<PAGE>
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[_] Preliminary Information Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
[X] Definitive Information Statement
Pacific Enterprises
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) 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):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------
[_] 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 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
PACIFIC ENTERPRISES
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
----------------
The Annual Meeting of Shareholders of Pacific Enterprises will be held on
May 11, 1999 at 10:00 a.m. at the offices of Sempra Energy, 101 Ash Street,
San Diego, California, for the following purposes:
(1) To elect directors for the ensuing year.
(2) To transact any other business that may properly come before the
meeting.
Shareholders of record at the close of business on March 22, 1999 are
entitled to notice of and to vote at the Annual Meeting.
The Annual Meeting is a business-only meeting. It will not include any
presentations by management.
Only shareholders of Pacific Enterprises are entitled to attend the Annual
Meeting. Shareholders who own shares registered in their names will be
admitted to the meeting upon verification of record share ownership.
Shareholders who own shares through banks, brokerage firms, nominees or other
account custodians must present proof of beneficial share ownership (such as a
brokerage account statement) to be admitted.
By Order of the Board of Directors
Los Angeles, California
April 9, 1999
<PAGE>
PACIFIC ENTERPRISES
----------------
INFORMATION STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
----------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
Pacific Enterprises is providing this Information Statement in connection
with its Annual Meeting of Shareholders to be held on May 11, 1999. It is
being mailed to shareholders commencing April 9, 1999.
PACIFIC ENTERPRISES
Pacific Enterprises is the parent corporation of Southern California Gas
Company, a public utility engaged in supplying natural gas throughout most of
Southern and portions of Central California. The Gas Company is the nation's
largest natural gas distribution utility, providing 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 with a population of 17.6 million.
On June 26, 1998, Pacific Enterprises and Enova Corporation (the parent
corporation of San Diego Gas & Electric Company) completed a business
combination in which the two companies became separate subsidiaries of Sempra
Energy, a newly formed holding company. In the combination, Pacific
Enterprises Common Stock and Enova Corporation Common Stock were converted
into Sempra Energy Common Stock. Pacific Enterprises Preferred Stock was not
converted in the business combination and remains outstanding.
As a result of the business combination, Pacific Enterprises (as well as
Enova Corporation) is now a direct subsidiary of Sempra Energy. All of the
outstanding Pacific Enterprises Common Stock, representing approximately 99%
of Pacific Enterprises' voting shares, is owned by Sempra Energy. The
remaining outstanding voting shares consist of publicly held Preferred Stock.
Pacific Enterprises' principal executive offices are located at 555 West
Fifth Street, Los Angeles, California. Its telephone number is (213) 895-5000.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders who are present at the Annual Meeting will be entitled to one
vote for each Pacific Enterprises share which they held of record at the close
of business on March 22, 1999. At that date, the outstanding shares consisted
of 83,917,664 shares of Common Stock, all of which is owned by Sempra Energy,
and 800,253 shares of Preferred Stock, all of which is publicly held. The
shares owned by Sempra Energy represent over 99% of the outstanding shares.
In electing directors, each share is entitled to one vote for each of the
sixteen director positions but cumulative voting is not permitted.
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, sixteen 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 sixteen director candidates receiving the greatest number of
votes will be elected as directors.
The names of the Board of Directors' sixteen nominees for election as
directors and biographical information regarding each nominee are set forth
below. Each nominee (other than Mr. Baum) is currently a director of Pacific
Enterprises and each (including Mr. Baum) is also a director of Sempra Energy.
Unless otherwise noted, each nominee has held the position set forth beneath
his or her name or various positions with the same or predecessor
organizations for at least the last five years.
[LOGO] Stephen L. Baum, 58, is Vice Chairman of the Board, President and
Chief Operating Officer of Sempra Energy and President of Pacific
Enterprises. Prior to the business combination of Pacific
Enterprises and Enova Corporation, he was Chairman and Chief
Executive Officer of Enova Corporation.
[LOGO] Hyla H. Bertea, 58, has been a director since 1993. She is a
realtor with Prudential California, a real estate sales company.
She is a trustee of Lewis & Clark College, a director of Orange
County Community Foundation, and a former commissioner of the
California Horse Racing Board. For a number of years she has been
involved in leadership positions with various other cultural,
educational and health organizations in the Orange County and Los
Angeles areas. Mrs. Bertea was a co-commissioner of gymnastics
and a member of the executive staff for the 1984 Olympics.
[LOGO] Ann L. Burr, 52, became a director in 1998. She is an Executive
Vice President for Residential Telephony of Time Warner Cable.
She is the former President of Time Warner Communications in
Rochester, New York and Time Warner Cable in San Diego. Ms. Burr
is a trustee of Rochester Institute of Technology, the RIT
Research Corporation and George Eastman House.
[LOGO] Herbert L. Carter, Ph.D., 65, has been a director since 1991. He
is President of California State University, Dominguez Hills, and
Executive Vice Chancellor Emeritus and Trustee Professor of
Public Administration of the California State University System.
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 1987
until 1992. Dr. Carter is a director of Golden State Mutual
Insurance Company, and a member of the Board of Councilors of the
School of Public Administration, University of Southern
California.
2
<PAGE>
[LOGO] Richard A. Collato, 55, became a director in 1998. He is
President and Chief Executive Officer of the YMCA of San Diego
County. He is a former director of Y-Mutual Ltd., a reinsurance
company, and The Bank of San Diego. Mr. Collato is a trustee of
Springfield College, YMCA Retirement Fund and Bauce Foundation,
and a director of Project Design Consultants.
[LOGO] Daniel W. Derbes, 68, became a director in 1998. He is President
of Signal Ventures. From 1985 until 1988, he was President of
Allied-Signal International Inc. and Executive Vice President of
Allied-Signal Inc., a multi-national advanced technologies
company. Mr. Derbes is a director of Oak Industries, Inc. and WD-
40 Company and a trustee of the University of San Diego.
[LOGO] Richard D. Farman, 63, has been a director since 1992. He is
Chairman of the Board and Chief Executive Officer of Sempra
Energy and Pacific Enterprises. He is a director of Union Bank,
Sentinel Group Funds, Inc. and Catellus Development Corporation.
He is 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.
[LOGO] Wilford D. Godbold, Jr., 60, has been a director since 1990. He
is the retired President and Chief Executive Officer of ZERO
Corporation, an international manufacturer primarily of
enclosures and thermal management equipment for the electronics
market. He is a director of K2, Inc., and the California State
Chamber of Commerce (past Chairman). Mr. Godbold is a trustee of
the Wellness Community, a member of the Council on California
Competitiveness and a past President of the Board of Trustees of
Marlborough School.
[LOGO] Robert H. Goldsmith, 68, became a director in 1998. He is a
management consultant. He is the former Chairman, President and
Chief Executive Officer of Exten Industries, Inc. and former
Chairman and Chief Executive Officer of Rohr, Inc. Mr. Goldsmith
also is the former Vice Chairman and Chief Operating Officer of
Precision Forge Company, Senior Vice President of Pneumo
Corporation's Aerospace and Industrial Group and Vice President
of General Electric Company and General Manager of GE's
commercial (aircraft) engine projects division and the gas
turbine division.
[LOGO] William D. Jones, 43, became a director in 1998. He is the
President and Chief Executive Officer and a director of CityLink
Investment Corporation. From 1989 to 1993, he served as General
Manager/Senior Asset Manager and Investment Manager with certain
real estate subsidiaries of The Prudential. Prior to joining The
Prudential, he served as a San Diego Council member from 1982 to
1987. Mr. Jones is a director of the Federal Reserve Bank of San
Francisco, Los Angeles Branch and a trustee of the University of
San Diego. He is a former director of The Price Real Estate
Investment Trust.
3
<PAGE>
[LOGO] Ignacio E. Lozano, Jr., 72, has been a director since 1978. He is
Chairman of the Board of La Opinion, a Spanish language daily
newspaper. During 1976 and 1977 he served as United States
Ambassador to El Salvador. He is a director of The Walt Disney
Company, Pacific Mutual Life Insurance Company, the Santa Anita
Foundation and the Youth Opportunities Foundation. Mr. Lozano is
a trustee of the University of Notre Dame and a member of the
California Press Association.
[LOGO] Ralph R. Ocampo, M.D., 67, became a director in 1998. He is a San
Diego physician and surgeon. Dr. Ocampo is a past President of
the California Medical Association.
[LOGO] William G. Ouchi, Ph.D., 55, became a director in 1998. He is a
Vice Dean and Faculty Director of Executive Education Programs
and Sanford and Betty Sigoloff Professor of Management in the
Anderson Graduate School of Management at UCLA. Dr. Ouchi is a
director of Allegheny-Teledyne and Firstfed Financial
Corporation.
[LOGO] Richard J. Stegemeier, 70, has been a director since 1995. He is
Chairman Emeritus of the Board of Unocal Corporation. He is a
director of Foundation Health Systems, Inc., Halliburton Company,
Montgomery Watson, Inc., and Northrop Grumman Corporation.
[LOGO] Thomas C. Stickel, 49, became a director in 1998. He is the
Chairman, Chief Executive Officer and founder of University
Ventures Network. He is the founder of Americana Partners Capital
Group, Inc. He previously was the Chairman, Chief Executive
Officer and President of TCS Enterprises, Inc. and the Bank of
Southern California, both of which he founded. Mr. Stickel is
Chairman of the Board of Onyx Acceptance Corporation; a director
of Blue Shield of California, Scripps International, Inc., Clair
Burgener Foundation and Del Mar Thoroughbred Club; and Vice
Chairman of the California Chamber of Commerce.
[LOGO] Diana L. Walker, 57, has been a director since 1989. Mrs. Walker
is a partner in the law firm of O'Melveny & Myers LLP. 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 provides legal
services to Pacific Enterprises and its affiliates.
4
<PAGE>
GOVERNANCE OF THE COMPANY
Board of Directors
The business and affairs of Pacific Enterprises are managed under the
direction of the Board of Directors in accordance with the California General
Corporation Law as implemented by the Company's Articles of Incorporation and
By-laws. Members of the board are kept informed through various reports
routinely sent to them as well as by operating and financial presentations
made at board and committee meetings by officers and others.
Shareholders who wish to suggest qualified candidates for consideration by
the Corporate Governance Committee as directors of Pacific Enterprises should
write to: Corporate Secretary, Pacific Enterprises, 555 West Fifth Street, Los
Angeles, California, 90013, stating in detail the qualifications of the
suggested candidates.
During 1998, the Board of Directors held seventeen meetings. The standing
committees listed below assisted the board in carrying out its duties.
Committees Of the Board
<TABLE>
<CAPTION>
Audit Compensation Corporate Governance Executive Finance
- ----------------------- ---------------------- --------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
Richard A. Collato, Richard J. Stegemeier, Hyla H. Bertea, Richard D. Farman, Daniel W. Derbes,
Chair Chair Chair Chair Chair
Ann L. Burr Hyla H. Bertea Ann L. Burr Herbert L. Carter Richard A. Collato
Wilford D. Godbold, Jr. Ignacio E. Lozano, Jr. Daniel W. Derbes Ignacio E. Lozano, Jr. Wilford D. Godbold, Jr.
Robert H. Goldsmith Ralph R. Ocampo Robert H. Goldsmith Thomas C. Stickel William D. Jones
William G. Ouchi Thomas C. Stickel Richard J. Stegemeier Diana L. Walker
Diana L. Walker
<CAPTION>
Public Policy
- ------------------
<C>
Herbert L. Carter,
Chair
William D. Jones
Ralph R. Ocampo
William G. Ouchi
</TABLE>
Audit Committee
The Audit Committee met five times in 1998. Its duties and responsibilities
include the following:
. Providing oversight of the financial reporting process and management's
responsibility for the integrity, accuracy and objectivity of financial
reports and accounting and financial reporting practices.
.Recommending to the board the selection of independent auditors.
. Reviewing and monitoring the compliance process for the Pacific
Enterprise's Code of Business Ethics and Conduct.
Compensation Committee
The Compensation Committee met five times in 1998. The duties and
responsibilities of the Compensation Committee include the following:
.Establishing overall strategy with respect to compensation for directors
and senior officers.
.Evaluating the performance of the Chairman and the President for
compensation purposes.
. Reviewing and approving individual salary adjustments and awards under
incentive plans for senior officers.
.Overseeing the executive succession plans.
Corporate Governance Committee
The Corporate Governance Committee met three times in 1998. Its duties and
responsibilities include the following:
.Reviewing and recommending nominees for election as directors.
.Assessing the performance of the Board of Directors.
5
<PAGE>
. Developing guidelines for board composition.
. Reviewing and administering the Company's Corporate Governance
Guidelines and considering other issues relating to corporate
governance.
Executive Committee
The Executive Committee did not meet in 1998. The committee meets on call
during the intervals between board meetings and, subject to the limitations
imposed by law, has all the authority of the board.
Finance Committee
The Finance Committee met twice in 1998. Its duties and responsibilities
include the following:
. Reviewing long term and short term financial requirements and financing
plans.
. Reviewing trading operations, financial guarantees and derivatives
positions and exposure.
Public Policy Committee
The Public Policy Committee met twice in 1998. Its duties and
responsibilities include the following:
. Reviewing public policy issues affecting Pacific Enterprises, including
ethnic, social and political trends.
. Reviewing employment and contracting policies, consumer issues and
community relations.
. Reviewing charitable and political contributions and programs.
Directors' Compensation
All of the directors and nominees as directors of Pacific Enterprises are
also directors or officers of Sempra Energy. They are not separately
compensated for services as directors of Pacific Enterprises.
Directors of Sempra Energy who are not also employees receive the following
retainer and fees for services as directors of Sempra Energy and its
subsidiaries:
<TABLE>
<S> <C>
Annual retainer................................................... $26,000
Attendance fee for each Board meeting............................. $ 1,000
Attendance fee for each Committee meeting......................... $ 1,000
Annual retainer for each Committee chaired........................ $ 3,000
</TABLE>
Directors may elect to receive their annual fees in Sempra Energy Common
Stock or to defer their annual fees into an interest-bearing account or a
phantom share account in which the fees are deemed invested in Sempra Energy
Common Stock.
During 1998, each non-employee director of Sempra Energy was granted a ten-
year option to purchase 15,000 shares of Sempra Energy Common Stock at an
exercise price of $26 7/8 per share, the fair market value of the shares on
the July 13, 1998 date of the grant. Each director will also be granted an
additional ten-year option for 5,000 shares at each annual meeting of Sempra
Energy following which the director continues to serve as a non-employee
director.
Non-employee directors of Sempra Energy who were directors of Pacific
Enterprises or Enova Corporation at the time of the business combination of
the two companies (currently all of the non-employee directors) continue to
accrue retirement benefits (subject to certain maximum years of service
credit) for service as non-employee directors of Sempra Energy. Benefits
commence upon the later of retirement as a director or attaining age 65 and
continue for a maximum period equal to the director's combined years of
service as a director of Sempra Energy and Pacific Enterprises or Enova
Corporation. The annual benefit is the sum of Sempra Energy's then current
annual retainer and ten times the then current board meeting fee.
6
<PAGE>
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
All of the outstanding Pacific Enterprises Common Stock is owned by Sempra
Energy and none of Pacific Enterprises' directors or officers owns any Pacific
Enterprises Preferred Stock.
The following table sets forth the number of shares of Sempra Energy Common
Stock beneficially owned by each director, by each of the five most highly
compensated executive officers of Pacific Enterprises and by all directors and
executive officers of Pacific Enterprises as a group, as of January 31, 1999.
These shares, in the aggregate, represent less than one percent of Sempra
Energy's outstanding shares.
Sempra Energy Common Stock
<TABLE>
<CAPTION>
Shares
Current Subject To
Beneficial Exercisable Phantom
Holdings Options(A) Shares (B) Total
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Frank H. Ault...................... 21,732 -0- 12,114 33,846
Stephen L. Baum.................... 79,898 -0- 52,747 132,645
Hyla H. Bertea..................... 9,274 15,000 -0- 24,274
Ann L. Burr........................ 2,200 15,000 -0- 17,200
Herbert L. Carter.................. 1,466 15,000 -0- 16,466
Richard A. Collato................. 3,907 15,000 -0- 18,907
Daniel W. Derbes................... 5,394 15,000 -0- 20,394
Richard D. Farman.................. 47,606 497,757 64,781 610,144
Wilford D. Godbold, Jr............. 3,006 15,000 -0- 18,006
Robert H. Goldsmith................ 2,618 15,000 -0- 17,618
William D. Jones................... 2,172 15,000 -0- 17,172
John R. Light...................... 15,736 -0- -0- 15,736
Ignacio E. Lozano, Jr.............. 2,248 15,000 -0- 17,248
Ralph R. Ocampo.................... 14,510 15,000 -0- 29,510
William G. Ouchi................... 10,000 15,000 -0- 25,000
Neal E. Schmale.................... 15,556 15,038 -0- 30,594
Richard J. Stegemeier.............. 1,503 15,000 -0- 16,503
Thomas C. Stickel.................. 2,006 15,000 -0- 17,006
Diana L. Walker.................... 866 15,000 -0- 15,866
Directors and Executive Officers as
a group
(19 persons)...................... 241,698 722,795 129,642 1,094,135
</TABLE>
- --------
(A) Shares which may be acquired through the exercise of stock options that
are exercisable on or before May 19, 1999.
(B) Represents deferred compensation deemed invested in shares of Sempra
Energy Common Stock. These phantom shares cannot be voted or transferred
but track the performance of Sempra Energy Common Stock.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pacific Enterprises is a subsidiary of Sempra Energy and all of the officers
of Pacific Enterprises are also officers of Sempra Energy. The officers are
compensated by Sempra Energy and are not separately compensated for their
services as officers of Pacific Enterprises.
Pacific Enterprises became a subsidiary of Sempra Energy in connection with
a business combination with Enova Corporation that was completed on June 26,
1998. Richard D. Farman, previously the Chief Executive Officer of Pacific
Enterprises, serves as Chairman and Chief Executive Officer of both Pacific
Enterprises and Sempra Energy. Stephen L. Baum, previously Chairman and Chief
Executive Officer of Enova Corporation, serves as President of Pacific
Enterprises and Vice Chairman and President of Sempra Energy. Together,
Messrs. Farman and Baum comprise Sempra Energy's Office of the Chairman.
The Boards of Directors of Pacific Enterprises and Sempra Energy each
maintain a Compensation Committee comprised of independent, non-employee
directors. The directors comprising the two committees are identical and the
committees typically meet in joint session.
The Compensation Committees have the responsibility for establishing
compensation principles and strategies, as well as designing a compensation
program for executive officers. Their responsibilities also include
administering a base salary program, executive annual and long term incentive
plans, and executive benefit programs.
The Compensation Committees concluded that the formation of Sempra Energy
would require a comprehensive review of the compensation programs and policies
of Pacific Enterprises and Enova Corporation and their respective
subsidiaries, and the development of new policies and programs appropriate to
a combined company with a significantly broader scope and substantially larger
size than either of the two combining companies. Accordingly, prior to the
completion of the business combination and with the assistance of nationally
recognized compensation and benefit consultants, the Compensation Committees
formulated compensation principles and strategies and developed compensation
policies and practices intended to enable Sempra Energy and its subsidiaries
to realize the objectives of the business combination and to create superior
shareholder value in a rapidly changing and increasingly competitive business
environment.
Compensation Principles and Strategies
In developing compensation principles and strategies, the Compensation
Committees considered the current and prospective business environment for
Sempra Energy and its subsidiaries and took into account numerous factors
including:
. The substantially larger size and broader scope of Sempra Energy's
operations over those of either Pacific Enterprises or Enova
Corporation.
. The rapidly changing and increasingly competitive environment in which
Sempra Energy and its subsidiaries would operate.
. The need to retain experienced executives of outstanding ability and to
motivate them to achieve superior performance.
. The need to attract executive talent from broader markets as the utility
and energy industries continue to rapidly evolve.
. The need to strongly link executive compensation to both annual and long
term corporate, business unit and individual performance.
. The need to strongly align the interests of executives with those of
shareholders.
8
<PAGE>
As a result of this review, the Compensation Committees approved a
compensation program designed to meet these objectives and encourage
executives to achieve superior shareholder returns. The program includes the
following elements.
. An emphasis on "pay-for-performance" with a substantial portion of total
compensation reflecting corporate, business unit and individual
performance.
. An emphasis on stock incentives closely aligning the interests of
executives with those of shareholders.
. An emphasis on total compensation with base salaries generally targeted
at or near median general industry levels for comparable sized companies
and with annual cash and long term equity incentives providing
opportunities to earn total compensation at significantly higher levels
for superior corporate, business unit and individual performance.
. An appropriate balance of short term and long term compensation to
retain talented executives, reward effective long term strategic results
and encourage share ownership.
. An emphasis on placing at risk, through equity and other performance-
based incentives, a greater portion of an executive's total compensation
as levels of responsibility increase.
The Compensation Committees also considered provisions of the Internal
Revenue Code limiting to $1 million the annual amount of compensation that
does not qualify as "qualified performance-based compensation" that publicly
held corporations may deduct for federal income tax purposes as compensation
expense for each of certain executive officers. The committees consider tax
deductibility to be an important factor but only one factor to be considered
in evaluating any executive officer compensation program. Accordingly, the
committees intend to design programs that will maximize federal income tax
deductions for compensation expense to the extent that doing so is consistent
with the compensation principles and strategies of Sempra Energy and its
subsidiaries. The committees believe, however, that there are circumstances in
which the interests of shareholders may be best served by providing
compensation that is not fully tax deductible, and may exercise discretion to
provide compensation (including incentive awards under the Sempra Energy Long
Term Incentive Plan) that will not qualify as a tax deductible compensation
expense.
Compensation Program
The primary components of the compensation program of Sempra Energy and its
subsidiaries are base salaries, annual cash incentive opportunities and long
term equity and equity-based incentive opportunities.
Base Salaries
Base salaries for executives are reviewed annually and, in general, are
targeted at the median of salaries for general industry companies of similar
size to Sempra Energy. This strategy, along with annual and long term
incentive opportunities at general industry levels, is intended to allow
Sempra Energy and its subsidiaries to retain and attract top quality executive
talent. However, the committees will continue to monitor this strategy as the
markets for executive talent intensify. In determining base salary
adjustments, the committees will also take into account such factors as
individual performance, executive responsibilities and market characteristics.
Survey data for assessing base salaries are based upon companies in the
Fortune 1000 and size-adjusted based upon Sempra Energy's revenues using
regression analysis. This group is broader than the peer group used for
assessing performance for incentive plan purposes. The Compensation Committees
believe that the most direct competitors of Sempra Energy and its subsidiaries
for executive talent will not be limited to companies in this peer group and
the Fortune 1000 appropriately reflects a broader group with which Sempra
Energy and its subsidiaries compete to retain and attract highly skilled and
talented executives.
Accordingly, initial base salaries for executive officers of Sempra Energy
and its subsidiaries were set at the approximate mid-point of these salary
data. An annual base salary of $870,000 was established for
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<PAGE>
Mr. Farman and $738,000 for Mr. Baum. These salaries became effective in June
1998 and were adjusted effective January 1, 1999 to $915,000 and $763,000,
respectively, in connection with the committees' annual salary review to
reflect changing market conditions and individual and corporate performance.
Annual Incentives
Annual cash bonus performance-based incentive opportunities are provided to
executive officers through the Sempra Energy Executive Incentive Plan. This
plan permits the payment of bonuses based upon the attainment of objective
financial performance goals. Bonus opportunities vary with the individual
officer's position and prospective contribution to the attainment of these
goals and no bonuses are paid unless a threshold performance level is attained
for the related performance period. Bonus opportunities increase for
performance above the threshold level. Performance at targeted levels is
intended to compensate executive officers with bonuses at the mid-point for
bonuses for comparable levels of responsibility at Fortune 1000 companies.
For the six-month period of 1998 during which the Sempra Energy Executive
Incentive Plan was in effect, award levels were based on attainment of
earnings per share goals with target award levels ranging from 80% of base
salary (for the six-month period) for Messrs. Farman and Baum to 45% of base
salary (for the six-month period) for Vice Presidents, with maximum award
levels ranging from 160% to 90% of six-month base salary. Performance for the
six months exceeded targeted performance and resulted in cash bonuses of 114%
of six-month base salary for Messrs. Farman and Baum ($497,640 and $422,136,
respectively,) with corresponding lesser amounts for other executive officers.
For the first half of 1998, the performance of Pacific Enterprises
substantially exceeded its performance goals for annual cash bonuses and
resulted in Mr. Farman receiving a maximum cash bonus for the six-month period
of $522,000. For the first six months of 1998, Mr. Baum was Chairman and Chief
Executive Officer of Enova Corporation which also substantially exceeded its
performance goals resulting in Mr. Baum receiving a maximum cash bonus of
$469,000 for the six-month period.
Long Term Incentives
Long term incentive opportunities are provided by equity and equity-based
awards under Sempra Energy's 1998 Long Term Incentive Plan. The plan permits a
wide variety of equity and equity-based incentive awards to respond to changes
in the market conditions and compensation practices. It is expected, however,
that most awards under the plan will be in the form of non-qualified stock
options and, to a lesser and declining extent, restricted stock.
During the second half of 1998, Sempra Energy granted to executives and
other employees of Sempra Energy and its subsidiaries non-qualified stock
options to purchase Sempra Energy Common Stock under stock option plans of
Pacific Enterprises and Enova Corporation that were assumed by Sempra Energy
in the business combination of the two companies. During the first half of
1998, Pacific Enterprises also granted stock options to Mr. Farman and to
others who were then executive officers of Pacific Enterprises. These Sempra
Energy and Pacific Enterprises option grants are described in this Proxy
Statement under the caption "Executive Compensation--Stock Options and Stock
Appreciation Rights."
During 1998, Sempra Energy also awarded grants of performance-based
restricted shares under its 1998 Long Term Incentive Plan to executives of
Sempra Energy and its subsidiaries. These awards and related total shareholder
return vesting standards are discussed in this Proxy Statement under the
caption "Executive Compensation--Restricted Stock Grants."
The Sempra Energy grants of options and restricted shares, consistent with
general industry practices, have a value of approximately 170% of base salary
for Messrs. Farman and Baum and reflect long term incentives expected to be
granted for 1999.
10
<PAGE>
Stock Ownership Guidelines
The Compensation Committees believe that a commitment to increased share
ownership by executives of Sempra Energy and its subsidiaries is an important
element in aligning the interests of executives with those of shareholders.
This belief has influenced the design of compensation plans and, in addition,
stock ownership guidelines have been established to further strengthen the
link between corporate performance and compensation.
In setting stock ownership guidelines, consideration was given to current
share ownership levels of senior executives and the desire to encourage
further share ownership in the new company. The guidelines are as follows:
<TABLE>
<CAPTION>
Sempra Energy Stock
Pacific Enterprises Ownership Guidelines
Executive Level (As a Multiple of Salary)
------------------- -------------------------
<S> <C>
Chief Executive Officer 4 x Base Salary
President 4 x Base Salary
Executive Vice Presidents 3 x Base Salary
Other Vice Presidents 1 x Base Salary
</TABLE>
Executives are expected to meet or exceed these share ownership levels over
a five-year period. For purposes of the guidelines, shares owned will include
phantom shares into which compensation has been deferred and the vested
portion of certain in-the-money employee stock options as well as shares owned
directly or through employee benefit plans.
COMPENSATION COMMITTEE
Richard J. Stegemeier, Chairman
Hyla H. Bertea
Ignacio E. Lozano, Jr.
Ralph R. Ocampo
Thomas C. Stickel
March 2, 1999
11
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The table below summarizes, for the periods indicated, the compensation paid
or accrued by Sempra Energy and its predecessors and subsidiaries to each of
the executive officers of Pacific Enterprises named in the table.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Awards Payouts
------ -------
Securities LTIP
Name and Principal Annual Compensation Underlying Payouts All Other
-------------------
Position Year Salary Bonus Options / SARS (#) (A) (B) Compensation (C)
------------------ ---- ------ ----- ------------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Farman....... 1998 $728,718 $1,019,640 274,593 $ -0- $1,689,295
Chairman and Chief 1997 $478,208 $ 500,000 45,000 $ -0- $ 108,049
Executive Officer 1996 $429,999 $ 430,000 2,000 $ -0- $ 76,309
Stephen L. Baum (D)..... 1998 $681,577 $ 891,136 167,900 $247,746 $1,494,258
President
Neal E. Schmale(E)...... 1998 $414,731 $ 371,600 109,334 $ -0- $ 107,932
Executive Vice
President
and Chief Financial
Officer
John R. Light (D)....... 1998 $292,308 $ 431,600 64,220 $ 35,539 $ 155,045
Executive Vice
President
and General Counsel
Frank H. Ault (D)....... 1998 $206,250 $ 168,568 16,860 $ 54,407 $ 343,070
Vice President and
Controller
Willis B. Wood, Jr.
(F).................... 1998 $613,167 $ 556,266 112,785 $ -0- $ 970,146
Chairman and Chief 1997 $682,201 $ 700,000 60,000 $ -0- $ 132,762
Executive Officer 1996 $635,000 $ 635,000 55,200 $ -0- $ 95,439
</TABLE>
(A) Long term incentive plan payouts represent the fair market value of shares
of restricted stock for which forfeiture and transfer restrictions
terminated during the year based upon satisfaction of long term
performance goals. Restricted stock awarded in 1998 under the Sempra
Energy Long Term Incentive Plan is reported below under the caption
"Restricted Stock Grants."
(B) The aggregate holdings/value of restricted stock held on December 31, 1998
by the individuals listed in the table are: 17,124 shares/$434,607 for Mr.
Farman; 37,229 shares/$944,872 for Mr. Baum; 5,556 shares/$141,011 for Mr.
Schmale; 10,341 shares/$262,455 for Mr. Light; 5,171 shares/$131,240 for
Mr. Ault; and 0 shares/$0 for Mr. Wood. Regular quarterly dividends are
paid on restricted stock held by these individuals.
(C) All other compensation includes amounts paid as (i) interest on deferred
compensation above 120% of the applicable federal rate, (ii) life
insurance premiums, (iii) financial and estate planning services, (iv)
contributions to defined benefit plans and related supplemental plans, and
(v) car allowances. The respective amounts paid in 1998 were $76,476,
$9,556, $7,763, $22,763 and $6,737 for Mr. Farman; $2,346, $113,211,
$4,313, $38,717, and $7,671 for Mr. Baum; $925, $2,077, $-0-, $1,385 and
$3,545 for Mr. Schmale; $-0-, $- 0-, $ -0-, $ -0- and $5,045 for Mr.
Light; $945, $14,412, $6,891, $9,488 and $6,334 for Mr. Ault; and $91,055,
$6,544, $7,841, $20,628 and $3,577 for Mr. Wood.
12
<PAGE>
Amounts for 1998 also include incentive/retention bonus accruals for Mr.
Farman under an agreement with Pacific Enterprises and for Messrs. Baum and
Ault under agreements with Enova Corporation. These agreements were entered
into in 1997 in connection with the business combination of the two
companies and provide that each executive becomes entitled to an
incentive/retention bonus upon the completion of the business combination
(which was completed on June 26, 1998) and continued employment with Sempra
Energy for a period of twenty-four months thereafter. Under the agreements,
deferral accounts were established for Messrs. Farman, Baum and Ault upon
the completion of the business combination and credited with
incentive/retention bonus amounts of $1,566,000, $1,328,000 and $305,000,
respectively, which were deemed invested in shares of Sempra Energy Common
Stock. Dividend equivalents on these phantom shares similarly are deemed
reinvested to purchase additional shares at then fair market value. Upon
becoming entitled to his incentive/retention bonus, the executive will be
paid in cash an amount based upon the number of phantom shares then
credited to his account and then fair market value of Sempra Energy Common
Stock.
Amounts for 1998 for Mr. Light also include $150,000 paid to him as a
signing bonus.
Amounts for 1998 for Mr. Schmale also include $100,000 paid to him as a
signing bonus.
Amounts for 1998 for Mr. Wood also include $840,500 paid to him by Pacific
Enterprises upon his retirement in recognition of his life-long service and
contributions to the company.
(D) Messrs. Baum, Light and Ault became executive officers of Pacific
Enterprises upon the completion on June 26, 1998 of the business
combination of Pacific Enterprises and Enova Corporation. Amounts shown for
these individuals for 1998 include compensation as an executive officer of
Enova Corporation (which in the case of Mr. Light began in April 1998) for
the period prior to the completion of the business combination.
(E) Mr. Schmale became an executive officer in December 1997.
(F) Mr. Wood retired as Chief Executive Officer of Pacific Enterprises in April
1998 and as Chairman of the Board in July 1998. His salary amount includes
$133,335 paid during 1998 under a six-month consulting agreement that
expired January 31, 1999.
13
<PAGE>
Stock Options and Stock Appreciation Rights
The following table contains information concerning the grant of stock
options during 1998 to the executive officers of Pacific Enterprises named in
the Summary Compensation Table. All options are to purchase Sempra Energy
Common Stock, were granted at an exercise price of 100% of the fair market
value of the option shares on the date of the grant and are for a ten-year
term subject to earlier expiration following termination of employment.
Option / SAR Grants in 1998
<TABLE>
<CAPTION>
% of Total
Number of Shares Options / SARs
Underlying Granted to
Options / SARs Employees Exercise Expiration Grant Date
Name Granted (#) in 1998 Price ($/Sh) Date Present Value
---- ---------------- -------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Richard D. Farman....... 76,693(A) 2.28% $24.27 3/3/08 $ 852,826
63,900(B) 1.90% $26.31 7/23/08 $ 591,714
134,000(C) 3.98% $26.31 7/23/08 $ 443,540
Stephen L. Baum......... 54,200(B) 1.61% $26.31 7/23/08 $ 501,892
113,700(C) 3.38% $26.31 7/23/08 $ 376,347
Neal E. Schmale......... 45,114(A) 1.34% $24.27 3/3/08 $ 501,668
20,720(B) 0.62% $26.31 7/23/08 $ 191,867
43,500(C) 1.29% $26.31 7/23/08 $ 143,985
John R. Light........... 20,720(B) 0.62% $26.31 7/23/08 $ 191,867
43,500(C) 1.29% $26.31 7/23/08 $ 143,985
Frank H. Ault........... 5,440(B) 0.16% $26.31 7/23/08 $ 50,374
11,420(C) 0.34% $26.31 7/23/08 $ 37,800
Willis B. Wood, Jr...... 112,785(A)(D) 3.35% $24.27 (D) $1,254,169(D)
</TABLE>
___________
(A) Exercisable in cumulative installments of one-third of the shares
initially subject to the option on each of the first three anniversaries
of the grant date. Granted with performance-based dividend equivalents
payable upon option exercise for the entire period the option is
outstanding. No dividend equivalents will be paid unless Pacific
Enterprises meets a threshold performance goal based on cash flow for the
three-year period ending December 31, 2000 and the percentage of dividends
paid as dividend equivalents (to a maximum of all dividends that would
have been paid on the option shares) depends upon the extent to which the
threshold performance goal is exceeded.
(B) Exercisable in cumulative installments of one-fourth of the shares
initially subject to the option on each of the first four anniversaries of
the grant date. Granted with performance-based dividend equivalents on
unexercised shares for the four-year period ending December 31, 2002. No
dividend equivalents will be paid unless Sempra Energy meets annual or
four-year threshold performance goals based on total return to
shareholders relative to a peer group of companies or the Standard &
Poor's 500 and the percentage of dividends paid as dividend equivalents
(to a maximum of all dividends that would have been paid on the shares for
the four-year period) will depend upon the extent to which the threshold
goals are exceeded.
(C) Exercisable in cumulative annual installments of one-fourth of the shares
initially subject to the option on each of the first four anniversaries of
the grant date. Granted without dividend equivalents.
(D) Mr. Wood's options expired unexercised following his retirement in July
1998.
14
<PAGE>
Sempra Energy used a modified Black-Scholes option pricing model to develop
the theoretical values set forth under the "Grant Date Present Value" column,
but the executive will realize value from the stock options only to the extent
that the price of Sempra Energy Common Stock on the exercise date exceeds the
price of the stock on the grant date. Consequently, there is no assurance the
value realized by an executive will be at or near the theoretical value, and
these amounts should not be used to predict stock performance.
The options granted at an exercise price of $24.27 were granted by Pacific
Enterprises and assumed by Sempra Energy in connection with the business
combination of Pacific Enterprises and Enova Corporation. Grant date present
values were based on an option value of $2.98 and a dividend equivalent value
of $10.06. These use the following assumptions: share volatility--11.9%;
dividend yield--4.94%; risk-free rate of return--5.98%; and outstanding term--
10 years.
The options granted at an exercise price of $26.31 were granted by Sempra
Energy following the business combination of Pacific Enterprises and Enova
Corporation. Grant date present values were based on an option value of $4.30
and, for options granted with dividend equivalents, a dividend equivalent
value of $4.79. These use the following assumptions: share volatility--15.8%;
dividend yield--4.35%; risk-free rate of return--5.62%; and outstanding term--
10 years.
15
<PAGE>
The following table contains information with respect to the executive
officers of Pacific Enterprises named in the Summary Compensation Table
concerning the exercise of options and stock appreciation rights during 1998
and unexercised options and stock appreciation rights held on December 31,
1998.
Option / SAR Exercises and Holdings
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired on Options / SARs at Year Options / SARs
Exercise Value End (#)(A) at Year End ($)(A)
------------------------- -------------------------
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Farman....... -0- -0- 439,109 319,707 $3,639,017 $310,992
Stephen L. Baum......... -0- -0- -0- 167,900 $ -0- $ -0-
Neal E. Schmale......... -0- -0- -0- 109,334 $ -0- $ 49,851
John R. Light........... -0- -0- -0- 64,220 $ -0- $ -0-
Frank H. Ault........... -0- -0- -0- 16,860 $ -0- $ -0-
Willis B. Wood, Jr...... 360,912 $3,740,000 212,235 -0- $1,685,731 $ -0-
</TABLE>
________
(A) The exercise price of outstanding options ranges from $12.80 to $31.00.
Restricted Stock Grants
The following table contains information concerning restricted shares of
Sempra Energy Common Stock granted during 1998 to the executive officers of
Pacific Enterprises named in the Summary Compensation Table who received
grants.
Restricted Stock Grants in 1998
<TABLE>
<CAPTION>
Estimated Future
Payouts Under
Non-Stock
Number of Performance Period Price-Based
Name Restricted Shares Until Payout Plans (A)
- ---- ----------------- ------------------- ----------------
<S> <C> <C> <C>
Richard D. Farman........ 17,124 Four Annual Periods $443,683
Stephen L. Baum.......... 14,524 Four Annual Periods $376,317
Neal E. Schmale.......... 5,556 Four Annual Periods $143,956
John R. Light (B)........ 5,556 Four Annual Periods $143,956
Frank H. Ault............ 1,456 Four Annual Periods $ 37,725
</TABLE>
- --------
(A) The payout amount represents the fair market value on the July 23, 1998
grant date of the restricted shares that will become vested upon the
achievement of all performance goals. The actual payout (if any) will
depend upon the achievement of performance goals and upon the then fair
market value of Sempra Energy Common Stock.
(B) Mr. Light also received a grant of 6,380 restricted shares upon joining
Enova Corporation in April 1998. These shares had an aggregate grant date
value (without any reduction for forfeiture or transfer restrictions) of
$177,874. The forfeiture and transfer restrictions on one-quarter of
these shares terminated as of December 31, 1998 based upon San Diego Gas
& Electric Company having earned its regulatory-authorized rate of return
for that year. Restrictions on an additional one-quarter of the shares
initially subject to the award will terminate as of the end of years
2000, 2001 and 2002 if San Diego Gas & Electric Company has earned its
authorized rate of return for such year. If the authorized rate of return
is not met as of any performance year-end, the restrictions will
terminate if the authorized rate of return is met or exceeded at the end
of the first, second and third quarters of the following year, for the
twelve months then ending.
Restricted shares awarded to executives generally are subject to forfeiture
and transfer restrictions that terminate upon the satisfaction of long term
objective corporate performance criteria. During the performance period, the
executive receives dividends on the restricted shares and is entitled to vote
them but the shares cannot
16
<PAGE>
be sold or otherwise transferred. If the performance criteria are not
satisfied or the executive's employment is terminated during the performance
period, the shares are forfeited to Sempra Energy and canceled.
The restricted shares shown in the table were awarded under the Sempra
Energy 1998 Long Term Incentive Plan. The forfeiture and transfer restrictions
on one-quarter of the shares initially subject to each of these awards will
terminate at the end of years 1999, 2000, 2001 and 2002 if the executive is
then employed by Sempra Energy or its subsidiaries and Sempra Energy has
achieved a total return to shareholders for the year that places it among the
top 25% of a peer group comprised of Sempra Energy and nineteen other energy
and energy services companies. If these annual performance criteria are not
met, the forfeiture and transfer restrictions on all or a portion of the
shares remaining subject to these restrictions may be terminated based upon
the satisfaction of cumulative shareholder return performance criteria for the
four years ending December 31, 2002.
The restrictions on all remaining shares will terminate at the end of the
year 2002 if the executive is then employed by Sempra Energy or its
subsidiaries and Sempra Energy has achieved a four-year cumulative total
return to shareholders that either places it among the top 50% of the peer
group companies or equals or exceeds the four-year cumulative return of the
companies then comprising the Standard & Poor's 500 Corporate Stock Price
Index. If neither of these performance criteria is satisfied, the restrictions
may be terminated as to a portion of the shares if Sempra Energy's four-year
cumulative total shareholder return is among the top 70% of the peer group.
Restrictions will terminate as to 80% of the shares for performance among the
top 55% of the peer group with the percentage of shares as to which the
restrictions may terminate declining ratably to 20% for performance among the
top 70% of the peer group. Any restricted shares for which forfeiture and
transfer restrictions are not terminated by or as of the end of year 2002 will
be forfeited to Sempra Energy and canceled.
Pension Plans
The following table shows the estimated single life annual pension annuity
benefit provided to the executive officers of Pacific Enterprises named in the
Summary Compensation Table under the Sempra Energy Supplemental Executive
Retirement Plan (combined with benefits payable under the other pension plans
of Pacific Enterprises and its affiliates in which the officers also
participate) based on the specified compensation levels and years of credited
service and retirement at age 65.
Pension Plan Table
($000's)
<TABLE>
<CAPTION>
Pension Plan
Compensation Years of Service
------------ ---------------------------------------------------------------------------
5 10 20 30 40
---- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C>
$ 400 $ 80 $160 $ 240 $ 250 $ 260
$ 600 $120 $240 $ 360 $ 375 $ 390
$ 800 $160 $320 $ 480 $ 500 $ 520
$1,000 $200 $400 $ 600 $ 625 $ 650
$1,200 $240 $480 $ 720 $ 750 $ 780
$1,400 $280 $560 $ 840 $ 875 $ 910
$1,600 $320 $640 $ 960 $1,000 $1,040
$1,800 $360 $720 $1,080 $1,125 $1,170
</TABLE>
Pension benefits are based on average salary for the highest two years of
service and the average of the three highest annual bonuses during the last
ten years of service. Years of service includes service with subsidiaries and
number 20 years for Mr. Farman, 14 years for Mr. Baum, one year for Mr.
Schmale, one year for Mr. Light and 29 years for Mr. Ault. Mr. Wood retired as
Chairman and Chief Executive Officer of Pacific Enterprises during 1998 with
38 years of service.
Messrs. Baum, Light and Ault are each entitled to pension benefits at the
greater of that provided by Sempra Energy's pension plans or that to which he
would have been entitled under the Enova Corporation pension plans
17
<PAGE>
(including a supplemental pension plan) had those plans remained in effect.
Under the Enova Corporation plans, upon retirement after attaining age 62 and
having completed ten years of service, Messrs. Baum and Ault would each be
entitled to a monthly pension benefit of 60% of final pay and Mr. Light of 50%
of final pay. Final pay is defined as the monthly base pay rate in effect
during the month immediately preceding retirement, plus one-twelfth of the
average of the highest three years' gross bonus awards. The plans provide for
reduced pension benefits for retirement between the ages of 55 and 62 and for
between 5 and 10 years of service, and surviving spouse and disability
benefits equal to 50% and 100%, respectively, of pension benefits.
Employment and Employment-Related Agreements
Employment Agreements
In connection with the business combination of Pacific Enterprises and Enova
Corporation, Sempra Energy entered into employment agreements with Richard D.
Farman and Stephen L. Baum. Prior to the completion of the business
combination, Mr. Farman was the Chief Executive Officer and President of
Pacific Enterprises and Mr. Baum was the Chairman and Chief Executive Officer
of Enova Corporation.
Each agreement provides for an initial employment term of five years
(subject to earlier mandatory retirement at age 65) which commenced on the
June 26, 1998 completion of the business combination of Pacific Enterprises
and Enova Corporation. The term of each agreement is automatically extended by
one year on June 26, 2002 and on each June 26 thereafter unless the executive
or Sempra Energy elects not to extend the term.
Mr. Farman's employment agreement provides that he will serve as the
Chairman of the Board and Chief Executive Officer of Sempra Energy and as a
member of its Office of the Chairman until June 26, 2000, the second
anniversary of the business combination. Thereafter, until September 1, 2000,
he will serve as the Chairman of the Board. For these services he will receive
an annual base salary of not less than $760,000 and be entitled to participate
in (i) annual incentive compensation plans providing him with annual bonus
opportunities of not less than 60% of his annual base salary at target
performance and 120% of his annual base salary at maximum performance, (ii)
long term compensation plans and (iii) all retirement and welfare benefit
plans applicable generally to employees or senior executives of Sempra Energy.
Mr. Baum's employment agreement provides that he will serve as the Vice
Chairman of the Board, President and Chief Operating Officer of Sempra Energy
and as a member of its Office of the Chairman until June 26, 2000, the second
anniversary of the business combination; as the Vice Chairman of the Board,
Chief Executive Officer and President from June 26, 2000 until September 1,
2000; and thereafter as the Chairman, Chief Executive Officer and President.
For these services, Mr. Baum will receive an annual base salary of not less
than $645,000 until June 26, 2000 (the period during which he serves as the
President and Chief Operating Officer) and thereafter (during the period in
which he will serve as the Chief Executive Officer and President) will receive
an annual base salary of no less than that of his predecessor as Chief
Executive Officer. He also will be entitled to participate in (i) annual
incentive compensation plans and long term compensation plans and awards
providing him with the opportunity to earn on a year-by-year basis, short term
and long term compensation at least equal (in terms of target, maximum and
minimum awards, expressed as a percentage of annual base salary) to the
greater of his opportunities in effect at Enova Corporation prior to the
completion of the business combination and the awards granted to the Chief
Executive Officer during the period in which he serves as the President and
Chief Operating Officer and (ii) all retirement and welfare benefit plans
applicable to employees or senior executives of Sempra Energy.
The employment agreement of each executive also provides that if Sempra
Energy or its subsidiaries terminates the executive's employment (other than
for cause, death or disability) or the executive terminates his employment for
good reason, the executive will be entitled to receive an amount equal to (i)
the sum of his annual base salary and annual incentive compensation (equal to
the greater of his target bonus for the year of termination or the average of
the three years' highest gross bonus awards in the five years preceding
termination) multiplied in the case of Mr. Farman by two and in the case of
Mr. Baum by the number of years remaining in
18
<PAGE>
the term of his agreement (but in no event less than two), provided that in
the event of termination following a change in control such multiplier will be
three; (ii) a pro rata portion of the target amount payable under any annual
incentive compensation awards for the year or, if greater, the average of the
three years' highest gross bonus awards paid to the executive in the five
years preceding the year of termination; and (iii) certain additional
retirement benefits. In the case of Mr. Farman, the additional retirement
benefit is the present value of the benefits to which he would be entitled
under Sempra Energy's defined benefit pension and retirement plans if he
continued working for an additional two years and had increased his age by two
years as of termination (in each case three years in the event of a
termination following a change of control), but not beyond mandatory
retirement age of 65. In the case of Mr. Baum, the additional retirement
benefit is the present value of the benefits attributable to additional years
of age and service credit (but in no event less than two years) for purposes
of the calculation of retirement benefits under the Enova Corporation
Supplemental Executive Retirement Plan as if he had remained employed for the
remainder of the term of his agreement. Each agreement also provides for
immediate vesting and exercisability 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
three years; payment of compensation previously deferred; and financial
planning and outplacement services. The agreements also provide for a gross-up
payment to offset the effects of any excise taxes imposed on the executive
under Section 4999 of the Internal Revenue code.
Good reason is defined in the employment agreements to include an adverse
change in the executive's title, authority, duties, responsibilities or
reporting lines; a reduction in the executive's base salary or aggregate
annualized compensation and benefit opportunities; the relocation of the
executive's principal place of employment; and a substantial increase in
business travel obligations. A change in control is defined to include the
acquisition by one person or group of 20% or more of the voting power of
Sempra Energy's shares; the election of a new majority of the board of Sempra
Energy comprised of individuals who are not recommended for election by two-
thirds of the current directors or successors to the current directors who
were so recommended for election; certain mergers, consolidations or sales of
assets that result in the shareholders of Sempra Energy owning less than 60%
of the voting power of Sempra Energy or of the surviving entity or its parent;
and shareholder approval of the liquidation or dissolution of Sempra Energy.
Severance Agreements
Sempra Energy has entered into a severance agreement with each of Pacific
Enterprises' executive officers, other than Messrs. Farman and Baum for whom
severance arrangements are contained in their respective employment agreements
summarized above. The severance agreements provide for the payment of benefits
in the event Sempra Energy or its subsidiaries terminates the executive's
employment (other than for cause, death or disability) or the executive
terminates his or her employment for good reason.
The benefits payable under the severance agreements include (i) a lump sum
cash payment equal to the executive's annual base salary and average annual
bonus for the two years prior to termination multiplied, in certain cases
depending upon the officer's position, by as much as two; (ii) continuation of
health benefits for a period of two years; and (iii) financial planning and
outplacement services. In addition, if the termination occurs within two years
after a change in control of Sempra Energy, (i) the lump sum cash payment
multiple is increased to as much as three; (ii) all equity-based incentive
awards immediately vest and become exercisable or payable and all restrictions
on such awards immediately lapse; (iii) all deferred compensation is paid out
in a lump sum; (iv) a lump sum cash payment is made equal to the present value
of the executive's benefits under the Supplemental Executive Retirement Plan
calculated as if the executive had attained age 62 (or, if the executive is
older than 62, based on the executive's actual age) and applying certain early
retirement factors; and (v) continued life, disability, accident and health
insurance for three years. The agreements also provide for a gross up payment
to offset the effects of any excise tax imposed on the executive under Section
4999 of the Internal Revenue Code.
Good reason is defined in the severance agreements to include the assignment
to the executive of duties materially inconsistent with those appropriate for
an executive of Sempra Energy, a material reduction in the
19
<PAGE>
executive's overall standing and responsibilities within Sempra Energy and a
material reduction in the executive's annualized compensation and benefit
opportunities other than across-the-board reductions affecting all similarly
situated executives of comparable rank. In addition, following a change in
control of Sempra Energy, good reason also includes an adverse change in the
executive's title, authority, duties, responsibilities or reporting lines, a
10% or greater reduction in the executive's annualized compensation and
benefit opportunities, relocation of the executive's principal place of
employment by more than 30 miles, and a substantial increase in business
travel obligations. A change in control is defined in the same manner as in
the employment agreements of Messrs. Farman and Baum summarized above.
SHAREHOLDER PROPOSALS
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 required by the By-laws. A copy of these By-law requirements will
be provided upon request in writing to the Secretary of Pacific Enterprises.
The period for notice of business to be brought by shareholders before the
1999 Annual Meeting of Shareholders has expired. The period for the receipt by
Pacific Enterprises of notice of business to be brought by shareholders before
the 2000 Annual Meeting of Shareholders will commence on January 12, 2000 and
end on March 10, 2000.
INDEPENDENT AUDITORS
Representatives of Deloitte & Touche LLP, independent auditors for Pacific
Enterprises, are expected to be present at 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' Annual Report to the Securities and Exchange Commission
on Form 10-K is being mailed to shareholders together with this Information
Statement.
----------------
20
