Exhibit 10.17
AMENDED
AND RESTATED
SEMPRA ENERGY
SEVERANCE PAY AGREEMENT
THIS AGREEMENT (this “ Agreement ”), dated as of
November 4, 2008, is made by and between SEMPRA ENERGY, a
California corporation (“ Sempra Energy ”), and
_____________ (the “ Executive ”).
WHEREAS , Sempra Energy and the Executive entered into
the Sempra Energy Severance Pay Agreement, dated as of ____________
(the “ Prior Agreement ”); and
WHEREAS , Sempra Energy and the Executive desire to
amend and restate the Prior Agreement to conform to the
requirements of Section 409A of the Code (as defined below) and the
Treasury Regulations thereunder, or certain exemptions from Section
409A of the Code; and
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 _____________________;
and
WHEREAS , the Board of Directors of Sempra Energy (the
“ Board ”) has authorized this amendment and
restatement of the Prior 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 9(b) hereof.
“ Act ” has the
meaning assigned thereto in Section 2 hereof.
“ Additional Post-Change in
Control Severance Payment ” has the meaning assigned
thereto in Section 6(a) hereof.
“ Affiliate ” has the
meaning set forth in Rule 12b-2 promulgated under the Exchange
Act.
“ Annual Base Salary ”
means the Executive’s 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
during all or any portion of one or two of the Bonus Fiscal Years
(but not three 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 all or any portion of which the
Executive was employed by the Company; and, provided,
further , that, if the Executive was not employed by the
Company during all or any portion of any of the Bonus Fiscal Years,
“ Average Annual Bonus ” means zero.
“ Beneficial Owner ”
has the meaning set forth in Rule 13d-3 promulgated under the
Exchange Act.
“ Cause ” means:
(a)
Prior to a Change in Control, (i) the
willful failure by the Executive to substantially perform the
Executive’s duties with the Company (other than any
such failure resulting from the Executive’s incapacity
due to physical or mental illness, (ii) the grossly negligent
performance of such obligations referenced in clause (i) of this
definition, (iii) the Executive’s gross
insubordination; and/or (iv) the Executive’s commission
of one or more acts of moral turpitude that constitute a violation
of applicable law (including but not limited to a felony) which
have or result in an adverse effect on the Company, monetarily or
otherwise, or one or more significant acts of dishonesty. For
purposes of clause (i) of this subsection (a), no act, or failure
to act, on the Executive’s part shall be deemed “
willful ” unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief
that the Executive’s act, or failure to act, was in the
best 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 Executive’s duties with the
Company (other than any such failure resulting from the
Executive’s incapacity due to physical or mental
illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the
Executive pursuant to Section 3 hereof) and/or (ii) the
Executive’s commission of one or more acts of moral
turpitude that constitute a violation of applicable law (including
but not limited to a felony) which have or result in an adverse
effect on the Company, monetarily or otherwise, or one or more
significant acts of dishonesty. For purposes of clause (i) of
this subsection (b), no act, or failure to act, on the
Executive’s part shall be deemed “ willful
” unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that the
Executive’s act, or failure to act, was in the best
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
Executive’s 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,
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 Energy’s 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 Period ”
has the meaning assigned thereto in Section 14(e)
hereof.
“ Date of Termination
” has the meaning assigned thereto in Section 3(b)
hereof.
“ Deferred Compensation Plan
” has the meaning assigned thereto in Section 5(f)
hereof.
“ Disability ” has the
meaning set forth in the Company’s long-term disability plan
or its successor; provided , however , that the Board
may not terminate the Executive’s 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.
“ Effective Date ”
means _________________.
“ Excise Tax ” has the
meaning assigned thereto in Section 9(a) hereof.
“ Good Reason ”
means:
(e)
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 3
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
Executive’s 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 Executive’s
overall status within the Company;
(iii)
a material reduction by the Company in
the Executive’s 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 Executive’s 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
Executive’s 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 11 of this
Agreement requires it to provide; or
(viii)
the failure by Sempra Energy to comply
with any material provision of this Agreement.
(f)
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 3
hereof):
(i)
an adverse change in the
Executive’s 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
Executive’s 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
Executive’s 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 Executive’s residence and more than thirty (30)
miles from such Principal Location, or the Company’s
requiring the Executive to be based anywhere other than such
Principal Location (or permitted relocation thereof), or a
substantial increase in the Executive’s business travel
obligations outside of the Southern California area as of the
Effective Date other than any such increase that (A) arises in
connection with extraordinary business activities of the Company of
limited duration and (B) is understood not to be part of the
Executive’s regular duties with the Company;
(iv)
the failure by the Company to pay to the
Executive any portion of the Executive’s current
compensation and benefits or any portion of an installment of
deferred compensation under any deferred compensation program of
the Company within thirty (30) days of the date such compensation
is due;
(v)
any purported termination of the
Executive’s employment that is not effected pursuant to
a Notice of Termination satisfying the requirements of Section 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 11 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
Executive’s determination that an act or failure to act
constitutes Good Reason shall be presumed to be valid unless such
determination is deemed to be unreasonable by an arbitrator
pursuant to the procedure described in Section 13 hereof. The
Executive’s right to terminate the
Executive’s employment for Good Reason shall not be
affected by the Executive’s incapacity due to physical
or mental illness. The Executive’s continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good Reason
hereunder.
“ Gross-Up Payment ”
has the meaning assigned thereto in Section 9(a) hereof.
“ 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 Executive’s Separation from
Service by reason of a termination of employment by the Company
other than for Cause, death, or Disability, or (b) the
Executive’s Separation from Service by reason of
resignation of employment with the Company for Good Reason.
“ JAMS Rules ” has the
meaning assigned thereto in Section 13 hereof.
“ Notice of Termination
” has the meaning assigned thereto in Section 3(a)
hereof.
“ Payment ” has the
meaning assigned thereto in Section 9(a) hereof.
“ Payment in Lieu of Notice
” has the meaning assigned thereto in Section 3(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 Accrued
Obligations ” has the meaning assigned thereto in Section
6(a) hereof.
“ Post-Change in Control
Severance Payment ” has the meaning assigned thereto in
Section 6 hereof.
“ Pre-Change in Control Accrued
Obligations ” has the meaning assigned thereto in Section
5(a) hereof.
“ Pre-Change in Control
Severance Payment ” has the meaning assigned thereto in
Section 5 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.
“ Release ” has the
meaning assigned thereto in Section 14(d) 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 Additional
Post-Change in Control Severance Payment, (e) the Consulting
Payment, (f) the payment under Section 6(b) (but only to the extent
such payment or portion thereof is subject to Section 409A of the
Code), (g) the financial planning services and the related tax
gross up payments provided under Sections 5(e) and 6(f),
(h) the Gross-Up Payments under Section 9, and (i) the legal
fees and expenses reimbursed under Section 15.
“
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
”, with respect to the Executive (or another Service
Provider), means the Executive’s (or such Service
Provider’s) (a) termination of employment or (b) other
termination or reduction in services, provided that such
termination or reduction in clause (a) or (b) constitutes a
“separation from service,” as defined in Treasury
Regulation Section 1.409A-1(h), with respect to the Service
Recipient.
“ SERP ” has the
meaning assigned thereto in Section 6(b) hereof.
“
Service Provider ” means the Executive or any
other “service provider,” as defined in Treasury
Regulation Section 1.409A-1(f).
“
Service Recipient ,” with respect to the
Executive, means Sempra Energy (if the Executive is employed
by Sempra Energy), or the subsidiary of Sempra Energy employing the
Executive, whichever is applicable, and all persons considered part
of the “service recipient,” as defined in Treasury
Regulation Section 1.409A-1(g), as determined from time to time.
As provided in Treasury Regulation Section 1.409A-1(g), the
“ Service Recipient ” shall mean the person for
whom the services are performed and with respect to whom the
legally binding right to compensation arises, and all persons with
whom such person would be considered a single employer under
Section 414(b) or 414(c) of the Code.
“
Specified Employee ” means a Service Provider who, as
of the date of the Service Provider’s Separation from Service
is a “ Key Employee ” of the Service Recipient
any stock of which is publicly traded on an established securities
market or otherwise. For purposes of this definition, a
Service Provider is a “ Key Employee ” if the
Service Provider meets the requirements of Section 416(i)(1)(A)(i),
(ii) or (iii) of the Code (applied in accordance with the Treasury
Regulations thereunder and disregarding Section 416(i)(5) of the
Code) at any time during the Testing Year. If a Service
Provider is a “ Key Employee ” (as defined
above) as of a Specified Employee Identification Date, the Service
Provider shall be treated as “ Key Employee ”
for the entire twelve (12) month period beginning on the Specified
Employee Effective Date. For purposes of this definition, a
Service Provider’s compensation for a Testing Year shall mean
such Service Provider’s compensation, as determined under
Treasury Regulation Section 1.415(c)-2(a) (and applied as if the
Service Recipient were not using any safe harbor provided in
Treasury Regulation Section 1.415(c)-2(d), were not using any of
the elective special timing rules provided in Treasury Regulation
Section 1.415(c)-2(e), and were not using any of the elective
special rules provided in Treasury Regulation Section
1.415(c)-2(g)), from the Service Recipient for such Testing Year.
The “Specified Employees” shall be determined in
accordance with Section 409A(a)(2)(B)(i) of the Code and Treasury
Regulation Section 1.409A-1(i).
“
Specified Employee Effective Date ” means the first
day of the fourth month following the Specified Employee
Identification Date. The Specified Employee Effective Date
may be changed by Sempra Energy, in its discretion, in accordance
with Treasury Regulation Section 1.409A-1(i)(4).
“
Specified Employee Identification Date ”, for purposes
of Treasury Regulation Section 1.409A-1(i)(3), shall mean December
31. The “ Specified Employee Identification Date
” shall apply to all “nonqualified deferred
compensation plans” (as defined in Treasury Regulation
Section 1.409A-1(a)) of the Service Recipient and all affected
Service Providers. The “ Specified Employee
Identification Date ” may be changed by Sempra Energy, in
its discretion, in accordance with Treasury Regulation Section
1.409A-1(i)(3).
“
Testing Year ” shall mean the twelve (12) month period
ending on the Specified Employee Identification Date, as determined
from time to time.
“ Underpayment ” has
the meaning assigned thereto in Section 9(b) hereof.
For purposes of this Agreement,
references to any “ Treasury Regulation ” shall
mean such Treasury Regulation as in effect on the date
hereof.
Section 2.
Sarbanes-Oxley Act of 2002
. Notwithstanding anything herein
to the contrary, if the Company determines, in its good faith
judgment, that any provision of this Agreement is likely to be
interpreted as a personal loan prohibited by the Sarbanes-Oxley Act
of 2002 and the rules and regulations promulgated thereunder (the
“ Act ”), then such provision shall be modified
as necessary or appropriate so as to not violate the Act; and if
this cannot be accomplished, then the Company shall use its
reasonable efforts to provide the Executive with similar, but
lawful, substitute benefit(s) at a cost to the Company not to
significantly exceed the amount the Company would have otherwise
paid to provide such benefit(s) to the Executive. In
addition, if the Executive is required to forfeit or to make
any repayment of any compensation or benefit(s) to the Company
under the Act or any other law, such forfeiture or repayment shall
not constitute Good Reason.
Section 3.
Notice and Date of
Termination
.
(a)
Any termination of the
Executive’s 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 Executive’s 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 Executive’s
termination of employment with the Company (the “ Date of
Termination ”) shall be determined as follows:
(i) if the Executive has a Separation from Service
by reason of the Company terminating his or her employment, either
with or without Cause, 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 Executive’s Annual Base Salary in effect
on the Date of Termination), and (ii) if the basis for the
Executive’s Involuntary Termination is his resignation
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 determined by the Company within thirty (30) days after
the date of the Executive’s 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 10
hereof.
Section 4.
Termination from the Board
. Upon the termination of the
Executive’s employment for any reason, the
Executive’s membership on the Board, the board of
directors of any of the Company’s Affiliates, any committees
of the Board and any committees of the board of directors of any of
the Company’s Affiliates, if applicable, shall be
automatically terminated.
Section 5.
Severance Benefits upon Involuntary
Termination Prior to Change in Control
. Except as provided in Section 6
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 the greater of: (X) ____% of
the Executive’s Annual Base Salary as in effect on the Date
of Termination, and (Y) the Executive’s Annual Base Salary as
in effect on the Date of Termination, plus the Executive’s
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). Except as provided in Section 5(f), the
Pre-Change in Control Severance Payment and the payment under
Section 5(a) shall be paid on such date as is determined by the
Company within thirty (30) days after the date of the Involuntary
Termination; provided, however , that, if the
Executive is a Specified Employee on the date of the
Executive’s Involuntary Termination, the Pre-Change in
Control Severance Payment and the financial planning services and
the related tax gross up payments provided under Section 5(e) shall
be paid as provided in Section 10 hereof.
(a)
Accrued Obligations
. The Company shall pay the
Executive a lump sum amount in cash equal to the sum of (A)
the Executive’s Annual Base Salary through the Date of
Termination to the extent not 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. (The amounts specified in
clauses (A), (B), (C) and (D) shall be hereinafter referred to as
the “ Pre-Change in Control Accrued Obligations
”).
(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 ____ months following the date of the Involuntary
Termination (and an additional ____ 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 Company’s
benefit plans. Such benefits shall be provided in a manner
that complies with Treasury Regulation Section
1.409A-1(a)(5).
(d)
Outplacement Services
. The Executive shall receive
reasonable outplacement services, on an in-kind basis, suitable to
his position and directly related to the Executive’s
Involuntary Termination, for a period of ____ 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
____ 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
Executive’s 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 5 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 6.
Severance Benefits upon Involuntary
Termination in Connection with and after Change in
Control
. Notwithstanding the provisions of
Section 5 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 5 above, the
Company shall pay the Executive, in one lump sum cash
payment, an amount (the “ Post-Change in Control Severance
Payment ”) equal to ___ times the greater of: (X)
____% of the Executive’s Annual Base Salary as in
effect immediately prior to the Change in Control or the Date of
Termination, whichever is greater, and (Y) the Executive’s
Annual Base Salary as in effect immediately prior to the Change in
Control or on the Date of Termination, whichever is greater, plus
the Executive’s 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 (f). Except as provided in Sections
6(g) and 6(h), the Post-Change in Control Severance Payment and the
payments under Sections 6(a) and (b) shall be paid on such date as
is determined by the Company within thirty (30) days after the date
of the Involuntary Termination; provided, however , that, if
the Executive is a Specified Employee on the date of the
Executive’s Involuntary Termination, the Post-Change in
Control Severance Payment, the Additional Post-Change in Control
Severance Payment under Section 6(a)(E), the payment under Section
6(b) (but only to the extent such payment or portion thereof is
subject to Section 409A of the Code), and the financial planning
services and the related tax gross up payments provided under
Section 6(f) shall be paid as provided in Section 10
hereof.
(a)
Accrued Obligations
. The Company shall pay the
Executive a lump sum amount in cash equal to the sum of (A)
the Executive’s Annual Base Salary through the Date of
Termination to the extent not 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, (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, and (E) an amount (the
“ Additional Post-Change in Control Severance Payment
”) equal to: (i) the greater of: (X) ____% of the
Executive’s 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 Executive’s 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, in the case of each amount described in clause (A),
(B), (C) or (D) to the extent not theretofore paid. (The
amounts specified in clauses (A), (B), (C), (D) and (E) shall be
hereinafter referred to as the “ Post-Change in Control
Accrued Obligations ”).
(b)
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 6(b), 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 Executive’s Vesting
Factor with respect to the Supplemental Retirement Benefit shall be
100%. The Executive’s Supplemental Retirement Benefit
shall be calculated based on the Executive’s 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 Executive’s
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 Executive’s 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 Executive’s Supplemental Retirement Benefit shall
be determined in accordance with this Section 6(b), 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 6(b) shall be in full satisfaction of
any and all of the benefits payable to or on behalf of the
Executive under the SERP.
(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 ____ months following the date of Involuntary
Termination (and an additional ____ 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).
(e)
Outplacement Services
. The Executive shall receive
reasonable outplacement services, on an in-kind basis, suitable to
his position and directly related to the Executive’s
Involuntary Termination, for a period of ____ months following the
date of Involuntary Termination (but in no event beyond the last
day of the Executive’s second taxable year following
the Executive’s 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 Plan
