<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
DOMINGUEZ SERVICES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LETTERHEAD]
April 4, 1997
TO THE SHAREHOLDERS OF DOMINGUEZ SERVICES CORPORATION
Your Board of Directors and management are pleased to invite you to attend the
Annual Meeting of Shareholders of Dominguez Services Corporation to be held on
May 6, 1997, at 1:30 p.m. California time. The meeting will take place at the
Torrance Marriott, 3635 Fashion Way, Torrance, California 90503. Lunch will be
served at 12:30 p.m. just prior to the Annual Meeting.
Please call (310) 834-2625, ext. 401, and let us know if you will attend.
Whether or not you plan to attend the meeting, please complete, sign, date, and
return the enclosed proxy card ("Proxy") in the envelope provided without delay.
Thank you, and I hope to see you on May 6.
Sincerely,
/s/ BRIAN J. BRADY
[MAP]
MAP TO TORRANCE MARRIOTT TO BE INSERTED HERE.
<PAGE>
DOMINGUEZ SERVICES CORPORATION
21718 SOUTH ALAMEDA STREET
LONG BEACH, CALIFORNIA 90810
-----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Dominguez Services Corporation:
The 1997 Annual Meeting of Shareholders of Dominguez Services Corporation
(the "Company") will be held at the Torrance Marriott, 3635 Fashion Way,
Torrance, California 90503, on May 6, 1997, at 1:30 p.m. California time for
the following purposes:
1. To elect nine directors to hold office until the Company's next Annual
Meeting and thereafter until their successors are duly elected and
qualified.
2. To consider and act on a proposal to adopt the Company's 1997 Stock
Incentive Plan.
3. To ratify, confirm, and approve the appointment by the Board of Directors
of Arthur Andersen LLP as the independent auditors for the Company and its
subsidiaries.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The Board of Directors has fixed March 24, 1997, as the record date for
determining the shareholders entitled to notice of and to vote at the Annual
Meeting and at any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN S. TOOTLE, SECRETARY
April 4, 1997
IMPORTANT: To assure your representation at the Annual Meeting, please indicate
your voting instructions on the enclosed proxy card ("Proxy") and date, sign,
and mail it promptly in the return envelope provided.
<PAGE>
DOMINGUEZ SERVICES CORPORATION
21718 SOUTH ALAMEDA STREET
LONG BEACH, CA 90810
-----------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 6, 1997
-----------
This Proxy Statement and the accompanying proxy card ("Proxy") are
furnished in connection with the solicitation by the Board of Directors of
Dominguez Services Corporation (the "Company") of proxies in the accompanying
form, to be voted at the Annual Meeting of Shareholders of the Company and at
any adjournments thereof (the "Annual Meeting") to be held at 1:30 p.m.
California time on May 6, 1997, at the Torrance Marriott, 3635 Fashion Way,
Torrance, California 90503. At the Annual Meeting, the shareholders of the
Company's common stock will be asked to vote upon the matters set forth in
the accompanying Notice of Annual Meeting of Shareholders. This Proxy
Statement, the accompanying Proxy, and the Notice of Annual Meeting of
Shareholders are being mailed to shareholders of the Company on or about
April 4, 1997.
SOLICITATION OF PROXIES
The enclosed Proxy is solicited on behalf of the Board of Directors of the
Company for use at the Annual Meeting and at any adjournments thereof.
The Company will bear the entire cost of preparing, assembling,
printing, and mailing the Proxy Statement, the accompanying Proxy, the Notice
of Annual Meeting of Shareholders, and any additional materials which may be
furnished to shareholders in connection therewith. The solicitation of
proxies will be made by mail and may also be made by telephone, facsimile,
telegraph, or personally by directors, officers, and regular employees of the
Company who will receive no extra compensation for such services.
Any person who executes and returns the Proxy accompanying this Proxy
Statement may revoke it at any time before its exercise by delivering to the
Secretary of the Company a written instrument of revocation or by presenting
a duly executed Proxy for the Annual Meeting bearing a later date. A Proxy
may also be revoked by attending the Annual Meeting and voting in person.
Each properly executed Proxy received prior to the Annual Meeting will be
voted as directed. If not otherwise specified, proxies will be voted for the
election of the nominees for directors named in this Proxy Statement, for
adoption of the Company's 1997 Stock Incentive Plan, for the appointment of
Arthur Andersen LLP, as independent auditors of the Company, and at the
discretion of management with respect to any other matters properly presented
at the Annual Meeting or any adjournments thereof.
2
<PAGE>
VOTING SECURITIES
Only holders of record of the Company's common stock at the close of
business on March 24, 1997, are entitled to notice of and to vote at the
Annual Meeting. At that date, 1,004,370 shares of common stock were
outstanding; also at that date, there were 317 holders of record of common
stock. Subject to cumulative voting rights in the election of directors,
holders of common stock are entitled to one vote on each matter submitted for
each share held of record. Each shareholder or his proxy (including the
persons named in the accompanying Proxy) entitled to vote for the election of
directors may cumulate his votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of
votes to which his shares are entitled, or distribute his votes on the same
principle among any or all of the nominees. No shareholder or proxy,
however, shall be entitled to cumulate votes for a candidate unless, prior to
the voting, such candidate or candidates have been placed in nomination and
the shareholder has given notice at the meeting that he intends to cumulate
his votes. If any shareholder gives such notice, all shareholders may
cumulate their votes for nominated candidates.
The presence, either in person or by proxy, of persons holding a
majority of the shares entitled to vote constitutes a quorum for the
transaction of business at the Annual Meeting. The affirmative vote of a
majority of the votes represented at the meeting will be required for the
election of directors (unless cumulative voting is in effect) and for the
approval of all other matters voted upon at the Annual Meeting.
The Company's principal executive offices are located at 21718 South
Alameda Street, Long Beach, California 90810.
PRINCIPAL SECURITIES HOLDERS
The following table sets forth information as of March 24, 1997, with
respect to the beneficial ownership of the Company's common stock by (i) each
person known by the Company to own beneficially five percent or more of any
class of the Company's outstanding common stock, (ii) each director nominee and
named executive officer, and (iii) all directors and executive officers as a
group. Each shareholder has sole voting and investment power with respect to
such shares unless otherwise indicated.
3
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES AND
NAME AND ADDRESS OF BENEFICIAL OWNER NATURE OF BENEFICIAL OWNERSHIP PERCENT OF COMMON STOCK
- ------------------------------------ ------------------------------ ----------------------
<S> <C> <C>
Carson Estate Company 205,105 20.4%
18710 S. Wilmington, Suite 200
Rancho Dominguez, CA 90220
Watson Land Company 88,596 8.8%
515 S. Figueroa St., Suite 910
Los Angeles, CA 90071
Dwight C. Baum 22,500(1) 2.2%
200 S. Los Robles Ave., Suite 645
Pasadena, CA 91101-2431
Brian J. Brady 720 *
21718 S. Alameda St.
Long Beach, CA 90810
Richard M. Cannon 88,596(2) 8.8%
515 S. Figueroa St., Suite 910
Los Angeles, CA 90071
Terrill M. Gloege 0 *
18710 S. Wilmington Ave., Suite 200
Rancho Dominguez, CA 90220
Thomas W. Huston 1,000 *
515 S. Figueroa St., Suite 910
Los Angeles, CA 90071
C. Bradley Olson 205,105(3) 20.4%
18710 S. Wilmington, Suite 200
Rancho Dominguez, CA 90220
Langdon W. Owen 5,400 *
1300 Bristol North, Suite 290
Newport Beach, CA 92660
Charles W. Porter 5,571 *
400 Paseo Dorado
Long Beach, CA 90803
Debra L. Reed 100 *
555 W. 5th St.
Los Angeles, CA 90013
John S. Tootle 2,529 *
21718 S. Alameda Street
Long Beach, CA 90810
All Directors and Officers 331,521(4) 33.0%
as a group (10 persons)
</TABLE>
* Less than one percent.
(1) All of such shares are owned by Mr. Baum and his spouse as trustees of
the Dwight C. Baum and Hildagarde E. Baum Trust. Mr. and Mrs. Baum
share voting and investment powers with respect to such shares.
(2) All of such shares are owned by Watson Land Company, of which Mr. Cannon
is president, chief executive officer, and a director. Mr. Cannon
shares voting and investing powers with respect to such shares with the
other directors of Watson Land Company.
(3) All of such shares are owned by the Carson Estate Company, of which Mr.
Olson is president and a director. Mr. Olson shares voting and
investment powers with respect to such shares with the other directors
of Carson Estate Company.
(4) Includes shares described in footnotes (2) and (3) above.
4
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on its review of the copies of
reports furnished to the Company and representations from reporting persons
that no reports were required to be filed, all officers, directors, and ten
percent beneficial owners of the Company's voting securities complied with
the filing requirements of Section 16(a) of the Securities Exchange Act of
1934 during 1996, except as set forth below.
Langdon W. Owen, a director of the Company, inadvertently failed to
file a Form 4 Statement of Change of Beneficial Ownership of Securities with
the Securities and Exchange Commission ("SEC") disclosing the purchase by his
individual retirement account of 900 shares of the Company common stock in
August 1996. Mr. Owen subsequently filed a Form 5 disclosing this purchase.
Charles W. Porter, a director of the Company, inadvertently failed to
file a Form 4 with the SEC disclosing his change in beneficial ownership when
he became the trustee and beneficiary under the Lorena Ray Porter Revocable
Trust. The trust assets included 1200 shares of the Company common stock
acquired previously. Mr. Porter subsequently filed a Form 5 disclosing his
change in beneficial ownership.
5
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Action is to be taken at the Annual Meeting with respect to the election
of nine directors to serve until the 1998 Annual Meeting of Shareholders and
until their successors are duly elected and qualified. The Company's bylaws
provide that there shall be no fewer than seven and no more than nine
directors. The Board has fixed the number of directors at nine.
Set forth below is certain information concerning each nominee for
director:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT DIRECTOR
NAME AGE AND ALL OTHER POSITIONS WITH COMPANY SINCE
- ---- ----- ------------------------------------ ---------
<S> <C> <C> <C>
Dwight C. Baum 84 Senior Vice President of Paine Webber Incorporated (and predecessors), a 1962
brokerage house.
Brian J. Brady 48 President, Chief Executive Officer, and Chairman of the Board of the Company 1995
since May 1996; President and Chief Executive Officer of the Company since November
1996; prior, Assistant General Manager Public Utilities, City of Anaheim, since
1992; prior, Vice President and General Manager, Energy Services, Inc., a
Subsidiary of Southern California Edison, since 1988.
Richard M. Cannon 55 Chief Executive Officer and President of Watson Land Company, a privately held 1991
developer and owner of industrial centers and buildings, since 1994; prior,
President of Watson Land Company since 1989.
Terrill M. Gloege 61 Senior Vice President, Chief Financial Officer of Carson Estate Company and 1991
affiliated entities, a privately held investment company since 1989.
Thomas W. Huston 35 Director of Leasing and Asset Management for Watson Land Company since 1995; 1995
prior, Assistant Director of Leasing and Asset Management, and Leasing Agent
for Watson Land Company.
C. Bradley Olson 56 President of Carson Estate Company since 1992; prior, Division President and 1993
Corporate Vice President of The Irvine Company since 1984.
Langdon W. Owen 66 President of Don Owen & Associates since 1973; Consulting Engineer and Financial 1994
Advisor.
Charles W. Porter 66 Business Consultant since January 1996; prior, President, Chief Executive Officer 1977
of the Company since 1980.
Debra L. Reed 40 Senior Vice President of Southern California Gas Company, since 1995; prior, 1995
Vice President, Southern California Gas Company since 1988.
</TABLE>
Dwight C. Baum serves as a director of Westminster Capital, Inc. and is
Chairman of the Board Emeritus of United Cities Gas Company.
6
<PAGE>
The Proxies received will be voted to elect as directors the nine
nominees listed above unless otherwise specified, and each nominee has agreed
to serve as a director if elected at the Annual Meeting. Although management
of the Company does not anticipate that any of the persons named in the
accompanying Proxy will be unable to serve, if any nominee is unable or
declines to serve as a director at the time of the Annual Meeting, the proxy
holders will vote for a substitute nominee at their discretion.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" THE ELECTION OF THE DIRECTORS NOMINATED
During 1996, the Board of Directors held seven meetings. Nominated
directors attended all Board of Director meetings with the exception of Mr.
Cannon who was unable to attend three of the seven Board Meetings. Mr.
Cannon is a member of the Planning/Growth Committee and attended all eight
meetings of this committee.
The Company has a standing Audit Committee consisting of three outside
directors. The current members of the Audit Committee are Dwight C. Baum,
Terrill M. Gloege, and Charles W. Porter. The Audit Committee reviews the
results of the Company's annual audit, the financial statements, and internal
accounting and control procedures, and recommends the selection of auditors
to the Board of Directors. The Audit Committee met two times during 1996.
The Company has a standing Compensation Committee consisting of three
outside directors. The current members of the Compensation Committee are
Terrill M. Gloege, Thomas W. Huston, and Debra L. Reed. The Compensation
Committee annually recommends to the Board of Directors the compensation for
each officer, including the President, for the ensuing year. During 1996,
the Compensation Committee met six times.
The Company also has a standing Planning/Growth Committee. The current
members of the Planning/Growth Committee are Richard M. Cannon, C. Bradley
Olson, and Langdon W. Owen. The Planning/Growth Committee met eight times
during 1996.
The Company does not have a standing Nominating Committee nor any other
committee performing similar functions.
Except for Mr. Brady (who was a director and an employee during 1996),
the Company paid each of its outside directors an annual fee of $3,900, plus
an additional $450 for each meeting of the Board of Directors or Committee
thereof attended.
7
<PAGE>
EXECUTIVE OFFICERS AND COMPENSATION
The Company's primary objective is to maximize shareholder value over
time. To accomplish this objective, the Company has adopted a comprehensive
strategic business plan. The overall goal of the Compensation Committee of
the Company's Board of Directors (the "Committee") is to develop executive
compensation policies which are consistent with and linked to the Company's
strategic plan and business objectives. Members of the Committee evaluate
the performance of the senior management team, including the Chief Executive
Officer, review and approve the base salary levels for the Company's senior
management team, review overall base salary levels for all managers in the
Company, and approve the annual salary increase budget of the Company. The
Committee also administers the Company's Annual Incentive Plan (AIP). The
Committee regularly reports to the full Board of Directors on its activities.
COMPENSATION PHILOSOPHY AND PROGRAM ELEMENTS
The Committee bases its decisions on the Company's executive compensation
philosophy, which relates the level of the compensation given to the
Company's success in meeting its performance goals, rewards individual
achievement, and seeks to attract and retain qualified executives. The
Company's executive compensation program currently consists of two principal
components: base salary and potential for an annual incentive award under the
Company's AIP based on Company performance as well as individual performance.
This second component constitutes the "at-risk" portion of the compensation
program.
The Company's fundamental policy is to offer the Company's executives
competitive compensation opportunities based upon overall Company
performance, their individual contribution to the financial success of the
Company, and their personal performance. It is the Committee's objective to
have a reasonable and, over time, an increasing portion of each officer's
compensation contingent upon the Company's performance, as well as upon his
or her own level of performance.
The Company has not had any stock-based or long-term incentive compensation
programs and has not provided its officers with any supplemental retirement
program or other supplemental benefits not available to any other employees
of the Company. In February 1997, the Board of Directors adopted, subject to
shareholder approval, the 1997 Stock Incentive Plan to provide a longer-term
reward element and encourage the acquisition and retention of shares of
Company stock by its key executives.
The Committee believes that this structure will result in a total
compensation program for executives that is competitive with similar
companies and is a fair and reasonable cost to shareholders and ratepayers.
For fiscal 1996, the process utilized by the Committee in determining
executive officer compensation levels took into account both qualitative and
quantitative factors. Among the factors considered by the Committee was data
provided by an independent management consulting firm specializing in
executive compensation. This firm was retained to assess the Company's
compensation policies and performance relative to similar indices for
comparable companies and assist with the design of the management
compensation program. The Committee reviewed this information and considered
the provided data in the context of the Company's business objectives,
financial requirements, and overall compensation policy.
8
<PAGE>
BASE SALARY
The Company positions its overall executive compensation levels at or near
the median of the range of base salary and total compensation levels for
other companies comparable to the Company in this industry and who are viewed
as competitors for executive talent in the overall labor market.
The Company uses a formal performance review system for all employees,
including the Chief Executive Officer and the other officers. This process
generates information that the Committee uses in making decisions on base
compensation and management incentive awards. The Chief Executive Officer is
responsible for preparing the reviews on all executive officers other than
himself. The Committee is responsible for reviewing the Chief Executive
Officer against established performance objectives. All reviews are
discussed and approved by the Committee. Executive performance is measured
both in terms of the performance of the Company as a whole and various
individual performance factors, including the overall professional
performance and managerial accomplishments of the individual.
The base salary for each executive officer is set within the formal
established salary range for the position which is based on market rates for
comparable positions as determined by the annual survey process. Individual
salaries are set within the range on the basis of personal performance. The
total salary increase budget for the Company is based on marketplace norms.
Individual salary increases for officers are based on position relative to
market and individual performance as assessed through the performance review
system and achievement of annually determined performance goals and
objectives.
ANNUAL INCENTIVE PLAN
The current Annual Incentive Plan (AIP), approved by the Board of Directors
in 1993 and revised in 1996, is structured to ensure that officers of the
Company have an opportunity to earn additional compensation only when the
Company and the individual officers have performed at a level that produces
acceptable results for shareholders. Each executive officer has an
established incentive award target for the fiscal year. The available
funding for incentive award payments is subject to specified levels of
Company financial performance established at the start of the fiscal year.
Actual incentive awards paid reflect both achievement of corporate objectives
and an individual's accomplishment of functional objectives, with greater
weight being given to achievement of corporate rather than independent
objectives.
Under the AIP, cash awards to a maximum amount of 20% of base salary for
the Chief Executive Officer ("CEO") and 15% of salary for other participants
are available based upon the Company's attainment of certain financial
targets, the individual's contribution to the attainment of these Company
objectives, performance against personal objectives, and a subjective
assessment by the Company's CEO and the Board of each executive's
professional performance (with assessment by the Board for the CEO). Awards
are paid to participants annually during the year following the year for
which performance was assessed.
For 1996, the availability of an annual incentive pool was contingent on
the Company achieving a threshold level of return on equity relative to the
industry peer group, and individual AIP awards were based on the Company
meeting performance objectives established by the Board of Directors.
Individual officers are also assessed on individual performance objectives
and their overall professional performance in the position.
9
<PAGE>
The 1996 AIP awards will be paid in cash. Beginning in 1997, a portion of
AIP awards may, at the discretion of the Board of Directors, be paid in
shares of common stock (the "Stock Payment Shares"). These Shares may be
subject to a multi-year vesting schedule. The Committee believes this will
enhance the Company's ability to retain key executives, ensure that annual
Company performance that results in AIP awards is reflected in longer-term
share price growth, and encourage increased levels of stock ownership by
Company executives.
LONG-TERM INCENTIVE COMPENSATION
The Board adopted in 1997, subject to shareholder approval, the 1997 Stock
Incentive Plan that is described under Proposal II of this Proxy Statement.
This Plan provides for awards of stock options, payment of AIP awards in
shares of the Company's common stock ("Stock Payments"), restricted stock
awards, and dividend equivalent payments.
The Company has not made any awards under the Plan. Generally, the
Committee intends the size of each option grant to be set at a level that is
reflective of the competitive market for long-term compensation among peer
water utilities and that the Committee deems necessary to create a meaningful
opportunity for stock ownership based upon the individual's position with the
Company, the individual's potential for future responsibility and promotion,
and the individual's performance in the recent period. The relative weight
given to each of these factors will vary from individual to individual at the
Committee's discretion based on the recommendation made by the CEO to the
Committee.
Each stock option grant will allow the employee to acquire shares of the
Company's common stock at a fixed price per share (no less than the market
price on the date of grant) over a specified period of time. Options will
vest in periodic installments over a multi-year period, contingent upon the
executive officer's continued employment with the Company. Accordingly, the
option will provide compensation to the executive officer only if he/she
remains in the Company's employ, and then only if the market price of the
Company's common stock appreciates over the option term. The number of
options granted will only provide a competitive level of compensation if the
Company's stock price exceeds historical growth rates over time.
The Committee anticipates awarding stock options to selected key executives
after the approval of the Plan and in conjunction with the annual review of
base salary levels, the determination of AIP awards for 1996 performance, and
consideration of industry peer compensation practices to be reported in 1997
proxy statements for the 1996 fiscal year. The Committee does not
anticipate, and has no plans to make, any awards of restricted stock. Any
stock payments of portions of earned AIP awards will commence with payments
in 1998 for 1997 performance, and the Committee may consider including
dividend equivalents with these awards.
CHIEF EXECUTIVE OFFICER COMPENSATION
To determine the compensation arrangements for the Chief Executive Officer
in 1996, the Committee applied the compensation philosophy and objectives
outlined above. Considerations included the average salary and annual
incentive compensation levels for comparable positions in the market, the
extent to which the Company's annual performance goals were achieved, and the
extent to which the Company's overall strategy was successfully implemented.
10
<PAGE>
The annual base salary for Mr. Brady, the Company's President and CEO, was
established by the Board at his date of hire in 1995. Mr. Brady received an
increase in annual base salary in fiscal 1996 to $150,000. The CEO's
incentive compensation award for 1996 was entirely dependent upon the
Company's financial performance and his individual performance since his date
of hire as assessed by the Board of Directors and did not include any
provisions for guaranteed payments. Each year, the Annual Incentive Plan is
reevaluated with a new achievement threshold and new targets for financial
performance. The Committee will determine in 1997 the AIP award for Mr.
Brady for fiscal 1996 based on the same incentive plan as for all other
officers, reflecting performance in 1996.
Compensation Committee: Debra L. Reed, Chairperson
Terrill M. Gloege
Thomas W. Huston
11
<PAGE>
Set forth below is certain information with respect to each of the
Company's executive officers. All officers have served at the discretion of the
Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY YEARS AS OFFICER
- ---- ----- --------------------- ----------------
<S> <C> <C> <C>
Brian J. Brady 48 President, Chief Executive Officer,
and Chairman of the Board (1) 1
John S. Tootle 42 Chief Financial Officer, Vice President
of Finance, Treasurer, Secretary 10
</TABLE>
The following table sets forth the compensation paid by the Company in
1996 and its two prior fiscal years to the Company's Chief Executive Officer
and the two other executive officers of the Company whose total annual salary
and bonus exceeded $100,000 in 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
AUTO & OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- ------------------------- ---- ------ ------- --------------
<S> <C> <C> <C> <C>
Brian J. Brady (1) 1996 $144,696.40 $2,000.00 $8,094.00
President & Chief Executive Officer 1995 19,005.03 0 612.30
1994 0 0 0
C.W. Rose (2) 1996 115,022.36 4,800.00 4,770.50
Secretary & Vice President 1995 96,448.95 7,520.00 4,705.50
1994 93,175.14 7,375.00 3,256.00
John S. Tootle (3) 1996 110,557.60 6,200.00 5116.60
Chief Financial Officer, Treasurer, 1995 107,677.54 9,340.00 5,154.90
Vice President of Finance, Secretary 1994 104,294.16 8,825.00 4,401.20
</TABLE>
(1) Mr. Brady was hired as President of the Company, effective November 6,
1995.
(2) Mr. Rose's employment with the Company terminated on August 15, 1996. In
accordance with his severance agreement, $20,855 of his severance pay has
been deferred until 1997.
(3) Following Mr. Rose's departure from the Company, Mr. Tootle assumed the
position of Secretary.
PENSION PLAN
The Company has a non-contributory defined benefit pension plan (the
"Defined Benefit Plan"). Benefits are determined under a formula applied
uniformly to all employees, regardless of position, and amounts dependent on
length of service and cash compensation received by a particular employee.
An employee's interest in the Defined Benefit Plan becomes vested after
completing at least five years of service with the Company. Benefits are
payable monthly upon retirement. The benefits listed in the following table
are not subject to any deduction for Social Security or other offset amounts.
The following table illustrates the estimated annual benefits payable upon
retirement for persons in the earnings classifications with years of service
as shown.
12
<PAGE>
<TABLE>
<CAPTION>
AVERAGE
ANNUAL SALARY
FOR HIGHEST
CONSECUTIVE ANNUAL BENEFITS BASED ON LENGTH OF SERVICE
------------------------------------------------------------------------------------
FIVE YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ------------- -------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 30,000 $ 7,400 $11,100 $14,800 $18,500 $ 22,200 $25,900
40,000 10,200 15,200 20,300 25,400 30,500 35,500
50,000 12,900 19,400 25,800 32,300 38,700 45,200
60,000 15,700 23,500 31,300 39,100 47,000 54,800
70,000 18,400 27,600 36,800 46,000 55,200 64,400
80,000 21,200 31,700 42,300 52,900 63,500 74,000
90,000 23,900 35,900 47,800 59,800 71,700 83,700
100,000 26,700 40,000 53,300 66,600 80,000 93,300
110,000 29,400 44,100 58,800 73,500 88,200 102,900
120,000 32,200 48,200 64,300 80,400 96,500 112,500
130,000 34,900 52,400 69,800 87,300 104,700 122,200
140,000 37,700 56,500 75,300 94,100 113,000 131,800
150,000 40,400 60,600 80,800 101,000 121,200 141,400
160,000 43,200 64,700 86,300 107,900 129,500 151,000
170,000 45,900 68,900 91,800 114,800 137,700 160,700
</TABLE>
Payments which are made by the Company to the Defined Benefit Plan are
computed on an actuarial basis. The benefits described in the table above are
not subject to any deduction for Social Security or other offset amounts.
Contributions in the amount of $539,288 were made to the Defined Benefit Plan
for the plan year ended February 28, 1997. The credited years of service for
Brian J. Brady and John S. Tootle are none and nine years respectively.
CERTAIN TRANSACTIONS
Watson Land Company leases to the Company two well sites for which the
Company paid rent of $38,778 in 1996. This lease continues until 2010 with
annual adjustments to the rental agreement based upon the Consumer Price
Index. Watson Land Company holds 8.8% of the Company's outstanding common
stock. Richard M. Cannon is President and Chief Executive Officer of Watson
Land Company and Thomas W. Huston is employed by Watson Land Company. The
Company believes that the terms of this transaction are at least as favorable
to the Company as they would have been if they had been negotiated with an
unaffiliated third party.
Carson Estate Company leases to the Company one well site for which the
Company paid rent of $13,500 in 1996. Dominguez Energy LP, an affiliate of
Carson Estate Company and Watson Land Company, leases to the Company one well
site for which the Company paid rent of $2,901 in 1996. The leases continue
until 2021 and 2002 respectively with annual adjustments to the rental amount
based upon the Consumer Price Index. Carson Estate Company holds 20.4% of
the Company's outstanding common stock. C. Bradley Olson is President of
Carson Estate Company and Terrill M. Gloege is Senior Vice President and
Chief Financial Officer of Carson Estate Company. The Company believes that
the terms of this transaction are at least as favorable to the Company as
they would have been if they had been negotiated with an unaffiliated third
party.
13
<PAGE>
PROPOSAL II
ADOPTION OF 1997 STOCK INCENTIVE PLAN
(ITEM 2 ON PROXY CARD)
The shareholders are being asked to vote on a proposal to approve the
Company's 1997 Stock Incentive Plan (the "Plan"). The following is a
description of the Plan.
The Company established the Plan, the first equity-based compensation
program in the Company's history, to provide a means whereby officers and
other key employees of the Company or subsidiary corporations may be given an
opportunity to purchase or be awarded shares of the Company's common stock.
The Plan was adopted by the Board on February 25, 1997. The Board believes
that compensation awards under the Plan will play an important role in the
Company's efforts to attract and retain key employees of outstanding ability
and align their interests more closely with those of the Company's
shareholders.
SUMMARY OF 1997 STOCK INCENTIVE PLAN
The principal terms and provisions of the Plan are summarized below.
The summary, however, is not intended to be a complete description of all the
terms of the Plan. A copy of the Plan will be furnished by the Company to
any shareholder upon written request to the Chief Financial Officer at the
Company's executive office in Long Beach, California.
STRUCTURE
The Plan contains provisions for four types of awards: (i) stock options
to purchase shares of the Company's common stock, (ii) payment of awards
earned under the Company's Annual Incentive Plan (AIP) in shares of stock,
(iii) issuance of restricted stock, and (iv) payment of dividend equivalents
which, at the discretion of the Committee, may be granted in conjunction with
stock options, stock payments, or restricted stock awards to provide cash
payments prior to the time the option is exercised or the shares are vested.
ADMINISTRATION
The Plan will be administered by the Compensation Committee of the Board
of Directors or such other committee designated by the Board. The committee
that administers the Plan shall be comprised of three or more Board members
who are non-employee directors of the Company, unless the Board determines
otherwise.
Committee members serve for such period of time as the Board may
determine. The Committee has full authority (subject to the express
provisions of the Plan) to determine the eligible individuals who are to
receive awards under the Plan, the number of shares to be covered by each
award, the date or dates on which the award is to become vested and/or
exercisable, the maximum term for which the award is to remain outstanding,
whether a stock option will be an Incentive Stock Option ("ISO") which
satisfies the requirements of section 422 of the Internal Revenue Code (the
"Code") or a
14
<PAGE>
nonqualified option ("NSO") not intended to meet such requirements, and the
remaining provisions of the award including whether to include a dividend
equivalent award with the award.
ELIGIBILITY
Employees (including officers) who render services to the Company or
subsidiary corporations (whether now existing or subsequently established)
are eligible to receive awards under the Plan.
SECURITIES SUBJECT TO PLAN
The Company may not issue more than 50,000 shares of its common stock
under the Plan. This number will be subject to further adjustment in the
event of subsequent changes to the capital structure of the Company or in the
judgment of the Committee and/or the Board of a business need for additional
shares, subject to shareholder approval. The shares may be made available
either from the Company's authorized but unissued common stock or from common
stock reacquired by the Company, including shares purchased on the open
market. In no event, however, may any one participant in the Plan be awarded
shares and options under the Plan in excess of 25,000 shares over the period
beginning on the effective date of the Plan and ending on the tenth
anniversary of such date. Should an award expire or terminate for any reason
prior to exercise and/or vesting, the shares subject to the portion of the
award not so exercised or vested will be available for subsequent awards
under the Plan.
The holder of an option shall have no shareholder rights with respect to
the shares optioned until such person shall have exercised the option, paid
the exercise price, and become the shareholder of record of the purchased
shares. Any dividend equivalents paid in conjunction with an award will be
treated for tax and accounting purposes as cash compensation and not as a
dividend paid on Company shares.
OPTION PRICE AND EXERCISABILTY
The option exercise price per share may not be less than one hundred
percent (100%) of the fair market value of the Company's common stock on the
grant date. Options granted under the Plan become exercisable at such time or
times, and during such period, as the Committee may determine and set forth
in the instrument evidencing the option grant. In any event, options granted
under the Plan may not have a term in excess of 10 years.
The exercise price for options granted under the Plan may be paid in
cash or in outstanding shares of the Company's common stock. Options may
also be exercised on a cashless basis through the same-day sale of the
purchased shares. The Committee may also permit the optionee to pay the
exercise price through a promissory note payable in installments over a
period of years. The amount financed may include any Federal or state income
and employment taxes incurred by reason of the option exercise.
Options are not assignable or transferable other than by will or the
laws of descent and distribution, and during the optionee's lifetime, the
option may be exercised only by the optionee.
15
<PAGE>
TERMINATION OF SERVICE
Any option held by the optionee at the time of cessation of service will
not remain exercisable beyond the post-service exercise period, if any, that
has been established by the Committee. Under no circumstances may any option
be exercised after the specified expiration date of the option term. Each
such option will normally, during such limited period, be exercisable only to
the extent of the number of shares of the Company's common stock in which the
optionee is vested at the time of cessation of service. The Committee has
complete discretion to extend the period following the optionee's cessation
of service during which his or her outstanding options may be exercised
and/or to accelerate the exercisability of such options in whole or in part.
Such discretion may be exercised at any time while the options remain
outstanding, whether before or after the optionee's actual cessation of
service.
INCENTIVE STOCK OPTIONS
Incentive Stock Options (ISOs) may only be granted to individuals who
are employees of the Company or any subsidiary corporation. During any
calendar year, the aggregate fair market value (determined as of the grant
date(s)) of the Company's common stock for which one or more options granted
to any employee under the Plan (or any other stock-based compensation plan of
the Company or its parent or subsidiary corporations) may for the first time
become exercisable and shall not exceed one hundred thousand dollars
($100,000).
If an employee to whom an ISO is granted is the owner of stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any of its parent or subsidiary
corporations, then the option price per share will be at least one hundred
and ten percent (110%) of the fair market value per share on the grant date,
and the option term will not exceed five (5) years, measured from the grant
date.
STOCK PAYMENTS
Awards under the Company's Annual Incentive Plan (AIP) may be paid
partially in shares of stock. If the shares are made subject to a vesting
schedule, the aggregate dollar amount of the shares will be increased by 8%
times the number of years in the vesting period prior to converting the award
into a number of shares. Unvested stock payment shares are forfeited upon
termination of employment.
RESTRICTED STOCK
Shares of stock may be granted to individuals subject to vesting
requirements and/or performance requirements. Unvested restricted shares or
stock payment shares are forfeited upon termination of employment.
DIVIDEND EQUIVALENTS
The Committee is authorized to issue dividend equivalents in connection
with awards under the Plan. Dividend equivalents provide the holders with cash
payments equal to the dividend amounts paid on the number of shares subject to
unvested and/or unexercised options, unvested stock payment shares, and unvested
restricted shares.
16
<PAGE>
GENERAL PROVISIONS: ACCELERATION OF OPTIONS
Upon the occurrence of certain events that would result in a "change in
control" of the Company, as that term is defined by the Plan, the Committee
has the discretion (i) to provide by the terms of the award or by resolution
adopted prior to the occurrence of such event that the award shall be
immediately exercisable as to all shares covered thereby prior to the
occurrence of such event, or (ii) to provide either by terms of such Award or
by a resolution adopted prior to the occurrence of such event that upon such
event, such Award shall be assumed by the successor corporation, or a parent
or subsidiary thereof, or shall be substituted for by similar options, rights
or awards covering the stock of the successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices.
The acceleration of options in the event of a Corporate Transaction or
change in control may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt, or other
efforts to gain control of the Company.
VALUATION
For purposes of establishing the price of shares awarded or optioned and
for all other valuation purposes under the Plan, the fair market value of a
share of the Company's common stock on any relevant date will be the closing
price per share of Company's common stock on the date immediately prior to
the date on which the value is established, as such price is reported on
NASDAQ. The fair market value on March 24, 1997, as reported on NASDAQ, was
$23.50 per share.
CHANGE IN CAPITALIZATION
In the event any change is made to the Company's common stock issuable
under the Plan by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change effecting the outstanding
Company's common stock as a class without the Company's receipt of
consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Plan, (ii) the maximum number
and/or class of securities for which any one person may be granted over the
specified term, and (iii) the number and/or class of securities and the
exercise price per share in effect under each outstanding option in order to
prevent the dilution or enlargement of benefits thereunder.
Each outstanding option or share which is assumed in connection with a
Change of Control transaction will be appropriately adjusted to apply and
pertain to the number and class of securities which would otherwise have been
issued, in consummation of such Change of Control transaction, to the option
holder had the option been exercised immediately prior to the Change of
Control transaction. Appropriate adjustments will also be made to the option
price payable per share and to the class and number of securities available
for future issuance under the Plan on both an aggregate and a per-participant
basis.
PLAN AMENDMENTS
The Board may amend or modify the Plan in any and all respects, except the
Board may not, without the approval of the Company's shareholders, (i)
materially increase the maximum number of
17
<PAGE>
shares issuable under the Plan (except in connection with certain changes in
capitalization), or (ii) materially modify the eligibility requirements for
awards.
Unless sooner terminated by the Board, the Plan will in all events
terminate ten years after the date of the adoption of the Plan by the Board
of Directors. Any awards outstanding at the time of such termination will
remain in force in accordance with the provisions of the agreements and/or
instruments evidencing such awards.
NEW PLAN BENEFITS
No awards may be made under the Plan prior to the approval of the Plan
by shareholders. Subsequent to shareholder approval of the Plan, awards made
under the Plan in the future are at the discretion of the Committee. No
awards have been made under the Plan, and potential future awards are not
determinable at this time.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS GRANTED UNDER THE PLAN
Options granted under the Plan may be either incentive stock options
(ISOs) that satisfy the requirements of Section 422 of the Internal Revenue
Code or nonqualified stock options (NSOs) that are not intended to meet such
requirements. The Federal income tax treatment for the two types of options
differs as follows:
INCENTIVE STOCK OPTIONS
No taxable income is recognized by the optionee at the time of the
option grant, and no taxable income is generally recognized at the time the
option is exercised. However, the excess of the fair market value of the
purchased shares on the exercise date over the exercise price paid for the
shares generally is includable in alternative minimum taxable income. The
optionee will recognize taxable income in the year in which the purchased
shares are sold or otherwise made the subject of disposition.
For Federal tax purposes, dispositions are divided into two categories:
(i) qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two (2)
years after the grant date of the option and more than one (1) year after the
exercise date. If the optionee fails to satisfy either of these two holding
periods prior to the sale or other disposition of the purchased shares, then
a disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of
those shares on the date the option was exercised over (ii) the exercise
price paid for the shares will be taxable as ordinary income. Any additional
gain recognized upon the disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased
shares, then the Company will be entitled to an income tax deduction for the
taxable year in which such disposition occurs equal to the excess of (i) the
fair market value of such shares on the date the option was exercised over
(ii) the exercise price paid for the shares. In no other instance will the
Company be allowed a deduction with respect to the optionee's disposition of
the purchased shares. The Company anticipates that any
18
<PAGE>
compensation deemed paid by the Company upon one or more disqualifying
dispositions of incentive stock option shares by the Company's executive
officers will remain deductible by the Company.
NONQUALIFIED OPTIONS
No taxable income is recognized by an optionee upon the grant of a
nonqualified option. The optionee will in general recognize ordinary income
in the year in which the option is exercised equal to the excess of the fair
market value of the purchased shares on the exercise date over the exercise
price paid for the shares, and the optionee will be required to satisfy the
tax withholding requirements applicable to such income.
The Company will be entitled to a business expense deduction equal to
the amount of ordinary income recognized by the optionee with respect to the
exercised nonstatutory option. The deduction will in general be allowed for
the taxable year of the Company in which such ordinary income is recognized
by the optionee. The Company anticipates that the compensation deemed paid
by the Company upon the exercise of nonstatutory options with exercise prices
equal to the fair market value of the option shares on the grant date will
remain deductible by the Company.
STOCK PAYMENTS
A participant who is granted shares of Company stock as a stock payment
will recognize ordinary income in the year in which the shares are no longer
subject to forfeiture, generally the date of vesting. The Company will be
entitled to a business expense deduction equal to the fair market value of the
shares as of the date on which the participant's taxable income is determined.
A participant may file an election ("Section 83(b) election") within 30 days of
an award of stock payment shares to recognize the value of the unvested shares
as income in the year of award. Any tax payments resulting from this election
are not refundable in the event the unvested shares are later forfeited due to
employment termination.
RESTRICTED STOCK
A participant who is granted shares of restricted stock will recognize
ordinary income in the year in which the shares are no longer subject to
forfeiture, generally the date of vesting. The Company will be entitled to a
business expense deduction equal to the fair market value of the shares as of
the date on which the participant's taxable income is determined. A participant
may file an election ("Section 83 (b) election") within 30 days of an award of
restricted stock to recognize the value of the unvested shares as income in the
year of award. Any tax payments resulting from this election are not refundable
in the event the unvested shares are later forfeited due to employment
termination.
DIVIDEND EQUIVALENTS
A participant who is granted a dividend equivalent right will recognize
ordinary income in the year of receipt of the payment. The Company will be
entitled to a business expense deduction equal to the cash amount paid for the
taxable year of the Company in which the ordinary income is recognized by the
optionee.
19
<PAGE>
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the shares present or represented
by proxy and entitled to vote at the Annual Meeting is required for approval
of this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE ADOPTION OF THE 1997 STOCK INCENTIVE PLAN.
20
<PAGE>
PROPOSAL III
INDEPENDENT AUDITORS
(ITEM 3 ON PROXY CARD)
The appointment of Arthur Andersen LLP by the Board of Directors is based
on the recommendation of the Audit Committee, which historically has reviewed
both the audit scope and the estimated audit fees and related services for the
coming year.
The Audit Committee has based its recommendation on Arthur Andersen LLP's
special expertise with respect to complex tax and accounting issues applicable
to regulated utilities. Arthur Andersen LLP has audited the Company's financial
statements since 1991.
A representative of Arthur Andersen LLP will attend the meeting and, if he
so desires, make a statement and respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE PROPOSAL TO RATIFY, CONFIRM, AND APPROVE THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS AUDITORS FOR THE COMPANY AND ITS SUBSIDIARIES.
SHAREHOLDER PROPOSALS
Eligible shareholders who wish proposals to be considered for inclusion
in the proxy solicitation materials relating to the 1998 Annual Meeting must
submit such proposals to the Company no later than December 2, 1997. An
eligible shareholder is one who owns at least one percent, or $1,000, in
market value of the voting securities entitled to vote at the 1998 Annual
Meeting of Shareholders and who has held such securities for at least one
year and continues to hold such securities through the date of that Annual
Meeting.
OTHER MATTERS
The Board of Directors knows of no business to be transacted at the
Annual Meeting other than that described above. Should other matters
properly come before the Annual Meeting, including any adjournments thereof,
action may be taken thereon pursuant to the proxies in the form enclosed,
which confer discretionary authority on the persons named therein with
respect to such matters.
21
<PAGE>
ANNUAL REPORT
The 1996 Annual Report to Shareholders is being mailed to shareholders
together with this Proxy Statement. The Company will provide to any
shareholder, without charge, a copy of its Annual Report on form 10-K for the
year ended December 31, 1996, including financial statements and financial
statement schedules appended thereto, upon the written request of any such
shareholder. Requests should be directed to Dominguez Services Corporation,
21718 South Alameda Street, Long Beach, California 90810, Attention: Debra
A. Beliso, Assistant Secretary.
BY ORDER OF THE BOARD OF DIRECTORS
DOMINGUEZ SERVICES CORPORATION
JOHN S. TOOTLE
SECRETARY
April 4, 1997
22
<PAGE>
DOMINGUEZ SERVICES CORPORATION
1997 STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN. Dominguez Services Corporation, a California
corporation, has adopted this 1997 Stock Incentive Plan (the "Plan"), for
the benefit of its eligible employees. The purposes of this Plan are as
follows:
(a) To encourage employees of Dominguez Services Corporation ("the Company"),
its divisions, and subsidiaries (as hereafter defined) to own stock of the
Company so that they may acquire or increase their proprietary interest in
the Company;
(b) To provide an incentive for Employees to further the growth, development,
and financial success of the Company by personally benefiting through the
ownership of Company stock and/or rights which recognize such growth,
development, and financial success; and
(c) To encourage such employees to remain in the employ of the Company and to
put forth maximum efforts with the intention of ensuring the success of the
Company's business.
2. DEFINITIONS. Where the following terms are used in this Plan they shall
have the meaning specified below, unless the context clearly indicates
otherwise.
(a) "Agreement" means a written agreement containing the terms and conditions
of an Award granted pursuant to this Plan.
(b) "AIP Award" means an amount earned by an Employee under the Company's
Annual Incentive Plan (AIP) which may be paid in whole or in part with a
Stock Payment pursuant to Section 8 of this Plan and subject to the
provisions of the AIP.
(c) "Award" means any issuance of a Stock Option, shares of Restricted Stock,
Stock Payment shares, or Dividend Equivalents as defined in this Section 2
and provided to an Employee pursuant to this Plan.
(d) "Award Date" means the date on which the granting of an Award is authorized
by the Committee.
(e) "Board" means the Board of Directors of the Company.
-1-
<PAGE>
(f) "Change of Control" shall be deemed to have occurred if (i) the percentage
of the voting stock of the Company owned by one or more persons ("person"
as that term is defined for purposes of Sections 13(d) and 14(d) of the
Exchange Act), or entities become owner of more than 50 percent of the
outstanding shares of Common Stock (determined on the basis of all
outstanding stock of the Company and not just with regard to a percentage
increase of such persons or entities over their prior interest), whether
such increase occurs by way of a merger, consolidation, redemption, direct
transfer, or sale of stock or otherwise, (ii) the stockholders of the
Company approve a plan of complete liquidation of the Company, or (iii) the
stockholders of the Company approve an agreement for the sale or
disposition of all or substantially all of the assets of the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code include regulations
thereunder and successor provisions and regulations thereto.
(h) "Committee" means the Compensation and Benefits Committee of the Board of
Directors or any such other committee designated by the Board to administer
the Plan.
(i) "Common Stock" means the Common Stock of the Company, par value $1.00 per
share, and any equity security of the Company issued or authorized to be
issued in the future, but excluding any preferred stock or any warrants,
options, or other rights that may be issued to purchase Common Stock.
(j) "Company" means Dominguez Services Corporation or any successor to such
corporation.
(k) "Director" means a member of the Board.
(l) "Dividend Equivalent" means a right to receive the equivalent value (in
cash or Common Stock) of dividends paid on Common Stock awarded under
Section 9 of this Plan.
(m) "Employee" means any regular full-time employee of the Company or any of
its Subsidiaries (as defined in accordance with Section 3401(c) of the
Code), including those who are officers of the Company or a Subsidiary.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to any provision of the Exchange Act include rules thereunder
and successor provisions and rules thereto.
-2-
<PAGE>
(o) "Fair Market Value" means, as of any given date, (i) the closing sale price
of a share of the Company's common stock on the principal exchange on which
shares of Common Stock are then trading, if any, on such date, or if shares
were not traded on such date, then on the closest preceding date on which a
trade occurred, or (ii) if such stock is not traded on an exchange but is
quoted on NASDAQ or a successor quotation system, (A) the last sales price
(if the stock is then listed as a National Market Issue under the NASDAQ
National Market System) or (B) the mean between the closing representative
bid and asked prices (in all other cases) for the stock on that date as
reported by NASDAQ or such successor quotation system; or (iii) if such
stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked
prices for the stock on such date as determined in good faith by the Board;
or (iv) if the Company's stock is not publicly traded, the fair market
value established in good faith by the Board.
(p) "Grantee" means an Employee who has been selected as a Participant in the
Plan and has received an Award.
(q) "Incentive Stock Option" or "ISO" means a Stock Option which conforms to
the applicable provisions of Section 422 of the Code and which is
designated as an Incentive Stock Option by the Committee.
(r) "Nonqualified Stock Option" or "NSO" means an option other than an
Incentive Stock Option and which is not designated as an Incentive Stock
Option by the Committee.
(s) "Participant" means an Employee determined in the Committee's sole and
absolute discretion to be eligible to receive Awards under this Plan.
(t) "Plan" means the Dominguez Services Corporation 1997 Stock Incentive Plan.
(u) "Restricted Shares" and "Restricted Stock" means Shares issued to a
Participant in the Plan which are subject to one or more sets of
restrictions on transfer as determined by the Committee.
(v) "Rule 16b-3" means that certain Rule 16b-3 under the Exchange Act, as such
Rule may be amended from time to time.
(w) "Stock" means the Common Stock of the Company as defined in this Section 2.
(x) "Stock Option" or "Option" means a Nonqualified Stock Option or Incentive
Stock Option.
-3-
<PAGE>
(y) "Stock Payment" shall mean a payment in the form of shares of Common Stock
made in lieu of all or any portion of compensation earned under the
Company's Annual Incentive Plan (AIP) or any such successor plan, that
would otherwise become payable to an Employee in cash, awarded under
Section 8(a) of this Plan.
(z) "Subsidiary" means any corporation, as defined in Section 425 of the Code
in an unbroken chain of corporations beginning with the Company if each of
the corporations other than the last corporation in the unbroken chain then
owns stock possessing 50 percent or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
(aa) "Ten Percent Stockholder" means an individual who "owns" as defined in
Section 424(d) of the Code stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of: (i) the
Company, or (ii) if applicable, a Subsidiary.
(bb) "Termination of Employment" shall mean the time when the employee-employer
relationship between the Grantee or and the Company or any Subsidiary is
terminated for any reason, including, but not by way of limitation, a
termination by resignation, discharge, death, disability or retirement; but
excluding (i) terminations where there is a simultaneous reemployment,
continuing employment of a Grantee by the Company or any Subsidiary, and
(ii) at the discretion of the Committee, terminations which result in a
temporary severance of the employee-employer relationship, and (iii) at the
discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former employee. The Committee, in its absolute
discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of
limitation, the question of whether a Termination of Employment resulted
from a discharge for good cause, and all questions of whether particular
leaves of absence constitute Terminations of Employment; provided, however,
that, with respect to Incentive Stock Options, a leave of absence, change
in status from an employee to an independent contractor or other change in
the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in
status or other change interrupts employment for the purposes of Section
422(a)(2) of the Code and the then applicable regulations and revenue
rulings under said Section. Nothing in this Plan shall be construed as
limiting or altering the right of the Company or any Subsidiary to
terminate an Employee's employment at any time for any reason whatsoever,
with or without cause.
-4-
<PAGE>
3. SHARES SUBJECT TO PLAN
(a) The aggregate number of shares of Stock which may be issued as Awards under
the Plan shall not exceed fifty thousand (50,000). The shares of Common
Stock issuable upon exercise or granting of such Awards may be either
previously authorized but unissued shares or treasury shares.
No more than five thousand (5,000) shares may be awarded under the Plan in
the form of Restricted Shares. No more than ten thousand (10,000) shares
may be awarded under the Plan in the form of Stock Payments.
(b) The maximum number of shares which may be subject to Awards granted under
the Plan to any individual is twenty five thousand (25,000) (the "Award
Limit"). To the extent required by Section 162(m) of the Code, shares
subject to Awards which are canceled continue to be counted against the
Award Limit and if, after grant of an Option, the price of shares subject
to such Option is reduced, the transaction is treated as a cancellation of
the Option and a grant of a new Option and both the Option deemed to be
canceled and the Option deemed to be granted are counted against the Award
Limit.
(c) If any shares of Stock that have been optioned cease to be subject to a
Stock Option, or if any such shares of Stock that are subject to any
Restricted Stock or Stock Payments granted hereunder are forfeited by the
Grantee, or if any such Stock Option or other Award otherwise terminates
without a payment being made to the participant in the form of Stock, or if
any shares of Stock previously distributed under the Plan are returned to
the Company in connection with the exercise of an Award, such shares shall
again be available for distribution in connection with future Awards under
the Plan, subject to the limitations of this Section 3.
4. ADMINISTRATION
(a) The Plan shall be administered by the Committee which shall consist of not
less than three Directors of the Company designated by the Board; provided,
however, that unless the Board determines otherwise, no director shall be
designated as or continue to be a member of the Committee, unless such
director shall be a "nonemployee director" within the meaning of Rule 16b-3
under the Act (or any successor rule or regulations).
(b) The Committee shall have full and final authority to operate, manage, and
administer the Plan on behalf of the Company. This authority includes, but
is not limited to the following:
-5-
<PAGE>
(i) Determining which Employees shall be eligible for Awards under the
Plan;
(ii) Granting of Awards (conditionally or unconditionally);
(iii)Entering into Stock Option exchanges;
(iv) Directing the Company to make accruals and payments provided for by
the Plan;
(v) Interpreting the Plan; and
(vi) Prescribing, amending, or rescinding rules and regulations relating to
the Plan.
(c) With respect to Awards the Committee shall have full and final authority in
its sole and absolute discretion to:
(i) Determine the time or times at which Awards will be granted;
(ii) Subject to the Award Limit, determine the number of shares to be
subject to such Awards granted to the selected Employees;
(iii)Determine whether such Awards are to be Stock Options or other
forms of Awards allowed under the Plan and whether such Awards are to
qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code; and
(iv) Determine whether an Option shall be and ISO or an NSO;
(v) Determine the exercise price of the shares subject to each Option,
which price shall not be less than the price set forth in Section 6(b)
of the Plan
(vi) Determine the time when each Stock Option shall become
exercisable and the duration of the exercise period which shall not
exceed the maximum period as set forth in Section 6(c) of the Plan
(vii)Determine the terms and conditions of such Awards, consistent
with this Plan; provided, however, that the terms and conditions of
Awards intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall include, but not
be limited to, such terms and conditions as may be necessary to meet
the applicable provisions of Section 162(m) of the Code.
-6-
<PAGE>
(d) Upon the selection of an Employee to be granted an Award, the Committee
shall instruct the Company to issue the Award and may impose such
conditions on the grant of the Awards as the Committee deems appropriate.
Without limiting the generality of the preceding sentence, the Committee
may, in its discretion and on such terms as it deems appropriate, require
as a condition on the grant of an Award to an Employee that the Employee
surrender for cancellation some or all of the Awards which have been
previously granted to him under this Plan or otherwise. An Option, the
grant of which is conditioned upon such surrender, may have an option price
lower (or higher) than the exercise price of such surrendered Option or
other award, may cover the same (or a lesser or greater) number of shares
as such surrendered Option or other award, may contain such other terms as
the Committee deems appropriate, and shall be exercisable in accordance
with its terms, without regard to the number of shares, price, exercise
period or any other term or condition of such surrendered Option or other
award.
5. ELIGIBILITY
Subject to the Award Limit, any Employee selected by the Committee shall be
eligible to be granted an Award. In determining the number of persons to
whom Awards shall be granted and the number of Shares to be covered by each
Award subject to the restrictions of Section 3 of the Plan, the Committee
shall take into account the duties of the respective persons, their present
and potential contributions to the success of the Company and such other
factors as the Committee shall deem in its sole discretion as relevant in
connection with accomplishing the purposes of the Plan.
6. TERMS OF OPTIONS
(a) OPTION AGREEMENT. Each Option shall be evidenced by a written Agreement,
which shall be executed by the Optionee and an authorized officer of the
Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan. Stock Option Agreements
evidencing Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet
the applicable provisions of Section 422 of the Code.
(b) OPTION PRICE. The price per share of the shares subject to each Option
shall be set by the Committee; provided, however, that such price shall be
not less than one hundred percent (100%) of Fair Market Value of a share of
Stock on the date
-7-
<PAGE>
the Option is granted and in the case of an Incentive Stock Option
granted to a Ten Percent Stockholder one hundred and ten percent
(110%) of Fair Market Value of a share of Stock on the date such
Option is granted.
(c) OPTION TERM. The term of an Option shall be set by the Committee in its
discretion; provided, however, that, in the case of Incentive Stock
Options, the term shall not be more than ten (10) years from the date the
Option is granted, or five (5) years from such date if the Option is
granted to a Ten Percent Stockholder. In the case of an Option granted
pursuant to an Agreement without reference to the term of the Option, the
term of each such Option shall be ten (10) years without variation or
acceleration hereunder, except as provided in Section 10 of the Plan.
(d) OPTION VESTING. The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee and
the Committee may determine that an Option may not be exercised in whole or
in part for a specified period after it is granted. At any time after
grant of an Option, the Committee (or the Board) may, in its sole
discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option vests.
(e) OPTION EXERCISABILITY UPON TERMINATION. No portion of an Option which is
unexercisable at Termination of Employment shall thereafter become
exercisable, except as may be otherwise provided by the Committee in the
applicable Agreement.
(f) INCENTIVE STOCK OPTIONS. To the extent that the aggregate Fair Market
Value of stock with respect to which "Incentive Stock Options" (within the
meaning of Section 422 of the Code, but without regard to Section 422(d) of
the Code) are exercisable for the first time by an Optionee during any
calendar year (under the Plan and all other Incentive Stock Option plans of
the Company and any Subsidiary) exceeds $100,000, such Options shall be
treated as Nonqualified Options to the extent required by Section 422 of
the Code. The rule set forth in the preceding sentence shall be applied by
taking Options into account in the order in which they were granted. For
purposes of this Section 6(f), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such stock is granted.
In addition,
(i) Any Incentive Stock Option granted under this Plan may be modified by
the Committee to disqualify such option from treatment as an
"Incentive Stock Option" under Section 422 of the Code.
-8-
<PAGE>
(ii) No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "Incentive Stock Option" under Section 422 of
the Code.
(g) CONSIDERATION. In consideration of the granting of an Option, the Company
may, in its discretion, require the Optionee to agree, in the written Stock
Option Agreement, to remain in the employ of the Company or any Subsidiary
for a period of at last one year after the Option is granted.
7. EXERCISE OF OPTIONS
(a) PARTIAL EXERCISE. An exercisable Option may be exercised in whole or in
part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.
(b) MANNER OF EXERCISE. All or portion of an exercisable Option shall be
deemed exercised upon delivery of all of the following to the Secretary of
the Company or his office:
(i) A written notice complying with the applicable rules established by
the Committee or the Board stating that the Option, or a portion
thereof, is exercised. The notice shall be signed by the Optionee or
other person then entitled to exercise the Option or such portion;
(ii) Such representations and documents as the Committee or the Board, in
its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act of
1933, as amended, and any other federal or state securities laws or
regulations. The Committee or Board may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and
registrars;
(iii)In the event that the Option shall be exercised pursuant to
Section 10(a) by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise
the Option; and
(iv) Full cash payment to the Company for the shares with respect to which
the Option, or portion thereof, is exercised. However, at the
discretion of the Committee the terms of the Options may (i) allow a
delay in payment up to thirty (30) days from the date the Option, or
portion thereof, is exercised; (ii) allow payment, in whole or in
part, through the delivery of
-9-
<PAGE>
shares of Common Stock owned by the Optionee, duly endorsed for
transfer to the Company with a Fair Market Value on the date of
delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part,
through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of
Option exercise equal to the aggregate exercise price of the Option
or exercised portion thereof; (iv) allow payment, in whole or in part,
through the delivery of a full recourse promissory note bearing
interest (at no less than such rate as shall then preclude the
imputation of interest under the Code) and payable upon such terms as
may be prescribed by the Committee or the Board may also prescribe the
form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note
or by a loan from the Company when or where such loan or other
extension of credit is prohibited by law.
(c) CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company shall not be
required to issue or deliver any certificate or certificates for shares of
Stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(i) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed;
(ii) The completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or Board shall, in
its absolute discretion, deem necessary or advisable;
(iii)The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee or Board shall, in
its absolute discretion, determine to be necessary or advisable;
(iv) The lapse of such reasonable period of time following the exercise of
the Option as the Committee or Board may establish from time to time
for reasons of administrative convenience; and
(v) The receipt by the Company of full payment for such shares, including
payment of any applicable withholding tax.
(d) RIGHTS AS STOCKHOLDERS. The holders of Options shall not be, nor have any
of the rights or privileges of, stockholders of the Company in respect of
any
-10-
<PAGE>
shares purchasable upon the exercise of any part of an Option unless
and until certificates representing such shares have been issued by the
Company to such holders, other than any rights granted pursuant to Section
9(a) hereof.
(e) OWNERSHIP AND TRANSFER RESTRICTIONS. The Committee, in its absolute
discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as
it deems appropriate. Any such restriction shall be set forth in the
respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares. The Committee may require the
Employee to give the Company prompt notice of any disposition of shares of
Common Stock acquired by exercise of an Incentive Stock Option within (i)
two years from the date of granting such Option to such Employee or (ii)
one year after the transfer of such shares to such Employee. The Committee
may direct that the certificates evidencing shares acquired by exercise of
an Option refer to such requirement to give prompt notice of disposition.
8. AWARDS OF STOCK PAYMENTS AND RESTRICTED STOCK
(a) STOCK PAYMENTS. Any Employee selected by the Committee may receive Stock
Payments in lieu of cash payments determined under the Company's Annual
Incentive Plan (AIP) in the manner determined from time to time by the
Committee. The number of shares shall be determined by the Committee and
will be based upon the Fair Market Value of Common Stock on the date such
Stock Payment is made.
(b) RESTRICTED STOCK. The Committee may from time to time, in its absolute
discretion select from among the Employees (including Employees who have
previously received other awards under this Plan) such of them as in its
opinion should be awarded Restricted Stock and determine the purchase
price, if any, and other terms and conditions applicable to such Restricted
Stock, consistent with this Plan.
(c) PURCHASE PRICE OF RESTRICTED STOCK. The Committee shall establish the
purchase price, if any, and form of payment for Restricted Stock; provided,
however, that such purchase price shall be no less than the par value of
the Common Stock to be purchased. In all cases, legal consideration shall
be required for each issuance of Restricted Stock.
(c) ISSUANCE OF RESTRICTED SHARES AND STOCK PAYMENTS. Upon the selection of an
Employee to be awarded Stock Payment shares or shares of Restricted Stock,
the Committee shall instruct the Secretary of the Company to
-11-
<PAGE>
issue such shares and may impose such conditions on the issuance of such
shares as it deems appropriate.
(d) STOCK PAYMENT AGREEMENT; RESTRICTED STOCK AGREEMENT. Stock Payments and
awards of Restricted Stock shall be issued only pursuant to a written
Agreement, which shall be executed by the selected Employee and the
Compensation Committee of the Company and which shall contain such terms
and conditions as the Committee shall determine, consistent with this Plan.
(e) CONSIDERATION. As consideration for the issuance of Restricted Stock, in
addition to payment of any purchase price, the Committee, at its
discretion, may ask the Restricted Stockholder to agree, in the written
Restricted Stock Agreement, to remain in the employ of, or to consult for,
the Company or any Subsidiary for a period of at least one year after the
Restricted Stock is issued.
(f) RIGHTS AS STOCKHOLDERS. Upon the delivery of shares of Stock Payment
Shares or shares of Restricted Stock, the Grantee shall have, unless
otherwise provided by the Committee, all the rights of a stockholder with
respect to said shares, subject to the restrictions in the related Stock
Payment Agreement or Restricted Stock Agreement including the right to
receive all dividends and other distributions paid or made with respect to
the shares.
(g) RESTRICTIONS. All Stock Payment Shares and shares of Restricted Stock
issued under this Plan (including any shares received by holders thereof
with respect to Shares as a result of stock dividends, stock splits or any
other form of recapitalization) shall, in the terms of each individual
Agreement, be subject to such restrictions as the Committee shall provide,
which restrictions may include, without limitation, restrictions concerning
voting rights and transferability and restrictions based on duration of
employment with the Company, Company performance and individual
performance. Stock Payment Shares and shares of Restricted Stock may not
be sold or encumbered until all restrictions are terminated or expire.
(h) ESCROW. The Secretary of the Company or such other escrow holder as the
Committee may appoint shall retain physical custody of each certificate
representing unvested Stock Payment Shares and unvested shares of
Restricted Stock until all of the restrictions imposed under the related
Agreement with respect to the Shares evidenced by such certificate expire
or shall have been removed.
(i) LEGEND. In order to enforce the restrictions imposed upon shares of Stock
Payment Shares and Restricted Stock hereunder, the Committee shall cause a
legend or legends to be placed on certificates representing all Stock
Payment
-12-
<PAGE>
Shares and shares of Restricted Stock that are still subject to
restrictions under Agreements, which legend or legends shall make
appropriate reference to the conditions imposed thereby.
9. DIVIDEND EQUIVALENTS
(a) DIVIDEND EQUIVALENTS. Any Employee selected by the Committee may be
granted Dividend Equivalents based on the dividends declared on Common
Stock, to be credited as of dividend payment dates, during the period
between the date an Award is granted to such Employee, and the date Award
is exercised, vests or expires, as determined by the Committee. Such
Dividend Equivalents shall be converted to cash or additional shares of
Common Stock by such formula and at such time and subject to such
limitations as may be determined by the Committee.
(b) DIVIDEND EQUIVALENT AGREEMENT. Each Dividend shall be evidenced by a
written Agreement, which shall be executed by the Grantee and the Committee
and which shall contain such terms and conditions as the Committee shall
determine, consistent with this Plan.
(c) TERM. The term of a Dividend Equivalent shall be set by the Committee in
its discretion but in no event shall the term extend beyond the earlier of
(i) the date on which the Award, or portion thereof, becomes vested or (ii)
the date on which the Option, or portion thereof, is exercised.
(d) CONSIDERATION. In consideration of the granting of a Dividend Equivalent,
the Committee, at its discretion, may ask the Grantee to agree, in a
written Agreement, to remain in the employ of the Company or any Subsidiary
for a period of at least one year after such Dividend Equivalent is
granted.
10. MISCELLANEOUS PROVISIONS
(a) NOT TRANSFERABLE. Awards under this Plan may not be sold, pledged,
assigned, transferred, or hypothecated in any manner other than by will or
the laws of descent and distribution, unless and until such rights or
awards have been exercised, and the Shares underlying such rights or awards
have been issued, and all restrictions applicable to such Shares have
lapsed. No Award or interest or right therein shall be liable for the
debts, contracts or engagements of the Grantee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether
such disposition be voluntary or involuntary or by operation of
-13-
<PAGE>
law by judgment, levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect.
During the lifetime of the Grantee, an Award (or any portion thereof)
granted under the Plan may be exercised or otherwise realized only by the
Grantee or by his guardian or legal representative. After the death of the
Grantee, any exercisable portion of an Option or vested portion of any
other Award may, prior to the time when such portion becomes unexercisable
under the Plan or the applicable Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased
Grantee's will or under the then applicable laws of descent and
distribution.
(b) AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN. This Plan may be wholly
or partially amended or otherwise modified, suspended or terminated at any
time or from time to time by the Board. However, without approval of the
Company's stockholders, no action of the Board may (except as provided in
Section 10(c) of the Plan) increase the limits imposed in Section 3 of the
Plan on the maximum number of Shares which may be issued under this Plan or
modify the Award Limit, and no action may be taken that would otherwise
require stockholder approval as a matter of applicable law, regulation or
rule. No amendment, suspension or termination of this Plan shall, without
the consent of the Grantees currently holding unvested or vested Awards,
alter or impair any rights or obligations under Awards theretofore granted
or awarded, unless the related Agreement itself otherwise expressly so
provides. No Awards may be granted or awarded during any period of
suspension or termination of this Plan, and in no event may an Award be
granted under this Plan after the expiration of ten years from the date the
Plan is adopted by the Board.
(c) CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY. In the event that the
outstanding shares of Common Stock are hereafter changed into or exchanged
for cash or a different number or kind of shares or other securities of the
Company, or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend, or combination of shares, appropriate adjustments shall be made
by the Committee in the number and kind of shares for which Options,
Restricted Stock, Dividend Equivalents, or Stock Payments may be granted,
including adjustments of the limitations in Section 3(a) of the Plan on the
maximum number and kind of shares which may be issued and of the Award
limit described in Section 3(b).
In the event of such a change or exchange, subject to the other provisions
of this Plan, the Committee shall also make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding
Options, Restricted
-14-
<PAGE>
Stock, Dividend Equivalents or Stock Payments, or portions thereof then
unexercised, shall be exercisable and in the number and kind of shares of
outstanding Restricted Shares. Such adjustment shall be made with the
intent that after the change or exchange of shares, each Grantee's and
each Restricted Stockholder's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding
Award may include a necessary or appropriate corresponding adjustment in
the exercise or grant price, but shall be made without change in the total
price applicable to the Award, or the unexercised portion thereof (except
for any change in the aggregate price resulting from rounding-off of share
quantities or prices).
Where an adjustment of the type described above is made to an Incentive
Stock Option under this Section, the adjustment will be made in a manner
which will not be considered a "modification" under the provisions of
subsection 424(h)(3) of the Code.
In the event of a "spin-off" or other substantial distribution of assets of
the Company which has a material diminutive effect upon the Fair Market
Value of the Company's Common Stock, the Committee (or the Board, in the
case of Options granted to Independent Directors) may in its discretion
make an appropriate and equitable adjustment to the Award to reflect such
diminution.
(d) CHANGES IN CONTROL OF THE COMPANY. In the event of a change in control of
the Company:
(i) At the discretion of the Committee, the terms of an Award may provide
that it cannot be exercised after such event.
(ii) In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide either by the terms of such
Award or by a resolution adopted prior to the occurrence of such event
that, for a specified period of time prior to such event, the Award
shall be exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in this Plan or in the provisions of such
Award.
(iii)In its discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide either by terms of such Award
or by a resolution adopted prior to the occurrence of such event that
upon such event, such Award shall be assumed by the successor
corporation, or a parent or subsidiary thereof, or shall be
substituted for by similar options, rights or awards covering the
stock of the successor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and
prices.
-15-
<PAGE>
(e) APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date
of the Board's initial adoption of this Plan. Awards may not be granted
prior to such stockholder approval.
(f) TAX WITHHOLDING. The Company shall be entitled to require payment in cash
or deduction from other compensation payable to each Grantee of any sums
required by federal, state or local tax law to be withheld with respect to
the issuance, vesting or exercise of any Award.
(g) LOANS. The Committee may, in its discretion, extend one or more loans to
Employees in connection with the exercise, receipt, or vesting of an Award
granted under this Plan. The terms and conditions of any such loan shall
be set by the Committee and shall conform to any and all applicable laws,
rules, and regulations.
(h) LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND PERFORMANCE-BASED
COMPENSATION. Notwithstanding any other provision of this Plan, any Award
granted to an Employee who is then subject to Section 16 of the Exchange
Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including
any amendment to Rule 16b-3 of the Exchange Act) that are requirements for
the application of such limitations. Furthermore, notwithstanding any
other provision of this Plan, any Option intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the
Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code)
or any regulations or rulings issued thereunder that are requirements for
qualification as performance-based compensation as described in Section
162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the
extent necessary to conform to such requirements.
(i) EFFECT OF PLAN UPON COMPENSATION PLANS. The adoption of this Plan shall
not affect any other compensation or incentive plans in effect for the
Company or any Subsidiary. Nothing in this Plan shall be construed to
limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees of the Company or any Subsidiary
or (ii) to grant or assume options or other rights otherwise than under
this Plan in connection with any proper corporate purpose including but not
by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of
the business, stock or assets of any corporation, partnership, firm or
association.
-16-
<PAGE>
(j) COMPLIANCE WITH LAWS. This Plan, the granting and vesting of Awards under
this Plan, and the issuance and delivery of shares of Common Stock and the
payment of money under this Plan hereunder are subject to compliance with
all applicable federal and state laws, rules and regulations (including but
not limited to state and federal securities law and federal margin
requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company,
be necessary or advisable in connection therewith. Any securities
delivered under this Plan shall be subject to such restrictions, and the
person acquiring such securities shall, if requested by the Company,
provide such assurances and representations to the Company as the Company
may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan
and Awards hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
(k) HEADINGS. The section and subsection headings are contained herein for
convenience only and are not to serve as a basis for interpretation or
construction of this Plan.
(l) GOVERNING LAW. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State
of California without regard to conflicts of laws thereof.
I hereby certify that the foregoing Plan was duly adopted by the Board of
Directors of Dominguez Services Corporation on February 25, 1997.
Executed on this 25th Day of February, 1997.
/s/ John S. Tootle
-------------------
-17-
<PAGE>
DOMINGUEZ SERVICES CORPORATION
21718 SOUTH ALAMEDA STREET
LONG BEACH, CA 90810-0351
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - MAY 6, 1997
The undersigned hereby appoints Brian J. Brady and John S. Tootle, or
either of them, each with full power of substitution, proxies of the
undersigned to vote all shares of common stock which the undersigned is
entitled to vote at the Company's Annual Meeting of Shareholders, scheduled to
be held on May 6, 1997, and at all adjournments thereof. The proxies have
authority to vote such shares, as specified on the reverse side hereof, (1)
to elect directors and (2) on the other items set forth in the Proxy
Statement. The proxies are further authorized to vote such shares upon any
other business that may properly come before the Annual Meeting or any
adjournments thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
<TABLE>
<CAPTION>
A / X / Please mark your
votes as in this
example.
THE DIRECTORS RECOMMEND A VOTE FOR THE ELECTION OF EACH NOMINEE AND FOR ITEMS 2 AND 3
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THIS RECOMMENDATION UNLESS OTHERWISE SPECIFIED.
<S> <C>
WITHHELD
FOR FOR ALL FOR AGAINST ABSTAIN
Item 1. Nominees: Dwight C. Baum Item 2. Adoption of / / / / / /
Election of / / / / Brian J. Brady 1997 Stock
Directors Richard M. Cannon Incentive Plan.
Terrill M. Gloege
WITHHELD FOR (Write Nominee(s) names Thomas W. Huston Item 3. Appointment of / / / / / /
in the Space Provided below). C. Bradley Olson Arthur Andersen
Langdon W. Owen LLP as Independent
Charles W. Porter Auditors.
- --------------------------------------- Debra L. Reed
This Proxy, when properly executed, will be voted in
the manner directed herein by the undersigned
shareholder.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD
IN THE ENCLOSED ENVELOPE.
NOTE: Change of Address
---------------------------- Change of Address / /
to the left
----------------------------
----------------------------
Signature(s) Date
-------------------------------------------------------------------------------------------------- -----------
Note: [Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such.]
</TABLE>
