<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):
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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 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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(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, 2000 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, 2000 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
San Diego, California
March 22, 2000
<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 being held on May 11, 2000. It is
being mailed to shareholders commencing April 5, 2000.
PACIFIC ENTERPRISES
Pacific Enterprises is the parent corporation of Southern California Gas
Company, a public utility supplying natural gas throughout most of Southern
and portions of Central California. The Gas Company is the nation's largest
natural gas distribution utility.
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.
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 101 Ash
Street, San Diego, California. Its telephone number is (619) 696-2034.
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, 2000. 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
fourteen director positions but cumulative voting is not permitted.
1
<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 strategic, 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, 101 Ash Street, San Diego,
California, 92101-3017, stating in detail the qualifications of the suggested
candidates.
During 1999, the Board of Directors held ten 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 PUBLIC POLICY
- --------------- ---------------------- --------------------- ---------------------- ----------------------- ------------------
<S> <C> <C> <C> <C> <C>
Richard A. Richard J. Stegemeier, Hyla H. Bertea, Richard D. Farman, Daniel W. Derbes, Herbert L. Carter,
Collato, Chair Chair Chair Chair Chair
Chair
Ann L. Burr Hyla H. Bertea Ann L. Burr Stephen L. Baum Richard A. Collato Stephen L. Baum
Wilford D. Ignacio E. Lozano, Jr. Daniel W. Derbes Herbert L. Carter Wilford D. Godbold, Jr. William D. Jones
Godbold, Jr.
Robert H. Ralph R. Ocampo Robert H. Goldsmith Ignacio E. Lozano, Jr. William D. Jones Ralph R. Ocampo
Goldsmith
William G. Ouchi Thomas C. Stickel Richard J. Stegemeier Thomas C. Stickel Diana L. Walker William G. Ouchi
Diana L. Walker
</TABLE>
Audit Committee
The Audit Committee met five times in 1999. Its duties and responsibilities
include:
. Providing oversight for management's conduct of financial reporting
processes.
. Recommending to the board the selection of independent auditors.
Compensation Committee
The Compensation Committee met five times in 1999. Its duties and
responsibilities include:
. 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 1999. Its duties and
responsibilities include:
. Reviewing and recommending nominees for election as directors.
. Assessing the performance of the Board of Directors.
. Developing guidelines for board composition.
. Reviewing and administering the Company's Corporate Governance
Guidelines and considering other issues relating to corporate
governance.
2
<PAGE>
Executive Committee
The Executive Committee did not meet in 1999. The committee meets on call
during the intervals between board meetings and, subject to some limitations
imposed by law, has all the authority of the board.
Finance Committee
The Finance Committee met two times in 1999. Its duties and
responsibilities include:
. 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 three times in 1999. Its duties and
responsibilities include:
. 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
Additional meeting fee for each Committee meeting chaired........ $ 1,000
</TABLE>
Directors may elect to receive their annual fees in Sempra Energy Common
Stock instead of cash or to defer their annual fees into an interest-bearing
account, a phantom investment fund or a phantom share account in which the
fees are deemed invested in Sempra Energy Common Stock.
Each non-employee director of Sempra Energy is granted upon becoming a
director a ten-year option to purchase 15,000 shares of Sempra Energy Common
Stock. Each non-employee director is also granted an additional ten-year
option to purchase 5,000 shares at each annual meeting of Sempra Energy (other
than the annual meeting that coincides with or first follows the director's
election to the board) following which the director continues to serve as a
non-employee director. Each option is granted at an option exercise price
equal to the fair market value of the option shares at the date the option is
granted and becomes fully exercisable commencing with the first annual meeting
of Sempra Energy following the date of the grant or the director's earlier
death, disability, retirement or involuntary termination of board service
other than for cause.
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.
3
<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 at February 15, 2000 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. These
shares, in the aggregate, represent less than 1% of Sempra Energy's
outstanding shares.
SEMPRA ENERGY COMMON STOCK
<TABLE>
<CAPTION>
SHARES
SUBJECT TO
BENEFICIAL EXERCISABLE PHANTOM
HOLDINGS OPTIONS(A) SHARES(B) TOTAL
---------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Frank H. Ault...................... 22,901 11,415 13,576 47,892
Stephen L. Baum.................... 92,195 116,450 59,830 268,475
Hyla H. Bertea..................... 9,630 20,000 -0- 29,630
Ann L. Burr........................ 2,200 20,000 -0- 22,200
Herbert L. Carter.................. 1,551 20,000 -0- 21,551
Richard A. Collato................. 4,222 20,000 -0- 24,222
Daniel W. Derbes................... 5,828 20,000 -0- 25,828
Richard D. Farman.................. 62,889 652,608 72,850 788,347
Wilford D. Godbold, Jr. ........... 3,006 20,000 -0- 23,006
Robert H. Goldsmith (C) ........... 2,659 20,000 -0- 22,659
William D. Jones................... 2,174 20,000 -0- 22,174
John R. Light...................... 20,218 40,230 -0- 60,448
Ignacio E. Lozano, Jr. (C) ........ 2,352 20,000 -0- 22,352
Ralph R. Ocampo.................... 14,621 20,000 -0- 34,621
William G. Ouchi................... 10,000 20,000 -0- 30,000
Neal E. Schmale.................... 20,761 70,306 1,186 92,253
Richard J. Stegemeier.............. 1,503 20,000 -0- 21,503
Thomas C. Stickel.................. 2,037 20,000 -0- 22,037
Diana L. Walker.................... 936 20,000 -0- 20,936
Directors and Executive Officers as
a group (19 persons).............. 281,683 1,171,009 147,442 1,600,134
</TABLE>
- --------
(A) Shares which may be acquired through the exercise of stock options that
are exercisable on or before May 15, 2000.
(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.
(C) Messrs. Goldsmith and Lozano will retire as directors before the Annual
Meeting and the authorized number of directors will be reduced to reflect
their retirements.
4
<PAGE>
Share ownership guidelines have been established for directors and officers
to further strengthen the link between performance and compensation. For non-
employee directors the guideline is ownership of a number of shares having a
market value equal to four times the annual retainer. For officers, the
guidelines are:
<TABLE>
<CAPTION>
SEMPRA ENERGY
PACIFIC ENTERPRISES SHARE OWNERSHIP
EXECUTIVE LEVEL GUIDELINES
------------------- ---------------
<S> <C>
Chief Executive Officer 4 X Base Salary
President 4 X Base Salary
Executive Vice Presidents 3 X Base Salary
Senior Vice Presidents 2 X Base Salary
Other Vice Presidents 1 X Base Salary
</TABLE>
In setting the guidelines the board considered then current share ownership
levels and the desirability of encouraging further share ownership. The
officer guidelines were established in 1998 and the director guidelines in
2000. They are expected to be met or exceeded within five years from adoption.
For purposes of the guidelines, shares owned include phantom shares into which
compensation is deferred and the vested portion of certain in-the-money stock
options as well as shares owned directly or through benefit plans.
5
<PAGE>
ELECTION OF DIRECTORS
Pacific Enterprises' Board of Directors will consist of fourteen directors
upon giving effect to the retirement of two directors who will retire prior to
the Annual Meeting of Shareholders and a corresponding reduction in the
authorized number of directors.
At the Annual Meeting of Shareholders, fourteen 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 fourteen director candidates receiving the greatest number of
votes will be elected as directors.
The names of the Board of Directors' fourteen nominees for election as
directors and biographical information regarding each nominee are set forth
below. Each nominee is currently a director of Pacific Enterprises and is also
a director of Sempra Energy. Unless otherwise noted, each nominee has held his
or her principal position or various positions with the same or predecessor
organizations for at least the last five years.
STEPHEN L. BAUM, 59, became a director in 1999. He is Vice
Chairman of the Board, President and Chief Operating Officer of
Sempra Energy and President of Pacific Enterprises. He will
become Sempra Energy Vice Chairman, Chief Executive Officer and
President on June 26, 2000, and Chairman, Chief Executive Officer
and President on September 1, 2000. He is a director of Computer
Sciences Corporation.
[Photo of Stephen L. Baum]
HYLA H. BERTEA, 59, 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.
[Photo of Hyla H. Bertea]
ANN L. BURR, 53, has been a director since 1998. She is an
Executive Vice President 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 the
Rochester Institute of Technology. She served as Chair of the
Board of Directors of the California Cable Television Association
and chaired its Telecommunications Policy Committee. She is a
former Chair of the Greater San Diego Chamber of Commerce Board
of Directors and the founder and former Chair of the Chamber's
Business Roundtable for Education and the San Diego
Communications Council.
[Photo of Ann L. Burr]
HERBERT L. CARTER, DPA, 66, has been a director since 1991. He
has served as 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 has served as a member of the
Board of Councilors of the School of Public Administration,
University of Southern California and the Board of Regents of
Loyola Marymount University.
[Photo of Herbert L. Carter]
6
<PAGE>
RICHARD A. COLLATO, 56, has been a director since 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 former
trustee of Springfield College, and currently is a trustee of the
YMCA Retirement Fund and Bauce Foundation, and a director of
Project Design Consultants.
[Photo of Richard A. Collato]
DANIEL W. DERBES, 69, has been a director since 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 WD-40 Company
and a trustee of the University of San Diego.
[Photo of Daniel W. Derbes]
RICHARD D. FARMAN, 64, 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
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
National Petroleum Council.
[Photo of Richard D. Farman]
WILFORD D. GODBOLD, JR., 61, 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. Mr. Godbold is a trustee of
the Wellness Community, a member of the Council on California
Competitiveness, a past President of the Board of Trustees of
Marlborough School and a past Chairman of the Board of Directors
of the California Chamber of Commerce and the Employers Group.
[Photo of Wilford D. Godbold]
WILLIAM D. JONES, 44, has been a director since 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.
[Photo of William D. Jones]
RALPH R. OCAMPO, M.D., F.A.C.S., 68 has been a director since
1998. He is a practicing surgeon, Governor of the American
College of Surgeons, past President of the California Medical
Association and a Clinical Professor of Surgery at the University
of California, San Diego.
[Photo of Ralph R. Ocampo]
7
<PAGE>
WILLIAM G. OUCHI, PH.D., 56, has been a director since 1998. He
is a Vice Dean and Faculty Director of Executive Education
Programs and Sanford and Betty Sigoloff Professor in Corporate
Renewal in the Anderson Graduate School of Management at UCLA.
Dr. Ouchi is a director of Allegheny Technologies, FirstFed
Financial Corp., and Water-Pik Technologies. He is a trustee of
Williams College and a director of KCET Public Service
Television.
[Photo of William G. Ouchi]
RICHARD J. STEGEMEIER, 71, 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.
[Photo of Richard J. Stegemeier]
THOMAS C. STICKEL, 50, has been a director since 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 and Del Mar Thoroughbred Club and
Vice Chairman of the California Chamber of Commerce.
[Photo of Thomas C. Stickel]
DIANA L. WALKER, 58, has been a director since 1989. Mrs. Walker
is a partner and General Counsel of the law firm of O'Melveny &
Myers LLP. She is a former director of United Way of Greater Los
Angeles, and Emeritus Governor and 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 Sempra Energy and its subsidiaries.
[Photo of Diana L. Walker]
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pacific Enterprises became a subsidiary of Sempra Energy in connection with
a business combination with Enova Corporation that was completed on June 26,
1998. All of its officers are also officers of Sempra Energy. They are
compensated by Sempra Energy and are not separately compensated for their
services as officers of Pacific Enterprises.
The Boards of Directors of Pacific Enterprises and Sempra Energy each
maintain a Compensation Committee comprised of independent 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 and perquisite programs.
During 1999, the Compensation Committees conducted a review of the
executive compensation programs and policies of Sempra Energy and its
subsidiaries that were originally developed in 1998 in connection with the
business combination of Pacific Enterprises and Enova Corporation. The
committees sought the assistance of nationally recognized compensation and
benefit consultants to assist with the review of executive compensation
principles and practices designed to assist the companies in realizing the key
objective of creating superior shareholder value in a rapidly changing and
increasingly competitive business environment. The committees, with the
assistance of a nationally recognized compensation firm, also reviewed board
compensation during 1999.
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 rapidly changing and increasingly competitive environment in which
Sempra Energy and its subsidiaries 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.
As a result of this review, the Compensation Committees approved the
continuation of the compensation program that had been developed in 1998 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.
9
<PAGE>
. 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 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 change. In determining base salary adjustments,
the committees also take into account individual performance, executive
responsibilities, market characteristics and other factors.
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 long-term 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.
Annual base salaries for executive officers of Sempra Energy and its
subsidiaries have been set at the approximate mid-point of these salary data.
For 1999, annual base salaries for Mr. Farman and Mr. Baum were set at
$915,000 and $763,000, respectively.
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
10
<PAGE>
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.
Executive Incentive Plan for 1999 were based on attainment of earnings per
share goals with target award levels ranging from 80% of base salary for
Messrs. Farman and Baum to 45% of base salary for Vice Presidents, with
maximum award levels ranging from 160% to 90% of six-month base salary.
Performance for the year was at 150% of targeted performance and resulted in
cash bonuses of 120% of base salary for Messrs. Farman and Baum ($1,098,000
and $915,600, respectively,) with corresponding lesser amounts for other
executive officers.
Long Term Incentives
Long term incentive opportunities are provided by equity and equity-based
awards under Sempra Energy's Long Term Incentive Plan. The plan permits a wide
variety of equity and equity-based incentive awards to permit the Compensation
Committees to respond to changes in the market conditions and compensation
practices. The committees expect, however, that most awards under the plan
will be in the form of non-qualified stock options.
During 1999, Sempra Energy granted to executives and other employees of
Sempra Energy and its subsidiaries non-qualified stock options to purchase
Sempra Energy Common Stock. These option grants are described in this Proxy
Statement under the caption "Executive Compensation--Stock Options and Stock
Appreciation Rights."
During 1999, Sempra Energy also awarded grants of performance-based
restricted shares under the 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."
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. These guidelines are
discussed under the caption "Share Ownership of Directors and Executive
Officers."
COMPENSATION COMMITTEE
Richard J. Stegemeier, Chairman
Hyla H. Bertea
Ignacio E. Lozano, Jr.
Ralph R. Ocampo
Thomas C. Stickel
March 7, 2000
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<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
ANNUAL COMPENSATION ------------------ --------
------------------- SECURITIES LTIP
NAME AND PRINCIPAL UNDERLYING PAYOUTS ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS / SARS (#) (A) (B) COMPENSATION (C)
- ------------------ ---- -------- ---------- ------------------ -------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Farman...... 1999 $914,307 $1,098,000 301,200 $ -0- $ 199,288
Chairman and Chief 1998 $728,718 $1,019,640 274,593 $ -0- $1,689,295
Executive Officer 1997 $478,208 $ 500,000 45,000 $ -0- $ 108,049
Stephen L. Baum (D).... 1999 $762,616 $ 915,600 297,900 $179,465 $ 144,516
President 1998 $681,577 $ 891,136 167,900 $247,746 $1,494,258
John R. Light (D)...... 1999 $415,754 $ 374,400 96,700 $ 29,308 $ 118,971
Executive Vice 1998 $292,308 $ 431,600 64,220 $ 35,539 $ 155,045
President
and General Counsel
Neal E. Schmale(E)..... 1999 $415,754 $ 374,400 96,700 $ -0- $ 51,461
Executive Vice 1998 $414,731 $ 371,600 109,334 $ -0- $ 107,932
President
and Chief Financial
Officer
Frank H. Ault (D)...... 1999 $217,964 $ 148,568 28,800 $ 33,079 $ 41,399
Vice President and 1998 $206,250 $ 168,568 16,860 $ 54,407 $ 343,070
Controller
</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 1999 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, 1999
by the individuals listed in the table are: 30,724 shares/$533,983 for Mr.
Farman; 40,729 shares/$708,565 for Mr. Baum; 13,146 shares/$228,477 for
Mr. Light; 9,956/$173,035 shares for Mr. Schmale; and 4,581 shares/$79,618
for Mr. Ault. 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 1999 were
$104,522, $16,999, $12,569, $58,198 and $7,000 for Mr. Farman; $4,998,
$75,092, $7,313, $49,613 and $7,500 for Mr. Baum; $0, $111,971, $0, $0 and
$7,000 for Mr. Light; $8,712, $1,628, $10,500, $23,621 and $7,000 for Mr.
Schmale; and $1,391, $14,412, $7,000, $11,596 and $7,000 for Mr. Ault.
Amounts for 1998 also include incentive/retention bonus accruals under
agreements entered into in 1997 in connection with the business combination
of Pacific Enterprises and Enova Corporation. Under the agreements,
deferral accounts were established for Messrs. Farman, Baum and Ault upon
the June 26, 1998 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 (together with
reinvestment
12
<PAGE>
of dividend equivalents) of Sempra Energy Common Stock. Each executive will
become entitled to his bonus upon continued employment with Sempra Energy
through June 26, 2000 and will be paid in cash an amount equal to the then
fair market value of the shares credited to the executive's account.
Amounts for Messrs. Light and Schmale for 1998 also include $150,000 and
$100,000, respectively, paid as signing bonuses.
(D) Messrs. Baum, Light and Ault became executive officers of Pacific
Enterprises upon the June 26, 1998 completion of the business combination
of Pacific Enterprises and Enova Corporation. Amounts shown for them for
1998 include compensation as executive officers of Enova Corporation
(which in the case of Mr. Light began in April 1998) for the period prior
to the completion of the business combination.
(E) Mr. Schmale became an executive officer in December 1997.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grant of stock
options during 1999 to the executive officers of Pacific Enterprises named in
the Summary Compensation Table. All options are to purchase Sempra Energy
Common Stock, were granted at an exercise price of 100% of the fair market
value of the option shares on the date of the grant and are for a ten-year
term subject to earlier expiration following termination of employment.
OPTION / SAR GRANTS IN 1999
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF SHARES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS / SARS EMPLOYEES EXERCISE PRICE EXPIRATION GRANT DATE
NAME GRANTED (#) IN 1999 ($/SH) DATE PRESENT VALUE
- ---- ---------------- ------------ -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Richard D. Farman....... 85,900(A) 5.92% $21.00 5/4/09 $621,916
215,300(B) 11.21% $21.00 5/4/09 $622,217
Stephen L. Baum......... 85,000(A) 5.86% $21.00 5/4/09 $615,400
212,900(B) 11.08% $21.00 5/4/09 $615,281
John R. Light........... 27,600(A) 1.90% $21.00 5/4/09 $199,824
69,100(B) 3.60% $21.00 5/4/09 $199,699
Neal E. Schmale......... 27,600(A) 1.90% $21.00 5/4/09 $199,824
69,100(B) 3.60% $21.00 5/4/09 $199,699
Frank H. Ault........... 8,200(A) 0.57% $21.00 5/4/09 $ 59,368
20,600(B) 1.07% $21.00 5/4/09 $ 59,534
</TABLE>
- --------
(A) 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, 2003. No
dividend equivalents will be paid unless Sempra Energy meets annual or
four-year threshold performance goals based on total return to
shareholders ranking within 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.
(B) 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.
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
13
<PAGE>
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.
Grant date present values were based on an option value of $2.89 and, for
options granted with dividend equivalents, a dividend equivalent value of
$4.35. These use the following assumptions: share volatility-17.9%; dividend
yield-5.49%; risk-free rate of return-5.66%; and outstanding term-10 years.
The following table contains information with respect to the executive
officers of Pacific Enterprises named in the Summary Compensation Table
concerning the exercise of options and stock appreciation rights during 1999
and unexercised options and stock appreciation rights held on December 31,
1999.
OPTION / SAR EXERCISES AND HOLDINGS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS / SARS AT IN-THE-MONEY OPTIONS /
YEAR END (#)(A) SARS AT YEAR END ($)(A)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard D. Farman....... -0- $ -0- 547,232 523,310 $677,687 $ -0-
Stephen L. Baum......... -0- $ -0- 41,975 423,825 $ -0- $ -0-
John R. Light........... -0- $ -0- 16,055 144,865 $ -0- $ -0-
Neal E. Schmale......... -0- $ -0- 31,093 174,941 $ -0- $ -0-
Frank H. Ault........... -0- $ -0- 4,215 41,445 $ -0- $ -0-
</TABLE>
- --------
(A) The exercise price of outstanding options ranges from $12.80 to $31.
RESTRICTED STOCK GRANTS
The following table contains information concerning restricted shares of
Sempra Energy Common Stock granted during 1999 to the executive officers of
Pacific Enterprises named in the Summary Compensation Table who received
grants.
RESTRICTED STOCK GRANTS IN 1999
<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........ 13,600 Four Annual Periods $310,624
Stephen L. Baum.......... 13,500 Four Annual Periods $308,340
Neal E. Schmale.......... 4,400 Four Annual Periods $100,496
John R. Light............ 4,400 Four Annual Periods $100,496
Frank H. Ault............ 1,300 Four Annual Periods $ 29,692
</TABLE>
- --------
(A) The payout amount represents the fair market value on the May 4, 1999
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 extent to which the performance goals are achieved and
upon the then fair market value of Sempra Energy Common Stock.
Restricted shares 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 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.
14
<PAGE>
The forfeiture and transfer restrictions on one-quarter of the shares
initially subject to each of the awards shown in the table will terminate at
the end of years 2000, 2001, 2002 and 2003 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 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, 2003.
The restrictions on all remaining shares will terminate at the end of the
year 2003 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 2003 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>
YEARS OF SERVICE
PENSION PLAN ---------------------------------------------------------------------------
COMPENSATION 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 21 years for Mr. Farman, 15 years for Mr. Baum, two years for Mr.
Schmale, two years for Mr. Light and 30 years for Mr. Ault.
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 (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 his final pay and Mr. Light to a
monthly pension benefit of 50% of his final pay. Final pay is defined as the
monthly base pay rate in effect during the month immediately
15
<PAGE>
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. 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. 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 it.
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 Mr. Baum 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 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
16
<PAGE>
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
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
17
<PAGE>
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
2000 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 2001 Annual Meeting of Shareholders will commence on January 11, 2001 and
end on March 12, 2001.
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.
----------------
18
