<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
Southern California Gas Company
- --------------------------------------------------------------------------------
(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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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
SOUTHERN CALIFORNIA GAS COMPANY
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
----------------
The Annual Meeting of Shareholders of Southern California Gas Company will
be held on May 11, 1999 at 10:30 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 Southern California Gas 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>
SOUTHERN CALIFORNIA GAS COMPANY
----------------
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.
Southern California Gas Company ("SoCalGas" or the "Gas Company") 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.
SOUTHERN CALIFORNIA GAS COMPANY
SoCalGas is a direct subsidiary of Pacific Enterprises and an indirect
subsidiary of Sempra Energy. It is a public utility engaged in supplying
natural gas throughout most of Southern and portions of Central California. It
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. Shares of SoCalGas and San Diego Gas &
Electric Company ("SDG&E") were unaffected by the business combination.
Consequently, both the Gas Company and SDG&E (which remain direct subsidiaries
of Pacific Enterprises and Enova Corporation, respectively) have become
indirect subsidiaries of Sempra Energy.
SoCalGas' principal executive offices are located at The Gas Company Tower,
555 West Fifth Street, Los Angeles, California. Its telephone number is (213)
244-1200.
OUTSTANDING SHARES AND VOTING RIGHTS
Shareholders who are present at the Annual Meeting will be entitled to one
vote for each of the Gas Company's shares which they held of record at the
close of business on March 22, 1999. At that date, the outstanding shares
consisted of 91,300,000 shares of Common Stock and 862,043 shares of Preferred
Stock. All of the shares of Common Stock and 50,677 shares of Preferred Stock
(together representing over 99% of the outstanding shares) are owned by
Pacific Enterprises.
In electing directors, shareholders will be entitled to cumulate votes if
any shareholder gives notice at the meeting, prior to the voting, of an
intention to cumulate votes. If that notice is given, all shareholders will be
entitled to fifteen votes (the number of directors to be elected) for each of
their shares and may cast all of their votes for any one director candidate
whose name has been placed in nomination prior to the voting or distribute
their votes among two or more such candidates in such proportions as they may
determine.
In voting upon other matters properly presented to the Annual Meeting, each
shareholder will be entitled to one vote for each share of SoCalGas Common or
Preferred Stock.
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, fifteen 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 fifteen director candidates receiving the greatest number of
votes will be elected as directors.
The names of the Board of Directors' fifteen nominees for election as
directors and biographical information regarding each nominee are set forth
below. Each nominee is currently a director of the Gas Company and each (other
than Mr. Mitchell) is also a director of Pacific Enterprises and 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.
[PHOTO OF Hyla H. Bertea, 58, has been a director since 1993. She is a
HYLA H. realtor with Prudential California, a real estate sales company.
BERTEA She is a trustee of Lewis & Clark College, a director of Orange
APPEARS County Community Foundation, and a former commissioner of the
HERE] 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 Ann L. Burr, 52, became a director in 1998. She is an Executive
ANN L. Vice President for Residential Telephony of Time Warner Cable. She
BURR is the former President of Time Warner Communications in
APPEARS Rochester, New York and Time Warner Cable in San Diego. Ms. Burr
HERE] is a trustee of Rochester Institute of Technology, the RIT
Research Corporation and George Eastman House.
[PHOTO OF Herbert L. Carter, Ph.D., 65, has been a director since 1993. He
HERBERT is President of California State University, Dominguez Hills, and
L. CARTER Executive Vice Chancellor Emeritus and Trustee Professor of Public
APPEARS Administration of the California State University System. He was
HERE] 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.
[PHOTO OF Richard A. Collato, 55, became a director in 1998. He is President
RICHARD and Chief Executive Officer of the YMCA of San Diego County. He is
A. COLLATO a former director of Y-Mutual Ltd., a reinsurance company, and The
APPEARS Bank of San Diego. Mr. Collato is a trustee of Springfield
HERE] College, YMCA Retirement Fund and Bauce Foundation, and a director
of Project Design Consultants.
[PHOTO OF Daniel W. Derbes, 68, became a director in 1998. He is President
DANIEL W. of Signal Ventures. From 1985 until 1988, he was President of
DERBES Allied-Signal International Inc. and Executive Vice President of
APPEARS Allied-Signal Inc., a multi-national advanced technologies
HERE] company. Mr. Derbes is a director of Oak Industries, Inc. and WD-
40 Company and a trustee of the University of San Diego.
2
<PAGE>
[PHOTO OF Wilford D. Godbold, Jr., 60, has been a director since 1993. He is
WILFORD the retired President and Chief Executive Officer of ZERO
D. GODBOLD Corporation, an international manufacturer primarily of enclosures
APPEARS and thermal management equipment for the electronics market. He is
HERE] 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.
[PHOTO OF Robert H. Goldsmith, 68, became a director in 1998. He is a
ROBERT H. management consultant. He is the former Chairman, President and
GOLDSMITH Chief Executive Officer of Exten Industries, Inc. and former
APPEARS Chairman and Chief Executive Officer of Rohr, Inc. Mr. Goldsmith
HERE] 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.
[PHOTO OF William D. Jones, 43, became a director in 1998. He is the
WILLIAM President and Chief Executive Officer and a director of CityLink
D. JONES Investment Corporation. From 1989 to 1993, he served as General
APPEARS Manager/Senior Asset Manager and Investment Manager with certain
HERE] 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 Ignacio E. Lozano, Jr., 72, has been a director since 1993. He is
IGNACIO Chairman of the Board of La Opinion, a Spanish language daily
E. LOZANO newspaper. During 1976 and 1977 he served as United States
APPEARS Ambassador to El Salvador. He is a director of The Walt Disney
HERE] 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.
[PHOTO OF Warren I. Mitchell, 60, has been a director since 1997. He is
WARREN I. Chairman and President of the Gas Company, Chairman of SDG&E and
MITCHELL Group President-Regulated Business Operations of Sempra Energy. He
APPEARS is a director of the Pacific Coast Gas Association, United Way of
HERE] Greater Los Angeles, Los Angeles Area Chamber of Commerce,
CALSTART, Gas Research Institute and The Employers Group; a
director and trustee of the Institute of Gas Technology; a trustee
of the University of California Riverside Foundation; and a member
of the American Gas Association.
[PHOTO OF Ralph R. Ocampo, M.D., 67, became a director in 1998. He is a San
RALPH R. Diego physician and surgeon. Dr. Ocampo is past President of the
OCAMPO] California Medical Association.
3
<PAGE>
[PHOTO OF William G. Ouchi, Ph.D., 55, became a director in 1998. He is a
WILLIAM Vice Dean and Faculty Director of Executive Education Programs and
G. OUCHI Sanford and Betty Sigoloff Professor of Management in the Anderson
APPEARS Graduate School of Management at UCLA. Dr. Ouchi is a director of
HERE] Allegheny-Teledyne and Firstfed Financial Corporation.
[PHOTO OF Richard J. Stegemeier, 70, has been a director since 1995. He is
RICHARD Chairman Emeritus of the Board of Unocal Corporation. He is a
J. director of Foundation Health Systems, Inc., Halliburton Company,
STEGEMEIER Montgomery Watson, Inc., and Northrop Grumman Corporation.
APPEARS
HERE]
[PHOTO OF Thomas C. Stickel, 49, became a director in 1998. He is the
THOMAS C. Chairman, Chief Executive Officer and founder of University
STICKEL Ventures Network. He is the founder of Americana Partners Capital
APPEARS Group, Inc. He previously was the Chairman, Chief Executive
HERE] 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.
[PHOTO OF Diana L. Walker, 57, has been a director since 1993. Mrs. Walker
DIANA L. is a partner in the law firm of O'Melveny & Myers LLP. She is a
WALKER director of United Way of Greater Los Angeles, the former Chair of
APPEARS the Board of Governors of the Institute for Corporate Counsel, a
HERE] former trustee of Marlborough School and a member of various
professional organizations. O'Melveny & Myers LLP provides legal
services to the Gas Company and its affiliates.
4
<PAGE>
GOVERNANCE OF THE COMPANY
Board of Directors
The business and affairs of the Gas Company 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 the Gas Company should
write to: Corporate Secretary, Southern California Gas Company, The Gas
Company Tower, 555 West Fifth Street, Los Angeles, California, 90013, stating
in detail the qualifications of the suggested candidates.
During 1998, the Board of Directors held fifteen meetings. The standing
committees listed below assisted the board in carrying out its duties.
Committees Of the Board
<TABLE>
<CAPTION>
Corporate
Audit Compensation Governance Executive Finance
----- ------------ ---------- --------- -------
<S> <C> <C> <C> <C>
Richard A. Collato, Richard J. Stegemeier, Hyla H. Bertea, Warren I. Mitchell, 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 four 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.
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.
. Developing guidelines for board composition.
. Reviewing and considering issues relating to corporate governance.
5
<PAGE>
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.
. Reviewing pension plan investment results and insurance coverages.
Public Policy Committee
The Public Policy Committee met twice in 1998. Its duties and
responsibilities include the following:
. Reviewing public policy issues affecting the Gas Company, 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 of the Gas Company are also directors or officers of
Sempra Energy. They are not separately compensated for services as directors
of the Gas Company.
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 SoCalGas Common Stock is owned by Pacific Enterprises
and none of the Gas Company's directors or officers owns any SoCalGas
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 the Gas Company and by all directors and
executive officers of the Gas Company 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>
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
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
Ignacio E. Lozano, Jr. .............. 2,248 15,000 -0- 17,248
Warren I. Mitchell................... 15,812 103,009 33,028 151,849
Ralph R. Ocampo...................... 14,510 15,000 -0- 29,510
William G. Ouchi..................... 10,000 15,000 -0- 25,000
Roy M. Rawlings...................... 8,172 37,595 517 46,284
Debra L. Reed........................ 10,473 60,904 764 72,141
Richard J. Stegemeier................ 1,503 15,000 -0- 16,503
Lee M. Stewart....................... 12,573 60,152 567 73,292
Thomas C. Stickel.................... 2,006 15,000 -0- 17,006
George E. Strang..................... 7,860 37,595 248 45,703
Diana L. Walker...................... 866 15,000 -0- 15,866
Directors and Executive Officers as a
group (21 persons).................. 132,764 564,144 35,909 732,817
</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
The Gas Company became an indirect subsidiary of Sempra Energy in connection
with a business combination of Pacific Enterprises (the direct parent of the
Gas Company) and Enova Corporation (the direct parent of San Diego Gas &
Electric Company) that was completed on June 26, 1998. Warren I. Mitchell,
previously an Executive Vice President of Pacific Enterprises, continues to
serve as the Chairman and President of the Gas Company and, in addition, has
become the Chairman of San Diego Gas & Electric Company ("SDG&E") and the
Group President-Regulated Business Operations of Sempra Energy. Mr. Mitchell
is not separately compensated for his services as an officer of Sempra
Energy's subsidiaries.
The Boards of Directors of the Gas Company, SDG&E and Sempra Energy each
maintain a Compensation Committee comprised of independent, non-employee
directors. The directors comprising the three 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 the Gas Company and SDG&E and their respective parent corporations, 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 of Pacific Enterprises and Enova
Corporation 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 the 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 its 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 $460,000 was established for Mr. Mitchell and
$270,000 for Debra R. Reed and $260,000 for Lee M. Stewart, the Gas Company's
Presidents
9
<PAGE>
of Energy Distribution Services and Energy Transportation Services,
respectively. These salaries became effective in June 1998 and were adjusted
effective January 1, 1999 to $475,000, $300,000, and $289,900, 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 of 70% of base salary (for
the six-month period) for Mr. Mitchell, 50% base salary (for the six-month
period) for Ms. Reed and Mr. Stewart, and 45% of base salary (for the six-
month period) for Vice Presidents, with maximum award levels ranging from 140%
to 90% of six-month base salary. Performance for the six months exceeded
targeted performance and resulted in cash bonuses of $230,230 for Mr.
Mitchell, and $96,525 for Ms. Reed and $92,950 for Mr. Stewart with
corresponding lesser amounts to 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. Mitchell, Ms.
Reed and Mr. Stewart receiving maximum cash bonuses for the six-month period
of $276,000 for Mr. Mitchell, $141,000 for Ms. Reed and $130,000 for Mr.
Stewart.
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 executive officers and
other employees of Pacific Enterprises and its subsidiaries. These Sempra
Energy and Pacific Enterprises option grants to executive officers of the Gas
Company 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 the 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 140% of base salary
for Mr. Mitchell, and 90% for Ms. Reed and Mr. Stewart, 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
SoCalGas Executive Ownership Guidelines
Level (As a Multiple of Salary)
------------------ -------------------------
<S> <C>
Chairman and President 3 x Base Salary
Presidents of Divisions 2 x Base Salary
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
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<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The table below summarizes, for the last three years, the compensation paid
or accrued by Sempra Energy and its predecessors and subsidiaries to each of
the executive officers of the Gas Company named in the table.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------
Annual
Compensation Awards Payouts
----------------- ------------------ -------
Securities LTIP
Name and Underlying Payouts All Other
Principal Position Year Salary Bonus Options / SARS (#) (A) (B) Compensation (C)
------------------ ---- -------- -------- ------------------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Warren I. Mitchell...... 1998 $437,409 $506,230 140,296 $-0- $816,659
Chairman and President 1997 $337,947 $280,000 40,602 $-0- $ 27,446
1996 $307,677 $249,600 31,579 $-0- $ 23,831
Debra L. Reed........... 1998 $282,646 $237,526 66,355 $-0- $326,134
President of Energy 1997 $250,526 $182,000 31,579 $-0- $ 19,153
Distribution Services.. 1996 $225,038 $161,000 22,557 $-0- $ 20,427
Lee M. Stewart.......... 1998 $264,813 $222,951 65,135 $-0- $316,488
President of Energy 1997 $237,024 $171,500 31,579 $-0- $ 18,637
Transporation Services 1996 $215,397 $154,000 22,557 $-0- $ 16,971
Roy M. Rawlings......... 1998 $204,099 $166,635 28,138 $-0- $177,295
Vice President 1997 $186,067 $ 93,900 9,925 $-0- $ 22,175
1996 $185,302 $ 92,900 9,925 $-0- $ 12,512
George E. Strang........ 1998 $187,278 $143,605 26,734 $-0- $ 86,689
Vice President 1997 $170,889 $ 81,225 9,925 $-0- $ 15,085
1996 $167,831 $ 63,100 9,925 $-0- $ 13,212
</TABLE>
- --------
(A) 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: 7,456 shares/$189,233 for Mr.
Mitchell; 2,812 Shares/$71,369 for Ms. Reed; 2,708 Shares/$68,729 for Mr.
Stewart; 1,456 Shares/$36,953 for Mr. Rawlings; 1,336 Shares/$33,908 for
Mr. Strang. 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
$1,772, $5,490, $6,900, $13,760 and $6,737 for Mr. Mitchell; $-0-, $1,324,
$5,324, $9,005, and $6,731 for Ms. Reed; $412, $3,451, $4,549, $8,845, and
$6,731 for Mr. Stewart; $836, $2,565, $6,936, $7,977, and $6,731 for Mr.
Rawlings; and $272, $3,394, $-0-, $6,511, and $6,731 for Mr. Strang.
Amounts for 1998 for Mr. Mitchell also include an incentive/retention bonus
accrual under an agreement with Pacific Enterprises entered into in 1997 in
connection with the business combination of Pacific Enterprises and Enova
Corporation. The agreement provides that Mr. Mitchell becomes entitled to
an incentive/retention bonus upon the completion of the business
combination (which was completed on
12
<PAGE>
June 26, 1998) and continued employment with Sempra Energy for a period of
twenty-four months thereafter. Under the agreement, a deferral account was
established for Mr. Mitchell upon the completion of the business
combination and credited with a incentive/retention bonus amount of
$782,000 which was 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, Mr. Mitchell will be
paid in cash an amount based upon the number of phantom shares then
credited to his account and the then fair market value of Sempra Energy
Common Stock.
Amounts for 1998 for Ms. Reed and Messrs. Stewart, Rawlings and Strang also
include $303,750, $292,500, $152,250 and $69,781, respectively, accrued or
paid by Pacific Enterprises as incentive/retention bonuses upon the
completion of six to twelve months of service following the completion of
the business combination of Pacific Enterprises and Enova Corporation.
13
<PAGE>
Stock Options and Stock Appreciation Rights
The following table contains information concerning the grant of stock
options during 1998 to the executive officers of the Gas Company named in the
Summary Compensation Table. All options are to purchase Sempra Energy Common
Stock, were granted at an exercise price of 100% of the fair market value of
the option shares on the date of the grant and are for a ten-year term subject
to earlier expiration following termination of employment.
Option / SAR Grants in 1998
<TABLE>
<CAPTION>
% of Total
Number of Shares Options / SARs
Underlying Granted to Exercise
Options / SARs Employees Price Expiration Grant Date
Name Granted (#) in 1998 ($/Sh) Date Present Value
- ---- ---------------- -------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Warren I. Mitchell...... 54,136(A) 1.61% $24.27 3/3/08 $601,992
27,800(B) 0.83% $26.31 7/23/08 $257,428
58,360(C) 1.73% $26.31 7/23/08 $193,172
Debra L. Reed........... 33,835(A) 1.00% $24.27 3/3/08 $376,245
10,500(B) 0.31% $26.31 7/23/08 $ 97,230
22,020(C) 0.65% $26.31 7/23/08 $ 72,886
Lee M. Stewart.......... 33,835(A) 1.00% $24.27 3/3/08 $376,245
10,100(B) 0.30% $26.31 7/23/08 $ 93,526
21,200(C) 0.63% $26.31 7/23/08 $ 70,172
Roy A. Rawlings......... 11,278(A) 0.33% $24.27 3/3/08 $125,411
5,440(B) 0.16% $26.31 7/23/08 $ 50,374
11,420(C) 0.34% $26.31 7/23/08 $ 37,800
George E. Strang........ 11,278(A) 0.33% $24.27 3/3/08 $125,411
4,988(B) 0.15% $26.31 7/23/08 $ 46,189
10,468(C) 0.31% $26.31 7/23/08 $ 34,649
</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.
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 $4.79. These use the following assumptions: share volatility--15.8%;
dividend yield--4.35%; risk-free rate of return--5.62%; and outstanding term--
10 years.
15
<PAGE>
The following table contains information with respect to the executive
officers of the Gas Company named in the Summary Compensation Table concerning
the exercise of options and stock appreciation rights during 1998 and
unexercised options and stock appreciation rights held on December 31, 1998.
Option / SAR Exercises and Holdings
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options / SARs Options / SARs
at Year End (#)(A) at Year End ($)(A)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Warren I. Mitchell...... 40,602 $311,006 71,429 167,364 $302,347 $195,556
Debra L. Reed........... 25,564 $177,569 39,099 87,407 $227,948 $142,963
Lee M. Stewart.......... 22,557 $175,250 38,347 86,187 $226,989 $142,963
Roy A. Rawlings......... -0- $ -0- 30,527 34,754 $202,335 $ 45,641
George E. Strang........ -0- $ -0- 30,527 33,350 $202,335 $ 45,641
</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
the Gas Company named in the Summary Compensation Table.
Restricted Stock Grants in 1998
<TABLE>
<CAPTION>
Estimated Future
Payouts Under
Number of Non-Stock
Restricted Performance Period Price-Based
Name Shares Until Payout Plans (A)
- ---- ---------- ------------------- ----------------
<S> <C> <C> <C>
Warren I. Mitchell.............. 7,456 Four Annual Periods $193,185
Debra L. Reed................... 2,812 Four Annual Periods $ 72,859
Lee M. Stewart.................. 2,708 Four Annual Periods $ 70,164
Roy A. Rawlings................. 1,456 Four Annual Periods $ 37,725
George E. Strang................ 1,336 Four Annual Periods $ 34,616
</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.
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 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.
16
<PAGE>
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 the Gas Company named in the
Summary Compensation Table under the Sempra Energy Supplemental Executive
Retirement Plan (combined with benefits payable under the other pension plans
of the Gas Company 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>
$ 200 $ 40 $ 80 $120 $125 $130
$ 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
</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 40 years for Mr. Mitchell, 20 years for Ms. Reed, 31 years for Mr.
Stewart, 25 years for Mr. Rawlings and 33 years for Mr. Strang.
Employment and Employment-Related Agreements
Employment Agreements
In connection with the business combination of Pacific Enterprises and Enova
Corporation, Sempra Energy entered into an employment agreement with Warren I.
Mitchell. Prior to the completion of the business combination, Mr. Mitchell
was an Executive Vice President of Pacific Enterprises. He was at that time
and continues to be the Chairman and President of the Gas Company and
subsequently also became the Chairman of SDG&E and the Group President
Regulated Operations of Sempra Energy.
Mr. Mitchell's 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 the agreement is automatically
extended by one year on June 26, 2002 and on each June 26 thereafter unless he
or Sempra Energy elects not to extend the term.
The agreement provides that Mr. Mitchell will serve as the President and
principal executive officer of the businesses of Sempra Energy that are
economically regulated by the California Public Utilities Commission. For
these services, he will receive an annual base salary of not less than
$440,000 and will be entitled to participate in (i) annual incentive
compensation plans and long term compensation plans and awards providing him
with an
17
<PAGE>
annual bonus opportunity at least equal (in terms of target, maximum and
minimum awards, expressed as a percentage of annual base salary) to his
opportunities in effect at Pacific Enterprises prior to the completion of the
business combination and (ii) all retirement and welfare benefit plans
applicable to employees or senior executives of Sempra Energy.
The agreement also provides that if Sempra Energy terminates Mr. Mitchell's
employment (other than for cause, death or disability) or Mr. Mitchell
terminates his employment for good reason, he 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 by 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 him in the five years
preceding the year of termination; and (iii) an additional retirement benefit
equal to 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.
The 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 agreement also provides for a gross-up payment to offset the
effects of any excise taxes imposed on Mr. Mitchell under Section 4999 of the
Internal Revenue code.
Good reason is defined in the employment agreements to include an adverse
change in Mr. Mitchell's title, authority, duties, responsibilities or
reporting lines; a reduction in his base salary or aggregate annualized
compensation and benefit opportunities; the relocation of his principal place
of employment; and a substantial increase in his 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 the Gas
Company's executive officers, other than Mr. Mitchell for whom severance
arrangements are contained in his employment agreement summarized above. The
severance agreements provide for the payment of benefits in the event Sempra
Energy and its subsidiaries terminate 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 150%; (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 two; (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
18
<PAGE>
(v) continued life, disability, accident and health insurance for two 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 and its subsidiaries, a material reduction in
the executive's overall standing and responsibilities within Sempra Energy and
its subsidiaries 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 Mr. Mitchell's employment agreement summarized above.
SHAREHOLDER PROPOSALS
Shareholders intending to bring any business before an Annual Meeting of
Shareholders of the Gas Company, including nominations of persons for election
as directors, must give written notice to the Secretary of SoCalGas of the
business to be presented. The notice must be received at the Gas Company's
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 the Gas Company.
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
SoCalGas 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 the Gas
Company, 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
The Gas Company's Annual Report to the Securities and Exchange Commission on
Form 10-K is being mailed to shareholders together with this Information
Statement.
----------------
19
