<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
WESTERN WATER COMPANY
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
WESTERN WATER COMPANY
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(l), or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
---------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
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Set forth the amount on which the filing fee is calculated and state
how it was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
WESTERN WATER COMPANY
4660 LA JOLLA VILLAGE DRIVE
SUITE 825
SAN DIEGO, CALIFORNIA 92122
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 4, 1996
Notice is hereby given that the Annual Meeting of Stockholders of
Western Water Company, a Delaware corporation (the "Company"), will be held at
the Hyatt Regency La Jolla at Aventine, the Athenia Room, San Diego, California
on Wednesday, December 4, 1996, at 2:00 p.m. P.S.T., for the following
purposes:
(1) To elect one member of the Company's Board of Directors for
the ensuing period;
(2) To amend Article IV of the Certificate of Incorporation to
increase the number of authorized shares of Common Stock of
the Company from 10,000,000 shares to 20,000,000 shares;
(3) To amend Article IV of the Certificate of Incorporation to
delete the reference to, and description of the previously
outstanding Series A Cumulative Convertible Redeemable
Preferred Stock;
(4) To approve an amendment to the Company's 1993 Stock Option
Plan to increase from 400,000 to 800,000 the number of shares
available for option grants;
(5) To ratify the appointment of Harlan & Boettger as the
independent accountants of the Company for the fiscal year
ending March 31, 1997; and
(6) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Your attention is directed to the accompanying proxy statement. Only
stockholders of record at the close of business on October 29, 1996 will be
entitled to notice of and to vote at the meeting and any adjournment thereof.
Please sign, date and complete the enclosed proxy and return it
promptly in the accompanying pre-addressed envelope, whether or not you expect
to attend the Annual Meeting, to ensure that your shares will be represented.
A majority of the outstanding shares of voting stock must be represented (in
person or by proxy) at the Annual Meeting in order that business may be
transacted. Therefore, your promptness in returning the enclosed proxy will
help to ensure that the Company will not have to bear the expense of
undertaking a second solicitation. A stockholder who executes and returns the
accompanying proxy may revoke such proxy at any time before it is voted at the
Annual Meeting by following the procedures set forth in the attached proxy.
By Order of the Board of Directors
Marilyn Buseman Dreyer
Secretary
San Diego, California
November 4, 1996
PLEASE SIGN AND DATE THE ENCLOSED FORM OF PROXY AND
MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE,
IN ORDER TO ENSURE THAT YOUR VOTES ARE COUNTED.
<PAGE> 3
WESTERN WATER COMPANY
4660 LA JOLLA VILLAGE DRIVE
SUITE 825
SAN DIEGO, CALIFORNIA 92122
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 4, 1996
INTRODUCTION
PERSONS MAKING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Western Water Company (the "Company") of proxies
for use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held
on December 4, 1996, and at any adjournment thereof. This proxy statement is
first being mailed to stockholders on or about November 4, 1996. You are
requested to sign, date and return the enclosed proxy card in order to ensure
that your shares are represented at the meeting.
A form of proxy is enclosed for your use. The shares represented by
each properly executed unrevoked proxy will be voted as directed by the
stockholder executing the proxy. If no direction is made, the shares
represented by each properly executed unrevoked proxy will be voted "FOR" (i)
the election of management's nominee for the Board of Directors, (ii) the
amendment to Article IV of the Certificate of Incorporation to increase the
number of authorized shares of Common Stock; (iii) the amendment of Section IV
of the Certificate of Incorporation to delete the reference to, and description
of the Series A Cumulative Convertible Redeemable Preferred Stock; (iv) the
approval of the amendment of the Company's 1993 Stock Option Plan to increase
from 400,000 to 800,000 the number of shares available for option grants; and
(v) the ratification of the appointment of Harlan & Boettger as the independent
accountants of the Company for the fiscal year ending March 31, 1997. With
respect to any other item of business that may come before the Annual Meeting,
the proxy holders will vote the proxy in accordance with their best judgment.
It is contemplated that the solicitation of proxies will be made
primarily by mail. Should it, however, appear desirable to do so in order to
ensure adequate representation of shares at the Annual Meeting, officers,
agents and employees of the Company may communicate with stockholders, banks,
brokerage houses and others by telephone, telegraph, or in person to request
that proxies be furnished. All expenses incurred in connection with this
solicitation will be borne by the Company. In following up the original
solicitation of proxies by mail, the Company may make arrangements with
brokerage houses and other custodians, nominees and fiduciaries to send proxies
and proxy material to the beneficial owners of the shares eligible to vote at
the Annual Meeting and will reimburse them for their expenses in so doing. The
Company has no present plans to hire special employees or pay solicitors to
assist in obtaining proxies, but reserves the option of doing so if it should
appear that a quorum otherwise might not be obtained.
REVOCABILITY OF PROXY
Any proxy given by a stockholder of the Company may be revoked at any
time before it is voted at the Annual Meeting by a written notice to the
Secretary of the Company, or upon request if the stockholder is present at the
meeting. Each valid proxy returned that is not revoked, unless indicated
otherwise on the proxy card, will be voted in the election of directors for the
nominee as described herein.
VOTING SECURITIES
Holders of record of the Company's Common Stock, $.001 par value (the
"Common Stock"), of the Company at the close of business on October 29, 1996
are entitled to notice of and to vote at the meeting or any adjournment
thereof. The outstanding voting securities of the Company on October 29, 1996
consisted of 8,092,326 shares of Common Stock. As of October 29, 1996, no
shares of Series A Cumulative Convertible Redeemable Preferred Stock ("Series A
Preferred Stock") were outstanding. The presence, in person or by proxy, of
stockholders entitled to cast
<PAGE> 4
at least a majority of the votes entitled to be cast by all stockholders will
constitute a quorum for the transaction of business at the Annual Meeting.
Holders of Common Stock are entitled to cast one vote per share on
each matter presented for consideration and action by the stockholders.
Abstentions may be specified as to all proposals to be brought before the
Annual Meeting other than the election of directors. Approval of the proposals
to amend the Certificate of Incorporation will require the affirmative vote of
a majority of the outstanding shares of Common Stock; ratification of the
Company's independent accountants and approval of the amendment to the 1993
Stock Option Plan will require the affirmative vote of at least a majority in
voting interest of the stockholders present in person or by proxy at the Annual
Meeting and entitled to vote thereon. Accordingly, as to the proposals to
amend the Certificate of Incorporation, an abstention will have the effect of a
negative vote on that proposal. However, with respect to the amendment of the
1993 Stock Option Plan, if a broker indicates that it does not have authority
to vote certain shares, those votes will not be considered as shares present
and entitled to vote with respect to that proposal and therefore will have no
effect on the outcome of the vote.
The Director to be elected at the Annual Meeting will be elected by a
plurality of the votes cast. Only votes cast for a nominee will be counted,
except that each properly executed unrevoked proxy will be voted for
management's nominee for the Board of Directors in the absence of instructions
to the contrary. Abstentions, broker non-votes and instructions on a proxy to
withhold authority to vote for management's nominee will result in the nominee
receiving fewer votes.
ELECTION OF DIRECTOR
The authorized number of Directors of the Company is currently fixed
at four and is divided into three classes, two of the classes having one member
and the third having two members. The Directors in each class are elected for
three-year terms, so that the term of office of one class of Directors expires
at each annual meeting. For election as a Director at the Annual Meeting, the
Board of Directors has approved the nomination of William D. Watt to serve a
three-year term expiring in 1999.
If Mr. Watt becomes unavailable for election, the accompanying proxy
will be voted for the election of such person, if any, as shall be recommended
by the Board of Directors, or will be voted in favor of holding a vacancy to be
filled at a later date by the Directors.
The following chart sets forth biographical information concerning (i)
the nominee for election as Director and (ii) the other Directors who will
continue in office after the meeting.
NOMINEE FOR ELECTION TO TERM EXPIRING IN 1999
<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION FOR THE
POSITIONS WITH PAST FIVE YEARS AND
NAME AGE COMPANY CERTAIN OTHER DIRECTORSHIPS
- ---- --- ------- ---------------------------
<S> <C> <C> <C>
William D. Watt 57 None From August 1995 to present, Mr. Watt has been
a principal and a director of SCCOT Financial
Group Incorporated, a privately held
investment banking firm; from 1973 through
August, 1995, he was a general partner at
Lazard Freres & Co., an investment banking
firm.
</TABLE>
2.
<PAGE> 5
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE MEETING
<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION FOR THE
POSITIONS WITH PAST FIVE YEARS AND
NAME AGE COMPANY CERTAIN OTHER DIRECTORSHIPS
- ---- --- ------- ---------------------------
<S> <C> <C> <C>
Incumbent Directors Whose Terms of Office Will Expire in 1997
Peter L. Jensen 45 Director, October 1984 to From 1984 to April 1989, President and Chief
present; Chairman, President Operating Officer of the Company; from 1983 to
and Chief Executive Officer, April 1989, Director, President and Chief
April 1989 to present Operating Officer of Yuba Natural Resources,
Inc. ("YNR"); from April 1989 to August 1990,
Director, President and Chief Executive
Officer of YNR; from August 1990 to July 1994,
Director of Yuba WestGold, Inc. (formerly
known as YNR).
Incumbent Directors Whose Terms of Office Will Expire in 1998
Jay B. Abramson 35 Director, April 1993 to From August 1986 to present, Executive Vice
present President and General Counsel of Cramer
Rosenthal McGlynn, Inc., a privately held
investment company.
John H. Huston 45 Vice President, February 1992 From November 1993 to present, Chairman of
to present, Director, Integrated Water Technologies, Inc. (formerly
November 1994 to present BCI Geonetics, Inc.); from 1983 to 1992, owner
or co-owner of the Procyon Group; from 1987 to
March 1992, the date on which Nigel
Corporation was acquired by the Company,
director and executive officer of Nigel
Corporation.
</TABLE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended March 31, 1996, the Board of Directors
held 11 meetings. Each Director attended all of the meetings. Jeffrey A.
Smith has resigned from the Board of Directors effective August 16, 1996.
During the fiscal year ended March 31, 1996, the Company's Compensation
Committee and Audit Committee each consisted of Mr. Abramson and Mr. Smith.
The Board of Directors currently expects that Mr. Watt will replace Mr. Smith
on both the Compensation Committee and the Audit Committee. During the fiscal
year ended March 31, 1996, the Compensation Committee held one meeting and the
Audit Committee held one meeting. The Compensation Committee establishes all
executive compensation arrangements and administers the Company's stock option
plans. The Company's Audit Committee reviews the independence, professional
services, fees, plans and results of the independent auditors' engagement and
recommends their retention or discharge to the Board of Directors. Other than
the Compensation Committee and the Audit Committee, the Company has no other
committees of its Board of Directors.
3.
<PAGE> 6
EXECUTIVE OFFICERS
The following chart sets forth information concerning the executive officers of
the Company.
<TABLE>
<CAPTION>
CURRENT POSITIONS PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE WITH COMPANY DURING PAST FIVE YEARS
- -------------------------- --- ----------------------------- ------------------------------------------
<S> <C> <C> <C>
Peter L. Jensen 45 Director, October 1984 to From 1984 to April 1989, President and
present; Chairman, President Chief Operating Officer of the Company;
and Chief Executive Officer, from 1983 to April 1989, Director,
April 1989 to present President and Chief Operating Officer of
YNR; from April 1989 to August 1990,
Director, President and Chief Executive
Officer of YNR; from August 1990 to July
1994, Director of Yuba WestGold, Inc.
(formerly known as YNR).
Marilyn Buseman Dreyer, 50 Chief Financial Officer and From 1985 to August 1990, Vice President
C.P.A. Secretary, August 1990 to of Finance and Secretary of YNR; from 1986
present to August 1990, Chief Financial Officer of
YNR
John H. Huston 45 Vice President, February 1992 From November 1993 to present, Chairman of
to present, Director, November Integrated Water Technologies, Inc.
1994 to present (formerly BCI Geonetics, Inc.); from 1983
to 1992, owner or co-owner of the Procyon
Group; from 1987 to March 1992, the date
on which Nigel Corporation was acquired by
the Company, director and executive
officer of Nigel Corporation.
Eric R. Robbins 34 Vice President, November 29, January 1995 to November 1995, Vice
1995 to present President at L.H. Friend, Weinress,
Frankson & Presson; January 1994 to
January 1995, Senior Vice President -
Public Finance at Chilton & O'Connor,
Incorporated; December 1992 to January
1994, Vice President at Sutro & Co.
Incorporated; November 1990 to December
1992, Finance Budget Manager for the
California Department of Finance; and from
March 1988 to November 1990, Senior
Consultant, California Assembly Water,
Parks & Wildlife Committee.
</TABLE>
4.
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of October 29, 1996 by
(i) each person (including any "group" as that term is defined in Section
13(d)(3) of the Securities Exchange Act of 1934) who is known by the Company to
own more than 5% of the outstanding Common Stock; (ii) each of the Company's
Directors and Director nominees; (iii) each of the executive officers named in
the compensation tables included in this Proxy Statement; and (iv) all
officers, Directors and Director nominees of the Company as a group. As of
October 29, 1996, there were no outstanding shares of the Company's Series A
Preferred Stock.
<TABLE>
<CAPTION>
Name and Address of Percent of
Beneficial Owner Number of Shares Common Stock
---------------------------- --------------------- ------------------
<S> <C> <C>
Peter L. Jensen
4660 La Jolla Village Dr.
Suite 825
San Diego, CA 92122 . . . . . . . . . . . 328,870(1) 4.0%
John H. Huston
4660 La Jolla Village Dr.
Suite 825
San Diego, CA 92122 . . . . . . . . . . . 291,126(2) 3.6%
Jay B. Abramson
520 Madison Avenue
35th Floor
New York, NY 10022 . . . . . . . . . . . . 1,175,900(3) 14.4%
William Watt
Suite 1450
230 Park Ave.
New York, NY 10169 . . . . . . . . . . . . -0- 0%
James W. Harpel(4)
237 Park Avenue, #952
New York, NY 10017 . . . . . . . . . . . . 453,200 5.6%
All directors and executive
officers as a group
(5 persons) . . . . . . . . . . . . . . . 1,890,928(5) 22.7%
</TABLE>
- -------------------------
(1) Includes 80,000 of Common Stock shares issuable upon exercise of
currently exercisable options.
(2) Includes 72,000 shares of Common Stock issuable upon exercise of
currently exercisable options.
(3) Consists of 60,000 shares of Common Stock issuable upon exercise of
currently exercisable options, 20,000 shares of Common Stock owned
directly by Mr. Abramson, 233,600 shares of Common Stock owned by
partnerships as to which Mr. Abramson has shared voting power and
shared investment power and 862,300 shares, over which a corporation
as investment advisor, has shared voting and shared investment power.
(4) Based on information contained in a statement on Schedule 13D filed by
the named person on January 18, 1996 and subsequent information
provided by the named person to the Company.
(5) Includes 242,000 of Common Stock shares issuable upon exercise of
currently exercisable options.
5.
<PAGE> 8
EXECUTIVE COMPENSATION
Summary Compensation Table. The following tables set forth certain
information concerning the annual and long-term compensation for services
rendered to the Company in all capacities for the fiscal years ended March 31,
1996, 1995 and 1994 of (i) all persons who served as the Chief Executive
Officer of the Company during the fiscal year ended March 31, 1996 and (ii)
each of the other executive officers of the Company whose total annual salary
and bonus during the fiscal year ended March 31, 1996 exceeded $100,000. (The
Chief Executive Officer and the other named officers are collectively referred
to as the "Named Executives.")
<TABLE>
<CAPTION>
Long-Term
Compensation
Summary Compensation Table Awards
---------------------------------------------------------- -----------------
Number Stock
Option Shares
Name and Principal Position Year Salary Bonus Granted
- --------------------------- ------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Peter L. Jensen 1996 $198,510 $ -0- 60,000
Chairman, President and 1995 $180,000 $ -0- -0-
Chief Executive Officer 1994 $203,359 $ -0- 60,000
John H. Huston 1996 $157,115 $ -0- 36,000
Vice President 1995 $140,655 $ -0- -0-
1994 $ 87,624 $ -0- 100,000
</TABLE>
Option Grants. The following table provides information on stock
options granted in the fiscal year ended March 31, 1996 to the Named
Executives.
OPTIONS GRANTED IN FISCAL YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
---------------------------------------------------------- Value at Assumed Annual
Percentage of Rates of Stock
Total Options Appreciation
Granted to Exercise or For Option Term(3)
Options Employees in Base Price Expiration --------------------------
Name Granted(1) Fiscal Year (per share)(2) Date 5% 10%
- ------------------------ ------------ --------------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Peter L. Jensen 60,000 44% $15.125 Nov. 2005 $570,700 $1,446,300
John H. Huston 36,000 27% $15.125 Nov. 2005 $342,400 $ 867,800
</TABLE>
- ------------------
(1) 34% of the options are exercisable on the date of grant, 33% one year
from the date of grant, and 33% two years from the date of grant.
(2) All options were granted at a price greater than the market value (the
closing stock price for the Company's Common Stock as reported on the
Nasdaq National Market) on the date of grant.
(3) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated that the
stock price on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option and that
the option is exercised and sold on the last day of its term for the
appreciated stock price. No gain to the optionee is possible unless
the stock price increases over the option term, which will benefit all
stockholders.
6.
<PAGE> 9
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED MARCH 31, 1996
AND FISCAL YEAR-END OPTION VALUE
Aggregated Option Exercises in Last Fiscal Year and Year-End Option
Values. The following table sets forth information regarding stock options
that were exercised by the Named Executives during the last fiscal year and the
number and value of unexercised options owned at March 31, 1996 by the Named
Executives.
<TABLE>
<CAPTION>
Number of Value of
Unexercised Options Unexercised Options
Shares at March 31, 1996 at March 31, 1996
Acquired Value ----------------- -----------------
Name on Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter L. Jensen 96,150(1) $1,376,147 80,000 40,000 $1,520,000 $760,000
John H. Huston 40,000 582,500 72,000 24,000 $ 860,000 $ 93,000
</TABLE>
- ----------------
(1) 1,850 of the shares of Common Stock acquired upon the exercise of the
option were donated to a charitable organization.
(2) The computation of the value realized amount is the aggregate
difference between the option exercise price and the closing price of
the Company's common stock on the Nasdaq National Market on the date
of exercise.
Director Compensation. Directors who are not employees of the Company
presently receive an annual fee of $10,000. In addition, all directors are
reimbursed for all out-of-pocket expenses incurred by them in connection with
attending board meetings. Each non-employee director will automatically be
granted an option on the first business day of each fiscal year to purchase
10,000 shares of Common Stock at an exercise price equal to the average of the
high and low bid prices for the Common Stock as reported by The Nasdaq Stock
Market for the 20 trading days preceding the date of grant of such option. If
the Common Stock is listed on the New York or American Stock Exchange on the
date of grant of the option, the high and low sale prices shall be used in
place of the high and low bid prices. All such options will be exercisable on
the date of grant as to 3,332 shares, with additional increments of 3,334
becoming exercisable on the first and second anniversary of grant. In
accordance with the foregoing provisions, options to purchase 10,000 shares
were granted to each of Mr. Smith and Mr. Abramson on April 1, 1995 and April
1, 1996, which options had an exercise price of $13.867 per share and $18.697
per share, respectively. The option granted to Mr. Smith in April 1996 expired
unexercised following his resignation from the Company's Board of Directors.
Employment Agreements. Peter Jensen serves as Chairman of the Board
and Chief Executive Officer of the Company pursuant to the terms of an
employment agreement, which may be terminated without cause on three years
written notice by the Company, and immediately for cause (including the
commission of any felonious act and gross negligence in the performance of his
duties). Effective November 1995, Mr. Jensen is entitled to a minimum annual
salary of $210,000, subject to adjustment for cost of living increases. Mr.
Jensen is also entitled to other specified benefits such as reimbursement for
expenses.
John Huston serves as Vice President of the Company pursuant to the
terms of an employment agreement that may be terminated by the Company without
cause on three-years' notice, and immediately for cause (including the
commission of any felonious act and gross negligence in the performance of his
duties). Effective November 1995, Mr. Huston is entitled to a minimum annual
salary of $175,000, subject to an adjustment for cost of living increases, and
to other specified benefits such as reimbursement for expenses.
Eric R. Robbins serves as Vice President of the Company pursuant to a
two year employment agreement that expires on November 28, 1997. Pursuant to
the employment agreement, Mr. Robbins will be paid a salary of $120,000 for the
first year of his employment and a salary of $130,000 for the second year. In
connection with his employment with the Company, Mr. Robbins was granted an
option to purchase 60,000 shares of Common Stock at an exercise price of
$15.125 per share. Of the options, 20,000 shares vested immediately upon his
employment, 20,000 shares will vest after the first anniversary of his
employment and the balance will vest after the second anniversary of his
employment. The options shall remain wholly exercisable until November 28,
2005. The
7.
<PAGE> 10
employment agreement may be terminated without cause for any reason at any time
on six months' written notice by the Company or Mr. Robbins.
BOARD OF DIRECTORS INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, the Company's Compensation
Committee consisted of Mr. Abramson and Mr. Smith. Neither Mr. Abramson nor
Mr. Smith are, or were, officers of the Company. Mr. Smith has resigned from
the Board of Directors and from the Compensation Committee. Upon William
Watt's election, the Board of Directors intends to appoint William Watt to fill
the vacancy on the Compensation Committee created by Mr. Smith's resignation.
The Compensation Committee fixes the compensation of executive officers and
administers the Company's two stock option plans.
STOCK OPTION PLANS
The Company currently has two stock option plans in effect.
1990 Stock Option Plan. Pursuant to a 1990 Stock Option Plan (the
"1990 Plan") adopted by the Company on July 20, 1990, 400,000 shares of Common
Stock are reserved for issuance upon exercise of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and nonqualified stock options that may be granted to officers,
directors, employees, consultants and others performing services for the
Company. The 1990 Plan is currently administered by the Compensation Committee
of the Board of Directors (previously by the full Board), which designates the
optionees, exercise prices and dates of grant. The exercise price may not be
less than 100% of the fair market value of the Common Stock on the date of
grant (110% for qualified options with respect to optionees who are 10% or more
shareholders of the Company). Options are nonassignable and may be exercised
only by the option holder while in the service of the Company or within 30 days
after termination of employment or cessation of services to the Company (one
year for terminations resulting from death or disability). Options may be
exercisable from the date they are granted and, if they are exercisable in
installments, may be exercised on a cumulative basis at any time before
expiration. All options expire no later than ten years from the date of grant.
1993 Stock Option Plan. The 1993 Stock Option Plan (the "1993 Plan")
authorizes the granting of both incentive stock options within the meaning of
Section 422 of the Code, and nonstatutory stock options to officers,
non-employee directors, employees, consultants and others performing services
for the Company to purchase in the aggregate 400,000 shares of the Company's
Common Stock. There are currently four officers, one non-employee director and
four other employees of the Company who would be eligible for the grant of
options. The 1993 Plan is administered by the Compensation Committee of the
Board of Directors. The Compensation Committee designates the optionees,
number of options, exercise prices, dates of grant, exercise period and other
terms and conditions.
The purchase price to be paid upon exercise of each incentive stock
option granted pursuant to the 1993 Plan will be at least 100% of the fair
market value of the Common Stock on the date the option is granted, or 110% of
such fair market value in the case of any optionee holding in excess of 10% of
the combined voting power of all classes of the Company's capital stock (or the
stock of a parent or subsidiary of the Company) as of the date of grant. Fair
market value shall mean the average of the bid and asked closing price of the
Company's Common Stock. The purchase price of each nonstatutory option granted
to officers and other key employees shall be determined by the Compensation
Committee. The purchase price is payable in full by cash, check, surrender of
Common Stock of the Company having a market value equal to the option price of
the shares to be purchased, or so-called cashless exercises as permitted by
law, or any combination of cash, check, shares and cashless exercises. The
Compensation Committee in its sole discretion may extend credit to pay the
purchase price of the shares of Common Stock acquired upon exercise of an
option, such credit to be evidenced by optionee's interest-bearing promissory
note and secured by the Common Stock issued on exercise of the option. The
Compensation Committee will have complete discretion to establish the amount
and terms of any credit extended. The Compensation Committee will also have
complete discretion to determine the interest rate to be charged on such
credit.
8.
<PAGE> 11
Options granted under the 1993 Plan become exercisable and shall
expire on such dates as determined by the Compensation Committee, provided,
however, that no term may exceed ten years from the date of grant, or five
years from the date of grant in the case of any optionee holding more than 10
percent of the combined voting power of all classes of the Company's capital
stock (or the stock of a parent or subsidiary of the Company) as of the date of
grant. After options become exercisable they may be exercised at any time or
from time to time as to any part thereof. The Compensation Committee may, at
any time after grant of the option and from time to time increase the number of
shares purchasable in any installment, subject to certain limitations.
Options granted under the 1993 Plan will expire on such date as the
Committee shall determine. Options will not be transferable except by will or
by the laws of descent and distribution; during the life of the person to whom
the option is granted, that person alone may exercise them. All rights to
exercise options terminate 30 days from the date a grantee ceases to be an
employee of the Company or any subsidiary for any reason other than death or
disability.
If a grantee dies while in the employ of the Company, his or her
option may be exercised at any time within 12 months following the grantee's
death by his or her estate or by the person or persons to whom the grantee's
rights under the option passed by will or operation of law, but only to the
extent such option was exercisable by the grantee at the time of his or her
death. Except for certain stated provisions covering termination, disability
or death, no option may be exercised after the expiration of its original term.
The 1993 Plan also provides that each non-employee director will
automatically be granted an option on the first business day of each fiscal
year to purchase 10,000 shares of Common Stock at an exercise price equal to
the average of the high and low bid prices for the Common Stock as reported by
The Nasdaq Stock Market for the 20 trading days preceding the date of grant of
such option.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
During the fiscal year ended March 31, 1996, the Compensation
Committee was comprised of Messrs. Jeffrey A. Smith and Jay B. Abramson. Mr.
Smith resigned as a Director and member of the Compensation Committee on August
16, 1996. The Board of Directors has not yet filled the vacancy on the
Compensation Committee created by Mr. Smith's resignation. However, the Board
of Directors intends to appoint Mr. Watt to the Compensation Committee
following his election to the Board of Directors.
Mr. Jensen is the Company's Chief Executive Officer. Mr. Jensen's
compensation for the fiscal year ended March 31, 1996 was based primarily on
his three-year employment contract with the Company, which agreement was
entered into in January 1994. Under the terms of Mr. Jensen's employment
contract, Mr. Jensen's annual base salary is $180,000, subject to annual
adjustments for cost-of-living increases. In order to reflect increases in
the compensation levels of executive officers at comparable public companies,
the Compensation Committee, effective November 1995, increased Mr. Jensen's
annual base salary to $210,000.
In February 1994, the Company entered into an employment contract with
John Huston pursuant to which he was to receive an annual salary of $135,000,
subject to annual adjustments for cost-of-living increases. Effective November
1995, the annual base salary of Mr. Huston was increased to $175,000 to reflect
salary levels at comparable public companies and to reflect Mr. Huston's
current duties at the Company.
In the Compensation Committee's opinion, Mr. Jensen's and Mr. Huston's
significant stockholdings of the Company, as well as their holdings of
long-term incentive options, are expected to provide motivation for these
individuals to optimize overall Company performance. In the Compensation
Committee's opinion, Mr. Jensen and Mr. Huston are properly compensated at the
present time, based on their current duties, when compared with others in
similar positions in comparably sized companies in the geographic area.
No member of the past Compensation Committee is, or during Fiscal 1996
was, a former officer or employee of the Company or of its subsidiary.
Fiscal 1996 Compensation Committee:
Jeffrey A. Smith and Jay B. Abramson
9.
<PAGE> 12
COMPARATIVE STOCK PERFORMANCE
The chart below sets forth a line graph comparing the performance of
the Company's Common Stock against the Total Return Index for the Nasdaq Stock
Market (US) ("Nasdaq Broad Market Index") and the Nasdaq Non-Financial Stocks
Index for the period commencing March 28, 1991 and ending March 31, 1996. The
chart sets the value of an investment in Western Water Company Common Stock and
the value of each index at 100 on March 28, 1991 and assumes that dividends
were reinvested.
The stockholder return shown on the following graph is not necessarily
indicative of future performance.
COMPARATIVE STOCK PERFORMANCE
[GRAPH]
<TABLE>
<CAPTION>
3/28/91 3/31/92 3/31/93 3/31/94 3/31/95 3/31/96
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Company's Common Stock 100.00 490.79 581.68 963.40 1,272.42 1,841.98
Nasdaq Broad Market Index 100.00 127.45 146.51 158.15 275.93 238.83
Nasdaq Non-Financial Stock Index 100.00 124.51 134.34 147.38 161.49 217.82
</TABLE>
10.
<PAGE> 13
INCREASE AUTHORIZED NUMBER OF COMMON STOCK
The Board of Directors has approved, and has voted to recommend to the
stockholders that they approve, an amendment to Article IV of the Company's
Certificate of Incorporation to increase the number of shares of Common Stock
that the Company is authorized to issue. The Company proposes to increase its
authorized Common Stock to 20,000,000 shares, which will then be available for
issuance from time to time, for such purposes and such consideration, and on
such terms, as the Board of Directors may approve, and no further vote of the
stockholders of the Company will be required except in certain transactions as
provided under the Delaware General Corporation Law.
As of October 29, 1996, there were issued and outstanding 8,092,326
shares of Common Stock. Of the unissued shares of Common Stock, 263,332 shares
were reserved for issuance pursuant to the Company's 1990 Stock Option Plan,
389,674 shares were reserved for issuance pursuant to the Company's 1993 Stock
Option Plan, 945,746 have been reserved for issuance upon the conversion of the
Company's outstanding 9% Convertible Subordinated Debentures, and 98,000 have
been reserved for issuance upon the exercise of currently outstanding warrants.
Consequently, assuming all of the foregoing shares are issued, the Company
presently has available for issuance only 210,922 additional shares of Common
Stock out of the 10,000,000 shares currently authorized under the Company's
Certificate of Incorporation. In addition, pursuant to the proposal to amend
the 1993 Plan at the Annual Meeting, the Company proposes to reserve an
additional 400,000 shares for possible issuance upon the grant of options under
the 1993 Plan.
The Board of Directors believes that it is in the best interests of
the Company to increase the number of authorized shares of Common Stock at this
time in light of the limited availability of shares. An increase in the
authorized shares will give the Company some flexibility in its financial
planning and enable the Company to respond quickly to possible contingencies
and opportunities in which the issuance of shares of Common Stock in amounts
greater than would otherwise remain available for issuance may be deemed
advisable, such as in equity financings or in acquisition transactions. By
adopting the proposed amendment to Article IV of the Certificate of
Incorporation at this time, consummation of issuances of additional shares of
Common Stock would be facilitated, because the delay and expense incident to
the calling of a special meeting of the Company's stockholders, in cases where
such a meeting would not otherwise be required, would be avoided. The timing
of the actual issuance of additional shares of Common Stock, if any, will
depend upon market conditions, the specific purpose for which the stock is to
be issued, and other factors. Any additional issuance of Common Stock could
have a dilutive effect on existing holders of Common Stock. The Company
currently has no plans for the issuance of any unreserved shares of Common
Stock for which authorization is sought.
The terms of the additional shares of Common Stock for which
authorization is sought will be identical to the terms of shares of Common
Stock currently authorized and outstanding, and approval of the proposed
amendment will not affect the terms, or the rights of the holders, of such
currently authorized and outstanding shares. Pursuant to the Certificate of
Incorporation, the holders of currently authorized and outstanding Common Stock
have no preemptive rights to subscribe for any shares of the additional Common
Stock for which authorization is sought.
If adopted by the stockholders, this proposal to increase the number
of shares of Common Stock that the Company is authorized to issue will become
effective upon the filing of a certificate of amendment to Certificate of
Incorporation with the Delaware Secretary of State, which filing is expected to
occur shortly after the Annual Meeting.
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO DELETE SERIES A PREFERRED STOCK
As of the date of this Proxy Statement, there were no shares of the
Series A Preferred Stock outstanding. All previously issued and outstanding
shares of Series A Preferred Stock were converted into Common Stock in 1995.
Pursuant to the Certificate of Incorporation, all such shares have been
canceled and have reverted to authorized but unissued shares of Preferred Stock
undesignated as to series. Accordingly, the Board of Directors of the Company,
by resolution, has retired the shares of Series A Preferred Stock. Any
continued reference to the Series A Preferred Stock in the Certificate of
Incorporation being, therefore, unnecessary, the Board of Directors proposes to
remove such reference and submits the matter to a stockholder vote for
ratification.
11.
<PAGE> 14
If adopted by the stockholders, this proposal to eliminate any
reference to the Series A Preferred Stock in the Certificate of Incorporation
will become effective upon the filing of the Certificate of Amendment to
Certificate of Incorporation with the Delaware Secretary of State, which filing
is expected to occur shortly after the Annual Meeting.
AMENDMENT TO THE COMPANY'S 1993 STOCK OPTION PLAN
TO INCREASE THE NUMBER OF SHARES COVERED BY THE PLAN
The Board of Directors has approved, and has voted to recommend to the
stockholders that they approve, an amendment to the Company's 1993 Stock Option
Plan (the "1993 Plan") to increase the number of shares of Common Stock that
may be issued upon the exercise of options provided under the 1993 Plan from
400,000 shares to 800,000 shares. The amendment to Section 4 of the 1993 Plan
is set forth as Appendix B to this Proxy Statement. For a summary description
of certain material features of the 1993 Plan, see "Executive Compensation -
Stock Option Plans," above.
The Board of Directors believes that the Company's existing stock
option plans have played a major role in enabling the Company to attract and
retain officers, directors, and other key employees. Options granted to such
individuals provide long-term incentives to enter the employ of the Company,
remain in the employ of the Company, and to further the performance of the
Company. The Company may seek to recruit additional personnel, and may wish to
grant options to such individuals. As of the date of this Proxy Statement, of
the 400,000 shares of Common Stock initially available for grant under the 1993
Plan, shares for 10,326 have been issued upon the exercise of options, and
options for 292,326 shares had been granted. Accordingly, options to purchase
only a total of 97,348 additional shares of Common Stock may be issued in the
future. To allow the Company to continue to obtain the benefit of incentives
available under a stock option plan, the Company's Board of Directors has
adopted and recommended for submission to the stockholders for their approval a
proposal to increase the number of shares that may be issued upon the exercise
of options granted under the 1993 Plan. Pursuant to Section 13 of the 1993
Plan, the increase must be approved by the affirmative vote of a majority of
the shares of the Company's Common Stock represented in person or by proxy and
voting at the Annual Meeting, assuming that a quorum is present.
The following table sets forth with respect to each executive officer,
all current executive officers as a group, all current non-employee directors
as a group, and all non-executive officers as a group, the number of shares of
Common Stock subject to options granted under the 1993 Plan as of the date of
this Proxy Statement, and the average per-share exercise price of such options.
<TABLE>
<CAPTION>
Options Granted
------------------------------------------------------------------
Name of Individual or Number of Shares Average Per-Share
Identity of Group Subject to Options Exercise Price (1)
- ----------------------------------------- -------------------------------- ---------------------------------
<S> <C> <C>
Peter L. Jensen, current President
and Chief Executive Officer . . . . . 120,000 $10.281
John H. Huston, current
Vice President . . . . . . . . . . . 36,000 $15.125
Executive Officers Group (4 persons) . 231,000 $12.609
Non-Employee Directors Group
(1 person) . . . . . . . . . . . . . 30,000 $14.875
Non-Executive Officers/Employee
Group (2 persons) . . . . . . . . . . 21,000 $15.125
- ---------------------
</TABLE>
(1) These amounts are based on a weighted average exercise price and then
dividing by the total number of options for such category. The
closing price of the Common Stock issuable upon the exercise of any
options under the 1993 Plan as of October 29, 1996 was $___________
per share.
12.
<PAGE> 15
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, as well as persons who own more
than ten percent of the Company's Common Stock, to file with the Commission
initial reports of beneficial ownership and reports of changes in beneficial
ownership of the Common Stock. Directors, executive officers and
greater-than-ten-percent stockholders are required by the Commission's
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on a review of copies of reports filed with the
Commission and submitted to the Company since March 31, 1995 and on
representations by certain directors and executive officers of the Company, the
Company believes that, with the exception of delinquent filings referred to
below, all persons subject to the reporting requirements of Section 16(a) filed
all required reports on a timely basis during the past fiscal year. Eric
Robbins, a Vice President of the Company, failed to timely file the Form 3
regarding his employment with the Company.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Harlan & Boettger as
the Company's independent auditors for the year ended March 31, 1997, subject
to ratification by the stockholders. Harlan & Boettger has audited the
Company's financial statements since June 1991. A representative of Harlan &
Boettger is expected to attend the Company's Annual Meeting. He or she will
have an opportunity to make a statement, if he or she desires to do so, and
will be available to respond to appropriate questions.
Stockholder ratification of the selection of Harlan & Boettger as the
Company's independent public accountants is not required by the Company's
Bylaws or otherwise. However, the Board is submitting the selection of Harlan
& Boettger to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board in their discretion may direct the appointment of a
different independent accounting firm at any time during the year if they
determine that such a change would be in the best interests of the Company and
its stockholders.
13.
<PAGE> 16
STOCKHOLDER PROPOSALS AT THE NEXT ANNUAL MEETING OF STOCKHOLDERS
Stockholders of the Company who intend to submit proposals to the
Company's stockholders at the next annual meeting of stockholders must submit
such proposals to the Company no later than July 5, 1997 in order for such
proposals to be included in the proxy materials. Stockholder proposals should
be submitted to Marilyn Buseman Dreyer, Secretary, Western Water Company, 4660
La Jolla Village Drive, Suite 825, San Diego, California 92122.
During the past few years the Company has held its annual meeting of
stockholders during March of each year. Because the Company's fiscal year ends
March 31, the proxy statements and annual reports that were distributed in
connection with such meetings contained financial information that was almost
one year old. In order to provide the Company's stockholders with more current
financial information, the Company this year decided to hold its annual
stockholder meeting during the calendar year in which the March 31 financial
statements are released. This change has caused this year's annual meeting to
be postponed from March 1996 to the date of the Annual Meeting.
OTHER MATTERS
If any matters not referred to in this Proxy Statement should properly
come before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment. Management is not aware
of any such matters that may be presented for action at the meeting. Matters
incident to the conduct of the meeting may be voted upon pursuant to the
proxies.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company will furnish without charge a copy of the Company's
Annual Report on Form 10-K for the fiscal year ended March 31, 1996 as filed
with the Securities and Exchange Commission to any stockholder desiring a copy.
Stockholders may write to the Company at:
Western Water Company
4660 La Jolla Village Drive
Suite 825
San Diego, California 92122
Attn: Marilyn Buseman Dreyer
By Order of the Board of Directors
Marilyn Buseman Dreyer
Secretary
November 4, 1996
14.
<PAGE> 17
APPENDIX A
4. STOCK SUBJECT TO PLAN. There shall be reserved for issue upon the
exercise of options granted under the Plan 800,000 shares of Common Stock of
the Parent ("Stock") or the number of shares of Stock, which, in accordance
with the provisions of Section 10 hereof, shall be substituted therefor. Such
shares may be treasury shares. If an option granted under the Plan shall
expire or terminate for any reason without having been exercised in full,
unpurchased shares subject thereto shall again be available for the purposes of
the Plan.
15.
