SCHEDULE 14C INFORMATION
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of the Securities Exchange Act of 1934 (Amendment No. )
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Pacific Enterprises
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PACIFIC ENTERPRISES
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NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
-----------------
The Annual Meeting of Shareholders of Pacific Enterprises will be held on
May 14, 2002 at 10:00 a.m. at the offices of Sempra Energy, 101 Ash Street, San
Diego, California. Pacific Enterprises is a subsidiary of Sempra Energy.
The Annual Meeting will be held for the following purposes:
(1) To vote upon an amendment to the Bylaws with respect to the authorized
number of directors.
(2) To elect directors for the ensuing year.
(3) To transact any other business that may properly come before the meeting.
Shareholders of record at the close of business on March 26, 2002 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.
Shareholders are invited to attend the Annual Meeting of Shareholders of
Sempra Energy. It will be held on May 7, 2002 at 10:00 a.m. at the Irvine
Marriott Hotel, 18000 Von Karman Avenue, Irvine, California, and will include
management presentations regarding Pacific Enterprises and its utility
subsidiary.
Only shareholders of Pacific Enterprises may 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.
PACIFIC ENTERPRISES
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INFORMATION STATEMENT
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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 14, 2002. It is being
mailed to shareholders beginning April 8, 2002.
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.
Pacific Enterprises' principal executive offices are located at 101 Ash
Street, San Diego, California. Its telephone number is (619) 696-2020.
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 26, 2002. 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
three director positions but cumulative voting is not permitted. In voting upon
other matters to be considered at the Annual Meeting each share is entitled to
one vote.
GOVERNANCE OF THE COMPANY
Board of Directors
The business and affairs of Pacific Enterprises are managed under the
direction of its Board of Directors in accordance with the California General
Corporation Law as implemented by its Articles of Incorporation and Bylaws.
Shareholders who wish to suggest qualified candidates for consideration as
directors 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 2001, the Board of Directors held seven meetings. Each director
attended at least 75% of the combined number of meetings of the board and board
committees of which he or she was a member.
The Audit Committee of the Board of Directors met four times during 2001.
The Compensation Committee and the Corporate Governance Committee each met five
times. These committees, as well as all other committees of the board (other
than the Executive Committee), were dissolved upon the restructuring of the
board described under the caption "Amendment of Bylaws" in this Information
Statement.
All of the current directors of Pacific Enterprises are also officers of
both Pacific Enterprises and Sempra Energy. They are not separately compensated
for services as directors or officers of Pacific Enterprises.
1
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.
Audit Fees
Fees of Deloitte & Touche LLP for the audit of the 2001 financial statements
of Pacific Enterprises and its subsidiaries were $437,000.
All Other Fees
Fees of Deloitte & Touche LLP for all other services provided to Pacific
Enterprises and its subsidiaries for 2001 were $9,400. The Board of Directors
has considered whether the provision of these services is compatible with
maintaining the independence of Deloitte & Touche LLP.
AUDIT REPORT
The Board of Directors reviewed the audited financial statements of Pacific
Enterprises for the year ended December 31, 2001 with management and Deloitte &
Touche LLP, Pacific Enterprises' independent auditors.
The board has also discussed and reviewed with Deloitte & Touche LLP all the
matters required to be discussed by Statement on Auditing Standards No. 61. It
has also received and reviewed the written disclosures and the letter from
Deloitte & Touche LLP required by Independence Standards Board Standard No. 1
and has discussed with Deloitte & Touche LLP their independence.
Based on this review and discussions, the Board of Directors has directed
that Pacific Enterprises' audited financial statements be included in its
Annual Report on Form 10-K for the year ended December 31, 2001, for filing
with the Securities and Exchange Commission.
BOARD OF DIRECTORS
Stephen L. Baum, Chairman
John R. Light
Neal E. Schmale
March 4, 2002
2
SHARE OWNERSHIP
All of the outstanding Pacific Enterprises Common Stock is owned by Sempra
Energy and none of Pacific Enterprises' directors or executive officers owns
any Pacific Enterprises Preferred Stock.
The following table sets forth the number of shares of Sempra Energy Common
Stock beneficially owned at March 1, 2002 by each director, by each of the
executive officers of Pacific Enterprises named in the compensation tables of
this Information Statement 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
Shares
Current Subject To
Beneficial Exercisable Phantom
Name Holdings Options(A) Shares(B) Total
- ---- ---------- ----------- --------- ---------
Frank H. Ault.......................................... 23,028 67,095 1,965 92,088
Stephen L. Baum........................................ 87,791 1,106,475 114,916 1,309,182
John R. Light.......................................... 18,285 235,015 18,435 271,735
Charles A. McMonagle................................... 6,156 52,383 2,362 60,901
Neal E. Schmale........................................ 21,847 282,454 45,509 349,810
Directors and Executive Officers as a group (5 persons) 157,107 1,743,422 183,187 2,083,716
- --------
(A) Shares which may be acquired through the exercise of stock options that are
currently exercisable or become exercisable on or before May 15, 2002.
(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.
Share ownership guidelines for Sempra Energy Common Stock have been
established for officers to further strengthen the link between performance and
compensation. The guidelines are:
Sempra Energy
Executive Level Share Ownership Guidelines
--------------- --------------------------
Chief Executive Officer.. 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
In setting the guidelines the board considered then current share ownership
levels and the desirability of encouraging further share ownership. The
guidelines are expected to be met or exceeded within five years from their
adoption in 1998. 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.
Sempra Energy has approximately 175,000 shareholders. The only person known
to Sempra Energy to own more than 5% of its shares is Barclays Global
Investors, N.A. (45 Fremont Street, San Francisco, California 94105), which on
February 8, 2002 reported that it and related entities held 11,393,523 shares
of Sempra Energy Common Stock as to which they had sole dispositive power
(including 10,949,470 shares as to which they had sole voting power) in trust
accounts for the economic benefit of the beneficiaries of those accounts. These
shares represent approximately 5% of the outstanding Sempra Energy Common Stock.
Employee savings and stock ownership plans of Sempra Energy and its
subsidiaries held 24,241,792 shares of Sempra Energy Common Stock
(approximately 12% of the outstanding shares) for the benefit of employees at
March 11, 2002.
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AMENDMENT OF BYLAWS
The Bylaws of Pacific Enterprises currently provide that the authorized
number of directors will be not less than nine nor more than seventeen. The
exact number of authorized directors (currently nine) is fixed and may be
altered, within these limits, by a resolution of the board. At the Annual
Meeting, shareholders will consider and vote upon a bylaw amendment that would
decrease the range of the authorized number of directors to a minimum of three
and a maximum of five.
Background, Purpose and Effect
In November 2001, the Board of Directors was restructured so that the
incumbent directors consisted entirely of the three current directors, each of
whom is also an officer of Pacific Enterprises and Sempra Energy. Immediately
prior to the restructuring, the board had consisted of Stephen L. Baum, the
Chairman, President and Chief Executive Officer of both Pacific Enterprises and
Sempra Energy who continues to serve as a director, and ten of the thirteen
non-officer directors of Sempra Energy.
The restructuring of the board is intended to facilitate corporate
effectiveness and decision-making. In connection with the restructuring, the
board fixed the authorized number of directors at nine directors (the minimum
number permitted by then applicable bylaw requirements) and amended related
bylaw quorum requirements to provide that one-third of the authorized number of
directors (but not less than two directors) would constitute a quorum for
conduct of business. Consequently, although there are currently six vacancies
in the board, the three incumbent directors are sufficient to constitute a
quorum for the conduct of business.
The proposed amendment to the Bylaws provides that the authorized number of
directors will be not less than three nor more than five with the exact number
to be fixed, within these limits, by a resolution of the board. The bylaw
amendment was approved by the board in connection with the restructuring and
authorized to be submitted for requisite shareholder approval. Effective upon
such approval being obtained, the board also fixed the authorized number of
directors at three.
The amendment would reduce the authorized number of directors to a number
consistent with the number of incumbent directors and thus eliminate the
current vacancies in the board. Approval of the amendment would also have the
effect of reducing quorum requirements so corporate actions could be authorized
by two directors rather than, as now, requiring all three incumbent directors.
In addition, by providing for a range rather than a fixed number, the board
would retain the flexibility to increase or decrease the authorized number of
directors (within a minimum of three and maximum of five) without requiring
further shareholder approval.
Shareholder Approval
Adoption of the bylaw amendment requires that the amendment be approved by a
majority of the outstanding shares of Pacific Enterprises and the number of
votes cast against the adoption of the amendment not exceed 16 2/3% of the
outstanding shares. Sempra Energy, as the parent corporation of Pacific
Enterprises, has advised Pacific Enterprises that it intends to vote all of its
shares of Pacific Enterprises to approve the amendment. Consequently, no other
shareholder approval would be required to adopt the amendment.
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ELECTION OF DIRECTORS
Pacific Enterprises' Board of Directors will consist of three directors upon
shareholder approval of the bylaw amendment described under the caption
"Amendment of Bylaws" in this Information Statement. At the Annual Meeting,
three directors will be elected to hold office until the next Annual Meeting
and until their successors have been elected and qualified. The three director
candidates receiving the greatest number of votes will be elected as directors.
The names of the Board of Directors' three nominees for election as
directors and biographical information regarding each nominee are set forth
below. Unless otherwise noted, each nominee has held his or her principal
position or other positions with the same or predecessor organizations for at
least the last five years.
[PHOTO] Stephen L. Baum, 61, has been a director since 1999. He is Chairman of the Board, President
STEPHEN L. BAUM and Chief Executive Officer of Pacific Enterprises and Sempra Energy. He is a director of
Computer Sciences Corporation.
[PHOTO] John R. Light, 61, became a director in 2001. He is an Executive Vice President and the
General Counsel of Pacific Enterprises and Sempra Energy. Prior to joining Sempra Energy in
JOHN R. LIGHT 1998, he was a partner in the law firm of Latham & Watkins. He is a member of the Board of
Trustees of St. John's Hospital in Santa Monica and the San Diego Museum of Art.
[PHOTO] Neal E. Schmale, 55, became a director in 2001. He is an Executive Vice President and the
Chief Financial Officer of Pacific Enterprises and Sempra Energy. Prior to joining Pacific
NEAL E. SCHMALE Enterprises in 1997, he was Chief Financial Officer of UNOCAL Corporation. He is a member
of the Board of Directors of WD-40, the San Diego Symphony Orchestra Association and the
YMCA--Mission Valley.
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REPORT ON EXECUTIVE COMPENSATION
Pacific Enterprises is a subsidiary of Sempra Energy and all of its
executive officers are also executive officers of Sempra Energy. They are
compensated by Sempra Energy and are not separately compensated for their
services as officers of Pacific Enterprises.
Sempra Energy's Board of Directors maintains a Compensation Committee
comprised of independent directors. The committee has established compensation
principles and strategies and designed a compensation program for executive
officers of Sempra Energy. It also administers Sempra Energy's base salary
program, executive annual and long term incentive plans, and executive benefit
programs.
Compensation Principles and Strategies
In developing compensation principles and strategies, the Sempra Energy
Compensation Committee considers the current and prospective business
environment for Sempra Energy and its subsidiaries and takes 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.
To reflect these factors and assist Sempra Energy and its subsidiaries in
realizing the key objective of creating superior shareholder value, the
Compensation Committee has developed policies and programs that include 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 companies of comparable
size, with annual cash and long term equity incentives providing
opportunities to earn total compensation at significantly higher levels
for superior 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 Committee also takes into account provisions of the
Internal Revenue Code limiting to $1 million the annual amount of compensation
(other than compensation that qualifies 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 committee believes that tax deductibility is an important factor but only
one factor to be considered in evaluating any compensation program.
Accordingly, the committee expects to design and implement policies and
programs that will maximize federal income tax
6
deductions for compensation expense to the extent that doing so is consistent
with Sempra Energy's other compensation principles and strategies. The
committee believes, 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 would 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 to
retain and attract top quality executive talent. In determining base salary
adjustments, individual performance, executive responsibilities, market
characteristics and other factors are also taken into account.
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. The Compensation Committee believes that the Fortune 1000
appropriately reflects the broad 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 are set at the
approximate mid-point of these salary data. For 2001, an annual base salary of
$975,000 was established for Stephen L. Baum, Chairman, President and Chief
Executive Officer of Pacific Enterprises and Sempra Energy, with corresponding
lesser amounts for other executive officers.
Annual Incentives
Annual performance-based incentive opportunities are provided to executive
officers through cash bonuses under the Sempra Energy Executive Incentive Plan.
The 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 with performance at targeted levels
intended to produce bonuses at the mid-point for bonuses for comparable levels
of responsibility at Fortune 1000 companies.
Executive Incentive Plan award levels for 2001 were based on attainment of
Sempra Energy earnings per share goals with target award levels ranging from
100% of base salary for Mr. Baum to 45% of base salary for Vice Presidents, and
maximum award levels ranging from 200% to 90% of base salary.
Sempra Energy earnings per share for 2001 were $2.52, a 22.3% increase over
2000 earnings of $2.06. These results exceeded those required for maximum
incentive bonus payouts and resulted in a cash bonus of $1,950,000 for Mr.
Baum, with corresponding lesser amounts for other executive officers.
Long Term Incentives
Long term incentive opportunities are provided by equity and equity-based
awards under Sempra Energy's 1998 Long Term Incentive Plan. The plan permits a
wide variety of awards to allow the Compensation Committee to respond to
changes in market conditions and compensation practices. During 2001, Sempra
Energy
7
granted to executives and other employees of Sempra Energy and its subsidiaries
non-qualified stock options to purchase Sempra Energy Common Stock. These
option grants to executive officers of Pacific Enterprises are described in
this Proxy Statement under the caption "Executive Compensation--Stock Options
and Stock Appreciation Rights."
Stock Ownership Guidelines
The Compensation Committee believes that a commitment to increased share
ownership by executives of Sempra Energy and its subsidiaries is an important
element in aligning the interests of executives with those of shareholders.
This belief has influenced the design of compensation plans and, in addition,
stock ownership guidelines have been established to further strengthen the link
between corporate performance and compensation. These guidelines are discussed
under the caption "Share Ownership" in this Information Statement.
BOARD OF DIRECTORS
Stephen L. Baum, Chairman
John R. Light
Neal E. Schmale
March 4, 2002
8
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The table below summarizes, for the last three years, the compensation paid
or accrued by Sempra Energy and its subsidiaries to each of the executive
officers of Pacific Enterprises named in the table.
Summary Compensation Table
Long Term Compensation
---------------------------
Awards Payouts
---------------- ----------
Annual Compensation Securities LTIP All Other
--------------------- Underlying Payouts Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options/SARS (#) ($) (A)(B) ($) (C)
- --------------------------- ---- ---------- ---------- ---------------- ---------- ------------
Stephen L. Baum.............. 2001 $975,000 $1,950,000 663,500 $263,459 $233,781
Chairman, President and 2000 $913,231 $1,560,000 982,500 $174,643 $234,177
Chief Executive Officer 1999 $762,616 $ 915,600 297,900 $179,465 $144,516
Neal E. Schmale.............. 2001 $454,577 $ 546,000 193,000 $ 58,492 $ 89,149
Executive Vice President 2000 $432,912 $ 519,600 136,800 $ -0- $ 79,653
and Chief Financial Officer 1999 $415,754 $ 374,400 96,700 $ -0- $ 51,461
John R. Light................ 2001 $432,999 $ 519,600 183,700 $ 95,974 $ 43,804
Executive Vice President 2000 $432,672 $ 519,600 136,800 $ 32,618 $158,383
and General Counsel 1999 $415,754 $ 374,400 96,700 $ 29,308 $118,971
Frank H. Ault................ 2001 $264,003 $ 263,925 59,200 $ 30,174 $ 98,884
Senior Vice President and 2000 $227,948 $ 205,300 36,100 $ 25,154 $ 33,958
Controller 1999 $217,964 $ 148,568 28,800 $ 33,079 $ 41,399
Charles A. McMonagle......... 2001 $224,230 $ 202,500 53,300 $ 11,210 $ 31,759
Vice President and Treasurer 2000 $184,712 $ 166,500 29,300 $ -0- $ 24,945
1999 $167,885 $ 114,750 19,700 $ -0- $ 19,513
- --------
(A) Long term incentive plan payouts represent the fair market value of Sempra
Energy restricted shares for which forfeiture and transfer restrictions
terminated during the year based upon satisfaction of long term performance
goals.
(B) The aggregate holdings/value of Sempra Energy restricted shares held on
December 31, 2001 by the individuals listed in the table are: 21,018
shares/$515,992 for Mr. Baum; 7,467 shares/$183,315 for Mr. Schmale; 7,467
shares/$183,315 for Mr. Light; 2,067 shares/$50,745 for Mr. Ault; and 1,431
shares/$35,131 for Mr. McMonagle. Regular quarterly dividends are paid on
restricted shares.
(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 2001 were $30,817, $90,520,
$15,000, $86,348 and $11,096 for Mr. Baum; $38,736, $1,460, $7,000. $31,455
and $10,498 for Mr. Schmale; $-0-, $-0-, $-0-, $33,306 and $10,498 for Mr.
Light; $6,445, $55,883, $7,000, $19,058 and $10,498 for Mr. Ault; and
$2,492, $571, $1,875, $16,323 and $10,498 for Mr. McMonagle.
9
Stock Options and Stock Appreciation Rights
The following table shows information as to the grant of stock options
during 2001 to the executive officers of Pacific Enterprises named in the
Summary Compensation Table. All options are to purchase Sempra Energy Common
Stock, were granted at an exercise price of 100% of the fair market value of
the option shares on the date of the grant, are for a ten-year term subject to
earlier expiration following termination of employment, and are exercisable in
cumulative installments of one-fourth of the shares subject to the option on
each of the first four anniversaries of the grant date.
Option / SAR Grants in 2001
Number of % of Total
Shares Options/SARs
Underlying Granted to Exercise Grant Date
Options/SARs Employees Price Expiration Present
Name Granted (#) In 2001 ($/Share) Date Value (A)
- ---- ------------ ------------ --------- ---------- ----------
Stephen L. Baum................... 663,500 23.36% $22.50 1/1/11 $3,363,945
Neal E. Schmale................... 193,000 6.80% $22.50 1/1/11 $ 978,510
John R. Light..................... 183,700 6.47% $22.50 1/1/11 $ 931,359
Frank H. Ault..................... 59,200 2.08% $22.50 1/1/11 $ 300,144
Charles A. McMonagle.............. 53,300 1.88% $22.50 1/1/11 $ 270,231
- --------
(A) Sempra Energy used a modified Black--Scholes option pricing model to
develop the theoretical values set forth under the "Grant Date Present
Value" column. Grant date present value per option share was $5.07 based on
the following assumptions: share volatility-23.60%; dividend yield-4.21%;
risk-free rate of return-5.28%; and outstanding term-10 years.
The following table shows information as to the exercise of options and
stock appreciation rights during 2001 and unexercised options and stock
appreciation rights held on December 31, 2001 by the executive officers named
in the Summary Compensation Table.
Option / SAR Exercises and Holdings
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs
Shares Year-End (#) at Year-End ($)(A)
Acquired Value ------------------------- -------------------------
Name on Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------- ----------- ------------- ----------- -------------
Stephen L. Baum................... -0- -0- 770,500 1,341,300 $3,598,515 $4,735,674
Neal E. Schmale................... -0- -0- 175,829 360,005 $ 371,947 $1,130,310
John R. Light..................... -0- -0- 130,715 350,705 $ 359,315 $1,111,245
Frank H. Ault..................... -0- -0- 36,070 104,890 $ 100,645 $ 321,054
Charles A. McMonagle.............. -0- -0- 26,808 88,336 $ 75,163 $ 264,820
- --------
(A) The exercise price of outstanding options ranges from $18.19 to $26.31.
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.
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PENSION PLAN TABLE
($000's)
Years of Service
Pension Plan --------------------------------
Compensation 5 10 20 30 40
------------ ---- ------ ------ ------ ------
$ 250 $ 50 $ 100 $ 150 $ 156 $ 163
$ 500 $100 $ 200 $ 300 $ 313 $ 325
$1,000 $200 $ 400 $ 600 $ 625 $ 650
$1,500 $300 $ 600 $ 900 $ 938 $ 975
$2,000 $400 $ 800 $1,200 $1,250 $1,300
$2,500 $500 $1,000 $1,500 $1,563 $1,625
$3,000 $600 $1,200 $1,800 $1,875 $1,950
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 17 years for Mr. Baum, 4 years for Mr. Schmale, 4 years for Mr. Light,
32 years for Mr. Ault, and 19 years for Mr. McMonagle.
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 pension plans (including a supplemental
pension plan) of a predecessor corporation had those plans remained in effect.
Under these 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 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 61 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 Agreement
Sempra Energy has an employment agreement with Stephen L. Baum providing 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 forming Sempra Energy. The term of the agreement is
automatically extended by one year on June 26, 2002 and on each June 26
thereafter unless Mr. Baum or Sempra Energy elects not to extend it.
The employment agreement provides that Mr. Baum will serve as the Chairman
of the Board, President, and Chief Executive Officer of Sempra Energy at an
annual base salary of not less than $975,000. It also provides that he is
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 his predecessor as Chief Executive Officer and (ii) all retirement
and welfare benefit plans applicable to employees or senior executives of
Sempra Energy.
The employment agreement also provides that if Sempra Energy or its
subsidiaries terminates Mr. Baum's employment (other than for cause, death or
disability) or he 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
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bonus awards in the five years preceding termination) multiplied 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 the
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 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. 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 him under Section
4999 of the Internal Revenue Code.
Good reason is defined in the employment agreement to include an adverse
change in Mr. Baum's title, authority, duties, responsibilities or reporting
lines; a reduction in his base salary or aggregate annualized compensation and
benefit opportunities other than across-the-board reductions similarly
affecting all executives whose compensation is directly determined by the
Compensation Committee of Sempra Energy's Board of Directors; 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 a severance agreement with each of Pacific Enterprises'
executive officers, other than Mr. Baum 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 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 the 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.
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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 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. Baum's employment agreement
summarized above.
SHAREHOLDER PROPOSALS
Shareholders intending to bring any business before an Annual Meeting of
Shareholders of Pacific Enterprises, including nominations for election as
directors, must give written notice to the Corporate Secretary of Pacific
Enterprises of the business to be presented. The notice must be received at
Pacific Enterprises' offices within the periods specified and must be
accompanied by the information required by the Bylaws. A copy of these bylaw
requirements will be provided upon request in writing to the Corporate
Secretary.
The period for notice of business to be brought by shareholders before the
2002 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 2003 Annual Meeting of Shareholders will commence on January 14, 2003 and
end on March 14, 2003.
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.
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