<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10 1996
REGISTRATION NO. 33-64310
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
POST-EFFECTIVE AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WATSON GENERAL CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-2873757
(State of incorporation) (I.R.S. Employer Identification No.)
32-B MAUCHLY
IRVINE, CALIFORNIA 92618
(714) 727-4020
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
RONALD CRANE, PRESIDENT
WATSON GENERAL CORPORATION
32-B MAUCHLY
IRVINE, CALIFORNIA 92618
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
Edward T. Swanson, Esq.
Swanson & Meepos
100 Wilshire Boulevard, Suite 200
Santa Monica, California 90401-1113
(310) 576-4841
--------------------------------------------
If the only securities being on this Form are being offered pursuant to dividend
or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [x]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
<PAGE> 2
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 3
PROSPECTUS
397,880 SHARES OF COMMON STOCK
WATSON GENERAL CORPORATION
This Prospectus, on behalf of Watson General Corporation (the
"Company"), is to be used in connection with offers and sales of up to an
aggregate of 397,880 shares (the "Shares") of the Company's common stock, no par
value per share ("Common Stock") by certain selling shareholders (the "Selling
Shareholders") as follows: (i) 147,880 shares of the Common Stock underlying the
Warrants purchased by the Selling Shareholders pursuant to the Company's Unit
Private Placement concluded in January 1993, which Warrants are exercisable at
$3.50 per share and expire at 11:59 p.m., New York time, on December 31, 1997;
(ii) 200,000 shares of Common Stock underlying the option (the "Selling Agent
Option") granted to the Placement Agent for the Unit Private Placement, Drake
Capital Securities, Inc. ("Drake"); and (iii) 50,000 shares of Common Stock
underlying the Warrants included in the Selling Agent Option.
The Shares being offered by the Selling Shareholders may be offered
from time to time in transactions in the over-the-counter market, in negotiated
transactions, or a combination of such methods of sale, at prices relating to
prevailing market prices or at negotiated prices. The Selling Shareholders may
effect such transactions by selling the Shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Shares for whom such broker-dealers may act as agents or to whom they
sell as principals, or both (which compensation as to a particular broker-dealer
might be in excess of customary commissions).
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Shareholders. However, the Company will receive funds of
up to $992,580 from exercise of Warrants, the Selling Agent Option, and the
Warrants issuable upon exercise of the Selling Agent Option. See "Selling
Shareholders." There is no assurance that any Warrants or the Selling Agent
Option will be exercised. The Company has agreed to bear certain expenses (other
than underwriting discounts and commissions and brokerage commissions and fees)
in connection with the registration and sale of the Shares being offered by the
Selling Shareholders, which expenses are estimated to be approximately $45,000.
The Common Stock is traded on NASDAQ under the symbol: WGEN. On
September __, 1996, the closing sales price per share for the Common Stock as
reported by NASDAQ was $-----.
--------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
THESE SECURITIES SHOULD BE PURCHASED ONLY BY THOSE PERSONS WHO CAN AFFORD A LOSS
OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS."
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------
THE DATE OF THIS PROSPECTUS IS SEPTEMBER __, 1996
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THE PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, AND SELLING SHAREHOLDER, OR BY ANY OTHER PERSON. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES TO ANY PERSON OR BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE
MADE.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
Available Information .................................. 2
Incorporation of Certain Documents by
Reference ........................................... 3
Risk Factors ........................................... 3
The Company ............................................ 5
Plan of Distribution ................................... 7
Selling Shareholders ................................... 7
Indemnification of Directors, Officers and
Controlling Persons Against Securities
Act Liabilities ..................................... 9
Legal Matters .......................................... 9
Experts ................................................ 9
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 75 Park Place,
New York 10007 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can be obtained by mail from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, the Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers such as the Company that file electronically with the
Commission; the address for such site is http://www.sec.gov.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as
<PAGE> 5
amended (the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No 0-16011)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the Fiscal Year Ended
September 30, 1995.
2. The Company's Quarterly Reports on Form 10-QSB for the Quarters
Ended December 31, 1995, March 31, 1996 and June 30, 1996.
3. The Company's Current Reports on Form 8-K as filed with the
Commission on January 10, 1996; on February 13, 1996 and amended on
April 15 and May 2, 1996; and on August 12, 1996.
4. The Company's Reports on Form 10-C as filed with the Commission on
February 2, 1995, December 28, 1995 and February 8, 1996.
5. The description of the Company's Common Stock contained in its
registration statement on Form 10 filed with the Commission on June
29, 1987, as amended by Amendment No. 2 on Form 8 filed with the
Commission on October 30, 1987.
6. All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the
Shares.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the request of any such person, a copy of
any or all of the documents which are incorporated herein by reference (other
than exhibits to such information, unless such exhibits are specifically
incorporated by reference into the information this Prospectus incorporates).
Requests should be directed to Watson General Corporation, 32-B Mauchly, Irvine,
California 92718, Attention: Joseph L. Christoffel, Chief Financial Officer,
telephone (714) 727-4020.
<PAGE> 6
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following factors in
evaluating the Company and its business before purchasing the shares of Common
Stock offered hereby.
NO ASSURANCE AS TO FUTURE OPERATIONS.
There is no assurance that the Company will be able to generate
earnings or successfully expand its operations in the future. To date, the
Company has not generated net income from continuing operations, and continues
to generate net losses from operations; the Company has been able to sustain its
operations only through the periodic sale of equity. The Company cannot predict
with any certainty the success or failure of its present and future operations.
DEPENDENCE ON KEY PERSONNEL.
The Company believes that its success depends to a significant extent
on the efforts and abilities of certain of its senior management. The loss of
key employees could have a material adverse effect on the Company. There can be
no assurance that satisfactory individuals will be available to replace existing
management should replacement become necessary.
NATURE OF INDUSTRY; DEPENDENCY ON GOVERNMENT REGULATIONS TO CREATE DEMAND FOR
THE COMPANY'S PRODUCTS AND SERVICES.
The market for the Company's products and services is created
principally by new governmental regulations. The Environmental Protection Agency
("EPA") has cited estimates that as many as 25 percent registered of underground
storage tanks ("USTs") have leaked or are leaking. In 1984 Congress responded to
the problem by amending the Resource Conservation and Recovery Act of 1976 to
require the EPA to develop regulations to protect human health and property from
leaking USTs. Regulations became effective in December 1988, with all USTs
obligated to meet specified requirements by December 1998. If these regulations
are delayed or not enforced, the demand for the Company's products and services
could be materially adversely affected.
In January 1996, it was reported that the State of California was
halting cleanup operations at underground gas tank sites more than 350 feet from
drinking water wells. This decision was made after a report conducted by the
Lawrence Livermore National Laboratory concluded that natural processes in the
ground remove most of the toxic ingredients left by underground petroleum leaks.
Such halt could adversely affect the business of the Company's subsidiary,
Toxguard Systems, Inc.
CONTROL BY PRESENT MANAGEMENT.
As of the date of this Prospectus, present officers and directors own
or control beneficially approximately 31% of the Company's Common Stock and
accordingly may be in a position to substantially influence the election of a
majority of the Company's directors, and may otherwise control the Company. As
part of the acquisition of EnviroQuest Technologies, Ltd. ("EnviroQuest"), the
Board of Directors of the Company elected John Marencik and Roger Sherwood to
the Board of Directors, and the Company agreed to use its best efforts to ensure
that they continue to be elected to the Board of Directors of the Company during
their employment by EnviroQuest. John Marencik subsequently resigned from the
Board of Directors and released the Company from its obligation to elect him to
the Board.
<PAGE> 7
COMPETITION.
Management of the Company is aware of at least two major monitoring
panel manufacturers who offer their own software monitoring system. Their
software is written only for use by their own equipment, whereas the Company's
software currently interfaces with all major brands. Major oil companies could
decide to build proprietary systems for their own station outlets, and such
software could be designed to directly compete with the Company's products
services. In addition, third parties could enter this market at any time,
possibly with substantially greater resources than the Company. Many of its
competitors have substantially greater resources than the Company.
To the knowledge of the Company, there are five national and four regional firms
in the Statistical Inventory Reconciliation (SIR) Services business today. Other
SIR systems may be in development. Watson Systems, Inc.'s SIRAS is believed to
be the only computer program to have received its third party certifications
through Midwest Research Institute (MRI), which management of the Company
considers to be the premier certifying entity in this country. SIRAS is
certified not only for method (as applied by trained statistical experts), but
also as a self-interpreting software program which can be operated by
non-statistical staff.
FINANCING AND CASH FLOW REQUIREMENTS.
The Company believes that proceeds of certain sales of Common Stock
during the past twelve months should be sufficient to satisfy its cash flow
requirements for at least a twelve-month period of time. In the event that the
Company is not successful in generating cash flow from its operations to sustain
such operations, the Company may need to secure additional financing to develop
and maintain its business. There can be no assurance that additional financing,
either through the sale of placement of debt or equity, will be available on
terms acceptable to the Company.
RECENT OFFERINGS BY THE COMPANY.
During late 1995 and early 1996, the Company sold a total of 1,114,287
shares of Common Stock to three accredited investors for an aggregate of
$1,950,000 ($1.75 per share) in private transactions in order to provide
sufficient funds for the pending acquisition of EnviroQuest and to provide
additional working capital for the Company. In connection with the transactions,
the Company also issued an aggregate of 60,000 shares of Common Stock to two
finders.
SHARES ELIGIBLE FOR SALE UNDER RULE 144
As of August 30, 1996, there were approximately 415,000 restricted
shares of Common Stock outstanding which had been held for more than two years
and were eligible for resale pursuant to Rule 144 under the Securities Act of
1933. Although Rule 144, with certain exceptions, imposes restrictions on the
number of shares which may be sold pursuant to that rule by a person during a
three-month period, the sale of a significant number of the shares eligible for
resale under Rule 144 could adversely affect the market for the Company's Common
Stock.
PENDING LITIGATION
In National Environmental Tank Testing Company, a/k/a Nettco, Inc. v.
EnviroQuest Technologies, Ltd. et al., plaintiff has filed suit against
EnviroQuest (now known as Watson Systems, Inc.) and John Marencik on grounds of
breach of contract, intentional interference with business relationships and
fraud. Actual damages in excess of $25,000 and punitive damages of $5,000,000
are sought by plaintiff. The case presently is in discovery stages. Based upon
the information which counsel for EnviroQuest has obtained to date relative to
the testimony of witnesses associated with this matter, the Company believes
that a successful claim against EnviroQuest for actual damages is possible but
not likely.
<PAGE> 8
NO DIVIDENDS AND NONE ANTICIPATED.
The Company has not paid any dividends, nor does it contemplate or
anticipate paying dividends upon its Common Stock in the foreseeable future.
THE COMPANY
Watson General Corporation (the "Company"), a California corporation
based in Irvine, California, considers itself to be a leader in the emerging
industry of remote monitoring software. Environmental consulting and
construction project management provide a significant portion of the Company's
business today. However, the Company believes that it has a special niche in
offsite monitoring of underground storage tanks because its proprietary software
is capable of interfacing with virtually every leak detection device presently
being manufactured. Monthly revenues are derived from software sales/support and
for performing the logistics of monitoring if customers decide to outsource. The
Company is evolving from an environmental consulting firm, with emphasis on
services for the petroleum industry, to a developer of proprietary software for
monitoring leakage and inventory levels in underground storage tanks. This
software not only assists in compliance with regulations but also provides
critical management information. The Company's primary market is
petroleum-related. Customers include federal and municipal agencies and oil,
transportation and retail companies.
The acquisition in January 1996 of EnviroQuest Technologies, Ltd. (the
name of which subsequently was changed to Watson Systems, Inc. ("WSI"), a
national provider of statistical inventory reconciliation services, was effected
to complement the Company's existing operations and enhance the Company's unique
position in the management service industry, with comprehensive solutions for
multiple unit offsite monitoring needs.
The Company's goal is to increase its revenues significantly and
establish long-term profitability by:
- Building long-term relationships with customers and, in the
process, develop strong recurring revenue streams with
value-added or additional services.
- Focusing on niches where there is currently little or no
competition.
- Furthering growth by acquiring businesses that add market
share and/or technologies to the Company, and by forming
strategic alliances to market and deliver the Company's
proprietary products and services.
The Company currently is engaged in niche market environmental
businesses through its operating subsidiaries:
Subsidiary Product/Service
Watson Systems, Inc. Remote monitoring software and
statistical inventory reconciliation
Toxguard Systems, Inc. Environmental consulting and project
management
Toxguard Fluid Technologies, Inc. On-site antifreeze recycling
<PAGE> 9
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Shareholders (consisting of
shares of Common Stock receivable upon exercise of the Warrants, the Selling
Agent Option and the Warrants included in the Selling Agent Option) may be sold
from time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and upon terms then prevailing, or at prices related to the
then-current market price, or in negotiated transactions. The Shares offered
hereby by Selling Shareholders may be sold by one or more of the following
methods, without limitation: (a) ordinary brokerage transactions and
transactions in which the broker solicits the purchaser; (b) a block trade in
which a broker or dealer so engaged will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (c) purchases by a broker or dealer as principal and resale by such
broker or dealer for its own account pursuant to this Prospectus; and (d) direct
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by Selling Shareholders may arrange
for other brokers or dealers to participate. Such brokers or dealers may receive
commissions or discounts from Selling Shareholders in amounts to be negotiated
immediately prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In addition, any
securities covered by this Prospectus that qualify for sale pursuant to Rule 144
might be sold under Rule 144 rather than pursuant to this Prospectus.
The reoffers or resales of the shares to which this Prospectus relates
may require qualification or registration under state "blue sky" laws unless an
appropriate exemption exists. The Company currently intends to take such
reasonable actions, if any, as may be necessary for the securities to be
reoffered or resold in the states of California and New York, but, depending on
the circumstances, may not take any action to qualify or register the securities
for reoffer or resale in any other jurisdiction.
The Selling Shareholders will pay the expenses of their counsel, if
any, as well as any commissions, discounts or other compensation payable to
brokers or dealers to effect sales, and the Company will pay the other expenses
of this offering, estimated to be approximately $45,000.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to the Common Stock of the Company for
a period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, each Selling Shareholder will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including without limitation Rules 10b-6 and 10b-7,
which provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Shareholders.
SELLING SHAREHOLDERS
The Selling Shareholders consist of persons who purchased Units in the
Unit Private Placement concluded in January 1993, Drake Capital Securities, Inc.
("Drake"), which acted as the placement agent for the Company in connection with
the Unit Private Placement, and two officers of Drake who have received a
portion of the Selling Agent Option granted to Drake. Each Unit consisted of
four shares of common Stock and one Warrant to purchase one share of Common
Stock at the exercise price of $3.50 per share until December 31, 1995, which
date subsequently was extended to December 31, 1997. The Selling Agent Option
entitles Drake to purchase up to 50,000 Units at a price of $6 per Unit (an
aggregate of 200,000 shares of Common Stock and 50,000 Warrants).
The following table sets forth information concerning the beneficial
ownership of Common Stock of the Selling Shareholders as of the date of this
Prospectus Such information in the tables was furnished to the Company by the
individual Selling Shareholders.
<PAGE> 10
<TABLE>
<CAPTION>
NAME OF SELLING SHAREHOLDER COMMON STOCK BENEFICIALLY OWNED(1)
UNDERLYING
WARRANTS COMMON STOCK
PRIOR TO REGISTERED AFTER THE OWNED BEFORE REGISTERED
THE OFFERING HEREWITH OFFERING THE OFFERING HEREWITH
------------ -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Hung Ming Chen 15,000 0 15,000 10,000 10,000
Chin-Wen Lai 70,000 0 70,000 17,500 17,500
Seligson Living Trust 0 0 0 2,080 2,080
Bernice J. Scott 0 0 0 2,500 2,500
Michael S. Raya 20,000 0 20,000 5,000 5,000
Arthur E. & Sherry A. Nicholas 100,000 0 100,000 25,000 25,000
Carol McGrew Living Trust 0 0 0 2,000 2,000
Verner Kraft 0 0 0 5,000 5,000
Jordan G. Kakas and Mary Kakas 0 0 0 10,000 10,000
Eli Benzur 0 0 0 800 800
Mortimer Andron Trust 0 0 0 10,000 10,000
Ronald G. Crane & Karen M. Crane(2) 1,129,500 0 1,129,500 2,500 2,500
Sun Gen Lo Sun 70,000 0 70,000 17,500 17,500
Theodore C.C. King & Li Heng King, 0 0 0 8,000 8,000
trustees, King Trust
Leo D. Fialkoff Trust 60,000 0 60,000 15,000 15,000
Joseph DiLillo & Martina Shih 200,235 88,200 112,035 20,373 20,373
DiLillo (3)
Mary L. Watson, trustee of the Charles 1,216,000 0 1,216,000 10,000 10,000
A. Watson & Mary L. Watson Trust(4)
Mark Tipton 74,546 50,308 24,238 12,577 12,577
Drake Capital Securities, Inc. 168,250 88,200 80,050 22,050 22,050
------- ------ ------ ------ ------
TOTAL 3,123,531 226,708 2,896,823 197,880 197,880
</TABLE>
- - ------------------------------
(1) Assumes the exercise of the Selling Agent Option, but excludes shares
of Common Stock underlying Warrants and indicated elsewhere in the
table. No Selling Shareholder owns more than 1% of the outstanding
shares of the Common Stock of the Company except as otherwise
indicated.
(2) Includes options to purchase 700,000 shares of Common Stock. Mr. Crane
beneficially owns approximately 9.4% of the outstanding Common Stock.
(3) In addition, Drake Capital Securities, Inc., of which Mr. DiLillo is a
principal and shareholder, beneficially owns 153,492 shares of Common
Stock.
(4) Beneficially owns approximately 10.8% of the outstanding Common Stock.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND CONTROLLING
PERSONS AGAINST SECURITIES ACT LIABILITIES
Section 317 of the California Corporations Code permits a corporation
to grant indemnification to directors, officers and other agents in terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities, including expenses, arising in connection with federal securities
laws, including but not limited to the Securities Act of 1933, as amended.
Pursuant to the Articles of Incorporation of the Company, as amended, and the
Bylaws of the Company, the Company is authorized to indemnify its directors,
officers and other agents to the full extent permitted by law and has
indemnified its directors for monetary damages to the full extent permitted by
law. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be
<PAGE> 11
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in said Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the sale of the Shares, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for
the Company by Swanson & Meepos, Santa Monica, California. Edward T. Swanson of
such firm represented Drake Capital Securities, Inc. in connection with the Unit
Private Placement.
EXPERTS
The consolidated financial statements of Watson General Corporation,
incorporated by reference herein from its Annual Report (Form 10-KSB) for the
year ended September 30, 1995, and the consolidated financial statements of
EnviroQuest Technologies Ltd., incorporated by reference herein from Watson
General Corporation's Current Report on Form 8-K/A2 dated April 30, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing in such filings, which are incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
<PAGE> 12
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
Item Amount
---- ------
<S> <C>
Registration fee $ 1,915.05
Blue Sky fees* 5,000.00
Legal fees ad expenses* 25,500.00
Accounting fees and expenses* 6,500.00
Printing costs* 3,000.00
Miscellaneous* 3,000.00
--------
Total.............................. $44,915.05
</TABLE>
- - -----------------
*Estimated.
The Selling Shareholders will bear their own sales commissions and
related sales expenses in connection with this offering, but will not bear any
of the expenses listed above.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the California Corporations Code permits a corporation
to grant indemnification to directors, officers and other agents in terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities, including expenses, arising in connection with federal securities
laws, including but not limited to the Securities Act of 1933, as amended.
Pursuant to the Articles of Incorporation, as amended, and the Bylaws of the
Company, the Company is authorized to indemnify its directors, officers and
other agents to the full extent permitted by law and has indemnified its
directors for monetary damages to the full extent permitted by law.
ITEM 16. EXHIBITS.
5.1 Opinion of Swanson & Meepos*
23.1 Consents of Ernst & Young
23.2 Consent of Swanson & Meepos (included in opinion filed as
Exhibit 5.1).*
24.1 Power of attorney (included on page II-3 of the original
Registration Statement).*
* Previously filed.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(a) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933 (the "Act"); (ii) to reflect in the prospectus any facts or events which,
individually or together, represent a
<PAGE> 13
fundamental change in the information in the registration statement; and (iii)
to include any additional or changed material information on the plan of
distribution; provided, however, that (i) and (ii) do not apply if the
information required in a post-effective amendment is incorporated by reference
from periodic reports filed by the Registrant under the Securities Exchange Act
of 1934.
(b) That for determining liability under the Act, each
post-effective amendment will be treated as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering.
(c) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(d) That insofar as indemnification for liabilities arising
under the Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling persons of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling persons in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(e) That for determining any liability under the Act, the
Registrant will treat the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant under Rule 424(b)(1) or (4) or
497(h) under the Act as part of this registration statement as of the time the
Securities ad Exchange Commission declared it effective.
(f) That for determining any liability under the Act, each
post-effective amendment that contains a form of prospectus will be treated as a
new registration statement for the securities offered in the registration
statement, and that offering of the securities at that time will be treated as
the initial bona fide offering of those securities.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment No. 2 to Registration Statement No. 33-64310 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the city
of Irvine, state of California, on this 10th day of September, 1996.
WATSON GENERAL CORPORATION
By /s/ RONALD G. CRANE
-------------------
Ronald G. Crane
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 2 to Registration Statement No. 33-64310 has been
signed by the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- - --------- ----- ----
<S> <C> <C>
CHARLES A. WATSON* Chairman of the Board and Director September 10, 1996
- - ------------------
(Charles A. Watson)
/s/ RONALD G. CRANE Chief Executive Officer, President and September 10, 1996
- - -------------------
(Ronald G. Crane) Director
JOSEPH L. CHRISTOFFEL* Chief Financial Officer (Principal September 10, 1996
- - ----------------------- Financial Officer and Principal
(Joseph L. Christoffel) Accounting Officer), Secretary and
Director
DENNIS E. MULLIGAN* Director September 10, 1996
- - --------------------
(Dennis E. Mulligan)
______________________ Director
(Roger Sherwood)
JAMES M. SMATHERS* Director September 10, 1996
- - -------------------
(James M. Smathers)
*By: /s/ RONALD G. CRANE
-------------------
Ronald G. Crane, Attorney in Fact
</TABLE>
<PAGE> 15
EXHIBITS
5.1 Opinion of Swanson & Meepos*
23.1 Consents of Ernst & Young
23.2 Consent of Swanson & Meepos (included in opinion filed as
Exhibit 5.1).*
24.1 Power of attorney (included on page II-3 of the original
Registration Statement).*
* Previously filed.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 33-64310) and related Prospectus of Watson
General Corporation for the registration of 397,880 shares of its common stock
and to the incorporation by reference therein of our report dated December 1,
1995, with respect to the consolidated financial statements of Watson General
Corporation included in its Annual Report (Form 10-K) for the year ended
September 30, 1995, filed with the Securitiesd and Exchange Commission.
/s/ERNST & YOUNG LLP
Orange County, California
September 4, 1996
<PAGE> 2
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 33-64310) and related Prospectus of Watson
General Corporation for the registration of 397,880 shares of its common stock
and to the incorporation by reference therein of our report dated April 26,
1996, with respect to the consolidated financial statements of EnviroQuest
Technologies Ltd. for the years ended September 30, 1995 and September 30, 1994,
contained in the Current Report (Form 8-K/A2) of Watson General Corporation
dated April 30, 1996 filed with the Securities and Exchange Commission.
/s/ERNST & YOUNG LLP
Kansas City, Missouri
September 4, 1996
