Deferred Compensation Obligations of the Registrant:
The following description of the deferred compensation obligations of the Registrant under the Plan is qualified by reference to the Plan.
Capitalized terms used in this description and not otherwise defined in this registration statement shall have the respective meanings attributed to such terms in the Plan.
The deferred compensation obligations incurred by the Registrant under the Plan are unsecured general obligations of the Registrant, and will
rank equally with other unsecured and unsubordinated indebtedness of the Registrant, from time to time outstanding, payable from the general assets of the Registrant. Because the Registrant has subsidiaries, the right of the Registrant, and hence
the right of creditors of the Registrant (including Participants in the Plan), to participate in a distribution of the assets of a subsidiary upon its liquidation or reorganization or otherwise, necessarily is subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the Registrant itself as a creditor may be recognized.
Under the Plan,
the compensation committee (the Committee) of the Registrants Board of Directors may provide one or more Eligible Individuals with the opportunity to elect to defer a portion of certain compensation otherwise payable to such
individual consistent with the terms of the Plan. Participants may defer a specified percentage of their Base Salary and/or Bonus and, if permitted by the Committee, restricted stock unit gains. Participants who are Executive Officers do not need
Committee approval to defer restricted stock unit gains, and may also defer SERP Lump Sum benefits (retirement benefits payable under either the Sempra Energy Supplemental Executive Retirement Plan or the Sempra Energy Excess Cash Balance Plan),
subject to the terms of the Plan. Participants who are Directors may defer a specified percentage of their retainer payments and/or meeting and other fees (including phantom share amounts) under the Plan. Amounts deferred under the Plan at the
election of the Participants are referred to herein as Elective Deferrals. Under certain circumstances, the Registrant may provide that certain fees paid to Directors will automatically be deferred under the Plan.
The amounts deferred under the Plan represent an obligation of the Registrant to make payments to the Participant at some time in the future.
The amount that the Registrant is required to pay under the terms of the Plan is equal to the Elective Deferrals made by the Participant, as adjusted for hypothetical gains or losses attributable to the deemed investment of such Elective Deferrals
as chosen by the Participants from among designated hypothetical investment alternatives, all of which is reflected in the Participants Accounts (bookkeeping accounts maintained under the Plan for each of the Participants). In addition, the
Registrant makes matching contributions in an amount equal to the sum of (1) 50% of the first 6% of Base Salary and Bonus deferred, plus (2) 20% of the next 5% of Base Salary and Bonus deferred, reduced by (3) the amount of the
Registrant matching contributions that would have been made under the Sempra Energy Savings Plan (the 401(k) Plan) if the Participant had contributed 11% of his or her eligible compensation (or such other amount that represents the
maximum level of pre-tax salary reduction contributions with respect to which Registrant matching contributions would have been made on behalf of the Participant under the 401(k) Plan).
Generally, the hypothetical investment alternatives available currently under the Plan are as follows: (1) a measurement fund with a
deemed rate of return equal to the average of the daily Moodys Corporate Bond Yield Average Monthly Average Corporates for the relevant month plus the greater of (i) 10% of the Moodys Corporate Bond Yield Average
Monthly Average Corporates or (ii) 1% per annum (the Moodys Plus Rate), (2) the investment alternatives available for participant-directed investment in the 401(k) Plan (excluding the Stable Value Fund and any brokerage
account option), and (3) a measurement fund in which investment earnings and losses parallel the investment return on the Registrants Common Stock (the Common Stock Fund). The Committee shall select, from time to time and in
its sole discretion, the investment alternatives to be available under the Plan, and the Committee may designate a substitute investment alternative for a Participant, so long as the substitute investment alternative provides the Participant with an
investment opportunity reasonably comparable to the original investment alternative elected by the Participant, as determined by the Committee in its sole discretion.
Registrant matching contributions will be deferred into investment alternatives in the same proportion as the corresponding Elective Deferrals
that are elected by Participants. Participants may elect to have any Registrant matching contributions made in the Common Stock Fund treated as liquidated and re-invested in any of the other available
investment alternatives. Participants also may elect to have their Elective Deferrals that are invested in the Common Stock Fund treated as liquidated and re-invested in any of the other available investment
alternatives, or to have their Elective Deferrals that are invested in any of the other available investment alternatives treated as transferred to and re-invested in the Common Stock Fund, except that
Elective Deferrals of restricted stock units gains may only be invested in the Common Stock Fund and may not be moved to any other investment alternative.
Employees are immediately vested in all Elective Deferrals and all Registrant matching contributions (and all income and gain attributable
thereto) made to their Accounts, except that Elective Deferrals of restricted stock unit gains and phantom share amounts are subject to the vesting conditions applicable to the underlying equity awards.
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