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Enova Corporation
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Enova Corporation
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
APRIL 23, 1996
Dear Shareholder:
You are invited to attend the 1996 Annual Meeting of Enova
Corporation shareholders at 11:00 a.m. on Tuesday, April 23, 1996, at
the San Diego Convention Center, 111 West Harbor Drive, Ballroom
Sections A and B (upper level), San Diego, California.
Refreshments will be served before the meeting.
During the meeting, the business of Enova Corporation will be
reviewed. A summary of the meeting will be included in the Spring
Investors Report, which will be mailed to you in May.
Whether or not you plan to attend the meeting, please fill out,
sign and return your proxy card right away. Your vote is very important.
Sincerely yours,
Thomas A. Page
Chairman
Map and Directions to 1996 Annual Meeting
Notice of Annual Meeting of Shareholders of Enova Corporation
Enova Corporation
P.O. Box 129400, 101 Ash Street
San Diego, California 92112-9400
Tuesday, April 23, 1996
The annual meeting of shareholders of Enova Corporation will be held on
Tuesday, April 23, 1996, at 11:00 a.m. at the San Diego Convention
Center, 111 West Harbor Drive, Ballroom Sections A and B (upper level),
San Diego, California, to:
1. Elect the four directors constituting Class I of Enova
Corporation's board of directors to serve a three-year term-the names of
the four nominees intended to be presented for election are Richard C.
Atkinson, Stephen L. Baum, Ann Burr and Richard A. Collato; and
2. Consider and act upon two shareholder's proposals, if properly
presented at the meeting; and
3. Act upon such other business as may properly come before the
meeting.
The Enova Corporation board of directors has fixed the close of business
on March 1, 1996 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting and any
adjournment or postponement thereof. It is anticipated that the proxy
material will be mailed to shareholders on or about the date of this
notice.
San Diego, California
March 11, 1996
By order of the Board of Directors
Thomas A. Page
Chairman
YOUR VOTE IS IMPORTANT! Please sign and return your enclosed proxy
promptly, even if you expect to attend the meeting. A business reply
envelope is enclosed for your convenience in returning the proxy. It
requires no postage if mailed within the United States. Ample free
parking will be available at the Convention Center.
Notice of Annual Meeting of Shareholders
and Proxy Statement
Tuesday, April 23, 1996
Contents Page
Proxy Statement 1
Introduction 1
Meeting Date, Voting, Proxies 1
Item No. 1-Election of Directors 2
Nominees 2
Board Meetings/Committees 5
Security Ownership of Management and Certain Beneficial Holders 6
Executive Compensation and Transactions with Management
and Others 8
Item Nos. 2 and 3-Shareholder Proposals 20
Relationship with Independent Public Accountant 22
Annual Report and Availability of Form 10-K 22
Shareholder Proposals for 1997 Annual Meeting 22
Proxy Solicitations 22
Other Business to Be Brought Before the Annual Meeting 22
Enova Corporation
Proxy Statement
Introduction
This Proxy Statement is provided to the shareholders of Enova
Corporation (Enova) in connection with its 1996 annual meeting of
shareholders, together with any adjournments or postponements thereof
(the Annual Meeting). The Annual Meeting is scheduled to be held on
Tuesday, April 23, 1996 at 11:00 a.m. at the San Diego Convention
Center, 111 West Harbor Drive, Ballroom Sections A and B (upper level),
San Diego, California.
As a result of a parent company formation merger (the Merger) which
was approved by the San Diego Gas & Electric Company (SDG&E)
shareholders at their 1995 Annual Meeting (held on April 25, 1995) and
which became effective on January 1, 1996, the holders of SDG&E Common
Stock immediately prior to the effectiveness of the Merger had their
shares of SDG&E Common Stock converted, on a share-for-share basis, into
shares of Enova Common Stock. Enova holds 100% of the issued and
outstanding shares of SDG&E Common Stock and effectively controls SDG&E
as a result.
This Proxy Statement and the enclosed proxy were first mailed on or
about March 11, 1996 to shareholders entitled to vote at the Annual
Meeting.
Mail to Enova should be addressed to Shareholder Services, P.O. Box
129400, San Diego, California 92112-9400.
Meeting Date, Voting, Proxies
The board of directors of Enova is soliciting proxies for use at
the Annual Meeting, and a form of proxy is being provided with this
Proxy Statement. Any proxy may be revoked at any time before it is
exercised by filing a written notice of revocation with Enova or by
presenting an executed proxy bearing a later date at or before the
Annual Meeting. A shareholder also may revoke a proxy by attending the
Annual Meeting and voting in person. However, attendance at the Annual
Meeting will not in and of itself constitute revocation of a proxy. All
shares represented by valid proxies will be voted as specified in this
Proxy Statement.
The Enova board of directors has fixed the close of business on
March 1, 1996 as the record date (the Record Date) for the determination
of shareholders entitled to notice of and to vote at the Annual Meeting.
At the close of business on the Record Date there were 116,563,375
shares of Enova Common Stock, without par value outstanding and entitled
to vote.
Each share of Enova Common Stock is entitled to one vote on each
matter considered by Enova shareholders.
Shares represented by properly executed proxies received by Enova
prior to or at the Annual Meeting will be voted at the Annual Meeting in
accordance with the instructions specified in such proxies. If no
instructions are specified in a proxy, shares represented thereby will
be voted (i) "FOR" the election of the nominees for directors of Enova,
unless authority to vote is withheld as provided in the proxy, and (ii)
"AGAINST" the shareholder proposals. In the event that any other matters
properly come before the Annual Meeting, the holders of proxies
solicited by the Enova board of directors will vote on those matters in
accordance with their judgment, and discretionary authority to do so is
included in the enclosed proxy.
Shares represented by proxies in which authority to vote is
"WITHHELD" with respect to any proposal or nominee will be counted in
the number of votes cast, but will not be counted as votes for or
against the proposal or nominee. If a broker or other nominee holding
shares for a beneficial owner does not vote on a proposal or nominee,
the shares will not be counted in the number of votes cast.
1
The Enova board recommends the election of its nominees for
directors.
The Enova board recommends that the Enova shareholders vote AGAINST
adoption of the shareholder proposals regarding instituting criteria for
granting officer options and bonuses and the issuance of stock options
and/or stock derivatives.
ITEM NO. 1 - ELECTION OF DIRECTORS OF ENOVA
There are presently eleven members on the Enova board of directors.
Enova's Restated Articles of Incorporation divide the board into three
approximately equal classes of directors serving staggered three-year
terms, with one class of directors to be elected at each annual meeting
of the shareholders of Enova. Four directors are to be elected at the
Enova Annual Meeting (representing the Class I Directors). The Enova
board has nominated the four current members of Class I of the Enova
board to be reelected. Directors elected to Class I of the Enova board
will serve a three-year term expiring in 1999.
Should any of the nominees for the Enova board become unavailable
(an event which is not anticipated), and the size of the board is not
reduced accordingly, proxies will be voted for the remainder of the
listed nominees and for such other nominees as may be designated by the
Enova board as replacements for those who become unavailable. The
nominees for the Enova board receiving the highest number of affirmative
votes of the shares entitled to vote for such nominees shall be elected
as directors. Votes withheld from any nominee are counted for purposes
of determining the presence or absence of a quorum, but have no other
legal effect under California law.
The Enova board's nominees for reelection at the Enova Annual
Meeting as Class I Directors (with terms expiring in 1999) are R. C.
Atkinson, S. L. Baum, A. Burr and R. A. Collato. The Enova board Class
II Directors (with terms expiring in 1997) are D. W. Derbes, C. T.
Fitzgerald (who has indicated that she intends to resign following the
Annual Meeting) and R. H. Goldsmith. The Enova board Class III Directors
(with terms expiring in 1998) are W. D. Jones, R. R. Ocampo, T. A. Page
and T. C. Stickel.
A brief biography of each nominee for election as a director, and
each continuing director, of Enova is presented below.
Nominees for election to Enova Board (Class I)
Richard C. Atkinson, Ph.D.
[picture]
Dr. Atkinson is president of the University of California. He served as
the chancellor of the University of California at San Diego from 1980 to
1995. He is a director of Qualcomm, Inc. Before joining UCSD, he served
as director of the National Science Foundation. He is a former long-term
member of the faculty at Stanford University.
Age 66
Director of Enova (Class I) since 1994; Director of SDG&E since 1992;
Member of the Audit (Chairman) and Executive Committees of Enova and
SDG&E.
Stephen L. Baum
[picture]
Mr. Baum has been the president and chief executive officer of Enova and
a member of the Enova and SDG&E boards since January 1, 1996. He joined
SDG&E as vice president and general counsel in 1985, and became senior
vice president and general counsel in 1987. Mr. Baum was appointed as an
executive vice president in January 1993. He is a director of Pacific
Diversified Capital Company (PDC).
Age 55
Director of Enova (Class I) and SDG&E since January 1996.
2
Ann Burr
[picture]
Ms. Burr is president of the Rochester, N. Y. Division of Time Warner
Communications. She was formerly president of the San Diego Division of
Time Warner Cable, which includes Southwestern Cable TV and American
Cablevision of Coronado.
Age 49
Director of Enova (Class I) since 1994; Director of SDG&E since 1993;
Member of the Audit and Nominating Committees of Enova and SDG&E.
Richard A. Collato
[picture]
Mr. Collato has been president and chief executive officer of the YMCA
of San Diego County since January 1981. He is a former director of Y-
Mutual Ltd., a reinsurance company, and is a trustee of Springfield
College and a director of the Armed Services YMCA of the USA.
Age 52
Director of Enova (Class I) since 1994; Director of SDG&E since 1993;
Member of the Finance and Nominating Committees of Enova and SDG&E.
Continuing members of Enova Board (Class II)
Daniel W. Derbes
[picture]
Mr. Derbes is president of Signal Ventures. From November 1985 until
December 31, 1988, he was president of Allied-Signal International Inc.
and executive vice president of Allied-Signal Inc., a multi-national
advanced technologies company. He is a director of Oak Industries, Inc.,
WD-40 Co. and PDC. He also is the chairman of the Board of Trustees of
the University of San Diego.
Age 65
Director of Enova (Class II) since 1994; Director of SDG&E since 1983;
Member of the Finance (Chairman), Executive, Executive Compensation and
Technology Committees of Enova and SDG&E.
Robert H. Goldsmith
[picture]
Mr. Goldsmith is a management consultant. He is a former chairman,
president and chief executive officer of Exten Industries, Inc. and a
former chairman and chief executive officer of Rohr, Inc. He is also a
former vice chairman and chief operating officer of Precision Forge Co.,
senior vice president of Pneumo Corporation's Aerospace and Industrial
Group and vice president and general manager, commercial (aircraft)
engine projects division and the gas turbine division of General
Electric Company.
Age 65
Director of Enova (Class II) since 1994; Director of SDG&E since 1992;
Member of the Executive Compensation (Chairman), Technology (Chairman)
and Finance Committees of Enova and SDG&E.
3
Continuing members of Enova Board (Class III)
William D. Jones
[picture]
Mr. Jones is president, chief executive officer and a director of
CityLink Investment Corporation. From 1989 to 1993, he served as general
manager/senior asset manager and investment manager with certain real
estate subsidiaries of The Prudential. Prior to joining The Prudential,
Mr. Jones served as a San Diego City Council member from 1982 to 1987.
He is a director of The Price Real Estate Investment Trust and a member
of the board of trustees of the University of San Diego.
Age 40
Director of Enova (Class III) and SDG&E since 1994; Member of the
Finance and Nominating Committees of Enova and SDG&E.
Ralph R. Ocampo, M.D.
[picture]
Dr. Ocampo is a San Diego physician and surgeon.
Age 64
Director of Enova (Class III) since 1994; Director of SDG&E since 1983;
Member of the Finance and Nominating Committees of Enova and SDG&E.
Thomas A. Page
[picture]
Mr. Page has been chairman of Enova since December 1994 and chairman of
SDG&E since February 1983. Mr. Page was the president and chief
executive officer of Enova from December 1994 until January 1, 1996. He
was also the chief executive officer of SDG&E from February 1983 to
January 1, 1996, and the president of SDG&E from February 1983 to
December 1991 and from January 1994 to January 1, 1996. He is a director
of Burnham Pacific Properties and is the chairman and a director of PDC.
Age 62
Director of Enova (Class III) since 1994; Director of SDG&E since 1979;
Chairman of the Executive and Nominating Committees of Enova and SDG&E.
Thomas C. Stickel
[picture]
Mr. Stickel is the chairman and founder of American Partners Capital
Group, Inc. He previously was chairman, chief executive officer and
president of TCS Enterprises, Inc. and the Bank of Southern California,
both of which he founded. Mr. Stickel is a director of Catellus
Development Corporation, Onyx Corporation, O'Connor R.P.T., Scripps
International, Inc., Clair Burgener Foundation and the Del Mar
Thoroughbred Club.
Age 46
Director of Enova (Class III) and SDG&E since 1994; Member of the Audit,
Executive Compensation and Technology Committees of Enova and SDG&E.
4
Footnotes
On March 4, 1993, Dr. Ocampo petitioned for protection under
Chapter 11 of the Federal Bankruptcy Code. This filing was made in
connection with certain legal proceedings involving a limited
partnership in which Dr. Ocampo is a general partner. Dr. Ocampo's
Chapter 11 Plan of Reorganization was approved by the bankruptcy court
on April 12, 1995. All payments required by the plan have been made and
the case is now closed.
Board Meetings/Committees
During 1995, the Enova Audit, Executive Compensation and Nominating
Committees did not meet (the Merger which caused Enova to become the
parent company of SDG&E did not become effective until January 1, 1996,
and Enova had no substantive activities prior to that time except to
prepare for the Merger and the resulting parent company structure).
During 1995, the SDG&E Audit and Executive Compensation Committees each
met two times while the Nominating Committee did not meet. The Enova
board met three times (to consider the Merger and matters relating
thereto), while the SDG&E board met 10 times.
During 1995, all directors attended 75% or more of the aggregate
total meetings of the Enova and SDG&E boards and committees on which
they served with the exception of Ms. Burr, who attended 60% of such
meetings.
In addition to Executive, Finance and Technology Committees, the
committees of each of the Enova and SDG&E boards are the Audit,
Executive Compensation and Nominating Committees. The major functions of
each of the Audit, Executive Compensation and Nominating Committees are
described briefly below. The composition of each committee is the same
for Enova and SDG&E.
Audit Committees
In addition to recommending an independent auditor for each ensuing
year, these committees review (1) the overall plan of the annual
independent audits, (2) financial statements, (3) audit results, (4) the
scope of internal audit procedures and (5) the auditors' evaluation of
internal controls. These committees are composed exclusively of
directors who are not salaried employees of Enova or SDG&E.
Executive Compensation Committees
These committees review the salaries and other forms of
compensation of executives of Enova and SDG&E and make compensation
recommendations to the full board of directors. These committees are
composed exclusively of directors who are not salaried employees of
Enova or SDG&E.
Nominating Committees
In addition to considering and recommending nominees to the Enova
and SDG&E boards, these Committees recommend (1) criteria for board and
committee composition and membership and (2) directors' compensation.
These committees consider any nominees recommended by shareholders by
letter to the respective board. These committees are composed of the
chairman of each entity and at least three directors who are not
salaried employees of Enova or SDG&E.
5
Security Ownership of Management and Certain Beneficial Holders
The following table presents certain information as of January 31,
1996, except as otherwise noted, regarding the equity securities of
Enova beneficially owned by (i) the directors, (ii) the executive
officers named in the "Summary Compensation Table" below under
"Executive Compensation and Transactions with Management and Others,"
(iii) the directors and executive officers of Enova and SDG&E as a
group, and (iv) the only beneficial owners known to Enova to hold more
than 5% of any class of the voting securities of Enova.
Amount and Nature
of Beneficial
Ownership Percent of
Beneficial Owner (Shares)(A) Class
---------------- ------------------ -----------
Directors and Named Executive Officers:
R. C. Atkinson 1,315 *
A. Burr 1,300 *
R. A. Collato 2,398 *
D. W. Derbes 3,626 *
C. T. Fitzgerald 3,015 *
R. H. Goldsmith 1,486 *
W. D. Jones 350 *
R. R. Ocampo 13,443 *
T. C. Stickel 1,003** *
T. A. Page 184,641 *
S. L. Baum 44,421 *
D. E. Felsinger 35,981 *
G. D. Cotton 29,980 *
E. A. Guiles 14,111 *
All Directors and Executive Officers of
Enova and SDG&E as a group
(20 persons) 405,034(B) *
Others:
First Interstate Bank of California 18,251,955(C) 15.66%
Trust Securities, W11-4
707 Wilshire Boulevard
Los Angeles, CA 90017
Franklin Resources, Inc. 7,267,210(D) 6.23%
777 Mariners Island Boulevard
San Mateo, CA 94404
Union Bank Trust Department 9,368,962(E) 8.04%
530 B Street
San Diego, CA 92101
* Less than 1% of the shares outstanding.
** Information as of February 6, 1996.
6
(A) All shares are beneficially owned by the directors and named
officers, with sole voting and investment power, except for the
following:
- Dr. Atkinson: 1,000 shares held jointly with spouse/children of
same household; 315 shares credited to a Common Stock Investment Plan
(CSIP) account with the shareholders' agent.
- Mr. Collato: 1,909 shares held jointly with spouse/children of
same household; 489 shares credited to a CSIP account with the
shareholders' agent.
- Mr. Derbes: 2,926 shares credited to a CSIP account with the
shareholders' agent.
- Ms. Fitzgerald: 3,015 shares credited to a CSIP account with the
shareholders' agent.
- Mr. Goldsmith: 486 shares credited to a CSIP account with the
shareholders' agent.
- Dr. Ocampo: 13,128 shares held jointly with spouse/children of
same household; 15 shares credited to a CSIP account with the
shareholders' agent.
- Mr. Page: 89,165 shares held jointly with or separately by
spouse/children of same household; 284 shares credited to a CSIP account
with the shareholders' agent; 52,840 shares credited to a Savings Plan
account with the trustee; 42,635 shares of restricted stock purchased
under the 1986 Long-Term Incentive Plan (LTIP) as to which vesting has
not occurred.
- Mr. Baum: 23,812 shares held jointly with or separately by
spouse/children of same household; 2,414 shares credited to a Savings
Plan account with the trustee; 18,195 shares of restricted stock
purchased under the LTIP as to which vesting has not occurred.
- Mr. Felsinger:14,030 shares held jointly with or separately by
spouse/children of same household; 5,756 shares credited to a Savings
Plan account with the trustee; 16,195 shares of restricted stock
purchased under the LTIP as to which vesting has not occurred.
- Mr. Cotton: 7,896 shares credited to a Savings Plan account with
the trustee; 8,735 shares of restricted stock purchased under the LTIP
as to which vesting has not occurred.
- Mr. Guiles: 2,267 shares credited to a Savings Plan account with
the trustee; 7,985 shares of restricted stock purchased under the LTIP
as to which vesting has not occurred.
(B) Excludes 17,280 shares delivered to Enova in January, 1996, to
satisfy certain withholding tax obligations relating to the vesting of
shares pursuant to the LTIP as described below under "1986 Long-Term
Incentive Plan." All shares beneficially owned by the directors and
officers, with sole voting and investment power, except for the
following:
- 138,652 shares held jointly with or separately by spouses or
children living in the same household.
- 87,100 shares credited to the officers' Savings Plan accounts with
the trustee.
- 9,058 shares credited to CSIP accounts with the shareholders'
agent.
- 126,750 shares of restricted stock purchased by officers in 1992,
1993, 1994 and 1995 under the LTIP, as to which restrictions for vesting
of shares have not yet been satisfied.
(C) 12,797,501 shares are held by the bank in its capacity as
shareholders' agent for the CSIP. The bank holds 5,454,454 shares of
Enova Common Stock as trustee for various other trusts.
(D) According to a Schedule 13G filed February 12, 1996, the
indicated shares are owned by Franklin Resources, Inc., its subsidiaries
and investment companies advised by such subsidiaries.
(E) 9,321,687 shares are held by the bank in its capacity as trustee
under the Savings Plan. The trustee has discretion under the Savings
Plan to vote the shares in the absence of voting directions by the
Savings Plan participants. The agent holds 47,275 shares of Enova Common
Stock as trustee for various other trusts.
7
Section 16 Reporting
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Enova's directors and officers, and persons who own more than
10% of a registered class of Enova's respective equity securities, to
file reports of ownership and changes in ownership of such equity
securities with the Securities and Exchange Commission (the SEC) and the
exchange (i.e., the New York or American Stock Exchanges) upon which
such securities are traded. Directors, officers and greater than 10%
shareholders are required by SEC regulations to furnish Enova with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to
the respective companies Enova believes that from January 1, 1995
through December 31, 1995 its directors, officers and greater than 10%
beneficial owners complied with all Section 16(a) filing requirements
except for Mr. Stickel, who inadvertently neglected to report the
ownership of 100 shares of SDG&E Common Stock held by an affiliated
charitable foundation on his original Section 16(a) form at the time he
became a director.
Executive Compensation and Transactions with Management and Others
The following table sets forth information as to all compensation
awarded, paid, earned or distributed by Enova and/or SDG&E during the
last three fiscal years for services in all capacities to or for the
benefit of the chief executive officer and the four highest compensated
executive officers whose earned compensation exceeded $100,000. Since
Enova paid no amounts to any executives for services as such in 1995,
the following table presents information solely for SDG&E. Moreover,
Enova presently has no salaried executives; rather, certain Policies and
Guidelines for Affiliated Company Transactions, which are mandated by
the California Public Utilities Commission and have been adopted by
SDG&E and Enova, provide that SDG&E will be compensated by Enova for
personnel and resources which provide services to Enova, including
executive resources.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
--------------------------------------- ------------
Other Annual LTIP All Other
Salary Bonus Compensation Payouts Compensation
Name and Principal Position Year (A) (B) (C) (D)(E) (F)
- --------------------------- ---- -------- -------- ------------ ------------ ------------
T. A. Page (G) 1995 $560,577 $404,000 $12,571 $549,205 $104,908
Chairman, Chief Executive 1994 528,615 253,000 11,228 76,147 60,078
Officer and President Enova 1993 509,203 337,000 9,910 513,777 55,161
and SDG&E
S. L. Baum (G) 1995 264,423 191,000 1,426 173,661 32,874
Executive Vice President 1994 244,999 90,000 1,278 23,969 18,606
Enova and SDG&E 1993 244,307 129,000 1,107 162,006 17,695
D. E. Felsinger (G) 1995 242,885 169,000 2,387 126,580 18,203
Executive Vice President 1994 228,076 81,000 2,137 13,644 14,103
Enova and SDG&E 1993 216,970 111,000 1,881 96,401 10,755
G. D. Cotton 1995 193,461 112,000 383 117,122 19,641
Sr. Vice President 1994 184,999 68,000 340 16,778 14,862
SDG&E 1993 184,722 98,000 302 105,076 14,160
E. A. Guiles 1995 190,773 109,000 - 91,127 14,124
Sr. Vice President 1994 172,692 64,000 - 10,325 7,922
SDG&E 1993 165,577 87,000 - 72,545 7,473
8
(A) Amounts shown reflect compensation paid and amounts deferred.
All officers may elect to defer bonuses and base salary for periods of
time they select. Restricted stock awarded in 1995 pursuant to the LTIP
is reported below in the Long-Term Incentive Plan table.
(B) Bonuses are paid pursuant to the Executive Incentive
Compensation Plan (EICP) as described under "Report of the Executive
Compensation Committee" below.
(C) Other annual compensation includes any deferred compensation
interest above 120% of the applicable federal rate.
(D) LTIP payouts relate to restrictions lifted on restricted stock
awarded pursuant to the LTIP. Payouts are based on Enova's performance
(and the performance of SDG&E for periods prior to January 1, 1996, the
effective date of the Merger), as described below under "1986 Long-Term
Incentive Plan."
(E) The aggregate holdings/value of restricted stock held on
December 31, 1995, by the individuals listed in this table, are: T. A.
Page, 58,420 shares/$1,241,425; S. L. Baum, 23,185 shares/$492,681; D.
E. Felsinger, 19,920 shares/$423,300; G. D. Cotton, 12,095
shares/$257,019; and E. A. Guiles, 10,660 shares/$226,525. The value of
the aggregate restricted stock holdings at December 31, 1995 is
determined by multiplying $23.75, the fair market value of SDG&E's
Common Stock on December 31, 1995, less the purchase price of $2.50 per
share, by the number of shares held. These December 31, 1995 share
amounts include the share amounts shown in "Security Ownership of
Management and Certain Beneficial Holders" above. All share amounts are
in shares of Enova Common Stock as shares of SDG&E Common Stock held on
December 31, 1995 converted, on a share-for-share basis, to Enova Common
Stock on January 1, 1996 pursuant to the Merger. In certain instances,
the January 31, 1996 amounts are less due to the vesting of certain
shares in January 1996. Regular quarterly dividends have been paid on
restricted stock held by these individuals, when declared by SDG&E, and
from and after the date of the Merger quarterly dividends will continue
to be paid on such restricted stock when and if declared by Enova.
(F) All other compensation includes a cash amount paid to each
officer designated solely for the purpose of paying (i) the premium for
an insurance policy providing death benefits equal to two times the sum
of annual base pay plus the average of such officer's three highest
bonuses; such cash amount includes a gross-up payment such that the net
amount retained by each officer, after deduction for any income tax
imposed on such payment, will be equal to the gross amount which would
have been paid to such officer had the income tax not been imposed; (ii)
a match under deferred compensation agreements which allows officers who
have exceeded the maximum pretax amount under the Savings Plan to
continue to make pretax deferrals of base compensation to an account in
their name up to a maximum of 15%; up to 6% of base compensation will be
matched by a contribution of 50 cents per dollar deferred; no amount can
be deferred by an officer or matched under this agreement until the
officer contributes to the Savings Plan the maximum amount allowed by
the tax law; and (iii) SDG&E matching contributions to the Savings Plan.
The respective amounts paid in fiscal year 1995 for each of the above
officers were: T. A. Page, $88,035, $14,969, and $1,904; S. L. Baum,
$24,843, $6,085, and $1,946; D. E. Felsinger, $12,349, $4,311, and
$1,543; G. D. Cotton, $13,765, $3,032, and $2,844; and E. A. Guiles,
$9,744, $116, and $4,264.
(G) As of January 1, 1996, (i) Mr. Page resigned as chief executive
officer and president of Enova and SDG&E, (ii) Mr. Baum became the chief
executive officer and president of Enova, and (iii) Mr. Felsinger became
the chief executive officer and president of SDG&E.
Compensation of Directors
During 1995, SDG&E directors not holding salaried positions in
SDG&E were paid an annual retainer of $30,000, payable at the rate of
$2,500 per month. No additional fees were paid for attendance at any
meeting of the SDG&E board or of any committee of such board. Non-
employee directors are reimbursed for their out-of-pocket expenses
incurred to attend meetings. All Enova directors except Mr. Page and Mr.
Baum, who joined the Enova and SDG&E boards on January 1, 1996, are non-
salaried directors.
9
During 1995, Enova directors were not paid for their service as
such (all Enova directors during 1995 were also SDG&E directors). All
Enova board meetings during 1995 were held in conjunction with SDG&E
board meetings. Accordingly, the directors incurred no incremental out-
of-pocket expenses in connection with Enova board meetings in 1995. A
non-salaried director serving on the boards of both Enova and SDG&E will
receive a single annual retainer in the amount of $30,000.
In addition to the annual retainer for service as a director, the
LTIP was amended at the 1995 Annual Meeting of SDG&E shareholders to
provide for the automatic grant of up to 300 shares of SDG&E Common
Stock (now Enova Common Stock) per year to non-employee directors. This
grant was first made promptly following the 1995 Annual Meeting to each
incumbent non-employee director based upon service during the prior
year, and this grant will continue to be made on the same terms for
future annual meetings, including the Annual Meeting. As a result of the
Merger, Enova has assumed the LTIP and the obligation to issue shares
thereunder. Although non-employee directors of Enova and SDG&E are
eligible for the annual grant of 300 shares of Enova Common Stock under
the LTIP, a director serving on both boards will receive only one grant
of 300 shares annually.
S. L. Baum, D. W. Derbes and T. A. Page are directors of Enova and
SDG&E who also served during 1995 as directors of PDC. Messrs. Derbes
and Page also served during 1995 as directors of Wahlco Environmental.
Mr. Page and Mr. Derbes resigned from the board of directors of Wahlco
Environmental during 1995. As a non-employee director, Mr. Derbes
received a $500 fee for attending each meeting of PDC. Mr. Derbes also
received an annual retainer of $12,000 plus a $1,000 fee for attending
each meeting of Wahlco Environmental.
Messrs. Baum and Page received no fees or other compensation for
serving as directors of Enova, SDG&E or any of their subsidiaries.
Directors may elect to defer their retainers and/or fees for
periods of time they select.
On December 17, 1990, the board of SDG&E adopted a Retirement Plan
for Directors applicable to directors serving on the board of SDG&E on
or after such date. As of the date of the Merger, this Retirement Plan
also applies to directors of Enova. If a director has at least five
years of total board service, then, beginning in the calendar quarter
following the later of the director's retirement from the board or
attaining age 65, the director (or a surviving spouse) will receive
during each subsequent 12-month period, a benefit amount equal to the
director's annual retainer (currently $30,000) plus meeting fees,
committee chair fees, and the cash value of any stock grant paid to the
director during the prior calendar year for a benefit period equal to
the number of years of the director's total service on the board.
Directors currently do not receive meeting or committee chair fees. The
benefit will end upon the completion of the benefit period or the death
of the later to die of the director and a surviving spouse, whichever
occurs first. In computing the benefit period, periods of service as an
employee director shall be disregarded, and concurrent service on the
board of SDG&E and Enova will not result in double-counting of years of
service.
Relocation Arrangements
In connection with her hiring as a vice president in July 1994,
SDG&E arranged for a relocation firm to assist K. A. Flanagan with the
potential sale of her former personal residence. Under the agreement
with the relocation firm, Ms. Flanagan had the option to cause that
entity to purchase her former residence within one year of her start
date with SDG&E at an agreed price which was $40,000 above the appraised
value of the residence at the time of her employment by SDG&E. In July
1995, Ms. Flanagan exercised her right to sell the former residence to
the relocation firm. SDG&E incurred expenses totaling approximately
$190,000 representing the $40,000 referenced above, the loss on the sale
price due to deterioration of the Los Angeles real estate market, costs
of sale, and certain carrying costs.
Employment Contract of Mr. Page
On September 12, 1988, Thomas A. Page and SDG&E entered into an
employment agreement dated as of June 15, 1988. Mr. Page's employment
agreement provides that he will serve as chief executive officer and
10
chairman of the board of directors of SDG&E for a period of two years
beginning June 15, 1988, subject to automatic extensions for successive
two-year periods (unless the contract is terminated as described below)
and that he will receive a salary at a rate of not less than $31,916.66
per month or such greater amount as may, from time to time, be
determined by the board. Mr. Page resigned from his position as chief
executive officer effective January 1, 1996. Mr. Page continues to serve
as chairman of the boards of directors of SDG&E and Enova. Mr. Page's
resignation did not trigger a termination under the employment agreement
as described below.
The employment agreement also provides that Mr. Page will be
entitled to participation in the EICP, any other annual bonus plan, the
Savings Plan, the LTIP and any other long-term incentive plan. In
addition, Mr. Page is entitled to participate in the Supplemental
Executive Retirement Plan (the SERP) and the Pension Plan. Pursuant to
an earlier agreement between Mr. Page and SDG&E, Mr. Page was credited
with years of service under the Pension Plan and the SERP equal to his
years of service with SDG&E plus five extra years.
Under the employment agreement, if Mr. Page's employment is
terminated (i) by the board upon two years' written notice, (ii) upon
his death or permanent disability, (iii) by SDG&E for cause or (iv) by
Mr. Page upon 30 days written notice to SDG&E, which termination is
other than a "Constructive Termination" (as defined below), he will
receive benefits through the last day of his term of employment and no
additional benefits. If Mr. Page's employment is terminated (i) because
of the dissolution, liquidation or winding-up of SDG&E, (ii) by a
majority vote of the SDG&E board of directors without cause upon 30 days
written notice or (iii) by Mr. Page as a result of (A) any violation of
the compensation provisions of the employment agreement, (B) any adverse
and significant change in Mr. Page's position, duties, responsibilities
or status, including the failure to be elected to the board and as chief
executive officer of SDG&E or (C) a change in Mr. Page's normal business
location to a point away from SDG&E's main headquarters (each, a
Constructive Termination), he will be entitled to two years' salary paid
in a lump sum plus a bonus equal to 200% of the average of the three
highest bonuses paid to him during the previous five years, continued
health and life insurance benefits under various plans, his SERP benefit
(without regard to the limit described therein relating to Section 280G
of the Internal Revenue Code of 1986, as amended (the Code)) and his
LTIP benefit. If any of the payments set forth in the previous sentence
become subject to the excise tax imposed by Section 4999 of the Code,
SDG&E will pay Mr. Page an additional amount such that the net amount
retained by Mr. Page after deduction for such excise tax and any income
and excise tax imposed on such additional amount will be equal to the
gross amount which would have been paid to Mr. Page under the agreement
had the excise tax not been imposed. The benefits payable to Mr. Page
under the agreement on account of a change in control are in lieu of any
benefits which would have otherwise been payable to Mr. Page under the
Executive Severance Allowance Plan. The term "change in control"
includes such significant events as those described under "Pension Plan
and Supplemental Executive Retirement Plan" below.
1986 Long-Term Incentive Plan
Long-Term Incentive Plan
Awards in Last Fiscal Year
Estimated Future
Payouts
Number Under
of Non-Stock
Restricted Performance Period Price-Based
Name Shares Until Payout Plans (A)(B)
- ---- ---------- ------------------- ---------------
T. A. Page 18,660 Four Annual Periods $370,868
S. L. Baum 5,680 Four Annual Periods 112,890
2,500 One-Year (1997)(C) 49,688
D. E. Felsinger 5,020 Four Annual Periods 99,773
2,500 One-Year (1997)(C) 49,688
G. D. Cotton 3,680 Four Annual Periods 73,140
E. A. Guiles 3,580 Four Annual Periods 71,153
11
(A) The value (target) of the restricted stock awards is determined
by multiplying $22.375, the fair market value of SDG&E Common Stock on
the date of grant, December 6, 1995, less the purchase price of $2.50
per share, by the number of shares awarded (shares of SDG&E Common Stock
have since converted, as of the date of the Merger (January 1, 1996) and
on a share-for-share basis, into Enova Common Stock).
(B) The payout amounts set forth in this column represent both the
maximum and the target amounts payable upon achievement of all
performance-vesting goals. The minimum payout upon failure to achieve
any of the performance vesting goals would be $0. The actual payout will
depend upon the achievement of performance-vesting goals and upon the
fair market value of Enova Common Stock at the date of vesting.
(C) Special grants of 2,500 shares each were made in 1995 to S. L.
Baum and D. E. Felsinger. Lifting of restrictions on these shares is
dependent upon Enova performance for 1997 (discussed below).
The LTIP provides that the Enova Executive Compensation Committee
may grant to certain executives any combination of nonqualified stock
options, incentive stock options, restricted stock, stock appreciation
rights, performance awards, stock payments or dividend equivalents. As
of December 31, 1995, all grants made to executives under the LTIP have
been in the form of restricted stock.
With respect to LTIP shares purchased in 1986 through 1990, all
restrictions have been lifted in prior years.
With respect to LTIP shares purchased in 1991, 1992 and 1993, the
earnings per share target was met for the 12 months ended June 30, 1995,
and the shares which would have been released if the December 31, 1994
target had been met, were released from restrictions and delivered to
the executives. The earnings target was met for the year ended December
31, 1995 and one-quarter of the LTIP shares purchased in 1991, 1992,
1993 and 1994 were released from restrictions and delivered to the
executives. All restrictions have now been lifted on LTIP shares
purchased in 1991.
With respect to LTIP shares purchased in 1992, 1993, 1994 and 1995,
restrictions on one-quarter of the number of shares originally placed in
escrow are to be released and the shares are to be delivered to the
executives for each of the four succeeding calendar years if SDG&E's
earnings per share (to be measured in terms of Enova's earnings per
share from and after January 1, 1996) meet or exceed the earnings per
share target set by the Executive Compensation Committee or if, at the
end of the first, second and third quarters of the following year,
earnings for the 12 months then ending equal or exceed the weighted
average of the targets for the prior year and the current year. In
addition, as to shares purchased in 1992, the restrictions on all
remaining shares that are not released in such manner will be released
and the shares will be delivered to executives at the end of the fourth
succeeding calendar year, if and only if, a total return to shareholders
goal, as determined by the Executive Compensation Committee or the Enova
board, is met. Shares purchased in 1993 have no end-of-term goal. As to
shares purchased in 1994 and 1995, the restrictions on all remaining
shares may be released by the Enova board of directors after considering
the impact on 1995-1998 earnings and 1996-1999 earnings, respectively,
of industry and corporate restructuring during such period.
In addition to the above-described restricted shares with four-year
performance period-based restrictions, special grants of 2,500 shares
were made to each of S. L. Baum and D. E. Felsinger in 1994 and 1995.
The restrictions on these shares are to be lifted at the end of 1996 and
1997, respectively, if Enova meets or exceeds the target earnings per
share as set by the Executive Compensation Committee at the time of
grant. Such target earnings may be adjusted to reflect industry and
corporate restructuring.
In general, restricted shares may not be sold, transferred or
pledged until restrictions are removed or expire. Purchasers of
restricted stock have voting rights and will receive dividends prior to
the time the restrictions lapse if, and to the extent, paid on Enova
Common Stock generally.
All shares of restricted stock purchased are placed in escrow. It
is anticipated that restricted stock would be forfeited and would be
resold to Enova at original cost in the event that vesting is not
achieved by virtue of performance or other criteria.
12
Under the LTIP, all outstanding incentive awards become fully
vested and exercisable without restrictions upon the occurrence of one
of two events after a change in control. The first triggering event is
the failure of a successor corporation or its parent or subsidiary to
make adequate provision for continuation of the LTIP by substituting new
awards. In the second triggering event, even if adequate provision for
continuation of the LTIP and substitution of new awards has been made,
an executive's incentive awards will become vested and exercisable if
the executive is terminated within three years after a change in control
for reasons other than cause, retirement, death or disability, or if the
executive voluntarily terminates employment due to adverse
circumstances.
The term "change in control" includes such significant events as
those described under "Pension Plan and Supplemental Executive
Retirement Plan" below. The adverse circumstances allowing such
voluntary termination of employment consist of significant and adverse
changes in the executive's position, duties, responsibilities or status,
or the reduction or elimination of the executive's compensation or
incentive compensation opportunities.
The LTIP will expire in 2005. Outstanding incentive awards will not
be affected by such expiration or termination and will vest or be
forfeited in accordance with their terms.
Pension Plan and Supplemental Executive Retirement Plan (SERP)
Pension Plan and SERP Table
--------------------------------------------------
Aggregate Annual Benefit for Credited
Years of Service(1)
-----------------------------------------
Assumed 10 Years
Annual and
Compensation 5 Years thereafter
------------ ------- ----------
$100,000 $ 30,000 $ 60,000
200,000 60,000 120,000
300,000 90,000 180,000
400,000 120,000 240,000
500,000 150,000 300,000
600,000 180,000 360,000
700,000 210,000 420,000
800,000 240,000 480,000
- ------------
(1) Credited years of service under the Pension Plan for the five
highest paid executive officers are: T. A. Page, 18 years; S. L. Baum,
11 years; D. E. Felsinger, 23 years; G. D. Cotton, 20 years; and E. A.
Guiles, 23 years.
In addition to the Pension Plan, the SERP provides a supplemental
retirement benefit for certain executives. As a result of the Merger,
the Pension Plan and the SERP are available for executives of Enova as
well as executives of SDG&E; however, concurrent service for both Enova
and SDG&E will not result in double-counting of years of service.
The aggregate monthly benefit payable under the combined Pension
Plan and SERP to an executive who retires at age 62 or thereafter and
has completed at least five years of service will be a percentage of the
executive's final pay equal to 5% times years of service (up to a
maximum of 10 years); however, officers appointed prior to July 1, 1994
shall receive 6% times years of service (up to a maximum of 10 years).
Final pay is defined in the SERP as the monthly base pay rate in effect
during the month immediately preceding retirement, plus 1/12 of the
average of the highest three years' gross bonus awards. Alternatively,
the executive may elect to receive a lump sum cash payment equal to the
actuarially determined present value of the monthly benefits. The SERP
also provides reduced benefits to executives who retire between the ages
of 55 and 61, if the executive has completed at least five years of
employee service.
13
The above table shows the aggregate annual retirement benefits
payable to executives under the Pension Plan and the SERP, assuming a
straight life annuity form of pension at the normal retirement age of 62
for specified compensation and years of service. The benefit amounts
listed in the table are not subject to a deduction for Social Security
benefits. SERP payments will be reduced by benefits payable under the
Pension Plan.
The SERP, as amended, provides monthly surviving spouse benefits
equal to 50% of the defined benefits and disability benefits equal to
100% of the defined benefits.
The SERP also provides enhanced benefits to an executive who is
adversely affected within three years after the occurrence of an event
constituting a change in control of Enova or SDG&E, as the case may be
(a Change in Control). If, during that period, an executive is
terminated for reasons other than cause, retirement, death or
disability, or voluntarily leaves employment for reasons specified in
the SERP, the executive may elect either to take early retirement, if
otherwise qualified to do so, or to receive a lump sum cash payment
equal to the actuarially determined present value of normal retirement
benefits based on 10 years of service. Some or all of the amounts to be
paid will be funded out of the cash value of life insurance policies
paid for by the employer on behalf of the executive.
The lump sum payment under the SERP is limited. If that payment
alone, or when added together with other payments that the executive has
the right to receive from Enova or SDG&E, as the case may be, in
connection with a Change in Control, becomes subject to the excise tax
imposed by Section 4999 of the Code, the payment must be reduced until
no such payment is subject to the excise tax. The effect of this
limitation is that total severance payments made to an executive in
connection with a Change in Control may not exceed approximately 2.99
times the executive's average W-2 income for the five years preceding
the Change in Control.
Certain significant events described in the SERP constitute a
Change in Control, such as the dissolution of Enova or SDG&E, the sale
of substantially all the assets of Enova or SDG&E, a merger or the
acquisition by one person or group of the beneficial ownership of more
than 25% of the voting power of Enova or SDG&E, coupled with the
election of a new majority of the board of Enova or SDG&E, as the case
may be. An Enova- or SDG&E-initiated merger in which Enova or SDG&E, as
the case may be, is the surviving entity is not a change in control;
accordingly, the Merger did not constitute a Change in Control. The
adverse actions that allow an executive to leave employment voluntarily
are described in the SERP and consist of events such as a significant
and adverse change in the executive's position, duties, responsibilities
or status, or the reduction or elimination of the executive's
compensation or incentive compensation opportunities.
Executive Severance Allowance Plan
The Executive Severance Allowance Plan, as amended (the Executive
Severance Plan), covers officers with one or more years of employee
service in lieu of coverage under the severance plan for non-officer
employees. As a result of the Merger, the Executive Severance Plan is
available for executives of Enova as well as executives of SDG&E;
however, concurrent service for both Enova and SDG&E will not result in
double-counting of years of service.
The Executive Severance Plan provides two different severance
allowances depending upon whether the officer's termination is related
to a Change in Control. Termination unrelated to a Change in Control
essentially means a termination due to a reduction in staff or a
termination resulting from the sale of a work unit. The term Change in
Control includes such significant events as those described under
"Pension Plan and Supplemental Executive Retirement Plan" above. If,
within three years after a Change in Control, the officer is terminated
for reasons other than cause, retirement, death or disability, or leaves
employment voluntarily due to adverse actions, the officer is entitled
to a severance allowance. The adverse actions that allow an officer to
leave employment voluntarily are described in the Executive Severance
Plan and consist of events such as a significant and adverse change in
the officer's position, duties, responsibilities or status, or the
reduction or elimination of the officer's compensation or incentive
compensation opportunities.
14
In the event of a termination unrelated to a Change in Control,
officers with one or more years of employee service, but less than five
years of employee service, will receive a severance allowance consisting
of a continuation of base salary and health and basic life insurance
benefits for nine months. Officers with five or more years of employee
service receive a continuation of base salary and such benefits for 12
months.
The Executive Severance Plan provides that if the length of an
officer's severance allowance is greater under the employees' severance
plan than under the Executive Severance Plan, the officer's severance
allowance under the Executive Severance Plan will be for that longer
period.
In the event of a termination related to a Change in Control, the
officer will receive a severance allowance consisting of one year's
final pay in a lump sum payable within five days after termination and,
at the officer's option, either the continuation of health and basic
life insurance coverage for 12 months or a lump sum payment equal to the
present value of that coverage. Payments pursuant to the Executive
Severance Plan alone, or when combined with compensation from other
Enova or SDG&E sources made in connection with a Change in Control, may
not exceed approximately 2.99 times the officer's average W-2 income for
the five years preceding the Change in Control.
The Executive Severance Plan provides a procedure and a formula to
reduce the total payments to be received by an officer by reason of a
Change in Control if such total payments would exceed the 2.99
limitation (causing an excise tax to be due) and if the officer waives
receipt of all or a portion of the excess. Under the formula, an
officer's lump sum benefit under the SERP would be first reduced, if
necessary, to zero. It is not anticipated that any reduction under any
other benefit plan would be necessary in the case of any officer.
Report of the Executive Compensation Committee
The Enova Executive Compensation Committee, which is composed
entirely of independent outside directors, acts on behalf of the board
of directors in the interests of the shareholders in formulating policy
and administering approved programs for compensating Enova and SDG&E
officers and other senior executives.
The compensation policy of Enova, with respect to its executives,
is to provide a total compensation package wherein the mix and total of
base salary, annual incentive and long-term incentive, the composition
of its benefit programs, and the terms and administration of the plans
by which such forms of compensation are determined (1) are structured
and administered in the best interests of the shareholders, (2) are
reasonable in comparison to competitive practice, (3) align the amount
of compensation with corporate performance, and (4) will continue to
motivate and reward on the basis of Enova, SDG&E and individual
performance. The Executive Compensation Committee believes that a
significant portion of the total compensation of all executives and,
most specifically, the chairman and chief executive officers of Enova
and SDG&E, should be "at risk" and based upon the achievement of
measurable, superior financial and operational performance.
In discharging its responsibility, the Executive Compensation
Committee, subject to the final approval of the board of directors,
determines the factors and criteria to be used in compensating the chief
executive officers, as well as other executives of Enova and SDG&E, and
applies these factors and criteria in administering the various plans
and programs in which these executives participate to ensure they are
(1) consistent with compensation policy, (2) compatible with other
compensation programs and (3) administered in accordance with their
terms and the objectives for which they are intended.
To assist in the performance of the above and to ensure that it is
provided with unbiased, objective input, the Executive Compensation
Committee may elect to retain the services of an outside independent
compensation consulting firm. The Executive Compensation Committee
considers the compensation practices and levels paid by major nation-
wide companies. In addition, the Executive Compensation Committee
reviews economic and comparative compensation surveys compiled and
provided by the Human Resources Division of SDG&E. The Executive
Compensation Committee believes that by taking into account the
compensation practices of other comparative utilities as well as major
nation-wide non-utility companies, it can best determine the level of
compensation necessary to attract, retain and motivate its executives.
15
While it may rely on such information, the Executive Compensation
Committee is ultimately and solely responsible for any decisions made or
recommended to the board of directors with regard to the compensation of
Enova and SDG&E executives.
The Executive Compensation Committee has reviewed the compensation
of Enova and SDG&E executives and has determined that their compensation
is consistent with Enova's policies.
Chief Executive Officer Compensation
The compensation of Mr. Page represents the positions he held in
1995 of chairman, president and chief executive officer. Mr. Page's
compensation, as well as that of the other executives, is directly tied
to the achievement of the corporate goals described below. Effective
January 1, 1996, Mr. Page resigned his positions as president and chief
executive officer of Enova and SDG&E. He will continue to serve as
chairman of the board of both companies. Effective January 1, 1996, Mr.
Stephen L. Baum was elected president and chief executive officer of
Enova and Mr. Donald E. Felsinger was elected president and chief
executive officer of SDG&E.
The base salary of the chief executive officers, and the other
executives, is targeted at the competitive median (50th percentile) for
comparably sized utilities and companies. Pursuant to Mr. Page's
employment agreement described above, he will receive a salary of not
less than $31,916.66 per month through his remaining term as chairman of
the board. For 1995, the targeted participation levels were 50% under
the EICP and 70% under the LTIP, of base salary. Actual incentive
compensation earned under these two plans is contingent upon Enova and
SDG&E's attaining stated performance goals. At targeted compensation
levels, 55% of Mr. Page's total compensation is contingent on the
achievement of these quantifiable corporate performance goals. As
discussed further below in the EICP and LTIP sections, these goals
address Enova earnings per share, return on equity, market-to-book, and
SDG&E operating and maintenance expenses, rates, electric reliability,
safety and customer satisfaction.
Base Salary Compensation
The base salary component for the chief executive officers and the
other executives is reviewed annually and is based upon the
responsibilities of the position and the experience of the individual.
The Executive Compensation Committee also takes into account the base
salaries of executives with similar responsibilities at the above-
mentioned companies. Other factors taken into consideration by the
Executive Compensation Committee are the condition of the local and
national economies and the financial and operational health of Enova and
SDG&E. The individual performance of the specific executive is also
considered. The base salary information is gathered and analyzed in
order to determine the appropriate compensation level. While these
statistical factors may warrant one level of pay, more subjective
elements such as the condition of the economy may dictate another.
Executive Incentive Compensation Plan (EICP)
Under the EICP, cash payments may be made annually to the chief
executive officers and other executives based on a combination of
financial and operating performance goals. There are three elements that
determine the individual awards: (1) the executive's base salary, (2)
the participation level, and (3) corporate performance. The
participation level is expressed as a percentage and is set by the
Executive Compensation Committee based on the executive's duties and
level of responsibility. The amount of the individual award is
determined by multiplying the executive's base salary by the
participation level and then modifying it by total corporate
performance.
16
The EICP is highly leveraged on the basis of performance.
Accordingly, no payments may be made unless and until the minimum
performance levels are exceeded. Under the terms of the EICP, corporate
performance is measured against preset quantifiable goals approved by
the Executive Compensation Committee at the beginning of the year. A
target and a minimum and maximum performance range are established for
each goal. Financial goals include (1) the percent return on Enova
shareholders' equity and (2) the ratio of Enova's stock market price to
its book value, which is then compared to other utilities. Operating
goals address (1) adherence to SDG&E's operating and capital budgets,
(2) an electric rate target, (3) customer service satisfaction as
measured by customer surveys, (4) customer average electric outage, and
(5) employee lost-time accidents. Total corporate performance is
determined from the degree of achievement of each of these goals. These
goals directly support the performance-based rates goals approved by the
California Public Utilities Commission. The Executive Compensation
Committee gives equal weight to the financial goals and the operating
goals in order to balance shareholder and customer interests. This
serves to assist SDG&E in reaching its goals of lowering rates and
increasing earnings at the same time.
All 1995 operating performance minimum goals were exceeded by
SDG&E, with customer satisfaction achieving an all-time high and safety
experiencing an all-time low number of accidents. The 1995 financial
goal of return on shareholders' equity was exceeded and the market-to-
book ratio is still in the top 25% of utilities. For 1995, the
individual awards could not exceed 75% of base salary for the chairman,
president, chief executive officer, and executive vice presidents and
60% for other executives. The EICP compensation component represents 23%
of the chairman, president and chief executive officer's total mix of
compensation based upon the targets set under the EICP and LTIP. The
actual amounts earned by each of the five highest compensated executives
under the EICP are listed in the Summary Compensation Table.
1986 Long-Term Incentive Plan (LTIP)
The LTIP was approved by the shareholders of SDG&E in 1986, and
amended and reapproved by the shareholders of SDG&E in 1995, to promote
the interests of SDG&E and its shareholders. The LTIP was assumed by
Enova as a result of the Merger. The LTIP delegates the responsibility
of administration and goal determination to the Executive Compensation
Committee. The LTIP's primary purpose is to enhance the value of Enova
to its shareholders by encouraging executives to remain with Enova
and/or SDG&E and to act and perform to increase the price of Enova
shares as well as Enova earnings per share. To accomplish these
objectives, Enova sells shares of Enova Common Stock to executives at a
fixed price of $2.50 per share. These shares are subject to substantial
restrictions on the rights of executives to benefit fully from such
shares unless and until certain earnings improvement and continued
service requirements are met. If these requirements or other criteria
are not met, it is anticipated that the executives' rights to such
shares would be forfeited and they would be sold back to Enova at their
original purchase price.
All Enova and SDG&E executives are eligible to participate in the
LTIP at various levels. The number of shares granted is determined by a
formula adopted by the Executive Compensation Committee, and is
calculated as a percentage of base salary. The higher the responsibility
level, the higher the participation level (or percentage of risk). For
example, in 1995 the chairman, president and chief executive officer
participated at 70% of base salary, making the LTIP equal to 31% of his
mix of total target compensation. As a component of the executives'
total compensation package, the LTIP formula is reviewed annually. The
review takes into consideration that the value of such shares, at the
time of grant, has been determined to be consistent with the size of
grants made to executives in similar positions in the above-mentioned
companies. Other factors accounted for are LTIP goals, current share
ownership and current participation levels.
With respect to LTIP shares purchased in 1992, 1993, 1994 and 1995
restrictions on one-quarter of the number of shares originally placed in
escrow are to be released and the shares are to be delivered to the
executives for each of the four succeeding calendar years if SDG&E's
earnings per share (to be measured in terms of Enova's earnings per
share from and after January 1, 1996) meet or exceed the earnings per
share target set by the Executive Compensation Committee or if, at the
end of the first, second and third quarters of the following year,
earnings for the twelve months then ending equal or exceed the weighted
average of the targets
17
for the prior year and the current year. In addition, as to shares
purchased in 1992, the restrictions on all remaining shares that are not
released in such manner will be released and the shares will be
delivered to executives at the end of the fourth succeeding calendar
year, if and only if, a total return to shareholders goal, as determined
by the Executive Compensation Committee or the Enova board, is met.
Shares purchased in 1993 have no end-of-term goal. As to shares
purchased in 1994 and 1995, the restrictions on all remaining shares may
be released by the Enova board of directors after considering the impact
on earnings of industry and corporate restructuring.
In addition to the above-described restricted shares with four-year
performance period-based restrictions, special grants of 2,500 shares
were made to each of S. L. Baum and D. E. Felsinger in 1994 and 1995.
The restrictions on these shares are to be lifted at the end of 1996 and
1997, respectively, if Enova meets or exceeds the target earnings per
share for 1996 and 1997 as set by the Executive Compensation Committee
at the time of grant. Such target earnings may be adjusted to reflect
industry and corporate restructuring.
The number of restricted shares sold to SDG&E's five highest-
compensated executives in 1995, pursuant to the LTIP, is shown in the
Long-Term Incentive Plan Table.
Revenue Reconciliation Act of 1993
In 1993, Section 162(m) of the Internal Revenue Code was amended to
limit the deductibility of most forms of compensation, over $1,000,000,
paid to top executives of publicly-held corporations. The Executive
Compensation Committee believes that awards of stock options and stock
appreciation rights, if any, under the LTIP will not be subject to the
limitations on compensation deductibility as a result of the amendments
approved by the shareholders of SDG&E at their 1995 Annual Meeting. The
Executive Compensation Committee intends to maintain flexibility in the
manner and conditions under which grants of restricted stock are made
under the LTIP, however, and such grants may in the future be subject to
the limitations on compensation deductibility under certain
circumstances.
The report is submitted by the Executive Compensation Committee:
Robert H. Goldsmith, Chairman
Daniel W. Derbes
Catherine T. Fitzgerald
Thomas C. Stickel
18
Comparative Common Stock Performance
The following graph compares the percentage change in SDG&E's
cumulative total shareholder return on SDG&E Common Stock over the last
five fiscal years with the performances of the Standard & Poor's 500
Index and the Dow Jones Utilities Index over the same period. The
returns were calculated assuming the investment in SDG&E Common Stock,
the S&P 500, and the Dow Jones Utilities Index on December 31, 1990, and
reinvestment of all dividends. Note that for future years, periods from
and after the date of the Merger (January 1, 1996) will be measured in
terms of Enova Common Stock.
[TOTAL SHAREHOLDER RETURN GRAPH]
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
AMONG SDG&E, DOW JONES UTILITIES INDEX AND S&P 500 INDEX
Measurement Period
(Fiscal Year Covered) Company S&P 500 Index Dow Jones Utilities
Index
Measurement Pt-- 12/31/90 $100.00 $100.00 $100.00
FYE 12/31/91 $107.41 $130.47 $115.09
FYE 12/31/92 $121.44 $140.41 $119.71
FYE 12/31/93 $133.22 $154.56 $131.19
FYE 12/31/94 $111.30 $156.60 $111.41
FYE 12/31/95 $147.31 $215.45 $147.25
(A) Calculations for the S&P 500 Index were performed by Standard &
Poor's Compustat Services, Inc.
(B) The Dow Jones Utilities Index (consisting of 11 electric
utilities and four gas utilities) is maintained by Dow Jones & Company,
Inc. and reported daily in The Wall Street Journal.
(C) Beginning in 1988 and through May 1991 SDG&E was involved in
merger negotiations and SDG&E Common Stock was trading at inflated
prices. SDG&E estimates that, absent the merger negotiations, the
cumulative total shareholder return on SDG&E Common Stock over the last
five fiscal years would have been $179.
19
ITEM NOS. 2 AND 3-SHAREHOLDER PROPOSALS
Enova has received the following shareholder proposals submitted in
accordance with the rules of the SEC. These proposals will be voted upon
at the Enova Annual Meeting only if properly presented by the proposing
shareholders or their qualified representatives. To be approved, a
proposal must receive the affirmative vote of a majority of the
outstanding shares of Enova Common Stock represented and voting at the
Enova Annual Meeting.
The proposals and supporting statements are presented as received
by Enova and the Enova board of directors disclaims any responsibility
for their content. The Enova board of directors recommends a vote
"AGAINST" the proposals for the reasons stated in the opposition
statements following the proposals. The name and address of, and number
of shares represented to be held by, the proposing shareholders will be
furnished by Enova to any shareholder promptly upon receipt of any oral
or written request to Enova Shareholder Services.
SHAREHOLDER PROPOSAL (Item No. 2 on Proxy Card)
"RESOLVED: That the shareholders recommend that the Board of
Directors institute the additional criteria that shareholders must
receive a total return of 9% in the fiscal year before any officer
options and bonus are granted."
"Reasons: Under the present system the officers may be awarded
options at $2.50 a share, and thus make a substantial profit even when
the shareholders have a negative return. The Directors have set a
criteria for bonus and option award that cannot be evaluated by the
shareholders."
"Total return is defined as the dividend paid plus the change in
share price during the year divided by the share price at the beginning
of the year. This resolution will put the officers interests with the
shareholders."
"In 1994 shareholders received a negative return of 17%, which was
one of the poorest returns in the utility industry, at the same time
each of the listed officers in the proxy statement received a
substantial bonus."
"This same proposal was submitted at the 1995 Annual Meeting and
received 15.24% of the vote."
Enova Opposition Statement
This proposal, in substantially the same form, was submitted at
last year's Annual Meeting of shareholders and was defeated by a
substantial majority of shareholders.
The board agrees that the compensation of officers should be tied
to the financial performance of Enova and SDG&E. In fact, the board has
emphasized the importance of total return to shareholders for many years
and has previously included "total return to shareholders compared to
industry performance" as a goal in the Long-Term Incentive Plan. The
board, however, no longer uses this criterion to determine incentive
compensation because stock price movement for utility stocks is
significantly affected by varying economic, industry and market forces
which are outside the scope of management's control. For example, in
1994 when "total return to shareholders" was adversely affected by the
decline in stock price, this decline was strongly influenced by at least
two factors beyond management's control: the reaction of the investment
community to the upward move in interest rates and the momentum gained
by deregulation of the electric utility industry. The board believes
that such factors should not drive executive compensation.
Furthermore, the board believes that its existing compensation
programs, which are tied to the achievement of specific financial and
operational goals, including earnings growth, provide the right type of
incentive for officers to enhance shareholder value. These plans
directly reward or penalize management for actions within their control.
For example, during the second quarter of 1994, SDG&E had a one-time
non-recurring, after-tax writedown of $80 million and posted a loss of
$0.30 a share-its first quarterly loss in a decade. The writedown was
taken to reflect the decline in value of certain utility and subsidiary
assets and to prepare the company for industry restructuring. The impact
of the writedown on SDG&E earnings caused some of the officers'
incentive compensation goals not to be met, thus significantly reducing
executive compensation, including 1994 long-term incentive payouts. For
example, the chairman's total compensation was down 34% in 1994 as
compared to 1993.
20
The Enova board urges each shareholder to review the full
discussion of Enova and SDG&E's executive compensation programs and its
"pay for performance" approach included above in this Proxy Statement
(see "Item No.1-Election of Directors-Executive Compensation and
Transactions with Management and Others" and "Report of the Executive
Compensation Committee").
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE "AGAINST" THIS PROPOSAL. Proxies received will be
voted against this proposal unless a contrary choice is specified.
SHAREHOLDER PROPOSAL (Item No. 3 on Proxy Card)
"Recommend: That no stock options and/or stock derivatives for
[Enova] and subsidiaries be issued except under the following
conditions:
1. The exercise price shall not be less than the closing price for any
day during the previous two years, the last issue price or the net book
value.
2. The exercise price shall also be increased each year by three
percent plus the yearly inflation rate minus dividends paid. In no case,
shall the yearly exercise price be reduced.
3. The maximum number of stock options or derivatives issued each year
may not exceed two percent of the number of shares outstanding.
4. Options or derivatives once issued shall not be reissued or the
terms changed.
5. No other stock shall be sold at less than 95% of current market
price."
Reasons: "Stock options and derivatives are an excellent tool for
rewarding executives for outstanding performance. During the last ten
years stock option programs have been added to almost every major
American public corporation. Most plans are structured so that even
below-average performers may be given undeserved rewards. This results
in an unwarranted dilution of stockholder equity. [Enova] should be in
the vanguard of companies that have option plans that reward outstanding
performance and are also fair to stockholders. The conditions presented
have the necessary elements for a good plan. We should help [Enova] lead
the way for a good national pattern."
ENOVA OPPOSITION STATEMENT
The board believes that to meet Enova's long-term goals, it is
important to have appropriate long- and short-term incentive
compensation programs. The Enova board believes that this
recommendation, if approved by the shareholders and adopted by Enova,
would limit Enova's flexibility to develop incentive programs that are
properly aligned with its goals. For example, if the Executive
Compensation Committee were to determine to grant stock options, it
would under the proposal be required to fix exercise prices higher than
the highest closing price for Enova's stock for the prior two years.
Consequently, if the fair market value of the stock on an option grant
date is below the required exercise price, the program would not reward
the executive officer for returning the stock to its two-year high.
This proposal, if adopted, might also limit the Enova board's
ability to grant restricted stock under the LTIP. In a regulated
environment, with limited utility returns authorized by the CPUC, the
board has determined that granting restricted stock contingent on the
attainment of performance goals is an effective way to drive decisions.
The Enova board needs the flexibility to structure incentive
compensation programs that will best serve the interests of the
shareholders.
The Enova board urges each shareholder to review the full
discussion of Enova and SDG&E's executive compensation programs and its
"pay for performance" approach included above in this Proxy Statement
(see "Item No.1-Election of Directors-Executive Compensation and
Transactions with Management and Others" and "Report of the Executive
Compensation Committee").
21
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE "AGAINST" THIS PROPOSAL. Proxies received will be
voted against this proposal unless a contrary choice is specified.
Relationship with Independent Public Accountant
Deloitte & Touche LLP (or its predecessor firm, Deloitte Haskins &
Sells) has been employed regularly by SDG&E for many years (and has now
been appointed by Enova) to audit financial statements and for other
purposes. Representatives of Deloitte & Touche LLP are expected to be
present at the Annual Meeting. They will have the opportunity to make a
statement, if they so desire, and will respond to appropriate questions
from shareholders.
Annual Report and Availability of Form 10-K
The Enova and SDG&E 1995 Annual Report to Shareholders accompanies
this Proxy Statement. The Annual Report of Enova and SDG&E to the SEC on
Form 10-K for 1995 will be provided to shareholders, without charge,
upon written request, to Shareholder Services, P.O. Box 129400, San
Diego, California 92112-9400.
Shareholder Proposals for 1997 Annual Meeting
Proposals that shareholders may wish to have included in the proxy
materials relating to the next Annual Meeting (1997) must be received by
Enova, by November 14, 1996.
Proxy Solicitations
In addition to the original solicitation by mail, some of the
officers and regular employees of Enova and SDG&E may solicit proxies by
personal visits, telephone or mail without receiving compensation in
addition to their regular salaries. Enova anticipates that the expense
associated with these solicitation efforts will be nominal. Enova will
reimburse brokerage firms and other securities' custodians for
reasonable expenses incurred by them in forwarding proxy material to
beneficial owners of stock.
Enova and SDG&E have also retained Georgeson & Co., Inc., a proxy
solicitation firm, to assist in the solicitation of proxies at an
estimated cost of $12,000 plus disbursements.
Other Business to Be Brought Before the Annual Meeting
The board of directors of Enova does not know of any matters that
will be presented for action at the Annual Meeting other than the
matters described above. However, if any other matters properly come
before the Annual Meeting, the holders of proxies solicited by the Enova
board of directors will vote on those matters in accordance with their
judgment, and discretionary authority to do so is included in the
enclosed proxy.
By order of the Board of Directors
Thomas A. Page
Chairman
San Diego, California
March 11, 1996
22
PROXY
This Proxy is Solicited on Behalf of the Board of Directors of
ENOVA CORPORATION
Post Office Box 129400, San Diego, California 92112-9400
Annual Meeting of Shareholders April 23, 1996
DANIEL W. DERBES, RALPH R. OCAMPO and THOMAS A. PAGE, jointly
or individually, are hereby appointed as proxies with full power of
substitution to represent and vote all shares of stock of the
undersigned shareholder(s) of record on March 1, 1996, at the annual
meeting of shareholders of Enova Corporation, to be held at the San
Diego Convention Center, 111 West Harbor Drive,
San Diego, California, on April 23, 1996, and at any adjournment or
postponement thereof, as indicated on reverse side.
THIS CARD IS ONLY FOR SHARES OF COMMON STOCK.
(Continued and to be signed on other side)
FOLD AND DETACH HERE
[MAP TO CONVENTION CENTER GOES HERE]
Please mark
your votes / X /
as this
This Proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder(s). If no direction
is made, this Proxy will be voted FOR Item 1 and AGAINST Items 2 and
3.
FOR
1. ELECTION OF CLASS I DIRECTORS / /
The Board of Directors recommends a vote
FOR the following Nominees:
Richard C. Atkinson, Stephen L. Baum,
Ann Burr, Richard A. Collato.
FOR all nominees listed;
except vote withheld for
the following nominees (if any):
- --------------------------------
WITHHELD
FOR ALL
/ / WITHHELD for all
nominees listed.
2. SHAREHOLDER
PROPOSAL The Board
of Directors recommends
a vote AGAINST this
proposal. Shareholder
Proposal as described in
the Proxy Statement.
FOR AGAINST ABSTAIN
/ / / / / /
3. SHAREHOLDER
PROPOSAL The Board of
Directors recommends a
vote AGAINST this
proposal. Shareholder
Proposal as described in
the Proxy Statement.
FOR AGAINST ABSTAIN
/ / / / / /
4. In their discretion, act upon such other business as
may properly come before the meeting.
YES NO
I am planning to attend the / / / /
Annual Meeting of Enova
Shareholders.
WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING please mark, sign, date and return the proxy
card promptly in the enclosed postage-paid envelope.
Signature(s)
--------------------------
Signature(s)
--------------------------
Dated ,1996
----------------------------
[Shareholder Name and Address]
NOTE: Please sign exactly as name appears at left. If
signing as executor, administrator, attorney, agent,
trustee or guardian, please give full title as such. If a
corporation or partnership, please sign in full such
name by authorized person.
(SEE OTHER SIDE)
Please indicate any change in the above address
FOLD AND DETACH HERE
[ENOVA ANNOUNCEMENT GOES HERE]
Annual Meeting of Shareholders
of Enova Corporation
Tuesday, April 23, 1996
11:00 a.m.
San Diego Convention Center
111 West Harbor Drive
San Diego, California 92101
YOUR VOTE IS IMPORTANT
Please complete, date and sign your proxy and promptly return it in
the enclosed envelope.
