<PAGE>
April 3, 1998
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 5, 1998, at 1:00 p.m. California time. The meeting will take
place at the Torrance Marriott, located at 3635 Fashion Way in Torrance,
California. Lunch will be served prior to the Annual Meeting at 12:15 p.m..
Please call (310) 834-2625, ext. 425, to 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 promptly in the envelope provided.
Thank you, and I hope to see you on May 5.
Sincerely,
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 BE HELD MAY 5, 1998
- ------------------------------------------------------------------------------
To the Shareholders of Dominguez Services Corporation:
The 1998 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 5, 1998, at 1:00 p.m. California time to
conduct the following business:
1. Elect nine directors to hold office until the Company's next Annual
Meeting and thereafter until their successors are duly elected and
qualified.
2. 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 for 1998 fiscal year.
3. Transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
The Board of Directors has fixed March 16, 1998, 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 3, 1998
IMPORTANT: To assure your representation at the Annual Meeting, please
indicate your voting instructions on the enclosed proxy card 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
- ------------------------------------------------------------------------------
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 1:00 p.m.
California time on May 5, 1998, 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 3, 1998.
- ------------------------------------------------------------------------------
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 described in this Proxy Statement, for
the appointment of Arthur Andersen LLP as independent auditors of the Company
and its subsidiaries, and at the discretion of management with respect to any
other matters properly presented at the Annual Meeting or any adjournments
thereof.
1
<PAGE>
- ------------------------------------------------------------------------------
VOTING SECURITIES
- ------------------------------------------------------------------------------
Only holders of record of the Company's common stock at the close of
business on March 16, 1998, are entitled to notice of and to vote at the
Annual Meeting. At that date, 1,506,512 shares of common stock were
outstanding; also at that date, there were 297 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 general administrative and executive offices are located at
21718 South Alameda Street in Carson, California.
2
<PAGE>
- ------------------------------------------------------------------------------
PRINCIPAL SECURITIES HOLDERS
- ------------------------------------------------------------------------------
The following table sets forth information as of March 16, 1998, 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.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF SHARES AND COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER NATURE OF BENEFICIAL OWNERSHIP STOCK
------------------------------------ ------------------------------ ----------
<S> <C> <C>
Carson Estate Company 307,657 20.4%
18710 South Wilmington, Suite 200, Rancho
Dominguez, CA 90220
Watson Land Company 132,894 8.8%
515 South Figueroa Street, Suite 1910, Los
Angeles, CA 90071
Dwight C. Baum 33,750(1) 2.2%
200 South Los Robles Avenue, Suite 645, Pasadena,
CA 91101-2431
Brian J. Brady 1,530 *
21718 South Alameda Street, Long Beach, CA 90810
Richard M. Cannon 132,894(2) 8.8%
22010 South Wilmington Avenue, Suite 400, Carson,
CA 90745
Terrill M. Gloege None *
18710 South Wilmington Avenue, Suite 200, Rancho
Dominguez, CA 90220
Thomas W. Huston 750 *
22010 South Wilmington Avenue, Suite 400, Carson,
CA 90745
C. Bradley Olson 307,657(3) 20.4%
18710 South Wilmington suite 200, Rancho Dominguez,
CA 90220
Langdon W. Owen 9,300 *
1300 Bristol North, Suite 290, Newport Beach,
CA 92660
Charles W. Porter 8,356 *
400 Paseo Dorado, Long Beach, CA 90803
Debra L. Reed 150 *
555 West 5th Street, Los Angeles, CA 90013
John S. Tootle 3,791 *
21718 South Alameda Street, Long Beach, CA 90810
All Directors and Officers as a group 498,181(4) 33.0%
(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.
3
<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 1997, except as set forth below.
Thomas W. Huston, a director of the Company, inadvertently failed to
file timely a Form 4 Statement of Change of Beneficial Ownership of
Securities with the Securities and Exchange Commission disclosing the sale of
500 shares of the Company common stock in November 1997. Mr. Huston
subsequently filed a Form 4 disclosing this sale.
4
<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 1999 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 THE COMPANY SINCE
---- --- ----------------------------------------------------- --------
<S> <C> <C> <C>
Dwight C. Baum 85 Senior Vice President of Paine Webber Incorporated 1962
(and predecessors), a brokerage house.
Brian J. Brady 49 President, Chief Executive Officer, and Chairman of 1995
the Board of the Company since May 1996; President
and Chief Executive Officer of the Company since
November 1995; 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 56 Chief Executive Officer and President of Watson Land 1991
Company, a privately held developer and owner of
industrial centers and buildings, since 1994; prior,
President of Watson Land Company since 1989.
Terrill M. Gloege 62 Senior Vice President, Chief Financial Officer of 1991
Carson Estate Company and affiliated entities, a
privately held investment company since 1989.
Thomas W. Huston 36 Director of Leasing and Asset Management for Watson 1995
Land Company since 1995; prior, Assistant Director of
Leasing and Asset Management, and prior Leasing Agent
for Watson Land Company.
C. Bradley Olson 57 President of Carson Estate Company since 1992; prior, 1993
Division President and Corporate Vice President of
The Irvine Company since 1984.
Langdon W. Owen 67 President of Don Owen & Associates since 1973; 1994
Consulting Engineer and Financial Advisor.
Charles W. Porter 67 Business Consultant since January 1996; prior, 1977
President, Chief Executive Officer of the Company
since 1980.
Debra L. Reed 41 Senior Vice President of Southern California Gas 1995
Company, since 1995; prior, Vice President, Southern
California Gas Company since 1988.
</TABLE>
5
<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 1997, the Board of Directors held twelve meetings. All nominated
directors attended more than eighty percent of the meetings.
The Company has a standing Audit Committee. 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 1997.
The Company has a standing Executive Compensation Committee. The current
members of the Executive Compensation Committee are Terrill M. Gloege, Thomas W.
Huston, and Debra L. Reed. The Executive Compensation Committee annually
recommends to the Board of Directors the compensation for each officer,
including the President, for the ensuing year. During 1997, the Compensation
Committee met five times.
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 1997), the
Company paid each of its directors an annual fee of $4,200, plus $500 for each
meeting of the Board of Directors. In addition, Committee Chairpersons received
$750 for each committee meeting attended, and Committee members were paid $500
for each committee meeting attended.
6
<PAGE>
- -------------------------------------------------------------------------------
COMPENSATION POLICY
- -------------------------------------------------------------------------------
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 Executive 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. In addition, the
Board of Directors may also use long-term incentives to align executive
interests with the long-term interests of shareholders and put more compensation
at risk. This long-tern incentive component was first used in 1997, after
shareholder approval, with the grant of stock options in lieu of base salary
increases for executives.
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.
In 1997 the Board of Directors adopted and the shareholders approved, the 1997
Stock Incentive Plan ("SIP") which provides a longer-term reward element and
encourages 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 1997, 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.
7
<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, AIP
The current AIP, approved by the Board of Directors in 1993 and revised in
1997, 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.
8
<PAGE>
For 1997, 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.
The 1997 AIP awards will be paid in cash. In the future, a portion of AIP
awards may, at the discretion of the Board of Directors, be paid in shares of
common stock (the "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
In 1997, the Board adopted and shareholders approved the SIP. This SIP
provides for awards of stock options, payment of AIP awards in shares of the
Company's common stock, restricted stock awards, and dividend equivalent
payments.
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.
In June 1997, the Company granted to five executive managers 25,800
options under the SIP (adjusted to reflect 3-for-2 stock split effected
January 1998). The options were issued at fair market value with the exercise
price equal to the Company's stock price at the date of grant (which was
$16.33 adjusted for 3-for-2 stock split effected January 1998). Options vest
in even increments over the next four years; are exercisable in whole or in
installments; and expire ten years from date of grant. The Committee does
not anticipate, and has no plans to make, any awards of restricted stock.
All of the options were outstanding at December 31, 1997. The Company did
not provide for any dividend equivalent to the executive managers.
9
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
To determine the compensation arrangements for the Chief Executive Officer
in 1997, 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.
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. In 1997, Mr. Brady's
base salary remained unchanged. Under the stock option, Mr. Brady was awarded
and granted 9,000 options (adjusted to reflect the 3-for-2 stock split effected
January 2, 1998), vest in even increment, over the next four years.
The CEO's incentive compensation award of $16,200 paid in 1997 was entirely
dependent upon the Company's financial performance and his individual
performance during 1996 as assessed by the Board of Directors and did not
include any provisions for guaranteed payments. Each year, the AIP is
reevaluated with a new achievement threshold and new targets for financial
performance. The Committee will determine in 1998 the AIP award for Mr. Brady
for fiscal 1997 based on the same incentive plan as for all other officers,
reflecting performance in 1997.
DEBRA L. REED, CHAIRPERSON
TERRILL M. GLOEGE
THOMAS W. HUSTON
MEMBERS OF THE COMPENSATION COMMITTEE
10
<PAGE>
- -------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
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 THE COMPANY YEARS AS OFFICER
- ---- --- ------------------------- ----------------
<S> <C> <C> <C>
Brian J. Brady 49 President, Chief Executive Officer, 2
and Chairman of the Board
John S. Tootle 43 Chief Financial Officer, Vice President 11
of Finance, Treasurer and Secretary
</TABLE>
The following table sets forth the compensation paid by the Company in 1997
and its two prior fiscal years to the Company's Chief Executive Officer and one
other executive officer of the Company whose total annual salary and bonus
exceeded $100,000 in 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
AUTO & OTHER
NAME & PRINCIPAL POSITION YEAR SALARY(2) BONUS COMPENSATION
- ------------------------- ---- --------- ----- ------------
<S> <C> <C> <C> <C>
Brian J. Brady(1) 1997 $150,009.60 $16,200.00 $3,920.54
President & Chief Executive Officer 1996 144,696.40 2,000.00 8,094.00
1995 19,005.03 - 612.30
John S. Tootle 1997 113,297.61 8,800.00 4,140.23
Chief Financial Officer, Treasurer, 1996 110,557.60 6,200.00 5,116.60
Vice President of Finance, Secretary 1995 107,677.54 9,340.00 5,154.90
</TABLE>
(1) Mr. Brady was hired as President of the Company, effective November 6, 1995.
(2) Mister Brady and Tootle were granted options during 1997 that are described
in the Options and Long-Term Incentive Plans - Awards table described below.
OPTIONS AND LONG-TERM INCENTIVE PLANS - AWARDS IN 1997 FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCES OR
SECURITIES OTHER PERIOD UNTIL EXPIRATION
NAME UNDERLYING OPTIONS MATURATION OR PAYOUT DATE
---- ------------------ -------------------- --------------
<S> <C> <C> <C>
Brian J. Brady 9,000 2,250 options every June 23, 2007
year for the next
four years.
John S. Tootle 5,400 1,350 options every June 23, 2007
year for the next
four years.
</TABLE>
11
<PAGE>
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. The annual benefits is
dependent on length of service and cash compensation received by the employee.
An employee's interest in the Defined Benefit Plan becomes fully vested
after completing full five plan 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.
<TABLE>
<CAPTION>
AVERAGE
ANNUAL
SALARY
FOR
HIGHEST ANNUAL BENEFITS BASED ON LENGTH OF SERVICE
CONSECUTIVE ------------------------------------------
5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 30,000 $ 8,100 $12,200 $16,200 $ 20,300 $ 24,300 $ 28,400
40,000 10,800 16,200 21,600 27,000 32,400 37,800
50,000 13,500 20,300 27,000 33,800 40,500 47,300
60,000 16,200 24,300 32,400 40,500 48,600 56,700
70,000 18,900 28,400 37,800 47,300 56,700 66,200
80,000 21,600 32,400 43,200 54,000 64,800 75,600
90,000 24,300 36,500 48,600 60,800 72,900 85,100
100,000 27,000 40,500 54,000 67,500 81,000 94,500
110,000 29,700 44,600 59,400 74,300 89,100 104,000
120,000 32,400 48,600 64,800 81,000 97,200 113,400
130,000 35,100 52,700 70,200 87,800 105,300 122,900
140,000 37,800 56,700 75,600 94,500 113,400 132,300
150,000 40,500 60,800 81,000 101,300 121,500 141,800
160,000 43,200 64,800 86,400 108,000 129,600 151,200
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. No
contributions were made to the Defined Benefit Plan for the plan year ended
February 28, 1998. The vested plan years of service for Brian J. Brady and John
S. Tootle are one and ten years respectively.
12
<PAGE>
- --------------------------------------------------------------------------------
CERTAIN TRANSACTIONS
- --------------------------------------------------------------------------------
Watson Land Company leases to the Company two well sites for which the
Company paid rent of $39,517 in 1997. 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 these transactions 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 $18,580 in 1997. 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 $4,174 in 1997. 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 these transactions are at least as favorable to the Company as they would
have been if they had been negotiated with an unaffiliated third party.
The Company has a twenty percent ownership interest in Chemical Services
Company ("CSC") with an option to acquire additional forty percent through the
year 2001. The Company purchases chlorine generation equipment and supplies
from CSC. In 1997, purchases from CSC totaled approximately $733,000. The
Company believes that the terms of these purchases 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
INDEPENDENT AUDITORS
(Item 2 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 1989.
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 1999 Annual Meeting must submit
such proposals to the Company no later than December 4, 1998. 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 1999 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.
14
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
The 1997 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, 1997, 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: John S.
Tootle, Secretary. This report is also available on the EDGAR web site
address http:/www.sec.gov.
BY ORDER OF THE BOARD OF DIRECTORS
JOHN S. TOOTLE
SECRETARY
APRIL 3, 1998
15
<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 5, 1998
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 5, 1998, 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) to appoint independent auditors. 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>
- PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED -
- --------------------------------------------------------------------------------
/ X / PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
THE DIRECTORS RECOMMEND A VOTE FOR THE ELECTION OF EACH NOMINEE AND FOR ITEM 2.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THIS
RECOMMENDATION UNLESS OTHERWISE SPECIFIED.
WITHHELD
FOR FOR ALL
ITEM 1. NOMINEES: Dwight C. Baum
ELECTION OF / / / / Brian J. Brady
DIRECTORS Richard M. Cannon
Terrill M. Gloege
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO Thomas W. Huston
VOTE FOR ANY INDIVIDUAL NOMINEE(S), STRIKE C. Bradley Olson
A LINE THROUGH THAT NOMINEE(S) NAME Langdon W. Owen
AT RIGHT. Charles W. Porter
Debra L. Reed
FOR AGAINST ABSTAIN
2. Appointment of Arthur Andersen LLP
as Independent Auditors. / / / / / /
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 1998
------------------------------------------------ -----------
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.)
