Pricing Agreement
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MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
SALOMON SMITH BARNEY INC.
As Representatives of the several
Underwriters named in Schedule I hereto,
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
April 24, 2002
Ladies and Gentlemen:
Sempra Energy, a California corporation (the "Company"), proposes, subject
to the terms and conditions stated herein and in the Purchase Agreement, dated
April 24, 2002 (the "Purchase Agreement") between the Company on the one hand
and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon Smith Barney
Inc. on the other hand, to issue and sell to the Underwriters named in Schedule
I hereto (the "Underwriters") the Securities specified in Schedule II hereto
(the "Designated Securities" consisting of the Firm Designated Securities and
the Optional Designated Securities the Underwriters may elect to purchase). Each
of the provisions of the Purchase Agreement is incorporated herein by reference
in its entirety, and shall be deemed to be a part of this Agreement to the same
extent as if such provisions had been set forth in full herein; and each of the
representations and warranties set forth therein shall be deemed to have been
made at and as of the date of this Pricing Agreement, except that each
representation and warranty which refers to the Prospectus in Section 2 of the
Purchase Agreement shall be deemed to be a representation and warranty as of the
date of the Purchase Agreement in relation to the Prospectus (as therein
defined), and also a representation and warranty as of the date of this Pricing
Agreement in relation to the Prospectus as amended or supplemented relating to
the Designated Securities which are the subject of this Pricing Agreement. Each
reference to the Representatives herein and in the provisions of the Purchase
Agreement so incorporated by reference shall be deemed to refer to you. Unless
otherwise defined herein, terms defined in the Purchase Agreement are used
herein as therein defined. The Representatives designated to act on behalf of
the Representatives and on behalf of each of the Underwriters of the Designated
Securities pursuant to Section 12 of the Purchase Agreement and the address of
the Representatives referred to in such Section 12 are set forth at the end of
Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the Purchase
Agreement incorporated herein by reference, (a) the Company agrees to issue and
sell to each of the Underwriters, and each of the Underwriters agrees, severally
and not jointly, to purchase from the Company, at the time and place and at the
purchase price to the Underwriters set forth in Schedule II hereto, the number
of Firm Designated Securities set forth opposite the name of such Underwriter in
Schedule I hereto, and (b) in the event and to the extent that the Underwriters
shall exercise the election to purchase Optional Designated Securities, as
provided below, the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company at the purchase price to the Underwriters set forth in
Schedule II hereto that portion of the number of Optional Designated Securities
as to which such election shall have been exercised.
The Company hereby grants to the Underwriters the right to purchase at
their election up to the aggregate number of Optional Designated Securities set
forth in Schedule II hereto on the terms referred to in the paragraph above for
the sole purpose of covering over-allotments in the sale of the Firm Designated
Securities. Any such election to purchase Optional Designated Securities may be
exercised in whole or in part from time to time and may be exercised by written
notice from the Representatives to the Company given within a period of 30
calendar days after the date of this Pricing Agreement, setting forth the
aggregate number of Optional Designated Securities to be purchased and the date
on which such Optional Designated Securities are to be delivered, as determined
by the Representatives, but in no event earlier than the First Time of Delivery
or, unless the Representatives and the Company otherwise agree in writing, no
earlier than ten or later than ten business days after the date of such notice.
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and for each of the Representatives plus one
for each counsel counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Purchase Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the
Underwriters, on the one hand, and the Company, on the other hand. It is
understood that your acceptance of this letter on behalf of each of the
Underwriters is or will be pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on the part of the
Representatives as to the authority of the signers thereof.
Very truly yours,
Sempra Energy
By: /s/ Frank H. Ault
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Name: Frank H. Ault
Title: Sr. Vice President and Controller
Accepted as of the date hereof:
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Karl Newlin
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Authorized Signatory
Salomon Smith Barney Inc.
By: /s/ Arthur H. Tildesley
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Name: Arthur H. Tildesley
Title: Managing Director
SCHEDULE I
Number of Firm
Designated Securities
Underwriter to be Purchased
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... 7,920,000
Salomon Smith Barney Inc........................ 7,920,000
Goldman, Sachs & Co............................. 1,540,000
Morgan Stanley & Co. Incorporated............... 1,540,000
ABN AMRO Rothschild LLC......................... 308,000
A.G. Edwards & Sons, Inc........................ 308,000
Banc One Capital Markets, Inc................... 308,000
Credit Lyonnais Securities (USA) Inc............ 308,000
Jefferies & Company, Inc........................ 308,000
J.P. Morgan Securities Inc...................... 308,000
Mizuho International plc........................ 308,000
The Royal Bank of Scotland plc.................. 308,000
SG Cowen Securities Corporation................. 308,000
Tokyo-Mitsubishi International plc.............. 308,000
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Total...................................... 22,000,000
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Schedule I-1
SCHEDULE II
Title of Designated Securities:
Equity Units (Initially Consisting of Income Equity Units)
Aggregate Number of Firm Designated Securities:
22,000,000 Equity Units (Initially Consisting of Income Equity Units) with
a stated amount of $25.00 per Equity Unit
Aggregate Number of Optional Designated Securities that may be purchased by the
Underwriters:
2,000,000 Equity Units (Initially Consisting of Income Equity Units)
Price to Public:
$25.00 per Equity Unit, plus accrued interest and accumulated contract
adjustment payments from April 30, 2002, if settlement occurs after that
date
Purchase Price by Underwriters:
$24.25 per Equity Unit
Commission Payable to the Underwriters:
$0.75 per Equity Unit
Contract Adjustment Payments:
2.90% of the Stated Amount
Contract Adjustment Payment Dates:
February 17, May 17, August 17 and November 17 of each year, commencing
August 17, 2002
Title of the Notes:
5.60% Notes due May 17, 2007 to be issued pursuant to the Base Indenture
and Supplemental Indenture referenced below
Aggregate principal amount of Notes:
$550,000,000 (or $600,000,000 if the over-allotment option is exercised in
full by the Underwriters)
Schedule II-1
Aggregate principal amount of Notes included in each Income Equity Unit:
$25.00
Note Interest Rate Reset Date:
On or after May 17, 2005
Purchase Contract Agreement:
Purchase Contract Agreement to be dated as of April 30, 2002 (the "Purchase
Contract Agreement"), between the Company and U.S. Bank Trust National
Association, as purchase contract agent (the "Purchase Contract Agent")
Purchase Contract Settlement Date:
May 17, 2005
Settlement Rate:
0.8190 to 0.9992 (pursuant to provisions of the Purchase Contract
Agreement)
Pledge Agreement:
Pledge Agreement to be dated as of April 30, 2002 (the "Pledge Agreement")
among the Company, the Purchase Contract Agent and U.S. Bank Trust National
Association, as collateral agent (the "Collateral Agent")
Remarketing Agreement:
Remarketing Agreement (the "Remarketing Agreement"), to be entered into
among the Company, the Purchase Contract Agent and one or more nationally
recognized investment banking firms to be selected by the Company to act as
remarketing agent (the "Remarketing Agent")
Form of Designated Securities:
Book-entry only form represented by one or more global securities deposited
with The Depository Trust Company ("DTC") or its designated custodian, to
be made available for checking by the Representatives at least twenty-four
hours prior to the Time of Delivery at the office of DTC.
Specified funds for payment of purchase price:
Federal (same day) funds
Time of Delivery:
10:00 a.m. (New York City time), April 30, 2002
Schedule II-2
Indenture:
Indenture dated February 23, 2000 (the "Base Indenture"), between the
Company and U.S. Bank Trust National Association, as Trustee
Supplemental Indenture dated April 30, 2002 (the "Supplemental Indenture"),
between the Company and U.S. Bank Trust National Association, as Trustee
Collectively, the Base Indenture and the Supplemental Indenture are
referred to as the "Indenture" in the Purchase Agreement
Maturity of Notes:
May 17, 2007
Interest Rate:
5.60% per year
Interest Payment Dates:
February 17, May 17, August 17 and November 17 of each year, commencing
August 17, 2002
Redemption Provisions:
The Notes are redeemable at the Company's option, in whole but not in part,
upon the occurrence and continuation of a tax event under the circumstances
set forth in the Supplemental Indenture
Closing location for delivery of Designated Securities:
Latham & Watkins
633 West Fifth Street
Los Angeles, California 90071
Names and addresses of Representatives:
Merrill Lynch, Pierce, Fenner & Smith Salomon Smith Barney Inc.
Incorporated 388 Greenwich Street
North Tower New York, New York 10013
World Financial Center
New York, New York 10281-1209
Address for Notices, etc.:
Merrill Lynch, Pierce, Fenner & Smith Salomon Smith Barney Inc.
Incorporated 388 Greenwich Street
Schedule II-3
North Tower New York, New York 10013
World Financial Center Attention: Syndicate Operations
New York, New York 10281-1209
Attention: Syndicate Operations
Schedule II-4