These benefits include financial planning services, excess personal liability
insurance, and a charitable contribution matching program. Mr. Lane and Ms. Wagner also received an annual executive benefit program allowance of $20,000 and $30,000, respectively, which was available to cover
out-of-pocket
costs for health and welfare benefits as well as the cost of financial planning and excess personal liability benefits. Any unused allowance is paid out at
year-end.
None of these benefits includes a tax
gross-up
provision.
SEVERANCE AND CHANGE IN CONTROL ARRANGEMENTS
Our executive officers have severance pay agreements that include change in control features. The agreements do not contain excise tax
gross-up
provisions. Equity awards granted include a double trigger change in control provision. None of our officers has an employment agreement.
Why does the company provide severance agreements?
We believe that
severance agreements, which are a prevalent market practice, are effective in:
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attracting executives who are leaving an existing employer;
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mitigating legal issues upon a separation of employment; and
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retaining talent during uncertain times.
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By mitigating the adverse effects of potential job loss, severance agreements reinforce management continuity, objectivity and focus on shareholder value. This is particularly critical in actual or
potential change in control situations. Payments are not required when terminations are for cause.
What benefits do severance agreements
provide?
The severance agreements provide for cash payments and the continuation of certain other benefits for a limited
period when:
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the company terminates an executives employment for reasons other than cause, or
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when the executive resigns for good reason.
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What does resignation for good reason mean?
A resignation for
good reason may occur if there is an adverse change in scope of duties or in compensation and benefit opportunities and, following a change in control of Sempra Energy, changes in employment location.
These provisions provide safeguards against arbitrary actions that effectively force an executive to resign. In order to receive some of
the benefits in the agreement, the executive must comply with contractual confidentiality,
non-solicitation
and
non-disparagement
obligations.
Do the severance agreements for the named executive officers provide for a tax
gross-up
to offset any taxes
incurred by the executive as a result of the severance payment?
The severance agreements do not contain a tax
gross-up
provision.
What happens to outstanding equity awards upon certain terminations or a change in
control?
Awards granted under the Sempra Energy 2013 Long-Term Incentive Plan are subject to a double trigger change in
control provision. Except as described below, awards do not automatically vest upon a change in control. Rather, vesting is only accelerated upon a termination of employment that meets certain conditions following a change in control of Sempra
Energy, except as described below.
Restricted stock unit awards issued to date under the Sempra Energy 2013 Long-Term
Incentive Plan provide for continuation following a change in control of Sempra Energy through the new companys assumption of the awards or the
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