8-KLeadership Changes

SEMPRA 8-K Report, Executive Changes (Jun 27, 2012)

Filed June 27, 2012For Securities:SRESREA

Summary

Sempra Energy (SRE) filed an 8-K on June 26, 2012, to report a key executive appointment and a related severance agreement. Trevor Mihalik was appointed Controller and Chief Accounting Officer, effective July 14, 2012, succeeding Joseph A. Householder who will continue as Executive Vice President and CFO. Mr. Mihalik's compensation package includes a $325,000 annual salary, a $200,000 sign-on bonus, annual performance bonuses, long-term incentives, and relocation benefits. The filing also details a severance pay agreement for Mr. Mihalik, which is effective from his start date and has an initial three-year term with automatic extensions. The agreement outlines substantial severance benefits, including cash payments, continued health insurance, outplacement, and financial planning services, particularly in the event of an involuntary termination or a termination following a Change in Control. Notably, the severance package includes provisions for potential excise tax limitations and a "best pay" limitation.

Key Highlights

  • 1Appointment of Trevor Mihalik as Controller and Chief Accounting Officer, effective July 14, 2012.
  • 2Joseph A. Householder will cease serving as Chief Accounting Officer but will remain Executive Vice President and CFO.
  • 3Mr. Mihalik's compensation includes an annual salary of $325,000, a $200,000 sign-on bonus, target annual bonus of 50% of salary, and long-term incentive awards.
  • 4A severance pay agreement was approved for Mr. Mihalik, outlining benefits in case of involuntary termination or resignation for "good reason."
  • 5Severance benefits are enhanced if termination occurs on or within two years after a "Change in Control."
  • 6The severance agreement includes provisions for cash payments, health benefits continuation, outplacement services, and financial planning.
  • 7The agreement features a "best pay" limitation to manage potential excise taxes on severance payments.

Frequently Asked Questions

The company is appointing Trevor Mihalik as the new Controller and Chief Accounting Officer. Joseph A. Householder, who previously held the Chief Accounting Officer title, will continue in his roles as Executive Vice President and Chief Financial Officer. This change appears to be an internal realignment of responsibilities within the senior finance team.

Trevor Mihalik will receive an annual salary of $325,000, a $200,000 one-time cash bonus (subject to repayment if he voluntarily leaves within three years), an annual performance bonus with a target of 50% of his salary, and long-term incentive awards valued at $402,000 initially. He will also receive relocation, financial planning, and insurance benefits, as well as participation in broad-based employee benefit plans.

Mr. Mihalik has a severance pay agreement that provides benefits in the event of an involuntary termination (termination by the company without cause, death, or disability) or resignation for "good reason." Benefits include a lump-sum cash severance payment (proportional to salary and average annual bonus), continued health insurance, outplacement services, and financial planning. These benefits are significantly enhanced if the termination occurs on or within two years after a "Change in Control."

Yes, the severance agreement includes a "best pay" limitation. This provision aims to ensure that if severance payments trigger excise taxes, the payments will be reduced to the extent necessary to avoid such taxes, while still providing Mr. Mihalik with at least 105% of the after-tax amount he would have received if the taxes were paid. There is no excise tax "gross-up" provided.