then if, on the date of such Asset Sale, the Executive becomes employed by the Asset Purchaser, Sempra Energy and the Asset Purchaser shall specify, in accordance with Treasury Regulation Section 1.409A-1(h)(4), that the Executive shall not be treated as having a Separation from Service, and Sempra Energy shall require such Asset Purchaser, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if the Asset Sale had not taken place, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to the Asset Purchaser or the parent thereof, as applicable, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of the Asset Sale.
Section 17.
Administration Prior to Change in Control. Prior to a Change in Control, the Compensation Committee shall have full and complete authority to construe and interpret the provisions of this Agreement, to determine an individuals entitlement to benefits under this Agreement, to make in its sole and absolute discretion all determinations contemplated under this Agreement, to investigate and make factual determinations necessary or advisable to administer or implement this Agreement, and to adopt such rules and procedures as it deems necessary or advisable for the administration or implementation of this Agreement. All determinations made under this Agreement by the Compensation Committee shall be final and binding on all interested persons. Prior to a Change in Control, the Compensation Committee may delegate responsibilities for the operation and administration of this Agreement to one or more officers or employees of the Company. The provisions of this Section 17 shall terminate and be of no further force and effect upon the occurrence of a Change in Control.
Section 18.
Section 409A of the Code.
(a)
Compliance with and Exemption from Section 409A of the Code. Certain payments and benefits payable under this Agreement (including, without limitation, the Section 409A Payments) are intended to comply with the requirements of Section 409A of the Code. Certain payments and benefits payable under this Agreement are intended to be exempt from the requirements of Section 409A of the Code. This Agreement shall be interpreted in accordance with the applicable requirements of, and exemptions from, Section 409A of the Code and the Treasury Regulations thereunder. To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder (subject to the transitional relief under Internal Revenue Service Notice 2005-1, the Proposed Regulations under Section 409A of the Code, Internal Revenue Service Notice 2006-79, Internal Revenue Service Notice 2007-78, Internal Revenue Service Notice 2007-86 and other applicable authority issued by the Internal Revenue Service). As provided in Internal Revenue Notice 2007-86, notwithstanding any other provision of this Agreement, with respect to an election or amendment to change a time or form of payment under this Agreement made on or after January 1, 2008 and on or before December 31, 2008, the election or amendment shall apply only with respect to payments that would not otherwise be payable in 2008, and shall not cause payments to be made in 2008 that would not otherwise be payable in 2008. If the Company and the Executive determine that any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, to the extent permitted under Section 409A of the Code, the Treasury Regulations thereunder and any applicable authority issued by the Internal Revenue Service, the Company and the Executive agree to amend this Agreement, or take such other actions as the Company and the Executive deem reasonably necessary or appropriate, to cause such compensation, benefits and other payments to comply with the requirements of Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, while providing compensation, benefits and other payments that are, in the aggregate, no less favorable than the compensation, benefits and other payments provided under this Agreement. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments to the extent such provision would cause a failure to comply, and such provision shall otherwise remain in full force and effect.
(b)
Deferral Elections. As provided in Sections 4(f), 5(i) and 14(d), the Executive may elect to defer the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment as follows. The Executives deferral election shall satisfy the requirements of Treasury Regulation Section 1.409A-2(b) and the terms and conditions of the Deferred Compensation Plan. Such deferral election shall designate the whole percentage (up to a maximum of 100%) of the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment to be deferred, shall be irrevocable when made, and shall not take effect until at least twelve (12) months after the date on which the election is made. Such deferral election shall provide that the amount deferred shall be deferred for a period of not less than five (5) years from the date the payment of the amount deferred would otherwise have been made, in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).
Section 19.
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 Companys 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 Executives or the Companys 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 1 hereof, or the right of the Company to terminate the Executives employment for Cause pursuant to Section 1 hereof 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; Exclusive Benefit; Supersession of Prior Agreement. This instrument contains the entire agreement of the Executive, the Company or any predecessor or subsidiary thereof with respect to any severance or termination pay. The Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and all other benefits provided hereunder shall be in lieu of any other severance payments to which the Executive is entitled under any other severance plan or program or arrangement sponsored by the Company, as well as pursuant to any individual employment or severance agreement that was entered into by the Executive and the Company, and, upon the Effective Date of this Agreement, all such plans, programs, arrangements and agreements are hereby automatically superseded and terminated.
(g)
No Right of Employment. Nothing in this Agreement shall be construed as giving the Executive any right to be retained in the employ of the Company or shall interfere in any way with the right of the Company to terminate the Executives employment at any time, with or without Cause.
(h)
Unfunded Obligation. The obligations under this Agreement shall be unfunded. Benefits payable under this Agreement shall be paid from the general assets of the Company. The Company shall have no obligation to establish any fund or to set aside any assets to provide benefits under this Agreement.
(i)
Termination upon Sale of Assets of Subsidiary. Notwithstanding anything contained herein, this Agreement shall automatically terminate and be of no further force and effect and no benefits shall be payable hereunder in the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) an Asset Sale (as defined in Section 16(e)) occurs (other than such a sale or disposition which is part of a transaction or series of transactions which would result in a Change in Control), and (iii) as a result of such Asset Sale, the Executive is offered employment by the Asset Purchaser in an executive position with reasonably comparable status, compensation, benefits and severance agreement (including the assumption of this Agreement in accordance with Section 16(e)) and which is consistent with the Executives experience and education, but the Executive declines to accept such offer and the Executive fails to become employed by the Asset Purchaser on the date of the Asset Sale.
(j)
Term. The term of this Agreement shall commence on the Effective Date and shall continue until the third (3rd) anniversary of the Effective Date; provided, however, that commencing on the second (2nd) anniversary of the Effective Date (and each anniversary of the Effective Date thereafter), the term of this Agreement shall automatically be extended for one (1) additional year, unless at least ninety (90) days 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. Notwithstanding the foregoing, if the Company gives such written notice to the Executive less than two (2) years after a Change in Control, the term of this Agreement shall be automatically extended until the later of (A) the date that is one (1) year after the anniversary of the Effective Date that follows such written notice or (B) the second (2nd) anniversary of the Change in Control Date.
(k)
Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
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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.
SEMPRA ENERGY
G. Joyce Rowland
Senior Vice President, Human Resources, Diversity and Inclusion
_____________________________________
Date
EXECUTIVE
James P. Avery
Senior Vice President, Power Supply
_____________________________________
Date
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 Severance Pay Agreement dated ____________, 20___ (the Severance Pay Agreement); and
WHEREAS, your right to receive certain severance pay and benefits pursuant to the terms of Section 4 or Section 5, and Section 14 of the Severance Pay Agreement, as applicable, are 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 the severance and benefit under the Severance Pay Agreement, 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 this 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 you and to the Company and each of the Companys 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, 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, indemnification and D&O 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, claim, any claim that you failed to perform or negligently performed or breached your duties during employment at the Company, any legal restrictions on the Companys right to terminate employment relationships; and any federal, state or other governmental statute, regulation, or ordinance, governing the employment relationship including, without limitation, all state and federal laws and regulations prohibiting discrimination based on protected categories, and all state and federal laws and regulations prohibiting retaliation against employees for engaging in protected activity or legal off-duty conduct. This release does not extend to claims for workers compensation or other claims which by law may not be waived or released by this Agreement.
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 and analogous laws of other states) which limits the effect of a release with respect to unknown claims. You and the Company do so understanding 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 and analogous laws of other states). 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 OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER 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 Companys 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 true 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. You agree that you will not be entitled to any monetary recovery that may result from any agency action against the Company related to the Claims released by 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 the 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.
As a further material inducement to you to enter into this Agreement, the Company hereby agrees to indemnify and hold each of the Releasees harmless from all loss, costs, damages, or expenses, including without limitation, attorneys fees incurred by the Releasees, arising out of any breach of this Agreement by it or the fact that any representation made in this Agreement by it was knowingly 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 attorneys fees; provided, that counsel has been approved by the Company prior to retention, which approval shall not be unreasonably withheld), 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 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. The Company agrees to reimburse you for any reasonable costs you incur in providing such cooperation.
TEN: This Agreement is entered into in California and shall be governed by substantive California law, except as provided in this section. If any dispute arises between you and the Company, including but not limited to, disputes relating to this Agreement, or if you prosecute a claim you purported to release by means of this Agreement (Arbitrable Dispute), you and the Company agree to resolve that Arbitrable Dispute through final and binding arbitration under this section. You also agree to arbitrate any Arbitrable Dispute which also involves any other released party who offers or agrees to arbitrate the dispute under this section. Your agreement to arbitrate applies, for example, to disputes about the validity, interpretation, or effect of this Agreement or alleged violations of it, claims of discrimination under federal or state law, or other statutory violation claims.
As to any Arbitrable Dispute, you and the Company waive any right to a jury trial or a court bench trial. You and the Company also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
Arbitration shall take place in San Diego, California under the employment dispute resolution rules of the Judicial Arbitration and Mediation Service (JAMS), (or, if you are employed outside of California at the time of the termination of your employment, at the nearest location of the American Arbitration Association and in accordance with the AAA rules), before an experienced employment arbitrator selected in accordance with those rules. The arbitrator may not modify or change this Agreement in any way. The Company will be responsible for paying any filing fee and the fees and costs of the Arbitrator; provided, however, that if you are the party initiating the claim, you will contribute an amount equal to the filing fee to initiate a claim in the court of general jurisdiction in the state in which you are employed by the Company. Each party shall pay for its own costs and attorneys fees, if any. However if any party prevails on a statutory claim which affords the prevailing party attorneys fees and costs, or if there is a written agreement providing for attorneys fees and/or costs, the Arbitrator may award reasonable attorneys fees and/or costs to the prevailing party, applying the same standards a court would apply under the law applicable to the claim. The Arbitrator shall apply the Federal Rules of Evidence and shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this section or any arbitration award. The arbitrator will not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action.
To the extent that the Federal Arbitration Act is inapplicable, California law pertaining to arbitration agreements shall apply. Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. Except as prohibited by the ADEA, should you or the Company attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this section, the responding party will be entitled to recover from the initiating party all damages, expenses, and attorneys fees incurred as a result of this breach. This Section TEN supersedes any existing arbitration agreement between the Company and me as to any Arbitrable Dispute. Notwithstanding anything in this Section TEN to the contrary, a claim for benefits under an ERISA-covered plan shall not be an Arbitrable Dispute.
ELEVEN: Both you and the Company understand that this Agreement is final and binding eight (8) 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 Sections 4 or 5 of the Severance Pay Agreement, as applicable, plus interest, and invite the Company to retain such monies and agree with you to cancel this Agreement and void the Companys obligations under Section 14(d) of the Severance Pay 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 the Severance Pay 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 Companys obligations under the Severance Pay 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 forty-five (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 forty-five (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 (7) days of signing it. If you wish to revoke, the Companys Vice President, Human Resources must receive written notice from you no later than the close of business on the seventh (7th) 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 Sections 4 or 5, and Section 14 of the Severance Pay Agreement, as applicable.
FOURTEEN: This Agreement constitutes the entire agreement of the parties hereto and supersedes any and all other agreements (except the Severance Pay 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 understanding 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
SEMPRA ENERGY
SEVERANCE PAY AGREEMENT
THIS AGREEMENT (this Agreement), dated as of February 18, 2013 (the Effective Date), is made by and between SEMPRA ENERGY, a California corporation (Sempra Energy), and Lee Schavrien (the Executive).
WHEREAS, the Executive is currently employed by Sempra Energy or a direct or indirect subsidiary of Sempra Energy (Sempra Energy and its subsidiaries are hereinafter collectively referred to as the Company) as Senior Vice President, Financial Regulatory and Legislative Affairs; and
WHEREAS, Sempra Energy and the Executive desire to enter into this Agreement; and
WHEREAS, the Board of Directors of Sempra Energy (the Board) has authorized this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and the Executive hereby agree as follows:
Section 1.
Definitions. For purposes of this Agreement, the following capitalized terms have the meanings set forth below:
Accounting Firm has the meaning assigned thereto in Section 8(d) hereof.
Accrued Obligations means the sum of (A) the Executives Annual Base Salary through the Date of Termination to the extent not theretofore 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, (C) any accrued and unpaid vacation, if any, and (D) reimbursement for unreimbursed business expenses, if any, properly incurred by the Executive in the performance of his duties in accordance with policies established from time to time by the Board, in each case to the extent not theretofore paid.
Affiliate has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.
Annual Base Salary means the Executives annual base salary from the Company.
Asset Purchaser has the meaning assigned thereto in Section 16(e).
Asset Sale has the meaning assigned thereto in Section 16(e).
Average Annual Bonus means the average of the annual bonuses from the Company earned by the Executive with respect to the three (3) fiscal years of the Company immediately preceding the Date of Termination (the Bonus Fiscal Years); provided, however, that, if the Executive was employed by the Company for less than three (3) Bonus Fiscal Years, Average Annual Bonus means the average of the annual bonuses (if any) from the Company earned by the Executive with respect to the Bonus Fiscal Years during which the Executive was employed by the Company; and, provided, further, that, if the Executive was not employed by the Company during any of the Bonus Fiscal Years, Average Annual Bonus means zero.
Cause means:
(a)
Prior to a Change in Control, (i) the willful failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives incapacity due to physical or mental illness, (ii) the grossly negligent performance of such obligations referenced in clause (i) of this definition, (iii) the Executives gross insubordination; and/or (iv) the Executives 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 subsection (a), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company.
(b)
From and after a Change in Control, (i) the willful and continued failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives 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 2 hereof) and/or (ii) the Executives 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 subsection (b), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed terminated for Cause pursuant to clause (i) of this subsection (b) unless and until the Executive shall have been provided with reasonable notice of and, if possible, a reasonable opportunity to cure the facts and circumstances claimed to provide a basis for termination of the Executives employment for Cause.
Change in Control shall be deemed to have occurred on the date that a change in the ownership of Sempra Energy, a change in the effective control of Sempra Energy, or a change in the ownership of a substantial portion of assets of Sempra Energy occurs (each, as defined in subsection (a) below), except as otherwise provided in subsections (b), (c) and (d) below:
(a)
(i)
a change in the ownership of Sempra Energy occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of Sempra Energy that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Sempra Energy,
(ii)
a change in the effective control of Sempra Energy occurs only on either of the following dates:
(A)
the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Sempra Energy possessing thirty percent (30%) or more of the total voting power of the stock of Sempra Energy, or
(B)
the date a majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of appointment or election, and
(iii)
a change in the ownership of a substantial portion of assets of Sempra Energy occurs on the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from Sempra Energy that have a total gross fair market value equal to or more than eighty-five percent (85%) of the total gross fair market value of all of the assets of Sempra Energy immediately before such acquisition or acquisitions.
(b)
A change in the ownership of Sempra Energy or a change in the effective control of Sempra Energy shall not occur under clause (a)(i) or (a)(ii) by reason of any of the following:
(i)
an acquisition of ownership of stock of Sempra Energy directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business,
(ii)
a merger or consolidation which would result in the voting securities of Sempra Energy 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, at least sixty percent (60%) of the combined voting power of the securities of Sempra Energy or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or
(iii)
a merger or consolidation effected to implement a recapitalization of Sempra Energy (or similar transaction) in which no Person is or becomes the Beneficial Owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Sempra Energy (not including the securities beneficially owned by such Person any securities acquired directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business) representing twenty percent (20%) or more of the combined voting power of Sempra Energys then outstanding securities.
(c)
A change in the ownership of a substantial portion of assets of Sempra Energy shall not occur under clause (a)(iii) by reason of a sale or disposition by Sempra Energy of the assets of Sempra Energy to an entity, at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by shareholders of Sempra Energy in substantially the same proportions as their ownership of Sempra Energy immediately prior to such sale.
(d)
This definition of Change in Control shall be limited to the definition of a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5). A Change in Control shall only occur if there is a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5) with respect to the Executive.
Change in Control Date means the date on which a Change in Control occurs.
Code means the Internal Revenue Code of 1986, as amended.
Compensation Committee means the compensation committee of the Board.
Consulting Payment has the meaning assigned thereto in Section 14(d) hereof.
Consulting Period has the meaning assigned thereto in Section 14(e) hereof.
Date of Termination has the meaning assigned thereto in Section 2(b) hereof.
Deferred Compensation Plan has the meaning assigned thereto in Section 4(f) hereof.
Disability has the meaning set forth in the Companys long-term disability plan or its successor; provided, however, that the Board may not terminate the Executives employment hereunder by reason of Disability unless (i) 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 and (ii) such termination is permitted by all applicable disability laws.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.
Excise Tax has the meaning assigned thereto in Section 8(a) hereof.
Good Reason means:
(a)
Prior to a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
the assignment to the Executive of any duties materially inconsistent with the range of duties and responsibilities appropriate to a senior Executive within the Company (such range determined by reference to past, current and reasonable practices within the Company);
(ii)
a material reduction in the Executives overall standing and responsibilities within the Company, but not including (A) a mere change in title or (B) a transfer within the Company, which, in the case of both (A) and (B), does not adversely affect the Executives overall status within the Company;
(iii)
a material reduction by the Company in the Executives aggregate annualized compensation and benefits opportunities, except for across-the-board reductions (or modifications of benefit plans) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
(b)
From and after a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
an adverse change in the Executives title, authority, duties, responsibilities or reporting lines as in effect immediately prior to the Change in Control;
(ii)
a reduction by the Company in the Executives aggregate annualized compensation opportunities, except for across-the-board reductions in base salaries, annual bonus opportunities or long-term incentive compensation opportunities of less than ten percent (10%) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive; or the failure by the Company to continue in effect any material benefit plan in which the Executive participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change in Control;
(iii)
the relocation of the Executives principal place of employment immediately prior to the Change in Control Date (the Principal Location) to a location which is both further away from the Executives residence and more than thirty (30) miles from such Principal Location, or the Companys requiring the Executive to be based anywhere other than such Principal Location (or permitted relocation thereof), or a substantial increase in the Executives 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 of limited duration and (B) is understood not to be part of the Executives regular duties with the Company;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
Following a Change in Control, the Executives 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 pursuant to the procedure described in Section 13 hereof. The Executives right to terminate the Executives employment for Good Reason shall not be affected by the Executives incapacity due to physical or mental illness. The Executives 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.
Incentive Compensation Awards means awards granted under Incentive Compensation Plans providing the Executive with the opportunity to earn, on a year-by-year basis, annual and long-term incentive compensation.
Incentive Compensation Plans means annual incentive compensation plans and long-term incentive compensation plans of the Company, which long-term incentive compensation plans may include plans offering stock options, restricted stock and other long-term incentive compensation.
Involuntary Termination means (a) the Executives Separation from Service by reason other than for Cause, death, or Disability, or Mandatory Retirement, or (b) the Executives Separation from Service by reason of resignation of employment for Good Reason.
JAMS Rules has the meaning assigned thereto in Section 13 hereof.
Mandatory Retirement means termination of employment pursuant to the Companys mandatory retirement policy.
Notice of Termination has the meaning assigned thereto in Section 2(a) hereof.
Payment has the meaning assigned thereto in Section 8(a) hereof.
Payment in Lieu of Notice has the meaning assigned thereto in Section 2(b) hereof.
Person has the meaning set forth in section 3(a)(9) of 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 Affiliates, (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) promulgated under the Exchange Act.
Post-Change in Control Severance Payment has the meaning assigned thereto in Section 5 hereof.
Pre-Change in Control Severance Payment has the meaning assigned thereto in Section 4 hereof.
Principal Location has the meaning assigned thereto in clause (b)(iii) of the definition of Good Reason, above.
Proprietary Information has the meaning assigned thereto in Section 14(a) hereof.
Pro Rata Bonus has the meaning assigned thereto in Section 5(b) hereof.
Release has the meaning assigned thereto in Section 4 hereof.
Section 409A Payments means any of the following: (a) the Payment in Lieu of Notice; (b) the Pre-Change in Control Severance Payment; (c) the Post-Change in Control Severance Payment; (d) the Pro Rata Bonus; (e) the Consulting Payment; (f) the payment under Section 5(c); (g) the financial planning services and the related payments provided under Sections 4(e) and 5(g); (h) the legal fees and expenses reimbursed under Section 15; and (i) any other payment that the Company determines in its sole discretion is subject to Section 409A of the Code as non-qualified deferred compensation.
Sempra Energy Control Group means Sempra Energy and all persons with whom Sempra Energy would be considered a single employer under Section 414(b) or 414(c) of the Code, as determined from time to time.
Separation from Service has the meaning set forth in Treasury Regulation Section 1.409A-1(h), with respect to the Service Recipient.
SERP has the meaning assigned thereto in Section 5(c) hereof.
Specified Employee shall be determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation 1.409A-1(i).
For purposes of this Agreement, references to any Treasury Regulation shall mean such Treasury Regulation as in effect on the date hereof.
Section 2.
Notice and Date of Termination.
(a)
Any termination of the Executives employment by the Company or by the Executive shall be communicated by a written notice of termination to the other party (the Notice of Termination). Where applicable, the Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated. 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.
(b)
The date of the Executives termination of employment with the Company (the Date of Termination) shall be determined as follows: (i) if the Executives Separation from Service is at the volition of the Company, the Date of Termination shall be the date specified in the Notice of Termination (which, in the case of a termination by the Company other than for Cause, shall not be less than two (2) weeks from the date such Notice of Termination is given unless the Company elects to pay the Executive, in addition to any other amounts payable hereunder, an amount (the Payment in Lieu of Notice) equal to two (2) weeks of the Executives Annual Base Salary in effect on the Date of Termination), and (ii) if the Executives Separation from Service is by the Executive for Good Reason, the Date of Termination shall be determined by the Executive and specified in the Notice of Termination, but shall not in any event be less than fifteen (15) days nor more than sixty (60) days after the date such Notice of Termination is given. The Payment in Lieu of Notice shall be paid on such date as is required by law, but no later than thirty (30) days after the date of the Executives Separation from Service; provided, however, that if the Executive is a Specified Employee on the date of his or her Separation from Service, such Payment in Lieu of Notice shall be paid as provided in Section 9 hereof.
Section 3.
Termination from the Board. Upon the termination of the Executives employment for any reason, the Executives membership on the Board, the board of directors of any of the Companys Affiliates, any committees of the Board and any committees of the board of directors of any of the Companys Affiliates, if applicable, shall be automatically terminated.
Section 4.
Severance Benefits upon Involuntary Termination Prior to Change in Control. Except as provided in Section 5(h) and Section 19(i) hereof, in the event of the Involuntary Termination of the Executive prior to a Change in Control, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Pre-Change in Control Severance Payment) equal to one-half (0.5) times the greater of: (X) 150% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. In addition to the Pre-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in subsections (a) through (e). The Company's obligation to pay the Pre-Change in Control Severance Payment or provide the benefits set forth in subsections (c), (d) and (e) are subject to and conditioned upon the Executive executing a release (the Release) of all claims substantially in the form attached hereto as Exhibit A within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Section 4(f), the Pre-Change in Control Severance Payment shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination; but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pre-Change in Control Severance Payment shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Pre-Change in Control Severance Payment and the financial planning services and the related payments provided under Section 4(e) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law.
(b)
Equity Based Compensation. The Executive shall retain all rights to any equity-based compensation awards to the extent set forth in the applicable plan and/or award agreement.
(c)
Welfare Benefits. Subject to Section 12 below, for a period of six (6) months following the date of the Involuntary Termination (and an additional twelve (12) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided with health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the date of the Involuntary Termination; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of the Involuntary Termination. Such benefits shall be provided through insurance maintained by the Company under the Companys benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(d)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of eighteen (18) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(e)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of eighteen (18) months following the Date of Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial planning services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv).
(f)
Deferral of Payments. The Executive shall have the right to elect to defer the Pre-Change in Control Severance Payment to be received by the Executive pursuant to this Section 4 under the terms and conditions of the Sempra Energy 2005 Deferred Compensation Plan (the Deferred Compensation Plan). Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 5.
Severance Benefits upon Involuntary Termination in Connection with and after Change in Control. Notwithstanding the provisions of Section 4 above, and except as provided in Section 19(i) hereof, in the event of the Involuntary Termination of the Executive on or within two (2) years following a Change in Control, in lieu of the payments described in Section 4 above, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Post-Change in Control Severance Payment) equal to the greater of: (X) 150% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or the Date of Termination, whichever is greater, and (Y) the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, plus the Executives Average Annual Bonus. In addition to the Post-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in subsections (a) through (g). The Company's obligation to pay the Post-Change in Control Severance Payment or provide the benefits set forth in subsections (b),(c), (d), (e), (f) and (g) are subject to and conditioned upon the Executive executing the Release within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Sections 5(h) and 5(i), the Post-Change in Control Severance Payment, the Pro Rata Bonus and the payments under Section 6(c) shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Post-Change in Control Severance Payment, Pro Rata Bonus and payments under Section 5(c) shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Post-Change in Control Severance Payment, the Pro Rata Bonus, the payment under Section 5(c) and the financial planning services and the related payments provided under Section 5(g) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law.
(b)
Pro Rata Bonus. The Company shall pay the Executive a lump sum amount in cash equal to: (i) the greater of: (X) 50% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, or (Y) the Executives Average Annual Bonus, multiplied by (ii) 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 equal to (the Pro Rata Bonus).
(c)
Pension Supplement. The Executive shall be entitled to receive a Supplemental Retirement Benefit under the Sempra Energy Supplemental Executive Retirement Plan, as in effect from time to time (SERP), determined in accordance with this Section 5(c), in the event that the Executive is a Participant (as defined in the SERP) as of the Date of Termination. Such Supplemental Retirement Benefit shall be determined by crediting the Executive with additional months of Service (if any) equal to the number of full calendar months from the Date of Termination to the date on which the Executive would have attained age 62. The Executive shall be entitled to receive such Supplemental Retirement Benefit without regard to whether the Executive has attained age 55 or completed five years of Service (as defined in the SERP) as of the Date of Termination. The Executive shall be treated as qualified for Retirement (as defined in the SERP) as of the Date of Termination, and the Executives Vesting Factor with respect to the Supplemental Retirement Benefit shall be 100%. The Executives Supplemental Retirement Benefit shall be calculated based on the Executives actual age as of the date of commencement of payment of such Supplemental Retirement Benefit (the SERP Distribution Date), and by applying the applicable early retirement factors under the SERP, if the Executive has not attained age 62 but has attained age 55 as of the SERP Distribution Date. If the Executive has not attained age 55 as of the SERP Distribution Date, the Executives Supplemental Retirement Benefit shall be calculated by applying the applicable early retirement factor under the SERP for age 55, and the Supplemental Retirement Benefit otherwise payable at age 55 shall be actuarially adjusted to the Executives actual age as of the SERP Distribution Date using the following actuarial assumptions: (i) the applicable mortality table promulgated by the Internal Revenue Service under Section 417(e)(3) of the Code, as in effect on the first day of the calendar year in which the SERP Distribution Date occurs, and (ii) the applicable interest rate promulgated by the Internal Revenue Service under Section 417(a)(3) of the Code for the November next preceding the first day of the calendar year in which the SERP Distribution Date occurs. The Executives Supplemental Retirement Benefit shall be determined in accordance with this Section 5(c), notwithstanding any contrary provisions of the SERP and, to the extent subject to Section 409A of the Code, shall be paid in accordance with Treasury Regulation Section 1.409A-3(c)(1). The Supplemental Retirement Benefit paid to or on behalf of the Executive in accordance with this Section 5(c) shall be in full satisfaction of any and all of the benefits payable to or on behalf of the Executive under the SERP.
(d)
Equity-Based Compensation. Notwithstanding the provisions of any applicable equity-compensation plan or award agreement to the contrary, all equity-based Incentive Compensation Awards (including, without limitation, stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance share awards, awards covered under Section 162(m) of the Code, and dividend equivalents) held by the Executive shall immediately vest and become exercisable or payable, as the case may be, as of the Date of Termination, to be exercised or paid, as the case may be, in accordance with the terms of the applicable Incentive Compensation Plan and Incentive Compensation Award agreement, and any restrictions on any such Incentive Compensation Awards shall automatically lapse; provided, however, that any such stock option or stock appreciation rights awards granted on or after June 26, 1998 shall remain outstanding and exercisable until the earlier of (A) the later of eighteen (18) months following the Date of Termination or the period specified in the applicable Incentive Compensation Award agreements or (B) the expiration of the original term of such Incentive Compensation Award (or, if earlier, the tenth anniversary of the original date of grant) (it being understood that all Incentive Compensation Awards granted prior to or after June 26, 1998 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).
(e)
Welfare Benefits. Subject to Section 12 below, for a period of twelve (12) months following the date of Involuntary Termination (and an additional twelve (12) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided 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 Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive. Such benefits shall be provided through insurance maintained by the Company under the Company benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(f)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of twenty-four (24) months following the date of Involuntary Termination (but in no event beyond the last day of the Executives second taxable year following the Executives taxable year in which the Involuntary Termination occurs), in the aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(g)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of twenty-four (24) months following the date of Involuntary Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Section 1.409A-3(i)(1)(iv).
(h)
Involuntary Termination in Connection with a Change in Control. Notwithstanding anything contained herein, in the event of an Involuntary Termination prior to a Change in Control, if the Involuntary Termination (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or in anticipation of such Change in Control, then the Executive shall, in lieu of the payments described in Section 4 hereof, be entitled to the Post-Change in Control Severance Payment and the additional benefits described in this Section 5 as if such Involuntary Termination had occurred within two (2) years following the Change in Control. The amounts specified in Section 5 that are to be paid under this Section 5(h) shall be reduced by any amount previously paid under Section 4. The amounts to be paid under this Section 5(h) shall be paid within sixty (60) days after the Change in Control Date of such Change in Control.
(i)
Deferral of Payments. The Executive shall have the right to elect to defer the Post-Change in Control Severance Payment and the Pro Rata Bonus to be received by the Executive pursuant to this Section 5 under the terms and conditions of the Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 6.
Severance Benefits upon Termination by the Company for Cause or by the Executive Other than for Good Reason. If the Executives employment shall be terminated for Cause, or if the Executive terminates employment other than for Good Reason, the Company shall have no further obligations to the Executive under this Agreement other than the Accrued Obligations and any amounts or benefits described in Section 10 hereof.
Section 7.
Severance Benefits upon Termination due to Death or Disability. If the Executive has a Separation from Service by reason of death or Disability, the Company shall pay the Executive or his estate, as the case may be, the Accrued Obligations and the Pro Rata Bonus (without regard to whether a Change in Control has occurred) and any amounts or benefits described in Section 10 hereof. 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. The Company's obligation to pay the Pro Rata Bonus is conditioned upon the Executive, the Executive's representative or the Executive's estate, as the case may be executing the Release within fifty (50) days after the date of Executive's Separation from Service and not revoking such Release in accordance with the terms thereof. The Accrued Obligations shall be paid within the time required by law and the Pro Rata Bonus shall be paid on such date as determined by the Company within sixty (60) days after the date of the Separation from Service but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pro Rata Bonus shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Separation from Service, the Pro Rata Bonus shall be paid as provided in Section 9 hereof.
Section 8.
Limitations on Payments by the Company.
(a)
Anything in this Agreement to the contrary notwithstanding and except as set forth in this Section 8 below, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise (the Payment) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, (the Excise Tax), then, subject to subsection (b), the Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall be reduced under this subsection (a) to the amount equal to the Reduced Payment. For such Payment payable under this Agreement, the Reduced Payment shall be the amount equal to the greatest portion of the Payment (which may be zero) that, if paid, would result in no portion of any Payment being subject to the Excise Tax.
(b)
The Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall not be reduced under subsection (a) if:
(i)
such reduction in such Payment is not sufficient to cause no portion of any Payment to be subject to the Excise Tax, or
(ii)
the Net After-Tax Unreduced Payments (as defined below) would equal or exceed one hundred and five percent (105%) of the Net After-Tax Reduced Payments (as defined below).
For purposes of determining the amount of any Reduced Payment under subsection (a), and the Net-After Tax Reduced Payments and the Net After-Tax Unreduced Payments, the Executive shall be considered to pay federal, state and local income and employment taxes at the Executives applicable marginal rates taking into consideration any reduction in federal income taxes which could be obtained from the deduction of state and local income taxes, and any reduction or disallowance of itemized deductions and personal exemptions under applicable tax law). The applicable federal, state and local income and employment taxes and the Excise Tax (to the extent applicable) are collectively referred to as the Taxes.
(c)
The following definitions shall apply for purposes of this Section 8:
(i)
Net After-Tax Reduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are reduced pursuant to subsection (a).
(ii)
Net After-Tax Unreduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are not reduced pursuant to subsection (a).
(iii)
Net After-Tax Basis shall mean, with respect to the Payments, either with or without reduction under subsection (a) (as applicable), the amount that would be retained by the Executive from such Payments after the payment of all Taxes.
(d)
All determinations required to be made under this Section 8 and the assumptions to be utilized in arriving at such determinations, shall be made by a nationally recognized accounting firm as may be agreed by the Company and the Executive (the Accounting Firm); provided, that the Accounting Firms determination shall be made based upon substantial authority within the meaning of Section 6662 of the Code. The Accounting Firm shall provide detailed supporting calculations to both the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. For purposes of determining whether and the extent to which the Payments will be subject to the Excise Tax, (i) no portion of the 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, (ii) no portion of the Payments shall be taken into account which, in the written opinion of the Accounting Firm, 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) and, in calculating the Excise Tax, no portion of such Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Payments shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
Section 9.
Delayed Distribution under Section 409A of the Code. If the Executive is a Specified Employee on the date of the Executives Involuntary Termination (or on the date of the Executives Separation from Service by reason of Disability), the Section 409A Payments, and any other payments or benefits under this Agreement subject to Section 409A of the Code, shall be delayed in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits shall be paid or distributed to the Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six-month period measured from the date of the Executives Separation from Service or (b) the date of the Executives death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 9 (excluding in-kind benefits) shall be paid in a lump sum payment to the Executive, plus interest thereon from the date of the Executives Involuntary Termination through the payment date at an annual rate equal to Moodys Rate. The Moodys Rate shall mean the average of the daily Moodys Corporate Bond Yield Average Monthly Average Corporates as published by Moodys Investors Service, Inc. (or any successor) for the month next preceding the Date of Termination. Any remaining payments due under the Agreement shall be paid as otherwise provided herein.
Section 10.
Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executives 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), including, without limitation, any and all indemnification arrangements in favor of the Executive (whether under agreements or under the Companys charter documents or otherwise), and insurance policies covering the Executive, 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. At all times during the Executives employment with the Company and thereafter, the Company shall provide (to the extent permissible under applicable law) the Executive with indemnification and D&O insurance insuring the Executive against insurable events which occur or have occurred while the Executive was a director or the Executive officer of the Company, on terms and conditions that are at least as generous as that then provided to any other current or former director or the Executive officer of the Company or any Affiliate. Such indemnification and D&O insurance shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(10).
Section 11.
Clawbacks. Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that if the Executive is required to forfeit or to make any repayment of any compensation or benefit(s) to the Company under the Sarbanes-Oxley Act of 2002 or pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other law, such forfeiture or repayment shall not constitute Good Reason.
Section 12.
Full Settlement; Mitigation. The Companys 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.
Section 13.
Dispute Resolution.
(a)
If any dispute arises between Executive and the Company, including, but not limited to, disputes relating to or arising out of this Agreement, any action relating to or arising out of my employment or its termination, and/or any disputes regarding the interpretation, enforceability, or validity of this Agreement (Arbitrable Dispute), Executive and the Company waive the right to resolve the dispute through litigation in a judicial forum and agree to resolve the Arbitrable Dispute through final and binding arbitration, except as prohibited by law. Arbitration shall be the exclusive remedy for any Arbitrable Dispute.
(b)
As to any Arbitrable Dispute, the Company and Executive waive any right to a jury trial or a court bench trial. The Company and Executive also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
(c)
Arbitration shall take place at the office of the Judicial Arbitration and Mediation Service (JAMS) (or, if Executive is employed outside of California, the American Arbitration Association (AAA)) nearest to the location where Executive last worked for the Company. Except to the extent it conflicts with the rules and procedures set forth in this Arbitration Agreement, arbitration shall be conducted in accordance with the JAMs Employment Arbitration Rules & Procedures (if Executive is employed outside of California, the AAA Employment Arbitration Rules & Mediation Procedures), copies of which are attached for my reference and available at www.jamsadr.com; tel: 800.352.5267 and www.adr.org; tel: 800.778.7879, before a single experienced, neutral employment arbitrator selected in accordance with those rules.
(d)
The Company will be responsible for paying any filing fee and the fees and costs of the arbitrator. Each party shall pay its own attorneys fees. However, if any party prevails on a statutory claim that authorizes an award of attorneys fees to the prevailing party, or if there is a written agreement providing for attorneys fees, the arbitrator may award reasonable attorneys fees to the prevailing party, applying the same standards a court would apply under the law applicable to the claim.
(e)
The arbitrator shall apply the Federal Rules of Evidence, shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party, and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator does not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action. The Company and Executive recognize that this Agreement arises out of or concerns interstate commerce and that the Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this Arbitration Agreement or any arbitration award.
(f)
EXECUTIVE ACKNOWLEDGES THAT BY ENTERING INTO THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT HE OR SHE MAY HAVE TO A TRIAL BY JURY.
Section 14.
Executives Covenants.
(a)
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 and its Affiliates; and the Executive agrees that it would be extremely damaging to the Company and its Affiliates if such Proprietary Information were disclosed to a competitor of the Company and its 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 or information the Executive is required by any governmental, administrative or court order to disclose) without limitation in time. In view of the nature of the Executives employment and the Proprietary Information the Executive has acquired during the course of such employment, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any disclosure of Proprietary Information in violation of the terms of this paragraph and that the Company and its 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 Companys Senior Vice President, Public Policy (or, if such position is vacant, the Companys then Chief Executive Officer); provided, that the Company shall not unreasonably classify information as Proprietary Information.
(b)
Non-Solicitation of Employees. The Executive recognizes that he possesses and will possess confidential information about other employees of the Company and its Affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customers of the Company and its 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 and its 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 and its Affiliates. The Executive agrees that at all times during the Executives employment with the Company and for a period of one (1) year thereafter, he will not, directly or indirectly, solicit or recruit any employee of the Company or its Affiliates for the purpose of being employed by him or by any competitor of the Company or its 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 and its 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 or its Affiliates who has either first contacted the Executive or regarding whose employment the Executive has discussed with and received the written approval of the Companys Vice President, Human Resources (or, if such position is vacant, the Companys then Chief Executive Officer), prior to making such solicitation or recruitment. In view of the nature of the Executives employment with the Company, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any solicitation or recruitment in violation of the terms of this paragraph and that the Company and its 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.
(c)
Survival of Provisions. The obligations contained in Section 14(a) and Section 14(b) above shall survive the termination of the Executives employment within the Company and shall be fully enforceable thereafter. If it is determined by a court of competent jurisdiction in any state that any restriction in Section 14(a) or Section 14(b) above is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.
(d)
Release; Lump Sum Payment. In the event of the Executives Involuntary Termination, if the Executive (i) reconfirms and agrees to abide by the covenants described in Section 14(a) and Section 14(b) above, (ii) executes the Release within fifty (50) days after the date of Involuntary Termination and does not revoke such Release in accordance with the terms thereof, and (iii) agrees to provide the consulting services described in Section 14(e) below, then in consideration for such covenants and consulting services, the Company shall pay the Executive, in one cash lump sum, an amount (the Consulting Payment) in cash equal to the greater of: (X) 150% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. Except as provided in this subsection, the Consulting Payment shall be paid on such date as is determined by the Company within the ten (10) day period commencing on the 60th day after the date of the Executives Involuntary Termination; provided, however, that if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Consulting Payment shall be paid as provided in Section 9 hereof. The Executive shall have the right to elect to defer the Consulting Payment under the terms and conditions of the Companys Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
(e)
Consulting. If the Executive agrees to the provisions of Section 14(d) above, then the Executive shall have the obligation to provide consulting services to the Company as an independent contractor, commencing on the Date of Termination and ending on the second anniversary of the Date of Termination (the Consulting Period). The Executive shall hold himself available at reasonable times and on reasonable notice to render such consulting services as may be so assigned to him by the Board or the Companys then Chief Executive Officer; provided, however, that unless the parties otherwise agree, the consulting services rendered by the Executive during the Consulting Period shall not exceed twenty (20) hours each month; and, provided, further, that the consulting services rendered by the Executive during the Consulting Period shall in no event exceed twenty percent (20%) of the average level of services performed by the Executive for the Company over the thirty-six (36) month period immediately preceding the Executives Separation from Service (or the full period of services to the Company, if the Executive has been providing services to the Company for less than thirty-six (36) months). The Company agrees to use its best efforts during the Consulting Period to secure the benefit of the Executives consulting services so as to minimize the interference with the Executives other activities, including requiring the performance of consulting services at the Companys offices only when such services may not be reasonably performed off-site by the Executive.
Section 15.
Legal Fees.
(a)
Reimbursement of Legal Fees. Subject to subsection (b), in the event of the Executives Separation from Service either (1) prior to a Change in Control, or (2) on or within two (2) years following a Change in Control, the Company shall reimburse the Executive for all legal fees and expenses (including but not limited to fees and expenses in connection with any arbitration) incurred by the Executive in disputing any issue arising under this Agreement relating to the Executives Separation from Service or in seeking to obtain or enforce any benefit or right provided by this Agreement.
(b)
Requirements for Reimbursement. The Company shall reimburse the Executives legal fees and expenses pursuant to subsection (a) above only to the extent the arbitrator or court determines the following: (i) the Executive disputed such issue, or sought to obtain or enforce such benefit or right, in good faith, (ii) the Executive had a reasonable basis for such claim, and (iii) in the case of subsection (a)(1) above, the Executive is the prevailing party. In addition, the Company shall reimburse such legal fees and expenses, only if such legal fees and expenses are incurred during the twenty (20) year period beginning on the date of the Executives Separation from Service. The legal fees and expenses paid to the Executive for any taxable year of the Executive shall not affect the legal fees and expenses paid to the Executive for any other taxable year of the Executive. The legal fees and expenses shall be paid to the Executive on or before the last day of the Executives taxable year following the taxable year in which the fees or expenses are incurred. The Executives right to reimbursement of legal fees and expenses shall not be subject to liquidation or exchange for any other benefit. Such right to reimbursement of legal fees and expenses shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv). If the Executive is a Specified Employee on the date of the Executives Separation from Service, such right to reimbursement of legal fees and expenses shall be paid as provided in Section 10 hereof.
Section 16.
Successors.
(a)
Assignment by the Executive. This Agreement is personal to the Executive and without the prior written consent of Sempra Energy shall not be assignable 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 Executives legal representatives.
(b)
Successors and Assigns of Sempra Energy. This Agreement shall inure to the benefit of and be binding upon Sempra Energy, its successors and assigns. Sempra Energy may not assign this Agreement to any person or entity (except for a successor described in Section 16(c), (d) or (e) below) without the Executives written consent.
(c)
Assumption. Sempra Energy 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 Sempra Energy to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities of this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement if no such succession had taken place, and Sempra Energy shall have no further obligations and liabilities under this Agreement. Upon such assumption, references to Sempra Energy in this Agreement shall be replaced with references to such successor.
(d)
Sale of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy that is a member of the Sempra Energy Control Group, (ii) Sempra Energy, directly or indirectly through one or more intermediaries, sells or otherwise disposes of such subsidiary, and (iii) such subsidiary ceases to be a member of the Sempra Energy Control Group, then if, on the date such subsidiary ceases to be a member of the Sempra Energy Control Group, the Executive continues in employment with such subsidiary and the Executive does not have a Separation from Service, Sempra Energy shall require such subsidiary or any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to such subsidiary, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if such subsidiary had not ceased to be part of the Sempra Energy Control Group, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to such subsidiary, or such successor or parent thereof, assuming this Agreement, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of such cessation.
(e)
Sale of Assets of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) such subsidiary sells or otherwise disposes of substantial assets of such subsidiary to an unrelated service recipient, as determined under Treasury Regulation Section 1.409A-1(f)(2)(ii) (the Asset Purchaser), in a transaction described in Treasury Regulation Section 1.409A-1(h)(4) (an Asset Sale), then if, on the date of such Asset Sale, the Executive becomes employed by the Asset Purchaser, Sempra Energy and the Asset Purchaser shall specify, in accordance with Treasury Regulation Section 1.409A-1(h)(4), that the Executive shall not be treated as having a Separation from Service, and Sempra Energy shall require such Asset Purchaser, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if the Asset Sale had not taken place, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to the Asset Purchaser or the parent thereof, as applicable, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of the Asset Sale.
Section 17.
Administration Prior to Change in Control. Prior to a Change in Control, the Compensation Committee shall have full and complete authority to construe and interpret the provisions of this Agreement, to determine an individuals entitlement to benefits under this Agreement, to make in its sole and absolute discretion all determinations contemplated under this Agreement, to investigate and make factual determinations necessary or advisable to administer or implement this Agreement, and to adopt such rules and procedures as it deems necessary or advisable for the administration or implementation of this Agreement. All determinations made under this Agreement by the Compensation Committee shall be final and binding on all interested persons. Prior to a Change in Control, the Compensation Committee may delegate responsibilities for the operation and administration of this Agreement to one or more officers or employees of the Company. The provisions of this Section 17 shall terminate and be of no further force and effect upon the occurrence of a Change in Control.
Section 18.
Section 409A of the Code.
(a)
Compliance with and Exemption from Section 409A of the Code. Certain payments and benefits payable under this Agreement (including, without limitation, the Section 409A Payments) are intended to comply with the requirements of Section 409A of the Code. Certain payments and benefits payable under this Agreement are intended to be exempt from the requirements of Section 409A of the Code. This Agreement shall be interpreted in accordance with the applicable requirements of, and exemptions from, Section 409A of the Code and the Treasury Regulations thereunder. To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder (subject to the transitional relief under Internal Revenue Service Notice 2005-1, the Proposed Regulations under Section 409A of the Code, Internal Revenue Service Notice 2006-79, Internal Revenue Service Notice 2007-78, Internal Revenue Service Notice 2007-86 and other applicable authority issued by the Internal Revenue Service). As provided in Internal Revenue Notice 2007-86, notwithstanding any other provision of this Agreement, with respect to an election or amendment to change a time or form of payment under this Agreement made on or after January 1, 2008 and on or before December 31, 2008, the election or amendment shall apply only with respect to payments that would not otherwise be payable in 2008, and shall not cause payments to be made in 2008 that would not otherwise be payable in 2008. If the Company and the Executive determine that any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, to the extent permitted under Section 409A of the Code, the Treasury Regulations thereunder and any applicable authority issued by the Internal Revenue Service, the Company and the Executive agree to amend this Agreement, or take such other actions as the Company and the Executive deem reasonably necessary or appropriate, to cause such compensation, benefits and other payments to comply with the requirements of Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, while providing compensation, benefits and other payments that are, in the aggregate, no less favorable than the compensation, benefits and other payments provided under this Agreement. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments to the extent such provision would cause a failure to comply, and such provision shall otherwise remain in full force and effect.
(b)
Deferral Elections. As provided in Sections 4(f), 5(i) and 14(d), the Executive may elect to defer the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment as follows. The Executives deferral election shall satisfy the requirements of Treasury Regulation Section 1.409A-2(b) and the terms and conditions of the Deferred Compensation Plan. Such deferral election shall designate the whole percentage (up to a maximum of 100%) of the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment to be deferred, shall be irrevocable when made, and shall not take effect until at least twelve (12) months after the date on which the election is made. Such deferral election shall provide that the amount deferred shall be deferred for a period of not less than five (5) years from the date the payment of the amount deferred would otherwise have been made, in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).
Section 19.
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 Companys 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 Executives or the Companys 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 1 hereof, or the right of the Company to terminate the Executives employment for Cause pursuant to Section 1 hereof 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; Exclusive Benefit; Supersession of Prior Agreement. This instrument contains the entire agreement of the Executive, the Company or any predecessor or subsidiary thereof with respect to any severance or termination pay. The Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and all other benefits provided hereunder shall be in lieu of any other severance payments to which the Executive is entitled under any other severance plan or program or arrangement sponsored by the Company, as well as pursuant to any individual employment or severance agreement that was entered into by the Executive and the Company, and, upon the Effective Date of this Agreement, all such plans, programs, arrangements and agreements are hereby automatically superseded and terminated.
(g)
No Right of Employment. Nothing in this Agreement shall be construed as giving the Executive any right to be retained in the employ of the Company or shall interfere in any way with the right of the Company to terminate the Executives employment at any time, with or without Cause.
(h)
Unfunded Obligation. The obligations under this Agreement shall be unfunded. Benefits payable under this Agreement shall be paid from the general assets of the Company. The Company shall have no obligation to establish any fund or to set aside any assets to provide benefits under this Agreement.
(i)
Termination upon Sale of Assets of Subsidiary. Notwithstanding anything contained herein, this Agreement shall automatically terminate and be of no further force and effect and no benefits shall be payable hereunder in the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) an Asset Sale (as defined in Section 16(e)) occurs (other than such a sale or disposition which is part of a transaction or series of transactions which would result in a Change in Control), and (iii) as a result of such Asset Sale, the Executive is offered employment by the Asset Purchaser in an executive position with reasonably comparable status, compensation, benefits and severance agreement (including the assumption of this Agreement in accordance with Section 16(e)) and which is consistent with the Executives experience and education, but the Executive declines to accept such offer and the Executive fails to become employed by the Asset Purchaser on the date of the Asset Sale.
(j)
Term. The term of this Agreement shall commence on the Effective Date and shall continue until the third (3rd) anniversary of the Effective Date; provided, however, that commencing on the second (2nd) anniversary of the Effective Date (and each anniversary of the Effective Date thereafter), the term of this Agreement shall automatically be extended for one (1) additional year, unless at least ninety (90) days 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. Notwithstanding the foregoing, if the Company gives such written notice to the Executive less than two (2) years after a Change in Control, the term of this Agreement shall be automatically extended until the later of (A) the date that is one (1) year after the anniversary of the Effective Date that follows such written notice or (B) the second (2nd) anniversary of the Change in Control Date.
(k)
Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
[remainder of page intentionally left blank]
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.
SEMPRA ENERGY
G. Joyce Rowland
Senior Vice President, Human Resources, Diversity and Inclusion
_____________________________________
Date
EXECUTIVE
Lee Schavrien
Senior Vice President, Financial Regulatory and Legislative Affairs
_____________________________________
Date
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 Severance Pay Agreement dated ____________, 20___ (the Severance Pay Agreement); and
WHEREAS, your right to receive certain severance pay and benefits pursuant to the terms of Section 4 or Section 5, and Section 14 of the Severance Pay Agreement, as applicable, are 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 the severance and benefit under the Severance Pay Agreement, 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 this 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 you and to the Company and each of the Companys 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, 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, indemnification and D&O 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, claim, any claim that you failed to perform or negligently performed or breached your duties during employment at the Company, any legal restrictions on the Companys right to terminate employment relationships; and any federal, state or other governmental statute, regulation, or ordinance, governing the employment relationship including, without limitation, all state and federal laws and regulations prohibiting discrimination based on protected categories, and all state and federal laws and regulations prohibiting retaliation against employees for engaging in protected activity or legal off-duty conduct. This release does not extend to claims for workers compensation or other claims which by law may not be waived or released by this Agreement.
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 and analogous laws of other states) which limits the effect of a release with respect to unknown claims. You and the Company do so understanding 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 and analogous laws of other states). 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 OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER 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 Companys 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 true 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. You agree that you will not be entitled to any monetary recovery that may result from any agency action against the Company related to the Claims released by 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 the 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.
As a further material inducement to you to enter into this Agreement, the Company hereby agrees to indemnify and hold each of the Releasees harmless from all loss, costs, damages, or expenses, including without limitation, attorneys fees incurred by the Releasees, arising out of any breach of this Agreement by it or the fact that any representation made in this Agreement by it was knowingly 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 attorneys fees; provided, that counsel has been approved by the Company prior to retention, which approval shall not be unreasonably withheld), 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 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. The Company agrees to reimburse you for any reasonable costs you incur in providing such cooperation.
TEN: This Agreement is entered into in California and shall be governed by substantive California law, except as provided in this section. If any dispute arises between you and the Company, including but not limited to, disputes relating to this Agreement, or if you prosecute a claim you purported to release by means of this Agreement (Arbitrable Dispute), you and the Company agree to resolve that Arbitrable Dispute through final and binding arbitration under this section. You also agree to arbitrate any Arbitrable Dispute which also involves any other released party who offers or agrees to arbitrate the dispute under this section. Your agreement to arbitrate applies, for example, to disputes about the validity, interpretation, or effect of this Agreement or alleged violations of it, claims of discrimination under federal or state law, or other statutory violation claims.
As to any Arbitrable Dispute, you and the Company waive any right to a jury trial or a court bench trial. You and the Company also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
Arbitration shall take place in San Diego, California under the employment dispute resolution rules of the Judicial Arbitration and Mediation Service (JAMS), (or, if you are employed outside of California at the time of the termination of your employment, at the nearest location of the American Arbitration Association and in accordance with the AAA rules), before an experienced employment arbitrator selected in accordance with those rules. The arbitrator may not modify or change this Agreement in any way. The Company will be responsible for paying any filing fee and the fees and costs of the Arbitrator; provided, however, that if you are the party initiating the claim, you will contribute an amount equal to the filing fee to initiate a claim in the court of general jurisdiction in the state in which you are employed by the Company. Each party shall pay for its own costs and attorneys fees, if any. However if any party prevails on a statutory claim which affords the prevailing party attorneys fees and costs, or if there is a written agreement providing for attorneys fees and/or costs, the Arbitrator may award reasonable attorneys fees and/or costs to the prevailing party, applying the same standards a court would apply under the law applicable to the claim. The Arbitrator shall apply the Federal Rules of Evidence and shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this section or any arbitration award. The arbitrator will not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action.
To the extent that the Federal Arbitration Act is inapplicable, California law pertaining to arbitration agreements shall apply. Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. Except as prohibited by the ADEA, should you or the Company attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this section, the responding party will be entitled to recover from the initiating party all damages, expenses, and attorneys fees incurred as a result of this breach. This Section TEN supersedes any existing arbitration agreement between the Company and me as to any Arbitrable Dispute. Notwithstanding anything in this Section TEN to the contrary, a claim for benefits under an ERISA-covered plan shall not be an Arbitrable Dispute.
ELEVEN: Both you and the Company understand that this Agreement is final and binding eight (8) 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 Sections 4 or 5 of the Severance Pay Agreement, as applicable, plus interest, and invite the Company to retain such monies and agree with you to cancel this Agreement and void the Companys obligations under Section 14(d) of the Severance Pay 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 the Severance Pay 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 Companys obligations under the Severance Pay 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 forty-five (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 forty-five (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 (7) days of signing it. If you wish to revoke, the Companys Vice President, Human Resources must receive written notice from you no later than the close of business on the seventh (7th) 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 Sections 4 or 5, and Section 14 of the Severance Pay Agreement, as applicable.
FOURTEEN: This Agreement constitutes the entire agreement of the parties hereto and supersedes any and all other agreements (except the Severance Pay 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 understanding 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
SEMPRA ENERGY
SEVERANCE PAY AGREEMENT
THIS AGREEMENT (this Agreement), dated as of February 18, 2013, (the Effective Date) is made by and between SEMPRA ENERGY, a California corporation (Sempra Energy), and Woodrow D. Smith (the Executive).
WHEREAS, the Executive is currently employed by Sempra Energy or a direct or indirect subsidiary of Sempra Energy (Sempra Energy and its subsidiaries are hereinafter collectively referred to as the Company) as Vice President and General Counsel, San Diego Gas & Electric; and
WHEREAS, Sempra Energy and the Executive desire to enter into this Agreement; and
WHEREAS, the Board of Directors of Sempra Energy (the Board) has authorized this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and the Executive hereby agree as follows:
Section 1.
Definitions. For purposes of this Agreement, the following capitalized terms have the meanings set forth below:
Accounting Firm has the meaning assigned thereto in Section 8(d) hereof.
Accrued Obligations" means the sum of (A) the Executives Annual Base Salary through the Date of Termination to the extent not theretofore 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, (C) any accrued and unpaid vacation, if any, and (D) reimbursement for unreimbursed business expenses, if any, properly incurred by the Executive in the performance of his duties in accordance with policies established from time to time by the Board, in each case to the extent not theretofore paid.
Affiliate has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.
Annual Base Salary means the Executives annual base salary from the Company.
Asset Purchaser has the meaning assigned thereto in Section 16(e).
Asset Sale has the meaning assigned thereto in Section 16(e).
Average Annual Bonus means the average of the annual bonuses from the Company earned by the Executive with respect to the three (3) fiscal years of the Company immediately preceding the Date of Termination (the Bonus Fiscal Years); provided, however, that, if the Executive was employed by the Company for less than three (3) years of the Bonus Fiscal Years, Average Annual Bonus means the average of the annual bonuses (if any) from the Company earned by the Executive with respect to the Bonus Fiscal Years during which the Executive was employed by the Company; and, provided, further, that, if the Executive was not employed by the Company during any portion of any of the Bonus Fiscal Years, Average Annual Bonus means zero.
Cause means:
(a)
Prior to a Change in Control, (i) the willful failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives incapacity due to physical or mental illness, (ii) the grossly negligent performance of such obligations referenced in clause (i) of this definition, (iii) the Executives gross insubordination; and/or (iv) the Executives 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 subsection (a), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company.
(b)
From and after a Change in Control, (i) the willful and continued failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives 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 2 hereof) and/or (ii) the Executives 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 subsection (b), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed terminated for Cause pursuant to clause (i) of this subsection (b) unless and until the Executive shall have been provided with reasonable notice of and, if possible, a reasonable opportunity to cure the facts and circumstances claimed to provide a basis for termination of the Executives employment for Cause.
Change in Control shall be deemed to have occurred on the date that a change in the ownership of Sempra Energy, a change in the effective control of Sempra Energy, or a change in the ownership of a substantial portion of assets of Sempra Energy occurs (each, as defined in subsection (a) below), except as otherwise provided in subsections (b), (c) and (d) below:
(a)
(i)
a change in the ownership of Sempra Energy occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of Sempra Energy that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Sempra Energy,
(ii)
a change in the effective control of Sempra Energy occurs only on either of the following dates:
(A)
the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Sempra Energy possessing thirty percent (30%) or more of the total voting power of the stock of Sempra Energy, or
(B)
the date a majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of appointment or election, and
(iii)
a change in the ownership of a substantial portion of assets of Sempra Energy occurs on the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from Sempra Energy that have a total gross fair market value equal to or more than eighty-five percent (85%) of the total gross fair market value of all of the assets of Sempra Energy immediately before such acquisition or acquisitions.
(b)
A change in the ownership of Sempra Energy or a change in the effective control of Sempra Energy shall not occur under clause (a)(i) or (a)(ii) by reason of any of the following:
(i)
an acquisition of ownership of stock of Sempra Energy directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business,
(ii)
a merger or consolidation which would result in the voting securities of Sempra Energy 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, at least sixty percent (60%) of the combined voting power of the securities of Sempra Energy or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or
(iii)
a merger or consolidation effected to implement a recapitalization of Sempra Energy (or similar transaction) in which no Person is or becomes the Beneficial Owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act, directly or indirectly, of securities of Sempra Energy (not including the securities beneficially owned by such Person any securities acquired directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business) representing twenty percent (20%) or more of the combined voting power of Sempra Energys then outstanding securities.
(c)
A change in the ownership of a substantial portion of assets of Sempra Energy shall not occur under clause (a)(iii) by reason of a sale or disposition by Sempra Energy of the assets of Sempra Energy to an entity, at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by shareholders of Sempra Energy in substantially the same proportions as their ownership of Sempra Energy immediately prior to such sale.
(d)
This definition of Change in Control shall be limited to the definition of a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5). A Change in Control shall only occur if there is a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5) with respect to the Executive.
Change in Control Date means the date on which a Change in Control occurs.
Code means the Internal Revenue Code of 1986, as amended.
Compensation Committee means the compensation committee of the Board.
Consulting Payment has the meaning assigned thereto in Section 14(d) hereof.
Consulting Period has the meaning assigned thereto in Section 14(e) hereof.
Date of Termination has the meaning assigned thereto in Section 2(b) hereof.
Deferred Compensation Plan has the meaning assigned thereto in Section 4(f) hereof.
Disability has the meaning set forth in the Companys long-term disability plan or its successor; provided, however, that the Board may not terminate the Executives employment hereunder by reason of Disability unless (i) 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 and (ii) such termination is permitted by all applicable disability laws.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.
Excise Tax has the meaning assigned thereto in Section 8(a) hereof.
Good Reason means:
(a)
Prior to a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
the assignment to the Executive of any duties materially inconsistent with the range of duties and responsibilities appropriate to a senior Executive within the Company (such range determined by reference to past, current and reasonable practices within the Company);
(ii)
a material reduction in the Executives overall standing and responsibilities within the Company, but not including (A) a mere change in title or (B) a transfer within the Company, which, in the case of both (A) and (B), does not adversely affect the Executives overall status within the Company;
(iii)
a material reduction by the Company in the Executives aggregate annualized compensation and benefits opportunities, except for across-the-board reductions (or modifications of benefit plans) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
(b)
From and after a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
an adverse change in the Executives title, authority, duties, responsibilities or reporting lines as in effect immediately prior to the Change in Control;
(ii)
a reduction by the Company in the Executives aggregate annualized compensation opportunities, except for across-the-board reductions in base salaries, annual bonus opportunities or long-term incentive compensation opportunities of less than ten percent (10%) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive; or the failure by the Company to continue in effect any material benefit plan in which the Executive participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change in Control;
(iii)
the relocation of the Executives principal place of employment immediately prior to the Change in Control Date (the Principal Location) to a location which is both further away from the Executives residence and more than thirty (30) miles from such Principal Location, or the Companys requiring the Executive to be based anywhere other than such Principal Location (or permitted relocation thereof), or a substantial increase in the Executives 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 of limited duration and (B) is understood not to be part of the Executives regular duties with the Company;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
Following a Change in Control, the Executives 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 pursuant to the procedure described in Section 13 hereof. The Executives right to terminate the Executives employment for Good Reason shall not be affected by the Executives incapacity due to physical or mental illness. The Executives 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.
Incentive Compensation Awards means awards granted under Incentive Compensation Plans providing the Executive with the opportunity to earn, on a year-by-year basis, annual and long-term incentive compensation.
Incentive Compensation Plans means annual incentive compensation plans and long-term incentive compensation plans of the Company, which long-term incentive compensation plans may include plans offering stock options, restricted stock and other long-term incentive compensation.
Involuntary Termination means (a) the Executives Separation from Service by reason other than for Cause, death, Disability or Mandatory Retirement, or (b) the Executives Separation from Service by reason of resignation of employment for Good Reason.
JAMS Rules has the meaning assigned thereto in Section 13 hereof.
Mandatory Retirement means termination of employment pursuant to the Companys mandatory retirement policy.
Notice of Termination has the meaning assigned thereto in Section 2(a) hereof.
Payment has the meaning assigned thereto in Section 8(a) hereof.
Payment in Lieu of Notice has the meaning assigned thereto in Section 2(b) hereof.
Person has the meaning set forth in section 3(a)(9) of 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 Affiliates, (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) promulgated under the Exchange Act.
Post-Change in Control Severance Payment has the meaning assigned thereto in Section 5 hereof.
Pre-Change in Control Severance Payment has the meaning assigned thereto in Section 4 hereof.
Principal Location has the meaning assigned thereto in clause (b)(iii) of the definition of Good Reason, above.
Proprietary Information has the meaning assigned thereto in Section 14(a) hereof.
Pro Rata Bonus has the meaning assigned thereto in Section 5(b).
Release has the meaning assigned thereto in Section 4 hereof.
Section 409A Payments means any of the following: (a) the Payment in Lieu of Notice; (b) the Pre-Change in Control Severance Payment; (c) the Post-Change in Control Severance Payment; (d) the Pro Rata Bonus; (e) the Consulting Payment; (f) the financial planning services and the related payments provided under Sections 4(e) and 5(f); (g) the legal fees and expenses reimbursed under Section 15; and (h) any other payment that the Company determines in its sole discretion is subject to Section 409A of the Code as non-qualified deferred compensation.
Sempra Energy Control Group means Sempra Energy and all persons with whom Sempra Energy would be considered a single employer under Section 414(b) or 414(c) of the Code, as determined from time to time.
Separation from Service has the meaning set forth in Treasury Regulation Section 1.409A-1(h).
Specified Employee shall be determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation Section 1.409A-1(i).
For purposes of this Agreement, references to any Treasury Regulation shall mean such Treasury Regulation as in effect on the date hereof.
Section 2.
Notice and Date of Termination.
(a)
Any termination of the Executives employment by the Company or by the Executive shall be communicated by a written notice of termination to the other party (the Notice of Termination). Where applicable, the Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated. 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.
(b)
The date of the Executives termination of employment with the Company (the Date of Termination) shall be determined as follows: (i) if the Executives Separation from Service is at the volition of the Company, then the Date of Termination shall be the date specified in the Notice of Termination (which, in the case of a termination by the Company other than for Cause, shall not be less than two (2) weeks from the date such Notice of Termination is given unless the Company elects to pay the Executive, in addition to any other amounts payable hereunder, an amount (the Payment in Lieu of Notice) equal to two (2) weeks of the Executives Annual Base Salary in effect on the Date of Termination), and (ii) if the Executives Separation from Service is by the Executive for Good Reason, the Date of Termination shall be determined by the Executive and specified in the Notice of Termination, but in no event less than fifteen (15) days nor more than sixty (60) days after the date such Notice of Termination is given. The Payment in Lieu of Notice shall be paid on such date as is required by law, but no later than thirty (30) days after the date of the Executives Separation from Service; provided, however, that if the Executive is a Specified Employee on the date of his or her Separation from Service, such Payment in Lieu of Notice shall be paid as provided in Section 9 hereof.
Section 3.
Termination from the Board. Upon the termination of the Executives employment for any reason, the Executives membership on the Board, the board of directors of any of the Companys Affiliates, any committees of the Board and any committees of the board of directors of any of the Companys Affiliates, if applicable, shall be automatically terminated.
Section 4.
Severance Benefits upon Involuntary Termination Prior to Change in Control. Except as provided in Section 5(g) and Section 19(i) hereof, in the event of the Involuntary Termination of the Executive prior to a Change in Control, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Pre-Change in Control Severance Payment) equal to one-half (0.5) times the greater of: (X) 145% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. In addition to the Pre-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in subsections (a) through (e). The Company's obligation to pay the Pre-Change in Control Severance Payment or provide the benefits set forth in subsections (c), (d) and (e) are subject to and conditioned upon the Executive executing a release (the Release) of all claims substantially in the form attached hereto as Exhibit A within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Section 4(f), the Pre-Change in Control Severance Payment shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination; but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pre-Change in Control Severance Payment shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Pre-Change in Control Severance Payment and the financial planning services and the related payments provided under Section 4(e) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law.
(b)
Equity Based Compensation. The Executive shall retain all rights to any equity-based compensation awards to the extent set forth in the applicable plan and/or award agreement.
(c)
Welfare Benefits. Subject to Section 12 below, for a period of six (6) months following the date of the Involuntary Termination (and an additional six (6) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided with health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the date of the Involuntary Termination; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of the Involuntary Termination. Such benefits shall be provided through insurance maintained by the Company under the Companys benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(d)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of twelve (12) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(e)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of twelve (12) months following the Date of Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial planning services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv).
(f)
Deferral of Payments. The Executive shall have the right to elect to defer the Pre-Change in Control Severance Payment to be received by the Executive pursuant to this Section 4 under the terms and conditions of the Sempra Energy 2005 Deferred Compensation Plan (the Deferred Compensation Plan). Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 5.
Severance Benefits upon Involuntary Termination in Connection with and after Change in Control. Notwithstanding the provisions of Section 4 above, and except as provided in Section 19(i) hereof, in the event of the Involuntary Termination of the Executive on or within two (2) years following a Change in Control, in lieu of the payments described in Section 4 above, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Post-Change in Control Severance Payment) equal to the greater of: (X) 145% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or the Date of Termination, whichever is greater, and (Y) the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, plus the Executives Average Annual Bonus. In addition to the Post-Change in Control Severance Payment, the Executive shall be entitled to the benefits specified in subsections (a) through (f). The Company's obligation to pay the Post-Change in Control Severance Payment or provide the benefits set forth in subsections (b), (c), (d), (e) and (f) are subject to and conditioned upon the Executive executing the Release within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Sections 5(g) and 5(h), the Post-Change in Control Severance Payment, and the Pro Rata Bonus shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Post-Change in Control Severance Payment and Pro Rata Bonus shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Post-Change in Control Severance Payment, the Pro Rata Bonus and the financial planning services and the related payments provided under Section 5(f) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Executive's Accrued Obligations within the time required by law.
(b)
Pro Rata Bonus. The Company shall pay the Executive a lump sum amount in cash equal to: (i) the greater of: (X) 45% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, or (Y) the Executives Average Annual Bonus, multiplied by (ii) 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 equal to the (Pro Rata Bonus).
(c)
Equity-Based Compensation. Notwithstanding the provisions of any applicable equity-compensation plan or award agreement to the contrary, all equity-based Incentive Compensation Awards (including, without limitation, stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance share awards, awards covered under Section 162(m) of the Code, and dividend equivalents) held by the Executive shall immediately vest and become exercisable or payable, as the case may be, as of the Date of Termination, to be exercised or paid, as the case may be, in accordance with the terms of the applicable Incentive Compensation Plan and Incentive Compensation Award agreement, and any restrictions on any such Incentive Compensation Awards shall automatically lapse; provided, however, that any such stock option or stock appreciation rights awards granted on or after June 26, 1998 shall remain outstanding and exercisable until the earlier of (A) the later of eighteen (18) months following the Date of Termination or the period specified in the applicable Incentive Compensation Award agreements or (B) the expiration of the original term of such Incentive Compensation Award (or, if earlier, the tenth anniversary of the original date of grant) (it being understood that all Incentive Compensation Awards granted prior to or after June 26, 1998 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).
(d)
Welfare Benefits. Subject to Section 12 below, for a period of six (6) months following the date of Involuntary Termination (and an additional twelve (12) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided 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 Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive. Such benefits shall be provided through insurance maintained by the Company under the Company benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(e)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of eighteen (18) months following the date of Involuntary Termination (but in no event beyond the last day of the Executives second taxable year following the Executives taxable year in which the Involuntary Termination occurs), in the aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(f)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of eighteen (18) months following the date of Involuntary Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Section 1.409A-3(i)(1)(iv).
(g)
Involuntary Termination in Connection with a Change in Control. Notwithstanding anything contained herein, in the event of an Involuntary Termination prior to a Change in Control, if the Involuntary Termination (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or in anticipation of such Change in Control, then the Executive shall, in lieu of the payments described in Section 4 hereof, be entitled to the Post-Change in Control Severance Payment and the additional benefits described in this Section 5 as if such Involuntary Termination had occurred within two (2) years following the Change in Control. The amounts specified in Section 5 that are to be paid under this Section 5(g) shall be reduced by any amount previously paid under Section 4. The amounts to be paid under this Section 5(g) shall be paid within sixty (60) days after the Change in Control Date of such Change in Control.
(h)
Deferral of Payments. The Executive shall have the right to elect to defer the Post-Change in Control Severance Payment and the Pro Rata Bonus to be received by the Executive pursuant to this Section 5 under the terms and conditions of the Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 6.
Severance Benefits upon Termination by the Company for Cause or by the Executive Other than for Good Reason. If the Executives employment shall be terminated for Cause, or if the Executive terminates employment other than for Good Reason, the Company shall have no further obligations to the Executive under this Agreement other than the Accrued Obligations and any amounts or benefits described in Section 10 hereof.
Section 7.
Severance Benefits upon Termination due to Death or Disability. If the Executive has a Separation from Service by reason of death or Disability, the Company shall pay the Executive or his estate, as the case may be, the Accrued Obligations and the Pro Rata Bonus (without regard to whether a Change in Control has occurred) and any amounts or benefits described in Section 10 hereof. 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. The Company's obligation to pay the Pro Rata Bonus is conditioned upon the Executive, the Executive's representative or the Executive's estate, as the case may be executing the Release within fifty (50) days after the date of Executive's Separation from Service and not revoking such Release in accordance with the terms thereof. The Accrued Obligations shall be paid within the time required by law and the Pro Rata Bonus shall be paid on such date as determined by the Company within sixty (60) days after the date of the Separation from Service but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pro Rata Bonus shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Separation from Service, the Pro Rata Bonus shall be paid as provided in Section 9 hereof.
Section 8.
Limitation on Payments by the Company.
(a)
Anything in this Agreement to the contrary notwithstanding and except as set forth in this Section 8 below, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise (the Payment) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, (the Excise Tax), then, subject to subsection (b), the Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall be reduced under this subsection (a) to the amount equal to the Reduced Payment. For such Payment payable under this Agreement, the Reduced Payment shall be the amount equal to the greatest portion of the Payment (which may be zero) that, if paid, would result in no portion of any Payment being subject to the Excise Tax.
(b)
The Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall not be reduced under subsection (a) if:
(i)
such reduction in such Payment is not sufficient to cause no portion of any Payment to be subject to the Excise Tax, or
(ii)
the Net After-Tax Unreduced Payments (as defined below) would equal or exceed one hundred and five percent (105%) of the Net After-Tax Reduced Payments (as defined below).
For purposes of determining the amount of any Reduced Payment under subsection (a), and the Net-After Tax Reduced Payments and the Net After-Tax Unreduced Payments, the Executive shall be considered to pay federal, state and local income and employment taxes at the Executives applicable marginal rates taking into consideration any reduction in federal income taxes which could be obtained from the deduction of state and local income taxes, and any reduction or disallowance of itemized deductions and personal exemptions under applicable tax law). The applicable federal, state and local income and employment taxes and the Excise Tax (to the extent applicable) are collectively referred to as the Taxes.
(c)
The following definitions shall apply for purposes of this Section 8:
(i)
Net After-Tax Reduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are reduced pursuant to subsection (a).
(ii)
Net After-Tax Unreduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are not reduced pursuant to subsection (a).
(iii)
Net After-Tax Basis shall mean, with respect to the Payments, either with or without reduction under subsection (a) (as applicable), the amount that would be retained by the Executive from such Payments after the payment of all Taxes.
(d)
All determinations required to be made under this Section 8 and the assumptions to be utilized in arriving at such determinations, shall be made by a nationally recognized accounting firm as may be agreed by the Company and the Executive (the Accounting Firm); provided, that the Accounting Firms determination shall be made based upon substantial authority within the meaning of Section 6662 of the Code. The Accounting Firm shall provide detailed supporting calculations to both the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. For purposes of determining whether and the extent to which the Payments will be subject to the Excise Tax, (i) no portion of the 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, (ii) no portion of the Payments shall be taken into account which, in the written opinion of the Accounting Firm, 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) and, in calculating the Excise Tax, no portion of such Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Payments shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
Section 9.
Delayed Distribution under Section 409A of the Code. If the Executive is a Specified Employee on the date of the Executives Involuntary Termination (or on the date of the Executives Separation from Service by reason of Disability), the Section 409A Payments, and any other payments or benefits under this Agreement subject to Section 409A of the Code, shall be delayed in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits shall be paid or distributed to the Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six-month period measured from the date of the Executives Separation from Service or (b) the date of the Executives death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 9 (excluding in-kind benefits) shall be paid in a lump sum payment to the Executive, plus interest thereon from the date of the Executives Involuntary Termination through the payment date at an annual rate equal to Moodys Rate. The Moodys Rate shall mean the average of the daily Moodys Corporate Bond Yield Average Monthly Average Corporates as published by Moodys Investors Service, Inc. (or any successor) for the month next preceding the Date of Termination. Any remaining payments due under the Agreement shall be paid as otherwise provided herein.
Section 10.
Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executives 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), including, without limitation, any and all indemnification arrangements in favor of the Executive (whether under agreements or under the Companys charter documents or otherwise), and insurance policies covering the Executive, 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. At all times during the Executives employment with the Company and thereafter, the Company shall provide (to the extent permissible under applicable law) the Executive with indemnification and D&O insurance insuring the Executive against insurable events which occur or have occurred while the Executive was a director or the Executive officer of the Company, on terms and conditions that are at least as generous as that then provided to any other current or former director or the Executive officer of the Company or any Affiliate. Such indemnification and D&O insurance shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(10).
Section 11.
Clawbacks. Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that if the Executive is required to forfeit or to make any repayment of any compensation or benefit(s) to the Company under the Sarbanes-Oxley Act of 2002 or pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other law, such forfeiture or repayment shall not constitute Good Reason.
Section 12.
Full Settlement; Mitigation. The Companys 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.
Section 13.
Dispute Resolution.
(a)
If any dispute arises between Executive and the Company, including, but not limited to, disputes relating to or arising out of this Agreement, any action relating to or arising out of my employment or its termination, and/or any disputes regarding the interpretation, enforceability, or validity of this Agreement (Arbitrable Dispute), Executive and the Company waive the right to resolve the dispute through litigation in a judicial forum and agree to resolve the Arbitrable Dispute through final and binding arbitration, except as prohibited by law. Arbitration shall be the exclusive remedy for any Arbitrable Dispute.
(b)
As to any Arbitrable Dispute, the Company and Executive waive any right to a jury trial or a court bench trial. The Company and Executive also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
(c)
Arbitration shall take place at the office of the Judicial Arbitration and Mediation Service (JAMS) (or, if Executive is employed outside of California, the American Arbitration Association (AAA)) nearest to the location where Executive last worked for the Company. Except to the extent it conflicts with the rules and procedures set forth in this Arbitration Agreement, arbitration shall be conducted in accordance with the JAMs Employment Arbitration Rules & Procedures (if Executive is employed outside of California, the AAA Employment Arbitration Rules & Mediation Procedures), copies of which are attached for my reference and available at www.jamsadr.com; tel: 800.352.5267 and www.adr.org; tel: 800.778.7879, before a single experienced, neutral employment arbitrator selected in accordance with those rules.
(d)
The Company will be responsible for paying any filing fee and the fees and costs of the arbitrator. Each party shall pay its own attorneys fees. However, if any party prevails on a statutory claim that authorizes an award of attorneys fees to the prevailing party, or if there is a written agreement providing for attorneys fees, the arbitrator may award reasonable attorneys fees to the prevailing party, applying the same standards a court would apply under the law applicable to the claim.
(e)
The arbitrator shall apply the Federal Rules of Evidence, shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party, and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator does not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action. The Company and Executive recognize that this Agreement arises out of or concerns interstate commerce and that the Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this Arbitration Agreement or any arbitration award.
(f)
EXECUTIVE ACKNOWLEDGES THAT BY ENTERING INTO THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT HE OR SHE MAY HAVE TO A TRIAL BY JURY.
Section 14.
Executives Covenants.
(a)
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 and its Affiliates; and the Executive agrees that it would be extremely damaging to the Company and its Affiliates if such Proprietary Information were disclosed to a competitor of the Company and its 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 or information the Executive is required by any governmental, administrative or court order to disclose) without limitation in time. In view of the nature of the Executives employment and the Proprietary Information the Executive has acquired during the course of such employment, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any disclosure of Proprietary Information in violation of the terms of this paragraph and that the Company and its 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 Companys Senior Vice President, Public Policy (or, if such position is vacant, the Companys then Chief Executive Officer); provided, that the Company shall not unreasonably classify information as Proprietary Information.
(b)
Non-Solicitation of Employees. The Executive recognizes that he possesses and will possess confidential information about other employees of the Company and its Affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customers of the Company and its 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 and its 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 and its Affiliates. The Executive agrees that at all times during the Executives employment with the Company and for a period of one (1) year thereafter, he will not, directly or indirectly, solicit or recruit any employee of the Company or its Affiliates for the purpose of being employed by him or by any competitor of the Company or its 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 and its 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 or its Affiliates who has either first contacted the Executive or regarding whose employment the Executive has discussed with and received the written approval of the Companys Vice President, Human Resources (or, if such position is vacant, the Companys then Chief Executive Officer), prior to making such solicitation or recruitment. In view of the nature of the Executives employment with the Company, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any solicitation or recruitment in violation of the terms of this paragraph and that the Company and its 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.
(c)
Survival of Provisions. The obligations contained in Section 14(a) and Section 14(b) above shall survive the termination of the Executives employment within the Company and shall be fully enforceable thereafter. If it is determined by a court of competent jurisdiction in any state that any restriction in Section 14(a) or Section 14(b) above is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.
(d)
Release; Lump Sum Payment. In the event of the Executives Involuntary Termination, if the Executive (i) reconfirms and agrees to abide by the covenants described in Section 14(a) and Section 14(b) above, (ii) executes the Release within fifty (50) days after the date of Involuntary Termination and does not revoke such Release in accordance with the terms thereof, and (iii) agrees to provide the consulting services described in Section 14(e) below, then in consideration for such covenants and consulting services, the Company shall pay the Executive, in one cash lump sum, an amount (the Consulting Payment) in cash equal to one-half (0.5) times the greater of: (X) 145% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. Except as provided in this subsection, the Consulting Payment shall be paid on such date as is determined by the Company within the ten (10) day period commencing on the 60th day after the date of the Executives Involuntary Termination; provided, however, that if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Consulting Payment shall be paid as provided in Section 9 hereof. The Executive shall have the right to elect to defer the Consulting Payment under the terms and conditions of the Companys Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
(e)
Consulting. If the Executive agrees to the provisions of in Section 14(d) above, then the Executive shall have the obligation to provide consulting services to the Company as an independent contractor, commencing on the Date of Termination and ending on the first anniversary of the Date of Termination (the Consulting Period). The Executive shall hold himself available at reasonable times and on reasonable notice to render such consulting services as may be so assigned to him by the Board or the Companys then Chief Executive Officer; provided, however, that unless the parties otherwise agree, the consulting services rendered by the Executive during the Consulting Period shall not exceed twenty (20) hours each month; and, provided, further, that the consulting services rendered by the Executive during the Consulting Period shall in no event exceed twenty percent (20%) of the average level of services performed by the Executive for the Company over the thirty-six (36) month period immediately preceding the Executives Separation from Service (or the full period of services to the Company, if the Executive has been providing services to the Company for less than thirty-six (36) months). The Company agrees to use its best efforts during the Consulting Period to secure the benefit of the Executives consulting services so as to minimize the interference with the Executives other activities, including requiring the performance of consulting services at the Companys offices only when such services may not be reasonably performed off-site by the Executive.
Section 15.
Legal Fees.
(a)
Reimbursement of Legal Fees. Subject to subsection (b), in the event of the Executives Separation from Service either (1) prior to a Change in Control, or (2) on or within two (2) years following a Change in Control, the Company shall reimburse the Executive for all legal fees and expenses (including but not limited to fees and expenses in connection with any arbitration) incurred by the Executive in disputing any issue arising under this Agreement relating to the Executives Separation from Service or in seeking to obtain or enforce any benefit or right provided by this Agreement.
(b)
Requirements for Reimbursement. The Company shall reimburse the Executives legal fees and expenses pursuant to subsection (a) above only to the extent the arbitrator or court determines the following: (i) the Executive disputed such issue, or sought to obtain or enforce such benefit or right, in good faith, (ii) the Executive had a reasonable basis for such claim, and (iii) in the case of subsection (a)(1) above, the Executive is the prevailing party. In addition, the Company shall reimburse such legal fees and expenses, only if such legal fees and expenses are incurred during the twenty (20) year period beginning on the date of the Executives Separation from Service. The legal fees and expenses paid to the Executive for any taxable year of the Executive shall not affect the legal fees and expenses paid to the Executive for any other taxable year of the Executive. The legal fees and expenses shall be paid to the Executive on or before the last day of the Executives taxable year following the taxable year in which the fees or expenses are incurred. The Executives right to reimbursement of legal fees and expenses shall not be subject to liquidation or exchange for any other benefit. Such right to reimbursement of legal fees and expenses shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv). If the Executive is a Specified Employee on the date of the Executives Separation from Service, such right to reimbursement of legal fees and expenses shall be paid as provided in Section 9 hereof.
Section 16.
Successors.
(a)
Assignment by the Executive. This Agreement is personal to the Executive and without the prior written consent of Sempra Energy shall not be assignable 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 Executives legal representatives.
(b)
Successors and Assigns of Sempra Energy. This Agreement shall inure to the benefit of and be binding upon Sempra Energy, its successors and assigns. Sempra Energy may not assign this Agreement to any person or entity (except for a successor described in Section 16(c), (d) or (e) below) without the Executives written consent.
(c)
Assumption. Sempra Energy 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 Sempra Energy to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities of this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement if no such succession had taken place, and Sempra Energy shall have no further obligations and liabilities under this Agreement. Upon such assumption, references to Sempra Energy in this Agreement shall be replaced with references to such successor.
(d)
Sale of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy that is a member of the Sempra Energy Control Group, (ii) Sempra Energy, directly or indirectly through one or more intermediaries, sells or otherwise disposes of such subsidiary, and (iii) such subsidiary ceases to be a member of the Sempra Energy Control Group, then if, on the date such subsidiary ceases to be a member of the Sempra Energy Control Group, the Executive continues in employment with such subsidiary and the Executive does not have a Separation from Service, Sempra Energy shall require such subsidiary or any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to such subsidiary, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if such subsidiary had not ceased to be part of the Sempra Energy Control Group, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to such subsidiary, or such successor or parent thereof, assuming this Agreement, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of such cessation.
(e)
Sale of Assets of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) such subsidiary sells or otherwise disposes of substantial assets of such subsidiary to an unrelated service recipient, as determined under Treasury Regulation Section 1.409A-1(f)(2)(ii) (the Asset Purchaser), in a transaction described in Treasury Regulation Section 1.409A-1(h)(4) (an Asset Sale), then if, on the date of such Asset Sale, the Executive becomes employed by the Asset Purchaser, Sempra Energy and the Asset Purchaser shall specify, in accordance with Treasury Regulation Section 1.409A-1(h)(4), that the Executive shall not be treated as having a Separation from Service, and Sempra Energy shall require such Asset Purchaser, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if the Asset Sale had not taken place, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to the Asset Purchaser or the parent thereof, as applicable, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of the Asset Sale.
Section 17.
Administration Prior to Change in Control. Prior to a Change in Control, the Compensation Committee shall have full and complete authority to construe and interpret the provisions of this Agreement, to determine an individuals entitlement to benefits under this Agreement, to make in its sole and absolute discretion all determinations contemplated under this Agreement, to investigate and make factual determinations necessary or advisable to administer or implement this Agreement, and to adopt such rules and procedures as it deems necessary or advisable for the administration or implementation of this Agreement. All determinations made under this Agreement by the Compensation Committee shall be final and binding on all interested persons. Prior to a Change in Control, the Compensation Committee may delegate responsibilities for the operation and administration of this Agreement to one or more officers or employees of the Company. The provisions of this Section 17 shall terminate and be of no further force and effect upon the occurrence of a Change in Control.
Section 18.
Section 409A of the Code.
(a)
Compliance with and Exemption from Section 409A of the Code. Certain payments and benefits payable under this Agreement (including, without limitation, the Section 409A Payments) are intended to comply with the requirements of Section 409A of the Code. Certain payments and benefits payable under this Agreement are intended to be exempt from the requirements of Section 409A of the Code. This Agreement shall be interpreted in accordance with the applicable requirements of, and exemptions from, Section 409A of the Code and the Treasury Regulations thereunder. To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder (subject to the transitional relief under Internal Revenue Service Notice 2005-1, the Proposed Regulations under Section 409A of the Code, Internal Revenue Service Notice 2006-79, Internal Revenue Service Notice 2007-78, Internal Revenue Service Notice 2007-86 and other applicable authority issued by the Internal Revenue Service). As provided in Internal Revenue Notice 2007-86, notwithstanding any other provision of this Agreement, with respect to an election or amendment to change a time or form of payment under this Agreement made on or after January 1, 2008 and on or before December 31, 2008, the election or amendment shall apply only with respect to payments that would not otherwise be payable in 2008, and shall not cause payments to be made in 2008 that would not otherwise be payable in 2008. If the Company and the Executive determine that any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, to the extent permitted under Section 409A of the Code, the Treasury Regulations thereunder and any applicable authority issued by the Internal Revenue Service, the Company and the Executive agree to amend this Agreement, or take such other actions as the Company and the Executive deem reasonably necessary or appropriate, to cause such compensation, benefits and other payments to comply with the requirements of Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, while providing compensation, benefits and other payments that are, in the aggregate, no less favorable than the compensation, benefits and other payments provided under this Agreement. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments to the extent such provision would cause a failure to comply, and such provision shall otherwise remain in full force and effect.
(b)
Deferral Elections. As provided in Sections 4(f), 5(h) and 14(d), the Executive may elect to defer the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment as follows. The Executives deferral election shall satisfy the requirements of Treasury Regulation Section 1.409A-2(b) and the terms and conditions of the Deferred Compensation Plan. Such deferral election shall designate the whole percentage (up to a maximum of 100%) of the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment to be deferred, shall be irrevocable when made, and shall not take effect until at least twelve (12) months after the date on which the election is made. Such deferral election shall provide that the amount deferred shall be deferred for a period of not less than five (5) years from the date the payment of the amount deferred would otherwise have been made, in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).
Section 19.
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 Companys 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 Executives or the Companys 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 1 hereof, or the right of the Company to terminate the Executives employment for Cause pursuant to Section 1 hereof 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; Exclusive Benefit; Supersession of Prior Agreement. This instrument contains the entire agreement of the Executive, the Company or any predecessor or subsidiary thereof with respect to any severance or termination pay. The Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and all other benefits provided hereunder shall be in lieu of any other severance payments to which the Executive is entitled under any other severance plan or program or arrangement sponsored by the Company, as well as pursuant to any individual employment or severance agreement that was entered into by the Executive and the Company, and, upon the Effective Date of this Agreement, all such plans, programs, arrangements and agreements are hereby automatically superseded and terminated.
(g)
No Right of Employment. Nothing in this Agreement shall be construed as giving the Executive any right to be retained in the employ of the Company or shall interfere in any way with the right of the Company to terminate the Executives employment at any time, with or without Cause.
(h)
Unfunded Obligation. The obligations under this Agreement shall be unfunded. Benefits payable under this Agreement shall be paid from the general assets of the Company. The Company shall have no obligation to establish any fund or to set aside any assets to provide benefits under this Agreement.
(i)
Termination upon Sale of Assets of Subsidiary. Notwithstanding anything contained herein, this Agreement shall automatically terminate and be of no further force and effect and no benefits shall be payable hereunder in the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) an Asset Sale (as defined in Section 16(e)) occurs (other than such a sale or disposition which is part of a transaction or series of transactions which would result in a Change in Control), and (iii) as a result of such Asset Sale, the Executive is offered employment by the Asset Purchaser in an executive position with reasonably comparable status, compensation, benefits and severance agreement (including the assumption of this Agreement in accordance with Section 16(e)) and which is consistent with the Executives experience and education, but the Executive declines to accept such offer and the Executive fails to become employed by the Asset Purchaser on the date of the Asset Sale.
(j)
Term. The term of this Agreement shall commence on the Effective Date and shall continue until the third (3rd) anniversary of the Effective Date; provided, however, that commencing on the second (2nd) anniversary of the Effective Date (and each anniversary of the Effective Date thereafter), the term of this Agreement shall automatically be extended for one (1) additional year, unless at least ninety (90) days 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. Notwithstanding the foregoing, if the Company gives such written notice to the Executive less than two (2) years after a Change in Control, the term of this Agreement shall be automatically extended until the later of (A) the date that is one (1) year after the anniversary of the Effective Date that follows such written notice or (B) the second (2nd) anniversary of the Change in Control Date.
(k)
Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
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.
SEMPRA ENERGY
G. Joyce Rowland
Senior Vice President, Human Resources, Diversity and Inclusion
_____________________________________
Date
EXECUTIVE
Woodrow D. Smith
Vice President and General Counsel, San Diego Gas & Electric
_____________________________________
Date
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 Severance Pay Agreement dated ____________, 20__ (the Severance Pay Agreement); and
WHEREAS, your right to receive certain severance pay and benefits pursuant to the terms of Section 4 or Section 5 of the Severance Pay Agreement, as applicable, are 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 the severance and benefits under the Severance Pay Agreement, 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 this 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 you and to the Company and each of the Companys 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, 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, indemnification and D&O 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, claim, any claim that you failed to perform or negligently performed or breached your duties during employment at the Company; any legal restrictions on the Companys right to terminate employment relationships or any federal, state or other governmental statute, regulation, or ordinance, governing the employment relationship including, without limitation: all state and federal laws and regulations prohibiting discrimination based on protected categories, and all state and federal laws and regulations prohibiting retaliation against employees for engaging in protected activity or legal off-duty conduct. This release does not extend to claims for workers compensation or other claims which by law may not be waived or released by this Agreement.
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 and analogous laws of other states) which limits the effect of a release with respect to unknown claims. You and the Company do so understanding 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 and analogous laws of other states). 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 OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER 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 Companys 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 true 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. You agree that you will not be entitled to any monetary recovery that may result from any agency action against the Company related to the Claims released by 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 the 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.
As a further material inducement to you to enter into this Agreement, the Company hereby agrees to indemnify and hold each of the Releasees harmless from all loss, costs, damages, or expenses, including without limitation, attorneys fees incurred by the Releasees, arising out of any breach of this Agreement by it or the fact that any representation made in this Agreement by it was knowingly 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 attorneys fees; provided, that counsel has been approved by the Company prior to retention, which approval shall not be unreasonably withheld), 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 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. The Company agrees to reimburse you for any reasonable costs you incur in providing such cooperation.
TEN: This Agreement is entered into in California and shall be governed by substantive California law, except as provided in this section. If any dispute arises between you and the Company, including but not limited to, disputes relating to this Agreement, or if you prosecute a claim you purported to release by means of this Agreement (Arbitrable Dispute), you and the Company agree to resolve that Arbitrable Dispute through final and binding arbitration under this section. You also agree to arbitrate any Arbitrable Dispute which also involves any other released party who offers or agrees to arbitrate the dispute under this section. Your agreement to arbitrate applies, for example, to disputes about the validity, interpretation, or effect of this Agreement or alleged violations of it, claims of discrimination under federal or state law, or other statutory violation claims.
As to any Arbitrable Dispute, you and the Company waive any right to a jury trial or a court bench trial. You and the Company also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
Arbitration shall take place in San Diego, California under the employment dispute resolution rules of the Judicial Arbitration and Mediation Service (JAMS), (or, if you are employed outside of California at the time of the termination of your employment, at the nearest location of the American Arbitration Association and in accordance with the AAA rules), before an experienced employment arbitrator selected in accordance with those rules. The arbitrator may not modify or change this Agreement in any way. The Company will be responsible for paying any filing fee and the fees and costs of the Arbitrator; provided, however, that if you are the party initiating the claim, you will contribute an amount equal to the filing fee to initiate a claim in the court of general jurisdiction in the state in which you are employed by the Company. Each party shall pay for its own costs and attorneys fees, if any. However if any party prevails on a statutory claim which affords the prevailing party attorneys fees and costs, or if there is a written agreement providing for attorneys fees and/or costs, the Arbitrator may award reasonable attorneys fees and/or costs to the prevailing party, applying the same standards a court would apply under the law applicable to the claim. The Arbitrator shall apply the Federal Rules of Evidence and shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this section or any arbitration award. The arbitrator will not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action.
To the extent that the Federal Arbitration Act is inapplicable, California law pertaining to arbitration agreements shall apply. Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. Except as prohibited by the ADEA, should you or the Company attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this section, the responding party will be entitled to recover from the initiating party all damages, expenses, and attorneys fees incurred as a result of this breach. This section TEN supersedes any existing arbitration agreement between the Company and me as to any Arbitrable Dispute. Notwithstanding anything in this section TEN to the contrary, a claim for benefits under an ERISA-covered plan shall not be an Arbitrable Dispute.
ELEVEN: Both you and the Company understand that this Agreement is final and binding eight (8) 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 Sections 4 or 5 of the Severance Pay Agreement, as applicable, plus interest, and invite the Company to retain such monies and agree with you to cancel this Agreement and void the Companys obligations under of the Severance Pay 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 of the Severance Pay 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 Companys obligations under of the Severance Pay 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 forty-five (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 forty-five (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 (7) days of signing it. If you wish to revoke, the Companys Vice President, Human Resources must receive written notice from you no later than the close of business on the seventh (7th) 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 Sections 4 or 5 of the Severance Pay Agreement, as applicable.
FOURTEEN: This Agreement constitutes the entire agreement of the parties hereto and supersedes any and all other agreements (except the Severance Pay 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 understanding 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
SEMPRA ENERGY
SEVERANCE PAY AGREEMENT
THIS AGREEMENT (this Agreement), dated as of February 18, 2013, (the Effective Date) is made by and between SEMPRA ENERGY, a California corporation (Sempra Energy), and Erbin Keith (the Executive).
WHEREAS, the Executive is currently employed by Sempra Energy or a direct or indirect subsidiary of Sempra Energy (Sempra Energy and its subsidiaries are hereinafter collectively referred to as the Company) as Vice President and General Counsel; and
WHEREAS, Sempra Energy and the Executive desire to enter into this Agreement; and
WHEREAS, the Board of Directors of Sempra Energy (the Board) has authorized this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and the Executive hereby agree as follows:
Section 1.
Definitions. For purposes of this Agreement, the following capitalized terms have the meanings set forth below:
Accounting Firm has the meaning assigned thereto in Section 8(d) hereof.
Accrued Obligations" means the sum of (A) the Executives Annual Base Salary through the Date of Termination to the extent not theretofore 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, (C) any accrued and unpaid vacation, if any, and (D) reimbursement for unreimbursed business expenses, if any, properly incurred by the Executive in the performance of his duties in accordance with policies established from time to time by the Board, in each case to the extent not theretofore paid.
Affiliate has the meaning set forth in Rule 12b-2 promulgated under the Exchange Act.
Annual Base Salary means the Executives annual base salary from the Company.
Asset Purchaser has the meaning assigned thereto in Section 16(e).
Asset Sale has the meaning assigned thereto in Section 16(e).
Average Annual Bonus means the average of the annual bonuses from the Company earned by the Executive with respect to the three (3) fiscal years of the Company immediately preceding the Date of Termination (the Bonus Fiscal Years); provided, however, that, if the Executive was employed by the Company for less than three (3) years of the Bonus Fiscal Years, Average Annual Bonus means the average of the annual bonuses (if any) from the Company earned by the Executive with respect to the Bonus Fiscal Years during which the Executive was employed by the Company; and, provided, further, that, if the Executive was not employed by the Company during any portion of any of the Bonus Fiscal Years, Average Annual Bonus means zero.
Cause means:
(a)
Prior to a Change in Control, (i) the willful failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives incapacity due to physical or mental illness, (ii) the grossly negligent performance of such obligations referenced in clause (i) of this definition, (iii) the Executives gross insubordination; and/or (iv) the Executives 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 subsection (a), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company.
(b)
From and after a Change in Control, (i) the willful and continued failure by the Executive to substantially perform the Executives duties with the Company (other than any such failure resulting from the Executives 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 2 hereof) and/or (ii) the Executives 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 subsection (b), no act, or failure to act, on the Executives 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 Executives act, or failure to act, was in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed terminated for Cause pursuant to clause (i) of this subsection (b) unless and until the Executive shall have been provided with reasonable notice of and, if possible, a reasonable opportunity to cure the facts and circumstances claimed to provide a basis for termination of the Executives employment for Cause.
Change in Control shall be deemed to have occurred on the date that a change in the ownership of Sempra Energy, a change in the effective control of Sempra Energy, or a change in the ownership of a substantial portion of assets of Sempra Energy occurs (each, as defined in subsection (a) below), except as otherwise provided in subsections (b), (c) and (d) below:
(a)
(i)
a change in the ownership of Sempra Energy occurs on the date that any one person, or more than one person acting as a group, acquires ownership of stock of Sempra Energy that, together with stock held by such person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of Sempra Energy,
(ii)
a change in the effective control of Sempra Energy occurs only on either of the following dates:
(A)
the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of Sempra Energy possessing thirty percent (30%) or more of the total voting power of the stock of Sempra Energy, or
(B)
the date a majority of the members of the Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of appointment or election, and
(iii)
a change in the ownership of a substantial portion of assets of Sempra Energy occurs on the date any one person, or more than one person acting as a group, acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from Sempra Energy that have a total gross fair market value equal to or more than eighty-five percent (85%) of the total gross fair market value of all of the assets of Sempra Energy immediately before such acquisition or acquisitions.
(b)
A change in the ownership of Sempra Energy or a change in the effective control of Sempra Energy shall not occur under clause (a)(i) or (a)(ii) by reason of any of the following:
(i)
an acquisition of ownership of stock of Sempra Energy directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business,
(ii)
a merger or consolidation which would result in the voting securities of Sempra Energy 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, at least sixty percent (60%) of the combined voting power of the securities of Sempra Energy or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or
(iii)
a merger or consolidation effected to implement a recapitalization of Sempra Energy (or similar transaction) in which no Person is or becomes the Beneficial Owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act, directly or indirectly, of securities of Sempra Energy (not including the securities beneficially owned by such Person any securities acquired directly from Sempra Energy or its Affiliates other than in connection with the acquisition by Sempra Energy or its Affiliates of a business) representing twenty percent (20%) or more of the combined voting power of Sempra Energys then outstanding securities.
(c)
A change in the ownership of a substantial portion of assets of Sempra Energy shall not occur under clause (a)(iii) by reason of a sale or disposition by Sempra Energy of the assets of Sempra Energy to an entity, at least sixty percent (60%) of the combined voting power of the voting securities of which are owned by shareholders of Sempra Energy in substantially the same proportions as their ownership of Sempra Energy immediately prior to such sale.
(d)
This definition of Change in Control shall be limited to the definition of a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5). A Change in Control shall only occur if there is a change in control event relating to Sempra Energy under Treasury Regulation Section 1.409A-3(i)(5) with respect to the Executive.
Change in Control Date means the date on which a Change in Control occurs.
Code means the Internal Revenue Code of 1986, as amended.
Compensation Committee means the compensation committee of the Board.
Consulting Payment has the meaning assigned thereto in Section 14(d) hereof.
Consulting Period has the meaning assigned thereto in Section 14(e) hereof.
Date of Termination has the meaning assigned thereto in Section 2(b) hereof.
Deferred Compensation Plan has the meaning assigned thereto in Section 4(f) hereof.
Disability has the meaning set forth in the Companys long-term disability plan or its successor; provided, however, that the Board may not terminate the Executives employment hereunder by reason of Disability unless (i) 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 and (ii) such termination is permitted by all applicable disability laws.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the applicable rulings and regulations thereunder.
Excise Tax has the meaning assigned thereto in Section 8(a) hereof.
Good Reason means:
(a)
Prior to a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
the assignment to the Executive of any duties materially inconsistent with the range of duties and responsibilities appropriate to a senior Executive within the Company (such range determined by reference to past, current and reasonable practices within the Company);
(ii)
a material reduction in the Executives overall standing and responsibilities within the Company, but not including (A) a mere change in title or (B) a transfer within the Company, which, in the case of both (A) and (B), does not adversely affect the Executives overall status within the Company;
(iii)
a material reduction by the Company in the Executives aggregate annualized compensation and benefits opportunities, except for across-the-board reductions (or modifications of benefit plans) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
(b)
From and after a Change in Control, the occurrence of any of the following without the prior written consent of the Executive, unless such act or failure to act is corrected by the Company prior to the Date of Termination specified in the Notice of Termination (as required under Section 2 hereof):
(i)
an adverse change in the Executives title, authority, duties, responsibilities or reporting lines as in effect immediately prior to the Change in Control;
(ii)
a reduction by the Company in the Executives aggregate annualized compensation opportunities, except for across-the-board reductions in base salaries, annual bonus opportunities or long-term incentive compensation opportunities of less than ten percent (10%) similarly affecting all similarly situated executives (both of the Company and of any Person then in control of the Company) of comparable rank with the Executive; or the failure by the Company to continue in effect any material benefit plan in which the Executive participates immediately prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive's participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Executive's participation relative to other participants, as existed at the time of the Change in Control;
(iii)
the relocation of the Executives principal place of employment immediately prior to the Change in Control Date (the Principal Location) to a location which is both further away from the Executives residence and more than thirty (30) miles from such Principal Location, or the Companys requiring the Executive to be based anywhere other than such Principal Location (or permitted relocation thereof), or a substantial increase in the Executives 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 of limited duration and (B) is understood not to be part of the Executives regular duties with the Company;
(iv)
the failure by the Company to pay to the Executive any portion of the Executives current compensation and benefits or 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 Executives employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3 hereof; for purposes of this Agreement, no such purported termination shall be effective;
(vi)
the failure by Sempra Energy to perform its obligations under Section 16(c), (d) or (e) hereof;
(vii)
the failure by the Company to provide the indemnification and D&O insurance protection Section 10 of this Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply with any material provision of this Agreement.
Following a Change in Control, the Executives 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 pursuant to the procedure described in Section 13 hereof. The Executives right to terminate the Executives employment for Good Reason shall not be affected by the Executives incapacity due to physical or mental illness. The Executives 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.
Incentive Compensation Awards means awards granted under Incentive Compensation Plans providing the Executive with the opportunity to earn, on a year-by-year basis, annual and long-term incentive compensation.
Incentive Compensation Plans means annual incentive compensation plans and long-term incentive compensation plans of the Company, which long-term incentive compensation plans may include plans offering stock options, restricted stock and other long-term incentive compensation.
Involuntary Termination means (a) the Executives Separation from Service by reason other than for Cause, death, Disability or Mandatory Retirement, or (b) the Executives Separation from Service by reason of resignation of employment for Good Reason.
JAMS Rules has the meaning assigned thereto in Section 13 hereof.
Mandatory Retirement means termination of employment pursuant to the Companys mandatory retirement policy.
Notice of Termination has the meaning assigned thereto in Section 2(a) hereof.
Payment has the meaning assigned thereto in Section 8(a) hereof.
Payment in Lieu of Notice has the meaning assigned thereto in Section 2(b) hereof.
Person has the meaning set forth in section 3(a)(9) of 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 Affiliates, (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) promulgated under the Exchange Act.
Post-Change in Control Severance Payment has the meaning assigned thereto in Section 5 hereof.
Pre-Change in Control Severance Payment has the meaning assigned thereto in Section 4 hereof.
Principal Location has the meaning assigned thereto in clause (b)(iii) of the definition of Good Reason, above.
Proprietary Information has the meaning assigned thereto in Section 14(a) hereof.
Pro Rata Bonus has the meaning assigned thereto in Section 5(b).
Release has the meaning assigned thereto in Section 4 hereof.
Section 409A Payments means any of the following: (a) the Payment in Lieu of Notice; (b) the Pre-Change in Control Severance Payment; (c) the Post-Change in Control Severance Payment; (d) the Pro Rata Bonus; (e) the Consulting Payment; (f) the financial planning services and the related payments provided under Sections 4(e) and 5(f); (g) the legal fees and expenses reimbursed under Section 15; and (h) any other payment that the Company determines in its sole discretion is subject to Section 409A of the Code as non-qualified deferred compensation.
Sempra Energy Control Group means Sempra Energy and all persons with whom Sempra Energy would be considered a single employer under Section 414(b) or 414(c) of the Code, as determined from time to time.
Separation from Service has the meaning set forth in Treasury Regulation Section 1.409A-1(h).
Specified Employee shall be determined in accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury Regulation Section 1.409A-1(i).
For purposes of this Agreement, references to any Treasury Regulation shall mean such Treasury Regulation as in effect on the date hereof.
Section 2.
Notice and Date of Termination.
(a)
Any termination of the Executives employment by the Company or by the Executive shall be communicated by a written notice of termination to the other party (the Notice of Termination). Where applicable, the Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executives employment under the provision so indicated. 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.
(b)
The date of the Executives termination of employment with the Company (the Date of Termination) shall be determined as follows: (i) if the Executives Separation from Service is at the volition of the Company, then the Date of Termination shall be the date specified in the Notice of Termination (which, in the case of a termination by the Company other than for Cause, shall not be less than two (2) weeks from the date such Notice of Termination is given unless the Company elects to pay the Executive, in addition to any other amounts payable hereunder, an amount (the Payment in Lieu of Notice) equal to two (2) weeks of the Executives Annual Base Salary in effect on the Date of Termination), and (ii) if the Executives Separation from Service is by the Executive for Good Reason, the Date of Termination shall be determined by the Executive and specified in the Notice of Termination, but in no event less than fifteen (15) days nor more than sixty (60) days after the date such Notice of Termination is given. The Payment in Lieu of Notice shall be paid on such date as is required by law, but no later than thirty (30) days after the date of the Executives Separation from Service; provided, however, that if the Executive is a Specified Employee on the date of his or her Separation from Service, such Payment in Lieu of Notice shall be paid as provided in Section 9 hereof.
Section 3.
Termination from the Board. Upon the termination of the Executives employment for any reason, the Executives membership on the Board, the board of directors of any of the Companys Affiliates, any committees of the Board and any committees of the board of directors of any of the Companys Affiliates, if applicable, shall be automatically terminated.
Section 4.
Severance Benefits upon Involuntary Termination Prior to Change in Control. Except as provided in Section 5(g) and Section 19(i) hereof, in the event of the Involuntary Termination of the Executive prior to a Change in Control, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Pre-Change in Control Severance Payment) equal to one-half (0.5) times the greater of: (X) 150% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. In addition to the Pre-Change in Control Severance Payment, the Executive shall be entitled to the following additional benefits specified in subsections (a) through (e). The Company's obligation to pay the Pre-Change in Control Severance Payment or provide the benefits set forth in subsections (c), (d) and (e) are subject to and conditioned upon the Executive executing a release (the Release) of all claims substantially in the form attached hereto as Exhibit A within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Section 4(f), the Pre-Change in Control Severance Payment shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination; but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pre-Change in Control Severance Payment shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Pre-Change in Control Severance Payment and the financial planning services and the related payments provided under Section 4(e) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Accrued Obligations within the time required by law.
(b)
Equity Based Compensation. The Executive shall retain all rights to any equity-based compensation awards to the extent set forth in the applicable plan and/or award agreement.
(c)
Welfare Benefits. Subject to Section 12 below, for a period of six (6) months following the date of the Involuntary Termination (and an additional six (6) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided with health insurance benefits substantially similar to those provided to the Executive and his dependents immediately prior to the date of the Involuntary Termination; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of the Involuntary Termination. Such benefits shall be provided through insurance maintained by the Company under the Companys benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(d)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of twelve (12) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(e)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of twelve (12) months following the Date of Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial planning services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv).
(f)
Deferral of Payments. The Executive shall have the right to elect to defer the Pre-Change in Control Severance Payment to be received by the Executive pursuant to this Section 4 under the terms and conditions of the Sempra Energy 2005 Deferred Compensation Plan (the Deferred Compensation Plan). Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 5.
Severance Benefits upon Involuntary Termination in Connection with and after Change in Control. Notwithstanding the provisions of Section 4 above, and except as provided in Section 19(i) hereof, in the event of the Involuntary Termination of the Executive on or within two (2) years following a Change in Control, in lieu of the payments described in Section 4 above, the Company shall pay the Executive, in one lump sum cash payment, an amount (the Post-Change in Control Severance Payment) equal to the greater of: (X) 150% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or the Date of Termination, whichever is greater, and (Y) the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, plus the Executives Average Annual Bonus. In addition to the Post-Change in Control Severance Payment, the Executive shall be entitled to the benefits specified in subsections (a) through (f). The Company's obligation to pay the Post-Change in Control Severance Payment or provide the benefits set forth in subsections (b), (c), (d), (e) and (f) are subject to and conditioned upon the Executive executing the Release within fifty (50) days after the date of Involuntary Termination and Executive not revoking such Release in accordance with the terms thereof. Except as provided in Sections 5(g) and 5(h), the Post-Change in Control Severance Payment, and the Pro Rata Bonus shall be paid on such date as is determined by the Company within sixty (60) days after the date of the Involuntary Termination. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Post-Change in Control Severance Payment and Pro Rata Bonus shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Post-Change in Control Severance Payment, the Pro Rata Bonus and the financial planning services and the related payments provided under Section 5(f) shall be paid as provided in Section 9 hereof.
(a)
Accrued Obligations. The Company shall pay the Executive a lump sum amount in cash equal to the Executive's Accrued Obligations within the time required by law.
(b)
Pro Rata Bonus. The Company shall pay the Executive a lump sum amount in cash equal to: (i) the greater of: (X) 50% of the Executives Annual Base Salary as in effect immediately prior to the Change in Control or on the Date of Termination, whichever is greater, or (Y) the Executives Average Annual Bonus, multiplied by (ii) 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 equal to the (Pro Rata Bonus).
(c)
Equity-Based Compensation. Notwithstanding the provisions of any applicable equity-compensation plan or award agreement to the contrary, all equity-based Incentive Compensation Awards (including, without limitation, stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance share awards, awards covered under Section 162(m) of the Code, and dividend equivalents) held by the Executive shall immediately vest and become exercisable or payable, as the case may be, as of the Date of Termination, to be exercised or paid, as the case may be, in accordance with the terms of the applicable Incentive Compensation Plan and Incentive Compensation Award agreement, and any restrictions on any such Incentive Compensation Awards shall automatically lapse; provided, however, that any such stock option or stock appreciation rights awards granted on or after June 26, 1998 shall remain outstanding and exercisable until the earlier of (A) the later of eighteen (18) months following the Date of Termination or the period specified in the applicable Incentive Compensation Award agreements or (B) the expiration of the original term of such Incentive Compensation Award (or, if earlier, the tenth anniversary of the original date of grant) (it being understood that all Incentive Compensation Awards granted prior to or after June 26, 1998 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).
(d)
Welfare Benefits. Subject to Section 12 below, for a period of six (6) months following the date of Involuntary Termination (and an additional twelve (12) months if the Executive provides consulting services under Section 14(e) hereof), the Executive and his dependents shall be provided 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 Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive; provided, however, that such benefits shall be provided on substantially the same terms and conditions and at the same cost to the Executive as in effect immediately prior to the date of Involuntary Termination or the Change in Control Date, whichever is more favorable to the Executive. Such benefits shall be provided through insurance maintained by the Company under the Company benefit plans. Such benefits shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(a)(5). Notwithstanding the foregoing, if the Company determines in its sole discretion that it cannot provide the foregoing benefit without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to the Executive a taxable monthly payment in an amount equal to the monthly premium that the Executive would be required to pay to continue the Executives and his covered dependents group insurance coverages under COBRA as in effect on the Date of Termination (which amount shall be based on the premiums for the first month of COBRA coverage); provided, however, that, if the Executive is a Specified Employee on the Date of Termination, then such payments shall be paid as provided in Section 9 hereof.
(e)
Outplacement Services. The Executive shall receive reasonable outplacement services, on an in-kind basis, suitable to his position and directly related to the Executives Involuntary Termination, for a period of eighteen (18) months following the date of Involuntary Termination (but in no event beyond the last day of the Executives second taxable year following the Executives taxable year in which the Involuntary Termination occurs), in the aggregate amount of cost to the Company not to exceed $50,000. Notwithstanding the foregoing, the Executive shall cease to receive outplacement services on the date the Executive accepts employment with a subsequent employer. Such outplacement services shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(9)(v)(A).
(f)
Financial Planning Services. The Executive shall receive financial planning services, on an in-kind basis, for a period of eighteen (18) months following the date of Involuntary Termination. Such financial planning services shall include expert financial and legal resources to assist the Executive with financial planning needs and shall be limited to (i) current investment portfolio management, (ii) tax planning, (iii) tax return preparation, and (iv) estate planning advice and document preparation (including wills and trusts); provided, however, that the Company shall provide such financial services during any taxable year of the Executive only to the extent the cost to the Company for such taxable year does not exceed [$25,000]. The Company shall provide such financial planning services through a financial planner selected by the Company, and shall pay the fees for such financial planning services. The financial planning services provided during any taxable year of the Executive shall not affect the financial planning services provided in any other taxable year of the Executive. The Executives right to financial planning services shall not be subject to liquidation or exchange for any other benefit. Such financial planning services shall be provided in a manner that complies with Section 1.409A-3(i)(1)(iv).
(g)
Involuntary Termination in Connection with a Change in Control. Notwithstanding anything contained herein, in the event of an Involuntary Termination prior to a Change in Control, if the Involuntary Termination (1) was at the request of a third party who has taken steps reasonably calculated to effect such Change in Control or (2) otherwise arose in connection with or in anticipation of such Change in Control, then the Executive shall, in lieu of the payments described in Section 4 hereof, be entitled to the Post-Change in Control Severance Payment and the additional benefits described in this Section 5 as if such Involuntary Termination had occurred within two (2) years following the Change in Control. The amounts specified in Section 5 that are to be paid under this Section 5(g) shall be reduced by any amount previously paid under Section 4. The amounts to be paid under this Section 5(g) shall be paid within sixty (60) days after the Change in Control Date of such Change in Control.
(h)
Deferral of Payments. The Executive shall have the right to elect to defer the Post-Change in Control Severance Payment and the Pro Rata Bonus to be received by the Executive pursuant to this Section 5 under the terms and conditions of the Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
Section 6.
Severance Benefits upon Termination by the Company for Cause or by the Executive Other than for Good Reason. If the Executives employment shall be terminated for Cause, or if the Executive terminates employment other than for Good Reason, the Company shall have no further obligations to the Executive under this Agreement other than the Accrued Obligations and any amounts or benefits described in Section 10 hereof.
Section 7.
Severance Benefits upon Termination due to Death or Disability. If the Executive has a Separation from Service by reason of death or Disability, the Company shall pay the Executive or his estate, as the case may be, the Accrued Obligations and the Pro Rata Bonus (without regard to whether a Change in Control has occurred) and any amounts or benefits described in Section 10 hereof. 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. The Company's obligation to pay the Pro Rata Bonus is conditioned upon the Executive, the Executive's representative or the Executive's estate, as the case may be executing the Release within fifty (50) days after the date of Executive's Separation from Service and not revoking such Release in accordance with the terms thereof. The Accrued Obligations shall be paid within the time required by law and the Pro Rata Bonus shall be paid on such date as determined by the Company within sixty (60) days after the date of the Separation from Service but not before the Release becomes effective and irrevocable. If the fifty (50) day period in which the Release could become effective spans more than one taxable year, then the Pro Rata Bonus shall not be made until the later taxable year. Notwithstanding the foregoing, if the Executive is a Specified Employee on the date of the Executives Separation from Service, the Pro Rata Bonus shall be paid as provided in Section 9 hereof.
Section 8.
Limitation on Payments by the Company.
(a)
Anything in this Agreement to the contrary notwithstanding and except as set forth in this Section 8 below, in the event it shall be determined that any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise (the Payment) would be subject (in whole or in part) to the excise tax imposed by Section 4999 of the Code, (the Excise Tax), then, subject to subsection (b), the Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall be reduced under this subsection (a) to the amount equal to the Reduced Payment. For such Payment payable under this Agreement, the Reduced Payment shall be the amount equal to the greatest portion of the Payment (which may be zero) that, if paid, would result in no portion of any Payment being subject to the Excise Tax.
(b)
The Pre-Change in Control Severance Benefit or the Post-Change in Control Severance Payment (whichever is applicable) payable under this Agreement shall not be reduced under subsection (a) if:
(i)
such reduction in such Payment is not sufficient to cause no portion of any Payment to be subject to the Excise Tax, or
(ii)
the Net After-Tax Unreduced Payments (as defined below) would equal or exceed one hundred and five percent (105%) of the Net After-Tax Reduced Payments (as defined below).
For purposes of determining the amount of any Reduced Payment under subsection (a), and the Net-After Tax Reduced Payments and the Net After-Tax Unreduced Payments, the Executive shall be considered to pay federal, state and local income and employment taxes at the Executives applicable marginal rates taking into consideration any reduction in federal income taxes which could be obtained from the deduction of state and local income taxes, and any reduction or disallowance of itemized deductions and personal exemptions under applicable tax law). The applicable federal, state and local income and employment taxes and the Excise Tax (to the extent applicable) are collectively referred to as the Taxes.
(c)
The following definitions shall apply for purposes of this Section 8:
(i)
Net After-Tax Reduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are reduced pursuant to subsection (a).
(ii)
Net After-Tax Unreduced Payments shall mean the total amount of all Payments that the Executive would retain, on a Net After-Tax Basis, in the event that the Payments payable under this Agreement are not reduced pursuant to subsection (a).
(iii)
Net After-Tax Basis shall mean, with respect to the Payments, either with or without reduction under subsection (a) (as applicable), the amount that would be retained by the Executive from such Payments after the payment of all Taxes.
(d)
All determinations required to be made under this Section 8 and the assumptions to be utilized in arriving at such determinations, shall be made by a nationally recognized accounting firm as may be agreed by the Company and the Executive (the Accounting Firm); provided, that the Accounting Firms determination shall be made based upon substantial authority within the meaning of Section 6662 of the Code. The Accounting Firm shall provide detailed supporting calculations to both the Company and the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. For purposes of determining whether and the extent to which the Payments will be subject to the Excise Tax, (i) no portion of the 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, (ii) no portion of the Payments shall be taken into account which, in the written opinion of the Accounting Firm, 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) and, in calculating the Excise Tax, no portion of such Payments shall be taken into account which, in the opinion of the Accounting Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Payments shall be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
Section 9.
Delayed Distribution under Section 409A of the Code. If the Executive is a Specified Employee on the date of the Executives Involuntary Termination (or on the date of the Executives Separation from Service by reason of Disability), the Section 409A Payments, and any other payments or benefits under this Agreement subject to Section 409A of the Code, shall be delayed in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits shall be paid or distributed to the Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six-month period measured from the date of the Executives Separation from Service or (b) the date of the Executives death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 9 (excluding in-kind benefits) shall be paid in a lump sum payment to the Executive, plus interest thereon from the date of the Executives Involuntary Termination through the payment date at an annual rate equal to Moodys Rate. The Moodys Rate shall mean the average of the daily Moodys Corporate Bond Yield Average Monthly Average Corporates as published by Moodys Investors Service, Inc. (or any successor) for the month next preceding the Date of Termination. Any remaining payments due under the Agreement shall be paid as otherwise provided herein.
Section 10.
Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executives 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), including, without limitation, any and all indemnification arrangements in favor of the Executive (whether under agreements or under the Companys charter documents or otherwise), and insurance policies covering the Executive, 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. At all times during the Executives employment with the Company and thereafter, the Company shall provide (to the extent permissible under applicable law) the Executive with indemnification and D&O insurance insuring the Executive against insurable events which occur or have occurred while the Executive was a director or the Executive officer of the Company, on terms and conditions that are at least as generous as that then provided to any other current or former director or the Executive officer of the Company or any Affiliate. Such indemnification and D&O insurance shall be provided in a manner that complies with Treasury Regulation Section 1.409A-1(b)(10).
Section 11.
Clawbacks. Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that if the Executive is required to forfeit or to make any repayment of any compensation or benefit(s) to the Company under the Sarbanes-Oxley Act of 2002 or pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act or any other law, such forfeiture or repayment shall not constitute Good Reason.
Section 12.
Full Settlement; Mitigation. The Companys 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.
Section 13.
Dispute Resolution.
(a)
If any dispute arises between Executive and the Company, including, but not limited to, disputes relating to or arising out of this Agreement, any action relating to or arising out of my employment or its termination, and/or any disputes regarding the interpretation, enforceability, or validity of this Agreement (Arbitrable Dispute), Executive and the Company waive the right to resolve the dispute through litigation in a judicial forum and agree to resolve the Arbitrable Dispute through final and binding arbitration, except as prohibited by law. Arbitration shall be the exclusive remedy for any Arbitrable Dispute.
(b)
As to any Arbitrable Dispute, the Company and Executive waive any right to a jury trial or a court bench trial. The Company and Executive also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
(c)
Arbitration shall take place at the office of the Judicial Arbitration and Mediation Service (JAMS) (or, if Executive is employed outside of California, the American Arbitration Association (AAA)) nearest to the location where Executive last worked for the Company. Except to the extent it conflicts with the rules and procedures set forth in this Arbitration Agreement, arbitration shall be conducted in accordance with the JAMs Employment Arbitration Rules & Procedures (if Executive is employed outside of California, the AAA Employment Arbitration Rules & Mediation Procedures), copies of which are attached for my reference and available at www.jamsadr.com; tel: 800.352.5267 and www.adr.org; tel: 800.778.7879, before a single experienced, neutral employment arbitrator selected in accordance with those rules.
(d)
The Company will be responsible for paying any filing fee and the fees and costs of the arbitrator. Each party shall pay its own attorneys fees. However, if any party prevails on a statutory claim that authorizes an award of attorneys fees to the prevailing party, or if there is a written agreement providing for attorneys fees, the arbitrator may award reasonable attorneys fees to the prevailing party, applying the same standards a court would apply under the law applicable to the claim.
(e)
The arbitrator shall apply the Federal Rules of Evidence, shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party, and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The arbitrator does not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action. The Company and Executive recognize that this Agreement arises out of or concerns interstate commerce and that the Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this Arbitration Agreement or any arbitration award.
(f)
EXECUTIVE ACKNOWLEDGES THAT BY ENTERING INTO THIS AGREEMENT, EXECUTIVE IS WAIVING ANY RIGHT HE OR SHE MAY HAVE TO A TRIAL BY JURY.
Section 14.
Executives Covenants.
(a)
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 and its Affiliates; and the Executive agrees that it would be extremely damaging to the Company and its Affiliates if such Proprietary Information were disclosed to a competitor of the Company and its 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 or information the Executive is required by any governmental, administrative or court order to disclose) without limitation in time. In view of the nature of the Executives employment and the Proprietary Information the Executive has acquired during the course of such employment, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any disclosure of Proprietary Information in violation of the terms of this paragraph and that the Company and its 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 Companys Senior Vice President, Public Policy (or, if such position is vacant, the Companys then Chief Executive Officer); provided, that the Company shall not unreasonably classify information as Proprietary Information.
(b)
Non-Solicitation of Employees. The Executive recognizes that he possesses and will possess confidential information about other employees of the Company and its Affiliates relating to their education, experience, skills, abilities, compensation and benefits, and inter-personal relationships with customers of the Company and its 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 and its 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 and its Affiliates. The Executive agrees that at all times during the Executives employment with the Company and for a period of one (1) year thereafter, he will not, directly or indirectly, solicit or recruit any employee of the Company or its Affiliates for the purpose of being employed by him or by any competitor of the Company or its 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 and its 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 or its Affiliates who has either first contacted the Executive or regarding whose employment the Executive has discussed with and received the written approval of the Companys Vice President, Human Resources (or, if such position is vacant, the Companys then Chief Executive Officer), prior to making such solicitation or recruitment. In view of the nature of the Executives employment with the Company, the Executive likewise agrees that the Company and its Affiliates would be irreparably harmed by any solicitation or recruitment in violation of the terms of this paragraph and that the Company and its 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.
(c)
Survival of Provisions. The obligations contained in Section 14(a) and Section 14(b) above shall survive the termination of the Executives employment within the Company and shall be fully enforceable thereafter. If it is determined by a court of competent jurisdiction in any state that any restriction in Section 14(a) or Section 14(b) above is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.
(d)
Release; Lump Sum Payment. In the event of the Executives Involuntary Termination, if the Executive (i) reconfirms and agrees to abide by the covenants described in Section 14(a) and Section 14(b) above, (ii) executes the Release within fifty (50) days after the date of Involuntary Termination and does not revoke such Release in accordance with the terms thereof, and (iii) agrees to provide the consulting services described in Section 14(e) below, then in consideration for such covenants and consulting services, the Company shall pay the Executive, in one cash lump sum, an amount (the Consulting Payment) in cash equal to one-half (0.5) times the greater of: (X) 150% of the Executives Annual Base Salary as in effect on the Date of Termination, and (Y) the Executives Annual Base Salary as in effect on the Date of Termination, plus the Executives Average Annual Bonus. Except as provided in this subsection, the Consulting Payment shall be paid on such date as is determined by the Company within the ten (10) day period commencing on the 60th day after the date of the Executives Involuntary Termination; provided, however, that if the Executive is a Specified Employee on the date of the Executives Involuntary Termination, the Consulting Payment shall be paid as provided in Section 9 hereof. The Executive shall have the right to elect to defer the Consulting Payment under the terms and conditions of the Companys Deferred Compensation Plan. Any such deferral election shall be made in accordance with Section 18(b) hereof.
(e)
Consulting. If the Executive agrees to the provisions of in Section 14(d) above, then the Executive shall have the obligation to provide consulting services to the Company as an independent contractor, commencing on the Date of Termination and ending on the first anniversary of the Date of Termination (the Consulting Period). The Executive shall hold himself available at reasonable times and on reasonable notice to render such consulting services as may be so assigned to him by the Board or the Companys then Chief Executive Officer; provided, however, that unless the parties otherwise agree, the consulting services rendered by the Executive during the Consulting Period shall not exceed twenty (20) hours each month; and, provided, further, that the consulting services rendered by the Executive during the Consulting Period shall in no event exceed twenty percent (20%) of the average level of services performed by the Executive for the Company over the thirty-six (36) month period immediately preceding the Executives Separation from Service (or the full period of services to the Company, if the Executive has been providing services to the Company for less than thirty-six (36) months). The Company agrees to use its best efforts during the Consulting Period to secure the benefit of the Executives consulting services so as to minimize the interference with the Executives other activities, including requiring the performance of consulting services at the Companys offices only when such services may not be reasonably performed off-site by the Executive.
Section 15.
Legal Fees.
(a)
Reimbursement of Legal Fees. Subject to subsection (b), in the event of the Executives Separation from Service either (1) prior to a Change in Control, or (2) on or within two (2) years following a Change in Control, the Company shall reimburse the Executive for all legal fees and expenses (including but not limited to fees and expenses in connection with any arbitration) incurred by the Executive in disputing any issue arising under this Agreement relating to the Executives Separation from Service or in seeking to obtain or enforce any benefit or right provided by this Agreement.
(b)
Requirements for Reimbursement. The Company shall reimburse the Executives legal fees and expenses pursuant to subsection (a) above only to the extent the arbitrator or court determines the following: (i) the Executive disputed such issue, or sought to obtain or enforce such benefit or right, in good faith, (ii) the Executive had a reasonable basis for such claim, and (iii) in the case of subsection (a)(1) above, the Executive is the prevailing party. In addition, the Company shall reimburse such legal fees and expenses, only if such legal fees and expenses are incurred during the twenty (20) year period beginning on the date of the Executives Separation from Service. The legal fees and expenses paid to the Executive for any taxable year of the Executive shall not affect the legal fees and expenses paid to the Executive for any other taxable year of the Executive. The legal fees and expenses shall be paid to the Executive on or before the last day of the Executives taxable year following the taxable year in which the fees or expenses are incurred. The Executives right to reimbursement of legal fees and expenses shall not be subject to liquidation or exchange for any other benefit. Such right to reimbursement of legal fees and expenses shall be provided in a manner that complies with Treasury Regulation Section 1.409A-3(i)(1)(iv). If the Executive is a Specified Employee on the date of the Executives Separation from Service, such right to reimbursement of legal fees and expenses shall be paid as provided in Section 9 hereof.
Section 16.
Successors.
(a)
Assignment by the Executive. This Agreement is personal to the Executive and without the prior written consent of Sempra Energy shall not be assignable 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 Executives legal representatives.
(b)
Successors and Assigns of Sempra Energy. This Agreement shall inure to the benefit of and be binding upon Sempra Energy, its successors and assigns. Sempra Energy may not assign this Agreement to any person or entity (except for a successor described in Section 16(c), (d) or (e) below) without the Executives written consent.
(c)
Assumption. Sempra Energy 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 Sempra Energy to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities of this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement if no such succession had taken place, and Sempra Energy shall have no further obligations and liabilities under this Agreement. Upon such assumption, references to Sempra Energy in this Agreement shall be replaced with references to such successor.
(d)
Sale of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy that is a member of the Sempra Energy Control Group, (ii) Sempra Energy, directly or indirectly through one or more intermediaries, sells or otherwise disposes of such subsidiary, and (iii) such subsidiary ceases to be a member of the Sempra Energy Control Group, then if, on the date such subsidiary ceases to be a member of the Sempra Energy Control Group, the Executive continues in employment with such subsidiary and the Executive does not have a Separation from Service, Sempra Energy shall require such subsidiary or any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to such subsidiary, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if such subsidiary had not ceased to be part of the Sempra Energy Control Group, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to such subsidiary, or such successor or parent thereof, assuming this Agreement, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of such cessation.
(e)
Sale of Assets of Subsidiary. In the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) such subsidiary sells or otherwise disposes of substantial assets of such subsidiary to an unrelated service recipient, as determined under Treasury Regulation Section 1.409A-1(f)(2)(ii) (the Asset Purchaser), in a transaction described in Treasury Regulation Section 1.409A-1(h)(4) (an Asset Sale), then if, on the date of such Asset Sale, the Executive becomes employed by the Asset Purchaser, Sempra Energy and the Asset Purchaser shall specify, in accordance with Treasury Regulation Section 1.409A-1(h)(4), that the Executive shall not be treated as having a Separation from Service, and Sempra Energy shall require such Asset Purchaser, or the parent thereof, to assume expressly and agree to perform the obligations and satisfy and discharge the liabilities under this Agreement in the same manner and to the same extent that Sempra Energy would have been required to perform the obligations and satisfy and discharge the liabilities under this Agreement, if the Asset Sale had not taken place, and, upon such assumption, Sempra Energy shall have no further obligations and liabilities under the Agreement. Upon such assumption, (i) references to Sempra Energy in this Agreement shall be replaced with references to the Asset Purchaser or the parent thereof, as applicable, and (ii) subsection (b) of the definition of Cause and subsection (b) of the definition of Good Reason shall apply thereafter, as if a Change in Control had occurred on the date of the Asset Sale.
Section 17.
Administration Prior to Change in Control. Prior to a Change in Control, the Compensation Committee shall have full and complete authority to construe and interpret the provisions of this Agreement, to determine an individuals entitlement to benefits under this Agreement, to make in its sole and absolute discretion all determinations contemplated under this Agreement, to investigate and make factual determinations necessary or advisable to administer or implement this Agreement, and to adopt such rules and procedures as it deems necessary or advisable for the administration or implementation of this Agreement. All determinations made under this Agreement by the Compensation Committee shall be final and binding on all interested persons. Prior to a Change in Control, the Compensation Committee may delegate responsibilities for the operation and administration of this Agreement to one or more officers or employees of the Company. The provisions of this Section 17 shall terminate and be of no further force and effect upon the occurrence of a Change in Control.
Section 18.
Section 409A of the Code.
(a)
Compliance with and Exemption from Section 409A of the Code. Certain payments and benefits payable under this Agreement (including, without limitation, the Section 409A Payments) are intended to comply with the requirements of Section 409A of the Code. Certain payments and benefits payable under this Agreement are intended to be exempt from the requirements of Section 409A of the Code. This Agreement shall be interpreted in accordance with the applicable requirements of, and exemptions from, Section 409A of the Code and the Treasury Regulations thereunder. To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder (subject to the transitional relief under Internal Revenue Service Notice 2005-1, the Proposed Regulations under Section 409A of the Code, Internal Revenue Service Notice 2006-79, Internal Revenue Service Notice 2007-78, Internal Revenue Service Notice 2007-86 and other applicable authority issued by the Internal Revenue Service). As provided in Internal Revenue Notice 2007-86, notwithstanding any other provision of this Agreement, with respect to an election or amendment to change a time or form of payment under this Agreement made on or after January 1, 2008 and on or before December 31, 2008, the election or amendment shall apply only with respect to payments that would not otherwise be payable in 2008, and shall not cause payments to be made in 2008 that would not otherwise be payable in 2008. If the Company and the Executive determine that any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, to the extent permitted under Section 409A of the Code, the Treasury Regulations thereunder and any applicable authority issued by the Internal Revenue Service, the Company and the Executive agree to amend this Agreement, or take such other actions as the Company and the Executive deem reasonably necessary or appropriate, to cause such compensation, benefits and other payments to comply with the requirements of Section 409A of the Code, the Treasury Regulations thereunder and other applicable authority issued by the Internal Revenue Service, while providing compensation, benefits and other payments that are, in the aggregate, no less favorable than the compensation, benefits and other payments provided under this Agreement. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments to the extent such provision would cause a failure to comply, and such provision shall otherwise remain in full force and effect.
(b)
Deferral Elections. As provided in Sections 4(f), 5(h) and 14(d), the Executive may elect to defer the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment as follows. The Executives deferral election shall satisfy the requirements of Treasury Regulation Section 1.409A-2(b) and the terms and conditions of the Deferred Compensation Plan. Such deferral election shall designate the whole percentage (up to a maximum of 100%) of the Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and the Consulting Payment to be deferred, shall be irrevocable when made, and shall not take effect until at least twelve (12) months after the date on which the election is made. Such deferral election shall provide that the amount deferred shall be deferred for a period of not less than five (5) years from the date the payment of the amount deferred would otherwise have been made, in accordance with Treasury Regulation Section 1.409A-2(b)(1)(ii).
Section 19.
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 Companys 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 Executives or the Companys 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 1 hereof, or the right of the Company to terminate the Executives employment for Cause pursuant to Section 1 hereof 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; Exclusive Benefit; Supersession of Prior Agreement. This instrument contains the entire agreement of the Executive, the Company or any predecessor or subsidiary thereof with respect to any severance or termination pay. The Pre-Change in Control Severance Payment, the Post-Change in Control Severance Payment and all other benefits provided hereunder shall be in lieu of any other severance payments to which the Executive is entitled under any other severance plan or program or arrangement sponsored by the Company, as well as pursuant to any individual employment or severance agreement that was entered into by the Executive and the Company, and, upon the Effective Date of this Agreement, all such plans, programs, arrangements and agreements are hereby automatically superseded and terminated.
(g)
No Right of Employment. Nothing in this Agreement shall be construed as giving the Executive any right to be retained in the employ of the Company or shall interfere in any way with the right of the Company to terminate the Executives employment at any time, with or without Cause.
(h)
Unfunded Obligation. The obligations under this Agreement shall be unfunded. Benefits payable under this Agreement shall be paid from the general assets of the Company. The Company shall have no obligation to establish any fund or to set aside any assets to provide benefits under this Agreement.
(i)
Termination upon Sale of Assets of Subsidiary. Notwithstanding anything contained herein, this Agreement shall automatically terminate and be of no further force and effect and no benefits shall be payable hereunder in the event that (i) the Executive is employed by a direct or indirect subsidiary of Sempra Energy, and (ii) an Asset Sale (as defined in Section 16(e)) occurs (other than such a sale or disposition which is part of a transaction or series of transactions which would result in a Change in Control), and (iii) as a result of such Asset Sale, the Executive is offered employment by the Asset Purchaser in an executive position with reasonably comparable status, compensation, benefits and severance agreement (including the assumption of this Agreement in accordance with Section 16(e)) and which is consistent with the Executives experience and education, but the Executive declines to accept such offer and the Executive fails to become employed by the Asset Purchaser on the date of the Asset Sale.
(j)
Term. The term of this Agreement shall commence on the Effective Date and shall continue until the third (3rd) anniversary of the Effective Date; provided, however, that commencing on the second (2nd) anniversary of the Effective Date (and each anniversary of the Effective Date thereafter), the term of this Agreement shall automatically be extended for one (1) additional year, unless at least ninety (90) days 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. Notwithstanding the foregoing, if the Company gives such written notice to the Executive less than two (2) years after a Change in Control, the term of this Agreement shall be automatically extended until the later of (A) the date that is one (1) year after the anniversary of the Effective Date that follows such written notice or (B) the second (2nd) anniversary of the Change in Control Date.
(k)
Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
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.
SEMPRA ENERGY
G. Joyce Rowland
Senior Vice President, Human Resources, Diversity and Inclusion
_____________________________________
Date
EXECUTIVE
Erbin Keith
Vice President and General Counsel
_____________________________________
Date
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 Severance Pay Agreement dated ____________, 20__ (the Severance Pay Agreement); and
WHEREAS, your right to receive certain severance pay and benefits pursuant to the terms of Section 4 or Section 5 of the Severance Pay Agreement, as applicable, are 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 the severance and benefits under the Severance Pay Agreement, 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 this 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 you and to the Company and each of the Companys 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, 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, indemnification and D&O 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, claim, any claim that you failed to perform or negligently performed or breached your duties during employment at the Company; any legal restrictions on the Companys right to terminate employment relationships or any federal, state or other governmental statute, regulation, or ordinance, governing the employment relationship including, without limitation: all state and federal laws and regulations prohibiting discrimination based on protected categories, and all state and federal laws and regulations prohibiting retaliation against employees for engaging in protected activity or legal off-duty conduct. This release does not extend to claims for workers compensation or other claims which by law may not be waived or released by this Agreement.
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 and analogous laws of other states) which limits the effect of a release with respect to unknown claims. You and the Company do so understanding 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 and analogous laws of other states). 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 OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER 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 Companys 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 true 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. You agree that you will not be entitled to any monetary recovery that may result from any agency action against the Company related to the Claims released by 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 the 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.
As a further material inducement to you to enter into this Agreement, the Company hereby agrees to indemnify and hold each of the Releasees harmless from all loss, costs, damages, or expenses, including without limitation, attorneys fees incurred by the Releasees, arising out of any breach of this Agreement by it or the fact that any representation made in this Agreement by it was knowingly 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 attorneys fees; provided, that counsel has been approved by the Company prior to retention, which approval shall not be unreasonably withheld), 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 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. The Company agrees to reimburse you for any reasonable costs you incur in providing such cooperation.
TEN: This Agreement is entered into in California and shall be governed by substantive California law, except as provided in this section. If any dispute arises between you and the Company, including but not limited to, disputes relating to this Agreement, or if you prosecute a claim you purported to release by means of this Agreement (Arbitrable Dispute), you and the Company agree to resolve that Arbitrable Dispute through final and binding arbitration under this section. You also agree to arbitrate any Arbitrable Dispute which also involves any other released party who offers or agrees to arbitrate the dispute under this section. Your agreement to arbitrate applies, for example, to disputes about the validity, interpretation, or effect of this Agreement or alleged violations of it, claims of discrimination under federal or state law, or other statutory violation claims.
As to any Arbitrable Dispute, you and the Company waive any right to a jury trial or a court bench trial. You and the Company also waive the right to bring, maintain, or participate in any class, collective, or representative proceeding, whether in arbitration or otherwise. Further, Arbitrable Disputes must be brought in the individual capacity of the party asserting the claim, and cannot be maintained on a class, collective, or representative basis.
Arbitration shall take place in San Diego, California under the employment dispute resolution rules of the Judicial Arbitration and Mediation Service (JAMS), (or, if you are employed outside of California at the time of the termination of your employment, at the nearest location of the American Arbitration Association and in accordance with the AAA rules), before an experienced employment arbitrator selected in accordance with those rules. The arbitrator may not modify or change this Agreement in any way. The Company will be responsible for paying any filing fee and the fees and costs of the Arbitrator; provided, however, that if you are the party initiating the claim, you will contribute an amount equal to the filing fee to initiate a claim in the court of general jurisdiction in the state in which you are employed by the Company. Each party shall pay for its own costs and attorneys fees, if any. However if any party prevails on a statutory claim which affords the prevailing party attorneys fees and costs, or if there is a written agreement providing for attorneys fees and/or costs, the Arbitrator may award reasonable attorneys fees and/or costs to the prevailing party, applying the same standards a court would apply under the law applicable to the claim. The Arbitrator shall apply the Federal Rules of Evidence and shall have the authority to entertain a motion to dismiss or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The Federal Arbitration Act shall govern the arbitration and shall govern the interpretation or enforcement of this section or any arbitration award. The arbitrator will not have the authority to consider, certify, or hear an arbitration as a class action, collective action, or any other type of representative action.
To the extent that the Federal Arbitration Act is inapplicable, California law pertaining to arbitration agreements shall apply. Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. Except as prohibited by the ADEA, should you or the Company attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this section, the responding party will be entitled to recover from the initiating party all damages, expenses, and attorneys fees incurred as a result of this breach. This section TEN supersedes any existing arbitration agreement between the Company and me as to any Arbitrable Dispute. Notwithstanding anything in this section TEN to the contrary, a claim for benefits under an ERISA-covered plan shall not be an Arbitrable Dispute.
ELEVEN: Both you and the Company understand that this Agreement is final and binding eight (8) 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 Sections 4 or 5 of the Severance Pay Agreement, as applicable, plus interest, and invite the Company to retain such monies and agree with you to cancel this Agreement and void the Companys obligations under of the Severance Pay 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 of the Severance Pay 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 Companys obligations under of the Severance Pay 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 forty-five (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 forty-five (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 (7) days of signing it. If you wish to revoke, the Companys Vice President, Human Resources must receive written notice from you no later than the close of business on the seventh (7th) 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 Sections 4 or 5 of the Severance Pay Agreement, as applicable.
FOURTEEN: This Agreement constitutes the entire agreement of the parties hereto and supersedes any and all other agreements (except the Severance Pay 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 understanding 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 12.1 | ||||||||||||||
SEMPRA ENERGY | ||||||||||||||
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES | ||||||||||||||
AND PREFERRED STOCK DIVIDENDS | ||||||||||||||
(Dollars in millions) | ||||||||||||||
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| March 31, | ||
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| 2008 |
| 2009 |
| 2010 |
| 2011 |
| 2012 |
| 2013 | ||
Fixed charges and preferred stock dividends: |
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Interest |
| $ 353 |
| $ 455 |
| $ 492 |
| $ 549 |
| $ 601 |
| $ 155 | ||
Interest portion of annual rentals |
| 3 |
| 2 |
| 3 |
| 2 |
| 2 |
| 1 | ||
Preferred dividends of subsidiaries (1) |
| 13 |
| 13 |
| 11 |
| 10 |
| 6 |
| 3 | ||
Total fixed charges |
| 369 |
| 470 |
| 506 |
| 561 |
| 609 |
| 159 | ||
Preferred dividends for purpose of ratio |
| - |
| - |
| - |
| - |
| - |
| - | ||
Total fixed charges and preferred dividends for purpose of ratio |
| $ 369 |
| $ 470 |
| $ 506 |
| $ 561 |
| $ 609 |
| $ 159 | ||
Earnings: |
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Pretax income from continuing operations before adjustment for income or loss from equity investees |
| $ 1,009 |
| $ 977 |
| $ 1,078 |
| $ 1,747 |
| $ 1,255 |
| $ 342 | ||
Add: |
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Total fixed charges (from above) |
| 369 |
| 470 |
| 506 |
| 561 |
| 609 |
| 159 | ||
Distributed income of equity investees |
| 133 |
| 493 |
| 260 |
| 96 |
| 50 |
| 10 | ||
Less: |
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Interest capitalized |
| 100 |
| 73 |
| 74 |
| 27 |
| 53 |
| 5 | ||
Preferred dividends of subsidiaries (1) |
| 10 |
| 13 |
| 11 |
| 10 |
| 6 |
| 3 | ||
Total earnings for purpose of ratio |
| $ 1,401 |
| $ 1,854 |
| $ 1,759 |
| $ 2,367 |
| $ 1,855 |
| $ 503 | ||
Ratio of earnings to combined fixed charges and preferred stock dividends |
| 3.80 |
| 3.94 |
| 3.48 |
| 4.22 |
| 3.05 |
| 3.16 | ||
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Ratio of earnings to fixed charges |
| 3.80 |
| 3.94 |
| 3.48 |
| 4.22 |
| 3.05 |
| 3.16 | ||
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(1) | In computing this ratio, Preferred dividends of subsidiaries represents the before-tax earnings necessary to pay such dividends, computed at the effective tax rates for the applicable periods. | |||||||||||||
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EXHIBIT 12.3 |
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SOUTHERN CALIFORNIA GAS COMPANY |
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COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES |
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AND PREFERRED STOCK DIVIDENDS |
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(Dollars in millions) |
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| March 31, | |||
| 2008 |
| 2009 |
| 2010 |
| 2011 |
| 2012 |
| 2013 | |||
Fixed Charges: |
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Interest | $ 65 |
| $ 74 |
| $ 72 |
| $ 77 |
| $ 77 |
| $ 19 | |||
Interest portion of annual rentals | 2 |
| 1 |
| 2 |
| 1 |
| 1 |
| - | |||
Total fixed charges | 67 |
| 75 |
| 74 |
| 78 |
| 78 |
| 19 | |||
Preferred stock dividends (1) | 2 |
| 2 |
| 2 |
| 2 |
| 2 |
| - | |||
Combined fixed charges and preferred stock dividends for purpose of ratio | $ 69 |
| $ 77 |
| $ 76 |
| $ 80 |
| $ 80 |
| $ 19 | |||
Earnings: |
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Pretax income from continuing operations | $ 385 |
| $ 418 |
| $ 463 |
| $ 431 |
| $ 369 |
| $ 70 | |||
Add: Total fixed charges (from above) | 67 |
| 75 |
| 74 |
| 78 |
| 78 |
| 19 | |||
Less: Interest capitalized | - |
| 1 |
| 1 |
| 1 |
| 1 |
| - | |||
Total earnings for purpose of ratio | $ 452 |
| $ 492 |
| $ 536 |
| $ 508 |
| $ 446 |
| $ 89 | |||
Ratio of earnings to combined fixed charges and preferred stock dividends | 6.55 |
| 6.39 |
| 7.05 |
| 6.35 |
| 5.58 |
| 4.68 | |||
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Ratio of earnings to fixed charges | 6.75 |
| 6.56 |
| 7.24 |
| 6.51 |
| 5.72 |
| 4.68 | |||
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(1) | In computing this ratio, Preferred stock dividends represents the before-tax earnings necessary to pay such dividends, computed at the effective tax rates for the applicable periods. |
EXHIBIT 31.1
CERTIFICATION
I, Debra L. Reed, certify that:
1.
I have reviewed this report on Form 10-Q of Sempra Energy;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
May 2, 2013
/S/ Debra L. Reed |
Debra L. Reed |
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, Joseph A. Householder, certify that:
1.
I have reviewed this report on Form 10-Q of Sempra Energy;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
May 2, 2013
/S/ Joseph A. Householder |
Joseph A. Householder |
Chief Financial Officer |
EXHIBIT 31.3
CERTIFICATION
I, Jessie J. Knight, Jr., certify that:
1.
I have reviewed this report on Form 10-Q of San Diego Gas & Electric Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
May 2, 2013
/S/ Jessie J. Knight, Jr. |
Jessie J. Knight, Jr. |
Chief Executive Officer |
EXHIBIT 31.4
CERTIFICATION
I, Robert M. Schlax, certify that:
1.
I have reviewed this report on Form 10-Q of San Diego Gas & Electric Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
May 2, 2013
/S/ Robert M. Schlax |
Robert M. Schlax |
Chief Financial Officer |
EXHIBIT 31.5
CERTIFICATION
I, Anne S. Smith, certify that:
1.
I have reviewed this report on Form 10-Q of Southern California Gas Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
May 2, 2013
/S/ Anne S. Smith |
Anne S. Smith |
Chief Executive Officer |
EXHIBIT 31.6
CERTIFICATION
I, Robert M. Schlax, certify that:
1.
I have reviewed this report on Form 10-Q of Southern California Gas Company;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a)-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
May 2, 2013
/S/ Robert M. Schlax |
Robert M. Schlax |
Chief Financial Officer |
Exhibit 32.1
Statement of Chief Executive Officer
Pursuant to 18 U.S.C. Sec 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of Sempra Energy (the "Company") certifies that:
(i)
the Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission for the quarter ended March 31, 2013 (the "Quarterly Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)
the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 2, 2013
/S/ Debra L. Reed |
Debra L. Reed |
Chief Executive Officer |
Exhibit 32.2
Statement of Chief Financial Officer
Pursuant to 18 U.S.C. Sec 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Financial Officer of Sempra Energy (the "Company") certifies that:
(i)
the Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission for the quarter ended March 31, 2013 (the "Quarterly Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)
the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 2, 2013
Exhibit 32.3
Statement of Chief Executive Officer
Pursuant to 18 U.S.C. Sec 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of San Diego Gas & Electric Company (the "Company") certifies that:
(i)
the Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission for the quarter ended March 31, 2013 (the "Quarterly Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)
the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 2, 2013
/S/ Jessie J. Knight, Jr. |
Jessie J. Knight, Jr. |
Chief Executive Officer |
Exhibit 32.4
Statement of Chief Financial Officer
Pursuant to 18 U.S.C. Sec 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Financial Officer of San Diego Gas & Electric Company (the "Company") certifies that:
(i)
the Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission for the quarter ended March 31, 2013 (the "Quarterly Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)
the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 2, 2013
/S/ Robert M. Schlax |
Robert M. Schlax |
Chief Financial Officer |
Exhibit 32.5
Statement of Chief Executive Officer
Pursuant to 18 U.S.C. Sec 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of Southern California Gas Company (the "Company") certifies that:
(i)
the Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission for the quarter ended March 31, 2013 (the "Quarterly Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)
the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 2, 2013
/S/ Anne S. Smith |
Anne S. Smith |
Chief Executive Officer |
Exhibit 32.6
Statement of Chief Financial Officer
Pursuant to 18 U.S.C. Sec 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Financial Officer of Southern California Gas Company (the "Company") certifies that:
(i)
the Quarterly Report on Form 10-Q of the Company filed with the Securities and Exchange Commission for the quarter ended March 31, 2013 (the "Quarterly Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii)
the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
May 2, 2013
/S/ Robert M. Schlax |
Robert M. Schlax |
Chief Financial Officer |