<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
PACIFIC ENTERPRISES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] 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
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE> 2
LOGO
555 West Fifth Street
Los Angeles, CA 90013-1011
WILLIS B. WOOD, JR.
Chairman and
Chief Executive Officer
March 25, 1998
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 Universal City on May 7. I hope you
will find it convenient to attend.
At the Annual Meeting, shareholders will elect eight directors. In
addition, if properly presented at the Annual Meeting, shareholders will also
vote upon a shareholder proposal with respect to director compensation.
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> 3
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 112th Annual Meeting of Shareholders of Pacific Enterprises will be
held on Thursday, May 7, 1998 at 11:00 a.m. at the Universal City Hilton &
Towers, 555 Universal Parkway Terrace, Universal City, California. At the Annual
Meeting, shareholders will consider the following items of business:
1. The election of directors.
2. If properly presented at the meeting, a shareholder proposal with
respect to director compensation.
3. Such other business as may properly come before the meeting.
Shareholders of record at the close of business on March 16, 1998 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 MEETING, PLEASE BRING
THIS TICKET WITH YOU. IT WILL ADMIT YOU AND A GUEST OR FAMILY MEMBER.
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 10:00 a.m.
Thomas C. Sanger, Secretary
March 25, 1998
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pacific Enterprises......................................... 1
Outstanding Shares and Voting Rights........................ 2
Board of Directors.......................................... 3
Election of Directors....................................... 4
Share Ownership of Directors and Executive Officers......... 7
Financial Performance and Shareholder Returns............... 8
Report of the Compensation Committee........................ 10
Executive Compensation...................................... 13
Shareholder Proposal........................................ 17
Solicitation of Proxies and Voting Instructions............. 20
Independent Auditors........................................ 21
Annual Reports.............................................. 21
1999 Annual Meeting of Shareholders......................... 21
</TABLE>
<PAGE> 5
LOGO
------------------------------
PROXY STATEMENT
------------------------------
Pacific Enterprises is providing this Proxy Statement to shareholders in
connection with its Annual Meeting of Shareholders to be held May 7, 1998. It is
being mailed to shareholders commencing March 25, 1998.
PACIFIC ENTERPRISES
Pacific Enterprises is a Los Angeles-based energy services company whose
principal subsidiary is Southern California Gas Company, the nation's largest
natural gas distribution utility. Southern California Gas Company provides
natural gas service to residential, commercial, industrial, utility electric
generation and wholesale customers through approximately 4.8 million meters in a
23,000-square-mile service territory comprising most of southern and part of
central California with a population of 17.6 million. Through other
subsidiaries, Pacific Enterprises also markets a wide range of unregulated
energy products and services, including natural gas, and has interests in
international utility operations in Argentina and Mexico, interstate and
offshore natural pipelines and centralized heating and cooling for large
building complexes.
During 1997, the shareholders of Pacific Enterprises and Enova Corporation,
the parent company of San Diego Gas & Electric Company, approved a business
combination of the two companies in a strategic merger of equals and a tax-free
transaction to be accounted for as a pooling of interests. Upon completion of
the combination, Pacific Enterprises and Enova will become separate subsidiaries
of Sempra Energy, a newly formed holding company, and the holders of their
common stock will become shareholders of Sempra Energy. Holders of Pacific
Enterprises Common Stock will receive 1.5038 shares of Sempra Energy Common
Stock for each of their shares and holders of Enova Common Stock will receive
one share of Sempra Energy Common Stock for each of their shares. Pacific
Enterprises Preferred Stock will remain outstanding and unaffected by the
business combination.
The completion of the business combination remains subject to approvals by
regulatory agencies, including the California Public Utilities Commission. To
pursue opportunities in unregulated energy markets pending the completion of the
combination, Pacific Enterprises and Enova have formed a joint venture to market
energy products and services.
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Pacific Enterprises was incorporated in California in 1907 as the successor
to a corporation organized in 1886. Its principal executive offices are located
at 555 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 Preferred Stock which they held of record on March 16, 1998. On that date
83,385,572 shares of Pacific Enterprises Common Stock and 800,253 shares of
Pacific Enterprises 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 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 that 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> 7
BOARD OF DIRECTORS
Pacific Enterprises' entire Board of Directors is elected at each Annual
Meeting of Shareholders. During 1997, the Board of Directors held sixteen
meetings.
BOARD COMMITTEES
The Board of Directors maintains standing Audit, Compensation, Executive,
Nominating and Public Policy 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 and financial policies, internal accounting controls and the results
of audit engagements. During 1997, the Committee held three meetings.
The Compensation Committee, which consists entirely of non-officer
directors, reviews the performance and approves or recommends the compensation
of senior management 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 1997, the Committee held five
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 1997, the Committee
held one meeting.
The Nominating Committee, which consists entirely of non-officer directors,
considers and makes recommendations regarding the nominations of directors and
the size and composition of the Board of Directors. During 1997, the Committee
held two 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.
The Public Policy Committee reviews and monitors Pacific Enterprises'
fulfillment of its responsibilities on matters of public policy and corporate
governance. During 1997, the Committee held three meetings.
DIRECTOR COMPENSATION
Directors who are also officers of Pacific Enterprises are not separately
compensated for their services as directors or as members of Committees of the
Board of Directors. Non-officer directors receive an annual base retainer 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 or
Committee of the
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<PAGE> 8
Board 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 plus ten times the meeting fee and continues for a maximum period
equal to the director's years of service as a non-officer director.
ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, eight directors (comprising the
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 director candidates receiving the highest number of affirmative votes (up to
the number of directors to be elected) will be elected as directors.
The names of the Board of Directors' eight 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 Pacific Enterprises and,
except for Messrs. Farman and Wood, also Southern California Gas Company. Unless
otherwise noted, each nominee 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, they may be voted
for a substitute nominee designated by the Board of Directors or the authorized
number of directors may be reduced.
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<PAGE> 9
HYLA H. BERTEA,
COMMUNITY LEADER.
Mrs. Bertea, 57, has been a director of Pacific Enterprises
since 1988. She is a realtor with Prudential California, a
real estate sales company. She is Commissioner of the
California Horse Racing Board and a Trustee of Lewis &
Clark College. She is a director of Orange County Community Foundation and for a
number of years has been involved in leadership positions with various other
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.
Committees: Audit, Executive, Shares: 5,962
Nominating, and
Public Policy
PHOTO
HERBERT L. CARTER,
EXECUTIVE VICE CHANCELLOR EMERITUS AND TRUSTEE PROFESSOR OF
PUBLIC ADMINISTRATION OF THE CALIFORNIA STATE UNIVERSITY
SYSTEM.
Dr. Carter, 64, has been a director of Pacific Enterprises
since 1991. He was President and Chief Executive Officer of
United Way of Greater Los Angeles from 1992 until 1995 and Executive Vice
Chancellor of the California State University System from 1974 until 1992. He is
a director of Golden State Mutual Insurance Co.; and a member of the Board of
Councilors of the School of Public Administration, University of Southern
California.
Committees: Audit, Nominating, Shares: 910
and Public Policy
PHOTO
RICHARD D. FARMAN,
PRESIDENT AND CHIEF OPERATING OFFICER OF PACIFIC
ENTERPRISES.
Mr. Farman, 62, has been a director of Pacific Enterprises
since 1992. He is also a director of Union Bank, Sentinel
Group Funds, Inc. and Catellus Development Corporation. He
is a past chairman of KCET Public Service Television, Progress L.A., Inc., the
American Gas Association and the Natural Gas Council, and a member of the
Pacific Coast Gas Association and the National Petroleum Council.
Committees: Executive Shares: 318,610
and Public Policy
PHOTO
WILFORD D. GODBOLD, JR., PRESIDENT, CHIEF EXECUTIVE OFFICER
AND A DIRECTOR OF ZERO CORPORATION, AN INTERNATIONAL
MANUFACTURER PRIMARILY OF ENCLOSURES AND THERMAL MANAGEMENT
EQUIPMENT FOR THE ELECTRONICS MARKET.
Mr. Godbold, 59, has been a director of Pacific Enterprises since 1990. He is
also a director of Santa Fe Pacific Pipelines, Inc., the California State
Chamber of Commerce (past chairman) and The Employer's Group (past chairman). He
is a member of the Board of Trustees of The Wellness Community, a member of the
Council on California Competitiveness and a past President of the Board of
Trustees of Marlborough School.
Committees: Audit, Shares: 2,000
Compensation, and
Executive
PHOTO
5
<PAGE> 10
IGNACIO E. LOZANO, JR.,
CHAIRMAN OF THE BOARD OF LA OPINION, A SPANISH LANGUAGE
DAILY NEWSPAPER. DURING 1976 AND 1977 MR. LOZANO SERVED AS
UNITED STATES AMBASSADOR TO EL SALVADOR.
Mr. Lozano, 71, has been a director of Pacific Enterprises
since 1978. He is also a director of The Walt Disney Company, Pacific Mutual
Life Insurance Company, the Santa Anita Foundation and the Youth Opportunities
Foundation. He is a trustee of the University of Notre Dame and a member of the
California Press Association.
Committees: Audit, Shares: 1,453
Compensation,
Executive, and Public
Policy
PHOTO
RICHARD J. STEGEMEIER,
CHAIRMAN EMERITUS OF THE BOARD OF UNOCAL CORPORATION, AN
INTEGRATED PETROLEUM COMPANY.
Mr. Stegemeier, 69, has been a director of Pacific
Enterprises since 1995. He is also a director of Foundation
Health Systems, Inc., Halliburton Company, Montgomery Watson, Inc., Northrop
Grumman Corporation and Wells Fargo Bank.
Committees: Audit, Shares: 1,000
Compensation, and
Nominating
PHOTO
DIANA L. WALKER,
PARTNER IN THE LOS ANGELES BASED LAW FIRM OF O'MELVENY &
MYERS.
Mrs. Walker, 56, has been a director of Pacific Enterprises
since 1989. She is a director of United Way of Greater Los
Angeles, the former Chair of the Board of Governors of the Institute for
Corporate Counsel, a former trustee of Marlborough School and a member of
various professional organizations. O'Melveny & Myers LLP, of whom Mrs. Walker
is a partner, provides legal services to Pacific Enterprises and its
subsidiaries.
Committees: Audit, Nominating, Shares: 562
and Public Policy
PHOTO
WILLIS B. WOOD, JR.,
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF
PACIFIC ENTERPRISES.
Mr. Wood, 63, has been a director of Pacific Enterprises
since 1989. He is also a director of Washington Mutual,
Inc. He is a director of the California Medical Center
Foundation, the California State Chamber of Commerce, the Los Angeles World
Affairs Council and the Automobile Club of Southern California; Vice Chairman of
the Board of Trustees of Harvey Mudd College, a trustee of the University of
Southern California and the Southwest Museum; and a member of the California
Business Roundtable.
Committee: Executive Shares: 231,765
PHOTO
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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 16, 1998 by each director and
nominee, the chief executive officer and the four other most highly compensated
executive officers of Pacific Enterprises and, as a group, all such persons and
all other executive officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF COMMON STOCK
---- ----------------
<S> <C>
Hyla H. Bertea.............................................. 5,962
Herbert L. Carter (#1)...................................... 910
Richard D. Farman (#2)...................................... 318,610
Wilford D. Godbold, Jr...................................... 2,000
Frederick E. John (#2)...................................... 63,474
Ignacio E. Lozano, Jr. (#3)................................. 1,453
Warren I. Mitchell (#2)..................................... 56,699
Debra L. Reed (#2).......................................... 33,173
Richard J. Stegemeier....................................... 1,000
Diana L. Walker............................................. 562
Willis B. Wood, Jr. (#2).................................... 231,765
All Directors and Executive Officers as a group
(15 persons) (#2)......................................... 801,813
</TABLE>
- ------------
#1 Includes 19 shares held as guardian.
#2 Includes shares issuable upon exercise of employee stock options that are
exercisable prior to May 31, 1998. Such option shares total 299,000 shares
for Mr. Farman; 56,500 shares for Mr. John; 51,500 shares for Mr. Mitchell;
28,800 shares for Ms. Reed; 201,200 for Mr. Wood; and 739,600 shares for all
directors and executive officers as a group.
#3 Includes 500 shares held by spouse.
No director or executive officer owns 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 less than 1% of the
outstanding shares.
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<PAGE> 12
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
During 1997, Pacific Enterprises earned $184 million ($2.22 per share of
Common Stock) compared to $203 million ($2.37 per share of Common Stock) during
1996. Results for 1996 included net benefits of $.11 per share from nonrecurring
events while results for 1997 were reduced by nonrecurring expenses of $.19 per
share related to the business combination with Enova Corporation. Excluding
these non-recurring items, earnings per share for 1997 were $2.41 compared with
$2.26 for 1996.
Pacific Enterprises' financial results are reflected in its stock price
performance and total return to shareholders as shown in the following graph,
which compares the market value (assuming reinvestment of dividends) over the
last five years of an initial $100 investment in Pacific Enterprises Common
Stock at the beginning of the five-year period with an identical investment in a
weighted basket of stocks comprising the Standard & Poor's 500 Stock Index and
an index developed by Pacific Enterprises of peer companies comprising the ten
other largest gas distribution utilities.
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL RETURN*
YEAR ENDING DECEMBER 31
<TABLE>
<CAPTION>
MEASUREMENT PERIOD PACIFIC STANDARD & GAS DISTRIBUTION
(FISCAL YEAR COVERED) ENTERPRISES POOR'S PEERS
<S> <C> <C> <C>
1992 100 100 100
1993 131 118 118
1994 125 112 108
1995 175 153 145
1996 198 189 169
1997 257 252 223
</TABLE>
* Assumes $100 invested on January 1, 1992 and all dividends reinvested.
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<PAGE> 13
The companies comprising the index of gas distribution peers are Atlanta
Gas Light Company, Keyspan Energy, Company, Indiana Energy, Inc., MCN Energy
Corporation, New Jersey Resources Corporation, NICOR, Inc., Northwest Natural
Gas Company, Peoples Energy Corporation, Piedmont Natural Gas Company, and
Washington Gas Light Company.
The factors affecting Pacific Enterprises future performance are discussed
under the caption "Management's Discussion and Analysis" in Pacific Enterprises
1997 Annual Report to Shareholders and in the financial statements appearing on
pages 31 through 55 of the Annual Report.
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<PAGE> 14
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors 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 large utilities throughout the United States
(including companies in Pacific Enterprises' index of peer gas distribution
utilities) as well as California-based general industry companies, 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 performance bonus opportunity
levels are developed and payment of bonuses tied to Pacific Enterprises' success
in achieving a rate of return on equity derived from that authorized for
Southern California Gas Company by the California Public Utilities Commission.
Longer term incentive compensation is provided by annual grants of employee
stock options which closely relate compensation to shareholder returns.
COMPENSATION CONSULTANTS
To assist in performing its functions, the Compensation Committee retains
Hewitt Associates and other nationally recognized consulting firms specializing
in executive compensation issues. These consultants assist the Committee in
formulating executive compensation policies and advise the Committee on programs
and practices to implement policies adopted by the Committee. In doing so, they
prepare and review with the Committee surveys and other materials reflecting
executive compensation policies of other companies and other factors (including
relative performance and general economic conditions) which they deem relevant.
COMPENSATION POLICY
The policy of the Compensation Committee is to establish total compensation
levels competitive with companies with which Pacific Enterprises competes for
executives. Base salaries are set at levels comparable to those of a combination
of other large utilities and California-based general industry companies. To
provide incentives for exceptional performance, the Committee has increasingly
provided opportunities for performance-based compensation (annual bonuses and
stock option awards as a percentage of base salary) at levels that bring total
compensation (salary and performance-based compensation) closer to
California-based general industry levels.
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<PAGE> 15
The Compensation Committee believes these policies appropriately align the
financial interests of Pacific Enterprises' executives with those of
shareholders. Base salaries are at competitive levels and amounts paid as annual
bonuses and the realized value of stock options is highly variable and closely
tied to corporate performance. As a consequence, much of an executive officer's
compensation is "at risk" with the targeted value of annual bonuses and the
grant-date estimated value of annual employee stock option awards intended to
contribute from at least 40% to 60% of total annual compensation.
As one of the factors in its consideration of compensation matters, the
Compensation Committee considers the anticipated tax consequences to Pacific
Enterprises and its executives of the form and amount of executive compensation
and considers various alternatives for preserving the tax deductibility of
executive compensation to Pacific Enterprises to the extent reasonably
practicable and consistent with the Committee's other compensation objectives.
Pacific Enterprises has obtained shareholder approval of performance goals for
the payment of bonuses and dividend equivalents that is intended to assure, to
the extent possible, that bonus and dividend equivalent opportunities awarded
over the next several years will, upon payment, be a tax deductible compensation
expense.
COMPENSATION AWARDS
Salaries
Willis B. Wood, Jr., Chairman of the Board and Chief Executive Officer, and
Richard D. Farman, President and Chief Operating Officer received base salary
increases of 10% and 16%, respectively, for 1997. They had not previously
received base salary increases since 1992 and 1993. This reflected a policy of
the Compensation Committee to place more of their compensation at risk and, in
lieu of salary increases, for these years they received greater opportunities
for performance bonuses. For 1997 their performance bonus opportunities remained
the same as for 1996.
Performance Bonuses
The Compensation Committee establishes annual performance bonus
opportunities for executive officers based upon the attainment of objective
financial goals. Performance at targeted levels is intended to compensate
executive officers with bonuses somewhat above the midpoint for bonuses for
comparable levels of responsibility at other large utilities. Target award
levels for 1997 were the same as for 1996 and ranged from 50% of base salary for
the Chief Executive Officer and the President to 25% of base salary for Vice
Presidents, with maximum award levels for excellent performance ranging from
100% to 50% of base salary.
During 1997, the continued superior performance of Southern California Gas
Company resulted in Pacific Enterprises achieving a return on equity of 14.4%.
This return was substantially above the
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<PAGE> 16
rate of return authorized for Southern California Gas Company by the California
Public Utilities Commission and the target return established by the
Compensation Committee for the payment of annual performance bonuses. This
excellent return, together with favorable assessments of their contributions to
achieving it, resulted in paying maximum performance bonuses to Messrs. Wood and
Farman for 1997.
Stock Options
To provide long-term incentive compensation and in lieu of cash
compensation, the Compensation Committee relies exclusively upon awards of stock
options, the ultimate realizable value of which closely equates compensation to
shareholder returns. Stock options are granted with an exercise price that is
not less than the fair market value of the option shares at the date of the
grant. They are typically granted for a ten-year term and vest in equal
cumulative annual installments over a three-year period, with vesting and
exercisability subject only to continuing employment.
Since 1995, stock options also typically have been granted with
performance-based dividend equivalents. These provide executive officers with
the opportunity to receive, upon the exercise of an option, all or a portion of
the cash dividends that would have been paid on the shares as to which the
option is exercised as if the shares had been outstanding from the date the
option was granted. No dividend equivalents are payable unless Pacific
Enterprises meets a threshold performance goal and the percentage of dividends
paid as dividend equivalents (to a maximum of all of the dividends that would
have been paid on the shares) depends upon the extent to which the threshold
performance goal is exceeded. In addition, no dividend equivalents are payable
in respect of the exercise of any "out-of-the-money" option -- an option for
which the exercise price exceeds the market value of the shares purchased.
In awarding stock options, the Compensation Committee sizes option grants
to provide a grant-date estimated value somewhat above the midpoint for option
and other long-term incentive awards provided by large utilities. Since the
Compensation Committee uses only stock options to provide long-term incentive
compensation, option awards are typically larger than those at companies that
provide additional forms of long-term compensation. During 1997, Messrs. Wood
and Farman were awarded options having a grant-date estimated value of $592,800
(60,000 shares) and $444,600 (45,000 shares), respectively.
COMPENSATION COMMITTEE
Richard J. Stegemeier, Chairman
Wilford D. Godbold, Jr.
Ignacio E. Lozano, Jr.
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<PAGE> 17
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by Pacific Enterprises
and its subsidiaries to Pacific Enterprises' chief executive officer and its
other four most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- ------------------------------------
AWARDS PAYOUTS
------------------------- --------
SHARES
RESTRICTED UNDERLYING ALL OTHER
STOCK OPTIONS/ LTIP COMPENSATION
YEAR SALARY BONUS AWARDS SARS PAYOUTS (#1)
NAME AND PRINCIPAL POSITIONS ---- -------- -------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Willis B. Wood, Jr.
Chairman and Chief 1997 $706,000 $700,000 -$0- 60,000 $-0- $98,058
Executive Officer 1996 $641,000 $635,000 -$0- 55,200 $-0- $67,197
of Pacific Enterprises 1995 $641,000 $603,250 -$0- 66,000 $-0- $63,728
Richard D. Farman
President and Chief 1997 $506,000 $500,000 -$0- 45,000 $-0- $86,394
Operating Officer 1996 $436,000 $430,000 -$0- 42,000 $-0- $57,133
of Pacific Enterprises 1995 $436,000 $408,500 -$0- 50,000 $-0- $54,587
Warren I. Mitchell
Executive Vice President 1997 $356,000 $280,000 -$0- 27,000 $-0- $ 8,977
of Pacific Enterprises 1996 $318,000 $249,600 -$0- 21,000 $-0- $ 5,721
and President of 1995 $306,000 $180,000 -$0- 27,000 $-0- $ 5,836
Southern California Gas
Company.
Frederick E. John
Senior Vice President 1997 $271,000 $185,500 -$0- 21,000 $-0- $ 8,366
of Pacific Enterprises 1996 $261,000 $178,500 -$0- 15,000 $-0- $ 5,540
1995 $251,000 $128,625 -$0- 15,000 $-0- $ 5,751
Debra L. Reed
Senior Vice President 1997 $266,000 $182,000 -$0- 21,000 $-0- $ 5,873
of Southern California 1996 $236,000 $161,000 -$0- 15,000 $-0- $ 5,308
Gas Company 1995 $221,000 $112,875 -$0- 15,000 $-0- $ 5,269
</TABLE>
- ------------------------
#1 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 and employer contributions to
defined contribution plans. Such interest accruals, insurance premiums and
contributions for 1997 were, respectively, $90,368, $2,890, and $4,800 for
Mr. Wood; $79,530, $2,064, and $4,800 for Mr. Farman; $2,732, $1,445, and
$4,800 for Mr. Mitchell; $2,472, $1,094, and $4,800 for Mr. John; and $-0-,
$1,073 and $4,800 for Ms. Reed.
13
<PAGE> 18
STOCK OPTIONS
The following table sets forth information regarding stock options granted
during 1997 to each of the executive officers named under "Executive
Compensation -- Summary Compensation Table."
OPTION/SAR GRANTS (#1)
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS/ GRANT DATE
SHARES SARS GRANTED ESTIMATED
UNDERLYING TO EMPLOYEES EXERCISE EXPIRATION PRESENT
NAME OPTIONS/SARS IN 1997 PRICE DATE VALUE(#2)
---- ------------ -------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Willis B. Wood, Jr................... 60,000 8.6% $30 5/8 3/3/07 $592,800
Richard D. Farman.................... 45,000 6.4% $30 5/8 3/3/07 $444,600
Warren I. Mitchell................... 27,000 3.9% $30 5/8 3/3/07 $266,760
Frederick E. John.................... 21,000 3.0% $30 5/8 3/3/07 $207,480
Debra L. Reed........................ 21,000 3.0% $30 5/8 3/3/07 $207,480
</TABLE>
- ---------------
#1 All options were granted with performance-based dividend equivalents (see
"Report of the Compensation Committee -- Compensation Awards -- Stock
Options"); at an exercise price of 100% of the fair market value of the
option shares on the date of grant; for a ten-year term, subject to earlier
expiration upon termination of employment; and exercisable in cumulative
annual installments of one-third of the shares initially subject to the
option on each of the first three anniversaries of the date of grant.
#2 Estimated present value is based on the Black Scholes Model and consists of
an option value of $4.05 and a dividend equivalent value of $5.83. The
following assumptions were used in the Black Scholes Model: stock price
volatility of 16.74%, a risk-free rate of return of 6.69%, and an annual
dividend yield of 4.7%. Further adjustments were made based on actuarial
assumptions regarding the termination of employment prior to option vesting
and prior to expiration of the ten-year option term, reducing estimated
values by 17.57% and 10.70% respectively. The dividend equivalent value is
based on a $1.44 annual dividend (the rate in effect at the grant date), and
the volatility of the cash flow measures which determine the amount of
dividend equivalents paid. At target levels of performance, 67% of the
dividends are paid. Options will have no actual value unless the stock price
appreciates from the date of grant to the exercise date. If the named
officers realize the estimated grant date values, total shareholder value
(dividends and stock price appreciation) will have increased by approximately
$822 million and the value of the named officers options will be .21% of the
total increase.
14
<PAGE> 19
The following table sets forth as to each executive officer named under
"Executive Compensation -- Summary Compensation Table" information regarding
stock options exercised in 1997 and the value of stock options outstanding at
December 31, 1997.
OPTION/SAR EXERCISES AND OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
OPTIONS/SARS SHARES UNDERLYING VALUE OF UNEXERCISED
EXERCISED IN 1997 UNEXERCISED OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
--------------------- AT DECEMBER 31, 1997(#1) AT DECEMBER 31, 1997
SHARES VALUE ------------------------------- -------------------------------
NAME ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ---------- ----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Willis B. Wood, Jr. ...... -0- $ -0- 421,200 60,000 $5,554,250 $ 420,000
Richard D. Farman......... -0- $ -0- 284,000 45,000 $3,506,250 $ 315,000
Warren I. Mitchell........ 45,600 $ 518,525 69,500 27,000 $ 584,250 $ 189,000
Frederick E. John......... -0- $ -0- 66,300 21,000 $ 639,300 $ 147,000
Debra L. Reed............. 6,000 $ 54,525 36,800 21,000 $ 365,500 $ 147,000
</TABLE>
- ---------------
#1 The exercise price of outstanding options ranges from $19 1/4 to $47 1/4.
PENSION BENEFITS
The following table sets 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 40 YEARS
----------------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000................ $ 93,000 $115,000 $117,500 $120,000 $ 122,500 $ 125,000
400,000................ 195,000 235,000 240,000 245,000 250,000 255,000
600,000................ 295,000 355,000 362,500 370,000 377,500 385,000
800,000................ 395,000 475,000 485,000 495,000 505,000 515,000
1,000,000................ 495,000 595,000 607,500 620,000 632,500 645,000
1,200,000................ 595,000 715,000 730,000 745,000 760,000 775,000
1,400,000................ 695,000 835,000 852,500 870,000 887,500 905,000
1,600,000................ 795,000 955,000 975,000 995,000 1,015,000 1,035,000
</TABLE>
15
<PAGE> 20
- ---------------
#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 37 for Mr. Wood, 19 for Mr. Farman, 39 for Mr.
Mitchell, 15 for Mr. John and 19 for Ms. Reed.
EMPLOYMENT AND EMPLOYMENT-RELATED AGREEMENTS
During 1996, Pacific Enterprises or Southern California Gas Company entered
into a Severance Agreement and an Incentive/Retention Bonus Agreement with each
of the executive officers named under "Executive Compensation -- Summary
Compensation Table," other than with Mr. Wood who requested that he not be
considered for these agreements. The Severance Agreements memorialize past
severance practices and provide benefits in the event of actual or constructive
termination of employment (other than for cause, death or disability) that
generally consist of a lump sum cash payment equal to either 2.0 or 1.5 times
annual base salary; continuation of welfare benefits for 18 months; payment of
deferred compensation at a preferred rate; payout of accrued vacation benefits;
and financial planning and outplacement services.
The Incentive/Retention Bonus Agreements provide compensation for services
in connection with the business combination of Pacific Enterprises and Enova
Corporation and an incentive for executives to continue employment with the
combined companies. They provide for the payment of bonuses in varying amounts
not in excess of the executive's base salary plus incentive bonus (at target)
that are conditioned upon the completion of the business combination (or another
business combination transaction) and the transition of the executive to
employment with the combined companies for a period of six to twelve months, or
actual or constructive termination of employment other than for cause. The
bonuses payable to Messrs. Farman and Mitchell are also subject to certain
deferral provisions.
Sempra Energy, the new holding company for Pacific Enterprises and Enova
Corporation that will result from the business combination of the two companies,
also during 1996 entered into employment agreements with Messrs. Farman and
Mitchell and two senior executives of Enova. These agreements will become
effective upon completion of the business combination and the agreements with
Messrs. Farman and Mitchell will supersede their Severance Agreements.
Mr. Farman's employment agreement provides that he will serve as Chairman
of the Board and Chief Executive Officer of Sempra Energy for two years
following the completion of the business combination (or, if earlier, until
September 1, 2000) and thereafter until September 1, 2000 will serve as Chairman
of the Board. For these services, he will receive an annual base salary of not
less than $760,000; participate in annual incentive compensation plans providing
him with bonus opportunities (as a percentage of annual base salary) of not less
than 60% at target performance and 120% at maximum performance; and participate
in long-term compensation and retirement and welfare benefit plans.
16
<PAGE> 21
Mr. Mitchell's employment agreement provides that he will serve as
President and principal executive officer of the businesses of Sempra Energy and
its subsidiaries that are economically regulated by the California Public
Utilities Commission. For these services, he will receive an annual base salary
of not less than $440,000; participate in annual and long-term incentive
compensation plans and awards providing him with an annual bonus opportunity at
least equal (as percentage of base salary) to his bonus opportunities in effect
prior to the completion of the business combination; and participate in
retirement and welfare benefit plans.
The employment agreements with Messrs. Farman and Mitchell also provide
that if the executive's employment is terminated by Sempra Energy (other than
for cause, death or disability) or by the executive for good reason, he will
receive twice (three times in the event of termination following a change in
control) his annual base salary and annual incentive compensation (at the higher
of the target bonus for the year of termination or the average of the three
highest bonuses in the preceding five years); a pro rata portion of the target
annual incentive compensation award for the year or, if greater, the average of
the three highest bonus awards for the preceding five years; the present value
of retirement benefits to which he would have been entitled had his employment
continued for an additional two years (three years in the case of termination
following a change of control) and had increased his age by such additional
years as of termination, but not beyond mandatory retirement age of age 65;
immediate vesting of all equity-based, long-term incentive compensation awards;
pro rata payment of cash-based, long-term incentive awards at target
performance; continued participation in welfare benefit plans for two years; and
payment of compensation previously deferred. In certain circumstances, payments
under these agreements may be increased to offset excise taxes they may impose
upon the executive.
SHAREHOLDER PROPOSAL
The proposal and related supporting statement set forth below have been
submitted 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 and the number of shares held by the shareholder proponent
will be furnished to any shareholder promptly upon receipt of any oral or
written request to the Corporate Secretary of Pacific Enterprises.
The proposal is required to be voted upon at the Annual Meeting of
Shareholders only if properly presented by the shareholder proponent or the
proponent's qualified representative. To be approved it must receive the
affirmative vote of a majority of the shares of Pacific Enterprises Common Stock
and Preferred Stock represented and voting at the Annual Meeting. For the
reasons set forth below, Pacific Enterprises' Board of Directors opposes and
recommends a vote against the proposal.
17
<PAGE> 22
Shareholder Proposal and Supporting Statement
The Shareholders of Pacific Enterprises request the Board of Directors take
the necessary steps to amend the company's governing instruments to adopt the
following:
Beginning on the 1999 Pacific Enterprises fiscal year all members of
the Board of the Director's total compensation will be solely in shares of
Pacific Enterprises common stock each year. A significant portion of these
shares shall be held and not sold until their term as a director is up. No
other compensation of any kind will be paid. Including the elimination of
retirement benefits to directors, excluding existing contracts with
directors.
For many years the Rossi Family have been submitting for shareholder vote,
at this corporation as well as other corporations, proposals aimed at putting
management on the same playing field as the shareholders. This proposal would do
just that.
Many corporations have seen the wisdom in paying directors primarily or
solely in stock. Ownership in the company is the American way. We feel that this
method of compensation should be welcomed by anyone who feels they have the
ability to direct a major corporation's fortunes. The directors would receive
shares each year and be required to hold a significant portion of these shares.
If the corporation does well, the directors will make more money in the value of
the stock they receive and the dividend that usually rise with more profits. If
things go bad, they will be much more inclined to correct things, because it
will be coming directly out of their pockets. Instead of the way directors are
paid now, where directors receive the same compensation for good or bad
performance.
Board of Directors Opposition Statement
Pacific Enterprises' Board of Directors believes that stock and stock-based
compensation are appropriate components of a director compensation program.
Indeed, Pacific Enterprises was considering adding a stock component to its
director compensation program at the time that it began discussions for its
pending business combination with Enova Corporation. But it was advised by its
independent certified public accountants, that instituting a director stock
compensation program before the business combination was completed would likely
prevent the use of the pooling of interests method of accounting for the
combination, which both companies consider essential to the combination.
Accordingly, Pacific Enterprises discontinued further consideration of director
stock compensation.
The business combination has been overwhelmingly approved by the
shareholders of both Pacific Enterprises and Enova Corporation but its
completion remains subject to regulatory approvals. In addition, the completion
of the combination is conditioned upon assurances that the combination will be
accounted for as a pooling of interests and both companies have agreed not to
take any actions that would be likely to prevent that accounting treatment.
18
<PAGE> 23
Nonetheless, Pacific Enterprises' Board of Directors continues to favor
stock and stock-based compensation for directors. And, Enova Corporation's
director compensation program currently includes a stock component. Accordingly,
Pacific Enterprises expects that stock compensation will be a significant
component of director compensation at Sempra Energy, the new holding company
that will result from the combination of Pacific Enterprises and Enova
Corporation.
Pacific Enterprises does not believe, however, that it is appropriate to
mandate that directors be compensated entirely in stock as the shareholder
proposal would require. To attract and retain highly qualified individuals with
experience in a wide diversity of fields to serve as directors, corporations
should retain the flexibility to adopt director compensation programs that are
competitive not only as to amount but also as to form and method of payment.
Accordingly, in view of both the adverse effect that the implementation of
the proposal could have on the pending business combination of Pacific
Enterprises and Enova Corporation and the inflexibility that it would impose on
designing appropriate and competitive director compensation programs, Pacific
Enterprises' Board of Directors believes that the shareholder proposal is
contrary to the best interests of Pacific Enterprises and its shareholders.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE AGAINST THE SHAREHOLDER PROPOSAL
19
<PAGE> 24
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 properly
executed proxies and voting instructions received in time for the Annual Meeting
of Shareholders will be voted in accordance with the instructions specified
thereon. If no instructions are specified, the shares will be voted in
accordance with the recommendations of the Board. The holders of the proxies or
voting instructions are authorized to vote the shares in their discretion as to
any other business that may come before the Annual Meeting or any matters
incident to the conduct of the meeting.
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.
At the March 16, 1998 record date for the Annual Meeting, employee benefit
plans of Pacific Enterprises and its subsidiaries held shares of Pacific
Enterprises Common Stock representing 14.4% 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, shares representing 11.9% 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. T. Rowe Price Trust Company, as
trustee for the plans, will vote unallocated shares and allocated shares for
which voting instructions are not timely received in the same manner and
proportion as allocated shares for which voting instructions are timely
received.
The remaining shares held by employee benefit plans (representing 2.5% 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
20
<PAGE> 25
solicitation is being made by mail and may also be made in person or by letter,
telephone, telegraph or other means of 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 & Co., Inc. has been
retained by Pacific Enterprises to assist in the solicitation of proxies and
will be paid a fee of $10,000 plus reimbursement of expenses for these services.
INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected Deloitte & Touche LLP to serve as Pacific Enterprises' independent
auditors for 1998. Representatives of Deloitte & Touche LLP are expected to
attend the Annual Meeting of Shareholders. 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' 1997 Annual Report to Shareholders was mailed to
shareholders commencing March 10, 1998. 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.
1999 ANNUAL MEETING OF SHAREHOLDERS
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 1998
Annual Meeting of Shareholders has expired.
The 1999 Annual Meeting of Shareholders is expected to be held on May 6,
1999. The period for the receipt by Pacific Enterprises of notice of business to
be brought by shareholders before the 1999 Annual Meeting will commence on
January 7, 1999 and end on March 8, 1999.
Proposals of shareholders that are intended to be included in Pacific
Enterprises' proxy materials for the 1999 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 25, 1998.
------------------------------
21
<PAGE> 26
IF YOU ARE PLANNING TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS 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.
- --------------------------------------------------------------------------------
LOGO
1998 ANNUAL MEETING OF SHAREHOLDERS
ADMISSION TICKET
THE ANNUAL MEETING OF SHAREHOLDERS WILL BE HELD AT 11:00 A.M. ON MAY 7, 1998, AT
THE UNIVERSAL CITY HILTON & TOWERS
555 UNIVERSAL PARKWAY TERRACE
UNIVERSAL CITY, CALIFORNIA
ADMIT ONE SHAREHOLDER AND GUEST
(Doors open at 10:00 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> 27
LOGO
ANNUAL SHAREHOLDERS' MEETING LOCATION
UNIVERSAL CITY
HILTON AND TOWERS
555 UNIVERSAL TERRACE PARKWAY
UNIVERSAL CITY, CALIFORNIA
LOGO
DIRECTIONS
FROM VENTURA FWY (134)
EASTBOUND
Exit at Cahuenga Blvd. Follow Cahuenga south and turn left on Lankershim Blvd.
and then turn left on Universal Terrace Pkwy. Proceed up the hill to the third
driveway [above Sheraton] for hotel entrance.
WESTBOUND
Exit at Lankershim Blvd. Follow Lankershim south and turn left on Universal
Terrace Pkwy. Proceed up the hill to the third driveway [above Sheraton] for
hotel entrance.
FROM HOLLYWOOD FWY (101)
NORTHBOUND AND SOUTHBOUND
Exit at Lankershim Blvd. Follow Lankershim north and turn right on Universal
Terrace Pkwy. Proceed up the hill to the third driveway [above Sheraton] for
hotel entrance.
PARKING
Valet parking is available at the hotel and will be paid by the company.
Upon entering hotel driveway from Universal Terrace Pkwy., follow signage to
valet parking at the ballroom entrance.
LOGO
ANNUAL MEETING OF
SHAREHOLDERS
UNIVERSAL CITY
HILTON AND TOWERS
555 UNIVERSAL TERRACE PARKWAY
UNIVERSAL CITY, CALIFORNIA
May 7, 1998
NOTICE OF MEETING
AND
PROXY STATEMENT
<PAGE> 28
Please mark [ X ]
your votes as
indicated in
this example
<TABLE>
<S> <C>
- ------------------------------------------------------------- -------------------------------------------------------------
PACIFIC ENTERPRISES' BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PACIFIC ENTERPRISES' BOARD OF DIRECTORS RECOMMENDS A
THE ELECTION OF DIRECTORS. VOTE AGAINST THE FOLLOWING SHAREHOLDER PROPOSAL.
- ------------------------------------------------------------- -------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. ELECTION OF [ ] [ ] 2. SHAREHOLDER PROPOSAL [ ] [ ] [ ]
DIRECTORS WITH RESPECT TO DIRECTOR
COMPENSATION.
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S): -------------------------------------------------------------
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: _________________________________________, 1998
-----------------------------------------------------
Signature
-----------------------------------------------------
Signature
PLEASE SIGN EXACTLY AS NAME APPEARS
</TABLE>
PACIFIC ENTERPRISES
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RICHARD D. FARMAN, 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 7, 1998, at 11:00 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., Richard J.
Stegemeier, 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 ITEM 1 AND AGAINST ITEM 2.
---
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
