Document:

Exhibit

Exhibit 10.1

BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE STATE OF CALIFORNIA

	
		
	Order Instituting Investigation on the Commission’s Own Motion into the Rates, Operations, Practices, Services and Facilities of Southern California Edison Company and San Diego Gas & Electric Company Associated with the San Onofre Nuclear Generating Station Units 2 and 3.
	Investigation 12-10-013 
(Filed October 25, 2012)

	And Related Matters.
	Application 13-01-016 
Application 13-03-005 
Application 13-03-013 
Application 13-03-014

SETTLEMENT AGREEMENT AMONG SOUTHERN CALIFORNIA EDISON COMPANY, SAN DIEGO GAS & ELECTRIC COMPANY, THE ALLIANCE FOR NUCLEAR RESPONSIBILITY, THE CALIFORNIA LARGE ENERGY CONSUMERS ASSOCIATION, CALIFORNIA STATE UNIVERSITY, CITIZENS OVERSIGHT DBA COALITION TO DECOMMISSION SAN ONOFRE, THE COALITION OF CALIFORNIA UTILITY EMPLOYEES, THE DIRECT ACCESS CUSTOMER COALITION, RUTH HENRICKS, THE OFFICE OF RATEPAYER ADVOCATES, THE UTILITY REFORM NETWORK, AND WOMEN’S ENERGY MATTERS 

Dated:  January 30, 2018

1

Exhibit 10.1

The parties to this Agreement are Southern California Edison Company (“SCE”), San Diego Gas & Electric Company (“SDG&E”), The Alliance for Nuclear Responsibility (“A4NR”), the California Large Energy Consumers Association (“CLECA”), California State University (“CSU”), Citizens Oversight dba Coalition to Decommission San Onofre (“Citizens Oversight”), the Coalition of California Utility Employees (“CUE”), the Direct Access Customer Coalition (“DACC”), Ruth Henricks, The Office of Ratepayer Advocates (“ORA”), The Utility Reform Network (“TURN”), and Women’s Energy Matters (“WEM”).  SCE and SDG&E are referred to herein as the “Utilities”; A4NR, CLECA, CSU, Citizens Oversight, CUE, DACC, Ruth Henricks, ORA, TURN, and WEM are referred to herein as “Intervenors”; and the parties collectively are referred to herein as the “Parties.”

The Parties agree to settle all claims, allegations, and liabilities in the Order Instituting Investigation Regarding San Onofre Nuclear Generating Station Units 2 and 3, I.12-10-013, and all proceedings consolidated with it (including A.13-01-016, A.13-03-005, A.13-03-013, and A.13-03-014) (collectively, the “OII”) on the following terms and conditions, which shall become effective only if the California Public Utilities Commission (“Commission”) approves this Agreement, as more fully described below.  

The Parties have entered into this Agreement as a compromise of disputed claims in order to minimize the time, expense, and uncertainty of further regulatory proceedings.  The Parties agree to the following terms and conditions as a complete and final resolution of all issues in the OII.  For the avoidance of doubt, this Agreement, if approved by the Commission, constitutes a complete and final resolution of all issues identified in the May 9, 2016, ruling of Commissioner Sandoval and Administrative Law Judge (“ALJ”) Bushey, the December 13, 2016, ruling of Commissioner Sandoval and ALJ Houck, and the October 10, 2017, and January 8, 2018, rulings of Commissioner Picker and ALJ Houck.

This Agreement constitutes the sole agreement among or between the settling Parties concerning the subject matter of this Agreement, except (1) SCE and SDG&E have entered into the Utility Shareholder Agreement (as defined below), and (2) SCE, Citizens Oversight, Ruth Henricks, and certain other parties have entered into the Federal Court Agreement (as defined below).

The Parties shall jointly submit this Agreement to the Commission for approval.
 I.  DEFINITIONS
		
	1.1.
	Capitalized terms not defined in this Agreement have the meanings defined in the 2014 Agreement.

		
	1.2.
	2014 Agreement:  SONGS OII Amended and Restated Settlement Agreement Between Southern California Edison Company, San Diego Gas & Electric Company, the Office of Ratepayer Advocates, The Utility Reform Network, Friends of the Earth, and the 

2

Exhibit 10.1

Coalition of California Utility Employees, dated September 23, 2014, approved in Commission Decision 14-11-040.
		
	1.3.
	AFR: The application for rehearing of Decision 14-11-040 filed by Ruth Henricks and the Coalition to Decommission San Onofre on December 18, 2014. 

		
	1.4.
	Agreement:  This document.

		
	1.5.
	Agreement Date:  The date by which this Agreement has been executed by all Parties.

		
	1.6.
	ALJ:  Administrative Law Judge.

		
	1.7.
	Approval Date:  The effective date of a Commission decision approving this Agreement.

		
	1.8.
	Cessation Date:  The date as of which the combined remaining balance of the SONGS regulatory assets of the Utilities equals $775 million (excluding deferred tax assets).  The Cessation Date is estimated to be December 19, 2017, assuming the Commission approves in the ERRA Proceeding SCE’s proposal to apply the DOE Proceeds to reduce SCE’s SONGS regulatory assets, in which case SCE’s SONGS regulatory assets will equal $624 million (excluding deferred tax assets) and SDG&E’s SONGS regulatory assets will equal $151 million.  In the event the Commission does not approve SCE’s proposal in the ERRA Proceeding to apply the DOE Proceeds to reduce SCE’s SONGS regulatory assets, the Cessation Date is estimated to be April 21, 2018, in which case SCE’s SONGS regulatory assets will equal $636 million (excluding deferred tax assets) and SDG&E’s SONGS regulatory assets will equal $139 million.

		
	1.9.
	CFBA: Either Utility’s Cost of Financing Balancing Account.  SCE’s CFBA was effective February 25, 2015, through Advice Letter 3169-E.  SDG&E’s CFBA was effective April 26, 2015, through Advice Letter 2718-E.

		
	1.10.
	Commission Approval:  A decision of the Commission approving this Agreement.

		
	1.11.
	DOE Proceeds: $71.555 million, representing a portion of the amounts that SCE received from the United States Department of Energy in settlement of the DOE Spent Fuel Litigation.

		
	1.12.
	DOE Spent Fuel Litigation:  Claims pursued by SCE on behalf of itself and the other SONGS owners against the United States Department of Energy regarding the agency’s failure to provide for a permanent storage facility for nuclear spent fuel produced by SONGS.

		
	1.13.
	ERRA Proceeding: Application 16-04-001, in which SCE seeks a Commission finding that its procurement-related and other operations for the record period January 1 through December 31, 2015, complied with its adopted procurement plan, and other relief, including application of the DOE Proceeds to reduce SCE's SONGS regulatory assets.

3

Exhibit 10.1

		
	1.14.
	Federal Court Agreement:  The agreement among SCE, Citizens Oversight, Ruth Henricks et al., dated January 30, 2018, to effectuate the dismissal with prejudice and conclusively resolve the actions styled as Citizens Oversight, Inc., et al. v. CPUC, et al., No 15-55762 (9th Cir. 2015) and Citizens Oversight, Inc., et al. v. California Public Utilities Commission, et al., No. 3:14-cv-02703 (S.D. Cal. 2014).

		
	1.15.
	Implementation Date:  The date on which the rate change resulting from this Agreement is implemented by the Utilities in accordance with Section 3.3 of this Agreement.  

		
	1.16.
	MNLMA: Either Utility’s Mitsubishi Net Litigation Memorandum Account.  

		
	1.17.
	NFCIMA: Either Utility’s Nuclear Fuel Cancellation Incentive Memorandum Account.

		
	1.18.
	NGBA: SDG&E’s Non-Fuel Generation Balancing Account.

		
	1.19.
	NNLMA: Either Utility’s NEIL Net Litigation Memorandum Account.

		
	1.20.
	Nuclear Decommissioning Trusts:  The trusts established by the Utilities and approved by the Commission pursuant to the Nuclear Facilities Decommissioning Act of 1985, Cal. Pub. Util. Code Sec. 8321 et seq.

		
	1.21.
	Nuclear Fuel: All assets to which the Utilities hold title containing uranium products designed to be used as fuel for a nuclear reactor, in whatever form, including U3O8, UF6, enriched uranium product, and conversion and enrichment services required to produce and sell those products.

		
	1.22.
	Overcollection Amount:  All SONGS Costs collected in rates on or after the Cessation Date and before the Implementation Date.

		
	1.23.
	PFMs: The petitions for modification of Decision 14-11-040 filed by A4NR on April 27, 2015 (as amended on May 26, 2015), and by ORA on August 11, 2015.

		
	1.24.
	Power Charge Indifference Adjustment (“PCIA”):  As stated in Commission Decision 16-09-044, a charge “assessed by a utility on departing load customers to cover generation costs incurred on that customer’s behalf before the customer decided to leave bundled service.” 

		
	1.25.
	Refund End Date:  The date of the Utility’s next scheduled rate change following the Implementation Date.  The Refund End Date will occur as soon as practical after the Approval Date.  If the Approval Date occurs prior to October 1, 2018, the Refund End Date will occur no later than January 1, 2019.

		
	1.26.
	SONGS:  San Onofre Nuclear Generating Station Units 2 and 3.

		
	1.27.
	SONGSOMA:  Either Utility’s SONGS Outage Memorandum Account.

4

Exhibit 10.1

		
	1.28.
	SONGS Costs:  Base Plant, M&S Investment, Nuclear Fuel Investment, and CWIP authorized to be recovered under the 2014 Agreement.

		
	1.29.
	SONGS DA Ratemaking Consensus Protocol:  The Direct Access Customer Ratemaking Consensus Protocol for SONGS Outage and Retirement, an agreement among SCE, SDG&E, CLECA, the Alliance for Retail Energy Markets, and DACC to ensure that the PCIA continues to achieve bundled customer indifference and that the impacts of the SONGS outages and retirement are borne by bundled and departing load customers equitably and symmetrically, as approved by the Commission in Decision 14-05-003.

		
	1.30.
	SONGS Regulatory Assets:

(a) For SCE, consistent with the manner in which SCE has previously reported to the Commission, SONGS Regulatory Assets are defined as the Net Book Value of Base Plant, CWIP, M&S Investment and Nuclear Fuel Investment, equal to $624 million as of December 19, 2017, assuming the Commission approves in the ERRA Proceeding SCE’s proposal to apply the DOE Proceeds to reduce SCE’s SONGS Regulatory Assets.
		
	(b)
	In the case of SDG&E, consistent with the manner in which SDG&E has previously reported to the Commission, SONGS Regulatory Assets are defined as the present value of the future revenues expected to be provided to recover the allowable cost of that abandoned plant and return on investment, if any, shall be reported as a separate new asset.  The discount rate used to compute the present value is SDG&E’s incremental borrowing rate.  As of December 19, 2017, SDG&E’s SONGS Regulatory Assets are equal to $151 million.

		
	1.31
	SONGS Revenue Requirement: The total amount of revenue required to recover SONGS Costs and associated income and property taxes (including the effect of deferred taxes), including a return on those investments and depreciation expenses determined in accordance with the 2014 Agreement.

		
	1.32.
	STAMA: Either Utility’s SONGS Technical Assistance Memorandum Account.  SCE’s STAMA was established on July 17, 2013, through Advice Letter 2922-E.  SDG&E’s STAMA was established on July 17, 2013, through Advice Letter 2502-E. 

		
	1.33.
	Utility/Utilities:  SCE and SDG&E, or either of them.

		
	1.34.
	Utility Shareholder Agreement: The agreement between SCE and SDG&E (and their respective parent companies), dated January 10, 2018, which allocates responsibility for the financial provisions of this Agreement between SCE shareholders and SDG&E shareholders.

 II.      RECITALS

5

Exhibit 10.1

		
	2.1.
	On November 25, 2014, the Commission issued Decision 14-11-040 approving the 2014 Agreement pursuant to Rule 12.1(d) of the Commission’s Rules.

		
	2.2.
	On November 26, 2014, SCE filed Advice Letter 3139-E, which implemented the 2014 Agreement, including a proposal for the disposition of amounts received from Mitsubishi Heavy Industries, Ltd. and its affiliates (“MHI”) in 2012, in relation to the SONGS outages, in accordance with Section 4.11 of the 2014 Agreement.  Per action of the Energy Division, Advice Letter 3139-E was made effective as of January 1, 2015.

		
	2.3.
	On November 26, 2014, SDG&E filed Advice Letters 2672-E, 2675-E and 2676-E, which implemented the 2014 Agreement in rates as of January 1, 2015, and established three new regulatory accounts (the NNLMA, the MNLMA and the NFCIMA).  Advice Letter 2672-E also included the disposition of amounts received from MHI in 2012, in relation to the SONGS outages, in accordance with Section 4.11 of the 2014 Agreement, as part of the NGBA year-end balance.  Per action of the Energy Division, Advice Letter 2672-E was made effective as of January 1, 2015.

		
	2.4.
	On December 18, 2014, Ruth Henricks and the Coalition to Decommission San Onofre filed the AFR.

		
	2.5.
	On February 9, 2015, SCE filed a Late-Filed Notice of Ex Parte Communication pursuant to Rule 8.4 of the Commission’s Rules of Practice and Procedure regarding a meeting on March 26, 2013, between the then-Commission President and an SCE Executive Vice President.  

		
	2.6.
	On April 27, 2015 (as amended on May 26, 2015), A4NR filed a petition to modify Decision 14-11-040 based on the Late-Filed Notice.  On June 24, 2015, TURN filed a response supporting A4NR’s petition.  On August 11, 2015, ORA also filed a petition to modify Decision 14-11-040.

		
	2.7.
	On December 8, 2015, the Commission issued Decision 15-12-016, finding that SCE committed eight violations of Rule 8.4 and two violations of Rule 1.1 of the Commission’s Rules.  The Commission imposed a penalty on SCE for those rule violations in the total amount of $16,740,000.  No violations were alleged to have been committed by SDG&E; no penalties were assessed on SDG&E.  

		
	2.8.
	In Decision 15-12-016, the Commission did not determine the impact, if any, of SCE’s rule violations on the OII settlement negotiations or on the Commission’s approval of the 2014 Agreement.

		
	2.9.
	On February 22, 2016, SCE filed Advice Letter 3367-E, which proposed the disposition of amounts received from Nuclear Electric Insurance Limited (“NEIL”) in accordance with Section 4.11 of the 2014 Agreement.  Per action of the Energy Division, Advice Letter 3367-E was made effective as of March 23, 2016.

6

Exhibit 10.1

		
	2.10.
	On February 24, 2016, SDG&E filed Advice Letter 2859-E, which proposed the disposition of amounts received from NEIL in accordance with Section 4.11 of the 2014 Agreement.  Per action of the Energy Division, Advice Letter 2859-E was made effective as of March 25, 2016.

		
	2.11.
	On April 1, 2016, SCE filed its application in the ERRA Proceeding, in which it requested that the Commission approve the application of the DOE Proceeds to reduce SCE's SONGS regulatory assets.  

		
	2.12.
	On May 9, 2016, Commissioner Sandoval and ALJ Bushey issued a ruling reopening the record in the OII and ordering briefing on whether the 2014 Agreement met the Commission’s standard for approving such agreements under Rule 12.1 of the Commission’s Rules.

		
	2.13.
	On November 2, 2016, SCE filed Advice Letter 3499-E seeking approval of SCE’s 2017 revenue requirement for the 2014 Settlement Agreement.  SCE’s SONGS Revenue Requirement for 2017 was $236.937 million.

		
	2.14.
	On November 7, 2016, SDG&E filed Advice Letter 2989-E, in which it requested approval of SDG&E’s 2017 revenue requirement for the 2014 Settlement Agreement.   SDG&E’s SONGS Revenue Requirement for 2017 was $38.0 million.  Advice Letter 2989-E also requested that the Commission approve the application of SDG&E’s share of certain proceeds from DOE Spent Fuel Litigation to reduce SDG&E’s SONGS regulatory assets.  Per action of the Energy Division, Advice Letter 2989-E was made effective as of December 8, 2016.

		
	2.15.
	On December 13, 2016, Commissioner Sandoval and ALJ Houck issued a ruling ordering the Utilities and the other parties to the OII to meet and confer regarding the standards for approving settlements under Rule 12.1 of the Commission’s Rules and regarding procedural actions for the Commission to consider in ruling on the petitions for modification of its November 25, 2014 decision.

		
	2.16.
	In response to the December 13, 2016 ruling, the Parties met and conferred throughout a significant portion of 2017, including multiple sessions facilitated by a third-party mediator, but those mediation sessions held in 2017 did not produce any agreement regarding modifying the 2014 Agreement.

		
	2.17.
	On October 10, 2017, Commissioner Picker and ALJ Houck issued a ruling proposing a process for the Commission to reconsider if the 2014 Agreement satisfies Rule 12.1 of the Commission’s Rules, as well as a process for additional testimony, evidentiary hearings, and briefing regarding cost allocation between ratepayers and shareholders should the Commission conclude that the 2014 Agreement should not be retained.

		
	2.18.
	On November 7, 2017, SDG&E filed Advice Letter 3139-E, in which it requested that the Commission approve the application of its share of certain proceeds from DOE Spent 

7

Exhibit 10.1

Fuel Litigation to reduce SDG&E’s SONGS regulatory assets.  Per action of the Energy Division, Advice Letter 3139-E was made effective as of December 18, 2017.
		
	2.19.
	The Parties, with the assistance of mediators, thereafter engaged in further settlement discussions in 2018, including mediated sessions in early January 2018, pursuant to Article 12 of the Commission’s Rules.

		
	2.20.
	On January 8, 2018, Commissioner Picker and ALJ Houck issued a ruling setting a schedule for further proceedings pursuant to the October 10, 2017 ruling and describing the scope of remaining issues for written testimony and hearings before the Commission.

		
	2.21.
	On January 10, 2018, the Utilities executed the Utility Shareholders Agreement.

		
	2.22.
	As of December 31, 2017, the balance in SCE’s STAMA was $3,242.19; the balance in SCE’s MNLMA was positive $3,988,315.79 (i.e., SONGS Litigation Costs exceeded SONGS Litigation Recoveries); and the balances in SCE’s NFCIMA and NNLMA were zero.  As of December 31, 2017, the balances in SDG&E’s STAMA, MNLMA, NFCIMA, and NNLMA were zero.

		
	2.23.
	Under the 2014 Settlement, the Utilities’ estimated SONGS Revenue Requirement from December 19, 2017, to February 1, 2022, is $873 million (nominal).

		
	2.24.
	The Utilities have not funded any grants to the University of California pursuant to Section 4.16 of the 2014 Agreement.

		
	2.25.
	The General Recitals described in Sections 2.1 through 2.24 provide factual background for this Agreement, and the Commission is not asked to confirm the General Recitals as true per the September 5, 2014 Ruling in this proceeding, at page 13.

 III.      TERMS AND CONDITIONS
		
	3.1.
	In consideration of the mutual obligations, promises, covenants, and conditions in this Agreement, the Parties agree, from and after the Agreement Date, to support approval by the Commission of this Agreement and not to oppose this Agreement before any regulatory agency or court of law where this Agreement, its meaning, or its effect is an issue, and further agree not to take or advocate for, either directly, or indirectly through another entity or otherwise, any action that would have the effect of modifying or abrogating the terms of this Agreement.

		
	3.2.
	Cessation of Certain Collections

		
	(a)
	As implemented retroactively pursuant to Section 3.3, the Utilities shall recover SONGS Costs in rates only until the Cessation Date.  As implemented retroactively pursuant to Section 3.3, the Utilities will cease collecting in rates the revenue requirement associated with all costs and amounts authorized to be recovered under the existing 2014 Agreement.

8

Exhibit 10.1

		
	(b)
	The deferred tax asset recorded by SCE, which is estimated to be $23 million as of the Cessation Date, is in addition to the SONGS Costs and also will not be recovered in rates.

		
	(c)
	The Utilities shall retain after the Cessation Date all SONGS Costs collected in rates prior to the Cessation Date.  In addition, the Utilities shall retain all other amounts relating to SONGS collected in rates prior to the Cessation Date, including without limitation O&M costs, Non-O&M Balancing Account Expenses, Non-O&M Expenses, the Capital-Related Revenue Requirements for the SGRP for periods prior to February 1, 2012, and market power purchases (as described in Section 4.10 of the 2014 Agreement).

		
	(d)
	No change shall be made to SCE Advice Letters 3367-E and 3139-E and SDG&E Advice Letters 2859-E and 2672-E.  The Utilities will retain the amounts set forth in those Advice Letters to offset their SONGS Litigation Costs, as well as the 5% of the negative balance in the NEIL Outage Memorandum Subaccount pursuant to Section 4.11(c)(ii) of the 2014 Agreement.  The Utilities will retain all amounts received from MHI in 2017 pursuant to the award issued on March 13, 2017, by the International Chamber of Commerce International Court of Arbitration (“ICC”) in ICC Arbitration Case No. 19784/AGF/RD, with the exception of the SDG&E ratepayer credit as shown in Table 1 of SDG&E Advice Letter 3127-E.  The Utilities have previously credited customers approximately $5 million in proceeds received from MHI.

		
	(e)
	From and after the Cessation Date, the Utilities will not recover Nuclear Fuel Investment in rates.  The Utilities shall retain all proceeds from the sale of their share of Nuclear Fuel (the City of Riverside having the remaining share), and no portion of such proceeds shall be credited to customers.  

		
	(f)
	This Agreement does not affect the disbursal to the Utilities of funds from the Nuclear Decommissioning Trusts for authorized purposes, including recovery of costs incurred after June 7, 2013, nor does this Agreement affect future contributions to the Nuclear Decommissioning Trusts (if any).  This Agreement also does not affect the recovery of costs that are not SONGS Costs, but which otherwise relate to SONGS, that the Commission has authorized the Utilities to recover through rates other than as authorized in the 2014 Settlement, i.e., costs for activities relating to seismic studies and risks, marine mitigation, and claims relating to conditions of employment, including worker’s compensation and employment law claims, relating to events occurring prior to June 7, 2013.  Further, this Agreement does not preclude the Utilities from requesting, or the Commission from granting, authority to recover in rates costs of third-party claims for personal injury or property damage, including environmental claims, arising out of SONGS operations prior to June 7, 2013, it being understood that the Intervenors reserve the right to oppose any such request.

		
	3.3.
	Implementation of Rate Changes

9

Exhibit 10.1

		
	(a)
	Within 45 days after the Approval Date, each Utility shall file with the Commission a Tier 2 advice letter describing the details of the rate changes resulting from this Agreement, as described in Section 3.3(c).

		
	(b)
	Following the Approval Date, the Parties shall coordinate regarding the timing of the issuance of press releases by the Parties regarding the rate changes resulting from this Agreement.  Such press releases shall describe, among other things, the amounts being returned to customers as a result of this Agreement and the average rate decrease by class (e.g., residential CARE, residential non-CARE).  In addition, the Utilities shall describe the impact of this Agreement on rates by email to customers for whom the Utilities have email addresses, by social media, and by posting on the official websites of the Utilities.  Parties may make public statements regarding this Agreement, provided that they do not characterize the Agreement as constituting an admission or other indication of wrongdoing or imprudence by the Utilities.  

		
	(c)
	The Utilities shall track the SONGS Revenue Requirement collected in rates from and after the Cessation Date.  In the advice letters described in Section 3.3(a) of this Agreement, the Utilities shall propose an adjustment to retail rates starting on the Implementation Date, reflecting (i) the removal of the SONGS Revenue Requirement from rates prospectively from the Implementation Date, (ii) a refund to customers of the Overcollection Amount, amortized over the period starting on the Implementation Date and ending on the Refund End Date, (iii) the disposition of any balances in the Utilities’ STAMAs, MNLMA, NFCIMAs and NNLMA, and (iv) a debit to customers of any excess cost savings booked in the Utilities’ CFBAs, as described in Section 3.8(b).  A Utility’s Implementation Date shall not occur on the same day as any other concurrent rate change for that Utility.  The Utilities may have different Implementation Dates.  SCE will effectuate the refund via a credit to the generation sub-account of the Base Revenue Requirement Balancing Account, or its successor account.  SDG&E will effectuate the refund via a credit to the NGBA, or its successor account.

		
	3.4.
	Greenhouse Gas Research Contributions and Program

		
	(a)
	The amount described in Section 4.16 of the 2014 Agreement shall be reduced to a total amount of $12.5 million ($2 million annually for five years for SCE, and $500,000 annually for five years for SDG&E) (“New Contribution Amount”).  The New Contribution Amount shall be paid by the Utilities using shareholder funds.  The five-year period shall commence with the approval of the Tier 2 advice letter described below in Section 3.4(f).

		
	(b)
	The New Contribution Amount shall be distributed on the basis of a competitive grant proposal process to campuses and research institutes of California State University located in Southern California, provided, however, that grant recipients may subcontract with other California State University campuses for specialized expertise.  Eligible proposals will focus on development of new technologies, 

10

Exhibit 10.1

methodologies and/or design modifications to reduce or avoid greenhouse gas (“GHG”) emissions and/or to mitigate the effects of GHG emissions, as well as research on the integration of renewable resources in rural and/or disadvantaged communities.  CSU grant proposals shall include CSU administrative costs, not to exceed 10%.
		
	(c)
	The program will be administered as part of the Utilities’ existing technology portfolios to better ensure a path to deployment, to improve coordination with and avoid duplication of other Utility RD&D efforts, and to limit administrative expenditures.  The program shall not be considered part of the Utilities’ Commission-approved plans under the Electric Program Investment Charge (“EPIC”) program established by the Commission in Decision 11-12-035 and Decision 12-05-037, or EPIC’s successor, nor shall the program established herein be required to adhere to the EPIC program’s procedural, programmatic or reporting rules and requirements.

		
	(d)
	It is expected that Utility personnel who are currently engaged in Utility technology programs shall also be engaged in the competitive grant proposal process described in Section 3.4(b) of this Agreement, including solicitation of grants, award of grants, and administration of grants (including any associated reporting requirements).  The costs of such personnel shall continue to be recovered in full via general rates, EPIC funding, and/or other Commission-approved programs, and such costs shall not reduce the New Contribution Amount.  

		
	(e)
	The Utilities will meet with CSU within 60 days after the Approval Date to discuss a Program Implementation Plan, including the identification of program topical areas that support California’s greenhouse gas reduction and avoidance goals.  Within 30 days following such meeting, the Utilities will file and serve a Tier 2 Advice Letter that describes the process for implementation, a proposed schedule and forecasted budget.

		
	(f)
	Following the completion of the competitive grant proposal process, the Utilities will file Tier 2 Advice Letters proposing the grants to be awarded, as well as the expected results, applications, and demonstrations of the chosen grant projects.  The Utilities shall not begin to disburse the funds until the Energy Division’s approval of such Tier 2 Advice Letters.

		
	(g)
	The Utilities will file, and serve, five “Information Only” Annual Reports to the Energy Division to apprise the Commission of the program’s status.  The first Annual Report shall be filed one year after Commission approval of the Tier 2 advice letter described in Section 3.4(f).  

		
	(h)
	For the avoidance of doubt, campuses of the University of California shall not be eligible to participate in the competitive grant proposal process described in 

11

Exhibit 10.1

Section 3.4(b) of this Agreement or otherwise receive any funds pursuant to Section 3.4 of this Agreement or Section 4.16 of the 2014 Agreement.
		
	3.5.
	No Adjustments.  

		
	(a)
	From and after the Cessation Date, no disallowances, adjustments or offsets of any kind shall be made to rates in respect of any costs incurred as a result of the non-operation of SONGS, or in respect of any amounts that customers could have received in the event that SONGS had continued to operate after June 7, 2013.  This limitation includes foregone generation sales revenues; there will be no future adjustments or disallowances imposed as a result of foregone sales of SONGS output.

		
	(b)
	The provisions of the 2014 Agreement relating to forecasted property taxes (see 2014 Agreement, § 4.3(j)), the savings realized in respect of financing the SONGS regulatory assets with debt (see 2014 Agreement, § 4.4(a)(ii)), and amounts received in respect of M&S (see 2014 Agreement, § 4.5(b)) shall be implemented for periods up to the Cessation Date.  For periods after the Cessation Date, customers will not pay in rates any amounts in respect of property taxes, financing of the SONGS regulatory assets, or M&S, and for such periods no disallowances, adjustments, credits or offsets of any kind shall be made to rates in respect of the provisions of the 2014 Agreement enumerated in this Section 3.5(b).

		
	(c)
	No disallowances, adjustments or offsets of any kind shall be made to rates in respect of any amounts that the Utilities claimed, or could have claimed, but did not receive from NEIL and/or MHI in connection with failure of the steam generators and subsequent permanent shutdown of SONGS.

		
	(d)
	No disallowances, adjustments, or offsets of any kind shall be made to rates in respect of any amounts the Utilities could have received or avoided, but did not receive or avoid, in respect of the acquisition, sale or other disposition of Nuclear Fuel Investment or M&S.

		
	(e)
	With the exception of nuclear fuel contract cancellation costs, nothing in this Settlement Agreement constrains the right of parties to seek disallowances for the recovery of costs related to the decommissioning of SONGS as considered in current or future Nuclear Decommissioning Cost Triennial Proceedings or any other related docket.

		
	(f)
	Nothing in this Section should be read to prevent any Intervenor from either of the following:

		
	(i)
	Opposing any proposal for the recovery in customer rates of costs that are not SONGS Costs but otherwise relate to SONGS (as described in Section 3.2(f)) and which remain subject to approval by the Commission; or

12

Exhibit 10.1

		
	(ii)
	Proposing any treatment for the future proceeds from DOE Spent Fuel Litigation.

		
	3.6.
	Capital Structure.

		
	(a)
	Pursuant to Section 4.4(a) of the 2014 Agreement, SCE and SDG&E financed the SONGS regulatory assets to be amortized pursuant to the 2014 Agreement with debt, and such debt was not recognized in determining either Utility’s ratemaking capital structure.  Notwithstanding that the Utilities will cease to amortize those SONGS regulatory assets from and after the Cessation Date, the debt borrowed to finance the SONGS regulatory assets that were being amortized pursuant to the 2014 Agreement will continue to be excluded from both Utilities’ ratemaking capital structure.  In addition, from and after the Cessation Date, the Utilities may exclude from their ratemaking capital structure the after-tax charge to equity resulting from the implementation of this Agreement.

		
	(b)
	Consistent with Section 4.4(b) of the 2014 Agreement, the Parties agree to support the continued exclusion, from the dates of the Utility’s financing the SONGS regulatory assets with debt, of the capital financing of those assets in determining the Utility’s overall AFUDC rate calculation at both the Commission and the Federal Energy Regulatory Commission, notwithstanding that both Utilities will cease to amortize the SONGS regulatory assets so financed from and after the Cessation Date.

		
	3.7.
	The PCIA, or any amended and/or successor mechanism adopted by the Commission, shall include any additional credits provided in this Agreement in accordance with the SONGS DA Ratemaking Consensus Protocol, to ensure that bundled service and departing load (i.e., direct access, community aggregation, and community choice aggregation) customers receive equitable and symmetrical benefits.

		
	3.8.
	Closure of Regulatory Accounts.

		
	(a)
	The Intervenors agree not to oppose requests by the Utilities to close their MNLMAs, NFCIMAs, NNLMAs, SONGSOMAs and STAMAs within 45 days after the Approval Date.

		
	(b)
	The Intervenors agree not to oppose requests by the Utilities to close their CFBAs within 45 days after the Approval Date.  For any amounts credited to ratepayers for savings tracked in the CFBAs between the Cessation Date and December 31, 2017, a debit shall be recorded by the Utilities.  SDG&E will effectuate the debit via the NGBA or its successor account.

		
	3.9.
	Utility Shareholder Agreement.

		
	(a)
	The Parties shall not take any position that would collaterally attack the Utility Shareholder Agreement in any venue.

13

Exhibit 10.1

		
	(b)
	In the event that the Commission takes an action that has the effect of invalidating the Utility Shareholder Agreement, SDG&E may, in its discretion, withdraw from this Agreement, in which case SCE shall remain a Party to this Agreement but this Agreement shall be terminated as to SDG&E.

		
	3.10.
	Except as expressly provided in this Agreement, the terms and conditions of the 2014 Agreement remain in full force and effect.

 IV.      GENERAL PROVISIONS
		
	4.1.
	The Parties shall use their best efforts to obtain Commission Approval.  Following the Agreement Date, the Parties shall:

		
	(a)
	Jointly file motions requesting that the Commission: 

		
	(i)
	Approve this Agreement in its entirety without change under Rule 12 of the Commission’s Rules of Practice and Procedure;

		
	(ii)
	Stay all proceedings in the OII pending its decision on the joint motion of the Parties to approve this Agreement; and

		
	(iii)
	Expedite its consideration and approval of this Agreement so as to provide the benefits of this Agreement as soon as possible;

		
	(b)
	Refrain from propounding discovery requests in the OII pending the Commission’s consideration of the motion for settlement approval.  The Parties shall not be required to respond to any pending discovery requests pending the Commission’s consideration of the motion for settlement approval.  Notwithstanding the foregoing, ORA cannot waive its statutory discovery rights over any entity regulated by the Commission as provided by the Public Utilities Code (e.g., Pub. Util. Code §§ 309.5, 314);

		
	(c)
	Support and mutually defend this Agreement in its entirety from and after the Agreement Date;

		
	(d)
	Avoid and abstain from making any collateral attacks on this Agreement or taking positions in other proceedings that would undermine the effect of this Agreement;

		
	(e)
	Oppose any change to this Agreement proposed by any non-settling party to the OII, unless all Parties jointly agree to support such change;

		
	(f)
	Cooperate reasonably on all submissions, including briefs and notices, necessary to achieve Commission Approval; and

		
	(g)
	Review any Commission decision regarding this Agreement to determine whether the Commission has conditioned its approval on a material change to this Agreement, the deletion of a material term of this Agreement, or the addition of a 

14

Exhibit 10.1

material term to this Agreement.  The Parties agree that any change to, deletion of, or addition to, Section 1.30 would be material.  Any Party unwilling to accept such material change, deletion, or addition shall so notify the other Parties within 15 calendar days of issuance of the order by the Commission or the court.  The Parties promptly shall discuss each change, deletion, or addition found unacceptable, negotiate in good faith to achieve a resolution acceptable to all Parties, and request Commission or court approval of the resolution so achieved.  Failure to resolve such change, deletion, or addition to the satisfaction of all Parties within 15 calendar days of notification, or to obtain Commission or court approval of such resolution, shall entitle any Party to withdraw from this Agreement by prompt notice to all other Parties; provided, however, that such withdrawal shall not affect the validity of this Agreement as to the other Parties.
		
	4.2.
	The Parties intend that Commission Approval will constitute a complete and final resolution of the OII, including all issues raised or that could have been raised in the AFR and PFMs, and will have the effect set forth in Rule 12.5 of the Commission’s Rules of Practice and Procedure.  Subject to Section 4.1, after the Agreement Date, the Parties will not assert in any other proceeding (including, but not limited to, pending SDG&E AL 3127-E and the reasonableness of nuclear fuel contract cancellation costs in A.16-03-004) positions contrary to those reflected in this Agreement.

		
	4.3.
	Nothing in this Agreement prevents ORA from continuing to advocate for its litigation positions in A.16-04-001, except that this provision shall not extend to any opposition to SCE’s position with respect to the DOE litigation proceeds.

		
	4.4.
	The Parties intend that this Agreement, as well as Commission Approval, shall not be a precedent in any other proceeding. 

		
	4.5.
	The Parties have entered into the stipulations in this Agreement as a compromise and on the basis that the stipulations not be construed as admissions or concessions by any Party regarding any fact or matter of law at issue in the OII.  If Commission Approval does not occur, the Parties reserve all rights to take any position whatsoever regarding any fact or matter of law at issue in the OII.

		
	4.6.
	The Parties agree that no signatory to this Agreement or any employee thereof assumes any personal liability as a result of this Agreement.

		
	4.7.
	If any Party fails to perform its obligations under this Agreement, any other Party may come before the Commission to pursue a remedy, including enforcement.  Prior to doing so, the Parties shall mediate the issue with the mediator who assisted with negotiations of the settlement, if the mediator consents.

		
	4.8.
	Each Party acknowledges and stipulates that it has agreed to this Agreement freely, voluntarily, and without any fraud, duress, or undue influence by any other party.  Each Party states that, through its authorized representatives, it has read and fully understands its rights, privileges, and duties under this Agreement, including its right to discuss this 

15

Exhibit 10.1

Agreement with its legal counsel, and has exercised those rights, privileges, and duties to the extent deemed necessary.
		
	4.9.
	In executing this Agreement, each Party declares and mutually agrees that its provisions are reasonable, consistent with the law, and in the public interest.

		
	4.10.
	This Agreement cannot be amended or modified without the express written and signed consent of all Parties, including pursuant to the process set forth in Section 4.1(g).

		
	4.11.
	No provision of this Agreement shall be considered waived by any Party unless such waiver is given in writing.  The failure of a Party to insist, in any one or more instances, on strict performance of any provision of this Agreement or to take advantage of any of its rights under the Agreement shall not be considered a waiver of such provision or a relinquishment of such rights in other instances, but the same shall continue and remain effective.

		
	4.12.
	No Party has relied, or presently relies, on any statement, promise, or representation by any other Party, whether oral or written, except as expressly set forth in this Agreement.  Each Party expressly assumes the risk of any mistake or misunderstanding of law or fact made by such Party or its authorized representative in entering into this Agreement.

		
	4.13.
	This Agreement shall not be construed against any Party on the basis that such Party was a drafter of this Agreement.

		
	4.14.
	This Agreement may be executed in separate counterparts by the Parties with the same effect as if all Parties had signed one and the same document.  All such counterparts shall be deemed to be an original and together shall constitute one and the same Agreement.

		
	4.15.
	This Agreement shall become effective and binding on the Parties as of the Approval Date; provided, however, that Section 4.1 of this Agreement shall impose obligations on the Parties immediately upon the Agreement Date.

		
	4.16.
	This Agreement shall be governed by the laws of the State of California as to all matters, including but not limited to validity, construction, effect, performance, and remedies.

		
	4.17.
	To the extent this Agreement requires that any Party provide notice to any other Party, such notice shall be in writing and directed to the signatories to this Agreement.

 V.      EXECUTION
IN WITNESS WHEREOF, the Parties have duly executed this Agreement.  The undersigned represent that they are authorized to sign on behalf of the Party represented.

16

Exhibit 10.1

	
		
	SOUTHERN CALIFORNIA EDISON COMPANY

	SAN DIEGO GAS & ELECTRIC COMPANY

	/s/ R. O. Nichols
	/s/ Lee Schavrien

	By:  Ronald O. Nichols
	By:  Lee Schavrien

	Title: President
	Title:  Chief Regulatory Officer

	Date:  January 30, 2018
	Date:  January 30, 2018

	
		
	THE ALLIANCE FOR NUCLEAR RESPONSIBILITY

	THE CALIFORNIA LARGE ENERGY CONSUMERS ASSOCIATION

	/s/ Rochelle Becker
	/s/ Nora Sheriff

	By:  Rochelle Becker
	By:  Nora Sheriff

	Title:  Executive Director
	Title:  Counsel

	Date:  January 30, 2018
	Date:  January 30, 2018

	
		
	CALIFORNIA STATE UNIVERSITY

	CITIZENS OVERSIGHT

	/s/ Greg Klatt
	/s/ Ray Lutz

	By:  Greg Klatt
	By:  Ray Lutz

	Title:  Attorney for CSU
	Title:  National Coordinator, Citizens' Oversight Projects

	Date:  January 30, 2018
	Date:  January 30, 2018

	
		
	THE COALITION OF CALIFORNIA UTILITY EMPLOYEES

	THE DIRECT ACCESS CUSTOMER COALITION

	/s/ Mila Buckner
	/s/ Daniel Douglass

	By:  Mila Buckner
	By:  Daniel Douglass

	Title:  Attorney
	Title:  Counsel

	Date:  January 30, 2018
	Date:  January 30, 2018

	
		
	RUTH HENRICKS
	THE OFFICE OF RATEPAYER ADVOCATES

	/s/ Maria Severson
	/s/ Elizabeth Echols

	By:  Maria Severson
	By:  Elizabeth Echols

	Title:  Attorney for Ruth Henricks
	Title:  Director

	Date:  January 30, 2018
	Date:  January 30, 2018

	
		
	THE UTILITY REFORM NETWORK
	WOMEN’S ENERGY MATTERS

	/s/ Mark Toney
	/s/ Jean Merrigan

	By:  Mark Toney
	By:  Jean Merrigan

	Title:  Executive Director
	Title:  Advocate

	Date:  January 30, 2018
	Date:  January 30, 2018

17Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into effective January 31, 2018 (the “Effective Date”), by and between Dova Pharmaceuticals, Inc., a Delaware corporation (the “Company”) and Mark W. Hahn (the “Employee”).

 

The Company desires to employ the Employee in the capacity of full-time Chief Financial Officer pursuant to the terms of this Agreement and, in connection therewith, to compensate the Employee for Employee’s personal services to the Company; and

 

The Employee wishes to be employed by the Company and provide personal services to the Company in return for certain compensation.

 

Accordingly, in consideration of the mutual promises and covenants contained herein, the parties agree to the following:

 

1.                                      EMPLOYMENT BY THE COMPANY.

 

1.1                               At-Will Employment. Employee shall be employed by the Company on an “at-will” basis, meaning either the Company or Employee may terminate Employee’s employment at any time, with or without cause or advanced notice.  Any contrary representations that may have been made to Employee shall be superseded by this Agreement.  This Agreement shall constitute the full and complete agreement between Employee and the Company on the “at-will” nature of Employee’s employment with the Company, which may be changed only in an express written agreement signed by Employee and a duly authorized officer of the Company. Employee’s rights to any compensation following a termination shall be only as set forth in Section 6.

 

1.2                               Position.  Subject to the terms set forth herein, the Company agrees to employ Employee, initially, in the position of Chief Financial Officer and Employee hereby accepts such employment.  During the term of Employee’s employment with the Company, Employee will devote Employee’s best efforts and substantially all of Employee’s business time and attention to the business of the Company.

 

1.3                               Duties.  Employee will report to the Chief Executive Officer (“CEO”) of the Company, performing such duties as are normally associated with his position and such duties as are assigned to him from time to time, subject to the oversight and direction of the CEO.  Employee shall perform his duties under this Agreement principally out of the Company’s corporate headquarters to be established within twenty-five (25) miles of Chapel Hill, North Carolina or such other location as assigned.  In addition, the Employee shall make such business trips to such places as may be necessary or advisable for the efficient operations of the Company.

 

1.4                               Company Policies and Benefits.  The employment relationship between the parties shall also be subject to the Company’s personnel policies and procedures as they may be interpreted, adopted, revised or deleted from time to time in the Company’s sole discretion.  The Employee will be eligible to participate on the same basis as similarly situated employees in 

 

 

the Company’s benefit plans in effect from time to time during his employment.  All matters of eligibility for coverage or benefits under any benefit plan shall be determined in accordance with the provisions of such plan.  The Company reserves the right to change, alter, or terminate any benefit plan in its sole discretion.  Notwithstanding the foregoing, in the event that the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.

 

1.5                               Paid Time Off.  As a Regular Full-Time Employee, you will be entitled to participate in Dova’s Unlimited Leave program.  With your manager’s approval, there is no cap on leave taken throughout the year.  When applicable, medical or other relevant leave plans will supersede the Unlimited Leave.

 

2.                                      COMPENSATION.

 

2.1                               Salary.  Employee shall receive for Employee’s services to be rendered hereunder an initial annualized base salary of $390,000 per year, subject to review and adjustment from time to time by the Company in its sole discretion, payable subject to standard federal and state payroll withholding requirements in accordance with Company’s standard payroll practices (“Base Salary”).

 

2.2                               Bonus.

 

(a)                                 During Employment. Employee shall be eligible to earn an annual performance bonus of up to 40% of his Base Salary (“Annual Bonus”).  The Annual Bonus will be based upon the assessment of the Employee’s performance by the Company’s Board of Directors (the “Board”) and the Company’s attainment of targeted goals as set by the Board in its sole discretion.  The Annual Bonus, if any, will be subject to applicable payroll deductions and withholdings.  Following the close of each calendar year, the Board will determine whether the Employee has earned the Annual Bonus, and the amount of any Annual Bonus, based on the set criteria.  No amount of the Annual Bonus is guaranteed, and the Employee must be an employee in good standing on the Annual Bonus payment date to be eligible to receive an Annual Bonus; no partial or prorated bonuses will be provided.  The Annual Bonus, if earned, will be paid no later than March 15 of the calendar year immediately following the applicable calendar year for which the Annual Bonus is being measured.  The Employee’s eligibility for an Annual Bonus is subject to change in the discretion of the Board (or any authorized committee thereof).

 

(b)                                 Upon Termination.  In the event Employee leaves the employ of the Company for any reason prior to payment of any bonus, he is not eligible for such bonus, prorated or otherwise.

 

2.3                               Stock Option.

 

(a)                                 Option Grant.  Subject to approval of the Board, which the Company agrees to use its best efforts to secure, Employee will be issued options to purchase 175,000 shares of the Company’s common stock (subject to adjustment for stock splits, dividends and combinations and similar events as will be set forth in the option agreement), with a 10-year term, pursuant and subject to the Company’s Equity Incentive Plan (“Plan”), which the 

 

2

 

Company is in the process of establishing, and the Company’s standard form of Stock Option Agreement (“Stock Agreement’) between the Employee and the Company.   The option shall be an incentive stock option to the extent permissible under Section 422 of the Internal Revenue Code and will have an exercise price per share equal to the fair market value of a share of the Company’s common stock, to be determined in accordance with Section 409A.

 

(b)                                 Vesting.  The Option shall vest over a period of four years as follows: (i) 25% of the total shares subject to the Option shall vest on February 19, 2019, and (ii) 1/48th of total shares subject to the Option shall vest monthly thereafter over the remaining three years of the vesting period, subject to Employee’s continuous service as of each applicable date.  The foregoing notwithstanding, in the event of a Sale Event (as defined below), subject to Employee’s continuous service as of the closing of such Sale Event, all of Employee’s then-unvested Option shall immediately and automatically vest as of the Closing of such Sale Event.  For purposes hereof, “Sale Event” shall mean the date on which the Company enters into a binding agreement pursuant to which: (A) any person, including a “group” as defined below, will acquire ownership of all or substantially all of the Company’s equity, excluding any acquisition of stock by a person or group of persons who were members or shareholders of such company immediately prior to such acquisition; or (B) any person, including a “group” as defined below, will acquire all or substantially all of the assets of the Company.  For purposes of this definition, the term “group” shall have the same meaning as in Section 13(d)(3) of the Securities Exchange Act of 1934.  None of the following shall constitute a Sale Event for purposes of this Agreement: (x) the sale of stock of the Company or any successor in an initial public offering, (y) any restructuring, merger or conversion of the Company to a corporation or to an entity organized under the laws of any jurisdiction other than the jurisdiction of the applicable company’s organization, whether by merger, conversion, consolidation, contribution of shares or assets, or otherwise, and where members immediately before such restructuring, merger or conversion own any of the capital and voting interests of the resulting or surviving corporation or entity, or (z) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof.  Furthermore, and notwithstanding anything herein to the contrary, an event which does not constitute a change in the ownership, a change in the effective control, or a change in the ownership of a substantial portion of the assets of the Company, each as defined in Section 1.409A-3(i)(5) of the Treasury Regulations (Title 26 of the Code of Federal Regulations, as amended from time to time), shall not constitute a Sale Event for purposes of this Agreement.

 

2.4                               Expense Reimbursement.  The Company will reimburse Employee for all reasonable, documented business expenses incurred in connection with his services hereunder, in accordance with the Company’s business expense reimbursement policies and procedures as may be in effect from time to time.

 

3.                                            PROPRIETARY INFORMATION, INVENTIONS, NON-COMPETITION AND NON-SOLICITATION OBLIGATIONS.  The parties hereto have entered into a Proprietary Information, Inventions, Non-Competition and Non-Solicitation Agreement (the “Proprietary Information Agreement”), which may be amended by the parties from time to time without regard to this Agreement.  The Proprietary Information Agreement contains provisions that are intended by the parties to survive and do survive termination or expiration of this Agreement.

 

3

 

4.                                      OUTSIDE ACTIVITIES.  Except with the prior written consent of the Company’s Board, Employee will not, while employed by the Company, undertake or engage in any other employment, occupation or business enterprise that would interfere with Employee’s responsibilities and the performance of Employee’s duties hereunder except for (i) reasonable time devoted to volunteer services for or on behalf of such religious, educational, non-profit and/or other charitable organization as Employee may wish to serve; (ii) reasonable time devoted to activities in the non-profit and business communities consistent with Employee’s duties; (iii) reasonable time devoted to service on boards of directors of companies that are not competitive with the Company, do not otherwise present a conflict of interest and would not otherwise interfere with Employee’s responsibilities and the performance of Employee’s duties hereunder, subject to the prior written approval of the Board (which approval shall not be unreasonably withheld); and (iv) such other activities that would not interfere with Employee’s responsibilities and the performance of Employee’s duties hereunder as may be specifically approved by the Board (which approval shall not be unreasonably withheld).  This restriction shall not, however, preclude the Employee from owning less than one percent (1%) of the total outstanding shares of a publicly traded company.

 

5.                                      NO CONFLICT WITH EXISTING OBLIGATIONS.  Employee represents that Employee’s performance of all the terms of this Agreement and as an Employee of the Company do not and will not breach any agreement or obligation of any kind made prior to Employee’s employment by the Company, including agreements or obligations Employee may have with prior employers or entities for which Employee has provided services.  Employee has not entered into, and Employee agrees that Employee will not enter into, any agreement or obligation, either written or oral, in conflict herewith.

 

6.                                      TERMINATION OF EMPLOYMENT.  The parties acknowledge that Employee’s employment relationship with the Company is at-will.  Either Employee or the Company may terminate the employment relationship at any time, with or without Cause.  The provisions in this Section govern the amount of compensation, if any, to be provided to Employee upon termination of employment and do not alter this at-will status.

 

6.1                               Termination by the Company Without Cause.

 

(a)                                 The Company shall have the right to terminate Employee’s employment with the Company pursuant to this Section 6.1 at any time without “Cause” (as defined in Section 6.2(a) below) by giving notice as described in Section 6.6 of this Agreement.  A termination pursuant to Section 6.5 below is not a termination without “Cause” for purposes of receiving the benefits described in this Section 6.1.

 

(b)                                 In the event Employee’s employment is terminated without Cause, then provided that the Employee executes and does not revoke a separation agreement that includes a general release substantially in the form attached hereto as Exhibit A (the “Release”), and subject to Section 6.1(c) (the date that the Release becomes effective and may no longer be revoked by the Employee is referred to as the “Release Date”), then:

 

4

 

(i)                                     the Company shall pay to Employee an amount equal to Employee’s then current Base Salary for the Severance Period (as defined below), less applicable withholdings and deductions (the “Severance Payment”), in installments in accordance with the Company’s ordinary payroll practices commencing on the Company’s first regular payroll date that is more than sixty (60) days following the Separation Date (as defined below), and shall be for any accrued Base Salary for the sixty (60) day period plus the period from the sixtieth (60th) day until the regular payroll date, if applicable, and all salary continuation payments thereafter, if any, shall be made on the Company’s regular payroll dates; and

 

(ii)                                  if the Employee timely elects continued coverage under COBRA for himself and his covered dependents under the Company’s group health plans following such termination, then the Employee will be entitled to the following COBRA benefits (the “COBRA Benefits,” together with the Severance Payment, the “Severance Benefits”):  the Company shall pay the COBRA premiums necessary to continue the Employee’s and his covered dependents’ health insurance coverage in effect for himself (and his covered dependents) on the termination date until the earliest of (x) a number of months following the termination date equal to the Severance Period (the “COBRA Severance Period”); (y) the date when the Employee becomes eligible for health insurance coverage in connection with new employment or self-employment; or (iii) the date the Employee ceases to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the termination date through the earlier of (i)-(iii), the “COBRA Payment Period”).  Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on the Employee’s behalf would result in a violation of applicable law (including but not limited to the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this Section, the Company shall pay the Employee on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding (such amount, the “Special Severance Payment”), such Special Severance Payment to be made without regard to the Employee’s payment of COBRA premiums and without regard to the expiration of the COBRA period prior to the end of the COBRA Payment Period.  Nothing in this Agreement shall deprive the Employee of his rights under COBRA or ERISA for benefits under plans and policies arising under his employment by the Company.

 

(c)                                  Employee shall not receive the Severance Benefits pursuant to Section 6.1(b) unless he executes the Release within the consideration period specified therein, which shall in no event be more than sixty (60) days, and until the Release becomes effective and can no longer be revoked by Employee under its terms.  Employee’s ability to receive benefits pursuant to Section 6.1(b) is further conditioned upon his:  returning all Company property; complying with his post-termination obligations under this Agreement and the Proprietary Information Agreement; and complying with the Release including without limitation any non-disparagement and confidentiality provisions contained therein.

 

(d)                                 The benefits provided to Employee pursuant to this Section 6.1 are in lieu of, and not in addition to, any benefits to which Employee may otherwise be entitled under any Company severance plan, policy or program.

 

5

 

(e)                                  The damages caused by the termination of Employee’s employment without Cause would be difficult to ascertain; therefore, the severance for which Employee is eligible pursuant to Section 6.1(b) above in exchange for the Release is agreed to by the parties as liquidated damages, to serve as full compensation, and not a penalty.

 

(f)                                   For purposes of this Agreement, “Severance Period” shall mean  (i) zero (0) months in the event a termination under this Section 6.1 or under Section 6.3 (an “Involuntary Termination”) occurs on or before February 19, 2019, (ii) six (6) months in the event an Involuntary Termination occurs after February 19, 2019 and on or before February 19, 2020, and (iii) twelve (12) months in the event an Involuntary Termination occurs after February 19, 2020.

 

6.2                               Termination by the Company for Cause.  Subject to Section 6.2(b) below, the Company shall have the right to terminate Employee’s employment with the Company at any time for Cause by giving notice as described in this Section 6.2 and in Section 6.6 of this Agreement.

 

(a)                                 “Cause” for termination shall mean the occurrence of any of the following: (i) Employee’s conviction of any felony or any crime involving fraud or dishonesty; (ii) Employee’s participation in a fraud, act of dishonesty or other act of gross misconduct that adversely affects the Company; (iii) conduct by Employee that demonstrates Employee’s gross unfitness to serve under circumstances that materially and adversely affect the Company; (iv) Employee’s violation of any statutory or fiduciary duty, or duty of loyalty, owed to the Company; (v) Employee’s breach of any material term of any contract between such Employee and the Company; and/or (vi) Employee’s serious violation of a material Company policy. Whether a termination is for Cause shall be decided by the Board in its sole and exclusive judgment and discretion.  Prior to termination for Cause pursuant to each event listed in (iii) and (iv) above, the Company shall give the Employee notice of such event(s), which notice shall specify in reasonable detail the circumstances constituting Cause, and an opportunity to explain the circumstances.  Prior to any termination for Cause pursuant to each event listed in (v) and (vi) above, to the extent such event(s) is (are) capable of being cured by Employee, (A) the Company shall give the Employee notice of such event(s), which notice shall specify in reasonable detail the circumstances constituting Cause, and an opportunity to cure, and (B) there shall be no Cause with respect to any such event(s) if the Board determines in good faith that such events have been cured by Employee within fifteen (15) days after the delivery of such notice.

 

(b)                                 In the event Employee’s employment is terminated at any time for Cause, Employee will not receive the Severance Benefits described in Section 6.1(b), or any other severance compensation or benefit, except that, pursuant to the Company’s standard payroll policies, the Company shall pay to Employee the accrued but unpaid salary of Employee through the date of termination, together with all compensation and benefits payable to Employee based on his participation in any compensation or benefit plan, program or arrangement through the date of termination.

 

6

 

6.3                               Resignation by the Employee With Good Reason.

 

(a)                                 Employee may resign from Employee’s employment with the Company for Good Reason by giving notice following the end of the Cure Period (as defined in this Section).  For purposes of this Agreement, “Good Reason” for the Employee to terminate his employment hereunder shall mean any of following actions are taken by the Company without Employee’s prior written consent: (i) a material reduction by the Company of Employee’s Base Salary as initially set forth herein or as the same may be increased from time to time, provided, however, that if such reduction occurs in connection with a Company-wide decrease in executive team compensation, such reduction shall not constitute Good Reason; (ii) a material breach of this Agreement by the Company; (iii) the relocation of Employee’s principal place of employment, without Employee’s consent, by fifty (50) or more miles from his then-current principal place of employment immediately prior to such relocation; or (iv) a material reduction in Employee’s title, duties, authority, or responsibilities relative to Employee’s title, duties, authority, or responsibilities in effect immediately prior to such reduction; provided, however, that, any such termination by Employee shall only be deemed for Good Reason pursuant to this definition if: (1) Employee gives the Company written notice of his intent to terminate for Good Reason within thirty (30) days following the occurrence of the condition(s) that he believes constitute(s) Good Reason, which notice shall describe such condition(s); (2) the Company fails to remedy such condition(s) within thirty (30) days following receipt of the written notice (the “Cure Period”); and (3) Employee voluntarily terminates his employment within thirty (30) days following the end of the Cure Period.

 

(b)                                 In the event Employee resigns from employment for Good Reason, then provided that the Employee executes and does not revoke the Release and subject to Section 6.1(c), then the Company shall pay to Employee the Severance Benefits described in Section 6.1(b).

 

6.4                               Resignation by the Employee Without Good Reason.

 

(a)                                 Employee may resign from Employee’s employment with the Company at any time by giving notice as described in Section 6.6.

 

(b)                                 In the event Employee resigns from Employee’s employment with the Company other than for Good Reason, Employee will not receive the Severance Benefits, or any other severance compensation or benefit, except that, pursuant to the Company’s standard payroll policies, the Company shall pay to Employee the accrued but unpaid salary of Employee through the date of resignation, together with all compensation and benefits payable to Employee through the date of resignation under any compensation or benefit plan, program or arrangement during such period and Employee shall be eligible for any benefit continuation or conversion rights provided by the provisions of a benefit plan or by law.

 

6.5                               Termination by Virtue of Death or Disability of the Employee.

 

(a)                                 In the event of Employee’s death while employed pursuant to this Agreement, all obligations of the parties hereunder shall terminate immediately, and the Company shall, pursuant to the Company’s standard payroll policies, pay to the Employee’s 

 

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legal representatives Employee’s accrued but unpaid salary through the date of death together with all compensation and benefits payable to Employee based on his participation in any compensation or benefit plan, program or arrangement through the date of termination.

 

(b)                                 Subject to applicable state and federal law, the Company shall at all times have the right, upon written notice to the Employee, to terminate this Agreement based on the Employee’s Disability (as defined below).  Termination by the Company of the Employee’s employment based on “Disability” shall mean termination because the Employee is unable due to a physical or mental condition to perform the essential functions of his position with or without reasonable accommodation for six (6) months in the aggregate during any twelve (12) month period or based on the written certification by two licensed physicians of the likely continuation of such condition for such period.  This definition shall be interpreted and applied consistent with the Americans with Disabilities Act, the Family and Medical Leave Act, and other applicable law. In the event Employee’s employment is terminated based on the Employee’s Disability, Employee will not receive the Severance Benefits, or any other severance compensation or benefit, except that, pursuant to the Company’s standard payroll policies, the Company shall pay to Employee the accrued but unpaid salary of Employee through the date of termination, together with all compensation and benefits payable to Employee based on his participation in any compensation or benefit plan, program or arrangement through the date of termination.

 

6.6                               Notice; Effective Date of Termination.

 

(a)                                 Termination of Employee’s employment (the “Separation Date”) pursuant to this Agreement shall be effective as follows:

 

(i)                                     ten (10) days after the Company has provided Employee with written notice  of Employee’s termination without Cause under Section 6.1;

 

(ii)                                  For a termination for Cause:  (aa) under Section 6.2(a)(i) or (ii), immediately upon provision by the Company of written notice of the reasons to Employee; (bb) under Section 6.2(a)(iii) or (iv), following the required written notice to Employee and expiration of the period during which Employee may explain; (cc) under Section 6.2(a)(v) or (vi),  following the required written notice to Employee and expiration of the 15-day cure period, if Employee has not cured;

 

(iii)                               immediately upon the Employee’s death;

 

(iv)                              thirty (30) days after the Company gives notice to Employee of Employee’s termination on account of Employee’s Disability under Section 6.5, unless the Company specifies a later Separation Date, in which case, termination shall be effective as of such later Separation Date, provided that Employee has not returned to the full time performance of Employee’s duties prior to such date;

 

(v)                                 on the date specified in Employee’s written notice of Employee’s resignation for Good Reason, provided it is within thirty (30) days after the Cure Period has ended and the Company has failed to remedy any of the reasons for Good Reason set forth in Employee’s initial notice under Section 6.3(a); or

 

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(vi)                              ten (10) days after the Employee gives written notice to the Company of Employee’s resignation, provided that the Company may set a Separation Date at any time between the date of notice and the date of resignation, in which case the Employee’s resignation shall be effective as of such other date.  Employee will receive compensation through the Separation Date.

 

(b)                                 In the event notice of a termination under subsections (a)(iii) and (iv) is given orally, at the other party’s request, the party giving notice must provide written confirmation of such notice within five (5) business days of the request in compliance with the requirement of Section 7.1 below.  In the event of a termination for Cause, written confirmation shall specify the subsection(s) of the definition of Cause relied on to support the decision to terminate.

 

6.7                               Cooperation With Company After Termination of Employment. Following termination of Employee’s employment for any reason, Employee shall reasonably cooperate with the Company in all matters relating to the winding up of Employee’s pending work including, but not limited to, any litigation in which the Company is involved, and the orderly transfer of any such pending work to such other Employees as may be designated by the Company.

 

6.8                               Application of Section 409A.  Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement that constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) shall not commence in connection with Employee’s termination of employment unless and until Employee has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to Employee without causing Employee to incur the additional 20% tax under Section 409A.  It is intended that each installment of severance pay provided for in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).  For the avoidance of doubt, it is intended that severance payments set forth in this Agreement satisfy, to the greatest extent possible, the exceptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5), and 1.409A-1(b)(9).  If the Company (or, if applicable, the successor entity thereto) determines that any payments or benefits constitute “deferred compensation” under Section 409A and Employee is, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the payments and benefits shall be delayed until the earlier to occur of:  (a) the date that is six months and one day after Employee’s Separation From Service, or (b) the date of Employee’s death (such applicable date, the “Specified Employee Initial Payment Date”).  On the Specified Employee Initial Payment Date, the Company (or the successor entity thereto, as applicable) shall (i) pay to Employee a lump sum amount equal to the sum of the payments and benefits that Employee would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of such amounts had not been so delayed pursuant to this Section and (ii) commence paying the balance of the payments and benefits in 

 

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accordance with the applicable payment schedules set forth in this Agreement.  All reimbursements provided under this Agreement shall be subject to the following requirements:  (i) the amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year, (ii) all reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred, and (iii) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for any other benefit.  It is intended that all payments and benefits under this Agreement shall either comply with or be exempt from the requirements of Section 409A, and any ambiguity contained herein shall be interpreted in such manner so as to avoid adverse personal tax consequences under Section 409A.  Notwithstanding the foregoing, the Company shall in no event be obligated to indemnify the Employee for any taxes or interest that may be assessed by the Internal Revenue Service pursuant to Section 409A of the Code to payments made pursuant to this Agreement.

 

7.                                            GENERAL PROVISIONS.

 

7.1                               Notices.  Any notices required hereunder to be in writing shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by electronic mail, telex or confirmed facsimile if sent during normal business hours of the recipient, and if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to the Company at its primary office location and to Employee at Employee’s address as listed on the Company payroll, or at such other address as the Company or the Employee may designate by ten (10) days advance written notice to the other.

 

7.2                               Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

 

7.3                               Waiver.  If either party should waive any breach of any provisions of this Agreement, such party shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.

 

7.4                               Complete Agreement.  This Agreement constitutes the entire agreement between Employee and the Company with regard to the subject matter hereof.  This Agreement is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter and supersedes any prior oral discussions or written communications and agreements.  This Agreement is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in writing signed by Employee and an authorized officer of the Company.  The parties have entered into a separate 

 

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Proprietary Information Agreement and have or may enter into separate agreement related to stock option awards.  These separate agreements govern other aspects of the relationship between the parties, have or may have provisions that survive termination of the Employee’s employment under this Agreement, may be amended or superseded by the parties without regard to this Agreement and are enforceable according to their terms without regard to the enforcement provision of this Agreement.

 

7.5                               Counterparts.  This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

 

7.6                               Headings.  The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.

 

7.7                               Successors and Assigns.  The Company shall assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any Company or other entity with or into which the Company may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its assets, if in any such case said Company or other entity shall by operation of law or expressly in writing assume all obligations of the Company hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder.  The Employee may not assign or transfer this Agreement or any rights or obligations hereunder, other than to his estate upon his death.

 

7.8                               Choice of Law.  All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of North Carolina, without regard to its rules of conflicts or choice of laws.

 

7.9                               Indemnification.  The Employee shall be entitled to indemnification to the maximum extent permitted by applicable law and the Company’s Bylaws with terms no less favorable than provided to any other Company executive officer and subject to the terms of any separate written indemnification agreement.  At all times during the Employee’s employment, the Company shall maintain in effect a directors and officers liability insurance policy with the Employee as a covered officer.

 

7.10                        Resolution of Disputes.  The parties recognize that litigation in federal or state courts or before federal or state administrative agencies of disputes arising out of the Employee’s employment with the Company or out of this Agreement, or the Employee’s termination of employment or termination of this Agreement, may not be in the best interests of either the Employee or the Company, and may result in unnecessary costs, delays, complexities, and uncertainty.  The parties agree that any dispute between the parties arising out of or relating to the negotiation, execution, performance or termination of this Agreement or the Employee’s employment, including, but not limited to, any claim arising out of this Agreement, claims under Title VII of the Civil Rights Act of 1964, as amended, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans with Disabilities Act of 1990, Section 1981 of the Civil Rights Act of 1966, as amended, the Family Medical Leave Act, the Employee Retirement Income Security Act, and any similar federal, state or local law, statute, 

 

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regulation, or any common law doctrine, whether that dispute arises during or after employment, shall be settled by binding arbitration conducted before a single arbitrator by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) or its successor, under the then applicable JAMS rules; provided however, that this dispute resolution provision shall not apply to any separate agreements between the parties that do not themselves specify arbitration as an exclusive remedy.  The location for the arbitration shall be Charlottesville, Virginia.  Any award made by such panel shall be final, binding and conclusive on the parties for all purposes, and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.  The arbitrators’ fees and expenses and all administrative fees and expenses associated with the filing of the arbitration shall be borne by the Company; provided however, that at the Employee’s option, Employee may voluntarily pay up to one-half the costs and fees, for which Employee shall be reimbursed by the Company.  The parties acknowledge and agree that their obligations to arbitrate under this Section survive the termination of this Agreement and continue after the termination of the employment relationship between Employee and the Company. The parties each further agree that the arbitration provisions of this Agreement shall provide each party with its exclusive remedy, and each party expressly waives any right it might have to seek redress in any other forum, except as otherwise expressly provided in this Agreement.  By election arbitration as the means for final settlement of all claims, the parties hereby waive their respective rights to, and agree not to, sue each other in any action in a Federal, State or local court with respect to such claims, but may seek to enforce in court an arbitration award rendered pursuant to this Agreement.  The parties specifically agree to waive their respective rights to a trial by jury, and further agree that no demand, request or motion will be made for trial by jury.

 

IN WITNESS WHEREOF, the parties have executed this Employment Agreement on the day and year first written above.

 

	
 
    	
COMPANY:
    
	
 
    	
 
    
	
 
    	
DOVA   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Alex Sapir
    
	
 
    	
Name:
    	
Alex   Sapir
    
	
 
    	
Title:
    	
President   and CEO
    
	
 
    	
 
    
	
 
    	
EMPLOYEE:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Mark W. Hahn
    
	
 
    	
Mark   W. Hahn
    

 

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