ENOVA CORPORATION
EMPLOYMENT AGREEMENT
This Agreement is made as of the 18th day of September, 1996,
between Enova Corporation, a California corporation (hereinafter the
"Company"), and Stephen L. Baum, President and Chief Executive Officer of the
Company (hereinafter "Officer").
The Company desires to retain the services of Officer and Officer
is willing to enter into this Agreement for such periods and upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
agreements hereinafter set forth, the parties agree as follows:
A. Position
1. The Company hereby employs Officer and Officer accepts
employment with the Company during the Term of Employment as set forth in
Section B of this Agreement to perform, at the direction of the Board of
Directors, the duties of Chief Executive Officer of the Company including, but
not limited to, directing the overall business, affairs and operations of the
Company, through its officers, all of whom, except for the Chairman, shall
report, directly or indirectly, to Officer, for the compensation and upon the
terms and conditions hereinafter provided.
2. During the Term of Employment, Officer will:
(a) Serve the Company well and faithfully in conformity with the
direction of the Board of Directors of the Company;
(b) Devote his entire time, effort and attention to the business
of the Company and its subsidiaries. Officer shall not personally engage in
any other business
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activity for gain or profit. Officer may invest his assets in other companies
so long as such investments do not require Officer's services or active
management; and
(c) Do nothing inconsistent with his responsibilities, duties,
and obligations to the Company, as defined by the Board of Directors.
B. Term of Employment
1. Subject to the applicable provisions of this Section B and
Sections D and E hereof, Officer's Term of Employment, as this phrase is used
throughout this Agreement, shall be for an initial period of two (2) years
beginning September 18, 1996. The Term of Employment shall be automatically
extended for a two (2) year period on September 18, 1998 and on each even
numbered anniversary thereof, unless it shall be terminated as set forth
herein.
2. Notwithstanding the foregoing, the Term of Employment shall
terminate upon the occurrence of one or more of the following events:
(a) The passage of two (2) years from the giving of written
notice of termination to Officer by the Board of Directors;
(b) The death of Officer;
(c) The "permanent disability" of Officer as defined in the
Company's Salary Continuation Plan (long-term disability insurance plan);
(d) A termination pursuant to Section D or E; and
(e) The dissolution, liquidation or winding-up of the Company;
and
(f) The retirement of Officer.
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C. Compensation and Benefits
1. Officer will be compensated for his services to the Company
as follows:
(a) During the Term of Employment, Officer will receive a base
salary for his services at the annual rate of not less than four hundred
ninety-five thousand ($495,000.00) dollars, or such greater amount as may from
time to time be determined by the Board of Directors of the Company (the "Base
Salary"), which amount will be paid in accordance with the Company's normal
payroll practices;
(b) In addition to the Base Salary, Officer will be entitled to
participate in the Company's Executive Incentive Plan, any other annual bonus
plan, the Savings Plan (including the 401(k) option), the 1986 Long Term
Incentive Plan and any other Company long-term incentive plan;
(c) Officer will be entitled to participate fully in the
Company's Supplemental Executive Retirement Plan ("SERP") and the Pension Plan
and any modification thereof or successor plan thereto at not less than his
current entitlement, together with any improvements thereto; provided however,
that Officer shall have the benefits provided in Section F in lieu of the
benefits provided for in the SERP pursuant to the change in control provisions
thereof.
(d) Officer will be entitled to participate in any deferred
compensation plans which have been or will be offered to any other officers of
the Company and in all other fringe benefits, including, but not limited to,
life and health insurance, Company car
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and executive perquisites in accordance with the Company's standard policy or
as more favorably determined by the Board of Directors;
(e) Officer shall have the benefits described in Section F in
lieu of any rights under the Company's Executive Severance Allowance Plan; and
(f) Officer will receive prompt reimbursement for all business-
related expenses substantiated in accordance with Company policy, which shall
for Officer be no less restrictive than existing at the date of this
Agreement.
2. Wherever referred to in this Agreement, all benefit or
compensation plans, programs or policies of the "Company" shall be construed
so as to refer to the appropriate plan, program or policy that is sponsored,
maintained or contributed to by either the Company or San Diego Gas & Electric
Company, a California corporation and a subsidiary of Enova, as the case may
be.
D. Right to Terminate by the Company
1. The Company, acting by a vote of its Board of Directors as
provided in (c) below, will have the right to terminate the Term of Employment
for cause as set forth in (a) and (b) below:
(a) The willful, substantial, continued, and unjustified refusal
of Officer to perform the duties required of him by this Agreement to the
extent of his ability to do so, provided Officer has not first given notice of
termination for "good cause" as set forth in Section E, paragraph 2, below; or
(b) The willful engaging by Officer in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise.
For purposes of this
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paragraph, no act, or failure to act, on Officer's part shall be deemed
"willful" unless done, or omitted to be done, by Officer not in good faith and
without reasonable belief that Officer's action or omission was in the best
interests of the Company.
(c) Notwithstanding the foregoing, Officer shall not be deemed
to have been terminated for cause unless and until there shall have been
delivered to Officer a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the
Board of Directors at a meeting of the Board (after reasonable notice to
Officer and an opportunity for Officer, together with Officer's counsel, to be
heard before the Board), finding that, in the good faith opinion of the Board,
Officer was guilty of engaging in such conduct.
2. The Company, acting by majority vote of its Board of
Directors, will have the right to terminate the Term of Employment without
cause upon thirty (30) days' written notice to Officer.
3. Upon termination of Officer under Section D, paragraph 1 or
upon notice of termination under Section D, paragraph 2, the Company may
require Officer to vacate the Company premises immediately and surrender all
access thereto, which requirements shall not prejudice any rights of Officer
under this Agreement.
E. Right to Termination by Officer
1. Officer may terminate the Term of Employment without cause
upon not less than thirty (30) days' written notice to the Company.
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2. Officer may terminate the Term of Employment upon the
occurrence without Officer's consent of one of the following events, which
events constitute "good cause" for Officer to terminate his employment:
(a) The Company violates any provision of Section C of this
Agreement;
(b) An adverse and significant change in position, duties,
responsibilities, or status within the Company, including the failure to be
nominated to the Board of Directors, the failure to be elected to the Board of
Directors or the failure to be elected Chief Executive Officer; or
(c) A change in Officer's normal business location to a point
away from the Company's main headquarters. Such voluntary termination for
"good cause" shall be effective as of the last day of the month of Officer's
giving of written notice to the Company.
F. Rights of Officer upon Termination of Term of Employment
1. Termination pursuant to Section B, paragraphs 2(a), (b), (c)
or (f), or Section D, paragraphs 1(a) or (b) or Section E, paragraph 1, will
result in benefits through the last day of the Term of Employment in
accordance with the terms hereof and, thereafter, no benefits in addition to
those to which Officer would be entitled pursuant to any then-existing Company
benefit plan, incentive plan or agreement.
2. Termination pursuant to Section B, paragraph 2(e) or Section
D, paragraph 2 or Section E, paragraph 2(a), (b) or (c), will result in the
following benefits becoming payable to Officer:
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(a) Two (2) years' Base Salary paid in a lump sum to be
determined by annualizing the highest monthly Base Salary paid at any time
during the Term of Employment;
(b) A bonus equivalent to two (2) times the average of the three
years' highest gross bonus awards, not necessarily consecutive, paid by the
Company to Officer in the previous five (5) years, payment to be made upon
execution by Officer of a customary release of claims in favor of the Company;
(c) Immediate vesting and/or the immediate ability to exercise
any rights and/or immediate removal of all restrictions on any 1986 Long Term
Incentive Plan award or other long or short term incentive award already
granted at the time of termination, and notwithstanding any conflicting
provision in such plan, each option or award granted to Officer shall remain
outstanding for three (3) years from the date of Officer's termination;
(d) Continuation of health and life insurance benefits and other
existing benefit plans for a period of two (2) years; and
(e) Two (2) years of additional age and service credit for
purposes of calculation of retirement benefits under the SERP; provided,
however, that there shall be no reduction under the SERP for early retirement
as set forth in Paragraph 4.a.ii, of the SERP, except for the early retirement
reduction factor as determined in accordance with the table in Section 5.4 of
the San Diego Gas & Electric Pension Plan, as adopted by the Company (the
"Pension Plan"); and provided further, that Officer's termination shall be a
"Qualifying Termination" as defined in the Split Dollar Life Insurance
Agreement entered into between the Company and Officer. The Company shall
also take such steps, including the payment
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of additional premiums, as may be necessary so that cash value of the policy
as of the date of termination shall reflect the additional two (2) years of
age and service credit set forth above.
3. Termination following a Change of Control as defined in
Section 2 of the Amended 1986 Long Term Incentive Plan ("Change of Control")
and pursuant to Section B, paragraph 2(e) or Section D, paragraph 2 or Section
E, paragraph 2(a), (b) or (c), will result in the following benefits to
Officer:
(a) Two (2) years Base Salary paid in a lump sum to be
determined by annualizing the highest monthly Base salary paid at any time
during the Term of Employment;
(b) A bonus equivalent to two (2) times the average of the three
years' highest gross bonus awards, not necessarily consecutive, paid by the
Company to Officer in the previous five (5) years;
(c) Immediate vesting and/or the immediate ability to exercise
any rights and/or immediate removal of all restrictions on any l986 Long Term
Incentive Plan award or other long or short term incentive award already
granted at the time of termination; and notwithstanding any conflicting
provision in such plan, each option or award held by the Officer remaining
outstanding until the expiration of its term;
(d) Continuation health and life insurance benefits and other
existing benefit plans until Officer reaches normal retirement age under the
Pension Plan and thereafter to the same extent as an Officer retiring at
normal retirement age under the Pension Plan;
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(e) A lump sum payment of benefits under the SERP as described
in paragraph 2.c of the SERP, less the value calculated consistently with
paragraph 4.b. of the SERP of Officer's entitlement under the Pension Plan.
Such benefit shall be calculated and paid without regard to the limitation
described in the SERP relating to Section 280G of the Internal Revenue Code of
l986, as amended (the "Code"). The Actuarial Present Value of the benefit
shall be determined with the credit to Officer of two (2) years of additional
age; and
(f) Termination pursuant to this Section F, paragraph 3 shall be
a "Qualifying Termination" as defined in the Split Dollar Life Insurance
Agreement entered into between the Company and Officer.
4. In the event that the payments provided for under Section F,
paragraph 3 or any portion of the payments received in the event of a Change
of Control will be subject to the excise tax imposed by Section 4999 of the
Code, the Company shall pay Officer on or before the thirty (30) calendar days
following the date of termination, an additional amount such that the net
amount retained by the Officer will be the same as if no excise tax were
imposed. In the event that any payment made pursuant to Section F, paragraph
2 of this Agreement becomes subject to the excise tax referred to above as a
result of a subsequent Change of Control, Company shall pay Officer on or
before thirty (30) calendar days prior to the date such excise tax would be
payable, an additional amount such that the net amount retained by the Officer
is the same as if no excise tax were imposed. The Employer's auditors will
complete all calculations for purposes of determining the termination payments
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subject to section 4999 of the Code and any additional amount required to be
paid to the Officer because of Section 4999.
5. Any lump sum payment or other payment to be made
hereunder will be paid to Officer on the date the Term of Employment ends.
Payment will be by certified check to the order of Officer. Late payments
will bear interest at the prime rate as published from time to time by
Citibank, New York, compounded quarterly, and payable when the lump sum due is
paid.
6. In the event of the retirement of Officer, this
Agreement shall terminate on the date of Officer's retirement and Officer
shall be entitled to any and all retirement benefits for which he is eligible.
G. Covenant Not to Compete
During the Term of Employment and for one (1) year thereafter,
Officer shall not become an officer, employee, agent, partner, or director of
any business enterprise in the western United States in substantial direct
competition with the Company or with any subsidiary of the Company, as the
business of the Company may be constituted at the time of termination of
employment.
H. Confidentiality
All information regarding the business and affairs of the Company
developed or acquired by, or furnished to, Officer while employed or
associated with the Company, which is not generally available to the public,
is acknowledged to be confidential information and the exclusive property of
the Company. During and after such employment, Officer agrees that, subject
to applicable law, he will not, directly or indirectly, divulge in any
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manner, use, or cause or suffer to be used for any purpose any such
information in competition with, or contrary to, the interests of the Company.
I. Notices
All notices under this Agreement will be in writing and sent to
Officer at 7767 Ludington Place, La Jolla, California 92037, and to the
Company at P.O. Box 129400, San Diego, California 92112-9400. Notice will be
deemed to be given when sent by ordinary mail.
J. Prior Agreements
This Agreement supersedes and replaces all prior agreements of
employment between the parties.
K. Attorney's Fees
If, after any "change in control" as defined in the Company's 1986
Long Term Incentive Plan, it becomes necessary for Officer to commence or
become a party to litigation for the purposes of enforcing any rights arising
under this Agreement, Officer shall be entitled to reimbursement from the
Company for all legal fees, costs, and expenses incurred in connection with
any such litigation; provided that any claim or action initiated by Officer in
good faith relating to this Agreement shall have been made or brought after
reasonable inquiry and shall be well grounded in fact and warranted by
existing law or a good faith argument for extension, modification or reversal
of existing law, and that it is not brought for any improper purposes such as
to harass or to cause unnecessary delay or needless increase in the cost of
litigation.
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L. Successors and Assigns
The rights and obligations of the Company under this Agreement
shall enure to the benefit of and shall be binding upon the successors and
assigns of the Company including successors created by mergers, acquisitions,
reorganizations, or consolidations. Officer shall have the right to assign
the benefits accruing to him under this Agreement to the Stephen L. Baum and
Brenda Baker Family Trust UTD March 14, l995, and any successor trust thereto
M. Severability
If any of the terms or conditions of this Agreement shall be
declared void or unenforceable by any court or administrative body of
competent jurisdiction, such term or condition shall be deemed severable from
the remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
N. Construction
This Agreement shall be construed under the laws of the State of
California. Section headings are for convenience only and shall not be
considered a part of the terms and conditions of the Agreement.
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IN WITNESS WHEREOF, ENOVA CORPORATION has caused this Agreement to
be executed by a duly authorized officer of the Company, and Officer has
agreed to the Agreement's terms and conditions this 18th day of September,
1996.
ENOVA CORPORATION
A California Corporation
By:
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(Authorized Officer)
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(Title)
OFFICER
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As witnessed by:
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