Item 1.01.
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Entry into a Material Definitive Agreement.
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On September 18, 2018, Sempra Energy (the
Company
) entered into a cooperation agreement (the
Agreement
) with Elliott
Associates, L.P. and Elliott International, L.P. (together,
Elliott
), Bluescape Resources Company LLC (
Bluescape
) and Cove Key Management, LP (together with Elliott and Bluescape, each an
Investor
and collectively, the
Investors
).
In connection with the Agreement, the Company and the Investors have
worked cooperatively together to identify a discrete list of final director candidates (each, an
Approved Candidate
) and expect to work together so that the Company can announce and appoint two new directors to the board of
directors of the Company (the
Board
) in the coming weeks that are mutually agreed between the Company and the Investors. In furtherance of the foregoing, under the Agreement, the Company agreed to: (i) at the time that the
Board appoints the first of the New Directors (as defined below) to the Board, increase the size of the Board from 14 to 16 directors to create two Board vacancies, (ii) mutually agree with the Investors on two individuals for appointment to
the Board and appoint such directors (each, a
New Director
and together the
New Directors
) to the two Board vacancies, (iii) (A) nominate the New Directors as directors of the Company,
(B) recommend that the common stock shareholders vote to elect the New Directors to the Board and (C) use its reasonable best efforts (including the solicitation of proxies) to obtain the election of the New Directors to the Board, at the
2019 annual meeting of holders of the Companys common stock (the
2019 Annual Meeting
) and, if the Cooperation Period (as defined below) under the Agreement is extended to the Outside Expiration Time (as defined below), at
the 2020 annual meeting of holders of the Companys common stock, provided that each New Director continues to meet certain qualification requirements and (iv) limit the size of the Board to no more than 15 directors from the conclusion of
the 2019 Annual Meeting through the end of the Cooperation Period under the Agreement. The Agreement acknowledges that Debra L. Reed will retire from the Board, as previously announced, effective as of December 1, 2018. In addition, the Company
agreed that William G. Ouchi, Ph.D., will not be nominated to stand for
re-election
as a director at the 2019 Annual Meeting, which is in accordance with the Companys policy that directors should not
stand for
re-election
after having attained age 75.
The Company also agreed to rename the LNG Construction and
Technology Committee as the LNG and Business Development Committee (the
Committee
) and to amend the charter of the Committee such that the Committees mandate will be to (i) work with management and the Board
to conduct a comprehensive business review of the Company (the
Business Review
), which will be presided over by the chair of the Committee, (ii) review and analyze issues pertaining to the Business Review, subject to the
direction of the Board, (iii) oversee the management and resolution of issues relating to the Business Review, subject to the direction of the Board and (iv) report to the Board the results of the Business Review and the corresponding
formal recommendations of the Committee. The Committees initial membership will consist of the Committees three prior members, William C. Rusnack, James C. Yardley, and Alan L. Boeckmann. Upon the appointment of a New Director to the
Board, the Board will take all necessary actions to appoint the New Director to the Committee. Mr. Boeckmann will continue to be the chair of the Committee.
The Agreement provides that at any meeting of holders of the Companys common stock during the Cooperation Period, each of the Investors will vote all
shares of common stock of the Company that it or certain of its affiliates have the right to vote in favor of the election of directors nominated and recommended by the Board for election and in accordance with the recommendations of the Board
except with respect to certain extraordinary transactions.
Under the Agreement, the Investors have agreed to certain customary standstill and mutual
non-disparagement
restrictions until December 31, 2019, which is subject to extension until September 30, 2020 (the
Outside Expiration Time
) under certain circumstances (such period as
it may be extended, the
Cooperation Period
). The Investors agree that during the Cooperation Period they will not comment publicly on the Board or the Companys management, strategy, operations or financial results or any
transactions involving the Company or any of its subsidiaries, other than with respect to certain specified transactions.
A copy of the Agreement is
filed with this Form
8-K
and attached hereto as Exhibit 10.1 and incorporated by reference herein. The foregoing description of the Agreement is qualified in its entirety by reference to the full text of the
Agreement.