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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 2, 1996 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 18, 1996 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 27, 1996
[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 to shareholders in connection with its
Annual Meeting of Shareholders to be held on May 2, 1996. It is being mailed to
shareholders commencing March 27, 1996.
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 utility, providing gas service through 4.7 million meters to 535
cities and communities in a 23,000-square-mile service territory with a
population of 17 million. The Gas Company is a subsidiary of Pacific Enterprises
which owns approximately 96% of SoCalGas' voting shares.
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 VOTING RIGHTS
Shareholders who are present at the Annual Meeting in person or by proxy
will be entitled to one vote for each share of the Gas Company's voting shares
which they held of record at the close of business on March 18, 1996. At that
date, SoCalGas' voting shares consisted of 91,300,000 shares of Common Stock
(all of which were owned by Pacific Enterprises) and 3,863,043 shares of
Preferred Stock (of which 49,504 shares were owned by Pacific Enterprises).
1
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.
The Board of Directors does not know of any matter to be presented for
consideration at the Annual Meeting other than the election of directors. 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 1995, the Board of Directors held twelve meetings.
BOARD COMMITTEES
The Board of Directors maintains Audit, Compensation, Executive, Nominating
and Public Policy Committees. These committees are identical in membership and
comparable in function to identically-named committees maintained by Pacific
Enterprises' Board of Directors.
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 1995, the Committee held three meetings.
The COMPENSATION COMMITTEE 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
1995, 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 1995, the Committee
did not meet.
The NOMINATING COMMITTEE considers and makes recommendations regarding the
nominations of directors and the size and composition of the Board of Directors.
During 1995, the Committee held three meetings. The Committee will consider
shareholder suggestions for nominees for director. Suggestions
2
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 1995, 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
1995, the Committee acted by written consent on two occasions.
DIRECTOR COMPENSATION
Each director of SoCalGas is also a director of Pacific Enterprises. The
Boards of Directors of the two companies typically meet jointly as typically do
the identically-named committees of the two boards.
Directors who are also officers of SoCalGas or Pacific Enterprises are not
separately compensated for their services as directors or as members of
Committees. For their services as directors of both the Gas Company and Pacific
Enterprises, non-officer directors receive annual retainers of $25,000 and an
additional $3,000 for each two identically-named committees of the two boards
which they chair. Non-officer directors also receive $900 for each separate or
joint meeting of the boards or committees 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 sum of
the then current annual base retainer and the then current board meeting fee
multiplied by ten and adjusted upward for subsequent increases in the retainer
or meeting fee. The benefit continues for a maximum period equal to the
director's years of service as a non-officer director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of four members, all of whom are
non-officer directors. The members of the Committee are Wilford D. Godbold, Jr.,
Harold M. Messmer, Jr., Ignacio E. Lozano, Jr., and Richard J. Stegemeier.
During 1995, Robert Half International, Inc., of which Mr. Messmer is Chariman,
President and Chief Executive Officer, was paid $105,000 by Pacific Enterprises
for personnel recruitment services.
3
ELECTION OF DIRECTORS
At the Annual Meeting, ten 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 ten
director candidates receiving the highest number of affirmative votes of the
shares entitled to be voted will be elected as directors.
The names of the Board of Directors' ten nominees for election as directors
of SoCalGas and biographical information regarding each nominee are set forth
below. Each nominee is currently a director of both the Gas Company and Pacific
Enterprises and, 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, 55, is a realtor with Grubb & Ellis, a real estate sales company.
She is a Commissioner of the California Horse Racing Board and a Trustee of
Lewis & Clark College. For a number of years she has been involved in leadership
positions with various 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, 62, 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.; a member of the Board of Councilors of the
School of Public Administration, University of Southern California; and a member
of the Board of Trustees of Loyola Marymount University.
Committees: Audit, Nominating, and
Public Policy
4
RICHARD D. FARMAN,
PRESIDENT AND CHIEF OPERATING OFFICER OF PACIFIC ENTERPRISES.
Mr. Farman, 60, is Chairman of KCET Public Service Television and Co-Chair of
Progress L.A., Inc. He is a director and executive committee member of the Los
Angeles Area Chamber of Commerce, and director of Union Bank, Sentinel Group
Funds, Inc. and the National Business-Higher Education Forum. He is a past
chairman of the American Gas Association and the Natural Gas Council, and a
member of the Pacific Coast Gas Association and the National Petroleum Council.
Committees: Debt Financing,
Executive, and Public
Policy
WILFORD D. GODBOLD, JR.,
PRESIDENT, CHIEF EXECUTIVE OFFICER AND A DIRECTOR OF ZERO CORPORATION, AN
INTERNATIONAL MANUFACTURER OF ENCLOSURES AND COOLING EQUIPMENT FOR THE
ELECTRONICS MARKET, AND OF AIR CARGO AND AIR FREIGHT ENCLOSURES.
Mr. Godbold, 57, is a director of Santa Fe Pacific Pipelines, Inc.; the
California State Chamber of Commerce (past chairman); The Employer's Group (past
chairman); a member of the Board of Trustees of the 4 A's Foundation and The
Wellness Community; and a member of the Council on California Competitiveness.
He is 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, 69, is a director of BankAmerica Corporation, Bank of America NT&SA,
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,
Executive, and Public
Policy
HAROLD M. MESSMER, JR.,
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF ROBERT HALF INTERNATIONAL
INC., A PERSONNEL SERVICE FIRM SPECIALIZING IN THE ACCOUNTING, FINANCIAL,
BANKING AND INFORMATION SYSTEMS FIELDS.
Mr. Messmer, 50, is a director of Airborne Freight Corporation, First Interstate
Bancorp, Health Care Property Investors, Inc., and Spieker Properties, Inc. He
is an active member of the Young Presidents' Organization and serves on the
board of several civic and educational groups, including the San Francisco Bay
Area Council and the San Francisco Boys and Girls Club.
Committees: Audit, Compensation,
and Nominating
5
PAUL A. MILLER,
RETIRED CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF PACIFIC
ENTERPRISES; CHAIRMAN OF THE EXECUTIVE COMMITTEE OF PACIFIC ENTERPRISES.
Mr. Miller, 71, is a director of Newhall Management Corporation, a director
emeritus of Wells Fargo & Company, Wells Fargo Bank, N.A., and a trustee of
Mutual Life Insurance Company of New York. He is a life trustee of the
University of Southern California.
Committee: Executive
RICHARD J. STEGEMEIER,
CHAIRMAN EMERITUS OF THE BOARD OF UNOCAL CORPORATION, AN INTEGRATED PETROLEUM
COMPANY.
Mr. Stegemeier, 67, became a director of SoCalGas and Pacific Enterprises in
1995. He is also a director of Unocal Corporation, First Interstate Bancorp,
Foundation Health Corporation, Halliburton Company, Northrop Grumman Corporation
and Outboard Marine Corporation.
Committees: Audit, Compensation,
and Nominating
DIANA L. WALKER,
PARTNER IN THE LOS ANGELES BASED LAW FIRM OF O'MELVENY & MYERS.
Mrs. Walker, 54, is a director of United Way of Greater Los Angeles and a former
trustee of Marlborough School. She has served various professional
organizations. O'Melveny & Myers, of whom Mrs. Walker is a partner, provides
legal services to the Gas Company and Pacific Enterprises.
Committees: Audit, Nominating, and
Public Policy
WILLIS B. WOOD, JR.,
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF PACIFIC ENTERPRISES.
Mr. Wood, 61, is a director of Great Western Financial Corporation and Great
Western Bank. He is the Chairman of the California Medical Center Foundation; a
director of the California State Chamber of Commerce, the Los Angeles World
Affairs Council and the Automobile Club of Southern California; Vice Chairman of
the Board of Trustees of Harvey Mudd College, a trustee of the University of
Southern California and the Southwest Museum; and a member of the California
Business Roundtable.
Committees: Debt Financing and
Executive
6
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 18, 1996 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..................................................... 5,429
Herbert L. Carter (#1)............................................. 852
Richard D. Farman (#2)............................................. 152,745
Wilford D. Godbold, Jr............................................. 2,000
Leslie E. LoBaugh, Jr. (#2)........................................ 36,237
Ignacio E. Lozano, Jr. (#3)........................................ 1,373
Harold M. Messmer, Jr.............................................. 1,000
Paul A. Miller..................................................... 11,386
Warren I. Mitchell (#2)............................................ 60,420
Roy M. Rawlings (#2)............................................... 29,452
Debra L. Reed (#2)................................................. 17,690
Richard J. Stegemeier.............................................. 1,000
Lee M. Stewart (#2)................................................ 21,015
Diana L. Walker.................................................... 512
Willis B. Wood, Jr. (#2)........................................... 262,286
All Directors and Executive Officers as a group (21 persons)(#2)... 707,333
- ----------
#1 Includes 39 shares held as guardian.
#2 Includes shares issuable upon exercise of employee stock options that are
exercisable prior to May 31, 1996. Such option shares total 134,666 shares
for Mr. Farman, 33,300 shares for Mr. LoBaugh, 56,100 shares for Mr.
Mitchell, 23,000 shares for Mr. Rawlings, 14,100 shares for Ms. Reed, 15,900
shares for Mr. Stewart, 234,000 shares for Mr. Wood and 593,266 shares for
all executive officers as a group.
#3 Includes 500 shares held by spouse.
The shares of Pacific Enterprises Common Stock owned by all directors and
executive officers as a group represent less than 1% of Pacific Enterprises'
voting shares.
7
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 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 gas and electric utilities and gas transmission companies
throughout the United States, 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, a nationally recognized consulting firm specializing in
executive compensation issues. Hewitt Associates assists 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, Hewitt Associates prepares and reviews 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 Compensation Committee has adopted a policy that overall compensation
(salary, targeted annual bonuses and the grant-date estimated value of annual
employee stock option awards) for executive officers generally should
approximate the mid-point of overall compensation for similar levels of
responsibility at large energy utilities and gas transmission companies. To
align compensation with performance, the Committee has also adopted programs
which afford the flexibility to recognize exceptional results through
incentive-based compensation.
8
The Compensation Committee believes its policies appropriately align the
financial interests of executives with those of shareholders. All elements of
executive compensation are at levels comparable to other large energy utilities
and gas transmission companies for comparable levels of performance in 1995. In
addition, 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 from about 40% to 60% of total annual
compensation.
COMPENSATION AWARDS
SALARIES
Warren I. Mitchell, President, received a salary increase 5.3% for 1995.
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 at the midpoint for bonuses for comparable
levels of responsibility and performance at other large energy utilities and gas
transmission companies. Target award levels for 1995 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 60% to 38% of base salary.
Continued superior performance during 1995 resulted in SoCalGas achieving a
return on equity of 13.9%. This return is substantially above the 12% 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 1995.
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. 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.
Commencing in 1995, the Compensation Committee also began granting stock
options 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
9
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 three-year cash flow 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) will depend upon the
extent to which this 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 at the approximate midpoint for option and
other long-term incentive awards provided by large energy utilities and gas
transmission companies for comparable levels of responsibility. Since the
Compensation Committee uses only stock options to provide long-term incentive
compensation, option awards are typically larger than those at otherwise
comparable companies that provide additional forms of long-term compensation.
During 1995, Mr. Mitchell was awarded options having a grant-date estimated
value of $173,070 (27,000 shares).
COMPENSATION COMMITTEE
Harold M. Messmer, Jr., Chairman
Wilford D. Godbold, Jr.
Ignacio E. Lozano, Jr.
Richard J. Stegemeier
10
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 1995 $306,000 $180,000 $ -0- 27,000 $ -0- $ 5,836
President 1994 $291,000 $171,000 $ -0- 25,000 $ -0- $ 6,803
1993 $271,000 $154,200 $ -0- 32,000 $ -0- $ 8,243
Debra L. Reed 1995 $221,000 $112,875 $ -0- 15,000 $ -0- $ 5,269
Senior Vice President 1994 $183,600 $ 67,000 $ -0- 7,000 $ -0- $ 5,139
1993 $177,600 $ 60,000 $ -0- 4,500 $ -0- $ 5,800
Leslie E. LoBaugh, Jr. 1995 $251,000 $ 81,300 $ -0- 7,500 $ -0- $ 7,236
Vice President and 1994 $251,000 $110,250 $ -0- 10,000 $ -0- $ 7,698
General Counsel 1993 $241,000 $141,000 $ -0- 24,000 $ -0- $ 3,863
Lee M. Stewart 1995 $211,000 $107,625 $ -0- 15,000 $ -0- $ 4,845
Senior Vice President 1994 $165,300 $ 51,000 $ -0- 7,000 $ -0- $ 5,075
1993 $156,300 $ 50,000 $ -0- 4,500 $ -0- $ 5,090
Roy M. Rawlings 1995 $181,800 $ 65,900 $ -0- 7,500 $ -0- $ 4,453
Vice President 1994 $173,800 $ 59,000 $ -0- 7,000 $ -0- $ 3,745
1993 $166,800 $ 56,000 $ -0- 4,500 $ -0- $ 4,737
- ---------
(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 1995 were, respectively, $271, $1,065 and $4,500 for Mr.
Mitchell; $-0-, $769 and $4,500 for Ms. Reed; $3,263, $858 and $3,115 for
Mr. LoBaugh; $-0-, $734 and $4,111 for Mr. Stewart; and $61, $633 and $3,759
for Mr. Rawlings.
(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, 1995, he would have
received benefits which would have exceeded his supplemental pension
benefits by $663,100.
11
STOCK OPTIONS
Pacific Enterprises maintains a Stock Option Plans 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 1995 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 1995 PRICE DATE PRESENT VALUE(2)
- ---------------------------------------- ------------- ----------------- ------------ ---------- ----------------
Warren I. Mitchell...................... 27,000 4.6 % $ 24 1/4 3/6/05 $ 173,070
Debra L. Reed........................... 15,000 2.6 % $ 24 1/4 3/6/05 $ 96,150
Leslie E. LoBaugh, Jr................... 7,500 1.3 % $ 24 1/4 3/6/05 $ 48,075
Lee M. Stewart.......................... 15,000 2.6 % $ 24 1/4 3/6/05 $ 96,150
Roy M. Rawlings......................... 7,500 1.3 % $ 24 1/4 3/6/05 $ 48,075
- ---------
(1) All options are to purchase shares of Pacific Enterprises Common Stock; were
granted with performance based dividend equivalents (see "Report of the
Compensation Committee -- Stock Options") were granted at an exercise price
of 100% of the fair market value of the option shares on the date of grant;
are for a ten-year term, subject to earlier expiration upon termination of
employment; and are 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. Upon a change in control in
Pacific Enterprises, the time periods relating to the exercise of stock
options will be accelerated and, upon the request of the optionee, Pacific
Enterprises will purchase the option for an amount in cash equal to the
amount which could be realized upon the exercise thereof.
(2) Estimated present value is based on the Black Scholes Model and consists of
an option value of $4.13 and a dividend equivalent value of $2.28. The
following assumptions were used in the Black Scholes Model: stock price
volatility of 25.44%, a risk-free rate of return of 7.2%, and an annual
dividend yield of 5.28%. 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 15.54% and 9.08% respectively. The dividend equivalent value is
based on $1.28 annual dividend (the rate in effect on the grant date) and
the volatility of the cash
12
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
grant to the exercise date.
The following table sets forth for each executive officer named in the under
"Executive Compensation -- Summary Compensation Table" information regarding
stock options to purchase shares of Pacific Enterprises Common Stock exercised
in 1995 and stock options outstanding at December 31, 1995.
OPTION/SARS EXERCISES AND OUTSTANDING OPTION/SAR VALUES
NUMBER OF
OPTIONS/SARS PACIFIC ENTERPRISES VALUE OF UNEXERC ISED
EXERC ISED IN 1995 UNEXERC ISED OPTIONS IN-THE-MONEY OPTIONS/SARS
------------------- AT DECEMBER 31, 1995(1) AT DECEMBER 31, 1995
SHARES VALUE ----------------------------- -----------------------------
ACQUIRED REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ------------ -------------- ------------ --------------
(OPTION SHARES)
Warren I. Mitchell............ 15,000 $ 78,125 35,100 78,200 $84,800 $545,000
Debra L. Reed................. 6,800 $ 23,675 6,800 24,200 $-0- $118,388
Leslie E. LoBaugh, Jr......... 29,600 $137,950 16,000 43,900 $-0- $287,400
Lee M. Stewart................ 3,200 $ 18,175 8,600 24,200 $10,800 $129,188
Roy M. Rawlings............... -0- $ -0- 18,200 16,700 $32,175 $120,563
- ---------
(1) The exercise price of outstanding options ranges from $19 1/4 to $50 7/8.
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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
1,000,000 ................ 495,000 595,000 607,500 620,000 632,500
1,200,000 ................ 595,000 715,000 730,000 745,000 760,000
- ---------
(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 37 for Mr. Mitchell, 17 for Ms. Reed, 20 for Mr.
LoBaugh, 28 for Mr. Stewart and 22 for Mr. Rawlings.
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.
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The period for notice of business to be brought by shareholders before the
1996 Annual Meeting of Shareholders has expired. The period for the receipt by
SoCalGas of notice of business to be brought by shareholders before the 1997
Annual Meeting of Shareholders will commence on January 2, 1997 and end on March
3, 1997.
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
1996. 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 1995 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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