<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
PACIFIC
ENTERPRISES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PACIFIC
ENTERPRISES
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
Check box if any part of the fee is offset as provided by Exchange Act Rule
/ / 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[PACIFIC ENTERPRISES LOGO]
633 WEST FIFTH STREET
LOS ANGELES, CA 90071-2006
WILLIS B. WOOD, JR.
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
March 22, 1994
Dear Shareholder:
On behalf of the Board of Directors, it is a pleasure to invite you to our
Annual Meeting of Shareholders to be held in Los Angeles on May 5. I hope you
will find it convenient to attend.
At the Annual Meeting directors will be elected and the employee stock
option plan described in the accompanying proxy statement will be voted upon. If
properly presented at the meeting, the shareholder proposal described in the
proxy statement will also be considered. Confidential voting is provided for
employee shareholders voting through the company's employee benefit plans and
other shareholders may elect confidential voting if they so desire.
Whether you own a few or many shares and whether or not you plan to attend
in person, it is important that your shares be voted at the Annual Meeting. I
urge you to complete the enclosed proxy or voting instruction and return it
promptly. If you have any questions concerning the Annual Meeting, please call
Pacific Enterprises Shareholder Services, 1-800-722-5483.
Very truly yours,
Willis B. Wood, Jr.
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 108th Annual Meeting of Shareholders of Pacific Enterprises will be held
on Thursday, May 5, 1994 at 9:30 a.m. in the Westin Bonaventure Hotel, 404 South
Figueroa Street, Los Angeles, California. At the Annual Meeting, shareholders
will consider the following items of business:
1. The election of directors.
2. Approval of an employee stock option plan.
3. If properly presented at the meeting, approval of a shareholder
proposal.
4. Such other business as may properly come before the meeting.
Shareholders of record at the close of business on March 21, 1994, are
entitled to notice of and to vote at the Annual Meeting.
ONLY SHAREHOLDERS OF PACIFIC ENTERPRISES ARE ENTITLED TO ATTEND THE ANNUAL
MEETING.
AN ADMISSION TICKET TO THE ANNUAL MEETING IS PRINTED ON THE INSIDE BACK
COVER OF THIS PROXY STATEMENT. IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
BRING THIS TICKET WITH YOU. IT WILL ADMIT YOU AND A GUEST OR FAMILY MEMBER TO
THE MEETING.
Shareholders who do not bring an admission ticket to the Annual Meeting must
have their share ownership verified to obtain admission. Shareholders of record
will be admitted upon verification of record share ownership at the admission
desk. Shareholders who own shares through banks, brokerage firms, nominees,
employee benefit plans or other account custodians, must present proof of
beneficial share ownership (such as a brokerage account or employee benefit plan
statement) at the admission desk.
If you expect to attend the Annual Meeting in person, please check the
attendance box provided on the enclosed proxy card or voting instruction.
Seating is limited and will be on a first-come, first-served basis. Doors will
open at 8:30 a.m.
Thomas C. Sanger, Secretary
March 22, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Pacific Enterprises........................................................................................ 1
Outstanding Shares and Voting Rights....................................................................... 1
Board of Directors......................................................................................... 3
Election of Directors...................................................................................... 4
Share Ownership of Directors and Executive Officers........................................................ 8
Financial Performance and Shareholder Returns.............................................................. 9
Report of the Compensation Committee....................................................................... 12
Executive Compensation..................................................................................... 16
Employee Stock Option Plan................................................................................. 20
Shareholder Proposal....................................................................................... 24
Solicitation of Proxies and Voting Instructions............................................................ 26
Independent Auditors....................................................................................... 27
Annual Reports............................................................................................. 27
1995 Annual Meeting........................................................................................ 27
Other Business............................................................................................. 28
</TABLE>
<PAGE>
[PACIFIC ENTERPRISES LOGO]
------------------------
PROXY STATEMENT
------------------------
Pacific Enterprises is providing this Proxy Statement to shareholders in
connection with its Annual Meeting of Shareholders to be held May 5, 1994. It is
being mailed to shareholders commencing March 22, 1994.
PACIFIC ENTERPRISES
Pacific Enterprises is a Los Angeles-based utility holding company engaged
in supplying natural gas throughout most of Southern and portions of Central
California. These operations are conducted through Southern California Gas
Company, the nation's largest natural gas distribution utility, which provides
gas service through 4.7 million meters to 535 cities and communities in a
23,000-square-mile service territory with a population of 16 million. Through
other subsidiaries, Pacific Enterprises is also engaged in interstate and
offshore natural gas transmission to serve its utility operations and in
alternate energy development.
Pacific Enterprises was incorporated in California in 1907 as the successor
to a corporation organized in 1886. Its principal executive offices are located
at 633 West Fifth Street, Los Angeles, California and its telephone number is
(213) 895-5000.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders who are present at the Annual Meeting in person or by proxy
will be entitled to one vote for each share of Pacific Enterprises Common Stock
and Voting Preferred Stock which they held of record on March 21, 1994. On that
date 84,381,175 shares of Pacific Enterprises Common Stock and 1,100,353 shares
of Pacific Enterprises Voting Preferred Stock were outstanding.
Pacific Enterprises' bylaws permit each shareholder who desires to do so to
elect that his or her identity and individual vote be held confidential.
Confidentiality will not apply to the extent that voting disclosure is required
by applicable law or is appropriate to assert or defend any claim relating to
shareholder voting. Confidentiality also will not apply with respect to any
matter for which shareholder votes are solicited in opposition to the nominees
or voting recommendations of the Board of Directors
1
<PAGE>
unless the persons engaged in the opposition solicitation provide shareholders
with voting confidentiality (which, if not otherwise provided, will be requested
by Pacific Enterprises) comparable to the voting confidentiality provided by
Pacific Enterprises. A shareholder desiring confidential voting must mark the
appropriate box and return the enclosed proxy card.
The employee benefit plans of Pacific Enterprises and its subsidiaries
automatically provide for confidential voting by employees participating in the
plans. Employees holding shares through these plans need not take any action to
obtain confidential voting and may vote their shares by returning the enclosed
voting instruction.
Proxies and voting instructions that are timely received will be voted in
the manner directed thereon. If no direction is given, they will be voted, as to
the shares for which they are authorized to be voted, in accordance with the
recommendations of the Board of Directors. Only votes for or against a
particular matter will be counted as votes cast in determining the outcome of
that matter.
2
<PAGE>
BOARD OF DIRECTORS
Pacific Enterprises' entire Board of Directors is elected at each Annual
Meeting of Shareholders. During 1993, the Board of Directors held fifteen
meetings.
BOARD COMMITTEES
The Board of Directors maintains standing Audit, Compensation, Corporate
Social Responsibility, Environmental, Executive, Finance and Technology, and
Nominating Committees.
THE AUDIT COMMITTEE, which consists entirely of non-officer directors,
recommends to the Board of Directors the selection of independent auditors;
approves and reviews services and fees of independent auditors; and reviews
accounting policies, internal accounting controls and the results of audit
engagements. During 1993, the Committee held five meetings.
THE COMPENSATION COMMITTEE reviews the performance and approves the
compensation of senior management (except that of the chief executive officer,
which requires approval by the Board of Directors) and recommends the adoption
of and administers compensation plans in which senior management is eligible to
participate. The Committee also considers management succession plans. During
1993, the Committee held six meetings.
THE CORPORATE SOCIAL RESPONSIBILITY COMMITTEE reviews and monitors Pacific
Enterprises' fulfillment of its responsibilities on matters of public policy.
During 1993, the Committee held two meetings.
THE ENVIRONMENTAL COMMITTEE reviews and monitors Pacific Enterprises'
fulfillment of its environmental responsibilities. During 1993, the Committee
held three meetings.
THE EXECUTIVE COMMITTEE may act on all but certain major corporate matters
reserved to the Board of Directors. It meets when emergency issues or scheduling
make it difficult to assemble the Board of Directors. During 1993, the Committee
held one meeting.
THE FINANCE AND TECHNOLOGY COMMITTEE reviews and monitors financial and
technological matters affecting Pacific Enterprises. During 1993, the Committee
held three meetings.
THE NOMINATING COMMITTEE considers and makes recommendations regarding the
nominations of directors and the size and composition of the Board of Directors.
During 1993, the Committee held four meetings. The Committee will consider
shareholder suggestions for nominees for director. Suggestions may be submitted
to the Secretary of Pacific Enterprises, P.O. Box 60043, Los Angeles, California
90060-0043. Biographical information concerning the proposed nominee should also
be included to assist the Committee in its deliberations.
3
<PAGE>
DIRECTOR COMPENSATION
Directors who are also officers of Pacific Enterprises or its subsidiaries
are not separately compensated for their services as directors or as members of
Committees of the Board of Directors. Non-officer directors receive annual
retainers of $25,000 and an additional $3,000 for each Committee which they
chair. Non-officer directors also receive $900 for each meeting of the Board of
Directors or Committee of the Board of Directors which they attend. Directors
may defer the receipt of their compensation and earn interest on the amounts
deferred.
Non-officer directors receive retirement benefits commencing upon the later
of retirement or attaining age 65. The annual retirement benefit is the annual
base retainer from time to time in effect plus the Board meeting fee from time
to time in effect multiplied by ten. The benefit continues for a maximum period
equal to the director's years of service as a non-officer director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of five members, all of whom are
non-officer directors and current or former chief executive officers of
corporations listed on the New York Stock Exchange. The members of the Committee
are James F. Dickason, Wilford D. Godbold, Jr., Harold M. Messmer, Jr., Paul A.
Miller and Rocco C. Siciliano. Mr. Miller is a former officer of Pacific
Enterprises who retired as Chairman of the Board and Chief Executive Officer in
1989.
ELECTION OF DIRECTORS
The Board of Directors currently is comprised of fourteen directors, four of
whom (James F. Dickason, Joseph N. Mitchell, Rocco C. Siciliano and Leonard H.
Straus) will retire at the Annual Meeting of Shareholders. The authorized number
of directors has been reduced to reflect these retirements.
At the Annual Meeting, ten directors (comprising the then entire authorized
number of directors) will be elected to hold office until the next Annual
Meeting and until their successors have been elected and qualified. The ten
director candidates receiving the highest number of affirmative votes of the
shares entitled to be voted will be elected as directors.
The names of the Board of Directors' ten nominees for election as directors
and biographical and shareholding information (see also "Share Ownership of
Directors and Executive Officers") regarding each nominee are set forth below.
Each nominee is currently a director of both Pacific Enterprises and Southern
California Gas Company and, unless otherwise noted, has held the position set
forth beneath his or her name or various positions with the same organization
for at least the last five years.
The proxies and voting instructions solicited by this Proxy Statement will
be voted for the election of these nominees unless other instructions are
specified. If any nominee should become unavailable to serve, the proxies and
voting instructions may be voted for a substitute nominee designated by the
Board of Directors or the authorized number of directors may be reduced.
4
<PAGE>
HYLA H. BERTEA,
COMMUNITY LEADER.
Mrs. Bertea, 53, has been a director of Pacific Enterprises
since 1988. She is a Senior Marketing Consultant and a realtor
with Grubb & Ellis, a real estate sales company, and from 1988
to 1990 was a Vice President of The Dalebout Association, a real estate sales
company. For a number of years she has been involved in leadership positions
with various cultural, educational and health organizations in the Orange County
and Los Angeles areas. She was a co-commissioner of gymnastics and member of the
executive staff for the 1984 Olympics.
<TABLE>
<S> <C> <C>
Committees: Audit and Nominating Shares: 9,273
</TABLE>
HERBERT L. CARTER,
PRESIDENT AND CHIEF EXECUTIVE OFFICER OF UNITED WAY OF LOS
ANGELES, INC.
Dr. Carter, 60, has been a director of Pacific Enterprises
since 1991. He was Executive Vice Chancellor of the California
State University from 1974 until 1992. He is a director of
Golden State Mutual Insurance Co.; a member of the Board of Councilors of the
School of Public Administration, University of Southern California; and a member
of the Board of Trustees of Loyola Marymount University.
<TABLE>
<S> <C> <C>
Committees: Corporate Social Shares: 759
Responsibility
and Environmental
</TABLE>
RICHARD D. FARMAN,
PRESIDENT OF PACIFIC ENTERPRISES AND CHIEF EXECUTIVE OFFICER
OF SOUTHERN CALIFORNIA GAS COM-
PANY.
Mr. Farman, 58, has been a director of Pacific Enterprises
since 1992. He is also a director of Union Bank, Associated
Electric & Gas Insurance Services Ltd., KCET Public Television and the Los
Angeles Area Chamber of Commerce. He is a former Chairman of the American Gas
Association and is immediate past Chairman of the Natural Gas Council.
<TABLE>
<S> <C> <C>
Committees: Environmental, Shares: 60,357
Executive and
Finance and
Technology
</TABLE>
WILFORD D. GODBOLD, JR.,
PRESIDENT, CHIEF EXECUTIVE OFFICER AND A DIRECTOR OF ZERO
CORPORATION, AN INTERNATIONAL MANUFACTURER OF ENCLOSURES AND
COOLING EQUIPMENT FOR THE ELECTRONICS MARKET, AND OF AIR CARGO
AND AIR FREIGHT ENCLOSURES.
Mr. Godbold, 55, has been a director of Pacific Enterprises since 1990. He is
also a director of Santa Fe Pacific Pipelines, Inc.; immediate past Chairman of
the Board of Directors of the California State Chamber of Commerce; Chairman of
the Board of Directors of The Employer's Group; a member of the Board of
Trustees of the 4 A's Foundation; and a member of the Council on California
Competitiveness. He is past President of the Board of Trustees of Marlborough
School.
<TABLE>
<S> <C> <C>
Committees: Audit, Compensation Shares: 2,000
and Finance and
Technology
</TABLE>
5
<PAGE>
IGNACIO E. LOZANO, JR.,
EDITOR-IN-CHIEF OF LA OPINION, A SPANISH LANGUAGE DAILY
NEWSPAPER. DURING 1976 AND 1977 MR. LOZANO SERVED AS UNITED
STATES AMBASSADOR TO EL SALVADOR.
Mr. Lozano, 67, has been a director of Pacific Enterprises
since 1978. He is also a director of BankAmerica Corporation, Bank of America
NT&SA, The Walt Disney Company, Pacific Mutual Life Insurance Company, the Santa
Anita Foundation, the Youth Opportunities Foundation and South Coast Repertory
Theatre. He is a trustee of the University of Notre Dame. He is a member of the
California Press Association and the Los Angeles Press Club.
<TABLE>
<S> <C> <C>
Committees: Corporate Social Shares: 1,294
Responsibility
and Nominating
</TABLE>
HAROLD M. MESSMER, JR.,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF ROBERT HALF
INTERNATIONAL INC., A PERSONNEL SERVICE FIRM SPECIALIZING IN
THE ACCOUNTING, FINANCIAL, BANKING AND INFORMATION SYSTEMS
FIELDS.
Mr. Messmer, 48, has been a director of Pacific Enterprises
since 1991. He is also a director of Airborne Freight Corporation, Health Care
Property Investors, Inc., NationsBank of North Carolina, N.A., and Spieker
Properties, Inc. He is an active member of the Young Presidents Organization and
serves on the board of several civic and educational groups, including the San
Francisco Bay Area Council and the San Francisco Boys and Girls Club. He is a
trustee of Sacred Heart Schools.
<TABLE>
<S> <C> <C>
Committees: Audit, Compensation Shares: 6,000
and Finance and
Technology
</TABLE>
PAUL A. MILLER,
RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF
PACIFIC ENTERPRISES; CHAIRMAN OF THE EXECUTIVE COMMITTEE OF
PACIFIC ENTERPRISES.
Mr. Miller, 69, has been a director of Pacific Enterprises
since 1952. He is also a director of Newhall Management
Corporation, Wells Fargo & Company, Wells Fargo Bank, N.A., and a trustee of
Mutual Life Insurance Company of New York and the University of Southern
California.
<TABLE>
<S> <C> <C>
Committees: Compensation and Shares: 11,386
Executive
</TABLE>
JOSEPH R. RENSCH,
RETIRED OFFICER OF PACIFIC ENTER-
PRISES.
Mr. Rensch, 71, has been a director of Pacific Enterprises
since 1970. He was the President of Pacific Enterprises from
1972 until 1986 and the Vice Chairman of the Board from 1986
until his retirement in 1988. He is a member of the American Bar Association and
a registered California Professional Engineer.
<TABLE>
<S> <C> <C>
Committee: Corporate Social Shares: 26,270
Responsibility
</TABLE>
6
<PAGE>
DIANA L. WALKER,
IS A PARTNER IN THE LOS ANGELES BASED LAW FIRM OF O'MELVENY &
MYERS.
Mrs. Walker, 52, has been a director of Pacific Enterprises
since 1989. She is a former trustee of Marlborough School. She
has served on various professional organizations. O'Melveny & Myers, of whom
Mrs. Walker is a partner, provides legal services to Pacific Enterprises.
<TABLE>
<S> <C> <C>
Committees: Audit and Finance Shares: 500
and Technology
</TABLE>
WILLIS B. WOOD, JR.,
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF PACIFIC
ENTERPRISES AND PRESIDING DIRECTOR OF SOUTHERN CALIFORNIA GAS
COMPANY.
Mr. Wood, 59, has been a director of Pacific Enterprises since
1989. He is also a director of Great Western Financial Corporation, Great
Western Bank, the California Medical Center Foundation, the California State
Chamber of Commerce and the Automobile Club of Southern California; a trustee of
Harvey Mudd College and the Southwest Museum; and a member of the California
Business Roundtable.
<TABLE>
<S> <C> <C>
Committees: Executive Shares: 124,001
</TABLE>
7
<PAGE>
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the number of shares of Pacific Enterprises
Common Stock beneficially owned as of March 21, 1994 by each director, the chief
executive officer and the four other most highly compensated executive officers
of Pacific Enterprises and, as a group, of such persons and all other executive
officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF COMMON STOCK
- ------------------------------------------------------------------- ------------------
<S> <C>
Hyla H. Bertea (#1)................................................ 9,273
Herbert L. Carter (#2)............................................. 759
James F. Dickason (#3)............................................. 5,414
Richard D. Farman (#4)............................................. 60,357
Wilford D. Godbold, Jr............................................. 2,000
Lloyd A. Levitin (#4).............................................. 64,332
Leslie E. LoBaugh, Jr. (#4)........................................ 32,754
Ignacio E. Lozano, Jr. (#1)........................................ 1,294
Harold M. Messmer, Jr.............................................. 6,000
Paul A. Miller..................................................... 11,386
Joseph N. Mitchell (#3)(#5)........................................ 8,536
Warren I. Mitchell (#4)............................................ 35,166
Joseph R. Rensch................................................... 26,270
Rocco C. Siciliano (#3)............................................ -0-
Leonard H. Straus (#3)(#6)......................................... 637,251
Diana L. Walker.................................................... 500
Willis B. Wood, Jr. (#4)........................................... 124,001
All Directors and Executive Officers as a group (18 persons)
(#4).............................................................. 1,053,999
<FN>
- --------------------------
#1 Includes shares held by spouse. Such shares total 4,100 shares for Mrs.
Bertea and 500 shares for Mr. Lozano.
#2 Includes 35 shares held as guardian.
#3 Messrs. Dickason, Mitchell, Siciliano and Straus will retire as directors
at the Annual Meeting. The authorized number of directors has been reduced
to ten to reflect their retirements.
#4 Includes shares issuable upon exercise of employee stock options that are
exercisable prior to May 31, 1994. Such option shares total 43,600 shares
for Mr. Farman, 49,600 shares for Mr. Levitin, 30,560 shares for Mr.
LoBaugh, 30,200 shares for Mr. Mitchell, 97,000 shares for Mr. Wood and
273,760 shares for all executive officers as a group.
#5 Includes 6,800 shares held as co-general partner of a limited partnership,
1,217 shares held as trustee of a family trust and 519 shares held as
trustee for adult children.
#6 Includes 270,717 shares held by trusts of which spouse is a co-trustee.
</TABLE>
No director or executive officer beneficially owns 1% or more of Pacific
Enterprises Common Stock or any shares of Pacific Enterprises Preferred Stock.
The shares of Pacific Enterprises Common Stock owned by all directors and
executive officers as a group represent approximately 1% of the outstanding
voting shares.
8
<PAGE>
THE FOLLOWING INFORMATION CONTAINED UNDER THE CAPTIONS "FINANCIAL
PERFORMANCE AND SHAREHOLDER RETURNS" AND "REPORT OF THE COMPENSATION COMMITTEE"
SHALL NOT BE DEEMED TO BE "SOLICITING MATERIAL" OR TO BE "FILED" WITH THE
SECURITIES AND EXCHANGE COMMISSION AND SHALL NOT BE DEEMED TO BE INCORPORATED
INTO ANY FILING BY PACIFIC ENTERPRISES UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES EXCHANGE ACT OF 1934 IN THE ABSENCE OF SPECIFIC REFERENCE TO SUCH
INFORMATION AND CAPTIONS.
FINANCIAL PERFORMANCE AND SHAREHOLDER RETURNS
Pacific Enterprises returned to profitability in 1993 and resumed dividends
on its Common Stock. This was accomplished through the completion of a strategic
restructuring and the continued strong performance of gas utility operations
conducted through Southern California Gas Company, which has achieved or
exceeded its authorized rate of return on rate base for the last 11 consecutive
years.
The restructuring was part of a new strategic plan to refocus on natural gas
utility operations. It was adopted in 1992 in response to increasingly
unsatisfactory financial performance and shareholder returns attributable to
non-utility operations. Non-utility operations had been greatly expanded in 1986
with the initial acquisition of retailing operations and, to a lesser extent,
again in 1988 with additional acquisitions in retailing and in oil and gas
exploration and production. The profitability of gas utility operations could
not offset declines in non-utility operations and earnings per share
increasingly declined beginning in 1988 and substantial and increasing losses
were incurred beginning in 1990. As a result, non-utility related indebtedness
increased substantially and dividends on Common Stock were reduced in 1991 and
suspended in 1992.
During 1992 and early 1993, retailing and oil and gas exploration and
production operations were sold with the sale proceeds applied to reduce
non-utility related debt and the remaining debt was refinanced. Corporate staff
and other expenses also were reduced. In addition, a quasi-reorganization for
financial reporting purposes was effected on December 31, 1993, adjusting
remaining non-utility assets to fair value and eliminating an accumulated
deficit in retained earnings.
In mid-1993, Pacific Enterprises completed a public offering of 8 million
shares of its Common Stock and applied a portion of the proceeds of the offering
to the repayment of substantially all remaining non-utility debt. Cash dividends
on Common Stock were then resumed at an initial annual rate of $1.20 per share.
The restructuring was completed later in 1993 by establishing common
membership for the Boards of Directors of Pacific Enterprises and Southern
California Gas Company and electing several officers in common between the two
companies. These include Willis B. Wood, Jr., Chairman and Chief Executive
Officer of Pacific Enterprises, who was elected as Presiding Director of
Southern California Gas Company and Richard D. Farman, Chief Executive Officer
of Southern California Gas Company, who was elected as President of Pacific
Enterprises.
9
<PAGE>
Pacific Enterprises financial results for 1993 and over the past five years
have been reflected in its stock price performance and total return to
shareholders as shown in the graphs on the following page. These graphs compare
the market value over the last year and the last five years (assuming
reinvestment of dividends) of an initial $100 investment in Pacific Enterprises
Common Stock at the beginning of each period with an identical investment in a
weighted basket of stocks comprising the Standard & Poor's 500 Stock Index and
indices of diversified/integrated gas utilities and gas distribution utilities
developed by the American Gas Association.
The companies comprising the American Gas Association's
diversified/integrated gas utilities group are Arkla, Inc., Chesapeake
Utilities, Columbia Gas System, Consolidated Natural Gas, Eastern Enterprises,
Energen Corporation, Enserch Corporation, Equitable Resources, K N Energy, Inc.,
Nicor Inc., Oneok, Inc., Pacific Enterprises, Pennsylvania Enterprises, Questar
Corporation, South Jersey Industries, Southwest Gas Corporation, UGI
Corporation, Valley Resources, Inc., Washington Energy and Wicor, Inc.
The companies comprising the American Gas Association's gas distribution
utilities group are Atlanta Gas Light Co., Atmos Energy Corporation, Bay State
Gas Company, Brooklyn Union Gas Co., Cascade Natural Gas Corp., Colonial Gas
Company, Connecticut Energy Corp., Connecticut Natural Gas, Delta Natural Gas
Co., Inc., Energynorth, Inc., Essex County Gas Company, Energywest, Indiana
Energy, Inc., MCN Corporation, Mobile Gas Service Corp., New Jersey Resources
Corp., North Carolina Natural Gas, Northwest Natural Gas Co., NUI Corporation,
Peoples Energy Corporation, Piedmont Natural Gas Co., Providence Energy Corp.,
PS Co of North Carolina, Southern Union Company, United Cities Gas Company,
Washington Gas Light Co., Wisconsin Southern Gas Co. and Yankek Energy System,
Inc.
In its proxy statement for the 1993 Annual Meeting of Shareholders, Pacific
Enterprises compared its cumulative total return to shareholders only to the
Standard & Poor's 500 Stock Index and the American Gas Association's index of
diversified/integrated gas utilities. As a result of the sale of its non-utility
operations and the completion of its strategic restructuring during 1993,
Pacific Enterprises this year has elected also to compare its total return to
the American Gas Association gas distribution utilities group as more comparable
with the non-diversified utility nature of its business during 1993 and for
future years.
The factors affecting Pacific Enterprises future performance are discussed
under the caption "Financial Review -- Management's Discussion and Analysis" in
Pacific Enterprises 1993 Annual Report to Shareholders and in the financial
statements appearing on pages 17 through 40 of the Annual Report.
10
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Pacific Enterprises......................... $146 $122 $ 89 $ 64 $ 84
S & P 500................................... 132 127 166 179 197
AGA Diversified/Integrated Gas Utilities.... 132 127 108 114 130
AGA Gas Distribution Utilities.............. 140 134 162 193 225
</TABLE>
COMPARISON OF ONE YEAR CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
3/31/93 6/30/93 9/30/93 12/31/93
------- ------- ------- --------
<S> <C> <C> <C> <C>
Pacific Enterprises................... $ 132 $ 132 $ 144 $ 131
S & P 500............................. 104 105 108 110
AGA Diversified/Integrated Gas
Utilities............................ 104 105 108 113
AGA Gas Distribution Utilities........ 104 105 108 116
<FN>
- ------------------------
* Assumes $100 invested on January 1, 1989 and all dividends reinvested.
** Assumes $100 invested on January 1, 1993 and all dividends reinvested.
Data for AGA Gas Distribution Utilities and AGA Diversified/Integrated
Utilities represent average return for the year by quarter.
</TABLE>
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is composed of five
non-officer directors, all of whom are current or former chief executive
officers of corporations listed on the New York Stock Exchange. The Chairman of
the Committee is Harold M. Messmer, Jr., who joined the Committee in February
1994.
COMMITTEE RESPONSIBILITIES
The Compensation Committee reviews management compensation levels, evaluates
management performance, and considers management succession and related matters.
The Committee also administers Pacific Enterprises' various executive incentive
plans.
Each year the Compensation Committee reviews and approves a compensation
plan for Pacific Enterprises' executive officers. The plan is developed in
conjunction with independent compensation consultants and includes a review of
compensation practices of comparable utility and gas utility companies
throughout the United States (including companies included in the American Gas
Association's index of gas distribution utilities) and major California general
industry companies with which Pacific Enterprises competes for executives, a
review of the performance of these companies and Pacific Enterprises and
subjective judgments as to the past and expected future contributions of Pacific
Enterprises' individual executives.
Base salaries are reviewed annually and adjustments are also considered upon
changes in executive responsibilities. Annual target and maximum bonus
opportunity levels are developed and historically have been set at general
industry levels for other California companies with which Pacific Enterprises
competes for executives. The payment of these bonuses is tied to Pacific
Enterprises' success in achieving returns on equity established annually by the
Compensation Committee as appropriate for Pacific Enterprises' mix of businesses
and the degree to which, in the judgment of the Committee, an executive's
performance and responsibilities contribute to that success. Longer term
incentive compensation historically has been provided by long-term incentive
bonuses tied to Pacific Enterprises' success in achieving longer-term financial
goals, although the Committee has more recently placed greater emphasis on stock
options to provide long-term incentives.
COMPENSATION CONSULTANTS
To assist the Compensation Committee in performing its functions, the
Committee retains the services of nationally known independent consulting firms
specializing in executive compensation issues. Since 1990, these services have
been provided by Hewitt Associates, which advises the Committee as to the
appropriateness of executive compensation in achieving Pacific Enterprises'
objectives. In doing so, Hewitt Associates prepares and reviews with the
Committee surveys and other materials reflecting compensation practices of other
companies and other factors (including relative performance and general economic
conditions) which they deem relevant.
12
<PAGE>
COMPENSATION ACTIONS
Pacific Enterprises returned to profitability in 1993 and resumed the
payment of dividends on Common Stock after several years of unsatisfactory
financial performance as a consequence of disappointing results on non-utility
operations. This return to profitability and prior years' unsatisfactory
performance have been reflected in Pacific Enterprises returns to shareholders
(See "Financial Results and Shareholder Returns") and in the compensation of
Pacific Enterprises' executives.
SALARIES
Through 1993, salaries for executive officers were generally frozen at 1991
levels except for adjustments to reflect changes in executive responsibilities.
Willis B. Wood, Jr. received a 24% salary increase upon becoming Chief Executive
Officer in December 1991 and an additional 10% increase upon assuming the
additional responsibilities of Chairman of the Board in September 1992.
Richard D. Farman, Chief Executive Officer of Southern California Gas
Company, also received a promotional increase of 9% in September 1993. In
addition, Messrs. Farman and Mitchell, whose performance is evaluated based upon
that of Southern California Gas Company of which they are the Chief Executive
Officer and President, respectively, also received salary increases for 1992 and
1993 based upon the superior performance of utility operations.
Reflecting a policy to put more chief executive compensation "at risk" and a
related 80,000-share stock option grant in 1993, Mr. Wood has not received a
salary increase for 1994. Mr. Farman (who received a promotional increase in
September 1993) also has not received a salary increase for 1994. Other
executive officers have been awarded salary increases for 1994 averaging 4.4%.
BONUSES
No annual bonuses were paid for 1991 except to Messrs. Farman and Mitchell
based upon the superior performance of Southern California Gas Company, and to
Leslie E. LoBaugh, Jr., Vice President and General Counsel, based upon his
individual performance. In evaluating performance and determining annual bonuses
for 1992 and 1993, the Compensation Committee has taken particular note of
Pacific Enterprises' success in developing and implementing the strategic plan
and restructuring program that returned Pacific Enterprises to profitability and
permitted the resumption of dividends in 1993.
The development and initial implementation of the strategic restructuring
program in 1992 resulted in the Compensation Committee paying annual bonuses for
that year based upon individual performance to Mr. Wood and other executive
officers in that year. In addition, the continued superior performance of
Southern California Gas Company for 1992 resulted in paying maximum annual
bonuses to Messrs. Farman and Mitchell.
For 1993, the success of the restructuring and continued superior
performance of Southern California Gas Company resulted in Pacific Enterprises
achieving a return on equity of 19.1%. This return on
13
<PAGE>
equity was substantially above the target return established by the Compensation
Committee at the beginning of 1993 for bonus purposes and, together with
favorable assessments of the contributions of individual executive officers to
achieving this return, resulted in paying to Mr. Wood and other executive
officers maximum or near maximum bonuses for 1993.
No long-term incentive bonuses have been paid since 1990 and the
Compensation Committee has determined to rely primarily upon stock options to
provide long-term incentive compensation. Consequently, the Committee has
terminated the long-term incentive bonus program.
STOCK OPTIONS
The Compensation Committee has determined to rely primarily on stock
options, which closely equate compensation to shareholder returns, in place of
long-term based cash bonuses to provide long-term incentive compensation.
Accordingly, during 1993, the Committee granted options to purchase an aggregate
of 303,000 shares to executive officers, including an 80,000-share grant to Mr.
Wood. All options were granted for ten years and at an option price equal to
100% of the then fair market value of the option shares. The options vest in
cumulative annual installments of 20% of the original grant over a five-year
period with vesting and exercisability subject only to continuing employment.
In early 1994 the Compensation Committee also adopted an Employee Stock
Option Plan. This Plan, which permits only the grant of stock options and
related dividend equivalents and is being submitted to shareholders for
approval, is significantly more restrictive in the types of incentive awards
than the Stock Incentive Plan which it would replace. See "Employee Stock Option
Plan."
In granting options and adopting the Employee Stock Option Plan, the
Compensation Committee reviewed the stock option practices of other companies,
and the number and price of options and other stock based incentives previously
awarded to executive officers and the substantial changes in Pacific Enterprises
resulting from the completion of the strategic restructuring. The size of option
grants is designed, together with salaries and bonuses, to provide competitive
overall compensation for various levels of executive responsibility. With
respect to the 80,000-share grant to Mr. Wood in 1993, the Committee took
particular note of his increased responsibilities upon becoming Chairman of the
Board in September 1992.
COMPENSATION POLICY
Throughout 1992 and in prior years, Pacific Enterprises owned major
non-utility operations in retailing and in oil and gas exploration and
production. These operations were sold in 1992 and early 1993 as part of a
strategic plan to refocus on natural gas utility operations. See "Financial
Performance and Shareholder Returns."
14
<PAGE>
Consequently, in previous years, the Compensation Committee implemented
policies intended to provide levels of executive compensation competitive with
general industry levels for other California companies. These levels were, in
general, above those for utility and gas utility companies and reflected the
diversified nature of Pacific Enterprises' business.
As a result of the successful implementation of the strategic restructuring,
Pacific Enterprises has refocused on natural gas utility operations.
Consequently, in early 1994, the Compensation Committee approved policies
intended over time to provide future levels of executive compensation more
comparable to those of other utility and gas utility companies. These policies
are expected to result in lower total executive compensation for similar levels
of individual performance, primarily through reductions in bonus opportunities,
than would have resulted from the continuation of the Committee's previous
policies.
As one of the factors in its consideration of compensation matters, the
Compensation Committee will continue to consider, to the extent determinable,
the anticipated tax consequences to Pacific Enterprises and its executives of
the level and forms of executive compensation. The tax consequences of various
levels and forms of compensation, including tax deductibility to Pacific
Enterprises, may depend upon the timing of payment or vesting or exercise of
previously granted rights. In addition, interpretations of and changes in the
tax laws and other factors beyond the Committee's control also affect the tax
consequences of executive compensation. For these and other reasons, the
Committee will not necessarily and in all circumstances limit executive
compensation to that level or those forms which would be deductible to Pacific
Enterprises for tax purposes. However, the Committee will consider various
alternatives for preserving the deductibility of executive compensation to the
extent reasonably practicable and consistent with its other compensation
objectives.
COMPENSATION COMMITTEE
Harold M. Messmer, Jr., Chairman
James F. Dickason
Wilford D. Godbold, Jr.
Paul A. Miller
Rocco C. Siciliano
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<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by Pacific Enterprises
to those persons who were, at December 31, 1993, its chief executive officer and
its other four most highly compensated executive officers and to one additional
executive officer who retired during 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
AWARDS
----------------------
SHARES PAYOUTS
ANNUAL COMPENSATION RESTRICTED UNDERLYING ------- ALL OTHER
------------------------ STOCK OPTIONS/ LTIP COMPENSATION
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS AWARDS(#1) SARS PAYOUTS (#2)(#3)
- --------------------------------------------------------- ---- -------- -------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Willis B. Wood, Jr.
Chairman and Chief 1993 $641,000 $511,438 $ -0- 80,000 $ -0- $ 57,808
Executive Officer of Pacific 1992 $601,000 $164,000 $ -0- 100,000 $ -0- $ 66,100
Enterprises and Presiding Director of Southern 1991 $479,510 $ -0- $ -0- 35,000 $ -0- $ 50,023
California Gas Company
Richard D. Farman
President of Pacific 1993 $412,000 $267,525 $ -0- 90,000 $ -0- $ 50,153
Enterprises and Chief 1992 $381,000 $254,000 $ -0- 35,000 $ -0- $ 56,694
Executive Officer of Southern 1991 $356,000 $236,300 $ -0- 20,000 $ -0- $ 42,880
California Gas Company
Lloyd A. Levitin
Executive Vice President 1993 $341,000 $226,126 $ -0- 40,000 $ -0- $ 63,009
and Chief Financial Officer 1992 $341,000 $ 75,000 $ -0- 50,000 $ -0- $ 72,110
of Pacific Enterprises and Southern California Gas 1991 $341,000 $ -0- $ -0- 20,000 $ -0- $ 55,777
Company
Warren I. Mitchell
President of 1993 $271,000 $154,200 $ -0- 32,000 $ -0- $ 8,243
Southern California 1992 $251,000 $147,000 $ -0- 25,000 $ -0- $ 7,649
Gas Company 1991 $236,000 $132,000 $ -0- 10,000 $ -0- $ 6,522
Leslie E. LoBaugh, Jr.
Vice President and 1993 $241,000 $141,000 $ -0- 24,000 $ -0- $ 3,863
General Counsel of Pacific 1992 $241,000 $ 35,000 $ -0- 30,000 $ -0- $ 11,809
Enterprises and Southern California Gas Company 1991 $241,000 $ 25,000 $ -0- 10,000 $ -0- $ 9,274
Harry L. Lepape
Executive Vice President 1993 $274,000 $182,250 $ -0- 20,000 $ -0- $ 899,803
of Pacific 1992 $366,000 $150,000 $ -0- 30,000 $ -0- $ 61,817
Enterprises (#4) 1991 $366,000 $ -0- $ -0- 20,000 $ -0- $ 47,345
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
<FN>
- ------------------------
#1 At December 31,1993, the only shares of restricted stock held by the
executive officers named above were 1,000 shares held by Mr. Wood. At that
date, these shares had a market value (without giving effect to the
diminution of value attributable to transfer restrictions and forfeiture
provisions) of $23,750. Dividends are paid on shares of restricted stock
to the same extent and at the same time as dividends are paid on other
shares of Pacific Enterprises Common Stock.
#2 Consists of interest accruals on deferred compensation above 120% of the
applicable federal rate, the dollar value of insurance premiums paid with
respect to the term portion of life insurance, employer contributions to
defined contribution plans and in the case of Mr. Lepape a payment upon
retirement of $893,000 in 1993. Such interest accruals, insurance premiums
and contributions for 1993 were, respectively, $48,541, $2,192 and $7,075
for Mr. Wood, $41,270, $1,517 and $7,366 for Mr. Farman, $54,768, $1,166
and $7,075 for Mr. Levitin, $312, $943 and $6,988 for Mr. Mitchell,
$3,039, $824 and $-0-for Mr. LoBaugh and $4,062, $1,252 and $1,489 for Mr.
Lepape.
#3 Life insurance policies have been purchased for each of the executive
officers named above (other than Mr. Mitchell) under arrangements
providing for offsets of supplemental pension benefits by the cash
surrender value of the policies. If Mr. LoBaugh had become entitled to the
cash surrender value of his policy at December 31, 1993, he would have
received benefits which would have exceeded his supplemental pension
benefits by $581,000.
#4 Mr. Lepape retired on September 30, 1993.
</TABLE>
17
<PAGE>
STOCK OPTIONS
The following table sets forth information regarding stock options granted
during 1993.
OPTION/SAR GRANTS (#1)
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS/ ESTIMATED
SHARES SARS GRANTED TO GRANT DATE
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION PRESENT
NAME OPTIONS/SARS 1993 PRICE DATE VALUE(#2)
- --------------------------------------------- -------------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Willis B. Wood, Jr........................... 80,000 12% $ 21 5/8 3/2/03 $ 542,400
Richard D. Farman............................ 40,000 6% $ 21 5/8 3/2/03 $ 271,200
50,000 7% $ 26 3/4 9/7/03 $ 148,500
Lloyd A. Levitin............................. 40,000 6% $ 21 5/8 3/2/03 $ 271,200
Warren I. Mitchell........................... 32,000 5% $ 21 5/8 3/2/03 $ 216,960
Leslie E. LoBaugh, Jr. ...................... 24,000 4% $ 21 5/8 3/2/03 $ 162,720
Harry L. Lepape.............................. 20,000 3% $ 21 5/8 3/2/03 $ 135,600
<FN>
- ------------------------
#1 All options are to purchase shares of Pacific Enterprises Common Stock;
were granted at an exercise price of 100% of the fair market value of the
option shares on the date of grant; are for a ten-year term, subject to
earlier expiration upon termination of employment; and become exercisable
in cumulative annual installments of 20% of the shares initially subject
to the option on each of the first five anniversaries of the date of
grant. The Compensation Committee of the Board of Directors may, in its
discretion, permit alternative settlement of stock options by payment to
the optionee of an amount (in cash or shares of Pacific Enterprises Common
Stock of equivalent market value) not exceeding the difference between the
exercise price and the then fair market value of the option shares. Upon a
change in control in Pacific Enterprises, the time periods relating to the
exercise of stock options will be accelerated and, upon the request of the
optionee, Pacific Enterprises will purchase the option for an amount in
cash equal to the amount which could be realized upon the exercise
thereof.
#2 Estimated present value at date of grant based on the Black-Scholes option
pricing model as modified by Pacific Enterprises' independent compensation
consultants to reflect actuarial assumptions regarding termination of
employment both prior to option vesting and prior to the expiration of the
ten-year option term. These modifications reduce estimated values by
approximately 28% and 13%, respectively, from those of immediately
exercisable and fully transferable options for which the model was
otherwise designed. Estimated values under the model are also based on
assumptions as to several variables including a ten-year option term and
with respect to the options expiring on March 2, 2003 and September 9,
2003 a stock price volatility of .374 and .20, respectively; a risk-free
rate of return of 5.98% and 5.68%, respectively; and an annual dividend
yield of 0% and 4.6%, respectively. The actual value, if any, an executive
may realize will depend on the excess of the stock price over the exercise
price on the date the option is exercised.
</TABLE>
18
<PAGE>
The following table sets forth information regarding stock options exercised
in 1993 and the value of stock options outstanding at December 31, 1993.
OPTION/SAR EXERCISES AND OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS/SARS SHARES UNDERLYING VALUE OF UNEXERCISED
EXERCISED IN 1993 UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTION/SARS
------------------------ AT DECEMBER 31, 1993(#1) AT DECEMBER 31, 1993
SHARES VALUE ---------------------------- ----------------------------
NAME ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ----------- ------------ -------------- ------------ --------------
(OPTION SHARES)
<S> <C> <C> <C> <C> <C> <C>
Willis B. Wood, Jr........... -0- $ -0- 49,000 191,000 $ 90,000 $ 530,000
Richard D. Farman............ -0- $ -0- 22,200 134,800 $ 31,500 $ 211,000
Lloyd A. Levitin............. -0- $ -0- 25,200 96,800 $ 45,000 $ 265,000
Warren I. Mitchell........... 5,000 $ 30,625 15,300 61,000 $ -0- $ 158,000
Leslie E. LoBaugh, Jr........ -0- $ -0- 16,760 56,000 $ 27,000 $ 159,000
Harry L. Lepape.............. 30,000 $ 168,750 -0- -0- $ -0- $ -0-
<FN>
- ------------------------
#1 The exercise price of outstanding options ranges from $19 1/4 to $50 7/8.
</TABLE>
PENSION BENEFITS
The following table set forth estimated annual pension benefits, including
supplemental pension benefits, payable upon retirement at age 65 to Pacific
Enterprises' executive officers (based upon payment of benefits as a straight
life annuity after maximum offset for social security benefits but without
offset for any other benefits) in various compensation and years-of-service
classifications.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE (#2)
---------------------------------------------------------------
REMUNERATION (#1) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
---------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 200,000............................. $ 93,346 $ 113,346 $ 115,846 $ 118,346 $ 120,846
400,000............................. 193,346 233,346 238,346 243,346 248,346
600,000............................. 293,346 353,346 360,846 368,346 375,846
800,000............................. 393,346 473,346 483,346 493,346 503,346
900,000............................. 443,346 533,346 544,596 555,346 567,096
1,000,000............................ 493,346 593,346 605,846 618,346 630,846
<FN>
- ------------------------
#1 Average salary for highest three consecutive years of service and average
of three highest annual bonuses during the last ten years of service.
#2 Years of service number 33 for Mr. Wood, 15 for Mr. Farman, 21 for Mr.
Levitin, 35 for Mr. Mitchell, 18 for Mr. LoBaugh and 31 for Mr. Lepape.
</TABLE>
19
<PAGE>
EMPLOYEE STOCK OPTION PLAN
At the Annual Meeting, shareholders will be requested to approve an Employee
Stock Option Plan which has been adopted by the Board of Directors upon the
recommendation of the Compensation Committee. The Plan will permit only the
grant of stock options and related dividend equivalents. Upon approval by
shareholders, the Employee Stock Option Plan will replace the Stock Incentive
Plan which was adopted in 1988 and permits the award of restricted stock and
other stock based awards as well as stock options and dividend equivalents.
The Board of Directors believes that the Employee Stock Option Plan will
assist Pacific Enterprises in providing employees with appropriate incentives
for high levels of performance. Since the Plan provides only for the grant of
stock options and related dividend equivalents, participants will benefit only
by increases in the market value of Pacific Enterprises Common Stock and the
payment of dividends. Accordingly, the Board of Directors believes that the Plan
appropriately aligns the financial interests of employees and shareholders.
Approval of the Employee Stock Option Plan requires the favorable vote of
holders of a majority of the Common and Voting Preferred Stock present or
represented and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE EMPLOYEE STOCK OPTION PLAN
The Employee Stock Option Plan is summarized below. This summary does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Plan which is reprinted as the appendix to this Proxy Statement.
PURPOSE OF THE PLAN
The purpose of the Employee Stock Option Plan is to further the growth and
development of Pacific Enterprises by strengthening the ability of Pacific
Enterprises to attract and retain outstanding employees upon whose judgment,
initiative and efforts the continued success of Pacific Enterprises is
dependent, by providing employees with additional incentives for high levels of
performance and by increasing the commonality of interests of employees and
Pacific Enterprises' shareholders. The Plan seeks to accomplish these purposes
by providing employees with a proprietary interest in Pacific Enterprises
through the grant of stock options to purchase Pacific Enterprises Common Stock.
SHARES SUBJECT TO THE PLAN
Stock options granted under the Employee Stock Option Plan will be for the
purchase of shares of Pacific Enterprises Common Stock. The number of shares as
to which options may be granted is 830,000 shares during 1994. In each year
after 1994, the number of shares as to which options may be granted will be a
number of shares equal to 1% of the shares of Pacific Enterprises Common Stock
20
<PAGE>
outstanding at the beginning of that year. If any option granted under the Plan
expires or terminates for any reason during the year in which it is granted, any
shares as to which the option was not exercised will again be available for the
grant of options during that year.
The number and kind of securities issuable under the Employee Stock Option
Plan and pursuant to then outstanding stock options is subject to adjustments to
prevent enlargement or dilution of rights resulting from recapitalizations,
reorganizations and similar transactions.
PARTICIPATION
Officers and other employees of Pacific Enterprises or any of its
subsidiaries are eligible for selection to participate in the Employee Stock
Option Plan. Directors who are not also employees of Pacific Enterprises or its
subsidiaries are not eligible for selection to participate in the Plan.
No determination has yet been made as to the number of employees to whom
stock options will be granted or the number of shares to be covered by these
options. It is estimated, however, that there are now approximately 120
employees whose positions and responsibilities would result in their
consideration for the grant of options.
ADMINISTRATION
The Employee Stock Option Plan will be administered by the Compensation
Committee of the Board of Directors. Subject to the express provisions of the
Plan, the Compensation Committee will have full and final authority (a) to grant
stock options to employees eligible for selection to participate in the Plan;
(b) to determine the terms and conditions (which need not be identical) of each
stock option; (c) to modify or amend any stock option or waive any restrictions
or conditions applicable to the exercise thereof; (d) to construe and interpret
the Plan and any related stock option and define the terms employed therein; (e)
to prescribe and rescind rules, regulations and policies for the administration
of the Plan; and (f) to make all of the determinations necessary or advisable
with respect to the Plan or any stock option granted thereunder. The Committee
may designate one or more officers or a committee of officers to exercise any or
all of its authority except with respect to the grant of stock options to, or
stock options held by, certain executive officers.
TERMS AND CONDITIONS OF STOCK OPTIONS
Under the Employee Stock Option Plan the Compensation Committee may grant
stock options to purchase shares of Pacific Enterprises Common Stock to
employees eligible for selection to participate in the Plan. The option price of
each share of stock subject to an option and the term of the option and any
related vesting schedule will be determined by the Compensation Committee but
the option price may not be less than 100% of the fair market value of the
shares on the date the option is granted. Each stock option may also provide for
the payment upon exercise of the option of dividend equivalents (the amount of
dividends that would have been paid on shares as to which the option is
exercised had the shares been outstanding from the date the option was granted)
as determined by the Committee. Each
21
<PAGE>
stock option may be granted subject to such additional terms and conditions as
may be determined by the Committee including provisions for increases in option
price or changes in option term, individual or corporate performance conditions
to exercisability of the stock option or the payment of dividend equivalents and
limitations on amounts payable as dividend equivalents.
The Compensation Committee is prohibited from modifying or amending any
stock option to reduce the option price or increase the number of option shares
(except as required or permitted in connection with recapitalizations,
reorganizations and similar transactions) or from granting to an employee in any
calendar year options to purchase more than 75,000 shares. The Committee is also
prohibited from modifying or amending any option in a manner materially adverse
to the rights of the optionee without the consent of the optionee.
CHANGE IN CONTROL
Upon the occurrence of a change in control of Pacific Enterprises any time
periods relating to the exercise of options held by employees will be
accelerated so that they may be immediately exercised and, upon the request of
an employee, Pacific Enterprises will purchase the employee's options for the
amount of cash which could have been obtained upon the exercise of the options
and sale of the option shares. The Compensation Committee may make such further
provisions with respect to a change in control of Pacific Enterprises as it
shall deem equitable and in the best interests of Pacific Enterprises. Such
provision may be made in any option agreement, by amendment or any such
agreement or by resolutions of the Compensation Committee.
The phrase "change in control of Pacific Enterprises" has such meaning as
from time to time ascribed thereto by the Compensation Committee and set forth
in any option agreement or by resolution of the Compensation Committee.
Notwithstanding the foregoing and subject to certain exceptions, a change in
control shall be deemed to have occurred if (a) any person becomes the
beneficial owner of 20% or more of the combined voting power of Pacific
Enterprises' then outstanding securities; (b) during any two consecutive years,
individuals who at the beginning of such a period constitute the Board of
Directors of Pacific Enterprises cease for any reason to constitute at least a
majority thereof; or (c) the shareholders of Pacific Enterprises approve (i) any
consolidation or merger of Pacific Enterprises in which Pacific Enterprises is
not the continuing or surviving corporation or pursuant to which shares of
Pacific Enterprises Common Stock are converted into cash, securities or other
property, (ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of Pacific Enterprises, or (iii) any plan or proposal for the liquidation or
dissolution of Pacific Enterprises.
22
<PAGE>
FEDERAL TAX CONSEQUENCES
The following is a brief summary of the principal United States federal tax
consequences under current tax laws relating to stock options and related
dividend equivalents granted under the Employee Stock Option Plan.
No taxable income will be realized by an option holder and no tax deduction
will be available to Pacific Enterprises upon the grant of a stock option under
the Employee Stock Option Plan. Upon the exercise of the option, the option
holder will realize income subject to income and employment taxes in the amount
by which the then fair market value of the shares purchased and the amount of
any dividend equivalents paid upon the exercise exceed the option price of the
shares and Pacific Enterprises generally will be entitled to a corresponding tax
deduction for employee compensation expense. Upon a subsequent sale of the
shares received upon the exercise of the option, the option holder will realize
income or loss in an amount equal to the difference between the sales price of
the shares and the fair market value of the shares used for computing taxable
income realized in connection with the exercise. The income or loss will be long
or short-term capital gain or loss depending upon the length of time the shares
have been held from the date the option was exercised.
Recent amendments to the federal income tax laws limit to $1,000,000 the
annual amount that corporations may deduct for compensation paid to certain
executive officers that does not qualify as performance based compensation. The
Employee Stock Option Plan contains provisions required under proposed tax
regulations in order that options granted under the plan qualify as performance
based. However, the regulations do not clearly address whether dividend
equivalents qualify as performance based compensation or affect the status of
stock options that otherwise would qualify as performance based compensation.
Accordingly, while Pacific Enterprises believes that both stock option and
dividend equivalent compensation should be held to be performance based, it is
at this time uncertain as to whether any stock options which are granted with
dividend equivalents will be so treated. Consequently, it is possible that all
or a portion of the compensation related to stock options that are granted with
dividend equivalents to an executive officer will be included in determining
whether the executive's taxable income exceeds the $1 million limitation on the
deductibility of compensation in the year the options are exercised.
If, as a result of certain changes in control, an employee's options become
immediately exercisable, the additional economic value attributable to the
acceleration will be deemed a "parachute payment" to the extent the additional
value (when combined with the value of other change of control payments) equals
or exceeds 300% of the employee's average annual taxable compensation over the
five calendar years preceding the change of control. Any such excess over the
employee's average annual taxable compensation will be subject to a 20%
non-deductible excise tax in addition to any income tax payable. Pacific
Enterprises will not be entitled to a deduction for that portion of any
parachute payment which is subject to the excise tax.
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<PAGE>
SHAREHOLDER PROPOSAL
The resolution set forth below has been proposed by a shareholder for
inclusion in this Proxy Statement in accordance with the Shareholder Proposal
Rule of the Securities and Exchange Commission. The name and address of and the
number of shares held by the shareholder proponent will be
furnished by Pacific Enterprises to any shareholder promptly upon receipt of any
oral or written request to the Corporate Secretary.
Unless properly presented at the Annual Meeting by the shareholder proponent
or the proponent's qualified representative, at the discretion of the Chairman,
this resolution may be omitted from shareholder consideration. Approval of the
resolution will require the affirmative vote of a majority of the outstanding
shares of Pacific Enterprises Common Stock and Voting Preferred Stock
represented and voting at the Annual Meeting.
The resolution and related supporting statement of the shareholder proponent
are presented as received by Pacific Enterprises and the Board of Directors
disclaims any responsibility for their content. For the reasons set forth below,
the Board of Directors and its Compensation Committee oppose and recommend a
vote against the resolution.
SHAREHOLDER PROPOSED RESOLUTION
RESOLUTION
"Resolved, that the stockholders of Pacific Enterprises recommend that the
board of directors adopt the following policy: As relates to future contracts,
the Chief Executive Officer's total compensation will be determined as follows:
The C.E.O.'s beginning total compensation will be 25 times more than the average
Pacific Enterprises employee's 1993 annual wages or salary. The C.E.O.'s total
compensation will go up or down in direct proportion to the company's
performance. To be determined as follows: One half of the compensation shall go
up or down gauged against the ten year average earnings per common share
(adjusted for stock splits) from 1983 to 1992. The remaining one half shall go
up or down gauged against the ten year average dividends per common share
(adjusted for stock splits) from 1983 to 1992."
SHAREHOLDER SUPPORTING STATEMENT
"The purpose of this proposal is to pay the Chief Executive Officer based
entirely on the company's performance. To do this you must pay gauged against
past performance. If the C.E.O. performs better the C.E.O. will be paid more, if
the C.E.O. performs worse, the C.E.O. will be paid less. You also need a
starting point, a base rate of 25 times more than the average employee's
compensation.
"For example, if the average Pacific Enterprises employee earned $32,000.00
in 1993, the C.E.O. would have a beginning total compensation of 25 times more
or $800,000.00. Pacific Enterprises ten year average earnings per share is
$2.33. If Pacific Enterprises earnings per share in 1994 rose 20% to
24
<PAGE>
$2.80, one half of the C.E.O.'s compensation would go up 20% from $400,000.00 to
$480,000.00. On the other hand if Pacific Enterprises earnings per share in 1994
fell 20% to $1.86, one half of the C.E.O.'s compensation would fall 20% to
$320,000.00. The other half of the C.E.O.'s compensation, $400,000.00 would
rise, fall or stay the same gauged against Pacific Enterprises ten year average
dividends per share of $3.00. The following year the process would repeat
itself."
BOARD OF DIRECTORS AND COMPENSATION COMMITTEE OPPOSITION STATEMENT
The Board of Directors and its Compensation Committee have developed and
implemented compensation policies, plans and programs which are intended closely
to align the financial interests of Pacific Enterprises' executive officers with
those of shareholders. These policies and practices reflect the commitment of
the Board and the Compensation Committee to "pay for performance."
The Board of Directors and the Compensation Committee believe, however, that
the inflexible compensation formula provided in the shareholder proposed
resolution would be inappropriate and, if implemented, would be detrimental to
the interests of Pacific Enterprises and its shareholders. They believe that
this formula would not necessarily or appropriately reflect the contributions of
a chief executive officer and could unduly reward or penalize those
contributions. For example, the formula would not take into account Pacific
Enterprises' success during 1992 and 1993 in developing and implementing a new
strategic plan and restructuring program that in 1993 returned Pacific
Enterprises to profitability and permitted the resumption of common stock
dividends.
The Board of Directors and the Compensation Committee do not believe that
the inflexible performance standards reflected in the proposed formula should be
the only factors considered in determining chief executive officer compensation.
They believe that other performance standards as well as many other factors must
be considered in establishing appropriate levels of chief executive compensation
and performance incentives. The Board of Directors believes that these factors
can be most appropriately evaluated by the Board of Directors and the
Compensation Committee which have and should continue to retain the flexibility
to design an appropriate compensation policy free from the rigid formula
proposed by the shareholder resolution.
ACCORDINGLY, THE BOARD OF DIRECTORS AND ITS COMPENSATION COMMITTEE RECOMMEND
THAT SHAREHOLDERS VOTE AGAINST THIS SHAREHOLDER PROPOSED RESOLUTION. PROXIES AND
VOTING INSTRUCTIONS SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS A CONTRARY
CHOICE IS SPECIFIED.
25
<PAGE>
SOLICITATION OF PROXIES AND VOTING INSTRUCTIONS
The accompanying proxy or voting instruction is solicited on behalf of the
Board of Directors of Pacific Enterprises. All shares represented by each
properly executed proxy or voting instruction received in time for the Annual
Meeting will be voted in accordance with the instructions specified thereon. If
no instructions are specified, it will be voted, as to the shares for which it
is authorized to be voted, in accordance with the recommendations of the Board
of Directors.
A shareholder giving a proxy may revoke it at any time before it is voted by
delivering to Pacific Enterprises a written notice of revocation, presenting to
the Annual Meeting a valid proxy bearing a later date, or attending the Annual
Meeting and voting in person. Attendance at the Annual Meeting will not by
itself revoke a proxy.
Employee benefit plans of Pacific Enterprises and its subsidiaries held
12,778,186 shares of Pacific Enterprises Common Stock at March 16, 1994,
representing 15% of the outstanding voting shares. Participants in these plans
may direct the voting of shares allocated to their individual employee accounts
by providing timely voting instructions to the plan trustees. Instructions must
be received by the trustees, and may be revoked or changed only by new
instructions received by the trustees, at least two days before the Annual
Meeting.
Of the shares held by employee benefit plans 10,202,496 shares, representing
12% of the outstanding voting shares, are held by the Retirement Savings Plans
of Pacific Enterprises and its subsidiaries. Substantially all of these shares
have been allocated to individual employee accounts. Unallocated shares and
allocated shares for which voting instructions are not timely received will be
voted by the trustee for the plans, Bankers Trust Company of California, N.A.,
in the same manner and proportion as allocated shares for which voting
instructions are timely received.
The remaining shares held by employee benefit plans (2,575,690 shares,
representing 3% of the outstanding voting shares) are held by Pacific
Enterprises' employee stock ownership plan. None of these shares has been
allocated to individual employee accounts and will be voted by the plan trustee,
U.S. Trust Company of California, in accordance with instructions to be received
from Pacific Enterprises' Benefits Committee, all of the members of which are
officers or other employees of Pacific Enterprises and Southern California Gas
Company. The Benefits Committee has adopted a general guideline contemplating
that these shares will be voted in the same manner and proportion as shares held
in the Retirement Savings Plans are voted but meets shortly prior to each Annual
Meeting to determine whether the specific issues to be voted upon are
appropriate for the application of that guideline.
The expenses of soliciting proxies and voting instructions will be paid by
Pacific Enterprises and will include reimbursement of banks, brokerage firms,
nominees, fiduciaries, and other custodians for expenses of forwarding
solicitation materials to beneficial owners of voting shares. The solicitation
is being made by mail and may also be made in person or by letter, telephone,
telegraph or other means of
26
<PAGE>
communication by directors, officers and management employees of Pacific
Enterprises and its subsidiaries who will not be additionally compensated
therefor. In addition, D. F. King & Company, Inc. has been retained by Pacific
Enterprises to assist in the solicitation of proxies and will be paid a fee of
$12,500 plus reimbursement of expenses for these services.
INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected Deloitte & Touche to serve as Pacific Enterprises' independent auditors
for 1994. Representatives of Deloitte & Touche are expected to attend the Annual
Meeting. They will have the opportunity to make a statement if they desire to do
so and to respond to appropriate questions from shareholders.
ANNUAL REPORTS
Pacific Enterprises' 1993 Annual Report to Shareholders was mailed to
shareholders commencing March 11, 1994. Copies of Pacific Enterprises' Annual
Report to the Securities and Exchange Commission on Form 10-K will be provided
to shareholders, without charge, upon written request to the Secretary of
Pacific Enterprises addressed to P.O. Box 60043, Los Angeles, California
90060-0043.
1995 ANNUAL MEETING
Shareholders intending to bring any business before an Annual Meeting of
Shareholders of Pacific Enterprises, including nominations of persons for
election as directors, must give written notice to the Secretary of Pacific
Enterprises of the business to be presented. The notice must be received at
Pacific Enterprises' offices within the periods and must be accompanied by the
information and documents specified in Pacific Enterprises' bylaws, a copy of
which may be obtained by writing to the Secretary of Pacific Enterprises. The
period for notice of business to be brought by shareholders before the 1994
Annual Meeting of Shareholders has expired.
The 1995 Annual Meeting of Shareholders is expected to be held on May 4,
1995. The period for the receipt by Pacific Enterprises of notice of business to
be brought by shareholders before the 1995 Annual Meeting will commence on
January 5, 1995 and end on March 6, 1995.
Proposals of shareholders that are intended to be included in Pacific
Enterprises' proxy materials for the 1995 Annual Meeting of Shareholders under
the Shareholder Proposal Rule of the Securities and Exchange Commission must be
received by the Secretary of Pacific Enterprises on or before November 22, 1994.
27
<PAGE>
OTHER BUSINESS
The Board of Directors does not know of any other business to be presented
for consideration at the Annual Meeting. If any other business should properly
come before the meeting, the shares represented by proxies and voting
instructions solicited hereby will be voted in accordance with the judgment of
the proxy holders.
By Order of the Board of Directors
THOMAS. C. SANGER, Secretary
28
<PAGE>
APPENDIX TO PROXY STATEMENT
PACIFIC ENTERPRISES
------------------
EMPLOYEE STOCK OPTION PLAN
------------------------
I
PURPOSE
The purpose of this Plan is to further the growth and development of Pacific
Enterprises (the "Company") by strengthening the ability of the Company to
attract and retain outstanding employees upon whose judgment, initiative and
efforts the continued success of the Company is dependent, by providing
employees with additional incentives for high levels of performance and by
increasing the commonality of interests of employees and the Company's
shareholders. This Plan seeks to accomplish these purposes by providing
employees with a proprietary interest in the Company through the grant of stock
options to purchase shares of the Company's Common Stock.
II
ADMINISTRATION
This Plan shall be administered by the Compensation Committee of the
Company's Board of Directors.
The Compensation Committee shall, subject to the express provisions of this
Plan, have full and final authority in its sole discretion:
(a) To grant stock options to persons eligible for selection to
participate in this Plan provided that no employee may be granted in any
calendar year stock options to purchase more than an aggregate of 75,000
shares of the Company's Common Stock;
(b) To determine the terms and conditions (which need not be identical)
of each stock option;
(c) To modify or amend any stock option granted under this Plan (except
to reduce the option price thereof or increase the number of shares subject
thereto, other than as required or permitted pursuant to Article IV of this
Plan) or waive any restrictions or conditions applicable thereto or to the
exercise thereof, provided that an optionee's rights may not be adversely
affected in any material respect without the consent of the optionee.
(d) To construe and interpret this Plan and any related stock option and
define the terms employed herein and therein;
<PAGE>
(e) To prescribe, amend and rescind rules, regulations and policies for
the administration of this Plan; and
(f) To make all other determinations necessary or advisable with
respect to this Plan and any stock option granted hereunder.
The Compensation Committee, in its sole discretion and upon such terms and
conditions as it may prescribe, may designate one or more officers or a
committee of officers of the Company or its subsidiaries to exercise any or all
of the foregoing authority of the Compensation Committee except authority with
respect to the grant of stock options to, or stock options held by, any person
who, at the time such authority is exercised, is subject to Section 16 of the
Securities Act of 1934 in respect of equity securities of the Company.
No member of the Board of Directors or the Compensation Committee or agent
or designee thereof will be liable for any action or inaction in respect of this
Plan or any stock option granted under this Plan.
III
PARTICIPATION
Officers and other employees of the Company or any of its subsidiaries (any
corporation of which 50% or more of the issued and outstanding stock having
ordinary voting rights is owned directly or indirectly by the Company or any
other business entity or association of which 50% or more of the outstanding
equity interest is so owned) shall be eligible for selection to participate in
this Plan. Directors who are not also employees of the Company or its
subsidiaries shall not be eligible for selection to participate in this Plan.
IV
SHARES SUBJECT TO STOCK OPTIONS
Stock options granted under this Plan shall be for the purchase of shares of
Common Stock of the Company. The maximum number of shares as to which stock
options may be granted under this Plan during 1994 shall be 830,000 shares.
During each subsequent year the maximum number of shares as to which stock
options may be granted under this Plan shall be a number of shares equal to 1%
of the number of shares of the Company's Common Stock outstanding at the
beginning of such year. If any stock option granted under this Plan shall for
any reason expire or terminate during the year in which it is granted without
having been exercised in full, then any unexercised shares which were subject to
such option shall again be available for the grant of stock options under this
Plan during such year.
If the outstanding shares of the Company's Common Stock are increased or
decreased as a result of split-up or consolidation thereof, stock dividend
thereon or a similar transaction, or are changed into
2
<PAGE>
or exchanged for a different number or kind of securities as a result of a
reclassification or recapitalization or of a reorganization, merger or
consolidation then, in each such case, an appropriate and proportionate
adjustment shall be made in the number and the kind of securities as to which
stock options may be granted under this Plan and to any employee. A
corresponding adjustment shall likewise be made in the number and kind of
securities to which stock options then outstanding shall relate. Any such
adjustment, however, in an outstanding stock option shall be made without change
in the total purchase price applicable to the securities to which such stock
option relates but with a corresponding adjustment in the option price for each
such security.
V
TERMS OF STOCK OPTIONS
Each stock option granted under this Plan shall be subject to the following
terms and conditions:
(a) OPTION PRICE. The option price of each share purchasable upon exercise
of a stock option shall be determined by the Compensation Committee but shall be
not less than 100% of the fair market value of the shares subject to the stock
option on the date the stock option is granted. Unless a higher option price is
specified by the Compensation Committee, the option price of each share
purchasable upon exercise of a stock option shall be 100% of the fair market
value on the date the stock option is granted.
(b) OPTION TERM. The term of each stock option shall be determined by the
Compensation Committee. Unless a different term is specified by the Compensation
Committee, the term of a stock option shall be for ten years from the date the
stock option is granted.
(c) EXERCISABILITY. Each stock option shall be exercisable either
immediately or at such time or times as may be determined by the Compensation
Committee. Unless a different determination is specified by the Compensation
Committee, a stock option shall become and remain exercisable in cumulative
installments of 20% of the shares originally subject thereto on each of the
first five anniversaries of the date the stock option is granted.
(d) DIVIDEND EQUIVALENTS. Each stock option may provide for the payment
upon the exercise of the stock option of dividend equivalents (the amount of
dividends that would have been paid on the shares as to which a stock option is
exercised had the shares been outstanding from the date the stock option was
granted) as may be determined by the Compensation Committee. Unless a different
determination is specified by the Compensation Committee, full dividend
equivalents shall be paid by the Company in cash to the employee upon the
exercise of a stock option.
3
<PAGE>
(e) TERMINATION OF EMPLOYMENT. Each option shall expire at such times
following the optionee's termination of employment with the Company and its
subsidiaries as may be determined by the Compensation Committee. Unless a
different determination is specified by the Compensation Committee:
(1) Upon the termination of employment by reason of the retirement by
the optionee after having attained age 60, a stock option shall expire on
the earlier of (a) three years from the date of retirement or (b) the date
on which it would otherwise have expired, and during that period shall be
exercisable only as to the shares as to which it was exercisable on the last
day of employment.
(2) Upon the termination of employment by reason of the death of the
optionee, a stock option shall expire on the earlier of (a) three years from
the date of the employee's death or (b) the date on which it would otherwise
have expired, and during that period shall be exercisable only as to the
shares as to which it was exercisable on the last day of employment.
(3) Upon the termination of employment for any other reason, a stock
option shall expire on the earlier of (a) three months from the date of
termination of employment or (b) the date on which it would otherwise have
expired, and during that period shall be exercisable only as to the shares
as to which it was exercisable on the last day of employment.
(f) NON-TRANSFERABILITY. Each stock option shall be non-transferable by
the optionee other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Internal
Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income
Security Act, or the rules thereunder.
(g) ADDITIONAL TERMS AND CONDITIONS. Each stock option shall be subject to
such additional terms and conditions, not inconsistent with the terms of this
Plan, as may be determined by the Compensation Committee including, without
limitation, provisions for increases in the option price or changes in the term
of the stock option, individual or corporate performance conditions to the
exercisability of the stock option or the payment of dividend equivalents and
limitations on amounts payable as dividend equivalents.
VI
CHANGE IN CONTROL
Upon the occurrence of a change in control of the Company:
(a) Any time periods relating to the exercise of any stock option
granted under this Plan and held by any optionee who is an employee of the
Company or its subsidiaries at the time of the change of control shall be
accelerated and any conditions to exercise shall immediately terminate so
that the stock option may be immediately exercised in full; and
4
<PAGE>
(b) The Company shall, upon the request of any optionee granted a stock
option under this Plan who is an employee of the Company or its subsidiaries
at the time of the change of control, purchase the stock option for an
amount of cash which could have been obtained upon the exercise of the stock
option and sale of the shares subject thereto as if such option had been
fully exercisable as to all such shares.
The phrase "change in control of the Company" shall have such meaning as
from time to time ascribed thereto by the Compensation Committee and set forth
in any agreement relating to any incentive award granted under this Plan or by
resolution of the Compensation Committee; provided, however, that
notwithstanding the foregoing, a "change in control of the Company" shall be
deemed to have occurred if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934 but excluding any benefit plan for
employees of the Company or its subsidiaries or any trustee, agent or other
fiduciary for any such plan acting in such person's capacity as such
fiduciary), directly or indirectly, becomes the beneficial owner of
securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities;
(b) During any two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of the Company cease for
any reason to constitute at least a majority thereof unless the election, or
the nomination for election by the Company's shareholders, of each new
director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period; or
(c) The shareholders of the Company shall have approved (i) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock are converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or (iii) any plan or
proposal for the liquidation or dissolution of the Company.
The Compensation Committee may make such further provisions with respect to
a change in control of the Company as it shall deem equitable and in the best
interests of the Company. Such provision may be made in any agreement relating
to a stock option granted under this Plan, by amendment to any such option or by
resolution of the Compensation Committee.
5
<PAGE>
VII
TERMINATION OF 1988 INCENTIVE PLAN
Upon the approval of this Plan by shareholders of the Company, the Company's
Stock Incentive Plan approved by the Company's Board of Directors and
shareholders in 1988 shall terminate as to the grant of additional incentive
awards.
VIII
GENERAL PROVISIONS
(a) Nothing in this Plan or in related agreement will confer upon any
employee any right to continue in the employ of the Company or any of its
subsidiaries or affect the right of the Company to terminate the employment of
any employee at any time with or without cause.
(b) No employee (individually or as a member of a group) and no beneficiary
or other person claiming under or through such employee will have any right,
title, or interest in or to any shares allocated or reserved under this Plan or
subject to any stock option except as to such shares, if any, that have been
issued to such employee.
(c) The Company may make such provisions as it deems appropriate to
withhold any taxes which it determines it is required to withhold in connection
with the exercise of any stock option.
(d) No stock option and no right under this Plan, contingent or otherwise,
will be assignable or subject to any encumbrance, pledge or charge of any nature
except that, under such rules and regulations as the Company may establish
pursuant to the terms of the Plan, a beneficiary may be designated with respect
to a stock option in the event of death of the employee granted the stock
option.
(e) No shares will be issued under this Plan or any stock option granted
under this Plan unless and until all then applicable requirements imposed by
federal and state securities and other laws, rules and regulations and by any
regulatory agencies having jurisdiction, and by any stock exchanges upon which
the shares may be listed, have been fully met.
(f) In the event that any member of the Compensation Committee shall fail
to be a "disinterested person" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 or an "outside director" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, the Board of Directors of
the Company may appoint a committee of two or more directors, each of whom shall
be a disinterested director and an outside director, to administer this Plan
and, upon such appointment, such committee shall become the administrator of
this Plan and shall succeed to all of the authority vested in the Compensation
Committee by this Plan.
6
<PAGE>
IX
AMENDMENT AND TERMINATION
The Board of Directors of the Company may at any time, suspend, amend,
modify or terminate this Plan, provided that no amendment or modification shall
become effective which, within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, would:
(i) materially increase the benefits accruing to participants in this
Plan,
(ii) materially increase the number of shares which may be issued under
this Plan, or
(iii) materially modify the requirements as to eligibility for
participation in this Plan
unless approved by the affirmative vote of the holders of a majority of the
Company's shares present, or represented, and entitled to vote at a meeting duly
held in accordance with applicable law. No such suspension, amendment,
modification or termination of this Plan shall alter or impair any rights or
obligations under any stock option theretofore granted under this Plan.
X
EFFECTIVE DATE
This Plan shall be effective upon the adoption thereof by the Board of
Directors of the Company subject to approval by the affirmative vote of the
holders of a majority of the Company's shares present, or represented, and
entitled to vote at a meeting of shareholders duly held in accordance with the
laws of the State of California within twelve months following the date of the
adoption of this Plan by the Board of Directors of the Company. Any stock option
granted under this Plan prior to such approval shall be granted subject to such
approval being so obtained.
7
<PAGE>
IF YOU ARE PLANNING TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE BRING THE
ADMISSION TICKET PRINTED ON THIS PAGE WITH YOU. IF YOU DO NOT HAVE AN ADMISSION
TICKET, VERIFICATION OF SHARE OWNERSHIP WILL BE NECESSARY TO OBTAIN ADMISSION TO
THE ANNUAL MEETING. SEE "NOTICE OF ANNUAL MEETING" FOR DETAILS.
[PACIFIC ENTERPRISES LOGO]
1993 ANNUAL MEETING ADMISSION TICKET
THE ANNUAL MEETING OF SHAREHOLDERS WILL BE HELD AT 9:30 A.M. ON MAY 5, 1994,
IN THE WESTIN BONAVENTURE HOTEL, 404 SOUTH FIGUEROA STREET,
LOS ANGELES, CALIFORNIA
ADMIT ONE SHAREHOLDER AND GUEST
(Doors open at 8:30 a.m. You may by-pass the registration area and present this
ticket to the hosts at the inside doors.)
NOTE: Cameras, tape recorders, etc., will not be allowed in the meeting room.
<PAGE>
[PACIFIC ENTERPRISES LOGO]
ANNUAL MEETING LOCATION
WESTIN BONAVENTURE HOTEL
404 SOUTH FIGUEROA STREET
LOS ANGELES, CALIFORNIA
[MAP]
[PACIFIC ENTERPRISES LOGO]
ANNUAL MEETING OF
SHAREHOLDERS
Westin Bonaventure Hotel
404 SOUTH FIGUEROA STREET
LOS ANGELES, CALIFORNIA
MAY 5, 1994
NOTICE OF MEETING
AND
PROXY STATEMENT
<PAGE>
[PACIFIC ENTERPRISES LOGO]
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS 1994
LLOYD A. LEVITIN, THOMAS C. SANGER and WILLIS B. WOOD, JR., or any of them,
with full power of substitution, are authorized to vote the stock of the
undersigned at the Annual Meeting of Shareholders of Pacific Enterprises to be
held on Thursday, May 5, 1994, at 9:30 A.M. or at any adjournment.
NOMINEES FOR ELECTION AS DIRECTORS: Hyla H. Bertea, Herbert L. Carter,
Richard D. Farman, Wilford D. Godbold, Jr., Ignacio E. Lozano, Jr., Harold
M. Messmer, Jr., Paul A. Miller, Joseph R. Rensch, Diana L. Walker, Willis
B. Wood, Jr.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE AND, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR ITEMS 1 AND 2 AND AGAINST ITEM 3. THIS
PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER
BUSINESS THAT MAY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE.)
<PAGE>
<TABLE>
<S><C> <C> <C> <C> <C> <C><C> <C> <C> <C>
PACIFIC ENTERPRISES' BOARD OF DIRECTORS RECOMMENDS A VOTE PACIFIC ENTERPRISES' BOARD OF DIRECTORS RECOMMENDS A
FOR THE ELECTION OF DIRECTORS AND THE EMPLOYEE STOCK OPTION VOTE AGAINST THE FOLLOWING SHAREHOLDER PROPOSAL.
PLAN.
1. Election of Directors FOR / / WITHHELD / / 3. Chief Executive Officer FOR / / AGAINST // ABSTAIN //
Compensation
For, except vote withheld from the following nominee(s):
- -----------------------------------------------------------
2. Employee Stock Option FOR / / AGAINST / / ABSTAIN / /
Plan
/ / MARK HERE IF YOU DESIRE CONFIDENTIAL VOTING IN
ACCORDANCE WITH THE POLICY DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT.
/ / MARK HERE IF YOU EXPECT TO ATTEND THE ANNUAL
MEETING IN PERSON.
DATE: _________________________________________, 1994
-----------------------------------------------------
-----------------------------------------------------
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON
</TABLE>
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PACIFIC ENTERPRISES
Bankers Trust Company of California, N.A., Trustee for the Retirement
Savings Plans of Pacific Enterprises and its subsidiaries, is authorized and
instructed to vote or appoint a proxy or proxies to vote all shares of stock of
Pacific Enterprises credited to my account in such Plans at the Annual Meeting
of Shareholders of Pacific Enterprises to be held on Thursday, May 5, 1994, at
9:30 A.M. or at any adjournment.
Nominees for election as directors: Hyla H. Bertea, Herbert L. Carter,
Richard D. Farman, Wilford D. Godbold, Jr., Ignacio E. Lozano, Jr., Harold M.
Messmer, Jr., Paul A. Miller, Joseph R. Rensch, Diana L. Walker, Willis B. Wood,
Jr.
The Retirement Savings Plans of Pacific Enterprises and its subsidiaries
make provisions for you to give confidential instructions as to how you wish
shares held by you in the Plans to be voted at the Annual Meeting of
Shareholders of Pacific Enterprises. Shares held by you in the Plans for which
instructions are not timely received and shares not allocated to individual
accounts will be voted in the same manner and ratio as shares for which voting
instructions are timely received from participants in the Plans. Revocation or
change of vote can be made only by new instructions received at least two days
before the meeting.
THIS INSTRUCTION WILL BE VOTED IN THE MANNER DIRECTED ON THE REVERSE AND, IF
NO DIRECTION IS GIVEN, WILL BE VOTED FOR ITEMS 1 AND 2 AND AGAINST ITEM 3.
Shares will be voted in the discretion of the Trustee as to any other business
that may come before the Annual Meeting or any adjournment thereof.
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)
<PAGE>
<TABLE>
<S><C> <C> <C> <C> <C> <C><C> <C> <C> <C>
PACIFIC ENTERPRISES' BOARD OF DIRECTORS RECOMMENDS A VOTE PACIFIC ENTERPRISES' BOARD OF DIRECTORS RECOMMENDS A
FOR THE ELECTION OF DIRECTORS AND THE EMPLOYEE STOCK OPTION VOTE AGAINST THE FOLLOWING SHAREHOLDER PROPOSAL.
PLAN.
1. Election of FOR WITHHELD 3. Chief Executive Officer FOR AGAINST ABSTAIN
Directors / / / / Compensation / / / / / /
For, except vote withheld from the following nominee(s):
- -----------------------------------------------------------
2. Employee Stock FOR AGAINST ABSTAIN
Option Plan / / / / / /
Confidential voting instructions must be received by Date: _________________________________________, 1994
trustee, and may be revoked or changed only by new -----------------------------------------------------
instructions received by the trustees, at least two days Please sign exactly as name appears hereon
before the annual meeting.
</TABLE>
SHARES
<PAGE>
Pacific Enterprises
Narrative Description of Graphic and Image
Information in Registrant's
Proxy Materials
Description of Graphic or
Image Information
--------------------------
Letter to Shareholders Contains stylized type for Pacific Enterprises
- ---------------------- name and signature of Chairman of the Board and
Chief Financial Officer.
Proxy Statement
- ---------------
Page 1 Contains stylized type for Pacific Enterprises name.
Page 5 Contains pictures of four directors named thereon.
Page 6 Contain pictures of four directors named thereon.
Page 7 Contains pictures of two directors named thereon.
Page 11 Contains line graph comparing five year total
cumulative return on $100 invested in Pacific
Enterprises, S&P 500, AGA Diversified/Integrated
Gas Utilities and AGA Gas Distribution Utilities
showing the data points set forth below:
<TABLE>
<CAPTION>
AGA Gas
Pacific AGA Diversified Distribution
Enterprises S&P 500 Integrated Utilities Utilities
----------- ------- -------------------- ------------
<S> <C> <C> <C> <C>
12/31/88 $100 $100 $100 $100
12/31/89 $146 $132 $132 $140
12/31/90 $122 $127 $127 $134
12/31/91 $89 $166 $108 $162
12/31/92 $64 $179 $114 $193
12/31/93 $84 $197 $130 $225
</TABLE>
<PAGE>
Page 11 Contains line graph comparing one year total
cumulative return on $100 invested in Pacific
Enterprises, S&P 500, AGA Diversified/Integrated
Gas Utilities and AGA Gas Distribution Utilities
showing the data points set forth below:
<TABLE>
<CAPTION>
AGA Gas
Pacific AGA Diversified Distribution
Enterprises S&P 500 Integrated Utilities Utilities
----------- ------- -------------------- ------------
<S> <C> <C> <C> <C>
12/31/92 $100 $100 $100 $100
3/31/93 $132 $104 $104* $104*
6/30/93 $132 $105 $105* $105*
9/30/93 $144 $108 $108* $108*
12/31/93 $131 $110 $113 $116
<FN>
- ------------------------------
*Represents average return for 1993 by quarter.
</TABLE>
Inside back cover Printed material is enclosed in a box which also contains
stylized type for Pacific Enterprises name.
Outside back cover Contains map of location of Annual Meeting of Shareholders
and stylized type for Pacific Enterprises name.
Form of Proxy
- -------------
Front Contains stylized type for Pacific Enterprises name.
Reverse Printed material is enclosed in two boxes with boxes
provided within each for marking votes.
Form of Voting Authorization
- ----------------------------
Front Contains stylized type for Pacific Enterprises name.
Reverse Printed material is enclosed in two boxes with boxes
provided within each for marking votes.
