<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1997
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMCOR CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 33-0329559
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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52-300 ENTERPRISE WAY
COACHELLA, CALIFORNIA 92236
(760) 398-9520
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
FRED H. BEHRENS, CHIEF EXECUTIVE OFFICER
AMCOR CAPITAL CORPORATION
52-300 ENTERPRISE WAY
COACHELLA, CALIFORNIA 92236
(760) 398-9520
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
THOMAS E. STEPP, JR., ESQ.
WHITE AND STEPP LLP
4100 NEWPORT PLACE
SUITE 800
NEWPORT BEACH, CALIFORNIA 92660
(714) 660-9700
BRUCE J. RUSHALL, ESQ.
RUSHALL & MCGEEVER
2111 PALOMAR AIRPORT ROAD
SUITE 200
CARLSBAD, CALIFORNIA 92009
(760) 438-6855
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
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 check the following box. [ ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, check the following box and list the
Securities Act registration 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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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT PRICE FEE(2)
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Series A 9% Convertible Preferred
Stock............................... 632,500 $10.00 $6,325,000 $1,916.67
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(1) Represents the maximum number of preferred shares to be issued. The Company
is offering 550,000 preferred shares and has granted to the Underwriter an
option, exercisable within 45 days of the Effective Date, to purchase up to
an aggregate of 82,500 additional shares at the public price less
underwriting discounts and commissions for the purpose of covering
over-allotments, if any.
(2) The filing fee has been computed based on the $10.00 per share maximum
offering price. The Underwriter and other parties may be offered certain
discounts on the maximum offering price.
THE REGISTRANT HEREBY AMENDS THIS 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 REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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PROSPECTUS PRELIMINARY PROSPECTUS DATED JUNE 3, 1997
550,000 SHARES
[AMCOR CAPITAL LOGO] AMCOR CAPITAL CORPORATION
$10.00 SERIES A 9% CONVERTIBLE PREFERRED STOCK
------------------------
AMCOR Capital Corporation, a Delaware corporation ("Company"), is primarily
engaged in agribusiness, biomass recycling, and real estate development and
management, with three core operating divisions: (i) growing, processing and
marketing fresh table grapes in southern California's Coachella Valley (near
Palm Springs); (ii) processing biomass into clean green waste, as part of a
State of California recycling program; and (iii) real estate development,
principally related to a 1,350 acre residential subdivision and championship
golf course located southeast of San Antonio, Texas.
Dividends on the shares of $10.00 Series A 9% Convertible Preferred Stock
("Series A Preferred Stock") are cumulative from the date of issue and are
payable semi-annually in an amount per share equal to 9% of the purchase price
of each share.
The Series A Preferred Stock will be convertible to shares of the Company's
Common Stock ("Common Stock") at a price equal to 125% of the closing price of
the Common Stock on the day ("Determination Date") before the effective date of
this Offering ("Effective Date"). The Company shall have the right to compel
conversion of the Series A Preferred Stock at such time as the Common Stock has
traded at a price equal to or greater than 150% of the closing price of the
Common Stock on the Determination Date for a period of 20 consecutive business
days. The Series A Preferred Stock will be senior to the Company's Series B
Preferred Stock and the Common Stock with respect to payment of dividends and
distributions to shareholders upon liquidation, dissolution or winding up of the
Company. Shares of Series A Preferred Stock will not be redeemable at the option
of the Company for five years from the issue date. On and after five years from
the issue date, shares of Series A Preferred Stock will be redeemable, at the
option of the Company, for (i) cash at a redemption price of $10.00 per share,
or (ii) for Common Stock. A redemption of shares of the Series A Preferred Stock
for shares of Common Stock will be treated as a conversion of the Series A
Preferred Stock into Common Stock. (See "Conversion Rights").
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN RISK
FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SERIES A PREFERRED STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
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Per Share...................... $10.00 $1.20 $8.80
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Total(4)....................... $5,500,000 $660,000 $4,840,000
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(1) Plus accrued dividends, if any, from , 1997.
(2) For information regarding underwriting discounts and commissions, as well as
the indemnification of the Underwriter by the Company, see "Underwriter and
Plan of Distribution."
(3) Before deducting offering expenses, which are payable by the Company.
(4) The Company has granted to the Underwriter an option, exercisable within 45
days of the Effective Date, to purchase up to an aggregate of 82,500
additional shares at the public price less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the
Underwriter exercises such option in full, the total Price to Public,
Underwriting Discounts and Commissions, and Proceeds to the Company will be
$6,325,000, $759,000 and $5,566,000, respectively. See "Underwriter and Plan
of Distribution."
The shares of Series A Preferred Stock are offered by the Underwriter,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriter, and subject to its right to reject orders in whole or in part. It
is expected that delivery of the Series A Preferred Stock will be made
electronically in New York, New York on or about , 1997.
TORREY PINES SECURITIES, INC.
The date of this Prospectus is , 1997.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THAT INFORMATION AND
THOSE REPRESENTATIONS SPECIFIED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF,
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
PREFERRED STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
CAUTIONARY STATEMENT FOR PURPOSES
OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE LITIGATION REFORM ACT OF 1995
THIS DOCUMENT SPECIFIES FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE
COMPANY, INCLUDING REVENUE PROJECTIONS. FORWARD-LOOKING STATEMENTS ARE
STATEMENTS THAT ESTIMATE THE HAPPENING OF FUTURE EVENTS, ARE NOT BASED ON
HISTORICAL FACT AND ARE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS MAY
BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "MAY", "WILL",
"EXPECT", "ESTIMATE", "ANTICIPATE", "PROBABLE", "CONTINUE", OR SIMILAR TERMS,
VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE "RISK FACTORS" SET
FORTH IN THIS DOCUMENT CONSTITUTE CAUTIONARY STATEMENTS IDENTIFYING IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE
FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS
DOCUMENT HAVE BEEN COMPILED BY MANAGEMENT OF THE COMPANY ON THE BASIS OF
ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BE REASONABLE.
FUTURE OPERATING RESULTS OF THE COMPANY, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND
NO REPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSE
FORWARD-LOOKING STATEMENTS. THEREFORE, PROSPECTIVE PURCHASERS OF THE SHARES OF
SERIES A PREFERRED STOCK ARE URGED TO CONSULT WITH THEIR ADVISORS (THE OPINIONS
OF WHICH MAY DIFFER FROM THOSE SPECIFIED IN THOSE FORWARD-LOOKING STATEMENTS)
WITH RESPECT TO THOSE ASSUMPTIONS OR HYPOTHESES.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS
SPECIFIED IN THIS DOCUMENT, INCLUDING THOSE REVENUE PROJECTIONS, REPRESENT
ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT TO UNCERTAINTY AS TO POSSIBLE CHANGES
IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND OTHER CIRCUMSTANCES. AS A RESULT, THE
IDENTIFICATION AND INTERPRETATION OF DATA AND OTHER INFORMATION AND THEIR USE IN
DEVELOPING AND SELECTING ASSUMPTIONS FROM AND AMONG REASONABLE ALTERNATIVES
REQUIRE THE EXERCISE OF JUDGMENT. TO THE EXTENT THAT THE ASSUMED EVENTS DO NOT
OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY FROM ANTICIPATED OR PROJECTED RESULTS,
AND, ACCORDINGLY, NO OPINION IS EXPRESSED ON THE ACHIEVABILITY OF THOSE
FORWARD-LOOKING STATEMENTS, INCLUDING THOSE REVENUE PROJECTIONS.
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THESE FORWARD-LOOKING STATEMENTS, INCLUDING THESE REVENUE PROJECTIONS, HAVE
BEEN COMPILED AS OF THE DATE OF THIS DOCUMENT AND SHOULD BE EVALUATED WITH
CONSIDERATION OF ANY CHANGES OCCURRING AFTER THE DATE OF THIS DOCUMENT. NO
ASSURANCE CAN BE GIVEN THAT ANY OF THE ASSUMPTIONS RELATING TO THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS DOCUMENT, INCLUDING THOSE REVENUE
PROJECTIONS, ARE ACCURATE OR THAT THEY WILL PROVE TO BE APPLICABLE TO A
PARTICULAR PURCHASER OF THE SHARES OF THE SERIES A PREFERRED STOCK. IT IS THE
RESPONSIBILITY OF THE PURCHASERS OF THE SERIES A PREFERRED STOCK AND THEIR
ADVISORS TO REVIEW THOSE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE REVENUE
PROJECTIONS, TO CONSIDER THE ASSUMPTIONS ON WHICH THOSE FORWARD-LOOKING
STATEMENTS ARE BASED AND TO ASCERTAIN THEIR REASONABLENESS.
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3
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GLOSSARY OF TERMS
The following defined terms are in addition to those defined terms
specified elsewhere in this Prospectus and are deemed to include the singular,
as well as the plural, and the present tense, as well as the past tense, and,
when they appear in this Prospectus, are defined as follows:
GENERAL TERMS
"Affiliate" shall mean (i) any person who directly or indirectly controls
or is controlled by or under common control with another person or entity; (ii)
a person owning or controlling 10% or more of the outstanding voting securities
of such other person or entity; (iii) any officer or director of such other
person or entity; or (iv) any person who is an officer, director, general
partner, trustee, or holder of 10% or more of the voting securities or
beneficial interests of any of the foregoing.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Funds Available For Distribution" shall mean cash receipts from the
operations of the Company, after deducting cash used to pay all expenses, debt
payments, capital improvements and replacements and less the amounts set aside
for restoration or creation of reserves.
"IRS" shall mean the United States Internal Revenue Service.
"Offering" shall mean the offer of no more, and possibly less, than 632,500
shares of the Series A Preferred Stock, on, and subject to, the terms and
conditions specified in this Prospectus.
"Prospectus" shall mean this Prospectus dated June 2, 1997, and any and all
amendments and supplements thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
BIOMASS TERMS
"Biomass" shall mean any organic waste product.
"Clean green waste" shall mean organic waste containing no more than 0.5
percent physical contaminants by total weight. Clean green waste is typically
composed of waste from plants, including leaves, clippings, cuttings, grass
trimmings, weeds, shrubbery, bushes, tree limbs, tree trunks, and untreated
wooden pallets.
"Chipper" shall mean a machine, typically powered by an internal combustion
engine, which reduces large pieces of wood (tree trunks, wood pallets, etc.)
into wood chips.
"Contaminant" shall mean, when used in connection with clean green waste,
any nonorganic foreign substance. The most common contaminants in clean green
waste are glass, plastic, styrofoam, and metal (such as screws, nails, and
beverage cans).
"Landfill" shall mean a licensed solid waste disposal site where solid
waste is compacted or burned; commonly referred to as a "dump".
"MRF" is an acronym for "Material Recycling Facility".
"Organic" shall mean products originating from living things; farm
operations are typically considered "organic" if they use fertilizers and
mulches consisting of vegetable matter.
"Recycle" shall mean removing usable materials from the waste disposal
process.
"Screen" shall mean a machine, typically powered by an internal combustion
engine, which removes and collects green waste from the waste disposal process.
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"Shear" shall mean a machine, typically powered by an internal combustion
engine, which crushes or cuts wood, metal, or other solid waste products.
REAL ESTATE TERMS
"Championship golf course" shall mean a golf course of more than 7,000
yards designed by a member of the Professional Golfer's Association ("PGA").
"Partnership" shall mean Rancho California Partners II, a California
limited partnership.
AGRICULTURAL TERMS
"Aquifer" shall mean a water-bearing rock, rock formation, or group of
formations.
"Drip Irrigation System" shall mean a water-conserving irrigation system
whereby an emitter delivers water directly to the plant.
"Table Grape" shall mean a grape grown primarily for fresh consumption, as
opposed to a grape grown for use as a base in juice or wine.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus and in the Exhibits to this
Prospectus which are incorporated by reference as if set forth fully herein.
Investors should carefully consider the information set forth under the heading
"Risk Factors."
THE COMPANY
AMCOR Capital Corporation, a Delaware corporation, defined previously in
this Prospectus as the "Company," is primarily engaged in agribusiness and real
estate development with three core operating divisions: (i) growing, processing
and marketing fresh table grapes in southern California's Coachella Valley (near
Palm Springs); (ii) processing Biomass into clean green waste, in accordance
with a State of California recycling mandate; and (iii) developing real estate,
principally related to a 1,350 acre residential subdivision and adjacent
championship golf course located southeast of San Antonio, Texas. The Company
also has a 50% ownership interest in a 6,000 acre irrigated potato and grain
farm located in the Columbia River Basin of Eastern Oregon, with certain
Columbia River water rights appurtenant thereto.
The Company currently operates a Coachella Valley table grape business,
which constitutes one of the country's largest growers and shippers of the
popular Flame Seedless table grapes. The Company's combined proprietary and
managed table grape acreage produces nearly 1.5 million boxes (approximately 30
million pounds) of grapes annually. In March, 1997, the Company entered into an
exclusive licensing agreement with Sun World International, Inc. ("Sun World")
to develop and produce the patented Sugraone "Superior Seedless" table grape.
In addition to the Sun World seedless grape licensing agreement, the
Company believes that expansion of its Biomass processing operations is now an
immediate priority due to the revenue potential in the recycling industry and
the operational advantages that the Company believes it presently maintains over
potential competitors in the biomass processing industry. AMCOR Biomass Farms
LLC, a subsidiary of the Company, has entered into working relationships with
major waste recycling companies, such as CR&R Recycling, Inc., located in
Stanton, California, Waste Recovery & Recycling, Inc., located in South Gate,
California, Sunset Environmental, located in Irvine, California, and CVT
Recycling, located in Anaheim, California. The Company anticipates that AMCOR
Biomass Farms LLC will enter into similar working relationships with other major
solid waste disposal and recycling companies. The Company intends to utilize a
significant portion of its available resources to expand these business
operations during the next one to two years.
The Company was incorporated in Delaware on March 10, 1988. The Company's
consolidated operations include its wholly-owned subsidiaries, Sun Goddess
Farms, Inc., a California corporation, and AMCOR Properties, Inc., a California
corporation. The Company also holds a 99% ownership interest in (i) Las Palomas
Country Club Estates LLC, a California limited liability company, which acts as
the development entity for the Las Palomas Golf Course (owned by the Company and
leased to Lake Valley Realty Partners, an Affiliate of the Company) and the
contiguous residential building lot development in Texas (owned by Lake Valley
Realty Partners); (ii) AMCOR Builders LLC, a California limited liability
company, which manages the construction operations of the Company in Texas; and
(iii) AMCOR Biomass Farms LLC, a California limited liability company, which
operates the clean green waste processing facilities. The remaining 1% interest
in Las Palomas Country Club Estates LLC is owned by Fred H. Behrens, Chief
Executive Officer and a director of the Company. The remaining 1% interest in
AMCOR Builders LLC is owned by Robert A. Wright, the President and a director of
the Company. The remaining 1% interest in AMCOR Biomass Farms LLC is owned by F.
Howard Lee, a director of the Company. The Company's principal executive office
is located at 52-300 Enterprise Way, Coachella, California 92236. The Company's
telephone number is (760)398-9520.
The Company's common stock, par value $.002 per share ("Common Stock"),
trades with its prices quoted on the Over The Counter Bulletin Board Quotation
System (Symbol: "ACAP"). On March 18, 1997 the Company applied for a National
Electronic Market listing on NASDAQ; that application is currently under review
by the National Association of Securities Dealers, Inc. ("NASD"). Management is
not aware of
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any reason that the application for a National Market listing would not be
approved by the NASD. Exhibit A to this Prospectus contains a chart indicating
the recent performance of the Common Stock.
THE OFFERING
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Securities Offered (1)........ 550,000 shares of Series A 9% Convertible Preferred Stock.
Dividends..................... The Series A Preferred Stock shall pay dividends of 9%
annually, paid on a semi-annual basis.
Conversion Rights............. The Series A Preferred Stock will be convertible to shares of
Common Stock at a price equal to 125% of the closing price of
the Common Stock on the Determination Date ("Conversion
Price"). The Company shall have the right to compel
conversion of the Series A Preferred Stock at such time as
the Common Stock has traded at a price equal to or greater
than 150% of the closing price of the Common Stock on the
Determination Date for a period of 20 consecutive business
days.
Redemption Rights............. The Series A Preferred Stock may be redeemed by the Company
on or after 5 years from the issue date of the Series A
Preferred Stock for shares of Common Stock or for cash at
$10.00 per share, plus an amount equal to accumulated,
accrued and unpaid dividends. A redemption of shares of the
Series A Preferred Stock for shares of Common Stock will be
treated as a conversion of the Series A Preferred Stock into
Common Stock, except that the conditions precedent to the
Company's right to compel conversion of the Series A
Preferred Stock into Common Stock will not apply to any
redemption by the Company of Series A Preferred Stock.
Liquidation Preference........ $10.00 per share, plus an amount equal to accumulated,
accrued and unpaid dividends.
Voting Rights................. Except as otherwise from time to time required by applicable
law, the holders of shares of Series A Preferred Stock will
have no voting rights.
Ownership Limit............... None.
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(1) Assumes no exercise of the Underwriter's over-allotment option. See
"Underwriter and Plan of Distribution."
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RISK FACTORS
A PURCHASE OF SERIES A PREFERRED STOCK INVOLVES A SIGNIFICANT AND SUBSTANTIAL
NUMBER OF SIGNIFICANT RISKS, WHICH EACH PROSPECTIVE PURCHASER OF SERIES A
PREFERRED STOCK SHOULD CONSIDER PRIOR TO MAKING A DECISION TO PURCHASE SERIES A
PREFERRED STOCK. EACH PROSPECTIVE PURCHASER OF SERIES A PREFERRED STOCK SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AS WELL AS OTHER RISK FACTORS,
WHICH MAY BE SPECIFIED BY THE PROVISIONS OF THIS DOCUMENT. THIS DOCUMENT
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
ACTUAL RESULTS OF THE COMPANY AND ITS SUBSIDIARIES AND AFFILIATES MAY DIFFER
MATERIALLY FROM THE RESULTS SPECIFIED IN THE FORWARD-LOOKING STATEMENTS BECAUSE
OF CERTAIN FACTORS, INCLUDING THOSE SPECIFIED IN THE FOLLOWING RISK FACTORS AND
ELSEWHERE IN THIS DOCUMENT. PROSPECTIVE PURCHASERS OF SERIES A PREFERRED STOCK
MUST BE PREPARED FOR THE POSSIBLE LOSS OF THEIR ENTIRE INVESTMENTS IN THE
COMPANY. THE ORDER IN WHICH THE FOLLOWING RISK FACTORS ARE PRESENTED IS
ARBITRARY, AND PROSPECTIVE PURCHASERS OF SERIES A PREFERRED STOCK SHOULD NOT
CONCLUDE, BECAUSE OF THE ORDER OF PRESENTATION OF THE FOLLOWING RISK FACTORS,
THAT ONE RISK FACTOR IS MORE SIGNIFICANT THAN ANOTHER RISK FACTOR.
POTENTIAL ENVIRONMENTAL LIABILITY AND RELATED RISKS
COMPLIANCE WITH GOVERNMENT AND ENVIRONMENTAL REGULATIONS. The collection
and disposal of solid wastes, including wastes incident to the operation of a
clean green waste processing facility and rendering of related environmental
services, are subject to federal, state and local laws and regulations which
regulate health, safety, the environment, zoning and land-use. Any future
violation of, and cost of compliance with, these laws and regulations could have
a material adverse effect on the Company's business, financial condition and
results of operations. Operating permits are generally required for recycling
facilities and certain collection vehicles, and these permits are subject to
revocation, modification, and renewal. Federal, state and local regulations
vary, but generally govern all types of waste disposal activities and the
location and use of facilities and also impose restrictions to prohibit or
minimize soil, air and water pollution. In connection with the Company's
recycling activities, it may be necessary to expend considerable time, effort
and money to bring the existing or acquired facilities into compliance with
applicable requirements and to obtain the permits and approvals necessary to
increase the recycling and storage capacity of such facilities. In addition,
governmental authorities have the power to enforce compliance with these
regulations and to obtain injunctions or impose fines in the case of violations,
including criminal penalties. These regulations are administered by the United
States Environmental Protection Agency ("EPA") and various other federal, state
and local environmental and health and safety agencies and authorities,
including the Occupational Safety and Health Administration of the United States
Department of Labor.
Subtitle D of the Resource Conservation and Recovery Act of 1976, as
amended, establishes a framework for regulating the storage, collection and
disposal of non-hazardous solid wastes. In the past, the Subtitle D framework
has left the regulation of non-hazardous waste storage, collection and disposal
largely to the states. However, in October 1991, the EPA promulgated a final
rule which imposes minimum federal comprehensive solid waste management criteria
and guidelines for disposal facilities and operations, including location
restrictions, facility design and operating criteria, closure and post-closure
requirements, financial assurance standards, groundwater monitoring requirements
and corrective action standards, many of which have not commonly been in effect
or enforced in connection with solid waste landfills. States are required to
revise their landfill regulations to meet these requirements. Because some parts
of the new regulations will be phased in over time, the full effect of these
regulations may not be known for several years. However, other than for
groundwater monitoring and financial assurance requirements, all provisions of
the final rule became effective in October 1993. There can be no assurance that
the EPA will not promulgate similar regulations under Subtitle D in connection
with the collection of non-hazardous solid waste.
8
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HAZARDOUS SUBSTANCES LIABILITY. The Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("Superfund" or "CERCLA"),
has been interpreted by some courts to impose strict, joint and several
liability on current and former owners or operators of facilities at which there
has been a release or a threatened release of a "hazardous substance" and on
persons who generate, transport or arrange for the disposal of such substances
at those facilities. Thousands of substances are defined as "hazardous" under
CERCLA and their presence, even in minute amounts, can result in substantial
liability. The statute provides for the remediation of contaminated facilities
and imposes the costs therefor on the responsible parties. The costs of
conducting such a cleanup and the damages can be very significant and, given the
limitations in insurance coverage for these risks, could have a material adverse
impact on the Company and its financial condition. Notwithstanding the efforts
of AMCOR Biomass Farms LLC to comply with applicable regulations and to avoid
transporting and receiving hazardous substances, such substances may be present
in waste collected or received for processing by AMCOR Biomass Farms LLC. AMCOR
Biomass Farms LLC intends to continue to focus on the non-hazardous clean green
waste recycling market and does not intend to acquire or develop hazardous waste
disposal operations. As used in this Prospectus, "non-hazardous waste" means
substances that are not defined as hazardous wastes under federal regulations.
LACK OF ENVIRONMENTAL LIABILITY INSURANCE. While AMCOR Biomass Farms LLC
may acquire and maintain site-specific pollution legal liability insurance,
which may provide coverage under certain circumstances for pollution damage to
third parties, such coverage is restrictive in nature, and subject to certain
exclusions and effective dates, consistent with insurance industry requirements.
In addition, such coverage is subject to specific and aggregate limits which may
not be sufficient to cover claims, if they should arise. If AMCOR Biomass Farms
LLC is not able to obtain comprehensive pollution insurance at reasonable costs,
it may carry only such coverage, if any, as is required by regulatory permits.
In addition, the extent of insurance coverage under certain forms of policies
has been the subject in recent years of litigation in which insurance companies
have, in some cases, successfully taken the position that certain risks are not
covered by such policies. If, in the absence of such insurance, AMCOR Biomass
Farms LLC were to incur liability for environmental damages of sufficient
magnitude, it could have a material adverse effect on the Company and its
financial condition.
RISKS OF FUTURE LEGAL PROCEEDINGS. In addition to the costs of complying
with environmental regulations, recycling companies and other waste management
companies, by the nature of their businesses, may be involved in legal
proceedings in the ordinary course of business. Government agencies may seek to
impose fines on AMCOR Biomass Farms LLC for alleged failure to comply with laws
and regulations or to deny, revoke or impede the renewal of AMCOR Biomass Farms
LLC's permits and licenses. In addition, such governmental agencies, as well as
surrounding landowners, may claim AMCOR Biomass Farms LLC is liable for
environmental damage. Citizens' groups have become increasingly active in
challenging the grant or renewal of permits and licenses, and responding to such
challenges has further increased the costs associated with permitting new
facilities or expanding current facilities. A significant judgment against AMCOR
Biomass Farms LLC, the loss of a significant permit or license or the imposition
of a significant fine could have a material adverse effect on the Company's
financial condition. AMCOR Biomass Farms LLC is currently not a party to any
legal proceedings or environmental proceedings arising from its clean green
waste processing operations, but no assurance can be given that AMCOR Biomass
Farms LLC will not be involved in such proceedings in the future. Unfavorable
resolution of any such matter could adversely affect the results of the
recycling and biomass processing operations of AMCOR Biomass Farms LLC.
CLAIMS AGAINST THE MURRIETA REAL PROPERTY. The Murrieta real property
("Site") which AMCOR Biomass Farms LLC currently uses as its primary depository
for clean green waste is owned by Rancho California Partners II, a California
limited partnership formed in or about 1986, which has previously been defined
in this Prospectus as the "Partnership". The general partners of the Partnership
are Fred Behrens, Chief Executive Officer and a director of the Company, and
Robert Wright, President and a director of the Company. On April 6, 1996, the
Company purchased loans owed by the Partnership in the amount of $5,691,686
(including accrued interest), secured by the Site. The agreements securing these
loans have been assigned to the Company. The purchase price of these loans is
payable pursuant to three secured promissory notes from the Company, which are
secured by the Site and a mortgage on the Texas real property upon which
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the Las Palomas Country Club Estates project (championship golf course and
residential lots) is located, owned by the Company and leased to Lake Valley
Realty Partners, an Affiliate of the Company.
SEASONALITY. AMCOR Biomass Farms LLC believes that its clean green waste
processing operations may be adversely affected by protracted periods of
inclement weather, which could delay the transfer of clean green waste or reduce
the volume of clean green waste generated, or both. Moreover, different types
and volumes of clean green waste are generated throughout the year, depending
upon optimum growing seasons, government weed abatement programs, and
specialized holiday green waste (for example, the disposal of evergreen trees
after the end of the Christmas season). There can be no assurance that
protracted periods of inclement weather will not have a material adverse effect
on the Company's future results of operations.
COMPETITION IN THE RECYCLING INDUSTRY. AMCOR Biomass Farms LLC will provide
one of the many alternatives to landfill disposal (such as recycling, biomass
milling and waste-to-energy). As set forth in other sections of this Prospectus,
there has been an increasing trend at the state and local levels to mandate
waste reduction at the source and to prohibit the disposal of certain types of
wastes at landfills. As this trend continues, AMCOR Biomass Farms LLC expects to
encounter competition from new and existing waste industry members. Management
believes that entry into the industry and ongoing operations within the industry
require a substantial agricultural land base, on-going agricultural operations
and substantial financial resources. The non-hazardous waste industry is led by
several large national waste management companies and numerous regional and
local companies, all of which contribute to the significant competition that
characterizes the industry. Some of these companies have significantly greater
financial and operational resources and more established market positions than
AMCOR Biomass Farms LLC. In addition, AMCOR Biomass Farms LLC may compete with
municipalities that maintain their own waste collection and landfill operations
and may have financial advantages due to the availability of tax revenues and
tax-exempt financing.
EXPANSION AND EQUIPMENT ACQUISITION RISKS. AMCOR Biomass Farms LLC is
expanding its clean green waste processing and recycling operations. New clean
green waste facility expansion is subject to a number of risks, including risks
of city, state and, where necessary, federal licensing delays and cost overruns
that may increase operating costs (see "Compliance with Government and
Environmental Regulations"), risks that leases for such facilities may not be
entered into on schedule or that the recycling operations will not achieve
anticipated volume to generate income to pay operating expenses, and new project
commencement risks, such as the receipt of zoning, occupancy and other required
governmental permits and authorizations and the occurrence of development costs
in connection with projects that are not pursued to completion. Acquisition of
machinery incidental to the operation of such recycling facilities entails risks
that the machinery will fail to perform in accordance with expectations and that
judgments with respect to the costs of such machinery will prove inaccurate, as
well as general investment risks associated with any expanding business venture.
Moreover, because some machinery is being specially modified for AMCOR Biomass
Farms LLC, there are risks that servicing and maintenance will be more expensive
or time-consuming than currently anticipated.
NO ASSURANCE OF ENFORCEMENT. The Company believes that passage of the
California Integrated Waste Management Act of 1989 (Assembly Bill 939 ("AB
939")) will benefit the clean green waste operations of AMCOR Biomass Farms LLC,
because AB 939 requires the diversion of clean green waste material from the
existing waste disposal process. However, there can be no assurance that the
local jurisdictions will comply with AB 939, or that the local enforcement
agencies responsible for monitoring and enforcing compliance with AB 939 will
ardently enforce its provisions.
AGRICULTURAL EXEMPTIONS. AMCOR Biomass Farms LLC presently enjoys certain
exemptions from permitting requirements promulgated and enforced by the State of
California South Coast Air Quality Management District, and the Riverside County
Local Enforcement Agency, because of the status of AMCOR Biomass Farms LLC as an
agricultural business under Standard Industrial Classification ("SIC") Codes. In
the event AMCOR Biomass Farms LLC loses its agricultural exemption, such event
could have a material adverse effect on the Company's business and financial
condition.
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REAL ESTATE RISKS
GENERAL. The real property assets of the Company and its Affiliates are
subject to varying degrees of risk, including the risk of rising interest rates.
The yields available from equity investments in real estate depend on the amount
of income generated and expenses incurred. If the properties of the Company and
its Affiliates do not generate income sufficient to meet operating expenses,
including debt service and capital expenditures, the Company's income and
ability to make distributions to its stockholders will be adversely affected.
Income from properties of the Company and its Affiliates may be adversely
affected by the general economic climate; local conditions, such as oversupply
of residential housing or a reduction in demand for residential housing in the
area; the attractiveness of the properties to potential buyers; competition from
other available housing; the ability of the owner to provide adequate
maintenance and insurance; and increased operating costs (including real estate
taxes). The Company's income would also be adversely affected if the Company's
golf course and related facilities do not operate at a profit.
ILLIQUIDITY OF REAL ESTATE. Real estate investments are generally illiquid
and, therefore, could limit the ability of the Company to vary its investment
strategies promptly in response to changes in economic or other conditions.
GEOGRAPHIC DIVERSIFICATION. The real property in which the Company and its
Affiliates have ownership or other beneficial interests are located in several
states, including California, Texas, and Oregon. The Company's performance may,
therefore, be influenced by economic conditions in these regions and the markets
for various products and services therein. A decline in the economy in any one
of these markets may adversely affect the ability of the Company to make
distributions to stockholders.
EXPANSION INTO NEW MARKETS. The Company is not restricted from engaging in
the real estate development business in the future. Pursuant to the Company's
plans to complete construction and development of its golf course and adjacent
residential building lots, and to expand its real estate development operations
in other areas, as opportunities may develop, the Company or its Affiliates may
acquire additional undeveloped land in Texas, Southern California, and other
states. The performance of the properties of the Company and its Affiliates in
these new areas may be linked to economic conditions in these areas and the
market for residential housing and recreational services therein, and there is
no assurance that the investments of the Company and its Affiliates in the new
areas will generate the same returns as similar investments have in the past in
these areas.
RISKS RELATING TO FINANCING; DISTRIBUTIONS. The Company anticipates that
its real estate development and acquisition activities, and those of its
Affiliates, will be largely financed by externally generated funds from
borrowings with credit facilities and other secured and unsecured debt financing
and from equity financing. In addition, new golf course and residential building
lot development activities may be financed under lines of credit or other forms
of secured or unsecured construction financing that would result in a risk that
permanent financing for newly developed projects might not be available or would
be available only on disadvantageous terms. Accordingly, were the Company unable
to obtain funds from borrowings or the capital markets to refinance new
development or acquisitions undertaken without permanent financing, the
Company's ability to grow through additional development and acquisition
activities could be curtailed, Funds Available For Distribution could be
adversely affected and the Company could be required to reduce distributions to
stockholders.
DEPENDENCE UPON KEY EMPLOYEES. The Company is significantly dependent upon
the services of Wayne Gann to manage the operation and maintenance of the
Company's real estate developments. In September, 1995, Las Palomas Country Club
Estates LLC appointed Mr. Gann as Project Administrator for Las Palomas Country
Club Estates and Lake Valley Estates, the residential building lot developments
contiguous to the Company's championship golf course located near San Antonio,
Texas. The Company anticipates that Mr. Gann will enter into an employment
agreement with the Company or one of its Affiliates. In the event that Mr. Gann
is unwilling or unable to fulfill his obligations under the employment agreement
(for example, due to ill health), such a failure to perform could have a
material adverse effect on the Company's real estate development contiguous to
the Company's golf course.
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UNINSURED LOSS. The Company or its Affiliates may maintain, in amounts
deemed appropriate by management, general liability, fire, flood (where
applicable), and other insurance with policy specifications, limits and
deductibles customarily maintained for similar properties owned or operated by
the Company and its Affiliates. There are, however, certain types of
extraordinary losses (such as losses resulting from earthquakes) that may be
either uninsurable or not economically insurable. Should such an uninsured loss
occur, the Company could lose its investment in, and anticipated revenue from, a
property.
RECREATIONAL FACILITY OPERATING RISKS
LIMITED HISTORY. The Company's only golf course operation ("Las Palomas
Course") opened in November, 1996 and, accordingly, has only a limited history
of operations. The Company leases the Las Palomas Course to Lake Valley Realty
Partners, an Affiliate of the Company ("Lake Valley"), which owns the contiguous
lots. The Company's prospects for receiving lease income are not solely
dependent upon Lake Valley's ability to operate the Las Palomas Course
profitably. However, Lake Valley's ability to operate the golf course
profitably, considering the risks, expenses and difficulties frequently
encountered by a new business in a highly competitive industry, may be a factor
in determining the ultimate value of the golf course lease to the Company.
DEPENDENCE ON SINGLE LOCATION. The Las Palomas Course is the only golf
course currently owned by the Company. Accordingly, a variety of factors
relating to having golf course operations at only one location could affect the
ongoing viability of the golf course operations and the ultimate value to the
Company of both the lease and the golf course. These factors include local
economic conditions, adverse publicity, accidents that could damage or destroy
the Las Palomas Course, and competition from other local golf course facilities.
SIGNIFICANT COMPETITION. The golf course business is competitive and
includes competition from other local golf courses, as well as other forms of
recreation, which could adversely affect Lake Valley's ability to pay its lease
obligations to the Company. Certain of Lake Valley's competitors may have
considerably greater financial, marketing, personnel, and other resources than
Lake Valley, as well as greater experience and customer recognition. In the San
Antonio area, Lake Valley faces competition from 17 public and 4 military golf
courses, although there are currently no other golf courses in Wilson County,
Texas (the county in which the Company's golf course is located). While
management believes that the location and the amenities associated with the Las
Palomas Course provide it with certain competitive advantages, there can be no
assurance that Lake Valley will be able to compete successfully.
SEASONAL RESULTS. The Company anticipates that revenues derived from the
Las Palomas Course may fluctuate based on weather conditions and the seasonal
nature of recreational golf in the San Antonio area. This seasonal pattern may
cause Lake Valley's results of operations to vary from quarter to quarter.
Accordingly, period-to-period comparisons are not necessarily meaningful and
should not be relied on as indicative of future results of golf course
operations. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
ADDITIONAL FINANCING REQUIREMENTS. Management believes that the cash
received from the Las Palomas Course will be sufficient for Lake Valley to
conduct its operations as currently contemplated. Although such belief is based
on management's best judgment, there can be no assurance that the assumptions
underlying this belief will prove accurate or that circumstances beyond Lake
Valley's control will not materially adversely affect Lake Valley's financial
condition and results of operations, requiring Lake Valley to seek additional
capital or default on its obligations to the Company.
DEPENDENCE UPON KEY EMPLOYEES. Lake Valley is heavily dependent upon the
services of Bert Buehler to manage the operation and maintenance of the Las
Palomas Course. Mr. Buehler has entered into a five-year employment agreement
with Las Palomas Country Club Estates LLC, a California limited liability
company, 99% of which is owned by the Company and 1% of which is owned by Robert
A. Wright, President and a director of the Company. Las Palomas Country Club
Estates LLC operates the Las Palomas Course for Lake Valley. In the event that
Mr. Buehler becomes unwilling or unable to fulfill his obligations under the
employment agreement (for example, due to ill health), such a failure to perform
could have a material adverse effect on the golf operations at the Las Palomas
Course and on the Company.
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DEPENDENCE ON DISCRETIONARY CONSUMER SPENDING. The amount spent by
consumers on discretionary items, such as golf and other recreational and
entertainment activities, is dependent upon consumers' levels of discretionary
income, which may be adversely affected by general or local economic conditions.
A decrease in consumer spending on such activities will have a material adverse
effect on the Las Palomas Course operations.
DEPENDENCE ON SALE OF ADJACENT RESIDENTIAL LOTS. The Las Palomas Course is
bordered by a residential subdivision consisting of 1,300 lots which are owned
by Lake Valley. The number of lots purchased, and the number of residences built
on those lots, may be adversely affected by general or local economic conditions
and may, in turn, adversely affect Lake Valley's ability to meet its obligations
under its lease with the Company for the Las Palomas Course.
POSSIBLE ADVERSE CONSEQUENCES OF ENVIRONMENTAL REGULATION. Golf and
recreational centers use and store various hazardous materials. Under various
federal, state, and local laws, ordinances, and regulations, an owner or
operator of real property is generally liable for the costs of removal or
remediation of hazardous substances that are released on its property,
regardless of whether the owner or operator knew of, or was responsible for, the
release of such hazardous materials. The Company has not been advised of any
non-compliance with all such laws, ordinances, and regulations applicable to the
Las Palomas Course. The Company, however, has not performed any environmental
studies on the Las Palomas Course and, as a result, there may be potential
liabilities or conditions existing on the Las Palomas Course of which the
Company is not aware. If any such liabilities or conditions arise with respect
to the Las Palomas Course or any related facilities which may be constructed,
acquired or operated by the Company or its Affiliates on or near the Las Palomas
Course in the future, there could be a material adverse effect on the Company.
AGRICULTURAL INDUSTRY RISKS
MARKETS FOR AGRICULTURAL PRODUCTS ARE SEASONAL AND VOLATILE. Market demand
for the Company's table grapes is primarily dependent upon growing conditions
and competition, which are always uncertain due to a number of factors. The most
important factors affecting agricultural conditions are weather patterns and
conditions (particularly precipitation) and the U.S. government's agricultural
policies. The agricultural operations of the Company may be subject to
significant interruption, and the Company may be subject to significant
liability, if one or more of its crops are damaged by severe weather or other
natural disaster. Table grape prices are also affected by world supply and
demand factors. The Company's agricultural business is seasonal and typically
the Company realizes most of its revenues during the primary harvest season,
which is May through June each year.
HIGHLY COMPETITIVE BUSINESS. Agricultural products are a global commodity
and customers, including wholesalers and end users, base their purchasing
decisions principally on the price and deliverability of the products. A number
of U.S. agricultural concerns compete with the Company in domestic and export
markets, either directly or indirectly. Agricultural concerns in other
countries, including state-owned and government subsidized entities, compete in
the U.S. and in foreign markets in which the Company competes or in which the
Company may compete in the future. Due to the passage of the North American Free
Trade Agreement ("NAFTA"), the Company faces substantial competition from
Mexican agricultural concerns. Some of the Company's principal competitors may
have greater total resources than the Company and this competition could have a
material adverse effect on the Company's profitability.
GENERAL RISK FACTORS
RELIANCE ON MANAGEMENT. All decisions regarding management of the Company's
affairs will be made exclusively by the officers and directors of the Company
and not by purchasers of the Series A Preferred Stock. Accordingly, no person
should purchase Series A Preferred Stock unless that person is willing to
entrust all aspects of management to the officers and directors of the Company,
or their successors. Potential purchasers of the Series A Preferred Stock must
carefully evaluate the personal experience and business performance of the
officers and directors of the Company.
DEPENDENCE ON KEY PERSONNEL. The Company is dependent upon the efforts and
abilities of its senior management, particularly those of Fred H. Behrens and
Robert A. Wright. The loss of either Mr. Behrens or
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Mr. Wright could have a material adverse affect on the business and prospects of
the Company. Moreover, newly elected director F. Howard Lee is President of one
of the Company's subsidiaries, AMCOR Biomass Farms LLC, and has significant
experience in environmental assessment and related fields (see "MANAGEMENT").
The loss of Mr. Lee could have a material adverse affect on the expansion of the
clean green waste recycling operations of AMCOR Biomass Farms LLC.
The officers of the Company believe that all commercially reasonable
efforts have been made to minimize the risks attendant with such dependence on
key personnel and the loss or departure of key personnel. Since 1992, the
Company has maintained key person life insurance policies on Mr. Behrens and Mr.
Wright. However, the proceeds from such policies might not fully compensate the
Company for the loss of either Mr. Behrens or Mr. Wright; but, as owners of
significant portions of the issued and outstanding Common Stock, both Mr.
Behrens and Mr. Wright have incentives to remain with the Company. The Company
anticipates that Mr. Lee will become party to an employment agreement with the
Company or an Affiliate of the Company which includes a stock option plan which
will not vest for several years, providing Mr. Lee with an incentive to remain
with the Company and AMCOR Biomass Farms LLC. However, there is no assurance
that Messrs. Behrens, Wright or Lee will remain with the Company or its
Affiliates or that, if they should elect to leave the Company and its
Affiliates, their respective replacements would cause the Company to operate
profitably.
LIMITATION ON LIABILITY OF OFFICERS AND DIRECTORS OF THE COMPANY. Section
145 of the Delaware General Corporation Law specifies that the Certificate of
Incorporation of a Delaware corporation may include a provision eliminating or
limiting the personal liability of a director or officer to that corporation or
its stockholders for damages for breach of fiduciary duty as a director or
officer, but such a provision must not eliminate or limit the liability of a
director or officer for (a) acts or omissions which involve intentional
misconduct, fraud, or a knowing violation of law; or (b) unlawful distributions
to stockholders. The Certificate of Incorporation of the Company includes a
provision eliminating or limiting the personal liability of the officers and
directors of the Company to the Company and its shareholders for damages for
breach of fiduciary duty as a director or officer. Moreover, Sections 6.1
through 6.6, inclusive, of the Company's By-laws provide certain indemnity to a
controlling person, director or officer which affects such a person's liability
while acting in a corporate capacity. Accordingly, the officers and directors of
the Company may have no liability to the shareholders of the Company for any
mistakes or errors of judgment or for any act or omission, unless such act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to the shareholders of the Company.
DISCLOSURE OF SECURITIES AND EXCHANGE COMMISSION'S POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE
COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT OF 1933 AND IS,
THEREFORE, UNENFORCEABLE.
NO LIMITATION ON INDEBTEDNESS. The organizational documents of the Company
do not contain any limitation on the amount or percentage of indebtedness,
funded or otherwise, the Company might incur. Accordingly, the Company and its
Affiliates could become more highly leveraged, resulting in an increase in debt
service that could adversely affect the Funds Available For Distribution and
subsequently its ability to make expected distributions to its stockholders and
result in an increased risk of default on its obligations.
USE OF DEBT FINANCING. The Company and its Affiliates are subject to the
risks normally associated with debt financing, including the risk that the
Company and its Affiliates will have insufficient cash available to meet
required payments of principal and interest. As a result of the use of
indebtedness and leverage by the Company and its Affiliates, including the use
of debt to finance development and acquisitions and the use of variable rate
financing, the cumulative effect of the risks associated with borrowing is
greater than that of each of these risks considered individually. In addition,
if a property or properties are mortgaged to secure payment
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of indebtedness and the Company or its Affiliates are unable to meet mortgage
payments or if certain other events of default occur, that property could be
foreclosed upon by or otherwise transferred to the mortgagee with a consequent
loss of income and asset value to the Company.
ADVERSE IMPACT OF INCREASING INTEREST RATES ON STOCK PRICE. One of the
factors that may influence the price of the Company's Series A Preferred Stock
in the public markets is the annual yield on the share price paid from dividend
distributions by the Company. Thus, a continued increase in market interest
rates may lead purchasers of shares of Series A Preferred Stock to demand a
higher annual yield, which could adversely affect the market price of the Series
A Preferred Stock.
RISK OF LIMITATION ON ACQUISITION AND CHANGE IN CONTROL. The Certificate of
Incorporation of the Company authorizes the Board of Directors of the Company to
issue shares of preferred stock and to establish the preferences and rights of
any preferred stock issued. The issuance of additional preferred stock could
have the effect of delaying or preventing a change in control of the Company,
even if a change in control were in the stockholders' interests.
DETERMINATION OF OFFERING PRICE. The offering price of the Series A
Preferred Stock was determined by mutual agreement between the Company and the
Underwriter and does not necessarily relate to the assets, book value, results
of operations of the Company and its Affiliates, or other established criteria
of value.
POTENTIAL PRICE VOLATILITY. There may be significant volatility in the
market price of the Company's securities. Period-to-period fluctuations in the
Company's revenues and financial results may have a significant impact on the
perceived value of the Company and, thus, on the market price of the Company's
securities. Although the Company has applied for listing on the NASDAQ National
Market, there is no assurance that the Company will be so listed. Even if the
Company is so listed, a NASDAQ National Market listing provides no assurance
that an active, liquid trading market will develop for the Company's securities
or, if developed, will be sustained. The price of the Company's capital stock,
including the Series A Preferred Stock, may be significantly affected by such
factors as the financial results and operating performance of the Company and
its Affiliates. Additionally, in recent years, the stock market has experienced
a high level of price and volume volatility and market prices for many
companies, particularly small and emerging growth companies, have experienced
significant price fluctuations not necessarily related to the operating
performance of those companies. The market price for the Company's capital
stock, including the Series A Preferred Stock, may be affected by general stock
market volatility.
LIMITED PUBLIC MARKET. Prior to the Offering, there has been no public
trading market for the Company's Series A Preferred Stock; provided, however, no
assurance is given that such a market will be developed or sustained after the
closing of this Offering. The Company plans to facilitate trading of its Series
A Preferred Stock by soliciting securities brokers to become market-makers of
the Company's Series A Preferred Stock; provided, however, no assurance is given
that the Company will be successful in soliciting and obtaining market-makers.
SPECULATIVE INVESTMENT. The business objectives of the Company and its
Affiliates must be considered speculative, and there is no assurance that the
Company, or its Affiliates, will satisfy those objectives. No assurance can be
given that the holders of the Series A Preferred Stock will realize a return on
their purchase of the Series A Preferred Stock, or that the holders of the
Series A Preferred Stock will not lose their investments in the Company
completely. For this reason, each prospective purchaser of Series A Preferred
Stock should read this Prospectus carefully and should consult with that
purchaser's attorney, business advisor, or investment advisor.
LOSS ON DISSOLUTION OF THE COMPANY. In the event of a dissolution of the
Company, the proceeds realized from the liquidation of the Company's assets, if
any, will be distributed to the shareholders of the Company only after
satisfaction of claims of the Company's creditors. The ability of a purchaser of
Series A Preferred Stock to recover all or any portion of his or her purchase
price for the Series A Preferred Stock in that event will depend on the amount
of funds realized and the claims to be satisfied therefrom.
GENERAL ALLOCATION OF PROCEEDS. The officers and directors of the Company
have complete discretion in the allocation of proceeds of the Offering;
therefore, purchasers of the shares of Series A Preferred Stock must entrust the
ultimate allocation of those proceeds to the judgment of those officers and
directors. It is
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anticipated by management of the Company that proceeds of the Offering will be
used as set forth under the caption "USE OF PROCEEDS" in this Prospectus.
Management of the Company, however, will have broad discretion regarding the
application of the proceeds of the Offering.
REMUNERATION OF DIRECTORS, OFFICERS AND SENIOR MANAGEMENT. Compensation
received by officers, directors and management personnel of the Company and its
Affiliates will be determined from time to time by the Board of Directors of the
Company. Officers, directors, and management personnel of the Company and its
Affiliates will be reimbursed for any out-of-pocket expenses incurred on behalf
of the Company.
RECEIPT OF COMPENSATION REGARDLESS OF PROFITABILITY. The officers,
directors and employees of the Company and its Affiliates may receive
significant compensation, payments, and reimbursements regardless of whether the
Company or its Affiliates operates at a profit or at a loss.
CONFLICTS OF INTEREST. Several of the directors of the Company are employed
independently of the Company and its Affiliates and those persons may engage in
other activities. The persons serving as officers and directors of the Company
shall have conflicts of interest in allocating time, services, and functions
between the other business ventures in which those persons may be or become
involved and, also, the affairs of the Company and its Affiliates. As a result,
conflicts of interest between the Company and the other activities of those
persons, including the affairs of the Company's Affiliates, may occur from time
to time.
The Company will attempt to resolve any such conflicts of interest in favor
of the Company. The officers and directors of the Company are accountable to the
Company and the Company's shareholders as fiduciaries (subject to the
restrictions set forth in the paragraph entitled "Limitation on Liability of
Officers and Directors of the Company" above), which requires that such officers
and directors exercise good faith and integrity in handling the Company's
affairs. Moreover, the officers and directors of the Company believe that the
Company will have sufficient staff, consultants, employees, agents, contractors,
and managers to adequately conduct the business of the Company and its
Affiliates.
Certain directors of the Company have ownership interests in Affiliates of
the Company, which may result in possible conflicts of interest. For a more
detailed account of such possible conflicts of interest, see the information
contained under the heading "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in
this Prospectus.
NO ARM'S LENGTH AGREEMENTS. Certain agreements and arrangements, including
those relating to compensation and payments between the Company and its
Affiliates, are not the result of arm's length negotiations. (See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.")
COMMON RELATIONSHIPS. The accountants for the Company may be or become the
accountants for the Company's Affiliates. The attorneys for the Company, also,
may be or become the attorneys for the Company's Affiliates. If any controversy
occurs following the completion of the Offering in which the interests of the
purchasers of the Series A Preferred Stock appear to be in conflict with the
interests of the Company, other accountants and attorneys, as appropriate, may
be retained for one or all of the parties in connection with such controversy.
Purchasers of the Series A Preferred Stock should be aware, however, instances
may occur where the interests of the Company and the purchasers may diverge and
in such instances a conflict of interest may exist.
DETERMINATION OF PER SHARE PRICE. The purchase price of the Series A
Preferred Stock has been determined by mutual agreement between the Underwriter
and the Company. The purchase price of the Series A Preferred Stock has no
relationship to any established criteria of value, such as book value or
earnings per share or any combination thereof. The purchase price of the Series
A Preferred Stock does not necessarily indicate current market value for the
assets owned by the Company or its Affiliates. No valuation or appraisal has
been prepared for the business of the Company or its Affiliates.
LIMITED RESOURCES OF THE COMPANY. The Company believes it has the financial
resources to serve and satisfy its obligations to its shareholders, including
the commitment of the Company to meet the ongoing administrative and business
expenses of the Company and its Affiliates. A significant financial reversal for
the Company or its Affiliates could adversely affect the ability of the Company
to meet and satisfy typical business obligations and to conduct the businesses
of the Company and its Affiliates.
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<PAGE> 18
ABILITY OF THE COMPANY TO IMPLEMENT ITS BUSINESS STRATEGY. Although the
Company and its Affiliates are committed to growth strategies in the
agricultural, real estate, and clean green waste processing operations of the
Company and its Affiliates, implementation of these strategies will depend in
large part on the ability of the Company and its Affiliates to (i) maintain
appropriate procedures, policies and systems in regard to compliance with
federal, state and local regulatory agencies; (ii) hire, train, and retain
skilled employees; (iii) continue to operate profitably in the face of
increasing competition; and (iv) obtain adequate financing on favorable terms to
fund the business and growth strategies of the Company and its Affiliates. The
inability of the Company or its Affiliates to obtain or maintain any or all of
these factors could impair the ability of the Company and its Affiliates to
implement their business strategies successfully, which could have a material
adverse effect on the results of operations and financial condition of the
Company.
ADDITIONAL FINANCING MAY BE REQUIRED. If all the Series A Preferred Stock
is sold, the Company believes that there will be adequate funds available from
the proceeds of the Offering and from cash from the operations of the Company
and its Affiliates to fund the business operations and obligations of the
Company and its Affiliates. There is no assurance that additional funds will be
available from any source should they be needed by the Company or its
Affiliates; and, if not available, the Company or its Affiliates may not be able
to conduct the operations of the Company or its Affiliates as effectively as the
Company or its Affiliates could if such financing were available. The proceeds
from the sale of the Series A Preferred Stock are expected to be sufficient for
the Company's purposes. However, additional financing may be acquired by
additional securities offerings or from bank financing. If additional shares of
preferred stock of the Company are issued to obtain financing, purchasers of the
Series A Preferred Stock will suffer a dilutive effect on their percentage of
preferred stock ownership in the Company. However, the book value of their
Series A Preferred Stock may not be diluted, provided additional shares of
preferred stock of the Company are sold at prices greater than that paid by
purchasers of the Series A Preferred Stock. The officers and directors of the
Company do not anticipate that subsequent offerings will dilute the book value
of the Series A Preferred Stock.
UNCERTAINTY OF FUTURE FINANCIAL RESULTS; FLUCTUATIONS IN OPERATING
RESULTS. The results of operations of the Company and its Affiliates may vary
from period to period due to a variety of factors, including, but not limited
to, cost increases from third-party manufacturers or suppliers, supply
interruptions, the availability and costs of raw materials, changes in marketing
or sales expenditures, market acceptance of the products and services of the
Company or its Affiliates, competitive pricing pressures, and general economic
and industry conditions that affect demand in the various business operations of
the Company and its Affiliates.
DETERMINATION OF OFFERING PRICE
The purchase price of the Series A Preferred Stock has been determined by
mutual agreement between the Company and the Underwriter after consideration of
a number of objective and subjective factors, and does not necessarily relate to
the assets, book value, results of operations, or other established criteria of
value of the Company and its Affiliates. Among the factors considered in
determining the initial public offering price were the future prospects of the
Company, its Affiliates, and their businesses in general, sales, earnings, the
capital requirements of the Company and its Affiliates, certain other financial
and operating information of the Company and its Affiliates in recent periods,
and the price-earnings ratios, price-sales ratios, market prices of securities
and certain other financial and operating information of companies engaged in
activities similar to those of the Company and its Affiliates. The price of the
Series A Preferred Stock does not necessarily indicate current market value for
the assets owned by the Company or its Affiliates. No valuation or appraisal has
been prepared for the business and potential business expansion of the Company
or its Affiliates.
17
<PAGE> 19
THE COMPANY
AMCOR Capital Corporation, a Delaware corporation, defined earlier in this
Prospectus as the "Company", is primarily engaged in agribusiness and real
estate development with three core operating divisions: (i) growing, processing
and marketing fresh table grapes in southern California's Coachella Valley (near
Palm Springs), (ii) processing Biomass into clean green waste, as part of a
State of California recycling mandate, and (iii) developing real estate,
principally related to a 1,350 acre residential subdivision and championship
golf course located southeast of San Antonio, Texas. The Company also holds a
50% ownership interest in a 6,000 acre irrigated potato and grain farm located
in the Columbia River Basin of Eastern Oregon, with certain Columbia River water
rights appurtenant thereto.
The Company's genesis dates back to 1981 when its predecessor began as a
syndicator and manager of agricultural properties. By 1986 that predecessor had
raised more than $200 million of venture capital, principally to acquire and
develop agricultural properties. Although many of those properties have now been
liquidated, certain of those properties have evolved into substantial business
operations. One such operation is the Company's Coachella Valley table grape
business, which constitutes one of the country's largest growers and shippers of
Flame Seedless table grapes. The Company's combined proprietary and managed
table grape acreage produces nearly 1.5 million boxes (approximately 30 million
pounds) of table grapes annually.
The Company, itself, was incorporated in Delaware on March 10, 1988. On
December 20, 1988, pursuant to a plan of reorganization, the Company acquired
100% of the common stock of AMCOR Capital, Inc., a California corporation, in
exchange for 6,591,271 shares of the Company's Common Stock. AMCOR Capital, Inc.
had been formed as a holding company in 1986 to consolidate the businesses of
several entities. The Company's consolidated operations include its wholly-owned
subsidiaries, Sun Goddess Farms, Inc., a California corporation, and AMCOR
Properties, Inc., a California corporation. The Company also holds a 99%
ownership interest in (i) Las Palomas Country Club Estates LLC, a California
limited liability company, which acts as the development entity for the Las
Palomas Course and the contiguous residential building lot development in Texas;
and (ii) AMCOR Builders LLC, a California limited liability company which
manages the construction operations of the Company in Texas; and (iii) AMCOR
Biomass Farms LLC, a California limited liability company, which operates the
clean green waste processing facilities. The remaining 1% interest in Las
Palomas Country Club Estates LLC is owned by Fred H. Behrens, Chief Executive
Officer and a director of the Company. The remaining 1% interest in AMCOR
Builders LLC is owned by Robert A. Wright, the President and a director of the
Company. The remaining 1% interest in AMCOR Biomass Farms LLC is owned by F.
Howard Lee, a director of the Company. The Company's principal executive office
is located at 52-300 Enterprise Way, Coachella, California 92236. The Company's
telephone number is (760)398-9520.
The Common Stock, par value $.002 per share ("Common Stock"), trades with
its prices quoted on the Over The Counter Bulletin Board Quotation System
(Symbol: "ACAP"). On March 18, 1997 the Company applied for a National
Electronic Market listing on NASDAQ; that application is currently under review
by the NASD. Management is not aware of any reason that the application for a
National Market listing would not be approved by the NASD. Exhibit A to this
Prospectus contains a chart indicating the recent performance of the Company's
common stock.
RECENT DEVELOPMENTS
There are significant recent developments in all three of the Company's
core business operations. The Company's first major area of business operation
involves its table grape business. The Company has entered into a letter of
intent with Sun World, a major agricultural corporation based jointly in
Bakersfield, California and Coachella, California, which provides that Sun World
will license the Company to plant 160 acres of "Sugraone" variety grapevines to
be planted in February, 1998. (For a more detailed discussion, see the caption
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS").
The Company's second major area of business operations involves the clean
green waste processing operations conducted by AMCOR Biomass Farms LLC, a
California limited liability company, for which the
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<PAGE> 20
Company serves as Manager and in which the Company owns a 99% interest. In July,
1996, AMCOR Biomass Farms LLC initiated a pilot project to process organic
material derived from the greater Los Angeles waste processing system and use
the processed material as a soil amendment on a 450 acre parcel of agricultural
land in Murrietta, which is in western Riverside County, California. The project
was largely influenced by California legislation, previously described in this
Prospectus as AB 939, mandating that all California municipalities immediately
recycle 25% of their processed waste (as a diversion from over-crowded
landfills), a requirement that increases to 50% by the year 2000. By processing
the clean green component of processed waste, the end product, which is a mulch
material, can be incorporated back into the soil. As previously defined in this
Prospectus, to be "clean green", the processed material must be 99.5% free of
any non-organic matter.
By the end of 1996, the Company concluded that the pilot project was
commercially feasible, and AMCOR Biomass Farms LLC acquired required heavy
equipment for use in its clean green waste processing operations. Contracts were
obtained from certain major waste haulers to deliver Biomass product for
processing. Additionally, AMCOR Biomass Farms LLC has entered into a working
relationship with CR&R Recycling to process grass clippings and related clean
green waste material. AMCOR Biomass Farms LLC has also entered into working
relationships to receive and process clean green waste material with other major
waste recycling companies, such as Waste Recovery & Recycling, Inc., located in
South Gate, California; Sunset Environmental, located in Irvine, California; and
CVT Recycling, located in Anaheim, California. AMCOR Biomass Farms LLC
anticipates entering into similar working relationships with other major solid
waste disposal and recycling companies. When fully operational, these locations
are expected to process approximately 2,200 tons of clean green waste per day
with projected annual revenues of as much as $8.4 million, with net operating
income of more than $1.8 million annually. With the mandatory diversion rate
mandated by AB 939 doubling to 50% by January 1, 2000, substantial expansion
opportunities appear to exist for this business.
The Company's third major area of business operations involves a 1,350-acre
golf course and residential development known as Las Palomas Country Club
Estates, which is located 30 miles southeast of San Antonio, Texas. The Company
has planned and manages a 1,300 lot residential subdivision for Lake Valley, an
Affiliate of the Company. During 1996 the Company, for its own account,
completed development of the 7,000 yard championship golf course. The Company
leases the golf course to Lake Valley, the owner of the contiguous subdivision.
The golf course opened for play in late 1996. The Company has a development
agreement with Lake Valley, and the Company receives revenue as lots are
completed and sold. Lots are currently being sold and homes are being
constructed on those lots.
It is anticipated that the residential lots of Las Palomas Country Club
Estates will be marketed during a five to seven year period, generating lot
sales proceeds approximating $35 million, for which the Company shall receive a
development fee of 50% of the gross income realized from those lot sales. There
are an additional 300 units of multi-family and timeshare units approved for the
Las Palomas Country Club Estates project. The Company owns a 99% interest in
AMCOR Builders LLC, a California limited liability company, which is currently
building homes on Las Palomas Country Club Estates residential lots and may
build additional homes in the future.
STRATEGIES FOR GROWTH
The Company will continue to manage the real estate based operations in
agribusiness, real estate development, and clean green waste processing. In
agribusiness, this will involve expansion of its proprietary table grape
operations in Coachella Valley, where the Company is currently planning to
increase its planted acreage, principally of white seedless grape varieties to
complement its red seedless table grape production. In that regard, in March,
1997, the Company entered into an exclusive licensing agreement with Sun World
to plant and produce the Sugraone "Superior Seedless" table grape. The Company
owns or controls sufficient additional acreage to plant approximately 700 more
acres during the next two years, although the Company anticipates using only a
portion of this acreage. The Company's overall objective is to increase
proprietary table grape production by 50%; provided, however, no assurance is
given that the Company will achieve that objective or increase proprietary table
grape production. The Company presently has excess cold storage and
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<PAGE> 21
processing capacity and should be able to assimilate the additional production;
provided, however, no assurance is given that the Company will assimilate
additional production.
The Company anticipates income from real estate activities, particularly
related to the San Antonio, Texas development, as well as from golf course
operations, which commenced in late 1996.
The Company believes that an expansion of the clean green waste processing
operations of AMCOR Biomass Farms LLC is now an immediate priority due to the
operations that AMCOR Biomass Farms LLC has established and the advantages AMCOR
Biomass Farms LLC now maintains over potential competitors by virtue of existing
agricultural operations and substantial real estate holdings. Therefore, clean
green waste processing will be the major expansionary program of the Company for
the next one to two years; provided, however, no assurance is given that the
Company or its Affiliates will be able to expand clean green waste processing
operations. The Company anticipates that the clean green waste processing
operations of AMCOR Biomass Farms LLC should be profitable, primarily due to its
competitive pricing; provided, however, no assurance or guaranty is or can be
provided that these operations will be profitable. Presently, green waste
comprises approximately 27% of the waste processing system. As the diversionary
requirement (from Landfills) increases from 25% to 50% by January 1, 2000, there
will be a substantially increased need for recycling services. The Company
intends to use a significant portion of the proceeds received from this Offering
to implement the Company's plan to meet green waste recycling needs in Southern
California.
Even at the present 25% diversionary rate, many municipalities are not
meeting compliance minimums. As the State of California intensifies its
enforcement procedures, it could begin to levy the statutory fine, which can be
as much as $10,000 per day. AMCOR Biomass Farms LLC has the ability to provide
waste haulers with certificates of compliance confirming that the diversionary
minimums have been met.
Under the direction of F. Howard Lee, President of AMCOR Biomass Farms LLC,
a director of the Company, and a Registered Environmental Assessor with the
State of California, AMCOR Biomass Farms LLC has developed a plan for a clean
green waste recycling facility to be located in Santa Fe Springs, California for
the conversion of biomass material into a milled clean green waste soil
amendment. At full capacity, the Santa Fe Springs facility will be capable of
processing approximately 2,200 tons of milled Biomass per day; provided,
however, no assurance is given that the Santa Fe Springs facility will process
that or any other amount of milled Biomass per day. It is projected that it will
take about nine months to achieve full capacity. AMCOR Biomass Farms LLC has
entered into a working relationship with CR&R Recycling, Inc. in Stanton,
California to process green waste, a portion of which has been earmarked for use
as a soil amendment on the Company's Coachella vineyards in preparation for the
Company's planned vineyard expansion arising from the Sun World licensing
agreement. The existing 450 acre farm site in Murrieta, California will
continue, in addition to the Company's Coachella Valley site, to function as a
repository for the clean green waste processed from the Santa Fe Springs Biomass
milling operations. (See "Proforma Operating Projections," Exhibit B to this
Prospectus).
BIOMASS PROCESSING OPERATIONS
Currently the clean green waste processing operations of AMCOR Biomass
Farms LLC are located in Riverside County, California approximately 50 miles
southeast of the general Los Angeles area, requiring a lengthy trucking haul for
the disposal companies. As a result of that distance, freight is a major cost
component in the operation. For example, the trucking cost of a 24-ton load
billed at $384 would be approximately $250, or more than 65% of revenues. A
closer processing Facility should increase interest from a significant number of
waste haulers.
A more compelling reason to develop a closer facility, which will
essentially function as a soil amendment milling operation, is that, through the
process of grinding and reducing the Biomass to a clean green waste material,
there is a significant reduction in the volume of the residual material,
primarily due to moisture evaporation. Therefore, the transportation costs to
deliver the clean green waste to the appropriate repository should be reduced
substantially.
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One challenge to conducting a waste processing operation is obtaining an
acceptable location -- one that meets local zoning approval. AMCOR Biomass Farms
LLC is in the process of negotiating to lease a facility in the City of Santa Fe
Springs, which is located in Southern Los Angeles County near Orange County. It
is a heavily industrialized area, and is the home of Golden West refinery, which
has largely abandoned its refinery operations. Golden West has approached AMCOR
Biomass Farms LLC and has offered AMCOR Biomass Farms LLC a lease for a facility
with access to a major thoroughfare with direct access to Interstate 5 (the
Santa Ana Freeway).
Preliminary meetings have been conducted with officials from the City of
Santa Fe Springs, who favor the Biomass processing operations at that facility.
On March 12, 1997, AMCOR Biomass Farms LLC applied for a Conditional Use Permit,
which was approved by the Santa Fe Springs Planning Commission on May 12 1997,
and which is subject to final approval of the Santa Fe Springs City Council. The
processing facility, which is approximately 1.7 acres, can be expanded should
conditions warrant. The refinery complex, including a tank farm, constitutes
approximately 260 acres.
When fully operational, the Company anticipates that the Santa Fe Springs
facility will conduct the principal Biomass processing operations. Clean green
waste will be shipped from the Santa Fe Springs facility to the farm properties,
including the farm operations of AMCOR Biomass Farms LLC in Murrieta, California
and the Company's vineyards in Coachella, California, as soil amendment
material. In certain circumstances the processed clean green waste may be
temporarily stored at Santa Fe Springs prior to being transported to the farm
properties. According to Riverside County authorities, because the Murrieta
operations of AMCOR Biomass Farms LLC are classified as agricultural operations,
those operations are exempt from certain regulations promulgated by the State of
California South Coast Air Quality Management District and the Riverside County
Local Enforcement Agency, which allows AMCOR Biomass Farms LLC to receive the
large quantities of clean green waste.
THE CALIFORNIA INTEGRATED WASTE MANAGEMENT ACT OF 1989 ("AB 939")
The provisions of AB 939 redefine solid waste management in terms of both
objectives and planning responsibilities for local jurisdictions and the State
of California. AB 939 required cities and counties to reduce solid waste
disposal 25% as of December 31, 1995, and which is increasing ratably to 50% by
January 1, 2000. In addition, AB 939 establishes a waste management compliance
system. The new system includes, in order of priority, source reduction;
recycling and feedstocking; and environmentally safe Landfill disposal and
transformation (e.g., incineration of solid waste materials).
To manage waste in accordance with this system, AB 939 requires each local
jurisdiction to prepare and implement the following solid waste elements:
- Source Reduction and Recycling Element ("SRRE")
- Household Hazardous Waste Element ("HHWE")
- Nondisposal Facility Element ("NDFE")
In addition, each county, except for counties within the jurisdiction of
certain regional agencies, must prepare a Countywide Integrated Waste Management
Plan ("CIWMP") consisting of a Siting Element, a Countywide Integrated Waste
Management Summary Plan ("Summary Plan"), and all SRREs, HHWEs, and NDFEs for
jurisdictions within the county.
Given the stringent requirements of AB 939, management of the Company
believes that the Company and certain of its Affiliates are ideally situated to
provide assistance. In particular, AMCOR Biomass Farms LLC can provide
certificates to the municipalities documenting compliance with the diversion
provisions of AB 939. This will certify that clean green waste has been diverted
from the landfills.
POLICIES AND PROCEDURES FOR PROCESSING CLEAN GREEN WASTE
The policy of the Company and AMCOR Biomass Farms LLC is that all material
delivered to the Murrieta and Coachella sites must meet the clean green material
processing requirements of the law. The
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<PAGE> 23
Company anticipates that AMCOR Biomass Farms LLC and the Company will receive
most of the clean green waste material to be processed from a California state
licensed MRF. Additionally, local green yard waste can be received through the
authority of the local county Local Enforcement Agency ("LEA").
Clean green waste material consists of and contains waste from plants,
leaves, clippings, cuttings, trimmings of grass, weeds, shrubbery, bushes,
trees, garden wastes, and wood products. The wood products come from both
commercial and residential locations, and include sawdust, tree trunks and
stumps, scrap lumber and pallets, branches and twigs. Industry sources indicate
that approximately three million tons of wood are lost to Landfills every year,
which is anticipated to be a large percentage of the clean green waste material
received at the Coachella and Murrieta facilities. Moreover, the material
received as clean green waste can not contain more than 0.5% contaminants (see
definition of "contaminant" in the "GLOSSARY OF TERMS" section of this
Prospectus). In order to assure compliance with AB 939, AMCOR Biomass Farms LLC
has entered into a working relationship with CR&R Recycling, Inc. ("CR&R") by
which AMCOR Biomass Farms LLC operates a clean green waste screen at CR&R's MRF
in Stanton, California and processes grass clippings and related green waste
prior to accepting clean green waste at the site in Murrieta.
Waste haulers have an economic incentive to recycle as well. For example,
the average fee for disposing of a ton of waste in a California landfill is
approximately $27. The clean green waste processing facility of AMCOR Biomass
Farms LLC has an initial rate of $16 per ton, providing a 40% cost savings.
Moreover, the Murrieta location is not only more convenient, but will eliminate
the lengthy dumping delays experienced at most landfills. The diversion credit
waste haulers receive by complying with AB 939 is an added incentive for these
waste haulers to do business with AMCOR Biomass Farms LLC.
USE OF PROCEEDS
The net cash proceeds to the Company from the Offering, after deducting the
underwriting discounts and commissions and all expenses of the Offering payable
by the Company, are expected to be approximately $4,840,000. The Company expects
to use the net proceeds of the Offering for four principal purposes: (i) to
finance expansion of the clean green waste processing operations, (ii) for
expanded table grape development, (iii) to acquire from the Partnership the 450
acre clean green waste repository in Murrieta, (iv) to retire certain short-term
indebtedness, and (v) for general working capital purposes; provided, however,
no assurance is given that those proceeds will be used as specified below.
A summary of the projected use of proceeds is as follows:
<TABLE>
<C> <S> <C>
(1) Santa Fe Springs Expansion
Processing and Related Equipment....................... $1,000,000
Installation and Leasehold Improvements................ 250,000
Other start-up costs................................... 150,000
----------
Subtotal............................................... 1,400,000
----------
(2) Table Grape Development................................ 1,120,000
----------
(3) Acquire 450 acre Site.................................. 1,000,000
----------
(4) General Working Capital and Debt Retirement............ 1,320,000
----------
Grand Total............................................ $4,840,000
==========
</TABLE>
The principal processing equipment will include a large shear to grind and
reduce the Biomass volume into a clean green waste material. This will require
heavy equipment to load, unload and transfer the clean green waste material to
volume reduction holding containers. Large scales will be required to weigh the
incoming and outgoing materials. An extensive conveyer belt system will be
installed to minimize handling. The Company anticipates that thirty to sixty
days will be required for site preparation of the Santa Fe Springs facility and
that the costs of a portion of the equipment acquired may be financed, if
interest rates are competitive. A schedule of equipment which has been recently
acquired and which may be acquired is attached as Exhibit C to this Prospectus.
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<PAGE> 24
CAPITALIZATION
The following table sets forth, at February 28, 1997, the (i) actual
capitalization of the Company; (ii) pro forma capitalization of the Company
giving effect to the conversion of all outstanding shares of Series B
Convertible Preferred Stock, par value $.001 per share ("Series B Preferred
Stock"), into 628,972 shares of the Company's Common Stock, par value $.002 per
share; and (iii) the subsequent conversion into an equal number of shares of
Common Stock capitalization as adjusted to give effect to the sale of the Series
A Preferred Stock at an assumed public offering price of $10.00 per share and
the application of the estimated net proceeds therefrom and after deducting the
estimated underwriting discounts and commissions and other estimated offering
expenses. See "USE OF PROCEEDS" herein. This table should be read in conjunction
with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and the consolidated financial statements of the Company and related
notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 28, 1997
-------------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
Current portion of long term debt................... $ 3,264,722 $ 3,264,722 $ 3,264,722
Long term debt and other obligations, net of current
portion........................................... $16,935,830 $16,935,830 $16,935,830
Stockholders' equity
Series A Convertible Preferred Stock ($0.01 par
value; 632,500 shares authorized, issued and
outstanding, outstanding, as adjusted)............ -- -- $ 6,325
Series B Convertible Preferred Stock ($0.01 par
value; 750,000 shares authorized, 628,972 actual
shares issued and outstanding; no shares issued
and outstanding, pro forma; and as adjusted....... $ 6,290 -- --
Common Stock, $.002 par value, 25,000,000 shares
authorized; 6,023,019 actual shares issued and
outstanding actual; 6,651,991 shares issued and
outstanding pro forma; and as adjusted............ $ 12,046 $ 13,303 $ 13,303
Paid-In Capital................................... $11,212,460 $11,217,493 $16,777,168
Accumulated Earnings.............................. $ 1,945,182 $ 1,945,182 $ 1,945,182
</TABLE>
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AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-2 (of which this Prospectus is a part)("Registration Statement"), under the
Securities Act, with respect to the Series A Preferred Stock. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain portions of which have been omitted as allowed by the rules and
regulations of the Commission. Information contained in this Prospectus as to
the content of any contract or other document are not necessarily complete, and
in each instance reference is made to the copy of the contract or other document
filed as an exhibit to the Registration Statement, each statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For additional information regarding the Company and the Series A
Preferred Stock, reference is hereby made to the Registration Statement and the
exhibits and schedules to the Registration Statement which may be obtained from
the Commission at its principal office in Washington, D.C., upon payment of fees
prescribed by the Commission.
The Company is subject to the information filing requirements of the
Exchange Act, and, in accordance therewith, files reports, proxy and information
statements and other information with the Commission. The reports, proxy and
information statements and other information and the Registration Statement and
the exhibits and financial statement schedules thereto filed by the Company with
the Commission can be inspected and copied at the Public Reference Section of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; copies of such materials can also be obtained by mail at
prescribed rates. Moreover, the Company is an electronic filer using the
Commission's Electronic Data Gathering, Analysis and Retrieval automated
electronic filing system ("EDGAR"). The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission using EDGAR. The
Commission's Web site address is http://www.sec.gov.
As set forth above, the Common Stock is listed for trading on the NASD's
Over The Counter Bulletin Board Electronic Quotation System. Reports and other
information concerning the Company may be inspected at the offices of the NASDAQ
Stock Market, Inc., 1735 K Street, NW, Washington, D.C. 20006-1500.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
(i) the Company's annual report on Form 10-KSB for the fiscal year ended August
31, 1996; and (ii) the Company's current report on Form 10-QSB filed April 14,
1997.
All documents filed by the Company pursuant to Sections 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 Series A Preferred Stock shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing such documents.
Any information contained herein or in a document incorporated herein by
reference or deemed to be incorporated herein by reference shall be deemed to be
modified or superseded for purposes of the Registration Statement and this
Prospectus to the extent that information contained in the Registration
Statement or this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such information. Any such information so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
Copies of all documents which are incorporated herein by reference, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates), will be provided without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
request of that person. Requests for such copies should be directed to Ms. Robin
Swanson, Corporate Secretary, AMCOR Capital Corporation, 52-300 Enterprise Way,
Coachella, California 92236.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Fred H. Behrens, CPA, has been the Chairman, Chief Executive Officer, and a
director of the Company since 1988 and Treasurer and Chief Financial Officer of
the Company since 1990. Mr. Behrens is, also, the Chairman and a director of Sun
Goddess Farms, Inc. ("SGF"), a wholly-owned subsidiary of the Company. Mr.
Behrens has been actively involved with the Company and its affiliates since
August 1979. From 1966 to 1971, Mr. Behrens was on the audit staff of Arthur
Andersen & Co.; between 1971 and 1973, he was a principal in a real estate
development company; and from 1973 to August 1979, he was employed as a Vice
President of an agricultural management company. Mr. Behrens received a Bachelor
of Science degree from the University of Minnesota School of Business
Administration in 1966.
Robert A. Wright has been the President, Chief Operating Officer, and a
director of the Company since 1988. Mr. Wright is also the President and a
director of SGF. During the past 25 years, Mr. Wright has been, and continues to
be, a principal in and the President of a farm equipment manufacturing company
located in central Illinois. Mr. Wright has made substantial investments in
various agricultural properties during the past several years. Mr. Wright also
served as general partner or co-general partner for several agricultural real
estate partnerships which were not organized by the Company or its Affiliates.
Mr. Wright has been active with the Company and its Affiliates since 1981. Mr.
Wright received a Bachelor of Science degree in Business (Management and
Finance) from the University of Colorado in 1958. Moreover, Mr. Wright, along
with Mr. Behrens, are the general partners of Rancho California Partners II, a
California limited partnership formed in or about 1986, which has been defined
previously in this Prospectus as the "Partnership", which filed a voluntary
Chapter 11 Reorganization Petition under the federal Bankruptcy Act to resolve
certain issues with the Riverside County Tax Assessor's Office on or about March
20, 1996. Those issues have been favorably resolved and the Partnership has
dismissed that Petition.
Marlene A. Tapie has been a Vice President and director of the Company
since 1988. Between 1988 and 1994 she was also the Secretary of the Company.
From 1992 through 1995, Ms. Tapie owned and operated a clothing company, Marlene
& Company, which was active in Los Angeles County and Orange County, California.
In October, 1994 she and her husband, Alan Tapie, a PGA golf professional,
purchased Buena Park Golf Center, a golf course and driving range located in
Buena Park, California, which they currently own and operate. Ms. Tapie also
acts as marketing director for Virginia Dixon Photography and Morgan Rae, Inc.,
a photography studio and publishing company located in Mission Viejo,
California. Ms. Tapie has been active with the Company and its Affiliates since
August, 1979.
Dale P. Paisley, CPA, was elected as a director of the Company in February
1997. Mr. Paisley was a CPA and general partner in the "Big 6" accounting firm
of Coopers & Lybrand from 1977 through 1991. Mr. Paisley directed that firm's
mergers and acquisitions practice and was responsible for services provided to
Shearson Lehman Brothers. From mid-1991 through mid-1993, he was Chief Operating
Officer of CMS Capital Ventures, a Newport Beach, California firm specializing
in providing financial and asset-management services to the Resolution Trust
Corporation and the Federal Deposit Insurance Corporation. From May 1993 to
October 1995, Mr. Paisley provided accounting and financial consulting services
to Pacific Snax Corporation. From October 1995 to April 1997 he was a financial
consultant to TravelMax International, Inc. In the past 5 years he has also
provided financial consulting services to companies such as Telluride Management
Solutions, Directors Mortgage Loan Company, and Admor Memory Corporation. Mr.
Paisley received a Bachelor of Arts degree in Accounting from San Diego State
University in 1965.
F. Howard Lee was elected as a director of the Company in February 1997.
Mr. Lee is President of AMCOR Biomass Farms LLC, a California limited liability
company, a subsidiary of the Company and for which the Company serves as
Manager. Mr. Lee has held that position since on or about October 28, 1996. Mr.
Lee was a self-employed field biologist for major developers in Riverside County
from 1980 through 1992, providing Environmental Impact Reports and acting as a
liaison between developers and various state regulatory agencies. From 1993
through August, 1996 he was a field biologist and director of training for
Target Specialty Products, a wholesale distributor of specialty chemical
products, particularly pesticides and herbicides, located in Santa Fe Springs,
California. Mr. Lee is a Registered Environmental Assessor with the
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State of California, and also holds a California Agricultural Pest Control
Advisor's license with all categories, including a special certification for
Ground Water Protection Advisories through the Department of Pesticide
Regulations. In addition, Mr. Lee has more than 20 years experience as a field
biologist and is approved as an Environmental Impact Biologist in Riverside
County, California, with 12 years experience in environmental assessments. Mr.
Lee has been a college instructor for 3 years in these fields and holds a
lifetime teaching credential. Additionally, Mr. Lee received a Bachelor of
Science degree in Biology from the University of California at Riverside in 1972
and a Masters Degree in Business from the University of Redlands in 1985. Mr.
Lee has continued his formal education in pursuit of a doctorate degree and has
completed all of the requirements for such a degree except for his dissertation.
Accordingly, on completion of that dissertation, Mr. Lee should be able to
receive his doctorate degree.
Marlin T. McKeever was elected as a director of the Company in February
1997. Mr. McKeever is Vice President of Sales at Andreini & Company, an
insurance brokerage firm located in Orange County, California, and has held that
position since 1989. Prior to that he was Vice President of another such firm,
Johnson & Higgins, also located in Orange County, California. Mr. McKeever was
also a professional football player with several teams, including the Los
Angeles Rams, Minnesota Vikings and Washington Redskins from 1961 through 1973.
Mr. McKeever received a Bachelors Degree in Finance from the University of
Southern California in 1961 and a Masters Degree in Business from the University
of Southern California in 1965. He has been licensed as an insurance broker in
California since 1974.
Barry Goverman has been a Vice President of the Company since 1983 and
maintains an office in Stoughton, Massachusetts, located near Boston. Mr.
Goverman has been active with the Company and its Affiliates since 1981. Between
1977 and 1981, Mr. Goverman was a principal of a management consulting firm
specializing in researching investments for brokers, accountants, attorneys, and
financial advisors. During 1976, he was on the staff of a national consulting
firm providing management consulting and research to agencies of federal and
state governments. From 1967 to 1975, Mr. Goverman was a management advisor to
various officials in the Massachusetts state government. Mr. Goverman received a
Bachelor of Arts degree and a Master of Public Administration degree from
Northeastern University in Boston in 1967 and 1971, respectively.
Jacques Genicot has been a Vice President of the Company since 1996, having
joined the Company in 1993 to assist with banking and international investor
relations. Mr. Genicot was born in Belgium and has lived in Oceanside,
California since August, 1992. His principal expertise is investment banking. He
was employed by Citibank from 1974 to 1982 in various capacities, including as
Manager of Corporate Banking, in Brussels, London, Liege and Paris. In 1982 he
was employed by Canadian Imperial Bank of Commerce Limited ("CIBC") in London as
Associate Director for Loan Syndications and Capital Markets. From 1983 to 1986
he was with the CIBC International SA in Paris, serving as General Manager and
Director. From 1986 to 1989 he was Branch Manager of National Westminster Bank
in Nantes, France. From 1990 to mid-1992 he was Managing Director of Translink
SA, an investment banking firm located in Paris, France; from mid-1992 through
1993 he was self-employed as an independent consultant to various financial
institutions and businesses. Mr. Genicot graduated from Hautes Etudes
Commerciales (Brussels) with a Bachelor's Degree in Business and has an MBA in
Finance from U.S. International University. Mr. Genicot has also been a member
of the Treasury Management Association (T.M.A.) since 1995. He speaks French,
English, Dutch and Italian.
OTHER KEY PERSONNEL
Edward W. Madigan, CPA, has been Controller of the Company since 1990 and
is responsible for all accounting and financial reporting matters. From 1974
through 1981 Mr. Madigan was employed by the Los Angeles office of Arthur
Andersen & Co., a "Big 6" international accounting firm, as a manager in the
audit division. From 1981 to 1986, he served as Vice President of Executive
Business Management, a Los Angeles-based entertainment industry business
management firm. Prior to joining the Company, he was Controller of Royal
International Partners, located in Palm Springs. Mr. Madigan graduated with a
Bachelor of Science degree in Accounting, with honors, from Loyola University of
Los Angeles in 1973. He is a Certified Public Accountant, a Certified Computing
Professional, and a Microsoft Certified Professional.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW. The Company, together with its affiliated partnerships, has its
primary operations in the Coachella Valley of California, where it historically
has been, and still remains, a major table grape producer and processor. The
Company also grows dates for two managed partnerships. The Company manages real
estate located in Southern California and Texas, and during fiscal 1996,
commenced development of the 1,300 lot Las Palomas Country Club Estates
residential subdivision located 30 miles southeast of San Antonio, Texas, which
includes an 18-hole championship golf course. The residential lot development
project is owned by Lake Valley Realty Partners, an Affiliate of the Company,
defined previously in this Prospectus as "Lake Valley"; the golf course, which
officially opened November 15, 1996, is owned by the Company and leased to Lake
Valley. In addition, AMCOR Biomass Farms LLC, a subsidiary of the Company,
recently completed a pilot project to process clean green waste for major
Southern California disposal companies on a 450 acre site owned by the
Partnership (for which the Company is the managing agent) and commenced
commercial operations during the Company's first quarter of fiscal 1997. On May
12, 1997, the City of Santa Fe Spring's Planning Commission approved AMCOR
Biomass Farms LLC's application for a Conditional Use Permit to expand its
Biomass processing operations in Santa Fe Springs, subject to final approval of
the Santa Fe Springs City Council. AMCOR Biomass Farms LLC is currently a party
to a working relationship to process Biomass at CR&R's Stanton material
recycling facility.
AGRICULTURAL BUSINESS. As set forth above, the Company's agricultural
division has been engaged in a variety of food producing activities since the
Company's formation. The Company is a leading producer of red and white table
grapes, specializing in early season (May and June) grapes which, typically,
command premium prices. The Company has the advantage of being a "vertical
producer", i.e., it packs, cold stores and ships its own grapes to nationally
known retailers such as Vons, Safeway, Winn-Dixie, and Kroeger. In 1995, the
Company obtained a 50% ownership interest in a 6,000 acre farming operation in
eastern Oregon, where it grows potatoes for McDonalds Corporation and corn for
Green Giant Foods. The Company also manages approximately 140 acres of producing
date gardens for Indio Date and Oasis Date, Affiliates of the Company, with
combined annual production of approximately 1,000,000 pounds. Dates are
harvested in September through December. The Company does not anticipate
expanding date operations in the next year.
The Company anticipates expansion of its Coachella grape producing
activities. Most of the planned expansion will be in the white grape activities
in order to balance processing capacity utilization and provide both red and
white table grapes. The Company has entered into a letter of intent with Sun
World, a major agricultural corporation based jointly in Bakersfield, California
and Coachella, California, which provides that Sun World will license the
Company to plant 160 acres of "Sugraone" variety grapevines beginning in
February, 1998. Sun World will provide the Company with all necessary rootings
in exchange for payment by the Company to Sun World of a licensing fee. The
Company will also pay Sun World an annual fruit production royalty. Sun World
has only one other domestic licensee, a former Sun World officer.
The Company has also agreed to provide Sun World with approximately 250,000
boxes of Red Flame Seedless table grapes, Thompson Seedless table grapes and
Perlette Seedless table grapes for Sun World to market in the 1997 season, and,
subject to satisfactory performance by both parties, Sun World and the Company
may enter into a long-term marketing agreement by which Sun World will provide
expanded marketing services to the Company.
The Company intends to use a substantial portion of the clean green waste
generated by the processing and recycling operations of AMCOR Biomass Farms LLC
on the proposed Sugraone vineyard development, a 700 acre parcel contiguous to
the Company's existing vineyards in Coachella, California. Grading and ground
preparation, including the importation of soil amendments, will take place from
July through December of 1997, in anticipation of planting an initial 160 acres
of Sugraone grapevines in February, 1998.
RECYCLING, COMPOSTING AND MILLING. The present clean green waste repository
of AMCOR Biomass Farms LLC, a subsidiary of the Company, located on a 450 acre
site near Murrieta, in Western Riverside County, California, is currently in
operation, utilizing clean green waste as a soil amendment. The Company
anticipates expanding the clean green waste operations to include additional
facilities, such as the Santa Fe
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Springs facility. Moreover, in April, 1997, AMCOR Biomass Farms LLC began a
working relationship with CR&R, a major recycling concern with principal offices
in Stanton, California. This working relationship contemplates that AMCOR
Biomass Farms LLC will operate its green waste screening equipment at CR&R's MRF
in Stanton and thereafter transport the processed clean green waste to various
sites owned by the Company or its Affiliates in Riverside County. A green waste
screen has been installed at the CR&R MRF and a permit application for that
screen is currently pending with the South Coast Air Quality Management
District, the State of California agency which has permit jurisdiction in Los
Angeles, Orange, and parts of Riverside and San Bernardino counties.
As set forth above, the Company anticipates using substantial portions of
the clean green waste as a soil amendment on the Company's planned Sugraone
vineyard acreage in Coachella, California.
In summary, the clean green waste processing facilities of AMCOR Biomass
Farms LLC should proactively respond to a compelling environmental mandate,
while at the same time improving the quality of the soil on the various
agricultural properties of the Company and its Affiliates. Landfills in Southern
California's metropolitan areas are generally becoming overcrowded; recycling
has become a reality, and the Company anticipates that it should play an
increasing role in this industry.
GOLF COURSE AND SUBDIVISION ACTIVITIES. Over the past decade, the
popularity of golf throughout the United States and the demand for golf courses
and related facilities has experienced continued growth. According to the
National Golf Foundation ("NGF"), the number of golfers in the United States
increased to approximately 25 million players in 1995 from approximately 21.2
million players in 1987. Management believes that this trend will continue for
the foreseeable future, as golf becomes an increasingly popular recreational
activity. Industry statistics of the NGF indicate that women and juniors are
learning and playing golf in increasing numbers. Management believes these
population segments will be important factors in the demand for golf facilities
similar to the type the Company presently owns.
In 1996, the Company developed (and now owns) a championship level 18-hole
golf course located on 153 acres of land southeast of San Antonio, Texas, which
opened for play on November 15, 1996. San Antonio is a growing city with annual
tourism exceeding 10,000,000 visitors per year, and was recently rated as one of
the top ten vacation destinations in the world by Conde' Nast Magazine. The San
Antonio area has gained prominence as a national convention location. The Texas
Department of Commerce reports that approximately $2 billion was spent in San
Antonio by 10.3 million visitors in 1994. The local economy has grown at a
steady rate for the last five years.
The Company's golf course is located approximately 30 miles from San
Antonio's central business district and is directly accessible from Texas State
Highway 539. The Company's golf course is located on the principal aquifer in
the area, the Carrizo Sands aquifer. Excluding the existing military golf
courses, there are 17 other golf courses in the greater San Antonio area. The
current adult population of San Antonio is approximately 750,000, of which
160,000 are military and civilian workers at various military bases serviced by
4 additional golf courses. Management believes that the existing playing demand
in the greater San Antonio area far exceeds the existing playing capacity. At
present, the Company's golf course is the only golf course in Wilson County,
Texas.
The Company has funded total development costs for its golf course totaling
approximately $2,500,000 and additional costs of project infrastructure related
to building lot improvements totaling approximately $2,000,000, totaling
approximately $4,500,000. Real estate surrounding the golf course has been
subdivided into 1,000 residential lots and 300 condominium lots for sale to
independent residential builders and the public. The Company has a financial
interest in the development and sale of these lots pursuant to a development
agreement with Lake Valley, consisting of 50% of the gross proceeds from lot
sales. The Company also owns 99% of AMCOR Builders LLC, a California limited
liability company, and, therefore, has an interest in any profits derived from
house construction on those lots.
The subdivision lot marketing plan contemplates a 5 to 7 year development
consisting of 1,000 single-family lots and 300 condominium units. Approval by
the United States Department of Housing and Urban Development has been obtained
for the initial phases (206 lots) of this development. The Company leases the
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golf course to Lake Valley for a flat fee of $275,000 per year, with yearly
increases determined by the Consumer Price Index. However, for the initial year
this lease rate has been reduced 50% to compensate for "start-up" costs and
other factors related to the new golf course.
OTHER REAL ESTATE DEVELOPMENT PROJECTS. The Company and certain Affiliates
own several small parcels of real estate which may be used for commercial or
residential developments.
FINANCIAL POSITION. As of February 28, 1997, the Company has 36.3% equity
and 63.7% indebtedness. This indebtedness primarily represents partnership and
working relationship interests in various development projects. The Company is
consolidating certain of these outstanding interests by an acquisition program
pursuant to which certain affiliated partnerships will be liquidated during the
next two years. The Company anticipates that, due to California tax credits for
enterprise zones, the Company's California state income tax liability should
remain modest.
RESULTS OF OPERATIONS
OVERVIEW. As outlined below, the Company's overall financial condition as
compared to August 31, 1996, has not changed significantly. The Company's
current ratio decreased to 1.85 at February 28, 1997, from 2.46 at August 31,
1996, primarily due to the advances by the Company to certain of its Affiliates
to fund real estate development costs, and for borrowings related to the 1997
table grape crop.
REVENUES. The Company's revenues are derived principally from the following
three sources: (i) farming operations (including packing and cold storage
services), (ii) management and development fees for real estate development
partnerships, and (iii) the processing and recycling of clean green waste. For
the six-month ended February 28, 1997, the Company's gross revenues were
significantly greater than the comparable six-month ended February 29, 1996, due
primarily to increased management and development fees related to the Las
Palomas Country Club Estates subdivision located southeast of San Antonio,
Texas, and income related to the California clean green waste processing
operations.
CROP SALES AND OTHER FARM INCOME. The Company receives fees and profits
from its table grape and date operations, both from third parties and its
Affiliates. During a typical season, the table grape packing facility (which is
leased to the Company) processes approximately 1.5 million boxes of table
grapes, for which the combined gross processing and cooling fees typically
exceed $2 million. During the next several years, the Company expects its crop
sales to continue to increase, as additional properties are acquired and
developed by the Company. Crop sales and other farm income were negligible for
the six-month period ended February 28, 1997, as 100% of table grape sales occur
in the Company's fiscal third and fourth quarters (March through August).
MANAGEMENT AND OTHER FEES. The Company has earned in the past, and will
continue to earn, management and accounting fees from its managed affiliated
partnerships, although this source of income will continue to decrease, as
additional partnership liquidations are completed. In the past, a portion of the
management fees were earned as a share of crop profits, although this is a
contingent source and not realizable in unprofitable periods. The accounting
fees generally range from $5,000 to $10,000 per year per partnership.
Management fees and other income increased substantially from the
comparable six-month period ended February 28, 1997, due to a development
contract related to the 1,300 residential lot subdivision, owned by Lake Valley,
located approximately 30 miles southeast of San Antonio, Texas.
OTHER INCOME. Other income consists primarily of interest and income
related to the Company's golf course and the clean green waste operations of
AMCOR Biomass Farms LLC. The Company receives interest income from note
receivables from certain related partnerships, Affiliates, and third parties.
Other income increased 17% to $475,000 for the six months ended February 28,
1997, due to interest earned on the 1996 acquisition of a $5.6 million secured
note receivable due from an Affiliate, and from golf course and clean green
waste revenues.
OPERATING COSTS AND EXPENSES. The Company's total operating costs and
expenses were $800,000 and $791,000 for the six-months ended February 28, 1997
and February 29, 1996, respectively. These costs and expenses include, among
others, corporate overhead expenses, clean green waste processing and golf
course costs, farming costs and cost of crops sold and depreciation expenses.
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FARMING COSTS AND COST OF CROPS SOLD. Farming costs and costs of crops sold
were zero in the six-month period ended February 28, 1997, as compared to
$209,000 in such costs in the comparable six-month period ended February 29,
1996, as all costs which pertained to the fiscal 1997 table grape crop have been
deferred. The annual table grape crop is harvested and marketed in May through
July each year.
OTHER OPERATING EXPENSES. Other operating expenses increased $244,000 (98%)
to $494,000 for the six-months ended February 28, 1997, as compared to the
six-months ended February 29, 1996, due to increased legal, accounting, and
other administrative expenses related to the Company's golf course and the clean
green waste processing operations of AMCOR Biomass Farms LLC.
INCOME FROM OPERATIONS. The Company posted operating income of $1,347,000
for the six-months ended February 28, 1997, as compared to operating income of
$132,000 for the comparable period ended February 29, 1996, primarily due to
increased management and development fee income related to the Las Palomas
Country Club Estates project and the clean green waste processing operations of
AMCOR Biomass Farms LLC.
ASSET SALES. A gain on asset sales of $833,000 was realized for the
six-months ended February 29, 1996, due to the sale of the San Luis Obispo
vineyards and repurchase option which resulted in a gain of $830,000. There were
no such gains in the current six-month period.
INTEREST EXPENSE. Interest expense increased by $61,000 (22%) to $344,000
primarily due to the acquisition in 1996 of $5.6 million of notes payable
acquired in connection with a corresponding note receivable due from the
Partnership, and from a $4.3 million lending transaction with Travelers
Insurance Company which occurred in 1996, collateralized by real and personal
property.
LIQUIDITY AND CAPITAL RESOURCES. The Company's liquidity, including its
ability to access conventional credit sources, has significantly improved during
the last two years primarily due to: (i) consistent management of cash, (ii)
implementation of effective cost cutting measures, (iii) successful crop
harvests, and (iv) disposal of marginal or nonproducing assets. These changes
should enable the Company to obtain capital from traditional markets and credit
from more conventional, and less costly, sources.
Moreover, long and short term liquidity are expected to continue to improve
due to: (i) the Company having entered into financing arrangements which will
provide for substantially all agricultural and farming costs related to the 1997
harvest, and (ii) the generation of new revenues from the Las Palomas Country
Club Estates project and golf course and the AMCOR Biomass Farms LLC clean green
waste processing business.
ANY FORWARD LOOKING STATEMENTS OF MANAGEMENT CONTAINED IN THIS DOCUMENT
HAVE BEEN COMPILED ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED
TO BE REASONABLE. FUTURE OPERATING RESULTS OF THE COMPANY, HOWEVER, ARE
IMPOSSIBLE TO PREDICT AND NO REPRESENTATION OR WARRANTY REGARDING FUTURE
OPERATING RESULTS OF THE COMPANY IS TO BE INFERRED FROM ANY FORWARD LOOKING
STATEMENTS CONTAINED IN THIS DOCUMENT.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Company's management relationships with its affiliated
limited partnerships, those partnerships are often indebted to the Company in
the form of promissory notes, accounts receivable and other advances. Accounts
receivable by the Company from those partnerships consist primarily of farming
costs incurred by the Company on behalf of those partnerships and advances to
those partnerships collateralized by accounts receivable from crop sales. Those
costs and advances totalled $5,337,704 at August 31, 1996, are due and payable
on demand and are without interest. The Company also has a promissory note
receivable from the Partnership in the principal amount of $5,691,686 at August
31, 1996.
In March 1992, the Company obtained $2 million key person life insurance
policies on each of the lives of Fred H. Behrens and Robert A. Wright, officers,
directors and principal shareholders of the Company.
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According to the provisions of those policies, $2 million would be paid upon the
death of either person, of which 50% would be paid to the Company and 50% to the
insureds' beneficiaries. The Company currently pays annual premiums of $6,484
and $11,519 on behalf of Mr. Behrens and Mr. Wright, respectively.
In 1996, the Company acquired a 50% interest in PS III Farms, LLC, an
Oregon limited liability company that leases approximately 6,000 acres to an
Affiliate of the other member of that limited liability company, and which is
not affiliated with the Company. The remaining lease term is for 40 months, and
the primary crop grown on the farm is potatoes, with a renewal option with terms
subject to mutual agreement.
The Company holds a 99% ownership interest in Las Palomas Country Club
Estates LLC, a California limited liability company which acts as the
development entity for the golf course (owned by the Company and leased to Lake
Valley) and a residential building lot development in Texas (owned by Lake
Valley). Fred H. Behrens, Chief Executive Officer, director, and principal
shareholder of the Company holds a 1% ownership interest in Las Palomas Country
Club Estates LLC. The Company also holds a 99% ownership interest in AMCOR
Builders LLC, a California limited liability company which manages the
construction operations of the Company in Texas. Robert A. Wright, President,
director, and principal shareholder of the Company, holds a 1% ownership
interest in AMCOR Builders LLC. The Company holds a 99% ownership interest in
AMCOR Biomass Farms LLC. F. Howard Lee, a director of the Company, owns the
remaining 1% ownership interest in AMCOR Biomass Farms LLC. Enterprise Packing
Company, a California general partnership, which has as its only partners Mr.
Behrens and Mr. Wright (each owning a 50% partnership interest) owns 442 limited
partnership interests issued by Lake Valley. Mr. Behrens and Mr. Wright are the
only general partners of Lake Valley. There are 2,600 limited partnership
interests of Lake Valley presently issued and outstanding. Therefore, by
attribution of their ownership interests in Enterprise Packing Company, Mr.
Wright and Mr. Behrens jointly own 17% of the issued and outstanding limited
partnership interests issued by Lake Valley.
The law firm of White and Stepp LLP, which serves as counsel to the
Company, has retained Judy Cannavo, on an independent contractor basis, to
render legal services, i.e., court appearances, for the benefit of various
clients of that law firm, including the Partnership. Ms. Cannavo is the wife of
Marlin McKeever, a director of the Company. Ms. Cannavo will be compensated by
the law firm of White and Stepp LLP who, in turn, will be reimbursed by the
Company for the compensation paid to Ms. Cannavo. The compensation which Ms.
Cannavo shall receive was determined by arms' length negotiations with the law
firm of White and Stepp LLP. The Company believes that the compensation which it
shall pay for the services rendered by Ms. Cannavo is not greater, and is
probably less, than compensation which the Company would pay to non-affiliated
third persons rendering similar legal service in the same geographic area.
A diagram specifying certain relationships between the Company and its
Affiliates is included in this Prospectus as Exhibit D.
DESCRIPTION OF SERIES A 9% CONVERTIBLE PREFERRED STOCK
The summary of certain terms and provisions of the Series A Preferred Stock
contained in this Prospectus does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the terms and provisions of the
Company's Amended and Restated Certificate of Incorporation ("Certificate of
Incorporation"), Bylaws, as amended, and the Certificate of Designations setting
forth the particular terms of the Series A Preferred Stock ("Series A
Certificate").
On or about January 16, 1997, the Certificate of Incorporation was amended
to specify that 25,000,000 shares of $.002 par value common stock and 2,000,000
shares of $.01 par value preferred stock shall be the Company's authorized
capital. To accomplish that amendment, the Board of Directors of the Company
approved, by unanimous written consent, an amendment to the Certificate of
Incorporation of the Company so that the Certificate of Incorporation specifies
that 25,000,000 shares of $.002 par value common stock and 2,000,000 shares of
$.01 par value preferred stock are the Company's authorized capital.
There are 1,371,028 shares of $.01 par value preferred stock currently
authorized but not issued. As set forth in the Series A Certificate, the 628,972
shares of the Company's $.01 par value preferred stock which are issued and
outstanding have been designated Series B Preferred Stock.
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On April 5, 1997, the Board of Directors authorized the Company to classify
and issue up to 632,500 shares of the Series A Preferred Stock as part of the
2,000,000 shares of the Company's authorized preferred stock. The Board of
Directors also voted, by adopting the Series A Certificate, to amend the
Certificate of Designations for the previous series A preferred stock of the
Company such that the shares of such Series A preferred stock shall be and
hereby are Series B Preferred Stock, and such Series B Preferred Stock is
subordinate and junior, with respect to payment of dividends and amounts upon
liquidation, dissolution or winding up of the Company, to the Series A Preferred
Stock.
When issued, the Series A Preferred Stock will be validly issued, fully
paid and nonassessable. Except as set forth below under "Redemption", the
holders of the Series A Preferred Stock will have no preemptive rights with
respect to any shares of capital stock of the Company or any other securities of
the Company convertible into or having rights or options to purchase any such
shares. The Series A Preferred Stock will not be subject to any sinking fund or
other obligation of the Company to redeem or retire the Series A Preferred
Stock. Unless converted into shares of Common Stock or redeemed by the Company,
the Series A Preferred Stock will have a perpetual term, with no maturity. The
Company has submitted to NASDAQ an application to obtain National Market listing
for the shares of Series A Preferred Stock.
Additional shares of the Company's preferred stock may be issued from time
to time in one or more series, without stockholder approval, with such
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends, qualifications and terms and conditions of
redemption thereof as shall be established by the Board of Directors. Therefore,
without stockholder approval, the Company could authorize the issuance of
preferred stock with voting, conversion and other rights that could dilute the
voting power and other rights of the holders of Common Stock and Series A
Preferred Stock.
SENIORITY. The Series A Preferred Stock will be senior to the Series B
Preferred Stock and to the Common Stock with respect to payment of dividends and
amounts upon liquidation, dissolution or winding up of the Company.
While any shares of Series A Preferred Stock are outstanding, the Company
may not authorize, create or increase the authorized amount of any class or
series of stock that ranks prior or senior to the Series A Preferred Stock with
respect to the payment of dividends or amounts upon liquidation, dissolution or
winding up without the consent of the holders of two-thirds of the outstanding
shares of Series A Preferred Stock. However, the Company may create additional
classes of stock, increase the authorized number of shares of preferred stock or
issue series of preferred stock which rank on a parity with the Series A
Preferred Stock with respect, in each case, to the payment of dividends and
amounts upon liquidation, dissolution or winding up of the Company ("Parity
Stock") without the consent of any holder of Series A Preferred Stock. See
"Voting Rights" below.
DIVIDENDS. Holders of shares of Series A Preferred Stock will be entitled
to receive, when and as declared by the Board of Directors of the Company, out
of funds of the Company legally available for payment thereof, cumulative cash
dividends payable in an amount per share equal to 9% annually. Such dividends
will be payable semiannually on October 1st and April 1st of each calendar
year(1) (and, in the case of any accumulated or accrued but unpaid dividends, at
such additional times and for such interim periods, if any, as determined by the
Board of Directors). Each such dividend will be payable to holders of record as
they appear on the stock records of the Company at the close of business on such
record dates, not exceeding 60 days preceding the payment dates thereof, as
shall be fixed by the Board of Directors of the Company. Dividends will accrue
from the date of original issuance of the Series A Preferred Stock. Dividends
will be cumulative from such date, whether or not in any dividend period or
periods such dividends shall be declared or there shall be funds of the Company
legally available for the payment of such dividends. Accumulated dividends on
shares of Series A Preferred Stock will not accrue interest. Dividends payable
on the Series A Preferred Stock for any period less than a full dividend period
will be computed on the basis of twelve 30-day months and a 360-day year.
- ---------------
1The Company's fiscal year ends August 31st.
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LIQUIDATION PREFERENCE. The holders of shares of Series A Preferred Stock
will be entitled to receive in the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, $10.00 for each
share of Series A Preferred Stock, plus an amount for each share of Series A
Preferred Stock equal to all dividends accumulated, accrued and unpaid thereon
to the date of final distribution to such holders ("Liquidation Preference"),
and no more.
Until the holders of the Series A Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder of junior
stock upon the liquidation, dissolution or winding up of the Company. If, upon
any liquidation, dissolution or winding up of the Company, the assets of the
Company, or proceeds thereof, distributable among the holders of the shares of
Series A Preferred Stock are insufficient to pay in full the Liquidation
Preference and the liquidation preference with respect to any other shares of
Parity Stock, then such assets, or the proceeds thereof, will be distributed
among the holders of shares of Series A Preferred Stock ratably in accordance
with the respective amounts which would be payable on such shares of Series A
Preferred Stock if all amounts payable thereon were paid in full. Neither a
consolidation or merger of the Company with another corporation, a statutory
share exchange by the Company nor a sale or transfer of all or substantially all
of the Company's assets will be considered a liquidation, dissolution or winding
up, voluntary or involuntary, of the Company.
VOTING RIGHTS. Except as indicated below, or except as otherwise from time
to time required by applicable law, the holders of shares of Series A Preferred
Stock will have no voting rights.
The approval of the holders of two-thirds of the outstanding shares of
Series A Preferred Stock will be required in order to amend the Certificate of
Incorporation to affect materially and adversely the rights, preferences or
voting power of the holders of the Series A Preferred Stock or to authorize,
create, or increase the authorized amount of, any class of stock having rights
prior or senior to the Series A Preferred Stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding up. However, the
Company may create additional classes of Parity Stock or junior stock, increase
the authorized number of shares of Parity Stock or junior stock and issue
additional series of Parity Stock or junior stock without the consent of any
holder of Series A Preferred Stock.
Except as required by law, the holders of Series A Preferred Stock will not
be entitled to vote on any merger or consolidation involving the Company or a
sale of all or substantially all of the assets of the Company. See "Conversion
Price Adjustments" below.
CONVERSION RIGHTS. Shares of Series A Preferred Stock will be convertible,
in whole or in part, at any time, at the option of the holder thereof, into
authorized but previously unissued shares of Common Stock, at a conversion price
equal to 125 percent of the closing price of the Common Stock on the
Determination Date, subject to adjustment as described below.
Conversion of shares of Series A Preferred Stock, or a specified portion
thereof, may be effected by delivering certificates evidencing such shares,
together with written notice of conversion and a proper assignment of such
certificates to the Company, or in blank, to the office or agency to be
maintained by the Company for that purpose. Initially, such office will be the
principal office of American Stock Transfer & Trust Company, 40 Wall Street, New
York, NY 10005.
Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of Series
A Preferred Stock shall be surrendered and notice shall have been received by
the Company (and, if applicable, payment of an amount equal to the dividend
payable on such shares shall have been received by the Company as described
below) and the conversion shall be at the Conversion Price in effect at such
time and on such date.
Holders of shares of Series A Preferred Stock at the close of business on a
dividend record date will be entitled to receive the dividend payable on such
shares on the corresponding dividend payment date, notwithstanding the
conversion of such shares following such dividend record date and prior to such
dividend payment date. However, shares of Series A Preferred Stock surrendered
for conversion during the period between the close of business on any dividend
record date and the opening of business on any corresponding dividend payment
date (except shares converted after the issuance of a notice of redemption with
respect to a
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<PAGE> 35
redemption date during such period) must be accompanied by payment of an amount
equal to the dividend payable on such shares on such dividend payment date. A
holder of shares of Series A Preferred Stock on a dividend record date who (or
whose transferee) tenders any such shares for conversion into shares of Common
Stock on such dividend payment date will receive the dividend payable by the
Company on such shares of Series A Preferred Stock on such date, and the
converting holder need not include payment of the amount of such dividend upon
surrender of shares of Series A Preferred Stock for conversion. Except as
provided above, the Company will make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for dividends on
the shares of Common Stock issued upon such conversion.
Fractional shares of Common Stock will not be issued upon conversion but,
in lieu thereof, the Company will pay an amount in cash based on the closing
market price of the Common Stock on the day prior to the conversion date.
COMPANY'S RIGHT TO COMPEL CONVERSION. The Company shall have the right to
compel conversion of the Series A Preferred Stock when the Common Stock has
traded at a price equal to or greater than 150% of the closing price of the
Common Stock on the Determination Date for a period of 20 consecutive business
days. If the Company elects to cause the mandatory conversion of the Series A
Preferred Stock, the Company shall send to the holders of the Series A Preferred
Stock at least 20 days prior written notice of the date when the conversion will
take place.
CONVERSION PRICE ADJUSTMENTS. The Conversion Price is subject to adjustment
upon certain events, including (i) dividends (and other distributions) payable
in Common Stock or any class of capital stock of the Company; (ii) the issuance
to all holders of Common Stock of certain rights or warrants entitling them to
subscribe for or purchase Common Stock at a price per share less than the fair
market value per share of Common Stock; (iii) subdivisions, combinations and
reclassifications of Common Stock; and (iv) distributions to all holders of
Common Stock of evidences of indebtedness of the Company or of assets (including
securities and cash, but excluding those dividends, rights, warrants and
distributions referred to in clauses (i), (ii) and (iii) above and excluding
cash dividends and cash distributions on shares of Common Stock to the extent
the same either constitute Permitted Common Stock Cash Distributions (as herein
defined) or result in a payment of an equal cash dividend to the holders of
shares of Series A Preferred Stock (see "Dividends")). In addition to the
foregoing adjustments, the Company will be permitted to make such reductions in
the Conversion Price as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or stock rights
will not be taxable to the holders of the Common Stock or, if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event.
"Permitted Common Stock Cash Distributions" means cash dividends and cash
distributions paid on the Common Stock after August 31, 1997 not in excess of
the sum of the (i) Company's cumulative undistributed net earnings at August 31,
1997, plus (ii) cumulative amount of Funds Available For Distribution, as
determined by the Board of Directors on a basis consistent with the financial
reporting practices of the Company, after August 31, 1997, and minus (iii) the
cumulative amount of dividends accumulated, accrued or paid on the Series A
Preferred Stock and all other classes of Preferred Stock after August 31, 1997.
In case the Company shall be a party to any transaction (including, without
limitation, a merger, consolidation, statutory share exchange, tender offer for
all or substantially all of the shares of Common Stock or sale of all or
substantially all of the Company's assets), in each case as a result of which
shares of Common Stock will be converted into the right to receive stock,
securities or other property (including cash or any combination thereof), each
share of Series A Preferred Stock, if convertible after the consummation of the
transaction, will thereafter be convertible into the kind and amount of shares
of stock, securities and other property receivable (including cash or any
combination thereof) upon the consummation of such transaction by a holder of
that number of shares of Common Stock into which one share of Series A Preferred
Stock was convertible immediately prior to such transaction (assuming such
holder of Common Stock failed to exercise any rights of election and received
per share the kind and amount of stock, securities and other property (including
cash or any combination thereof) received per share by a plurality of
nonelecting shares). The Company may not become a party to any such transaction,
unless the terms thereof are consistent with the foregoing.
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<PAGE> 36
No adjustment of the Conversion Price will be required to be made in any
case, until cumulative adjustments amount to 1% or more of the Conversion Price.
Any adjustments not so required to be made will be carried forward and taken
into account in subsequent adjustments.
REDEMPTION. The shares of Series A Preferred Stock are redeemable at the
option of the Company, in its sole and absolute discretion, on or after 5 years
from the date of issuance either (i) for such number of authorized but
previously unissued shares of Common Stock as equals the Liquidation Preference
(without regard to accumulated, accrued and unpaid dividends, if any, to the
date set for redemption, which are to be paid in cash), divided by the
Conversion Price as of the opening of business on the date set for such
redemption, or (ii) for cash at a redemption price of $10.00 per share, plus any
accumulated, accrued and unpaid dividends. The conditions precedent to the
Company's right to compel conversion of the Series A Preferred Stock will not
apply to the redemption by the Company of Series A Preferred Stock.
Notice of redemption will be given by mail or by publication (with
subsequent prompt notice by mail) to the holders of record of the Series A
Preferred Stock not less than 30 nor more than 60 days prior to the date of
redemption. The redemption date will be a date selected by the Company not less
than 10 nor more than 60 days after the date on which the Company gives the
notice of redemption.
On the redemption date, the Company must pay in cash on each share of
Series A Preferred Stock to be redeemed any accumulated, accrued and unpaid
dividends, if any, on the redemption date. In the event a redemption date is
fixed after a dividend record date and prior to the related dividend payment
date, the holders of the Series A Preferred Stock at the close of business on
such record date will be entitled to receive the dividend payable on such shares
on the corresponding dividend payment date, notwithstanding the redemption of
such shares following such dividend record date. Except as provided for in the
preceding sentences, no payment or allowance will be made for accumulated or
accrued dividends on any shares of Series A Preferred Stock called for
redemption or on the shares of Common Stock issuable upon such redemption.
On and after the date fixed for redemption, provided that the Company has
made available at the office of the Transfer Agent a sufficient number of shares
of Common Stock and an amount of cash to effect the redemption, dividends will
cease to accumulate or accrue on the Series A Preferred Stock called for
redemption (except that, in the event a redemption date is fixed after a
dividend record date and prior to the related dividend payment date, holders of
Series A Preferred Stock on the dividend record date will be entitled on such
dividend payment date to receive the dividend payable on such shares), such
shares shall no longer be deemed to be outstanding and all rights of the holders
of such shares of Series A Preferred Stock shall cease, except the right to
receive the shares of Common Stock upon such redemption or any cash payable upon
such redemption, without interest from the date of such redemption. At the close
of business on the redemption date, each holder of Series A Preferred Stock to
be redeemed (unless the Company defaults in the delivery of the Common Stock or
cash) will be, without any further action, deemed a holder of the number of
shares of Common Stock or the amount of cash for which such Series A Preferred
Stock is redeemable.
Fractional shares of Common Stock will not be issued upon redemption of the
Series A Preferred Stock, but, in lieu thereof, the Company will pay an amount
in cash based on the current market price of the Common Stock on the day prior
to the redemption date.
TRANSFER AGENT, REGISTRAR, DIVIDEND DISBURSING AGENT AND REDEMPTION
AGENT. The transfer agent, registrar, dividend disbursing agent and redemption
agent for the shares of Series A Preferred Stock will be American Stock Transfer
& Trust Company, 40 Wall Street, New York, NY 10005.
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<PAGE> 37
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods shown:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31 YEAR ENDED NOVEMBER 30
------------------------------- -----------------------
1996 1995 1994 1993 1992
--------- --------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Earnings(loss)........................... 1,384,945 1,049,737 719,809 (1,067,808) (2,521,818)
--------- --------- ------- ---------- ----------
Interest Expense......................... 930,190 711,039 332,555 1,347,914 1,399,081
--------- --------- ------- ---------- ----------
Ratio of Earnings to Fixed Charges....... 1.49 1.48 2.16 (0.79) (1.80)
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense and the amortization of debt issuance costs.
DIVIDEND POLICY ON SERIES B PREFERRED STOCK AND COMMON STOCK
The Company has paid or accrued dividends on Series B Preferred Stock since
1994 by issuing additional shares of Series B Preferred Stock, which is in
accordance with the terms of the Series B Preferred Stock. On August 31, 1995,
the payment of dividends on the Series B Preferred Stock was effected through
the issuance of additional shares of Series B Preferred Stock cumulating to
$398,791 in value. Management of the Company does not anticipate paying any cash
dividends on the Company's Common Stock or on the Company's Series B Preferred
Stock in the foreseeable future. Instead, management of the Company intends to
retain any earnings to pay dividends on the Series A Preferred Stock, to finance
the Company's growth strategies, for working capital, and for general corporate
purposes. Any payment of dividends on the Common Stock and Series B Preferred
Stock will be at the discretion of the Company's Board of Directors and will
depend upon earnings, financial condition, capital requirements, amount of
indebtedness, contractual restrictions with respect to payment of such
dividends, if any, and other factors.
FEDERAL INCOME TAX CONSIDERATIONS TO THE STOCKHOLDERS
The following summary of material federal income tax considerations to the
stockholders is (i) based on current law, (ii) for general information only, and
(iii) not tax advice. This information does not purport to deal with all aspects
of taxation that may be relevant to particular stockholders regarding their
personal investments or tax circumstances, or except to the extent discussed
under the heading "Taxation of Foreign Stockholders," to certain types of
shareholders (including insurance companies, financial institutions or
broker-dealers) subject to special treatment under the federal income tax law.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF THE SERIES A PREFERRED STOCK, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
REDEMPTION AND CONVERSION. A cash redemption of shares of the Series A
Preferred Stock will be treated under Section 302 of the Code as a distribution
taxable as a dividend (to the extent of the Company's current and accumulated
earnings and profits) at ordinary income rates, unless the redemption satisfies
one of the tests set forth in Section 302(b) of the Code and is, therefore,
treated as a sale or exchange of the redeemed shares. The cash redemption will
be treated as a sale or exchange if it (i) is "substantially disproportionate"
with respect to the holder, (ii) results in a "complete termination" of the
holder's stock interest in the Company, or (iii) is "not essentially equivalent
to a dividend" with respect to the holder, all within the meaning of Section
302(b) of the Code. In determining whether any of these tests have been
satisfied, shares of capital stock (including Common Stock, Preferred Stock and
other equity interests in the Company) considered to be owned by the holder by
reason of certain constructive ownership rules set forth in the Code, as well as
shares of capital stock actually owned by the holder, must generally be taken
into account. Because the determination as to whether any of the alternative
tests of Section 302(b) of the Code will be
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<PAGE> 38
satisfied with respect to any particular holder of the Series A Preferred Stock
depends upon the facts and circumstances at the time that the determination must
be made, prospective holders of the Series A Preferred Stock are advised and
encouraged to consult their own tax advisors to determine the appropriate tax
treatment.
If a cash redemption of shares of the Series A Preferred Stock is not
treated as a distribution taxable as a dividend to a particular holder, it will
be treated, as to that holder, as a taxable sale or exchange. As a result, such
holder will recognize gain or loss for federal income tax purposes in an amount
equal to the difference between (i) the amount of cash and the fair market value
of any property received (less any portion thereof attributable to accumulated
and declared but unpaid dividends, which will be taxable as a dividend to the
extent of the Company's current and accumulated earnings and profits), and (ii)
such holder's adjusted basis in the shares of the Series A Preferred Stock for
tax purposes. Such gain or loss will be capital gain or loss if the shares of
the Series A Preferred Stock have been held as a capital asset, and will be
long-term gain or loss if such shares have been held for more than one year.
If a cash redemption of shares of the Series A Preferred Stock is treated
as a distribution taxable as a dividend, the amount of the distribution will be
measured by the amount of cash and the fair market value of any property
received by the holder. The holder's adjusted basis in the redeemed shares of
the Series A Preferred Stock for tax purposes will be transferred to the
holder's remaining shares of capital stock in the Company, if any. If the holder
owns no other shares of capital stock in the Company, such basis may, under
certain circumstances, be transferred to a related person or it may be lost
entirely.
REDEMPTION PREMIUM. Under Section 305(c) of the Code and applicable
Treasury Regulations, if the cash redemption price of the Series A Preferred
Stock exceeds the issue price by more than a reasonable redemption premium, the
amount of such excess may be deemed to be a constructive distribution (treated
as a dividend to the extent of the current and accumulated earnings and profits
and otherwise subject to the treatment described above for distributions)
taxable to the holder over the period during which the Series A Preferred Stock
cannot be redeemed.
A redemption premium is considered to be reasonable if it is in the nature
of a penalty for a premature redemption of redeemable preferred stock and if
such premium does not exceed the amount which the issuer would be required to
pay for such redemption right under market conditions existing at the time of
issuance of the stock. Applicable Treasury Regulations currently provide that a
redemption premium not exceeding 10% of the issue price of preferred stock which
is not redeemable for five years from the date of issue will be considered
reasonable.
Proposed amendments to the Treasury Regulations provide that the existence
of a redemption premium will result in a constructive distribution only if,
based upon all of the facts and circumstances as of the issue date, redemption
by the Company is more probable than not to occur. The proposed regulation
provides a safe harbor pursuant to which redemption will be treated as more
probable than not to occur if (i) the issuer and the holder are not related,
(ii) there are no arrangements that effectively require the issuer to redeem the
stock, and (iii) exercise by the issuer of the right to redeem would not reduce
the yield of the stock. Although the Revenue Reconciliation Act of 1990
substituted a 0.25% de minimis rule for the 10% "safe harbor" set forth in the
Treasury Regulations, the applicable legislative history and the proposed
Treasury Regulations provide that the reduced de minimis test will not apply to
stock which (such as the Series A Preferred Stock) is neither manditorily
callable by the issuer nor puttable by the holder.
The Company believes that the redemption premium on the Series A Preferred
Stock should be considered reasonable. There can be no assurance, however, that
the IRS will regard the redemption premium on the Series A Preferred Stock as
reasonable. If the Series A Preferred Stock is deemed to have an unreasonable
redemption premium, holders would be required to accrue the premium over the
period of time during which the Series A Preferred Stock cannot be called for
redemption.
A redemption of shares of the Series A Preferred Stock in exchange for
shares of Common Stock will be treated as a conversion of the Series A Preferred
Stock into Common Stock, except that the conditions precedent to the Company's
right to compel conversion of the Series A Preferred Stock will not apply to the
redemption by the Company of the Series A Preferred Stock. See "Conversion of
Series A Preferred Stock into Common Stock".
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CONVERSION OF SERIES A PREFERRED STOCK INTO COMMON STOCK. In general, no
gain or loss will be recognized for federal income tax purposes upon conversion
of the Series A Preferred Stock solely into shares of Common Stock. The basis
that a holder will have for tax purposes in the shares of Common Stock received
upon conversion will be equal to the adjusted basis for the holder in the shares
of Series A Preferred Stock so converted, and, provided that the shares of
Series A Preferred Stock were held as a capital asset, the holding period for
the shares of Common Stock received would include the holding period for the
shares of Series A Preferred Stock converted. A holder will, however, recognize
gain or loss on the receipt of cash in lieu of fractional shares of Common Stock
in an amount equal to the difference between the amount of cash received and the
holder's adjusted basis for tax purposes in the Series A Preferred Stock for
which cash was received. Additionally, under certain circumstances, a holder of
shares of Series A Preferred Stock may recognize gain or dividend income to the
extent that there are dividends in arrears on those shares at the time of
conversion into Common Stock.
ADJUSTMENTS IN CONVERSION PRICE. Adjustments in the Conversion Price (or
the failure to make such adjustments) pursuant to any anti-dilution provisions
of the Series A Preferred Stock, or otherwise, may result in constructive
distributions to the holders of Series A Preferred Stock that could, under
certain circumstances, be taxable to them as dividends pursuant to Section 305
of the Code. If such a constructive distribution occurs, a holder of Series A
Preferred Stock could be required to recognize ordinary income for tax purposes
without receiving a corresponding distribution of cash.
BACKUP WITHHOLDING. The Company will report to its domestic stockholders
and the IRS the amount of dividends paid during each calendar year and the
amount of tax withheld, if any. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid unless the holder (a) is a corporation or comes within certain
other exempt categories and, when required, demonstrates this fact, or (b)
provides a taxpayer identification number, certifies as to no loss of exemption
from backup withholding, and otherwise complies with applicable requirements of
the backup withholding rules. A stockholder that does not provide the Company
with his or her correct taxpayer identification number may also be subject to
penalties imposed by the IRS. Any amount paid as backup withholding will be
creditable against the stockholder's income tax liability. In addition, the
Company may be required to withhold a portion of capital gain distributions to
any stockholders who fail to certify their non-foreign status to the Company.
See "Taxation of Foreign Stockholders."
TAXATION OF FOREIGN STOCKHOLDERS. The rules governing United States federal
income taxation of nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made in this document to
provide more than a summary of the rules. Prospective Non-U.S. Stockholders
should consult with their own tax advisors to determine the impact of federal,
state and local income tax laws with regard to a purchase of Series A Preferred
Stock, including any reporting requirements.
Distributions by the Company that are not attributable to gain from sales
or exchanges by the Company of United States real property interests and not
designated by the Company as capital gains dividends will be treated as
dividends of ordinary income to the extent that they are made out of current or
accumulated earnings and profits of the Company. These distributions,
ordinarily, will be subject to a withholding tax equal to 30% of the gross
amount of the distribution, unless an applicable tax treaty reduces that tax. To
the extent that these distributions exceed the adjusted basis of a Non-U.S.
Stockholder's shares, these distributions will result in tax liability if the
Non-U.S. Stockholder would otherwise be subject to tax on any gain from the sale
or disposition of his or her shares in the Company, as described below. If
income from the investment in the shares is treated as effectively connected
with the Non-U.S. Stockholder's conduct of a United States trade or business,
the Non-U.S. Stockholder generally will be subject to a tax at graduated rates,
in the same manner as U.S. stockholders are taxed with respect to the dividends
(and may also be subject to the 30% branch profits tax in the case of a
stockholder that is a foreign corporation). The Company expects to withhold
United States income tax at the rate of 30% on the gross amount of any such
dividends made to each Non-U.S. Stockholder unless (i) a lower treaty rate
applies and the Non-U.S. Stockholder provides certification, if necessary, or
(ii) the Non-U.S. Stockholder files an IRS Form 4224 with the Company certifying
that the investment to which the distribution relates is effectively connected
to a United States trade or business of
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<PAGE> 40
such Non-U.S. Stockholder. Distributions in excess of current and accumulated
earnings and profits of the Company will not be taxable to a stockholder to the
extent that they do not exceed the adjusted basis of the stockholder's shares,
but, rather, will reduce the adjusted basis of such shares. If it cannot be
determined at the time a distribution is made whether or not such distribution
will be in excess of current and accumulated earnings and profits, the
distributions will be subject to withholding at the same rate as dividends.
However, amounts thus withheld are refundable, if it is subsequently determined
that the distribution was, in fact, in excess of current and accumulated
earnings and profits of the Company.
In the case of Non-U.S. Stockholders, any distribution of gain generally
will not be subject to taxation, unless (i) the investment in the shares is
effectively connected with the Non-U.S. Stockholder's United States trade or
business, in which event the Non-U.S. Stockholder will be subject to the same
treatment as U.S. Stockholders with respect to the gain (except that a
stockholder that is a foreign corporation may also be subject to the 30% branch
profits tax), or (ii) the Non-U.S. Stockholder is a nonresident alien individual
who was present in the United States for 183 days or more during the taxable
year and has a "tax home" in the United States, in which event the nonresident
alien individual will be subject to a 30% tax on the individual's capital gains.
Non-U.S. Stockholders may be required to certify their non-U.S. status to be
exempt from backup withholding.
OTHER TAX CONSEQUENCES. The Company's stockholders may be subject to state
or local taxation in various state or local jurisdictions, including those in
which they transact business or reside. The state and local tax treatment of the
Company's stockholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective purchasers of Series A Preferred
Stock should consult their own tax advisors regarding the effects of state and
local tax laws resulting from a purchase of Series A Preferred Stock.
UNDERWRITER AND PLAN OF DISTRIBUTION
Under the terms and subject to the conditions of the Underwriting Agreement
("Underwriting Agreement") Torrey Pines Securities, Inc., as underwriter
("Underwriter"), has agreed to purchase from the Company, and the Company has
agreed to sell to the Underwriter, 550,000 shares of Series A Preferred Stock,
with an option to purchase an additional 82,500 shares of Series A Preferred
Stock, subject to certain terms and conditions, some of which are specified
below.
The Underwriter is committed to take and pay for all of the shares of
Series A Preferred Stock, if any are taken. The Company has been advised by the
Underwriter that it proposes to offer the shares of Series A Preferred Stock to
the public at the initial public offering price of $10.00 per share, and to
certain dealers at such price less a concession of approximately 6.5%. Such
dealers may re-allow a discount not in excess of approximately 5%. The initial
public offering price, concession and discount to dealers may be changed by the
Underwriter after the shares of Series A Preferred Stock are released for sale
to the public. The Underwriter has informed the Company that it does not intend
to confirm sales to any account over which it exercises discretionary authority.
The Company shall compensate the Underwriter out of the proceeds of the
Offering by providing the Underwriter with a 9% discount on the Series A
Preferred Stock and by thereafter providing a 3% non-accountable expense
allowance, to be paid as follows: $20,000 upon execution of a formal, written
underwriting agreement; $41,250 upon the completion and filing of the
Registration Statement; and the remaining amount to be paid upon completion of
the Offering. $15,000 of the initial $20,000 shall be for costs of the
Underwriter's due diligence and, as such, will be non-refundable in the event
the Offering is terminated at any time.
Upon the successful completion of the Offering, the Company will grant the
Underwriter warrants to purchase up to 10% of the total Offering at a price of
$0.01 per warrant. These warrants will entitle the Underwriter to purchase
shares of Series A Preferred Stock at a price equal to 120% of the Offering
Price for a period commencing one year after the Effective Date and ending 5
years after that date. The Company has agreed to pay all costs and expenses
incident to the registration and qualification of the Series A Preferred Stock
with the Commission, the NASD, and such state securities regulatory agencies as
the Underwriter may reasonably request.
39
<PAGE> 41
The Underwriter shall have a 30 day right of refusal, for a period of 4
years after the Effective Date, to act as underwriter or agent with respect to
any public offering or private financing by the Company. The Company has filed
an application to obtain NASDAQ National Market listing for the Series A
Preferred Stock. The disclosure provisions set forth in Regulations 228.506 and
228.507 of Regulation S-B promulgated under the Securities Act and the Exchange
Act are not applicable to the Offering.
The Underwriting Agreement provides that the obligations of the Underwriter
to pay for and accept delivery of the shares of Series A Preferred Stock are
subject to the approval of certain legal matters by counsel and to certain other
conditions. The Underwriter is obligated to take and pay for all of the shares
of the Series A Preferred Stock (other than the shares covered by the
over-allotment option described below) if any are taken.
The Underwriter initially proposes to offer part of the shares of the
Series A Preferred Stock directly to the public at the initial public offering
price set forth on the cover page hereof and part to certain dealers at a price
that represents a concession not in excess of 6.5% of the initial public
offering price.
The Company has granted to the Underwriter an option, exercisable for 45
days from the Effective Date, to purchase up to 82,500 additional shares of
Series A Preferred Stock at the initial public offering price set forth on the
cover page hereof, less underwriting discounts and commissions. The Underwriter
may exercise such option to purchase solely for the purpose of covering
over-allotments, if any, incurred in the sale of the shares of Series A
Preferred Stock. The Underwriter has informed the Company that the Underwriter
does not intend sales to discretionary accounts to exceed 5% percent of the
total number of shares of Series A Preferred Stock offered by the Underwriter.
The purchase price of the Series A Preferred Stock has been determined by
mutual agreement between the Company and the Underwriter. The offering price has
no direct relationship to any established criteria of value, such as book value
or earnings per share or any combination thereof. The price of the Series A
Preferred Stock does not necessarily indicate current market value for the
assets owned by the Company or the Company's Affiliates. No valuation or
appraisal has been prepared for the business and potential business of the
Company or its Affiliates. See "DETERMINATION OF OFFERING PRICE." The Company
has agreed to indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act. See "DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES."
EXPERTS
Kelly & Company is responsible for the audit of the Company's financial
statements for the fiscal year ended August 31, 1996 for inclusion in the 1996
Annual Report on Form 10-KSB to stockholders.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by White and
Stepp LLP, located in Newport Beach, California. Certain legal matters will be
passed upon for the Underwriter by Rushall & McGeever located in Carlsbad,
California.
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the named experts or counsel have been hired on a contingent basis,
or will receive a direct or indirect interest in the Company, nor was any expert
or counsel a promoter, underwriter, voting trustee, director, officer, or
employee of the Company.
40
<PAGE> 42
EXHIBIT A
OTC BULLETIN BOARD(R)
ACAP AMCOR CAPITAL CORP NEW
DAILY TRADING SUMMARY REPORT -- APRIL 1997
<TABLE>
<CAPTION>
PRICE BID ASK
------------------------------- ----------------------------- -----------------------------
DATE HIGH LOW CLOSE HIGH LOW CLOSE HIGH LOW CLOSE VOLUME
- ----------------- ------- -------- -------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997-04-01....... 4.625 4.5 4.6 4.5625 4.375 4.375 4.625 4.625 4.625 28,234
1997-04-02....... 0 0 0 4.375 4.375 4.375 4.625 4.625 4.625 0
1997-04-03....... 0 0 0 4.375 4.375 4.375 4.625 4.625 4.625 0
1997-04-04....... 0 0 0 4.375 4.375 4.375 4.625 4.5625 4.5625 0
1997-04-07....... 4.5625 4.5 4.5 4.5 4.375 4.5 4.625 4.5625 4.625 11,500
1997-04-08....... 4.5 4.5 4.5 4.5 4.5 4.5 4.625 4.625 4.625 1,831
1997-04-09....... 0 0 0 4.5 4.5 4.5 4.625 4.625 4.625 0
1997-04-10....... 4.625 4.375 4.5 4.5 4.375 4.375 4.625 4.5 4.625 11,300
1997-04-11....... 4.625 4.625 4.625 4.375 4.375 4.375 4.625 4.625 4.625 211
1997-04-14....... 4.375 4.125 4.375 4.375 4.125 4.125 4.625 4.375 4.375 9,824
1997-04-15....... 4.375 4.125 4.25 4.125 4.0625 4.125 4.375 4.25 4.25 11,400
1997-04-16....... 4.3125 4.15625 4.3125 4.125 4.125 4.125 4.3125 4.25 4.3125 4,025
1997-04-17....... 4.625 4.25 4.625 4.4375 4.125 4.4375 4.625 4.3125 4.625 22,000
1997-04-18....... 4.6875 4.5625 4.5625 4.625 4.4375 4.5625 4.6875 4.625 4.6875 13,500
1997-04-21....... 4.5625 4.5625 4.5625 4.5625 4.5 4.5 4.6875 4.625 4.625 500
1997-04-22....... 4.625 4.5 4.5 4.5 4.5 4.5 4.625 4.625 4.625 11,581
1997-04-23....... 4.5 4.3125 4.3125 4.5 4.3125 4.375 4.625 4.5 4.5 5,821
1997-04-24....... 4.5 4.375 4.5 4.375 4.25 4.3125 4.5 4.5 4.5 11,300
1997-04-25....... 4.6875 4.4375 4.625 4.5625 4.3125 4.5 4.6875 4.5 4.6875 89,000
1997-04-28....... 4.6875 4.5625 4.625 4.625 4.5 4.625 4.75 4.6875 4.75 26,600
1997-04-29....... 4.75 4.75 4.75 4.625 4.625 4.625 4.75 4.6875 4.75 500
1997-04-30....... 4.75 4.625 4.75 4.625 4.5625 4.625 4.75 4.75 4.75 3,269
1997-05-01....... 4.75 4.625 4.625 4.625 4.625 4.625 4.875 4.75 4.875 18,300
1997-05-02....... 4.875 4.625 4.875 4.75 4.625 4.75 4.875 4.875 4.875 22,300
1997-05-05....... 4.875 4.75 4.875 4.8125 4.75 4.75 5 4.875 5 10,000
1997-05-06....... 5 5 5 4.75 4.75 4.75 5 5 5 800
1997-05-07....... 4.8125 4.8125 4.8125 4.75 4.75 4.75 5 5 5 2,000
1997-05-08....... 4.75 2.625 4.75 4.75 4.75 4.75 5 5 5 2,000
1997-05-09....... 5 4.9375 5 4.75 4.75 4.75 5 5 5 13,500
1997-05-12....... 4.75 4.75 4.75 4.75 4.75 4.75 5 5 5 1,000
1997-05-13....... 5 4.75 4.75 4.875 4.75 4.75 5 4.875 4.875 9,425
1997-05-14....... 0 0 0 4.75 4.75 4.75 4.875 4.875 4.875 0
1997-05-15....... 4.875 4.75 4.84375 4.8125 4.75 4.8125 5 4.875 5 31,222
1997-05-16....... 5.1875 4.875 5 5 4.8125 4.9375 5.25 5 5.0625 110,067
</TABLE>
A-1
<PAGE> 43
EXHIBIT B
THESE FORWARD-LOOKING STATEMENTS, INCLUDING THESE REVENUE PROJECTIONS, HAVE
BEEN COMPILED AS OF THE DATE OF THIS DOCUMENT AND SHOULD BE EVALUATED WITH
CONSIDERATION OF ANY CHANGES OCCURRING AFTER THE DATE OF THIS DOCUMENT. NO
ASSURANCE CAN BE GIVEN THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-
LOOKING STATEMENTS SPECIFIED IN THIS DOCUMENT, INCLUDING THOSE REVENUE
PROJECTIONS, ARE ACCURATE OR THAT THEY WILL PROVE TO BE APPLICABLE TO A
PARTICULAR PURCHASER OF THE SHARES OF THE SERIES A PREFERRED STOCK. IT IS THE
RESPONSIBILITY OF THE PURCHASERS OF THE SERIES A PREFERRED STOCK AND THEIR
ADVISORS TO REVIEW THOSE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE REVENUE
PROJECTIONS, TO CONSIDER THE ASSUMPTIONS ON WHICH THOSE FORWARD-LOOKING
STATEMENTS ARE BASED AND TO ASCERTAIN THEIR REASONABLENESS.
------------------------
AMCOR BIOMASS FARMS
SUMMARY INFORMATION
APRIL 24, 1997
(QUARTERS BASED ON AUGUST YEAR END)
<TABLE>
<CAPTION>
QTR 2 QTR 3 QTR 4 QTR 1 QTR 2 QTR 3 QTR 4
------- ------- ------- --------- --------- --------- ---------
FEB 28, MAY 31, AUG 31, TOTAL NOV 30, FEB 28, MAY 31, AUG 31, TOTAL PROJECTION
1997 1997 1997 1997 1997 1998 1998 1998 1998 TOTALS
------- ------- ------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volume
(tons)....... 4,396 30,697 68,782 103,875 97,400 122,384 167,882 153,989 541,655 645,530
Volume
(sales)...... 39,966 279,063 919,567 1,238,596 1,509,784 1,905,777 2,629,718 2,403,103 8,448,382 9,686,978
Operating
Income....... (11,809) 121,939 103,679 213,809 240,347 347,052 650,418 621,103 1,858,920 2,072,729
Debt Service... 7,807 21,467 19,148 48,422 13,346 11,334 9,914 8,950 43,544 91,966
</TABLE>
B-1
<PAGE> 44
THESE FORWARD-LOOKING STATEMENTS, INCLUDING THESE REVENUE PROJECTIONS, HAVE
BEEN COMPILED AS OF THE DATE OF THIS DOCUMENT AND SHOULD BE EVALUATED WITH
CONSIDERATION OF ANY CHANGES OCCURRING AFTER THE DATE OF THIS DOCUMENT. NO
ASSURANCE CAN BE GIVEN THAT ANY OF THE ASSUMPTIONS RELATING TO THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THIS DOCUMENT, INCLUDING THOSE REVENUE
PROJECTIONS, ARE ACCURATE OR THAT THEY WILL PROVE TO BE APPLICABLE TO A
PARTICULAR PURCHASER OF THE SHARES OF THE SERIES A PREFERRED STOCK. IT IS THE
RESPONSIBILITY OF THE PURCHASERS OF THE SERIES A PREFERRED STOCK AND THEIR
ADVISORS TO REVIEW THOSE FORWARD-LOOKING STATEMENTS, INCLUDING THOSE REVENUE
PROJECTIONS, TO CONSIDER THE ASSUMPTIONS ON WHICH THOSE FORWARD-LOOKING
STATEMENTS ARE BASED AND TO ASCERTAIN THEIR REASONABLENESS.
------------------------
AMCOR BIOMASS FARMS LLC
SUMMARY INFORMATION
APRIL 24, 1997
<TABLE>
<CAPTION>
RANCHO CALIFORNIA SANTA FE SPRINGS
------------------------ ---------------------------
DOLLARS LOADS TONS DOLLARS LOADS TONS
------- ----- ------ --------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
January 97.................................. 18,040 90 1,984
February 97................................. 21,926 110 2,412
------- ----- ------
39,966 200 4,396
March 97.................................... 45,863 229 5,045
April 97.................................... 74,800 374 8,228
May 97...................................... 158,400 792 17,424
------- ----- ------
279,063 1,395 30,697
June 97..................................... 198,000 990 21,780 116,160 330 7,260
July 97..................................... 19,800 99 2,178 255,552 726 15,972
August 97................................... 20,295 101 2,232 309,760 880 19,360
------- ----- ------ --------- ----- -------
238,095 1,190 26,190 681,472 1,936 42,592
September 97................................ 20,802 104 2,288 446,054 1,267 27,878
October 97.................................. 21,322 107 2,345 538,982 1,531 33,686
November 97................................. 21,856 109 2,405 460,768 1,309 28,798
------- ----- ------ --------- ----- -------
63,980 320 7,038 1,445,804 4,107 90,362
December 97................................. 22,402 112 2,464 520,397 1,478 32,525
January 98.................................. 22,962 115 2,526 619,520 1,760 38,720
February 98................................. 23,536 118 2,589 696,960 1,980 43,560
------- ----- ------ --------- ----- -------
68,900 345 7,579 1,836,877 5,218 114,805
March 98.................................... 24,124 121 2,654 851,840 2,420 53,240
April 98.................................... 24,727 124 2,720 851,840 2,420 53,240
May 98...................................... 25,347 127 2,788 851,840 2,420 53,240
------- ----- ------ --------- ----- -------
74,198 372 8,162 2,555,520 7,260 159,720
June 98..................................... 25,979 130 2,858 774,400 2,200 48,400
July 98..................................... 26,629 133 2,929 774,400 2,200 48,400
August 98................................... 27,295 137 3,002 774,400 2,200 48,400
------- ----- ------ --------- ----- -------
79,903 400 8,789 2,323,200 6,600 145,200
</TABLE>
B-2
<PAGE> 45
EXHIBIT C
AMCOR BIOMASS FARMS LLC
PROPERTY ASSUMPTION
MAY 28, 1997
MACHINERY ACQUIRED
<TABLE>
<CAPTION>
PURCHASE IN SERVICE
DESCRIPTION CATEGORY DATE DATE PRICE FINANCING
- ---------------------------- ------------- -------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
988 Cat Wheel Loader........ Machinery Feb-97 Feb-97 $ 50,000 Mortgage
Morgardshammer/Shredder..... Machinery Jan-97 Jan-97 171,669 Mortgage
Bottom Dump Trailer (2)..... Machinery Feb-97 Feb-97 6,443 Mortgage
633c CAT Scraper............ Machinery Feb-97 Feb-97 72,731 Mortgage
Service Truck............... Machinery Feb-97 Feb-97 4,500 Purchase
Military Truck.............. Machinery Feb-97 Feb-97 8,775 Mortgage
ANC Shammer/CAT............. Machinery Mar-97 Mar-97 40,623 Mortgage
Screen...................... Machinery Mar-97 Mar-97 138,759 Capital Lease
721B Case Wheel Loader...... Machinery Jan-97 Jan-97 91,706 Capital Lease
953 Bobcat Loader........... Machinery Jan-97 Jan-97 36,109 Capital Lease
Bobcat Grapple.............. Machinery Jan-97 Jan-97 3,070 Capital Lease
Bobcat Utility Bucket....... Machinery Jan-97 Jan-97 910 Capital Lease
Case 9270 Tractor........... Machinery Jan-97 Jan-97 107,074 Capital Lease
9270 Stubble Disc........... Machinery Jan-97 Jan-97 23,705 Capital Lease
9270 Switch Plow............ Machinery Jan-97 Jan-97 8,620 Capital Lease
Champion 720 Motor Grader... Machinery Mar-97 Mar-97 45,022 Capital Lease
Tools -- Service Truck...... Machinery Feb-97 Feb-97 5,000 Capital Lease
Total....................................................... $ 814,716
</TABLE>
MACHINERY TO BE ACQUIRED
<TABLE>
<CAPTION>
PURCHASE IN SERVICE
DESCRIPTION CATEGORY DATE DATE PRICE FINANCING
- ---------------------------- ------------- -------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Farm Site Off Road Truck.... Machinery July-97 Aug-97 $ 42,000 Purchase
Storage Vessels (11)........ Machinery July-97 Aug-97 192,000 Purchase
Paving/Concrete............. Leasehold July-97 Aug-97 40,000 Purchase
Improvements
Landscape Berms............. Leasehold July-97 Aug-97 10,000 Purchase
Improvements
Scales...................... Machinery July-97 Aug-97 320,000 Purchase
721 Loader (shear).......... Machinery July-97 Aug-97 120,000 Purchase
721B Loader (screen)........ Machinery July-97 Aug-97 120,000 Purchase
980/960 CAT (export Machinery July-97 Aug-97 150,000 Purchase
loading)..................
Office Trailers............. Leasehold July-97 Aug-97 6,000 Purchase
Improvements
Service Trucks.............. Machinery July-97 Aug-97 80,000 Purchase
Tools....................... Machinery July-97 Aug-97 30,000 Purchase
Yard Truck, Moving Machinery July-97 Aug-97 10,000 Purchase
Trailers..................
Set-Up, Welding............. Machinery July-97 Aug-97 10,000 Purchase
Trailers (20)............... Machinery July-97 Aug-97 200,000 Purchase
Total....................................................... $1,330,000
</TABLE>
C-1
<PAGE> 46
EXHIBIT D
Diagram of certain relationships between
Amcor Capital Corporation and its Affiliates
D-1
<PAGE> 47
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Face Page of Prospectus............... 1
Risk Factors.......................... 8
Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................... 14
Determination of Offering Price....... 17
The Company........................... 18
Use of Proceeds....................... 22
Capitalization........................ 23
Available Information................. 24
Incorporation of Certain Documents by
Reference........................... 24
Management............................ 25
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 27
Certain Relationships and Related
Transactions........................ 30
Description of Series A Preferred
Stock............................... 31
Ratio of Earnings to Fixed Charges.... 36
Dividend Policy (Series B and Common
Stock).............................. 36
Federal Income Tax Considerations to
the Stockholders.................... 36
Underwriter and Plan of
Distribution........................ 39
Experts............................... 40
Legal Matters......................... 40
Interest of Named Experts and
Counsel............................. 40
</TABLE>
======================================================
======================================================
550,000 SHARES
LOGO
SERIES A
9% CONVERTIBLE PREFERRED STOCK
------------------------
PROSPECTUS
------------------------
TORREY PINES SECURITIES, INC.
, 1997
======================================================
<PAGE> 48
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of all expenses of the offering,
other than underwriting discounts and commissions (1):
<TABLE>
<S> <C>
Registration fees.................................................. $ 1,916
Federal taxes (estimated).......................................... $ 0
State taxes and fees (estimated)................................... $ 0
Trustees' and transfer agents' fees (estimated).................... $ 5,000
Costs of printing and engraving (estimated)........................ $60,000
Legal fees and costs (estimated)................................... $40,000
Accounting fees and costs (estimated).............................. $25,000
Engineering fees (not applicable)..................................
Listing fees....................................................... $ 1,600
</TABLE>
(2) Include as a separate item any premium paid on any policy to insure
directors or officers against any liabilities incurred in the registration or
sale of the securities: Not applicable
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The statutes, charter provisions, by-laws, contracts or other arrangements
that insure or indemnify a controlling person, director or officer of the
Registrant which affects his or her liability in that capacity are as follows:
Indemnification by Statute. The Company is a corporation duly formed and
existing under the laws of the State of Delaware. Section 145(a) of the Delaware
General Corporation Law permits indemnification of officers, directors,
employees or agents for attorneys' fees and other expenses as well as judgments
or amounts paid in settlement of civil cases. This section applies only to third
party actions, not to actions brought by or in the right of the Company. The
person seeking indemnification must have acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
Company in respect to the claim made against him or her. In criminal cases, the
indemnitee may be indemnified for fines and costs provided that, in addition to
the foregoing standard of conduct, he or she did not have reasonable cause to
believe his or her conduct was unlawful.
Additionally, Section 145(b) of the Delaware General Corporation Law
permits limited indemnification for actions brought by or in the right of the
Company, in that it permits indemnification only of expenses in derivative suits
and does not authorize indemnification of judgments or amounts paid in
settlement of derivative suits. Section 145(c) of the Delaware General
Corporation Law provides mandatory indemnification for an indemnitee in the
event he or she wins a judgment on the merits or otherwise in defense of any
action, suit or proceeding referenced in Sections 145(a) or 145(b) of the
Delaware General Corporation Law.
Indemnification in Bylaws. The Company's Bylaws contain provisions which
provide certain indemnity to a controlling person, director or officer which
affects such a person's liability while acting in a corporate capacity. The
pertinent sections of the Company's bylaws are as follows:
"Section 6.1 Right to Indemnification. The corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable
law as it presently exists or may hereafter be amended, any person who was
or is made or is threatened to be made a party or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a 'proceeding'), by reason of the fact that he, or a person
for whom he is the legal representative, is or was a director or officer of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity,
including service with respect to employee benefit plans (an 'indemnitee'),
against all liability and loss suffered
II-1
<PAGE> 49
and expenses (including attorneys' fees) reasonably incurred by such
indemnitee. The corporation shall be required to indemnify an indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if the initiation of such proceeding (or part thereof) by the
indemnitee was authorized by the Board of Directors of the corporation.
Section 6.2 Payment of Expenses. The corporation shall pay the
expenses (including attorneys' fees) incurred by an indemnitee in defending
any proceeding in advance of its final disposition; provided, however, that
the payment of expenses incurred by a director or officer in advance of the
final disposition of the proceeding shall be made only upon receipt of an
undertaking by the director or officer to repay all amounts advanced if it
should be ultimately determined that the director or officer is not
entitled to be indemnified under this Article VI or otherwise.
Section 6.3 Claims. If a claim for indemnification or payment of
expenses under this Article VI is not paid in full within sixty days after
a written claim therefor by the indemnitee has been received by the
corporation, the indemnitee may file suit to recover the unpaid amount of
such claim and, if successful in whole or in part, shall be entitled to be
paid the expense of prosecuting such claim. In any such action the
corporation shall have the burden of proving that the indemnitee was not
entitled to the requested indemnification or payment of expenses under
applicable law.
Section 6.4 Nonexclusivity of Rights. The rights conferred on any
person by this Article VI shall not be exclusive of any rights which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, these By-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 6.5 Other Indemnification. The corporation's obligation, if
any, to indemnify any person who was or is serving at its request as a
director, officer, employee or agent of another corporation, partnership,
working relationship, trust, enterprise or nonprofit entity shall be
reduced by any amount such person may collect as indemnification from such
other corporation, partnership, joint venture, trust, enterprise or
nonprofit enterprise.
Section 6.6 Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any
right or protection hereunder of any person in respect of any act or
omission occurring prior to the time of such repeal or modification."
INDEMNIFICATION IN CERTIFICATE OF INCORPORATION. Section 145 of the
Delaware General Corporation Law specifies that the Certificate of Incorporation
of a Delaware corporation may include a provision eliminating or limiting the
personal liability of a director or officer to a corporation or its stockholders
for damages for breach of fiduciary duty as a director or officer, but such a
provision must not eliminate or limit the liability of a director or officer for
(i) acts or omissions which involve intentional misconduct, fraud, or a knowing
violation of law; or (ii) unlawful distributions to stockholders. The
Certificate of Incorporation of the Company includes a provision eliminating or
limiting the personal liability of the officers and directors of the Company to
the Company and its shareholders for damages for breach of fiduciary duty as a
director or officer. Accordingly, the officers and directors of the Company may
have no liability to the shareholders of the Company for any mistakes or errors
of judgment or for any act or omission, unless such act or omission involves
intentional misconduct, fraud, or a knowing violation of law or results in
unlawful distributions to the shareholders of the Company.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1 Underwriting Agreement*
2 Plan of Acquisition (N/A)
4 Instruments defining the rights of holders, including indentures
5 Opinion re: legality
8 Opinion re: tax matters
10 Material contracts (N/A)
</TABLE>
II-2
<PAGE> 50
<TABLE>
<C> <S>
11 Statement re: computation of per share earnings
13 Annual or quarterly reports, Forms 10-KSB and 10-QSB (incorporated by reference,
filed with Commission August 31, 1996 and April 14, 1997, respectively, file no.
0-17594).
15 Letter on unaudited interim financial information (N/A)
16 Letter on change in certifying accountant (N/A)
23.1 Consent of experts
23.2 Consent of counsel
24 Power of Attorney (included on signature page of this Registration Statement)
25 Statement of eligibility of trustee (N/A)
26 Invitation for competitive bids (N/A)
27 Financial data schedule (N/A -- filing does not include interim financial
statements)
99 Additional exhibits (N/A)
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS. 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, 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 Securities Act and will be governed by the final
adjudication of such issue.
(f) If the Registrant relies on Rule 430A under the Securities Act, the
Registrant will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance on 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 Securities Act as part of this Registration Statement as of the time the
Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and the offering of the securities at that time as the initial bona fide
offering for those securities.
II-3
<PAGE> 51
SIGNATURES AND POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Thomas E. Stepp, Jr. with full power to act as
his or her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities (until and unless revoked in a writing) to
sign any and all amendments (including but not limited to post-effective
amendments and amendments thereto) to this Registration Statement on Form S-2 of
AMCOR Capital Corporation, a Delaware corporation, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact full
power and authority to do and perform each and every act and thing requisite and
necessary to be done to make this Registration Statement on Form S-2 effective,
as fully and for all intents and purposes, as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact or his substitute
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that the Registrant meets
all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement on Form S-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Newport Beach, State of
California, on May 28, 1997.
(Registrant) AMCOR CAPITAL CORPORATION, A DELAWARE CORPORATION
By: /s/ FRED H. BEHRENS
----------------------------------
Fred H. Behrens, Chairman of the
Board
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>
<S> <C>
(Signature) /s/ FRED H. BEHRENS (Signature) /s/ ROBERT A. WRIGHT
------------------------------- ----------------------------------
Fred H. Behrens Robert A. Wright
(Title) Director (Title) Director
(Date) May 28, 1997 (Date) May 28, 1997
(Signature) /s/ MARLENE A. TAPIE (Signature) /s/ DALE P. PAISLEY
------------------------------- ----------------------------------
Marlene A. Tapie Dale P. Paisley
(Title) Director (Title) Director
(Date) May 28, 1997 (Date) May 28, 1997
(Signature) /s/ F. HOWARD LEE (Signature) /s/ MARLIN T. MCKEEVER
------------------------------- ----------------------------------
F. Howard Lee Marlin T. McKeever
(Title) Director (Title) Director
(Date) May 28, 1997 (Date) May 28, 1997
</TABLE>
II-4
<PAGE> 52
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
---- -----------------------------------------------------------------------------------
<C> <S> <C>
1 Underwriting Agreement*.................................................
2 Plan of Acquisition (N/A)...............................................
4 Instruments defining the rights of holders, including indentures........
5 Opinion re: legality....................................................
8 Opinion re: tax matters.................................................
10 Material contracts (N/A)................................................
11 Statement re: computation of per share earnings.........................
13 Annual or quarterly reports, Forms 10-KSB and 10-QSB (incorporated by
reference, filed with Commission August 31, 1996 and April 14, 1997,
respectively, file no. 0-17594).........................................
15 Letter on unaudited interim financial information (N/A).................
16 Letter on change in certifying accountant (N/A).........................
23.1 Consent of experts......................................................
23.2 Consent of counsel......................................................
24 Power of Attorney (included on signature page of this Registration
Statement)..............................................................
25 Statement of eligibility of trustee (N/A)...............................
26 Invitation for competitive bids (N/A)...................................
27 Financial data schedule (N/A -- filing does not include interim
financial statements)...................................................
99 Additional exhibits (N/A)...............................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibit 4
CERTIFICATE OF DESIGNATIONS, PREFERENCES,
AND RELATIVE RIGHTS, QUALIFICATIONS AND
RESTRICTIONS OF THE SERIES A 9% CONVERTIBLE
PREFERRED STOCK OF
AMCOR CAPITAL CORPORATION
-----------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
-----------------
AMCOR Capital Corporation, a corporation organized and existing
pursuant to and by virtue of, the provisions of the General Corporation Law of
the State of Delaware, certifies as follows:
The undersigned, Robert A. Wright and Robin Swanson, hereby certify
that:
1. They are the duly elected and acting President and Secretary,
respectively, of AMCOR Capital Corporation, a Delaware corporation
("Corporation");
2. WHEREAS, the Certificate of Incorporation of the Corporation, as
amended, authorizes the issuance of 2,000,000 shares of Preferred Stock, par
value $.01 per share ("Preferred Shares"), and, additionally, authorizes the
issuance of shares of Preferred Stock from time to time in one or more series as
may from time to time be determined by the Board of Directors, each of those
series to be distinctly designated, and on such terms and for such consideration
as shall be determined by the Board of Directors of the Corporation, and,
additionally, grants to the Board of Directors of the Corporation the authority
to determine by resolution or resolutions adopted prior to the issuance of any
shares of a particular series of Preferred Stock, the voting powers, if any, and
the designations, privileges, powers, preferences and rights of the shares of
each such series and the qualifications, limitations and restrictions thereof;
and
3. WHEREAS, the Board of Directors of the Corporation, pursuant to
action taken at a special meeting of that Board of Directors held on May 17,
1997, has duly adopted the following resolutions authorizing the creation of and
issuance of a series of that Preferred Stock to be known as Series A 9%
Convertible Preferred Stock; NOW, THEREFORE, IT IS:
RESOLVED, the Board of Directors of the Corporation hereby determines
and fixes the number, designations, preferences, privileges, rights and
limitations of another series of the Preferred Shares on the terms and with the
provisions herein specified:
1
<PAGE> 2
1. DESIGNATION. A series of Preferred Stock of the Corporation is
hereby designated "Series A 9% Convertible Preferred Stock" ("Series A 9%
Convertible Preferred Stock"), consisting initially of 632,500 shares. The
Series A 9% Convertible Preferred Stock shall have a par value of $.01 per
share. The Series A Preferred Stock issued by the Corporation and outstanding
as of the date of this Certificate shall be and hereby is designated "Series B
Preferred Stock" and shall be junior and subordinate to the Series A 9%
Convertible Preferred Stock.
2. PRIORITY. Shares of the Series A 9% Convertible Preferred Stock
shall rank prior to the Corporation's Common Stock, $.002 par value per share
("Common Stock"), with respect to the payment of dividends and upon liquidation.
The Series B Preferred Stock presently outstanding and other classes of
Preferred Shares shall be subordinated to and shall rank junior to the Series A
9% Convertible Preferred Stock with respect thereto; provided, however, that
holders of Series A 9% Convertible Preferred Stock, by vote or written consent
of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the then
outstanding Series A 9% Convertible Preferred Stock, may elect from time to time
to allow other series or classes of Preferred Shares to rank senior to the
Series A 9% Convertible Preferred Stock with respect to dividends, assets or
liquidation. The Company may create additional classes of stock, increase the
authorized number of shares of Preferred Stock or issue series of Preferred
Stock which rank on a parity with the Series A Preferred Stock with respect, in
each case, to the payment of dividends and amounts upon liquidation, dissolution
or winding up of the Company ("Parity Stock") without the consent of any holder
of Series A Preferred Stock.
3. DIVIDENDS.
(a) Dividend rates on the shares of Series A 9% Convertible Preferred
Stock shall be at an annual rate of nine percent (9%) for each semi-annual
dividend period ("Semi Annual Dividend Period"), which Semi Annual Dividend
Periods shall commence on October 1 and April 1 in each year and shall end on
and include the day immediately preceding the first day of the next Semi Annual
Dividend Period. Dividends shall be cumulative (but not compounded) and accrue
semi-annually from the date of original issue of the Series A 9% Convertible
Preferred Stock and shall be payable, if, when, and as declared by the Board of
Directors of the Corporation, on October 31 in respect of the Semi Annual
Dividend Period beginning the preceding April 1), and on April 30, (in respect
of the Semi Annual Dividend Period beginning the preceding October 1) of each
year. Each dividend shall be paid to the holders of record of the Series A 9%
Convertible Preferred Stock as they shall appear on the stock register of the
Corporation on such record date, not exceeding sixty (60) days nor less than ten
(10) days preceding the payment date thereof, as shall be fixed by the Board of
Directors of the Corporation or a duly authorized committee thereof. If
declared, dividends shall be payable in cash.
(b) No dividends shall be payable on any shares of any class of the
Corporation's capital stock ranking junior and subordinate to the Series A 9%
Convertible Preferred Stock as to the payment of dividends, unless all accrued
dividends on the Series A 9% Convertible Preferred Stock to the record date of
the proposed dividends on the junior class and subordinate shall have been paid
or have been declared and an amount sufficient for the payment of those
dividends reserved.
2
<PAGE> 3
(c) Upon any conversion of any shares of Series A 9% Convertible
Preferred Stock, as described in Section 6 hereof, the holders thereof shall be
entitled to receive in cash any accumulated, accrued or unpaid dividends in
respect of such shares of the Series A 9% Convertible Preferred Stock.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of shares of the Series A 9% Convertible Preferred Stock shall be
entitled to receive, out of the assets of the Corporation, whether such assets
are capital or surplus and whether or not any dividends as such are declared,
$10.00 per share plus an amount equal to all accrued and unpaid dividends
thereon to the date fixed for distribution, and no more, before any distribution
shall be made to the holders of the Common Stock or any other class of shares or
series thereof ranking junior and subordinate to the Series A 9% Convertible
Preferred Stock with respect to the distribution of assets.
(b) For purposes of this Section 4, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or the merger of
any other corporation or corporations with or into the Corporation, or the sale
of all or substantially all of the assets of the Corporation, or any other
corporate reorganization, in which consolidation, merger, sale of assets or
reorganization the stockholders of the Corporation receive distributions in cash
or securities of another corporation or corporations as a result of such
consolidation, merger, sale of assets or reorganization, shall be treated as a
liquidation, dissolution or winding up of the Corporation, unless the
stockholders of the Corporation hold more than fifty percent (50%) of the voting
equity securities of the successor or surviving corporation immediately
following such consolidation, merger, sale of assets or reorganization, in which
case such consolidation, merger, sale of assets or reorganization shall not be
treated as a liquidation, dissolution, or winding up within the meaning of this
Section 4.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, specifying a
payment date and the place where the distributive amounts shall be payable,
shall be given by mail, postage prepaid, not less than thirty (30) days prior to
the payment date elected therein, to the holders of record of the Series A 9%
Convertible Preferred Stock at their respective addresses as the same shall
appear on the books of the Corporation.
(d) No payment on account of such liquidation, dissolution or winding
up of the affairs of the Corporation shall be made to the holders of any class
or series of stock ranking on a parity with the Series A 9% Convertible
Preferred Stock in respect of the distribution of assets, unless there shall
also be paid at the same time to the holders of the Series A 9% Convertible
Preferred Stock similar proportionate distributive amounts, ratably, in
proportion to the fully distributive amounts to which they and the holders of
such parity stock are respectively entitled with respect to such preferential
distribution.
3
<PAGE> 4
5. VOTING RIGHTS. Except as specified in Sections 2 and 8 hereof, the
holders of Series A 9 % Convertible Preferred Stock shall not have any voting
powers, either general or special.
6. CONVERSION.
6.1. VOLUNTARY CONVERSION. Each share of Series A 9%
Convertible Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of the Series A 9% Convertible
Preferred Stock at the office of the Corporation or, if the Corporation shall
have appointed a transfer agent for the Series A 9% Convertible Preferred
Stock, at the office of such transfer agent, into authorized but previously
unissued shares of Common Stock, at a conversion price equal to 125 percent of
the closing price of the Common Stock ("Conversion Price") on the day before the
date the Registration Statement on Form S-2 regarding the Series A 9%
Convertible Preferred Stock filed by the Corporation with the Securities and
Exchange Commission becomes effective ("Effective Date"). For these purposes,
the closing price of a whole share of Common Stock shall be the closing price of
the Common Stock on the day before the Effective Date. The closing price on day
before the Effective Date shall be the last sale price, regular way, or, in the
case no such sale takes place on the day before the Effective Date, the average
of the high bid and low bid asked prices in the over-the-counter market, as
reported by NASDAQ or such other system then in use, or, if on the day before
the Effective Date the Common Stock is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Stock, which market maker shall be
selected by the Board of Directors of the Corporation. If on the day before the
Effective Date no such market maker is making a market in the Common Stock, the
closing price of the Common Stock on the day before the Effective Date as
determined in good faith by the Board of Directors of the Corporation shall be
utilized.
6.2. MANDATORY CONVERSION. At such time as the closing price
of the Common Stock (as determined above), for a period of 20 consecutive
business days, is an amount equal to or greater than that amount which is equal
to 150% of the closing price of the Common Stock on the day before the Effective
Date, the Company shall have the right to require and compel each holder of
Series A 9% Convertible Preferred Stock to convert the Series A 9% Convertible
Preferred Stock to Common Stock on those terms specified by the provisions of
Section 6.1 above.
6.3. MECHANICS OF CONVERSION. No fractional shares of Common
Stock shall be issued upon any conversion of Series A 9% Convertible Preferred
Stock. In lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction. Before any
holder of Series A 9% Convertible Preferred Stock shall be entitled to convert
the same into full shares of Common Stock and to receive certificates therefor,
the holder shall surrender the certificate or certificates representing and
evidencing the Series A 9% Convertible Preferred Stock, duly endorsed, at the
office of the Corporation, or if the Corporation shall have appointed a transfer
agent for the Series A 9% Convertible Preferred Stock, at the office of such
transfer agent, and shall give written notice to the Corporation at either such
office that the holder elects to convert the same; provided, however,
4
<PAGE> 5
that in the event of any mandatory conversion pursuant to Section 6.2 above, the
outstanding shares of Series A 9% Convertible Preferred Stock shall be converted
automatically without any further action by the holders of such shares, whether
or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent, if any; and provided, further, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such mandatory conversion unless the
certificates evidencing such shares of Series A 9% Convertible Preferred Stock
are either delivered to the Corporation or its transfer agent, if any, as
provided above, or the holder notifies the Corporation or its transfer agent, if
any, that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. The Corporation shall,
as soon as practicable after such delivery, or such agreement and
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder of Series A 9% Convertible Preferred Stock, a certificate
or certificates for the number of shares of Common Stock to which the holder
shall be entitled as aforesaid and a check payable to the holder in the amount
of any cash amounts payable as a result of the conversion into fractional shares
of Common Stock. In the case of any mandatory conversion pursuant to Section
6.2, such conversion shall be deemed to have been made immediately prior to the
close of business on the date of the event causing the required conversion. The
person or persons entitled to receive the shares of Common Stock issuable upon
any such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
6.4 ADJUSTMENTS FOR SUBDIVISIONS, COMBINATIONS OR
CONSOLIDATIONS OF COMMON STOCK. If the outstanding shares of Common Stock are
subdivided (by stock split, stock dividend or otherwise), into a greater number
of shares of Common Stock, the number of shares of Common Stock into which each
share of Series A 9% Convertible Preferred Stock may be converted shall,
concurrently with the effectiveness of such subdivision, be proportionately
increased. In the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, the number of shares of Common Stock which each share of
Series A 9% Convertible Preferred Stock may be converted into shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately decreased.
6.5. ADJUSTMENTS FOR STOCK DIVIDENDS AND OTHER DISTRIBUTIONS.
If the Corporation at any time or from time to time makes, or fixes a record
date for the determination of holders of Common Stock entitled to receive any
distribution (excluding any repurchases of securities by the Corporation not
made on a pro rata basis from all holders of any class of the Corporation's
securities) payable in property or in securities of the Corporation other than
shares of Common Stock, and other than as otherwise adjusted in this Section 6
or as provided in Paragraph (a) of Section 3, then and in each such event the
holders of Series A 9% Convertible Preferred Stock shall receive at the time of
such distribution, the amount of property or the number of securities of the
Corporation that they would have received had their Series A 9% Convertible
Preferred Stock been converted into Common Stock on the date of such event.
5
<PAGE> 6
6.6. ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. Except as provided in Section 4, upon any liquidation, dissolution
or winding up of the Corporation, if the Common Stock issuable upon conversion
of the Series A 9% Convertible Preferred Stock is changed into the same or a
different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than a subdivision
or combination of shares provided for above), the number of shares of Common
Stock into which each share of Series A 9% Convertible Preferred Stock may be
converted shall, concurrently with the effectiveness of such reorganization or
reclassification, be proportionately adjusted such that the Series A 9%
Convertible Preferred Stock shall be convertible into, in lieu of the number of
shares of Common Stock which the holders would otherwise have been entitled to
receive, a number of shares of such other class or classes of stock equivalent
to the number of shares of Common Stock that would have been subject to receipt
by the holders upon conversion of the Series A 9% Convertible Preferred Stock
immediately before the change.
6.7. REORGANIZATION, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time there is a capital reorganization of
the Common Stock (other than a subdivision, combination, consolidation,
reclassification, substitution or exchange of shares provided for elsewhere in
this Section 6), or a merger or consolidation of the Corporation with or into
another corporation, or the sale of all or substantially all of the
Corporation's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation, or sale, provision shall be made so that
the holders of the Series A 9% Convertible Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A 9% Convertible Preferred
Stock, the number of shares of stock or other securities or property of the
Corporation, or of the successor corporation resulting from such merger or
consolidation or sale, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 6 with respect to the
rights of the holders of the Series A 9% Convertible Preferred Stock after the
reorganization, merger, consolidation, or sale to the end that the provisions of
this Section 6 shall be applicable after that event as nearly equivalent as may
be practicable.
6.8. NO IMPAIRMENT. Except as provided in Section 7, the
Corporation will not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 6 and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of the Series A 9% Convertible Preferred
Stock against impairment.
6.9. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment of the number of shares of Common Stock which
each share of Series A 9% Convertible Preferred Stock may be converted into
pursuant to this Section 6, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the
6
<PAGE> 7
terms hereof and furnish to each holder of Series A 9% Convertible Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based.
6.10 REDEMPTION. Shares of Series A 9% Convertible Preferred
Stock will be redeemable, at the option of the Corporation, in its sole and
absolute discretion, on or after 5 years from the date of issuance, either (i)
for such number of authorized but previously unissued shares of Common Stock as
equals the liquidation preference of the Series A 9% Convertible Preferred Stock
to be redeemed (without regard to accumulated, accrued and unpaid dividends, if
any, to the date set for redemption, which are to be paid in cash), divided by
the Conversion Price as of the opening of business on the date set for such
redemption, or (ii) for cash at a redemption price of $10.00 per share, plus any
accumulated, accrued and unpaid dividends. The conditions precedent to the
Company's right to compel conversion of the Series A 9% Convertible Preferred
Stock will not apply to the redemption by the Company of the Series A 9%
Convertible Preferred Stock.
Notice of redemption will be given by mail or by publication (with
subsequent prompt notice by mail) to the holders of record of the Series A 9%
Convertible Preferred Stock not less than 30 nor more than 60 days prior to the
date of redemption, in the case of a redemption for cash. The redemption date
will be a date selected by the Corporation not less than 10 nor more than 60
days after the date on which the Corporation gives the notice of redemption.
On the redemption date, the Corporation must pay in cash on each share
of Series A 9% Convertible Preferred Stock to be redeemed any accumulated,
accrued and unpaid dividends, if any, on the redemption date. In the case of a
redemption date falling after a dividend record date and prior to the related
dividend payment date, the holders of the Series A 9% Convertible Preferred
Stock at the close of business on such record date will be entitled to receive
the dividend payable on such shares on the corresponding dividend payment date,
notwithstanding the redemption of such shares following such dividend record
date. Except as provided for in the preceding sentences, no payment or allowance
will be made for accumulated or accrued dividends on any shares of Series A 9%
Convertible Preferred Stock called for redemption or on the shares of Common
Stock issuable upon such redemption.
In the event that full cumulative dividends on the Series A 9%
Convertible Preferred Stock and any Parity Stock have not been paid or declared
and set apart for payment, the Series A 9% Convertible Preferred Stock may not
be redeemed in part and the Company may not purchase or acquire shares of Series
A 9% Convertible Preferred Stock otherwise than pursuant to a purchase or
exchange offer made on the same terms to all holders of shares of Series A 9%
Convertible Preferred Stock.
On and after the date fixed for redemption, provided that the
Corporation has made available at the office of the Registrar and Transfer Agent
a sufficient number of shares of Common Stock and/or an amount of cash to effect
the redemption, dividends will cease to accumulate or accrue on the Series A 9%
Convertible Preferred Stock called for redemption
7
<PAGE> 8
(except that, in the case of a redemption date after a dividend record date and
prior to the related dividend payment date, holders of Series A 9% Convertible
Preferred Stock on the dividend record date will be entitled on such dividend
payment date to receive the dividend payable on such shares), such shares shall
no longer be deemed to be outstanding and all rights of the holders of such
shares of Series A 9% Convertible Preferred Stock shall cease except the right
to receive the shares of Common Stock upon such redemption and/or any cash
payable upon such redemption, without interest from the date of such redemption.
At the close of business on the redemption date, each holder of Series A 9%
Convertible Preferred Stock to be redeemed (unless the Corporation defaults in
the delivery of the Common Stock or cash) will be, without any further action,
deemed a holder of the number of shares of Common Stock and/or the amount of
cash for which such Series A 9% Convertible Preferred Stock is redeemable.
Fractional shares of Common Stock will not be issued upon redemption of
the Series A 9% Convertible Preferred Stock, but, in lieu thereof, the
Corporation will pay an amount in cash based on the current market price of the
Common Stock on the day prior to the redemption date.
6.11 NOTICES OF RECORD DATE. If the Corporation proposes at
any time to:
(a) declare any dividend or distribution upon its Common Stock, whether
in cash, property, stock or other securities, whether or not a regular cash
dividend and whether or not out of earnings or earned surplus;
(b) offer for subscription pro rata to the holders of any class or
series of its capital stock any additional shares of capital stock of any class
or series or other rights;
(c) effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock;
(d) merge or consolidate with or into any other corporation, or sell,
lease or convey all or substantially all its property or business, or to
liquidate, dissolve or wind up;
(e) cause the mandatory conversion of the Series A 9% Convertible
Preferred Stock; or
(f) redeem the Series A 9% Convertible Preferred Stock,
then, in connection with each such event, this Corporation shall send to the
holders of the Series A 9% Convertible Preferred Stock:
(i) at least twenty (20) days prior written notice of the date
on which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (a) and (b) above; and
8
<PAGE> 9
(ii) in the case of the matters referred to in (c), (d), (e)
and (f) above, at least twenty (20) days prior written notice of the date when
the same shall take place (and specifying the date on which the holders of
Preferred or Common Stock shall be entitled or compelled to exchange their
Preferred or Common Stock for securities or other property deliverable upon the
occurrence of such event).
Each such written notice shall be delivered personally or given by
first class mail, postage prepaid, addressed to the holders of the Series A 9%
Convertible Preferred Stock at the address for each such holder as shown on the
books of this Corporation.
7. STATUS OF CONVERTED STOCK. If any shares of Series A 9% Convertible
Preferred Stock are repurchased or converted pursuant to Section 6, the shares
so repurchased or converted shall be retired and shall thereafter have the
status of authorized and unissued shares of Preferred Shares which may be
reissued by the Corporation at any time as shares of any series of Preferred
Shares.
8. RESTRICTIONS AND LIMITATIONS
(a) At such time as any shares of Series A 9% Convertible Preferred
Stock remain outstanding, the Corporation shall not, without the vote or written
consent of the holders of at least sixty-six and two-thirds percent (66 2/3%)
of the then outstanding shares of Series A 9% Convertible Preferred Stock:
(i) Redeem, purchase or otherwise acquire for value, any share
or shares of Series A 9% Convertible Preferred Stock, otherwise than by
conversion in accordance with Section 6:
(ii) Redeem, purchase or otherwise acquire any of the Common
Stock; provided, however, that this restriction shall not apply to the
repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for the Corporation or any
subsidiary of the Corporation pursuant to agreements pursuant to which the
Corporation has the option to repurchase such shares at cost upon the occurrence
of certain events, such as the termination of employment;
(iii) Authorize or issue, or obligate itself to issue, any
other equity security (including any security convertible into or exercisable
for any equity security) senior to or on a parity with the Series A 9%
Convertible Preferred Stock as to dividend or redemption rights and liquidation
preferences;
(iv) Effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of the Corporation or any
of its subsidiaries, or any consolidation or merger involving the Corporation or
any of its subsidiaries, or any reclassification or other change of any stock,
or any recapitalization of the Corporation; or
9
<PAGE> 10
(v) Increase or decrease (other than by conversion) the total
number of authorized shares of Series A 9% Convertible Preferred Stock.
(b) The Corporation shall not amend its Certificate of Incorporation
without the approval, by vote or written consent, by the holders of 66 2/3% of
the Series A 9% Convertible Preferred Stock, if such amendment would amend,
modify, annul, supersede, or otherwise change any of the rights, preferences,
privileges of, or limitations provided for herein for the benefit of any shares
of the Series A 9% Convertible Preferred Stock. Without limiting the generality
of the preceding sentence, the Corporation will not amend its Certificate of
Incorporation without the approval by the holders of sixty-six and two-thirds
percent (66 2/3%) of the Series A 9% Convertible Preferred Stock, if such
amendment would:
(i) Reduce the dividend rate on the Series A 9% Convertible
Preferred Stock provided for herein, or make such dividends noncumulative, or
defer the date from which dividends will accrue, or cancel accrued and unpaid
dividends, or change the relative seniority rights of the holders of the Series
A 9% Convertible Preferred Stock as to the payment of dividends in relation to
the holders of any other capital stock of the Corporation;
(ii) Reduce the amount payable to the holders of the Series A
9% Convertible Preferred Stock upon the voluntary or involuntary liquidation,
dissolution, or winding up the Corporation, or change the relative seniority of
the liquidation preferences of the holders of the Series A 9% Convertible
Preferred Stock to the rights upon liquidation of the holders of any other
capital stock of the Corporation; or
(iii) Cancel or modify the conversion rights of the Series A
9% Convertible Preferred Stock provided for in Section 6.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations, Preferences and Relative Rights, Qualifications and Restrictions
of the Series A 9% Convertible Preferred Stock to be duly executed by its Chief
Executive Officer and President and attested to by its Secretary and has caused
its corporate seal to be affixed hereto, this 27th day of May, 1997.
(Corporate Seal)
/s/ Fred H. Behrens
----------------------------------------
Fred H. Behrens, Chief Executive Officer
/s/ Robert A. Wright
----------------------------------------
ATTEST: /s/ Robin Swanson Robert A. Wright, President
-------------------------
Robin Swanson, Secretary
10
<PAGE> 11
The undersigned, Robert A. Wright and Robin Swanson, the President and
Secretary, respectively, of AMCOR Capital Corporation, a Delaware corporation,
each declares under penalty of perjury under the laws of the State of California
that the matters set out in the foregoing Certificate are true of his or her own
knowledge.
Executed at Coachella, California on May 27, 1997.
/s/ Robert A. Wright
----------------------------
Robert A. Wright
/s/ Robin Swanson
----------------------------
President
Robin Swanson
Secretary
<PAGE> 1
EXHIBIT 5
WHITE AND STEPP LLP
ATTORNEYS AT LAW
4100 NEWPORT PLACE, SUITE 800
NEWPORT BEACH, CALIFORNIA 92660-2422
TELEPHONE: 714.660.9700
FACSIMILE: 714.660.9010
May 30, 1997
Mr. Fred Behrens
AMCOR Capital Corporation
52300 Enterprise Way
Coachella, CA 92236
Re: AMCOR Capital Corporation Series A 9% Convertible Preferred Stock
Offering Opinion Re: Legality
Dear Mr. Behrens:
We have acted as counsel for AMCOR Capital Corporation, a Delaware
corporation ("Company"), in connection with the Company's Registration Statement
on Form S-2 ("Registration Statement") relating to the registration, pursuant to
the provisions of the Securities Act of 1933, as amended, of the offer and sale
of 550,000 shares of Series A 9% Convertible Preferred Stock ("Series A
Preferred Shares") of the Company, to be offered and sold by Torrey Pines
Securities, Inc. ("Underwriter"). As specified in the Registration Statement,
the Company is also registering an additional 82,500 shares of Series A 9%
Convertible Preferred Stock which may be sold to the Underwriter pursuant to an
over-allotment option ("Additional Shares").
In so acting, we have examined a copy of the Registration Statement,
copies of the Company's Certificate of Incorporation and By-laws, and such other
instruments and documents as we have deemed necessary as a basis for the
opinions hereinafter expressed. In giving such opinions, we have assumed that
all signatures on all documents examined by us are genuine, that all documents
submitted to us as originals are authentic, that all documents submitted to us
as copies are true and correct copies of the originals thereof and that all
information submitted to us was accurate and complete.
Based on our examination as aforesaid and subject to the assumptions
and limitations herein set forth, we are of the opinion that, upon the issuance
by the Company of the Series A Preferred Shares and the Additional Shares, if
any, to the Underwriter and payment therefor as described in the Registration
Statement, such shares will be validly issued, fully paid and nonassessable.
<PAGE> 2
Mr. Fred Behrens
May 30, 1997
Page 2
This opinion is limited in all respects to the General Corporation Law
of the State of Delaware and the laws of the United States of America insofar as
such laws are concerned. We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and the reference to the use of our firm
name under the caption "Legal Matters" herein.
Sincerely,
WHITE AND STEPP LLP
BY: Thomas E. Stepp, Jr.
<PAGE> 1
EXHIBIT 8
Opinion Re: Tax Matters
June 2, 1997
Mr. Fred Behrens
AMCOR Capital Corporation
52300 Enterprise Way
Coachella, CA 92236
Re: Offer and Sale by AMCOR Capital Corporation of Series A 9%
----------------------------------------------------------
Convertible Preferred Stock - Opinion Re: Tax Matters
-----------------------------------------------------
Dear Mr. Behrens:
Relating to the Registration Statement on Form S-2 ("Registration
Statement") filed by AMCOR Capital Corporation, a Delaware corporation
("Company"), with the Securities and Exchange Commission pursuant to the
provisions of the Securities Act of 1933, as amended, relating to the offer and
sale by the Company of not more than 550,000 shares of Series A 9% Convertible
Preferred Stock ("Preferred Stock"), with an option to purchase an additional
82,500 shares of Preferred Stock (an aggregate offering price, if the option to
purchase is 82,500 shares of Preferred Stock (an aggregate offering price, if
the option to purchase is exercised, of $6,325,000, as specified more
particularly by the provisions of the prospectus included in the Registration
Statement ("Prospectus")), the Company has requested this firm's opinion
regarding certain of the material federal income tax considerations to
purchasers of the Preferred Stock. This opinion does not purport to deal with
all aspects of taxation that may be relevant to particular stockholders as a
result of their personal investments or tax circumstances or, except to the
extent specified in that portion of the Prospectus entitled "Taxation of Foreign
Shareholders," to certain types of shareholders, including insurance companies,
financial institutions or broker-dealers, subject to special treatment pursuant
to the federal income tax law.
This opinion relates only to the effect on the subject transaction of the
federal income tax laws of the United States, and this firm expresses no opinion
with respect to the applicability thereto, or the effect thereon, of other
federal laws, the laws of any state or other jurisdiction or as to any matters
of municipal law or the laws of any other local agencies within any state.
Based on information, representations and warranties furnished by
management of the Company and certain assumptions made as a result thereof, it
is this firm's opinion that the information in the Prospectus specified in that
portion entitled "Federal Income Tax Considerations to the Stockholders," has
been reviewed by this firm and is accurate in all material respects.
No opinion is expressed as to any matter not specified herein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the information, representations or warranties furnished by
management of the Company may affect or alter the conclusions specified in this
letter.
This opinion is furnished only to the Company, and is solely for the
Company's use in connection with the Registration Statement. Each prospective
purchaser of the Preferred Stock is advised and encouraged to consult his or
her own tax advisor regarding the specific tax
<PAGE> 2
consequences to him or her resulting from the purchase, ownership and sale of
the Preferred Stock, including the federal, state, local, foreign and other tax
consequences of such purchase, ownership and sale and potential changes in
applicable tax laws.
This firm hereby consents to the filing of this opinion as an exhibit
to the Registration Statement and to the use of this firm's name under the
caption "Experts" in the Registration Statement.
Sincerely,
KELLY & COMPANY
By: /s/ GERALD KELLY
------------------------------
Title: President
---------------------------
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
We are the independent auditors for the Company. Primary and fully
diluted earnings per common and common equivalent shares are computed based on
the weighted average number of shares of common stock and common stock
equivalents outstanding during each period. The computation takes into effect
common shares issuable under stock option plans. No effect has been given to
convertible preferred stock, as the market price did not exceed the liquidation
value of $10 per share. The primary weighted average common and common
equivalent shares, as applicable, outstanding during the three and six months
ended February 28, 1997 and February 29, 1996, was 6,231,288 and 5,494,573,
respectively. The fully diluted average common and common equivalent shares, as
applicable, outstanding during the three and six months ended February 28, 1997
and February 29, 1996 was 6,396,842 and 5,519,792, respectively.
KELLY & COMPANY
By: /s/ Gerald Kelly
-------------------------
Title: President
----------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Form S-2 and the related Prospectus of AMCOR
Capital Corporation, a Delaware corporation, for the registration of up to
632,500 shares of its Series A 9% Convertible Preferred Stock, and to the
incorporation by reference therein of (i) the consolidated financial statements
of AMCOR Capital Corporation included in its annual report on Form 10-KSB for
the fiscal year ended August 31, 1996; (ii) our proforma operating projections
(Exhibit B to the Prospectus); and (iii) Exhibit C to the Prospectus. The Form
10-KSB was filed with the Securities and Exchange Commission.
KELLY & COMPANY
By: /s/ Gerald Kelly
------------------------
Title: President
--------------------
<PAGE> 1
EXHIBIT 23.2
CONSENT OF COUNSEL
We consent to the use of our firm name under the caption "Legal
Matters" herein.
WHITE AND STEPP LLP
By: /s/ Thomas E. Stepp, Jr.
--------------------------
Title: General Partner
-----------------------
