<PAGE>
As filed with the Securities and Exchange Commission on July 2, 1999
Registration No. 333-39115
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
POST-EFFECTIVE AMENDMENT NO. 3
ON FORM S-3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Aqua Alliance Inc.
(formerly named Air & Water Technologies Corporation)
(Exact Name of Registrant as Specified in Its Charter)
30 Harvard Mill Square
Delaware Wakefield, Massachusetts 01880 13-341875
(State or Other (781) 246-5200 (I.R.S. Employer
Jurisdiction of Identification
Number)
(Address, Including Zip Code, and Telephone Number,
Incorporation or
Organization)
Including Area Code, of Registrant's Principal Executive Offices)
---------------
Neil Lawrence Lane, Esq.
Vice President, General
Counsel and Secretary
800 Third Avenue
New York, New York
(212) 702-3184
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent For Service)
---------------
Copies to:
Martha E. McGarry, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
(212) 735-3000
---------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this amendment to the Registration
Statement.
If the only securities being registered 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
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. [_]
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. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of
Shares Amount Proposed Maximum
To Be To Be Aggregate Price Proposed Maximum Amount of
Registered Registered Per Unit Aggregate Offering Price Registration Fee
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
N/A(1) N/A(1) N/A(1) N/A(1) N/A(1)
- ---------------------------------------------------------------------------------
</TABLE>
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(1) No additional securities are to be registered and the registration fee
previously has been paid. Therefore, no further registration fee is
required.
---------------
The registrant hereby amends this post-effective amendment to the
registration statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further amendment which
specifically states that this post-effective amendment to the registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the post-effective amendment to the
registration statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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<PAGE>
EXPLANATORY NOTE
This amendment is being filed as the third post-effective amendment to the
Registration Statement on Form S-1 (No. 333-39115) of Aqua Alliance Inc.,
which was declared effective on January 30, 1998 (the "Registration
Statement"). The first post-effective amendment to the Registration Statement
was filed with the Securities and Exchange Commission on April 10, 1998 and
was numbered "Amendment No. 3." The second post-effective amendment to the
Registration Statement was filed with the Securities and Exchange Commission
on May 6, 1999 and was numbered "Post-Effective Amendment No. 4." This
amendment has been numbered "Post-Effective Amendment No. 3" to correctly
reflect that it is the third post-effective amendment to the Registration
Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the post-effective amendment to the +
+registration statement filed with the Securities and Exchange Commission is +
+effective. This prospectus is not an offer to sell these securities and it is +
+not soliciting an offer to buy these securities in any state where the offer +
+or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED July 2, 1999.
Prospectus
3,949,099 shares
Aqua Alliance Inc.
(formerly named Air & Water Technologies Corporation)
Class A common stock issuable upon the exercise of warrants
------------
Aqua Alliance Inc. is offering to holders of its warrants to purchase shares
of its class A common stock, par value $.001 per share, 3,949,099 shares of
class A common stock. The exercise price for the warrants is $2.50 per share.
We may adjust the exercise price in accordance with the terms of the warrant
agreement.
The class A common stock is traded on the American Stock Exchange, Inc. under
the symbol "AAI."
Before you decide whether or not to exercise any warrants, we urge you to
carefully consider the factors set forth in "Risk Factors" beginning on page 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warrant Exercise Discounts and Proceeds to the
Price(1) Commissions Company
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share........................ $2.50 None $2.50
- --------------------------------------------------------------------------------
Total............................ $9,872,747.50 None $9,872,747.50
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Subject to adjustment as provided in the warrant agreement.
------------
The date of this prospectus is , 1999.
<PAGE>
About this prospectus
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. You
should read this prospectus together with additional information described
under the heading "Where you can find more information about us."
Where you can find more information about us
We file reports, proxy statements and other information with the SEC. You
may read and copy these reports, proxy statements and other information at the
SEC's Public Reference Room at:
Securities and Exchange Commission
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
and at the following regional offices of the Securities and Exchange
Commission:
Northeast Regional Office
7 World Trade Center
13th Floor
New York, New York 10048
and
Midwest Regional Office
Citicorp Center
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
You may obtain information on the operation of the SEC's Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that
web site is http://www.sec.gov. Our class A common stock and warrants are
listed on the American Stock Exchange, and our reports, proxy statements and
other information can also be inspected at the offices of the American Stock
Exchange, Inc., 86 Trinity Place, New York, New York 10006.
This prospectus is part of a post-effective amendment to a registration
statement filed by us with the SEC. You can obtain the full registration
statement (including all amendments) from the SEC as described above or from
us. Some statements contained in this prospectus as to the contents of
contracts or other documents summarize all material elements of the relevant
contracts or other documents. In each instance, reference is made to the copy
of the contract or other document and the statements are qualified in all
respects by this reference. We urge you to read the copy of the contract or
other document.
The SEC allows us to "incorporate by reference" the information we file with
the SEC. This permits us to disclose important information to you by
referencing these filed documents. Any information referenced this way is
considered part of this prospectus, and any information filed with the SEC
subsequent to this prospectus will
automatically be deemed to update and supersede this information. We
incorporate by reference into this prospectus the following documents
previously filed with the SEC pursuant to the Securities Exchange Act of 1934:
(1) Our Annual Report on Form 10-K for the fiscal year ended October 31,
1998, filed with the SEC on February 1, 1999;
2
<PAGE>
(2) Our Quarterly Report on Form 10-Q for the quarter ended January 31,
1999, filed with the SEC on March 17, 1999;
(3) Our Quarterly Report on Form 10-Q for the quarter ended April 30,
1999, filed with the SEC on June 14, 1999;
(4) Our Current Reports on Form 8-K, filed with the SEC on November 10,
1998, March 5, 1999, April 1, 1999 and April 6, 1999; and
(5) Our Proxy Statement on Schedule 14A, filed with the SEC on June 10,
1999, with respect to our 1999 Annual Meeting of Stockholders.
In addition, all documents we file after the date of this prospectus
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to
termination of the offering, shall be deemed to be incorporated by reference
into the prospectus.
We will provide to each person, including any beneficial owner, to whom a
prospectus is delivered, a copy of any and all of the information that has
been incorporated by reference in the prospectus but not delivered with the
prospectus, without charge, upon written or oral request, to Aqua Alliance
Inc., 30 Harvard Mill Square, Wakefield, Massachusetts 01880, Attention:
Robert S. Volland, telephone: (781) 246-5200.
3
<PAGE>
Prospectus Summary
This summary highlights information about us and the offer which is contained
elsewhere or incorporated by reference in this prospectus. This summary is not
complete and may not contain all the information that is important to you. You
should read the entire prospectus before making a decision to exercise your
warrants.
About Aqua Alliance
Aqua Alliance Inc., formerly named Air & Water Technologies Corporation, is
an integrated single source provider of services and solutions for the water
and wastewater and hazardous waste remediation markets. Through our
subsidiaries, we provide a comprehensive range of services and technologies
directed principally at providing complete services for:
. the operation, maintenance, and management of water and wastewater
treatment systems;
. engineering, design and construction of water and wastewater facilities;
and
. the remediation of hazardous waste.
We believe we provide a complement of products and services that satisfy the
environmental and essential services needs of our targeted client base. We
market our products and services through two widely recognized trade names:
Professional Services Group for the operation, maintenance and management of
water and wastewater treatment systems; and Metcalf & Eddy for water,
wastewater and hazardous waste engineering and consulting services. PSG
provides operation, maintenance, and management services for treatment systems
in various water, wastewater, sludge and biosolids waste management markets.
M&E provides its clients with a broad spectrum of environmental consulting
services, including engineering studies and design, project management, site
evaluation, environmental assessment and master planning.
As part of our revised business strategy to redeploy our capital to our core
water businesses, on December 2, 1997, we announced our decision to divest our
Research-Cottrell business. Research-Cottrell designed and developed products
and technologies targeted at specific client needs such as air pollution
control equipment. During the course of fiscal 1998, we divested a major
portion of the Research-Cottrell business. On January 19, 1999, we completed
the divestiture with the sale of Regenerative Environmental Equipment Company,
Inc.
We provide our full range of services to predominantly the following customer
sectors: governmental entities, including municipalities, and state and federal
agencies; and specific industrial categories, such as petroleum refining, pulp
and paper, pharmaceutical, chemical, primary and secondary metals, food
processing, and textile manufacture.
Our principal executive offices are located at 30 Harvard Mill Square,
Wakefield, Massachusetts 01880, telephone: (781) 246-5200.
4
<PAGE>
Risk factors
You should carefully examine all the information contained in this prospectus
and should carefully consider the factors set forth under the caption "Risk
factors" in evaluating an investment in the class A common stock. In
particular, you should consider the factors that could adversely affect our
results of operations and financial condition, such as:
. our history of operating losses,
. our dependency on key projects and government contracts, including a
contract with the Puerto Rico Aqueduct and Sewer Authority (PRASA) which
accounted for 24% of our total sales in fiscal 1998,
. our ability to continue to implement our revised business strategy and
realize the anticipated benefits of the strategy,
. restrictions imposed by the terms of our bank credit facility,
. potential litigation liability, and
. our relationship with Vivendi, a French company and the beneficial owner,
as of the date of this prospectus, of approximately 83.0% of the class A
common stock.
Relationship with Vivendi
As of the date hereof, Vivendi beneficially owns, through its indirect
wholly-owned subsidiary, Vivendi North America Operations, Inc., approximately
83.0% of the class A common stock. In addition, pursuant to our investment
agreement with Vivendi, Vivendi received the right to designate as members of
our board of directors (and all committees thereof, other than the special
committee) at least that number of directors that is proportionate to the
aggregate voting power represented by the shares of stock beneficially owned by
Vivendi (subject to a minimum of three independent directors on the board). We
have also agreed in the investment agreement that Vivendi will have the right
to designate the chairman of our board of directors, our chief executive
officer and our chief financial officer. In addition, our bank credit facility
requires Vivendi to maintain its support of us, including a minimum 48% voting
equity ownership interest in us and its right to designate at least 48% of our
board of directors as well as our chief executive officer and our chief
financial officer. The investment agreement also regulates some transactions
between us and Vivendi and its subsidiaries. As a result of its ownership
interest, its representation on our board of directors and other business
relationships, Vivendi exercises significant influence on us and our governance
structure. See "Risk factors--Vivendi is a controlling stockholder and
exercises significant influence on us."
On March 22, 1999, Vivendi announced that it had agreed to acquire United
States Filter Corporation. USFilter is the leading global provider of
commercial, industrial, municipal and residential water and wastewater
treatment systems, products and services. USFilter is also a leading provider
of outsourced water services, including the operation of water and wastewater
treatment systems at customer sites. On April 1, 1999, Vivendi submitted to
members of a special committee of our board of directors a proposal to take us
private for $2.00 per share in cash for each outstanding share of class A
common stock. The formation of the special committee, composed of our two
independent directors, has been formally authorized by our board of directors
for the purpose of examining issues arising from the announcement of March 22
by Vivendi that it had agreed to acquire USFilter. See "Risk factors--Vivendi
is a controlling stockholder and exercises significant influence on us." Six
purported class action complaints relating to Vivendi's April 1 proposal have
been filed in the Delaware Court of Chancery against us, Vivendi, Vivendi North
America Company or Vivendi North America Operations, and each of the members of
our board of directors. See "Risk factors--We have potential litigation
liability."
5
<PAGE>
The warrants
The warrants............ In connection with the recapitalization completed on
March 11, 1998, we issued 3,949,099 warrants. The
warrants, when exercised, entitle the holders to
purchase, in the aggregate, up to 3,949,099 shares of
class A common stock. See "Description of warrants--
General."
Expiration date......... The warrants expire on March 11, 2001. See
"Description of warrants--General."
Exercise................ Each warrant entitles the holder, subject to some
conditions, to purchase, at any time and from time to
time prior to March 11, 2001, one share of class A
common stock at a price equal to $2.50 per share. We
may adjust this price from time to time upon the
occurrence of some changes in class A common stock.
See "Determination of warrant exercise price,"
"Description of warrants--General" and "Description
of warrants--Adjustments."
Rights as Holders of warrants do not have any rights as
stockholders........... stockholders of Aqua Alliance. See "Description of
warrants--General."
Registration of Holders of warrants will be able to exercise their
underlying shares...... warrants only if:
either
. the registration statement is then in effect and we
have delivered to each person exercising a warrant
a current prospectus meeting the requirements of
the Securities Act, or
. the exercise of the warrants is exempt from the
registration requirements of the Securities Act,
and
. the shares underlying the warrants are qualified
for sale or exempt from qualification under the
applicable securities laws of the states in which
the various holders of the warrants reside.
Subject to the periods described in the warrant
agreement, we will use our commercially reasonable
efforts to keep the registration statement
continuously effective under the Securities Act until
the expiration or exercise of all warrants in order
to permit the prospectus included in the registration
statement to be lawfully delivered. See "Description
of warrants--Registration of shares underlying
warrants" and "Risk factors--There are restrictions
on your ability to exercise your warrants."
Transfer The warrants are freely transferable and are listed
restrictions/listing... on the American Stock Exchange under the symbol
"AAI.WS." See "Description of warrants--Transfer
restrictions; listing."
Warrant agent........... First Chicago Trust Company of New York. See
"Description of warrants."
For additional information concerning the warrants and the common stock, see
"Description of warrants" and "Description of capital stock."
6
<PAGE>
Risk factors
Each prospective purchaser should carefully examine all the information
contained in this prospectus and should give particular consideration to the
following factors in evaluating an investment in the class A common stock:
We have historically experienced net losses
We have experienced net losses on a historical basis and may incur net
losses in the future. We incurred net losses of approximately $12.9 million
for the six months ended April 30, 1999, and approximately $50.0 million,
$160.6 million, $5.3 million, $8.0 million and $261.8 million for the fiscal
years ended October 31, 1998, 1997, 1996, 1995 and 1994, respectively. The
amount of our net loss for the fiscal year ended October 31, 1997 was
primarily the result of some operating charges and asset write-offs taken in
connection with our decision to divest the Research-Cottrell businesses. The
amount of our net loss for the fiscal year ended October 31, 1994, is
attributable in part to the impact of unusual charges, losses from
discontinued operations and an extraordinary loss in the amount of $224.5
million for the period. There can be no assurance as to when, if ever, we will
be profitable.
We are dependent on key projects and government contracts
In any given period, a substantial percentage of our sales is dependent upon
several large projects. To the extent that these projects are canceled or
substantially delayed and not replaced, it could have a material adverse
impact on our sales and earnings. Furthermore, approximately 86% of our fiscal
year 1998 gross revenues were derived from contracts with federal, state,
municipal and other governmental agencies. The termination of any of our
significant contracts with these governmental agencies, or the failure to
obtain either extensions or renewals of some existing contracts or additional
contracts with these governmental agencies, could have a material adverse
effect on our earnings and business.
One of these large projects and significant contracts is our contract with
the Puerto Rico Aqueduct & Sewer Authority (PRASA), a public corporation of
the Commonwealth of Puerto Rico, providing for the operation, management,
repair and maintenance of a significant portion of Puerto Rico's water and
sewage treatment system. A wholly-owned subsidiary of PSG commenced operations
under this contract in September 1995 and the contract was assigned to us and
Compagnie Generale des Eaux-Sahide, a wholly-owned subsidiary of Vivendi, as
joint operators, on September 15, 1998. During the fiscal years ended October
31, 1998 and 1997, respectively, the contract with PRASA accounted for 24% and
23% of our total sales. The contract's profitability is contingent upon
achieving contract incentives. Our performance obligations to PRASA under the
contract are secured by a performance bond issued by an independent surety
company and a limited guarantee in favor of PRASA by Vivendi. PRASA has a one-
time option to terminate the contract on September 1, 2000, upon ninety-days'
written notice. Although no assurances can be given, management expects that
this contract will not be prematurely cancelled but will remain in effect
through its full term of August 31, 2001.
A wholly-owned subsidiary of Vivendi has guaranteed certain of our obligations
to USF&G
Vivendi North America Company, an indirect wholly-owned subsidiary of
Vivendi, has partially indemnified United States Fidelity and Guaranty Company
and certain of its affiliates under the master surety agreement pursuant to
which USF&G has provided bid, performance and/or payment bonds in support of
our client contractual requirements. USF&G was recently acquired by the St.
Paul Fire and Marine Insurance Company. We are often required to procure bid,
performance and/or payment bonds from surety companies, particularly for
clients in the public sector. See "--We are dependent on key projects and
government
7
<PAGE>
contracts."A bid bond guarantees that we will enter an awarded contract at the
price bid; a performance bond guarantees performance of the contract by us;
and a payment bond (which may or may not be issued in conjunction with a
performance bond) secures our payment obligations to our subcontractors and
vendors under bonded contracts. There can be no assurance that USF&G will
continue to provide bid, performance and/or payment bonds without a similar
indemnity from Vivendi or one of its affiliates.
Failure to successfully implement our revised business strategy may adversely
affect our future results
We are continuing to implement our revised business strategy to redeploy our
capital to our core water businesses. As part of this strategy, in January
1999, we completed the divestiture of our Research-Cottrell businesses.
Although management believes that current provisions for the liquidation of
Research-Cottrell are adequate, the estimated loss on disposal and losses
through disposition may change in the near-term based on the final resolution
of any retained liabilities.
In addition, management is continuing to implement the next stages of our
strategy which consist of the reorganization and streamlining of our
operations. As part of this reorganization, we changed our corporate name to
reflect our dedication to the water business and the relationship formed with
our clients, moved our headquarters to Wakefield, Massachusetts, have been
organized into four operating regions and have consolidated certain corporate
functions in order to decrease costs, improve efficiencies and optimize
business development. Although the reorganization is expected to result in
improved operating performance and cash flow, there can be no assurance that
these results will be realized. In addition, our revised business plans
include assumptions relating to growth initiatives which may require
significant up-front investments including capital improvements, upgrades or
other investments. There can be no assurance that these assumptions will be
realized, and the failure to achieve these assumptions could have a material
adverse effect on our ability to implement successfully our revised business
strategy. In addition, significant investments may be required in the near
term due to current growth initiatives and we will require additional
financial resources to develop and support our businesses, to undertake
related long-term capital expenditures or other investments and to participate
in the emerging privatization market in the wastewater management industry.
Our ability to access capital for these requirements, whether through access
to the capital markets, a potential investment fund or off-balance sheet
funding vehicle or Vivendi, may have a significant impact on the successful
implementation of our business plans. Our inability to implement all stages of
our revised business strategy or realize the anticipated benefits of our
revised business strategy may have a material adverse effect on our results of
operations and financial condition.
Our bank credit facility imposes restrictions on us and is scheduled to expire
in December 1999
We maintain a $50 million secured bank credit facility with Societe
Generale, New York Branch. As of June 1, 1999, we had no borrowings under the
bank credit facility and outstanding letters of credit under the bank credit
facility totaled $18.6 million (unused capacity of $31.4 million). The bank
credit facility is primarily designed to finance working capital requirements,
subject to some limitations, and to provide for the issuance of letters of
credit. The bank credit facility is scheduled to expire in December 1999. We
intend to enter into discussions regarding the establishment of a new credit
facility prior to the maturity of the existing bank credit facility. The
replacement of the bank credit facility is anticipated to enable us to meet
our long-term operating requirements. In the event we are unable to replace
the existing bank credit facility, our financial condition and liquidity could
be adversely affected.
8
<PAGE>
In addition, the existing bank credit facility contains financial and other
restrictive covenants, including, among other things, the maintenance of
financial ratios and restrictions on the incurrence of additional
indebtedness, acquisitions, the sale of assets, the payment of dividends and
the repurchase of subordinated debt. The bank credit facility is secured by a
fixed security interest in substantially all of our assets. Our ability to
comply with the financial and other covenants in the bank credit facility will
be dependent upon our future performance and market conditions, which will be
subject to prevailing economic conditions and to financial, business and other
factors, including factors beyond our control. In addition, some of our other
financial and non-financial obligations contain cross-default or acceleration
provisions. In the event that we are unable to comply with the financial and
other covenants in the bank credit facility and are unable to amend the bank
credit facility or receive a waiver of our compliance with these covenants,
our financial condition and liquidity could be adversely affected.
We have potential litigation liability
In connection with a broad investigation by the U.S. Department of Justice
into alleged illegal payments by various persons to members of the Houston
City Council, our subsidiary, PSG, received a federal grand jury subpoena on
May 31, 1996, requesting documents regarding some PSG consultants and
representatives who had been retained by PSG to assist it in advising the City
of Houston regarding the benefits that could result from the privatization of
Houston's water and wastewater system. PSG has cooperated and continues to
cooperate with the Department of Justice which has informed us that it is
reviewing transactions among PSG and its consultants. We promptly initiated
our own independent investigation into these matters and placed PSG's then
chief executive officer on administrative leave of absence with pay. This
chief executive officer, who has denied any wrongdoing, resigned from PSG on
December 4, 1996. In the course of our ongoing investigation, we became aware
of questionable financial transactions with third parties and payments to some
PSG consultants and other individuals, the nature of which requires further
investigation. We have brought these matters to the attention of the
Department of Justice and continue to cooperate fully with its investigation.
No charges of wrongdoing have been brought against PSG or any PSG executive or
employee by any grand jury or other government authority. However, since the
government's investigation is still underway and is conducted largely in
secret, no assurance can be given as to whether the government authorities
will ultimately determine to bring charges or assert claims resulting from
this investigation that could implicate or reflect adversely upon or otherwise
have a material adverse effect on the financial position or results of
operations of PSG or Aqua Alliance taken as a whole.
The City of Bremerton, Washington brought a contribution and contract action
against Metcalf & Eddy Services, Inc., the operator of a city-owned wastewater
treatment plant from 1987 until late 1995. The action arises from two prior
lawsuits against the city for alleged odor nuisances brought by two groups of
homeowners neighboring the plant. In the first homeowners' suit, the city paid
$4.3 million in cash and approximately $5 million for odor control technology
to settle the case. M&E Services understands the odor control measures
generally have been successful and the odors have been reduced as a result.
M&E Services was not a party to the first homeowners' suit, which has been
dismissed with prejudice as to all parties. In the settlement of the second
homeowners' case, the City of Bremerton paid the homeowners $2.9 million, and
M&E Services contributed $0.6 million to the settlement without admitting
liability. All claims raised by the homeowners in the second suit have been
resolved. All claims by and between M&E Services and the city in the second
homeowners' suit were expressly reserved.
At trial, which commenced on March 2, 1998, the city sought to recover the
amounts it expended on the two settlements, damages for M&E Services' alleged
substandard operation of the plant, and attorney's fees. The damages claimed
exceeded $14 million. On April 22, 1998, the jury returned a verdict against
M&E Services and in favor of the city in the net amount of approximately $0.6
million. After considering various motions by the city challenging the verdict
and its amount, on June 26, 1998, the trial court entered final judgement
against M&E Services and in favor of the city in the net amount of
approximately $0.75 million. Both sides have appealed. The appellate court
could increase or decrease the judgement by $2.0 million or more or remand the
case for a new trial. No assurances can be given that, as a result of further
court proceedings, an adverse judgement would not have a material adverse
effect on our financial position or results of operations.
9
<PAGE>
On October 14, 1997, Research-Cottrell, Inc. (now known as AWT Air Company,
Inc.) and its subsidiary, Research-Cottrell Belgium, S.A. (now known as AWT
Air Company (Belgium) S.A.) were named in a lawsuit by N.V. Seghers
Engineering filed in the Commercial Court in Mechelen, Belgium. Seghers is AWT
Belgium's joint venture partner on two large pollution control projects. The
suit claims damages of approximately $13 million allegedly resulting from AWT
Belgium's breach of contract and substandard performance. Damages claimed in
the lawsuit consist not only of Seghers' alleged cost to repair the AWT
Belgium equipment, but also lost profits, damages to business reputation,
theft of employees (AWT Belgium hired two former Seghers employees), increased
costs arising out of the failure to gain timely acceptance of the two plants,
excessive payments to AWT Belgium due to alleged unfair pricing practices by
AWT Belgium and other miscellaneous interest charges and costs. Seghers has
also filed a suit in Belgium against AWT Belgium, Hamon Research-Cottrell
(Belgium) S.A., the purchaser of AWT Belgium's assets, and related entities,
claiming that the sale of AWT Belgium would operate as a fraud and deprive
Seghers of its rightful recovery in the litigation. The cases involve complex
technical and legal issues. Nevertheless, we deny liability to Seghers and,
based upon the information currently available, believe Seghers' claimed
damages are grossly inflated. In addition, we believe we have counterclaims
based upon Seghers' breaches of contract.
The United States Attorney's Office in Boston, Massachusetts is conducting
an investigation of certain entertainment and travel payments allegedly made
to Egyptian officials between 1994 and 1996 by our subsidiary, Metcalf & Eddy
International, Inc. (which was merged into its parent, Metcalf & Eddy, Inc.),
while Metcalf & Eddy International, Inc. was performing services in Egypt
pursuant to contracts with the United States Agency for International
Development. M&E has cooperated and continues to cooperate fully with the U.S.
Attorney's Office. No charges of wrongdoing have been brought against M&E or
any M&E executive or employee by any grand jury or other government authority.
To date, the government has advised M&E that it has made no decision as to how
it will proceed.
Six purported class action complaints relating to Vivendi's April 1 proposal
to take us private have been filed in the Delaware Court of Chancery against
us, Vivendi, Vivendi North America Company or Vivendi North America
Operations, and each of the members of our board of directors. See "--Vivendi
is a controlling stockholder and exercises significant influence on us." The
complaints allege, among other things, that the consideration proposed to be
paid by Vivendi for the shares of class A common stock is grossly inadequate
and that the terms of the proposed transaction are unfair to our public
stockholders. The complaints seek preliminary and permanent injunctive relief,
recission in the event that the transaction is consummated and compensatory
damages. The special committee is in the process of reviewing the going
private proposal from Vivendi. We believe that the claims are meritless and
intend to defend them vigorously.
We and our subsidiaries are parties to various other legal actions and
government audits arising in the normal course of their businesses, some of
which involve claims for substantial sums. We believe that the disposition of
these actions and audits, individually or in the aggregate, will not have an
adverse effect on our consolidated financial position or results of
operations. Moreover, as a general matter, providers of services similar to
those provided by us may be subject to lawsuits alleging negligence or other
similar claims and environmental liabilities, which may involve claims for
substantial damages. Damages assessed in connection with and the costs of
defending these actions could be substantial. Our management believes that the
levels of insurance coverage are adequate to cover currently estimated
exposures. Although we believe that we will be able to obtain adequate
insurance coverage in the future at acceptable costs, there can be no
assurance that we will be able to obtain coverage or will be able to do so at
an acceptable cost or that we will not incur significant liabilities in excess
of policy limits.
Vivendi is a controlling stockholder and exercises significant influence on us
Vivendi, through its indirectly wholly-owned subsidiary, Vivendi North
America Operations, Inc., beneficially owns shares of class A common stock
representing approximately 83.0% of the class A common stock (and voting
power) of Aqua Alliance. Vivendi does not beneficially own any warrants. In
addition, pursuant
10
<PAGE>
to our investment agreement with Vivendi, Vivendi received the right to
designate as members of our board of directors (and all committees thereof,
other than the special committee) at least that number of directors that is
proportionate to the aggregate voting power represented by the shares of stock
beneficially owned by Vivendi (subject to a minimum of three independent
directors on the board). We have also agreed in the investment agreement that
Vivendi will have the right to designate the chairman of our board of
directors, our chief executive officer and our chief financial officer. Except
for the two current independent directors, our seven person board of directors
is comprised entirely of Vivendi designees. Furthermore, the bank credit
facility requires Vivendi to maintain its support of Aqua Alliance, including
a minimum 48% voting equity ownership interest in Aqua Alliance and its right
to designate at least 48% of our board of directors as well as our chief
executive officer and our chief financial officer. Also, pursuant to the
investment agreement and our recapitalization agreement with Vivendi, Vivendi
has agreed on behalf of itself and its affiliates that, for so long as Vivendi
and its affiliates are our largest stockholder, we will be Vivendi's exclusive
vehicle in the United States, its possessions and its territories for water
management and wastewater management and air pollution activities, provided
that the foregoing will not apply to any acquisition or investment by Vivendi
or any of its affiliates of a privately-owned, publicly-traded or publicly-
owned company in the water utility sector whose primary business is the
production, distribution and/or sale of potable, fire, bulk, draining or
irrigation water ("Water Utility") nor to Vivendi's present or future
investments in Consumers Water Company and Philadelphia Suburban Corporation
(such Water Utilities, Consumers Water Company and Philadelphia Suburban
Corporation are referred to in this paragraph as the "Water Businesses").
Vivendi also has agreed, pursuant to the investment agreement and the
recapitalization agreement, to, and to cause its affiliates to, assist us in
developing our water management and wastewater management activities in both
Canada and Mexico, subject to contractual agreements as of March 30, 1994, and
taking into account our interests and the interests of Vivendi and its
affiliates. Vivendi also has agreed, pursuant to the investment agreement and
the recapitalization agreement, to offer, and to cause its affiliates to
offer, us an active participation in any proposed water management or
wastewater management activities by Vivendi or any of its affiliates in the
United States (excluding the Water Businesses), which investment is too
capital intensive for us to undertake on a stand-alone basis. Also, pursuant
to the investment agreement and the recapitalization agreement, Vivendi has
agreed that in the event Vivendi or any of its affiliates acquires control of
a Water Business which is also engaged in wastewater activities similar to
those conducted by us as of the date the investment agreement was entered
into, then Vivendi or that affiliate will use reasonable efforts to cause,
subject to the fiduciary duties of the board of directors of that Water
Business and other applicable regulatory standards, that Water Business to
offer to us the opportunity to obtain "operating and maintenance" contracts
with the wastewater management business of that Water Business and the
opportunity to obtain new engineering contracts with that Water Business, in
each case, on terms which are commercially reasonable in the judgment of that
Water Business, provided that the foregoing does not apply to any existing
business of Consumers Water Company or Philadelphia Suburban Corporation as of
the date the investment agreement was entered into. Pursuant to the investment
agreement, Vivendi and its affiliates have the right to engage in transactions
with us and our affiliates, including the acquisition of securities, subject
to approval, in the event the transaction has an aggregate value in excess of
$1,000,000, of a majority of the independent directors or a special committee
thereof. Moreover, pursuant to the recapitalization agreement, until March 4,
2001, Vivendi has agreed not to effect a "short-form" merger of Aqua Alliance
without approval of a majority of the independent directors.
As a result of its ownership interest, representation on our board of
directors and its other business relationships with us, Vivendi exercises
significant influence on us and our governance structure. There can be no
assurance that the interests of Vivendi will be the same as those of our other
stockholders. In addition, Vivendi's controlling ownership interest in us may
tend to deter non-negotiated tender offers or other efforts to obtain control
of us and thereby preclude stockholders from having the opportunity to sell
shares at prices higher than those otherwise prevailing.
On March 22, 1999, Vivendi announced that it had agreed to acquire United
States Filter Corporation. USFilter is the leading global provider of
commercial, industrial, municipal and residential water and wastewater
treatment systems, products and services. USFilter is also a leading provider
of outsourced water services,
11
<PAGE>
including the operation of water and wastewater treatment systems at customer
sites. On April 1, 1999, Vivendi submitted to members of a special committee
of our board of directors a proposal to take us private for $2.00 per share in
cash for each outstanding share of class A common stock. The formation of the
special committee, composed of our two independent directors, has been
formally authorized by our board of directors for the purpose of examining
issues arising from the announcement on March 22 by Vivendi that it had agreed
to acquire USFilter. Six purported class action complaints relating to
Vivendi's April 1 proposal have been filed in the Delaware Court of Chancery
against us, Vivendi, Vivendi North America Company or Vivendi North America
Operations, and each of the members of our board of directors. See "--We have
potential litigation liability."
We are prohibited from paying dividends on the class A common stock
We have never paid cash dividends on the class A common stock, and we
currently intend to retain our earnings, if any, to finance the growth and
development of our business and do not expect to pay dividends on the class A
common stock in the foreseeable future. In addition, our bank credit facility
prohibits us from declaring or paying cash dividends on the class A common
stock. See "--Our bank credit facility imposes restrictions on us and is
scheduled to expire in December 1999."
There are market risks associated with the class A common stock
The warrant exercise price of $2.50 per share of class A common stock
represents a premium of approximately 57.3% over the average closing price of
$1.590 for the class A common stock as reported on the American Stock Exchange
for the 30 consecutive trading day period ending on March 31, 1999.
The market price of our class A common stock has been volatile in recent
years. Factors such as quarter-to-quarter variations in our revenues and
results of operations and liquidity have caused and are expected to continue
to cause the market price of our securities to fluctuate significantly. In
addition, in recent years the stock markets have experienced significant
volatility, which often may be unrelated to the operating performance of the
affected companies. Such volatility may also adversely affect the market price
of our securities. There can be no assurance that the market price of the
class A common stock will not decline during the period warrants are
outstanding or that a holder will be able to sell shares purchased upon the
exercise of warrants at a price equal to or greater than the exercise price.
There are restrictions on your ability to exercise your warrants
Holders of warrants will be able to exercise their warrants only if:
either
. a registration statement is then in effect and we have delivered to each
person exercising a warrant a current prospectus meeting the requirements
of the Securities Act, or
. the exercise of the warrants is exempt from the registration requirements
of the Securities Act,
and
. the shares underlying the warrants are qualified for sale or exempt from
qualification under the applicable securities laws of the states in which
the various holders of the warrants reside.
Under the terms of the warrant agreement, subject to some specified periods,
we are required to use our commercially reasonable efforts to keep the
registration statement continuously effective under the Securities Act until
the expiration or exercise of all warrants in order to permit the prospectus
included in the registration statement to be lawfully delivered. The warrants
expire on March 11, 2001. See "Description of warrants--Registration of shares
underlying warrants." There can be no assurance that we will be able to keep
the registration statement continuously effective until all of the warrants
have been exercised or have expired.
12
<PAGE>
Use of proceeds
We currently intend to utilize the aggregate gross proceeds of up to
$9,872,747.50, assuming all of the warrants are exercised, to fund general
corporate purposes.
Determination of warrant exercise price
Each warrant, when exercised, entitles the holder to acquire one share of
class A common stock at a price of $2.50 per share. We may adjust the warrant
exercise price and the number of shares issuable upon exercise of a warrant in
some cases, as described in the warrant agreement and in this prospectus. See
"Description of warrants--Adjustments." The warrants were issued to rights
holders (other than Vivendi and its subsidiaries) who exercised rights in our
recently completed rights offering. The rights offering was a part of our
recently completed recapitalization.
The warrant exercise price was determined through arm's-length negotiation
between Vivendi and the special committee of our board of directors formed in
connection with our recently completed recapitalization. The exercise price
represents a premium of approximately 66.7% over the last sale price of the
class A common stock on the American Stock Exchange on the last trading day
immediately prior to the announcement of the recapitalization and a premium of
approximately 57.3% over the average daily closing price of $1.590 for the
class A common stock as reported on the American Stock Exchange for the 30
consecutive trading day period ending on March 31, 1999.
Dilution
We currently have a negative tangible net worth. The negative net tangible
book value of the shares of class A common stock as of April 30, 1999 was
approximately ($126,058,000), or ($0.68) per share. "Net tangible book value"
per share represents the amount of total tangible assets (total assets less
intangible assets) less total liabilities, divided by the number of shares of
class A common stock outstanding. Assuming the exercise of all warrants and
our receipt of gross proceeds of approximately $9,873,000, the pro forma
negative net tangible book value of the shares of class A common stock as of
April 30, 1999 would have been approximately ($116,185,000), or ($0.61) per
share, representing an immediate and substantial dilution of ($3.11) per
share. The following table illustrates the per share dilution:
<TABLE>
<CAPTION>
Dilution
assuming
exercise of
all warrants
--------------
<S> <C> <C>
Exercise price of warrants.................................... $2.50
Net negative tangible book value per share before exercise
of any warrants.............................................. $(0.68)
Increase per share attributable to warrant holders
exercising warrants.......................................... 0.07
------
Pro forma net tangible book value per share after exercise of
all warrants................................................. (0.61)
------
Dilution to warrant holders exercising warrants(1)............ $(3.11)
======
</TABLE>
- --------
(1) Dilution is determined by subtracting the pro forma negative net tangible
book value per share from the warrant exercise price of $2.50.
13
<PAGE>
Description of warrants
The warrants were issued pursuant to our warrant agreement with First
Chicago Trust Company of New York as warrant agent. The following summary of
certain provisions of the warrant agreement and the warrants may not contain
all of the information that is important to you and is qualified in its
entirety by reference to the warrant agreement and the warrants, including the
definitions in the warrant agreement of some terms. The warrant agreement is
substantially in the form of the warrant agreement filed as an exhibit to the
registration statement of which this prospectus is a part.
General
We issued 3,949,099 warrants which, when exercised, entitle the holders
thereof to purchase, in the aggregate, up to 3,949,099 shares of class A
common stock. The warrants were issued on March 11, 1998 in connection with
our recently completed recapitalization.
Each warrant, when exercised, entitles the holder thereof to acquire, at any
time before March 11, 2001, one share of class A common stock at an exercise
price of $2.50 per share. See "Determination of warrant exercise price." The
warrant exercise price and the number of shares issuable on exercise of a
warrant may be adjusted by us in certain cases referred to below. Unless
exercised, the warrants will expire on March 11, 2001.
Subject to the limitations set forth below under the caption "Registration
of warrant shares," the warrants may be exercised at any time prior to March
11, 2001, by surrendering to us at the office of the warrant agent the
certificates evidencing the warrants being exercised with the accompanying
form of election to purchase properly completed and executed, together with
payment of the warrant exercise price. Payment of the warrant exercise price
may be made in the form of cash or a certified or official bank check payable
to the order of Aqua Alliance or, in the discretion of the warrant agent, by
wire transfer of immediately available funds to an account designated by the
warrant agent. Upon surrender of the warrant certificate and payment of the
warrant exercise price, the warrant agent will deliver or cause to be
delivered, to or upon the written order of the holder, a stock certificate
representing the number of whole warrant shares or other securities or
property to which the holder is entitled under the warrant agreement and the
warrants. If less than all of the warrants evidenced by a warrant certificate
are to be exercised, a new warrant certificate will be issued for the
remaining number of warrants.
No fractional share of class A common stock will be issued upon exercise of
the warrants. If any fraction of a share of class A common stock would
otherwise be issuable upon the exercise of any warrants or a specified portion
of any warrants, we will pay an amount in cash equal to the current market
price per share of class A common stock, as determined on the day immediately
preceding the date the warrant is presented for exercise, multiplied by the
fraction, computed to the nearest whole U.S. cent. Alternatively, warrant
holders may elect to purchase full shares of class A common stock by
delivering an appropriate amount of cash.
Warrant certificates will be issued in registered form only, and no service
charge will be made for registration of transfer or exchange upon surrender of
any warrant certificate at the office of the warrant agent maintained for that
purpose. We may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration,
transfer or exchange of warrant certificates.
Warrant holders will not, by virtue of being warrant holders, have any
rights as stockholders of Aqua Alliance. Warrant holders have no right to vote
on matters submitted to our stockholders and have no right to receive
dividends. Warrant holders are not entitled to share in our assets in the
event of liquidation, dissolution or winding up of our affairs.
14
<PAGE>
In the event of a taxable distribution to holders of class A common stock
which results in an adjustment to the number of shares of class A common stock
or other consideration for which a warrant may be exercised, warrant holders
may, in certain circumstances, be considered to have received a distribution
subject to United States federal income tax as a dividend. See "Certain United
States federal income tax considerations."
Adjustments
The number of shares of class A common stock purchasable upon the exercise
of the warrants and the warrant exercise price both will be subject to
adjustment in certain events, subject to certain exceptions, including
. the payment by us of dividends and other distributions on class A common
stock payable in class A common stock or other shares of our capital
stock,
. subdivisions, combinations, exchanges, split-ups, reorganizations and
reclassifications of class A common stock,
. the issuance of rights, options or warrants to subscribe for class A
common stock, for a consideration per share of class A common stock which
is less than the current market price per share of class A common stock
and
. the distribution to all holders of class A common stock of any of our
assets.
No adjustment in the warrant exercise price will be required unless the
adjustment would require an increase or decrease of at least one percent in
the warrant exercise price. Any adjustment which is not made will be carried
forward and taken into account in any subsequent adjustment.
If we consolidate or merge with or into, or transfer or lease all or
substantially all of our assets to, any person, upon consummation of such
transaction, the warrants will automatically become exercisable for the kind
and amount of securities, cash or other assets which the warrant holder would
have owned immediately after the consolidation, merger, transfer or lease if
the holder had exercised the warrant immediately before the effective date of
the transaction. No consolidation, merger, transfer or lease will be effected
unless the successor company, if other than us, assumes by written instrument
the obligation to issue securities, cash or other assets as stated above.
Registration of shares underlying warrants
Warrant holders will be able to exercise their warrants only if:
. the registration statement is then in effect and we have delivered to
each person exercising a warrant a current prospectus meeting the
requirements of the Securities Act, or
. the exercise of the warrants is exempt from the registration requirements
of the Securities Act,
and
. the shares are underlying the warrants qualified for sale or exempt from
qualification under the applicable securities laws of the states in which
the various holders of the warrants reside.
Subject to the periods described in the warrant agreement, we will use our
commercially reasonable efforts to keep the registration statement
continuously effective under the Securities Act until the expiration or
exercise of all warrants in order to permit the prospectus included in the
registration statement to be lawfully delivered.
Notwithstanding the foregoing, if an event occurs and is continuing and as a
result of that event the registration statement, any related prospectus or any
document incorporated by reference in that registration statement or
prospectus would, in our good faith judgment, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and we determine in our good faith judgment that the
disclosure of that event at that time would have a material adverse effect on
our business, operations or prospects or the
15
<PAGE>
disclosure otherwise relates to a material business transaction which has not
yet been publicly disclosed, we will not be required to amend or supplement
the registration statement, any related prospectus or any document
incorporated by reference in that registration statement or prospectus, for a
period not to exceed the shorter of the period ending on the date the
information responsible for that period is disclosed to the public and sixty
days. Only two of these periods may occur during any period of 135 consecutive
days, none of these periods may be in effect during the six months prior to
March 11, 2001, and there will be no more than three of these periods during
the term of the warrants.
In addition, we will not be required to amend or supplement the registration
statement, any related prospectus or any document incorporated by reference in
that registration statement or prospectus if we determine in our good faith
judgment that the current market price per share of the class A common stock
is substantially below the warrant exercise price such that exercise of the
warrants is unlikely to occur, for a period continuing until the time that we
determine in our good faith judgment that exercise of the warrants appears
likely. During this period we will monitor the current market price per share
of the class A common stock and will not permit the exercise of any warrant
unless we have delivered to each person exercising a warrant a current
prospectus meeting the requirements of Section 10(a) of the Securities Act.
See "Risk factors--There are restrictions on your ability to exercise your
warrants."
Transfer restrictions; listing
The warrants are freely transferable and are listed on the American Stock
Exchange under the symbol "AAI.WS." We will use our commercially reasonable
efforts to maintain the listing of the warrants and the class A common stock
upon each national securities exchange or automated quotation system, if any,
upon which the shares of class A common stock are then listed, so long as any
other shares of class A common stock will be so listed or quoted.
Authorized shares
We have authorized for issuance and have reserved a sufficient number of
authorized shares of class A common stock to permit the exercise of all the
warrants issued. These shares of class A common stock, when paid for and
issued, will be duly and validly issued, fully paid and non-assessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue of these shares, other than any tax, lien,
charge or security interest imposed upon or granted by the holder of the class
A common stock.
Amendment
From time to time, we and the warrant agent, without the consent of the
warrant holders, may amend or supplement the warrant agreement for certain
purposes, including curing defects or inconsistencies or making changes that
do not materially adversely affect the rights of any holder. Any amendment or
supplement to the warrant agreement that has a material adverse effect on the
interests of the warrant holders will require the written consent of the
holders of a majority of the then outstanding warrants, excluding warrants
held by us or any of our affiliates. The consent of each holder of the
warrants affected will be required for any amendment pursuant to which the
warrant exercise price would be increased or the number of shares underlying
the warrants purchasable upon exercise of warrants would be decreased, other
than pursuant to adjustments provided in the warrant agreement.
Governing law
The warrant agreement and the warrants are governed by, and construed in
accordance with, the laws of the State of New York without regard to the
principles of conflicts of law thereof.
The warrants are listed on the American Stock Exchange under the symbol "AAI
.WS".
The warrant agent is First Chicago Trust Company of New York.
16
<PAGE>
Description of capital stock
The following summary of the capital stock summarizes some material elements
of our restated certificate of incorporation. The summary may not contain all
the information that is important to you and is qualified in its entirety by
reference to the certificate of incorporation, a copy of which is on file with
the SEC. See "Where you can find more information about us."
We are authorized by our certificate of incorporation to issue 260,000,000
shares of common stock, par value $.001 per share, and 2,500,000 shares of
preferred stock, par value $.01 per share. As of June 1, 1999, 185,176,527
shares of class A common stock were issued and outstanding.
Class A common stock
Holders of issued and outstanding shares of class A common stock are
entitled to one vote for each share they hold.
Holders of the class A common stock are entitled to receive dividends as may
from time to time be declared by our board of directors. We have not paid cash
dividends on the class A common stock in recent years, and do not expect to
pay dividends in the foreseeable future. In addition, our bank credit facility
prohibits us from declaring or paying cash dividends on the class A common
stock. See "Risk factors--We are prohibited from paying dividends on the class
A common stock."
The outstanding shares of class A common stock are listed on the American
Stock Exchange under the symbol "AAI".
The transfer agent and registrar for the class A common stock is First
Chicago Trust Company of New York.
Preferred stock
Shares of our preferred stock may be issued from time to time in one or more
classes or series with designations or titles as fixed by our board of
directors. Each class or series of preferred stock will have the voting
powers, full or limited, or no voting powers, and the preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions, as determined by our board of
directors, in accordance with the laws of the State of Delaware. There are
currently no issued and outstanding shares of preferred stock.
Conversion of convertible debentures
Currently $115 million principal amount of our convertible debentures are
outstanding. Any convertible debenture or any portion of the principal amount
of any convertible debenture which is $1,000 or a whole multiple of $1,000 may
be converted into shares of class A common stock at a conversion price of
$30.00 per share, subject to adjustments. The convertible debentures are
redeemable in whole or in part at our option for cash at a redemption price of
101.6% of the principal amount in 1998 reducing to 100% of the principal
amount in 2000, together with accrued interest to the redemption date. The
convertible debentures require equal annual sinking fund payments beginning
May 15, 2000, which are calculated to retire 75% of the convertible debentures
prior to maturity.
17
<PAGE>
Certain United States federal income tax consequences
The following summary sets forth the material United States federal income
tax consequences of the exercise and disposition of the warrants, and of the
receipt, ownership, and disposition of the shares of class A common stock
underlying the warrants, to United States holders under present law. This
summary is based on the Internal Revenue Code of 1986, as amended to the date
hereof, administrative pronouncements, judicial decisions and existing and
proposed Treasury Regulations, changes to any of which subsequent to the date
of this prospectus may affect the tax consequences described herein, possibly
on a retroactive basis. This summary does not discuss all aspects of United
States federal income taxation that may be relevant to a particular investor
or to certain types of investors subject to special treatment under the United
States federal income tax laws (for example, persons deemed to hold directly
or indirectly 10% or more of our stock, banks, dealers in securities, life
insurance companies, tax exempt organizations, foreign taxpayers or persons
holding our stock as part of a straddle or conversion transaction), nor does
it discuss any aspect of state, local or foreign income or other tax laws.
This discussion is limited to United States holders of class A common stock
who hold the stock as a capital asset. For purposes of this discussion, a
United States holder is a holder that is (1) a citizen or resident of the
United States, (2) a corporation or partnership created or organized under the
laws of the United States or any political subdivision of the United States,
(3) an estate the income of which is subject to United States federal income
taxation regardless of its source, or (4) a trust if a United States court is
able to exercise primary supervision over the administration of the trust and
one or more United States trustees or fiduciaries have the authority to
control all substantial decisions of the trust.
Upon the exercise of a warrant, a warrant holder will not recognize gain or
loss (except to the extent of cash, if any, received in lieu of the issuance
of fractional shares in which case the amount and character of which will be
determined as if such holder had received such fractional shares and
immediately had them redeemed by us for cash) and will have a tax basis in the
shares acquired (including fractional shares in lieu of which cash is
received) by that exercise equal to that holder's tax basis in the exercised
warrant (which, in the case of an initial holder, will equal the portion of
the subscription price properly allocable to that warrant, as described above)
plus the warrant exercise price. The holding period of the shares so acquired
will commence on the day after the date of exercise of the warrant. If any
cash is received in lieu of fractional shares, the warrant holder will
recognize gain or loss, the amount and character of which will be determined
as if that holder had received those fractional shares and then immediately
had them redeemed by the us for cash. Similarly, upon the sale of shares
received upon exercise of a warrant, a warrant holder generally will recognize
capital gain or loss equal to the difference between the amount realized upon
the sale and the holder's tax basis in the shares. In the case of some non-
corporate taxpayers, that capital gain, if any, generally will be subject to a
maximum U.S. federal income tax rate of (i) 28% if the holder's holding period
is more than one year but not more than eighteen months and (ii) 20% if the
holding period is more than eighteen months. The distinction between capital
gain or loss and ordinary income is also relevant for purposes of, among other
things, limitations on the deductibility of capital losses.
The sale of a warrant will generally result in the recognition of capital
gain or loss to the warrant holder in an amount equal to the difference
between the amount realized and the holder's tax basis in the warrant (which,
in the case of an initial holder, will equal the portion of the subscription
price properly allocable to the warrant, as described above).
If a warrant expires unexercised, a warrant holder will recognize a capital
loss equal to the holder's tax basis in the warrant.
Under Section 305 of the Internal Revenue Code, adjustments to the exercise
price or conversion ratio of the warrants which may occur under certain
circumstances, or the failure to make these adjustments, may result in the
receipt of taxable constructive dividends by a warrant holder to the extent of
our current or accumulated earnings and profits, regardless of whether there
is a distribution of cash or property.
The foregoing summary is included for general information only. Accordingly,
each holder is urged to consult with his or her own tax advisor with respect
to the tax consequences of the ownership, exercise and disposition of the
warrants, and of the receipt, ownership and disposition of the shares of class
A common stock underlying the warrants on his or her own particular tax
situation, including the application and effect of state, local and foreign
income and other tax laws.
18
<PAGE>
Legal matters
The validity of the authorization and issuance of the class A common stock
offered by this prospectus has been passed upon by Douglas A. Satzger, Esq.,
our immediate past Senior Vice President, General Counsel and Secretary.
19
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
You should rely only on the information contained in this document or that we
have referred you to. We have not authorized any other person to provide you
with different information. This prospectus may be delivered to you after the
date of this prospectus. However, you should realize that the affairs of Aqua
Alliance may have changed since the date of this prospectus. This prospectus
will not reflect such changes. You should not consider this prospectus to be
an offer or solicitation relating to the notes in any jurisdiction in which
such an offer or solicitation is not authorized.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About this prospectus...................................................... 2
Where you can find more information about us............................... 2
Prospectus summary......................................................... 4
Risk factors............................................................... 7
Use of proceeds............................................................ 13
Determination of warrant exercise price.................................... 13
Dilution................................................................... 13
Description of warrants.................................................... 14
Description of capital stock............................................... 17
Certain United States federal income tax consequences...................... 18
Legal matters.............................................................. 19
</TABLE>
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Aqua Alliance Inc.
(formerly named
Air & Water Technologies Corporation)
3,949,099 shares of
class A common stock
issuable upon the exercise of warrants
--------------
PROSPECTUS
--------------
--------------
Dated , 1999
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth expenses in connection with the issuance and
distribution of the class A common stock upon exercise of warrants. All
amounts shown are estimated:
<TABLE>
<S> <C>
Warrant agent's fees and expenses..................................... $ *
Transfer agent's fees and expenses.................................... *
Accounting fees....................................................... *
Legal fees and expenses............................................... *
Printing fees......................................................... *
Miscellaneous......................................................... *
-----
Total............................................................... $ *
=====
</TABLE>
- --------
* To be supplied by amendment.
No additional securities are to be registered and the SEC registration fee
previously has been paid. Therefore, no further SEC registration fee is
required.
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware grants
each corporation organized thereunder the power to indemnify its directors and
officers against liabilities for certain of their acts.
Article VIII of our by-laws provides, in substance, that directors,
officers, employees and agents shall be indemnified to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware.
Our Restated Certificate of Incorporation provides that no director shall be
personally liable to us or our stockholders for monetary damages for breaches
of fiduciary duty as a director. This indemnification does not cover liability
(i) for any breach of the director's duty of loyalty to us or our
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the General Corporation Law of the State of Delaware (liability
for unlawful payment of dividend or unlawful stock purchase or redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit. The repeal or modification of this provision by the stockholders will
not adversely affect any right or protection of a director which exists at the
time of the repeal or modification with respect to acts or omissions which
occurred prior to the repeal or modification. In addition, our directors and
officers are beneficiaries under directors' and officers' insurance policies.
Item 16. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Location
------- ----------------------- --------
<C> <S> <C>
4.01 Warrant Agreement, including Form of Warrant Certificate (1)Ex. 4.01
included as an exhibit thereto, between the Registrant
and the Warrant Agent
4.02(a) Indenture, dated as of May 15, 1990, between the (2)
Registrant and Midlantic National Bank, as Trustee
4.02(b) Supplemental Indenture, dated as of February 23, 1998, (3)
between the Registrant and The Chase Manhattan Bank, as
Trustee
5.01 Opinion of Douglas A. Satzger re: validity of securities (1)
23.1 Consent of McGladrey & Pullen, LLP *
24.1 Power of Attorney (4)
</TABLE>
II-1
<PAGE>
- --------
(1) Previously filed as the similarly numbered exhibit (unless otherwise
indicated) to Amendment No. 2 to the Registrant's Registration Statement
on Form S-1 (No. 333-39115) filed with the Securities and Exchange
Commission on January 29, 1998.
(2) Incorporated by reference to Exhibit 4.05 to the Registrant's
Registration Statement on Form S-1 (No. 33-33088), as amended, filed with
the Securities and Exchange Commission on April 24, 1990.
(3) Incorporated by reference to Exhibit 4.01 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1998, as filed with
the Securities and Exchange Commission on March 17, 1998.
(4) Included in the signature page to the Registrant's Registration Statement
on Form S-1 (No. 333-39115) filed with the Securities and Exchange
Commission on October 30, 1997.
(*) Filed herewith.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, 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;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus field with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement, or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report, to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule
II-2
<PAGE>
14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 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 such
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereby, 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 such Act and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city of
Wakefield, state of Massachusetts, on July 2, 1999.
Aqua Alliance Inc.
/s/ Alain Brunais
By: _________________________________
Alain Brunais Senior Vice
President and Chief Financial
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board of July 2, 1999
______________________________________ Directors
William V. Kriegel
* President, Chief Executive July 2, 1999
______________________________________ Officer and Director
Thierry M. Mallet (Principal Executive
Officer)
/s/ Alain Brunais Senior Vice President, July 2, 1999
______________________________________ Chief Financial Officer
Alain Brunais and Director (Principal
Accounting Officer)
(Principal Financial
Officer)
* Director July 2, 1999
______________________________________
Jean-Claude Banon
* Director July 2, 1999
______________________________________
Daniel Caille
* Director July 2, 1999
______________________________________
Martha O. Hesse
* Director July 2, 1999
______________________________________
John W. Morris
/s/ Alain Brunais
*By: _________________________________
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document Location
------- ----------------------- --------
<C> <S> <C>
4.01 Warrant Agreement, including Form of Warrant (1)Ex. 4.01
Certificate included as an exhibit thereto, between
the Registrant and the Warrant Agent
4.02(a) Indenture, dated as of May 15, 1990, between the (2)
Registrant and Midlantic National Bank, as Trustee
4.02(b) Supplemental Indenture, dated as of February 23, 1998, (3)
between the Registrant and The Chase Manhattan Bank,
as Trustee
5.01 Opinion of Douglas A. Satzger re: validity of (1)
securities
23.1 Consent of McGladrey & Pullen, LLP *
24.1 Power of Attorney (4)
</TABLE>
- --------
(1) Previously filed as the similarly numbered exhibit (unless otherwise
indicated) to Amendment No. 2 to the Registrant's Registration Statement
on Form S-1 (No. 333-39115) filed with the Securities and Exchange
Commission on January 29, 1998.
(2) Incorporated by reference to Exhibit 4.05 to the Registrant's
Registration Statement on Form S-1 (No. 33-33088), as amended, filed with
the Securities and Exchange Commission on April 24, 1990.
(3) Incorporated by reference to Exhibit 4.01 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended January 31, 1998, as filed with
the Securities and Exchange Commission on March 17, 1998.
(4) Included in the signature page to the Registrant's Registration Statement
on Form S-1 (No. 333-39115) filed with the Securities and Exchange
Commission on October 30, 1997.
(*) Filed herewith.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement (No. 333-39115) of our report, dated January 12, 1999, which appears
on page 33 of the Annual Report on Form 10-K of Aqua Alliance Inc. for the year
ended October 31, 1998.
McGladrey & Pullen, LLP
New York, New York
July 1, 1999
