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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
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Southern California Gas Company
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LOGO
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 5, 1998 at 10:00 a.m., at The Gas Company Tower, 555 West Fifth
Street, Los Angeles, California, for the following purposes:
(1) To elect directors for the ensuing year.
(2) To transact any other business which may properly come before the
meeting.
Shareholders of record at the close of business on March 16, 1998 will be
entitled to notice of and to vote at the Annual Meeting.
ONLY SHAREHOLDERS OF THE COMPANY ARE ENTITLED TO ATTEND THE ANNUAL MEETING.
SHAREHOLDERS OF RECORD WILL BE ADMITTED UPON VERIFICATION OF RECORD SHARE
OWNERSHIP AT THE ADMISSION DESK. SHAREHOLDERS WHO OWN SHARES THROUGH BANKS,
BROKERAGE FIRMS, NOMINEES OR OTHER ACCOUNT CUSTODIANS, MUST PRESENT PROOF OF
BENEFICIAL SHARE OWNERSHIP (SUCH AS A BROKERAGE ACCOUNT STATEMENT) AT THE
ADMISSION DESK.
By Order of the Board of Directors
Thomas C. Sanger, Secretary
Los Angeles, California
March 31, 1998
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SOUTHERN CALIFORNIA GAS COMPANY
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INFORMATION STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
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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 to shareholders in connection with its
Annual Meeting of Shareholders to be held on May 5, 1998. It is being mailed to
shareholders commencing March 31, 1998.
SOUTHERN CALIFORNIA GAS COMPANY
SoCalGas 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.
The Gas Company is a subsidiary of Pacific Enterprises which owns
approximately 96% of SoCalGas' voting shares. During 1997, the shareholders of
Pacific Enterprises and Enova Corporation, the parent company of San Diego Gas &
Electric Company, approved a business combination of the two companies. Upon
completion of the combination, Pacific Enterprises and Enova will become
separate subsidiaries of Sempra Energy, a newly-formed holding company, and the
holders of their common stock will become shareholders of the new holding
company. SoCalGas will remain a direct subsidiary of Pacific Enterprises and
will become an indirect subsidiary of Sempra Energy. SoCalGas Common Stock and
Preferred Stock will remain outstanding and unaffected by the business
combination.
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.
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OUTSTANDING SHARES VOTING RIGHTS
Shareholders who are present at the Annual Meeting in person or by proxy
will be entitled to one vote for each of the Company's shares which they held of
record at the close of business on March 16, 1998. At that date, SoCalGas'
outstanding shares consisted of 91,300,000 shares of Common Stock (all of which
were owned by Pacific Enterprises) and 862,043 shares of Preferred Stock (of
which 50,477 shares were 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 a number of votes for each of their shares equal to the number of
directors to be elected 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.
BOARD OF DIRECTORS
SoCalGas' entire Board of Directors is elected at each Annual Meeting of
Shareholders. During 1997, the Board of Directors held eleven meetings.
BOARD COMMITTEES
The Board of Directors maintains Audit, Compensation, Executive, Nominating
and Public Policy Committees.
The Audit Committee, which consists entirely of non-officer directors,
recommends to the Board of Directors the selection of independent auditors;
approves and reviews services and fees of independent auditors; and reviews
accounting and financial policies, internal accounting controls and the results
of audit engagements. During 1997, the Committee held three meetings.
The Compensation Committee, which consists entirely of non-officer
directors, reviews the performance and approves or recommends the compensation
of senior management and recommends the adoption of and administers compensation
plans in which senior management is eligible to participate. The Committee also
considers management succession plans. During 1997, the Committee held five
meetings.
The Executive Committee may act on all but certain major corporate matters
reserved to the Board of Directors. It meets when emergency issues or scheduling
make it difficult to assemble the Board of Directors. During 1997, the Committee
did not meet.
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The Nominating Committee considers and makes recommendations regarding the
nominations of directors and the size and composition of the Board of Directors.
During 1997, the Committee held two meetings. The Committee will consider
shareholder suggestions for nominees for director. Suggestions may be submitted
to the Secretary of Southern California Gas Company, P.O. Box 3249, Los Angeles,
California 90051-1249. Biographical information concerning the proposed nominee
should also be included to assist the Committee in its deliberations.
The Public Policy Committee reviews and monitors SoCalGas' fulfillment of
its responsibilities on matters of public policy and corporate governance.
During 1997, the Committee held three meetings.
The Board of Directors also maintains a Debt Financing Committee which
authorizes borrowings and other debt financings and related matters. During
1997, the Committee acted by written consent on one occasion.
DIRECTOR COMPENSATION
All directors of SoCalGas are also directors of Pacific Enterprises or
officers of SoCalGas. Non-officer directors receive an annual base retainer of
$25,000 and an additional $3,000 for each Committee which they chair.
Non-officer directors also receive $900 for each meeting of the Board or
Committee which they attend. Directors may defer the receipt of their
compensation and earn interest on the amounts deferred.
Non-officer directors receive retirement benefits commencing upon the later
of retirement or attaining age 65. The annual retirement benefit is the annual
base retainer plus ten times the meeting fee and continues for a maximum period
equal to the director's years of service as a non-officer director.
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ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, directors will elect seven directors
(comprising the entire authorized number of directors) to hold office until the
next Annual Meeting and until their successors have been elected and qualified.
The director candidates receiving the highest number of affirmative votes (up to
the number of directors to be elected) will be elected as directors.
The names of the Board of Directors' seven 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, except for
Mr. Mitchell, also Pacific Enterprises. Unless otherwise noted, each nominee has
held the position set forth beneath his or her name or various positions with
the same organization for at least the last five years.
HYLA H. BERTEA,
COMMUNITY LEADER.
Mrs. Bertea, 57, has been a director of the Gas Company since 1993 and of
Pacific Enterprises since 1988. She is a realtor with Prudential California, a
real estate sales company. She is a Commissioner of the California Horse Racing
Board and a Trustee of Lewis & Clark College. She is a director of Orange County
Community Foundation and for a number of years she has been involved in
leadership positions with various other cultural, educational and health
organizations in the Orange County and Los Angeles areas. She was a
co-commissioner of gymnastics and member of the executive staff for the 1984
Olympics.
Committees: Audit, Nominating,
and Public Policy
HERBERT L. CARTER,
EXECUTIVE VICE CHANCELLOR EMERITUS AND TRUSTEE PROFESSOR OF PUBLIC
ADMINISTRATION OF THE CALIFORNIA STATE UNIVERSITY SYSTEM.
Dr. Carter, 64, has been a director of the Gas Company since 1993 and of Pacific
Enterprises since 1991. He was President and Chief Executive Officer of United
Way of Greater Los Angeles from 1992 until 1995 and Executive Vice Chancellor of
the California State University System from 1974 until 1992. He is a director of
Golden State Mutual Insurance Co.; and a member of the Board of Councilors of
the School of Public Administration, University of Southern California.
Committees: Audit, Nominating,
and Public Policy
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WILFORD D. GODBOLD, JR.,
PRESIDENT, CHIEF EXECUTIVE OFFICER AND A DIRECTOR OF ZERO CORPORATION, AN
INTERNATIONAL MANUFACTURER PRIMARILY OF ENCLOSURES AND THERMAL MANAGEMENT
EQUIPMENT FOR THE ELECTRONICS MARKET.
Mr. Godbold, 59, has been a director of the Gas Company since 1993 and of
Pacific Enterprises since 1990. He is also a director of Santa Fe Pacific
Pipelines, Inc., the California State Chamber of Commerce (past chairman) and
The Employer's Group (past chairman). He is a member of the Board of Trustees of
The Wellness Community, a member of the Council on California Competitiveness
and a past President of the Board of Trustees of Marlborough School.
Committees: Audit, Compensation,
and Executive
IGNACIO E. LOZANO, JR.,
CHAIRMAN OF THE BOARD OF LA OPINION, A SPANISH LANGUAGE DAILY NEWSPAPER. DURING
1976 AND 1977 MR. LOZANO SERVED AS UNITED STATES AMBASSADOR TO EL SALVADOR.
Mr. Lozano, 71, has been a director of the Gas Company since 1993 and of
Pacific Enterprises since 1978. He is also a director of The Walt Disney
Company, Pacific Mutual Life Insurance Company, the Santa Anita Foundation and
the Youth Opportunities Foundation. He is a trustee of the University of Notre
Dame and a member of the California Press Association.
Committees: Audit, Compensation, Debt Financing,
Executive, and
Public Policy
WARREN I. MITCHELL
PRESIDENT OF SOUTHERN CALIFORNIA
GAS COMPANY AND EXECUTIVE
VICE PRESIDENT OF PACIFIC ENTERPRISES.
Mr. Mitchell, 60, became a director of SoCalGas in 1997. He is a director
of the Pacific Coast Gas Association, United Way of 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.
Committees: Debt Financing
and Executive
RICHARD J. STEGEMEIER,
CHAIRMAN EMERITUS OF THE BOARD OF UNOCAL
CORPORATION, AN INTEGRATED PETROLEUM
COMPANY.
Mr. Stegemeier, 69, has been a director of the Gas Company and of Pacific
Enterprises since 1995. He is also a director of Foundation Health Systems,
Inc., Halliburton Company, Montgomery Watson, Inc., Northrop Grumman
Corporation, Outboard Marine Corporation and Wells Fargo Bank.
Committees: Audit, Compensation,
and Nominating
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DIANA L. WALKER,
PARTNER IN THE LOS ANGELES BASED LAW FIRM OF O'MELVENY & MYERS.
Mrs. Walker, 56, has been a director of the Gas Company since 1993 and of
Pacific Enterprises since 1989. She is also a director of United Way of Greater
Los Angeles, the former Chair of the Board of Governors of the Institute for
Corporate Counsel, a former trustee of Marlborough School and a member of
various professional organizations. O'Melveny & Myers LLP, of whom Mrs. Walker
is a partner, provides legal services to the Gas Company and Pacific
Enterprises.
Committees: Audit, Nominating,
and Public Policy
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SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
None of SoCalGas' directors or executive officers own any SoCalGas Common
Stock (all of which is owned by Pacific Enterprises) or Preferred Stock. The
following table sets forth the number of shares of Pacific Enterprises Common
Stock beneficially owned as of March 16, 1998 by each director and nominee, each
executive officer named under "Executive Compensation" and, as a group, all such
persons and all other executive officers of the Gas Company.
NUMBER OF SHARES
NAME OF COMMON STOCK
---- -----------------
Hyla H. Bertea............................................. 5,962
Herbert L. Carter (#1)..................................... 910
Wilford D. Godbold, Jr. ................................... 2,000
Leslie E. LoBaugh, Jr. (#2)................................ 34,868
Ignacio E. Lozano, Jr. (#3)................................ 1,453
Warren I. Mitchell (#2).................................... 63,474
Debra L. Reed (#2)......................................... 33,173
Richard J. Stegemeier...................................... 1,000
Lee M. Stewart (#2)........................................ 33,024
Ralph Todaro (#2).......................................... 39,209
Diana L. Walker............................................ 562
All Directors and Executive Officers as a group
(19 persons)(#2)......................................... 378,368
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#1 Includes 19 shares held as guardian.
#2 Includes shares issuable upon exercise of employee stock options that are
exercisable on or prior to May 31, 1998. Such option shares total 31,300
shares for Mr. LoBaugh; 51,500 shares for Mr. Mitchell; 28,800 shares for Ms.
Reed; 27,000 shares for Mr. Stewart; 32,500 shares for Mr. Todaro; and
313,400 shares for all directors and executive officers as a group.
#3 Includes 500 shares held by spouse.
No SoCalGas director or executive officer owns any shares of Pacific
Enterprises Preferred Stock. The shares of Pacific Enterprises Common Stock
owned by all directors and executive officers as a group represent less than 1%
of Pacific Enterprises' outstanding shares.
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The information contained under the caption "Report of the Compensation
Committee" shall not be deemed to be "soliciting material" or to be "filed" with
the Securities and Exchange Commission and shall not be deemed to be
incorporated into any filing by SoCalGas under the Securities Act of 1933 or the
Securities Exchange Act of 1934 in the absence of specific reference to such
information and caption.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors reviews management
compensation levels, evaluates management performance, and considers management
succession and related matters. The Committee also administers executive
incentive plans.
Each year the Compensation Committee reviews and approves a compensation
plan for executive officers. The plan is developed in conjunction with
independent compensation consultants and includes a review of compensation
practices of large utilities throughout the United States as well as
California-based general industry companies, a review of the performance of
these companies and SoCalGas, and subjective judgments as to the past and
expected future contributions of individual executives.
Base salaries are reviewed annually and adjustments are also considered
upon changes in executive responsibilities. Annual performance bonus opportunity
levels are developed and payment of bonuses tied to success in achieving a rate
of return on equity derived from that authorized for SoCalGas by the California
Public Utilities Commission. Longer term incentive compensation is provided by
annual grants of employee stock options to purchase shares of Pacific
Enterprises Common Stock.
COMPENSATION CONSULTANTS
To assist in performing its functions, the Compensation Committee retains
Hewitt Associates and other nationally recognized consulting firms specializing
in executive compensation issues. These consultants assist the Committee in
formulating executive compensation policies and advises the Committee on
programs and practices to implement policies adopted by the Committee. In doing
so, they prepare and review with the Committee surveys and other materials
reflecting executive compensation policies of other companies and other factors
(including relative performance and general economic conditions) which they deem
relevant.
COMPENSATION POLICY
The policy of the Compensation Committee is to establish total compensation
levels competitive with companies with which SoCalGas competes for executives.
Base salaries are set at levels comparable to those of a combination of other
large utilities and California-based general industry companies. To provide
incentives for exceptional performance, the Committee has increasingly provided
opportunities for performance-based compensation (annual bonuses and stock
option
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awards as a percentage of base salary) at levels that bring total compensation
(salary and performance-based compensation) closer to California-based general
industry levels.
The Compensation Committee believes these policies appropriately align the
financial interests of executives with those of shareholders. Base salaries are
at competitive levels and amounts paid as annual bonuses and the realized value
of stock options is highly variable and closely tied to corporate performance.
As a consequence, much of an executive officer's compensation is "at risk" with
the targeted value of annual bonuses and the grant-date estimated value of
annual employee stock option awards intended to contribute at least 40% to 60%
of total annual compensation.
COMPENSATION AWARDS
Salaries
Warren I. Mitchell, President of the Gas Company, received a 12% salary
increase for 1997 to bring his salary more in line with competitive practices.
Performance Bonuses
The Compensation Committee establishes annual performance bonus
opportunities for executive officers based upon the attainment of objective
financial goals. Performance at targeted levels is intended to compensate
executive officers with bonuses somewhat above the midpoint for bonuses for
comparable levels of responsibility and performance at other large utilities.
Target award levels for 1997 ranged from 40% of base salary for the President to
25% of base salary for Vice Presidents, with maximum award levels for excellent
performance ranging from 80% to 50% of base salary.
Continued superior performance during 1997 resulted in SoCalGas achieving a
return on equity of 16.7%. This return is substantially above the 11.6% rate of
return authorized by the California Public Utilities Commission and the target
return established by the Compensation Committee for the payment of performance
bonuses. This excellent return, together with favorable assessments of his
contributions to achieving it, resulted in paying a maximum performance bonus to
Mr. Mitchell for 1997.
Stock Options
To provide long-term incentive compensation and in lieu of cash
compensation, the Compensation Committee relies exclusively upon awards of
options to purchase Pacific Enterprises Common Stock, the ultimate realizable
value of which closely equates compensation to shareholder returns. Stock
options are granted with an exercise price that is not less than the fair market
value of the option shares at the date of the grant. They are typically granted
for a ten-year term and vest in equal cumulative annual installments over a
three-year period with vesting and exercisability subject only to continuing
employment.
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Since 1995, stock options also have been typically granted with
performance-based dividend equivalents. These provide executive officers with
the opportunity to receive, upon the exercise of an option, all or a portion of
the cash dividends that would have been paid on the shares as to which the
option is exercised as if the shares had been outstanding from the date the
option was granted. No dividend equivalents are payable unless Pacific
Enterprises meets a threshold performance goal and the percentage of dividends
paid as dividend equivalents (to a maximum of all of the dividends that would
have been paid on the shares) depends upon the extent to which the threshold
performance goal is exceeded. In addition, no dividend equivalents are payable
in respect of the exercise of any "out-of-the-money" option -- an option for
which the exercise price exceeds the market value of the shares purchased.
In awarding stock options, the Compensation Committee sizes option grants
to provide a grant-date estimated value somewhat above the midpoint for option
and other long-term incentive awards provided by large utilities. Since the
Compensation Committee uses only stock options to provide long-term incentive
compensation, options awards are typically larger than those at companies that
provide additional forms of long-term compensation. During 1997, Mr. Mitchell
was awarded options on 27,000 shares having a grant-date estimated value of
$266,760.
COMPENSATION COMMITTEE
Richard J. Stegemeier, Chairman
Wilford D. Godbold, Jr.
Ignacio E. Lozano, Jr.
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EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by SoCalGas and its
affiliates to SoCalGas' President and its other four most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------ ---------------------------------
AWARDS PAYOUTS
----------------------- -------
SHARES
RESTRICTED UNDERLYING ALL OTHER
NAME AND STOCK OPTIONS/ LTIP COMPENSATION
PRINCIPAL POSITIONS YEAR SALARY BONUS AWARDS SARS PAYOUTS (1)(2)
- --------------------------------------- ---- -------- -------- ---------- ---------- ------- ------------
Warren I. Mitchell
President 1997 $356,000 $280,000 $-0- 27,000 $-0- $ 8,977
1996 $318,000 $249,600 $-0- 21,000 $-0- $ 5,721
1995 $306,000 $180,000 $-0- 27,000 $-0- $ 5,836
Debra L. Reed
Senior Vice President 1997 $266,000 $182,000 $-0- 21,000 $-0- $ 5,873
1996 $236,000 $161,000 $-0- 15,000 $-0- $ 5,308
1995 $221,000 $112,875 $-0- 15,000 $-0- $ 5,269
Lee M. Stewart
Senior Vice President 1997 $251,000 $171,500 $-0- 21,000 $-0- $ 6,361
1996 $226,000 $154,000 $-0- 15,000 $-0- $ 5,277
1995 $211,000 $107,625 $-0- 15,000 $-0- $ 4,845
Leslie E. LoBaugh, Jr.
Vice President and 1997 $261,000 $122,400 $-0- 6,600 $-0- $ 8,270
General Counsel 1996 $256,000 $112,500 $-0- 6,600 $-0- $ 5,237
1995 $251,000 $ 81,300 $-0- 7,500 $-0- $ 7,236
Ralph Todaro
Vice President and 1997 $201,900 $ 97,950 $-0- 6,600 $-0- $ 5,584
Controller 1996 $182,900 $ 84,000 $-0- 6,600 $-0- $ 5,230
1995 $177,900 $ 55,400 $-0- 7,500 $-0- $ 5,210
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(1) Consists of interest accruals on deferred compensation above 120% of the
applicable federal rate, the dollar value of insurance premiums paid with
respect to the term portion of life insurance and employer contributions to
defined contribution plans. Such interest accruals, insurance premiums and
contributions for 1997 were, respectively, $2,732, $1,445 and $4,800 for Mr.
Mitchell; $-0-, $1,073 and $4,800 for Ms. Reed; $550, $1,011 and $4,800 for
Mr. Stewart; $6,295, $1,011 and $964 for Mr. LoBaugh; and $-0-, $784 and
$4,800 for Mr. Todaro.
(2) A life insurance policy has been purchased for Mr. LoBaugh under
arrangements providing for offsets of supplemental pension benefits by the
cash surrender value of the policy. If Mr. LoBaugh had become entitled to
the cash surrender value of his policy at December 31, 1997, he would have
received $753,130.
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STOCK OPTIONS
Pacific Enterprises maintains a Stock Option Plan pursuant to which stock
options may be granted to employees of SoCalGas to purchase Pacific Enterprises
Common Stock. The following table sets forth information regarding stock options
granted during 1997 to each of the Gas Company's executive officers named under
"Executive Compensation -- Summary Compensation Table."
OPTION/SAR GRANTS(1)
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS/ GRANT DATE
UNDERLYING SARS GRANTED TO EXERCISE EXPIRATION ESTIMATED
NAME OPTIONS/SARS EMPLOYEES IN 1997 PRICE DATE PRESENT VALUE(2)
---- ------------ ----------------- -------- ---------- ----------------
Warren I. Mitchell........... 27,000 3.9% $30 5/8 3/3/07 $266,760
Debra L. Reed................ 21,000 3.0% $30 5/8 3/3/07 $207,480
Lee M. Stewart............... 21,000 3.0% $30 5/8 3/3/07 $207,480
Leslie E. LoBaugh, Jr. ...... 6,600 .9% $30 5/8 3/3/07 $ 65,208
Ralph Todaro................. 6,600 .9% $30 5/8 3/3/07 $ 65,208
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(1) All options are to purchase shares of Pacific Enterprises Common Stock. They
were granted with performance based dividend equivalents (see "Report of the
Compensation Committee -- Stock Options"); at an exercise price of 100% of
the fair market value of the option shares on the date of grant; for a
ten-year term, subject to earlier expiration upon termination of employment;
and exercisable in cumulative annual installments of one-third of the shares
initially subject to the option on each of the first three anniversaries of
the date of grant.
(2) Estimated present value is based on the Black Scholes Model and consists of
an option value of $4.05 and a dividend equivalent value of $5.83. The
following assumptions were used in the Black Scholes Model: stock price
volatility of 16.74%, a risk-free rate of return of 6.69%, and an annual
dividend yield of 4.7%. Further adjustments were made based on actuarial
assumptions regarding the termination of employment prior to option vesting
and prior to expiration of the ten-year option term, reducing estimated
values by 17.57% and 10.70% respectively. The dividend equivalent value is
based on $1.44 annual dividend (the rate in effect on the grant date) and
the volatility of the cash flow measures which determine the amount of
dividend equivalent paid. At target levels of performance 67% of the
dividends are paid. Options will have no actual value unless the stock price
appreciates from the date of the grant to the exercise date.
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The following table sets forth for each executive officer named under
"Executive Compensation -- Summary Compensation Table" information regarding
stock options to purchase shares of Pacific Enterprises Common Stock exercised
in 1997 and stock options outstanding at December 31, 1997.
OPTION/SARS EXERCISES AND OUTSTANDING OPTION/SAR VALUES
NUMBER OF
OPTIONS/SARS PACIFIC ENTERPRISES VALUE OF UNEXERCISED
EXERCISED IN 1997 UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS/SARS
------------------- AT DECEMBER 31, 1997(1) AT DECEMBER 31, 1997
SHARES VALUE ------------------------------ ------------------------------
ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ---------------- ----------- ----------------
(OPTION SHARES)
Warren I. Mitchell..... 45,600 $518,525 27,000 60,000 $584,250 $189,000
Debra L. Reed.......... 6,000 $ 54,525 36,800 21,000 $365,500 $147,000
Lee M. Stewart......... 6,900 $ 66,262 35,000 21,000 $364,812 $147,000
Leslie E.
LoBaugh,Jr. ......... 21,600 $258,669 29,100 6,600 $170,438 $ 46,200
Ralph Todaro........... -0- $ -0- 30,300 6,600 $297,212 $ 46,200
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(1) The exercise price of outstanding options ranges from $19 1/4 to $47 1/4.
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PENSION BENEFITS
The following table sets forth estimated annual pension benefits, including
supplemental pension benefits, payable upon retirement at age 65 to SoCalGas'
executive officers (based upon payment of benefits as a straight life annuity
and after maximum offset for social security benefits but without offset for any
other benefits) in various compensation and years-of-service classifications.
PENSION PLAN TABLE
YEARS OF SERVICE(2)
-----------------------------------------------------------------------------------
REMUNERATION(1) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
--------------- --------------- --------------- --------------- --------------- ---------------
$ 200,000............ $ 95,000 $ 115,000 $ 117,500 $ 120,000 $ 122,500
400,000............ 195,000 235,000 240,000 245,000 250,000
600,000............ 295,000 355,000 362,500 370,000 377,500
800,000............ 395,000 475,000 485,000 495,000 505,000
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(1) Average salary for highest three consecutive years of service and average of
three highest annual bonuses during the last ten years of service.
(2) Years of continuous service for each executive officer named in the Summary
Compensation Table number 39 for Mr. Mitchell, 19 for Ms. Reed, 30 for Mr.
Stewart, 22 for Mr. LoBaugh and 12 for Mr. Todaro.
EMPLOYMENT AND EMPLOYMENT-RELATED AGREEMENTS
During 1996, SoCalGas or Pacific Enterprises entered into a Severance
Agreement and an Incentive/Retention Bonus Agreement with each of the executive
officers named under "Executive Compensation -- Summary Compensation Table." The
Severance Agreements memorialize past severance practices and provide benefits
in the event of actual or constructive termination of employment (other than for
cause, death or disability) that generally consist of a lump sum cash payment
equal to either 2.0 or 1.5 times annual base salary; continuation of welfare
benefits for 18 months; payment of deferred compensation at a preferred rate;
payout of accrued vacation benefits; and financial planning and outplacement
services.
The Incentive/Retention Bonus Agreements provide compensation for services
in connection with the business combination of Pacific Enterprises and Enova
Corporation and an incentive for executives to continue employment with the
combined companies. They provide for the payment of bonuses in varying amounts
not in excess of the executive's base salary plus incentive bonus (at target)
that are conditioned upon the completion of the business combination (or another
business
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combination transaction) and the transition of the executive to employment with
the combined companies for a period of six to twelve months, or actual or
constructive termination of employment other than for cause. The bonus payable
to Mitchell is also subject to certain deferral provisions.
Sempra Energy, the new holding company for Pacific Enterprises and Enova
Corporation that will result from the business combination of the two companies,
also during 1996 entered into employment agreements with Mr. Mitchell and
Richard D. Farman, President and Chief Operating Officer of Pacific Enterprises,
and two senior executives of Enova.
Mr. Mitchell's employment agreement will, upon becoming effective,
supercede his Severance Agreement with SoCalGas. It provides that he will serve
as President and principal executive officer of the businesses of Sempra Energy
and its subsidiaries that are economically regulated by the California Public
Utilities Commission. For these services, he will receive an annual base salary
of not less than $440,000; participate in annual and long-term incentive
compensation plans and awards providing him with an annual bonus opportunity at
least equal (as percentage of base salary) to his bonus opportunities in effect
prior to the completion of the business combination; and participate in
retirement and welfare benefit plans.
The employment agreement also provides that if Mr. Mitchell's employment is
terminated by Sempra Energy (other than for cause, death or disability) or by
Mr. Mitchell for good reason, he will receive twice (three times in the event of
termination following a change in control) his annual base salary and annual
incentive compensation (at the higher of the target bonus for the year of
termination or the average of the three highest bonuses in the preceding five
years); a pro rata portion of the target annual incentive compensation award for
the year or, if greater, the average of the three highest bonus awards for the
preceding five years; the present value of retirement benefits to which he would
have been entitled had his employment continued for an additional two years
(three years in the case of termination following a change of control) and had
increased his age by such additional years as of termination but not beyond
mandatory retirement age of 65; immediate vesting of all equity-based, long-term
incentive compensation awards; pro rata payment of cash-based, long-term
incentive awards at target performance; continued participation in welfare
benefit plans for two years; and payment of compensation previously deferred. In
certain circumstances, payments to Mr. Mitchell under the employment agreement
may be increased to offset excise taxes they may impose upon him.
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SHAREHOLDER PROPOSALS
Shareholders intending to bring any business before an Annual Meeting of
Shareholders of SoCalGas, including nominations of persons for election as
directors, must give written notice to the Secretary of the Gas Company 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 and
documents specified in SoCalGas' bylaws, a copy of which may be obtained by
writing to the Secretary of the Gas Company.
The period for notice of business to be brought by shareholders before the
1998 Annual Meeting of Shareholders has expired. The period for the receipt by
SoCalGas of notice of business to be brought by shareholders before the 1999
Annual Meeting of Shareholders will commence on January 5, 1999 and end on March
5, 1999.
INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected Deloitte & Touche LLP to serve as SoCalGas' independent auditors for
1998. Representatives of Deloitte & Touche LLP are expected to attend 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 1997 Annual Report to Shareholders (which includes its
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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