<PAGE> 1
As filed with the Securities and Exchange Commission on June 6, 1997
Securities Act File No. 333-_____ Exchange Act File No. 0-18756
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
WESTERN WATER COMPANY
(Exact name of registrant as specified in its charter)
Delaware 33-0085833
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4660 La Jolla Village Drive, Suite 825
San Diego, California 92122
(619) 535-9282
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
Peter L. Jensen, President
Western Water Company
4660 La Jolla Village Drive, Suite 825
San Diego, California 92122
(619) 535-9282
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
Istvan Benko, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
(310) 553-4441
Approximate date of commencement of proposed sale to public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective r gistration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities To Be Amount To Be Offering Price Aggregate Offering Amount of
Registered Registered Per Share Price Registration Fee
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred Stock ($1,000 stated value)....... 10,350 shares $1,000(1) $10,350,000(1) $3,137
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock ($.001 par value)(2)........... 622,744 shares -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Common Stock ($.001 par value).............. 276,330 shares $14.125(3) $3,903,161(3) $1,183
- -------------------------------------------------------------------------------------------------------------------------------
Total................................... $4,320
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</TABLE>
(1) Based on the stated value of the Series C Convertible Redeemable Preferred
Stock.
(2) Issuable upon conversion of the Series C Convertible Redeemable Preferred
Stock, plus an indeterminate number of additional shares of Common Stock
that may be issued as a result of the antidilution provisions of such
preferred stock. Pursuant to Rule 457(i), no registration fee is required.
(3) Estimated pursuant to Rule 457(c), solely for the purpose of calculating
the registration fee, based on the average of the high and low sale prices
per share of Common Stock, as reported on the Nasdaq National Market, on
June 4, 1997.
--------------------
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 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION, DATED JUNE 6, 1997
PROSPECTUS
WESTERN WATER COMPANY
10,350 SHARES OF SERIES C CONVERTIBLE REDEEMABLE PREFERRED STOCK
899,074 SHARES OF COMMON STOCK
This Prospectus relates to the offer by the securityholders named
herein ("Selling Securityholders") for sale from time to time of the following
securities of Western Water Company, a Delaware corporation (the "Company"): (i)
9,000 outstanding shares of the Company's Series C Convertible Redeemable
Preferred Stock, $1,000 per share stated value ("Series C Preferred Stock"),
(ii) up to 1,350 shares of Series C Preferred Stock issuable as dividends on the
outstanding shares of Series C Preferred Stock that the Company may pay in lieu
of cash dividends, (iii) up to 622,744 shares of the Company's common stock,
$.001 par value ("Common Stock"), issuable upon the conversion of Series C
Preferred Stock, (iv) 107,000 shares of Common Stock currently outstanding, and
(v) 169,330 shares of Common Stock issuable upon the exercise of currently
outstanding stock purchase options granted under the Company's 1993 Stock Option
Plan (the "Options"). The Company will not receive any proceeds from the sale of
the Series C Preferred Stock or from the sale of the Common Stock offered
hereby. Upon the exercise of the Options, the Company will receive $2,255,948 in
the aggregate.
Each share of Series C Preferred Stock provides for dividends in the
amount of $72.50 per year, payable semi-annually, and is convertible at any time
at the option of the holder into shares of Common Stock at an initial conversion
price of $16.62 per share. The initial conversion price, and therefore the
number of shares of Common Stock issuable upon the conversion of the Series C
Preferred Stock, is subject to adjustment in certain events to prevent dilution.
The Company may redeem some or all of the shares of Series C Preferred Stock on
or after April 1, 1999 at a cash redemption price of $1,000 per share, plus
accrued but unpaid dividends. Each holder of Series C Preferred Stock is
entitled to vote on any matter submitted to the stockholders as if the Series C
Preferred Stock had been converted into Common Stock. Each share of Series C
Preferred Stock has a liquidation preference equal to its $1,000 stated value.
See "Description of Securities -- Preferred Stock."
The Common Stock is quoted on the Nasdaq National Market under the
symbol "WWTR." The closing price of the Common Stock reported on the Nasdaq
National Market on June 4, 1997 was $14.125 per share. There is no established
trading market for the Series C Preferred Stock, and it is not anticipated that
an established trading market will develop.
The Selling Securityholders have advised the Company that it may sell,
directly or through brokers, all or a portion of the securities offered hereby
in negotiated transactions or in one or more transactions in the market at the
price prevailing at the time of sale. In connection with such sales, the Selling
Securityholders and any participating broker may be deemed to be "underwriters"
of the Series C Preferred Stock and the Common Stock within the meaning of the
Securities Act of 1933, as amended. It is anticipated that usual and customary
brokerage fees will be paid by the Selling Securityholders in all open market
transactions. The Company will pay all other expenses of this offering. See
"Plan of Distribution."
--------------------------
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON
PAGES 6 THROUGH 8 OF THE PROSPECTUS.
--------------------------
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.
The date of this Prospectus is June ___, 1997
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy or information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following regional
offices: Seven World Trade Center, New York, New York 10048, and Citicorp
Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, the Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the Commission's Web site is http://www.sec.gov. The Common Stock of the
Company is quoted on the Nasdaq National Market. Reports, proxy statements and
other information concerning the Company may be inspected at the offices of the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
Additional information regarding the Company and the securities offered
hereby is contained in the Registration Statement of which this Prospectus is a
part, and the exhibits thereto, filed with the Commission under the Securities
Act of 1933, as amended (the "Securities Act"). For further information
pertaining to the Company and the securities offered hereby, reference is made
to the Registration Statement and the exhibits thereto, which may be inspected
without charge at, and copies thereof may be obtained at prescribed rates from,
the office of the Commission at Judiciary Plaza, 450 Fifth Street, Washington,
D.C. 20549. Statements contained herein concerning the provisions of any
document are not necessarily complete and in each instance reference is made to
the copy of the document filed as an exhibit or schedule to the Registration
Statement. Each such statement is qualified in its entirety by reference to the
copy of the applicable documents filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
the Exchange Act are incorporated in this Prospectus by reference: (a) the
Company's Annual Report on Form 10-K for the year ended March 31, 1996; (b) the
Company's quarterly report on Form 10-Q for the quarter ended June 30, 1996,
filed with the Commission on August 14, 1996; (c) the Company's quarterly report
on Form 10-Q for the quarter ended September 30, 1996, filed with the Commission
on November 14, 1996; (d) the Company's quarterly report on Form 10-Q for the
quarter ended December 31, 1996, filed with the Commission on February 14, 1997;
(e) the Company's current report on Form 8-K dated March 31, 1997, filed with
the Commission on March 31, 1997; (f) the Company's current report on Form 8-K
dated April 30, 1997, filed with the Commission on May 1, 1997; (g) the
Company's proxy statement furnished in connection with its Annual Meeting of
Shareholders on December 4, 1996, filed with the Commission on November 6, 1996;
(h) all other reports filed with the Commission pursuant to Section 13 and 15(d)
of the Exchange Act since February 14, 1997; and (i) the description of the
Common Stock set forth in the Company's Registration Statement on Form 8-B under
the Exchange Act, including any amendment or report subsequently filed by the
Company for the purpose of updating that description. The file number of each of
the foregoing documents is 0-18756.
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 securities offered hereby shall
be deemed to be incorporated by reference into this Prospectus and to be a part
of this Prospectus from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated by reference (other than
exhibits to such documents that are not specifically incorporated by reference
in such documents). Written
2.
<PAGE> 4
requests for such copies should be directed to Ronald I. Simon, Vice President
and Chief Financial Officer, Western Water Company, 4660 La Jolla Village Drive,
Suite 825, San Diego, California 92122. Telephone requests may be directed to
Mr. Simon at (619) 535-9282.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995.
Except for the historical information contained herein, the matters
discussed in this Prospectus are forward-looking statements which involve risks
and uncertainties, including but not limited to economic, competitive,
governmental and environmental factors affecting the Company's revenues,
operations, markets, properties and prices, and other factors discussed in the
section entitled "Risk Factors" on pages 6 through 8 of this Prospectus.
3.
<PAGE> 5
THE COMPANY
Western Water Company (the "Company") is engaged in (i) a broad range
of activities related to the identification, acquisition, ownership,
development, transfer and sale of water and water rights primarily in the
Western United States and (ii) the sale of real estate properties acquired in
connection with the Company's water supply business activities. The Company,
directly and indirectly, owns a diverse portfolio of water rights and real
estate interests in California and Colorado. The Company's plan is to develop
and package its own water and water rights for sale to municipalities and other
water users and to provide a variety of water-related services to unaffiliated
owners of water rights. Such services include identifying, developing,
marketing, transporting, distributing and selling water or water rights that are
owned by the unaffiliated owners. In addition, the Company's plan is to resell
the real estate interests that it owns and occasionally acquires in connection
with its acquisition of water interests.
The Company has recently focused its efforts on becoming an independent
water provider to municipalities and other agencies located primarily in
Southern California. The Company's goal is to acquire water assets and to sell
or lease such water or water rights to municipalities or other water agencies or
districts. In order to fund a portion of the anticipated cost of acquiring
groundwater rights and other water-related assets, the Company recently
completed a $9,000,000 private placement of its Series C Preferred Stock. In
addition, in November 1996 the Company entered into a letter agreement with J.P.
Morgan Securities, Inc. pursuant to which J.P. Morgan was appointed as the
Company's financial advisor and agent in arranging the placement of debt
securities for the special purpose entities expected to be formed for the
purpose of acquiring such water assets. To date, one special purpose entity has
been organized, but no financing has yet been raised by J.P. Morgan for any
special purpose entity. The Company is currently evaluating certain water
transfer opportunities and has held discussions with certain Southern California
water districts regarding the sale and transfer of water to such water
districts. However, the Company has not yet entered into any binding agreements
with such water districts.
The principal California water interests currently owned by the Company
consist of (i) certain riparian and appropriative water rights, together with
certain groundwater rights, associated with approximately 9,055 acres of real
property (the "Yuba Property") located along the Yuba River in California, (ii)
the water rights associated with 2,236 acres of California rice farms and
ranches, (iii) interests owned in various California mutual water companies, and
(iv) certain groundwater pumping rights in Los Angeles County and San Bernadino
County, California. The Company's California real estate holdings consist of a
total of approximately 1,602 acres located in Northern California.
The principal Colorado water interests owned by the Company consist of
the water rights associated with an aggregate of 4,559 acres of undeveloped land
and certain other water rights in the Cherry Creek basin. The Cherry Creek basin
is the drainage area of Cherry Creek south of Denver, Colorado. The Cherry Creek
assets were acquired primarily for the purpose of developing, processing,
packaging and selling water and water rights to water districts in the Cherry
Creek basin (the "Cherry Creek Project"). The Company has filed a plan of
augmentation with the Colorado Water Court in order to obtain the right to sell
packages of long-term, reliable water resources. Although the Company believes
that there is a market for its Cherry Creek water and water rights, in order to
increase the number of potential purchasers for its water and to increase the
possible price of such water, the Company may have to develop and build a water
delivery infrastructure. The Company and certain infrastructure developer are
currently jointly marketing to water agencies a package consisting of the
Company's water rights and a water delivery system. However, the Company does
not have any definitive agreements with any potential builders of such a water
delivery system. The principal real estate interests owned by the Company
consist of 1,800 acres of undeveloped land located in the Cherry Creek basin,
Colorado.
On April 23, 1997, the Company sold its 35.3% initial percentage
interest in Nevada Land and Resource Company, LLC (the "Nevada LLC") to Global
Equity Corporation, an Ontario, Canada corporation ("Global"). The Nevada LLC is
the limited liability company that was formed by the Company and a joint venture
comprised of The Morgan Stanley Real Estate Fund II, L.P. and two affiliates of
that real estate partnership (collectively, "Western Land JV") to own
approximately 1.38 million acres of land and related water interests in Nevada
(the "Nevada Property"). The Corporation acquired its interest in the Nevada LLC
in October 1995 for $12,000,000. The sale of the Corporation's interest pursuant
to the Agreement was consummated on April 23, 1997. The Corporation's portion of
the purchase price was $13,360,000, of which $12,024,000 was paid in cash and
4.
<PAGE> 6
$1,336,000 was paid by the delivery to the Corporation of a convertible note
from Global due on December 31, 1997. In addition to the sale of the Company's
interest in the Nevada LLC to Global, the Nevada LLC entered into a consulting
agreement with Western Agua, L.P. (the "Consulting Agreement"). Western Agua,
L.P. is a Delaware limited partnership formed by the Corporation and Western
Land JV. The Corporation owns a 70% interest in Western Agua, L.P. and is the
sole general partner of the partnership. In exchange for providing consulting
services to Nevada LLC, Western Agua, L.P. will receive 50% of all the net
proceeds, if any, derived from the Nevada Property after Global both recoups its
investment in the Nevada LLC and earns a 20% cumulative return compounded
annually on its investment. In addition, the Western Land JV has agreed to
provide the Company with a three-year right of first offer to review all Western
Land JV's water investment opportunities in the Western United States.
The Company is currently engaged by The Atchison, Topeka and Santa Fe
Railway Company and by Burlington Northern Railroad Company (collectively,
"Burlington Santa Fe") to act as Burlington Santa Fe's exclusive agent in
California, Arizona, New Mexico, Colorado, Washington and Montana in connection
with identifying, developing and marketing water assets owned by Burlington
Santa Fe, and to identify and assist in marketing Burlington Santa Fe's Texas
water rights, and to advise Burlington Santa Fe in connection with such matters.
On March 28, 1996, the Company issued a 100% stock dividend whereby the
Company issued one share of Common Stock for each share of Common Stock then
outstanding (the "Stock Dividend"). A 100% stock dividend effectively is the
equivalent of a 2-for-1 stock split. All share, per share and other information
contained in this Prospectus has been adjusted to reflect the 2-for-1 stock
adjustment.
The Company's principal executive office is located at 4660 La Jolla
Village Drive, Suite 825, San Diego, California 92122. Its telephone number is
(619) 535-9282. Unless the context requires otherwise, references to the
"Company" in this report include YG Procyon Corporation, its wholly-owned
subsidiary, and YG Rice Farms, L.P., a California limited partnership directly
and indirectly wholly owned and controlled by the Company. On September 18,
1992, the Company changed its name from "YG Development Company" to "Western
Water Company," and on March 23, 1994, the Company changed its state of
incorporation from California to Delaware.
5.
<PAGE> 7
RISK FACTORS
The securities offered hereby are speculative in nature, involve a high
degree of risk, and should not be purchased by any investor who cannot afford
the loss of his entire investment. Prior to making an investment decision with
respect to the securities offered hereby, prospective investors should carefully
consider, along with the other matters discussed in this Prospectus, the
following risk factors:
LIMITED HISTORY OF OPERATIONS IN PRINCIPAL BUSINESS. To date, the
Company's activities have primarily consisted of (i) acquiring its various water
rights and related assets, (ii) raising capital to fund both the cost of such
acquisitions and its working capital needs, and (iii) developing its water
rights. Although the Company operates in two business segments (water rights
activities and its real estate development and disposition activities), the
Company anticipates that a majority of its revenues in the future will be
derived from its water rights activities. However, the Company only generated
$974,000 and $207,000 of revenues from its water rights activities during the
fiscal years ended March 31, 1996 and March 31, 1995, respectively, and only
generated a total of $168,000 of revenues from its water rights activities
during the nine-month period ended December 31, 1996. Accordingly, the Company
does not have an established record of water rights transactions. To date, the
Company's administrative and interest expenses have exceeded its on-going
revenues from its water and water rights development and disposition business,
and the majority of its operating revenues have been derived from the sale of
the Company's real estate assets. No assurance can be given that the Company
will continue to be able to profitably resell its remaining real estate holdings
in the future or that it will be able to successfully develop, package and sell
water rights.
UNCERTAINTY OF FUTURE REAL ESTATE REVENUES. During the past two fiscal
years, revenues from the disposition of real estate have constituted
approximately 80% and 92%, respectively, of the Company's total revenues.
Accordingly, until the Company completes its water development activities and
derives revenues from the sale or other disposition of its water resources, the
Company's ability to generate revenues will continue to be dependent primarily
on its ability to sell its real estate holdings. To date, the Company's real
estate sales efforts in Colorado have benefitted from a strong demand for real
estate in the Cherry Creek basin. No assurance can, however, be given that the
current market conditions in the Cherry Creek market will continue or that the
Company will be able to profitably resell its real estate assets in the future.
During the nine-month period ended December 31, 1996, the Company consummated
only one sale of its Cherry Creek real estate holdings and, accordingly,
generated only a total of $150,000 of revenues from its real estate activities
during the nine-month period. The Company's ability to sell its Colorado and
California real estate properties will also be dependent on general economic
conditions, on interest rates, and on the location and particular
characteristics of the properties offered for sale.
UNCERTAINTY OF FUTURE WATER REVENUES. The Company's business plan is
twofold: to engage in various water acquisition, transfer, development and sale
activities, and to develop and dispose of the real estate that it acquires in
connection with the acquisition of water rights. While the Company's current
operating revenues have been primarily derived from real estate sales, the
Company's long-term future profitability will be primarily dependent on (i) the
Company's ability to sell significant quantities of water from the Company's
Northern California water assets, (ii) the Company's ability to develop and sell
water or water rights packages as part of the Cherry Creek Project, and (iii)
the Company's activities as an independent water provider in Southern
California. Until May 1996, the Company's plan was to permit the Yuba County
Water Agency to integrate the Company's Yuba Property water into the Water
Agency's conjunctive use plans for developing and marketing water to third
parties. The Company's agreement with the Yuba County Water Agency regarding the
joint development and marketing of water expired in May 1996, and the Company is
currently evaluating various alternative plans to commercially exploit its Yuba
Property water rights. The value of the Company's Cherry Creek Project is
dependent upon the approval of the Company's proposed plan of augmentation. The
Colorado Water Court has rejected the Company's initial Cherry Creek plan of
augmentation based on objections that were filed with the court by the third
parties. Although the Company has since received the consent of all but one of
the objectors, no assurance can be given that the Colorado Water Court will
approve the Company's plan of augmentation in the near future, or ever. The
Company's ability to become an independent water provider in Southern California
is dependent upon the Company acquiring groundwater rights and other water
assets, its ability to arrange for the transportation and storage of water, its
success in obtaining all necessary consents and approvals, and on its ability to
finance the foregoing activities. To date, the Company has not yet consummated
any water transfer transactions in Southern California, and no assurance can be
given that the Company will be able to do so in the future.
6.
<PAGE> 8
YUBA PROPERTY TITLE ISSUES. It is possible that owners of adjoining
land or land located downstream from the Yuba Property could assert claims to
the groundwater adverse to the Company due to possible uncertainties as to the
source of water located on or under the Yuba Property and the complexities of
water laws. Although the Company believes that its claims would be held to be
superior to any claims by other property owners, no assurance can be given that
adverse claims, if asserted, would not be sustained.
ENVIRONMENTAL REGULATION AND RISK. Water leased or sold by the Company
may be subject to regulation as to quality by the United States Environmental
Protection Agency (the "EPA") acting pursuant to the Federal Safe Drinking Water
Act (the "US Act"). In California, the responsibility for enforcing the US Act
is delegated to the California Department of Health Services (the "Health
Department") and to the Resources Board acting pursuant to the California Safe
Drinking Water Act (the "Cal Act"). The US Act provides for the establishment of
uniform minimum national water quality standards, as well as governmental
authority to specify the type of treatment processes to be used for public
drinking water. Moreover, the EPA has an ongoing directive to issue regulations
under the US Act and to require disinfection of drinking water, specification of
maximum contaminant levels ("MCLS") and filtration of surface water supplies.
The Cal Act and the mandate of the Health Department are similar to the US Act
and the mandate of the EPA, and in many instances MCLS and other requirements of
the Health Department are more restrictive than those promulgated by the EPA.
Both the EPA and the Health Department have promulgated regulations and
other pronouncements which require various testing and sampling of water and
inspections by producers which set MCLS for numerous contaminants. Since the
Company does not intend to sell water directly to the consumers, these standards
only affect the water agencies that may buy or lease the Company's water. While
environmental regulations do not directly affect the Company, the regulations
regarding the quality of water distributed affects the Company's intended
customers and may, therefore, depending on the quality of the Company's water,
impact the price and terms upon which the Company may in future sell its water
or water rights.
Under various federal, state and local laws, regulations and ordinances
(collectively, "Environmental Laws"), an owner or operator of real estate
interests may be liable for the costs of cleaning up, as well as certain damages
resulting from, past or present spills, disposals or other releases of hazardous
or toxic substances or wastes on, in or from a property. Certain Environmental
Laws including the federal Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA") and Resource Conservation and Recovery Act ("RCRA"),
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of hazardous or toxic substances or wastes at or
from the property. The presence of such substances or wastes, or the failure to
properly remediate any resulting contamination, also may adversely affect the
owner's or operator's ability to sell, lease, or operate its property or to
borrow using its property as collateral. Although the Company is not aware of
any such environmental contamination on any of its real estate holdings or on
any locations adjacent to its holdings, there can be no assurance that such
environmental contamination does not exist.
VOLATILE MARKET FOR COMMON STOCK. There has been significant volatility
in the market for the Company's Common Stock. Since April 1, 1995 (the beginning
of the fiscal year ended March 31, 1996), the daily closing sales prices of the
Common Stock have ranged from $10.125 to $23.25 per share. The trading price of
the Common Stock has fluctuated widely, and it may be subject to similar future
fluctuations in response to quarter-to-quarter variations in the Company's
operating results, Company announcements regarding acquisitions or dispositions
of properties, and variations in the stock market indices in general. The Common
Stock offered by this Prospectus (assuming conversion of all shares of Series C
Preferred Stock into shares of Common Stock and the exercise of all Options)
constitutes approximately 10% of the total amount of Common Stock currently
outstanding (assuming the conversion of all shares of Series C Preferred Stock
and the exercise of all Options). Such Common Stock may be offered and sold from
time to time throughout an indefinite and extended period of time, which sales
may have an adverse effect on the prevailing market price for the Common Stock.
The extent of such adverse effect, if any, cannot be predicted, but based on the
volume of trading in the market and on the number of shares that could be sold
hereunder by the Selling Securityholders, such adverse effect may be material.
ANTI-TAKEOVER EFFECT OF CHARTER AND BYLAW PROVISIONS. The Company's
Certificate of Incorporation and Bylaws contain certain provisions that may
discourage attempts to acquire control of the Company that are not negotiated
with the Company's Board of Directors. These provisions may have the effect of
discouraging takeover attempts that some stockholders might deem to be in their
best interests, including takeover proposals in which
7.
<PAGE> 9
stockholders might receive a premium for their shares over the then current
market price, as well as making it more difficult for individual stockholders or
a group of stockholders to elect directors. The Board of Directors believes,
however, that these provisions are in the best interests of the Company and its
stockholders because such provisions may encourage potential acquirors to
negotiate directly with the Board of Directors which is in the best position to
act on behalf of all stockholders. The Certificate of Incorporation provides
that the affirmative vote of the holders of at least 66-2/3% of the total voting
power of all outstanding securities of the Company then entitled to vote
generally in the election of directors, voting together as a single class, is
required to amend certain provisions of the Certificate of Incorporation,
including among others, those provisions relating to the number, election and
term of directors; the removal of directors and the filling of vacancies; and
the supermajority voting requirements of the Certificate of Incorporation. These
voting requirements will have the effect of making more difficult any
amendments, even if a majority of the Company's stockholders believes that such
amendment would be in their best interest. See "Description of Securities --
Anti-Takeover Provisions."
ABSENCE OF PUBLIC MARKET FOR SERIES C PREFERRED STOCK. Prior to this
offering, there was no established trading market for the Series C Preferred
Stock, and it is not anticipated that an established trading market will
develop. The Company does not plan to apply to have the Series C Preferred Stock
quoted on Nasdaq or any other exchange.
DIVIDENDS UNLIKELY. The Company has never paid cash dividends on its
Common Stock (other than the Stock Dividend effected in March 1996) and
anticipates that for the foreseeable future all earnings, if any, will be
retained for operations and for the development of the Company's assets and
business. The payment of any dividends on the Common Stock is subject to the
prior payment of dividends on the outstanding shares of Series C Preferred
Stock. The Company's ability to meet its semi-annual dividend obligations under
the terms of the Series C Preferred Stock is dependent on its financial
condition and on Delaware law. Under Delaware law, a corporation is permitted to
pay dividends only out of surplus (including paid-in and earned surplus) or out
of net profits for the current and immediately preceding fiscal years. Although
the Company currently is permitted by Delaware law to make dividend payments on
the Series C Preferred Stock, no assurance can be given that the Company will
continue to do so in the future or that the Company will in the future be
permitted under Delaware law to pay dividends.
See "Description of Securities."
DEPENDENCE ON KEY PERSONNEL. The success of the Company is largely
dependent upon the knowledge, efforts and active participation of Mr. Peter L.
Jensen, its President, and Messrs. John H. Huston and Eric R. Robbins, its Vice
Presidents. The Company's employment agreements with Messrs. Jensen, Huston and
Robbins expire in July 1997. The loss of the services of either Messrs. Jensen,
Huston or Robbins could have a material adverse effect on the Company.
AUTHORIZATION OF PREFERRED STOCK; PROVISIONS AFFECTING CHANGES IN
CONTROL. The Company's Certificate of Incorporation authorizes the issuance of
"blank check" preferred stock with such designation, rights and preferences as
may be determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue a new
series of preferred stock with dividend, liquidation, conversion, voting or
other rights which could adversely affect the voting power or other rights of
the holders of the Series C Preferred Stock and the Common Stock. In the event
of issuance, the new series of preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention to issue
any additional shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. See "Description of Securities."
8.
<PAGE> 10
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale by the
Selling Securityholders of any of the shares of Series C Preferred Stock and
Common Stock offered hereby. The Company will pay all of the costs of this
offering.
SELLING SECURITYHOLDERS
THE SERIES C PREFERRED STOCK PRIVATE PLACEMENT
The Company sold a total of 9,000 shares of Series C Preferred Stock
(at a price of $1,000 per share) in a private placement that was completed on
April 21, 1997 (the "Private Placement"). Credit Suisse First Boston acted as
the financial advisor and placement agent to the Company in connection with the
Private Placement. In connection with the Private Placement, the Company agreed
to use its best efforts to promptly register the shares of Series C Preferred
Stock (and the Common Stock issuable upon the conversion of the Series C
Preferred Stock) under the Securities Act. This Prospectus was prepared, in
part, pursuant to the foregoing contractual commitment to register the Series C
Preferred Stock and the underlying Common Stock.
Except as set forth in the footnotes to the table below, no investor in
the Private Placement has, or during the past three years had, any position,
office, or other material relationship with the Company or any predecessor or
affiliate of the Company.
SALE OF COMMON STOCK IN CONNECTION WITH PURCHASE OF WATER RIGHTS
On July 25, 1996, the Company entered into that certain Agreement for
Sale of Water Rights and Option to Sell Water Rights (the "Agreement") with
Golden West Refining Company, a California corporation ("Golden West"). Pursuant
to the Agreement, the Company agreed from time to time to purchase from Golden
West, and Golden West agreed from time to time to sell to the Company the rights
to water located in the Central Water Basin, Los Angeles County, California, for
a purchase price of $3,200 per acre foot. The Agreement grants Golden West the
option, but not the obligation, to sell to the Company the water rights to up to
a total of 1,078 acre feet of water per year. The option expires on September
27, 1997, although Golden West, in its discretion, may terminate the option at
any time during the last nine months of the option term. The Company has
previously purchased the rights to 300 acre feet of water. On February 13, 1997
and on May 9, 1997, the option for the purchase of an aggregate of 400 acre feet
of additional water was exercised. The purchase price paid by the Company for
the additional 400 acre feet was paid in shares of Common Stock included in this
Prospectus. The purchase price for any future sales of water under the Agreement
will likewise be paid in shares of Common Stock. The amount of shares issued to
Golden West in connection with the foregoing purchase, and the amount of shares
to be issued in the event the option is exercised in the future by Golden West,
is determined by the average last trading price of the Common Stock as reported
by The Nasdaq Stock Market during the 20 trading days immediately preceding the
closing date of each sale. The Agreement also contained registration rights
provisions that require the Company to register the shares of Common Stock to be
issued to Golden West. This Prospectus was prepared, in part, pursuant to the
registration rights provisions contained in the Agreement.
The terms of the Agreement were determined by arm's-length negotiations
between the Company and Golden West. Except for the transactions contemplated by
the Agreement, Golden West does not have, or during the past three years has not
had, any material relationship with the Company or any of its predecessors or
affiliates.
OPTIONS
The Options consist of stock purchase options to purchase a total of
169,330 shares of Common Stock. The Options were granted in 1997 pursuant to the
Company's 1993 Stock Option Plan. All of the Options were granted to persons
who, at the time of grant, were officers and directors of the Company. The
weighted average exercise price of the Options is $13.32 per share.
9.
<PAGE> 11
The following table lists the Selling Securityholders, the number of
shares of Series C Preferred Stock and Common Stock beneficially owned by each
such Selling Securityholder as of the date of this Prospectus, the number of
shares offered by them pursuant to this Prospectus, and the number of shares of
Common Stock beneficially owned by each Selling Securityholder after the
completion of this offering. The shares listed under the caption "Number of
Shares Being Offered -- Shares of Common Stock" refer (i) to the number of
shares of Common Stock into which the shares of Series C Preferred Stock held by
each Selling Securityholder can be converted, (ii) the number of shares of
Common Stock issuable upon the exercise of any Options owned by the Selling
Securityholder, and, (iii) for those Selling Securityholders who do not own any
shares of Series C Preferred Stock or Options, the shares of Common Stock owned
by such Selling Securityholder that are included in this Prospectus. All shares
of Common Stock listed under the caption "Number of Shares Being Offered --
Shares of Common Stock" may be sold pursuant to this Prospectus. The Company
believes that the Selling Securityholders own no securities of the Company other
than as listed in the table.
<TABLE>
<CAPTION>
SHARES OF
SERIES C SHARES OF NUMBER OF SHARES
PREFERRED COMMON STOCK BEING OFFERED (3) AFTER OFFERING(1)(2)
BENEFICIALLY BENEFICIALLY ----------------------------- --------------------------
OWNED AS OF OWNED AS OF SHARES OF SHARES OF SHARES OF
THE DATE OF THE DATE OF SERIES C COMMON COMMON STOCK
PROSPECTUS(1) PROSPECTUS(1) PREFERRED STOCK BENEFICIALLY OWNED PERCENT
------------- ------------- --------- --------- ------------------ -------
<S> <C> <C> <C> <C> <C> <C>
T. Rowe Price New Era Fund
Inc. 2,000 1,058,874(4) 2,000 120,337 818,200 10.0%
T. Rowe Price Small-Cap
Value Fund, Inc. 2,000 1,058,874(4) 2,000 120,337 818,200 10.0%
Ashford Capital Partners, L.P. 1,000(5) 60,168(5) 1,000 60,168 0 --
Workplace Health, Safety and
Compensation Commission of
New Brunswick 250 15,042 250 15,042 0 --
Dalhousie University General
Endowment Fund 125 7,521 125 7,521 0 --
Dalhousie University Killam
Endowment Fund 100 6,017 100 6,017 0 --
Dalhousie University Pension
Fund 500 30,084 500 30,084 0 --
Wisconsin Alumni Research
Foundation 1,000 60,168 1,000 60,168 0 --
Trustees of Dartmouth College 300 18,051 300 18,051 0 --
Ashford Capital Management,
Inc. as investment advisor for
certain investment accounts 1,725(6) 103,791(6) 1,725 103,791 0 --
Golden West Refining
Company(7) -- 107,000 -- 107,000 0 --
Peter Jensen -- 388,536 -- 41,666 346,870 4.2%
Marilyn B. Dreyer -- 102,017 -- 20,000 82,017 1.0%
John Huston -- 322,458 -- 33,332 289,126 3.5%
Arik Prawer -- 75,000 -- 25,000 50,000 *
Eric Robbins -- 73,332 -- 33,332 40,000 *
Ronald I. Simon -- 16,000 -- 16,000 0 --
</TABLE>
- -------------------
* less than 1%.
(1) Pursuant to the rules promulgated under the Exchange Act, a person is
deemed to be the beneficial owner of a security if that person has the
right to acquire ownership of such security within 60 days.
10.
<PAGE> 12
(2) The table assumes that the Selling Securityholders will dispose of all
shares of Series C Preferred Stock and Common Stock owned by them or
issuable to them that are being registered for sale by this Prospectus.
(3) Excludes (i) shares of Series C Preferred Stock that the holders of
Series C Preferred Stock may receive if the Company exercises its right
to pay dividends on the Series C Preferred Stock by issuing additional
shares of Series C Preferred Stock, and (ii) the Common Stock issuable
upon the conversion of such additional shares of Series C Preferred
Stock.
(4) Includes shares beneficially owned through T. Rowe Price Associates,
Inc., the investment advisor of T. Rowe Price New Era Fund, Inc., T.
Rowe Price Small-Cap Value Fund, Inc. and other registered investment
companies.
(5) Excludes the 1,725 shares of Series C Preferred Stock (103,791 shares
of Common Stock) that Ashford Capital Partners, L.P. holds as
investment advisor for certain investment accounts.
(6) Ashford Capital Management, Inc. purchased and holds these shares as
the investment advisor and nominee for 16 accredited investors (as
defined in Rule 501 under the Securities Act). Ashford Capital
Management, Inc. has the sole power to vote, or to direct the voting
of, such securities and the power to dispose, or to direct the
disposition of, such security.
(7) Golden West may, at any time prior to September 27, 1997, exercise its
option to sell to the Company rights to an additional 378 acre feet of
water at a price of $3,200 per acre foot. The purchase price to be paid
for such water rights is required to be paid in shares of Common Stock.
The number of shares to be issued upon any such future option exercise
will be based upon the then current trading price of the Common Stock.
Since the future trading price of the Common Stock is not currently
known, the Company is unable to determine the number of shares of
Common Stock that could be issued to the Selling Securityholders.
Accordingly, the amounts set forth in this table do not include any
shares that could be issued in the future under the Agreement.
11.
<PAGE> 13
PLAN OF DISTRIBUTION
The Selling Securityholders may sell, directly or through brokers, the
shares of Series C Preferred Stock and Common Stock in negotiated transactions
or in one or more transactions in the market at the price prevailing at the time
of sale. In connection with such sales, the Selling Securityholders and any
participating broker may be deemed to be "underwriters" of the shares within the
meaning of the Securities Act, although the offering of these securities will
not be underwritten by a broker-dealer firm. Sales in the market may be made to
broker-dealers making a market in the Common Stock or other broker-dealers, and
such broker-dealers, upon their resale of such securities, may be deemed to be
"selling securityholders" in this offering. The NASD member firms who make a
market in the Company's Common Stock, as most recently reported to the Company
by The Nasdaq Stock Market, are Bear, Stearns & Co. Inc.; Mayer & Schweitzer
Inc.; Carr Securities Co.; Neuberger & Berman; Fahnestock & Co., Inc.; Sharpe
Capital Inc.; Furman Selz Incorporated; Sherwood Securities Corp.; Herzog,
Heine, Geduld, Inc.; Torrey Pines Securities Inc.; L.H. Friend & Co.; and
Troster Singer Corp. The Company will not receive any of the proceeds from the
sale of the shares of Series C Preferred Stock or Common Stock by the Selling
Securityholders. Pursuant to the terms under which the shares of Series C
Preferred Stock and Common Stock were sold, the Company has agreed to indemnify
the Selling Securityholders against such liabilities as they may incur as a
result of any untrue statement of a material fact in the Registration Statement
of which this Prospectus forms a part, or any omission herein or therein to
state a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading. Such
indemnification includes liabilities that the Selling Securityholders may incur
under the Securities Act.
The Company will bear all costs and expenses of the registration under
the Securities Act and certain state securities laws of the Series C Preferred
Stock and Common Stock, other than fees of counsel (if any) for the Selling
Securityholders and any discounts or commissions payable with respect to sales
of such securities.
From time to time this Prospectus will be supplemented and amended as
required by the Securities Act. During any time when a supplement or amendment
is so required, the Selling Securityholders are required to cease sales until
the Prospectus has been supplemented or amended.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 20,000,000 shares of Common Stock,
$.001 par value, and 1,000,000 shares of preferred stock, $.001 par value, of
which 15,000 have been designated as the Series C Convertible Redeemable
Preferred Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record by them on all matters voted on by stockholders. The Company's
Certificate of Incorporation ("Certificate") does not provide for cumulative
voting in the election of directors. The holders of Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors out of
funds legally available therefor, subject to the prior rights of the holders of
any preferred stock. In the event of liquidation, dissolution or a winding up of
the Company's affairs, the holders of Common Stock are entitled to share ratably
in all assets of the Company that are legally available for distribution, after
payment of or provision for all debts and liabilities and after provision has
been made for payments with respect to the class of stock, including any
preferred stock outstanding at that time, that has preference over the Common
Stock. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption or sinking
fund provisions applicable to the Common Stock. All of the outstanding shares of
Common Stock are fully paid and nonassessable.
PREFERRED STOCK
General. Shares of preferred stock may be issued without stockholder
approval. The Board of Directors is authorized to issue such shares in one or
more series and to fix the rights, preferences, privileges, qualifications,
12.
<PAGE> 14
limitations and restrictions thereof, including dividend rights and rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of such series, without any vote or action by the stockholders. As
of the date of this Prospectus, the Company has no current plans for the
issuance of any additional shares of the preferred stock. Any preferred stock
that may, however, be issued in the future could rank prior to the Common Stock
offered hereby with respect to dividend rights and rights on liquidation. The
Board of Directors, without stockholder approval, may issue preferred stock with
voting and conversion rights that could adversely affect the voting power of
holders of Common Stock offered hereby or create impediments to persons seeking
to gain control of the Company.
Series C Convertible Redeemable Preferred Stock. Each share of Series C
Preferred Stock has a stated value of $1,000, a par value of $.001, and is
convertible at any time at the option of the holder into shares of Common Stock
at a conversion price of $16.62 per share. The conversion price, and therefore
the number of shares of Common Stock issuable upon the conversion of the Series
C Preferred Stock, is subject to adjustment in certain events to prevent
dilution.
The holders of Series C Preferred Stock are entitled to vote on all
matters presented to the stockholders, together with the holders of Common Stock
as one class, except as otherwise required by law. Each share of Series C
Preferred Stock is entitled to the number of votes equal to the number of shares
of Common Stock into which such share of Series C Preferred Stock would have
been convertible, if such conversion had taken place on the record date set for
determining stockholders entitled to vote at a meeting or the date of the
consent of stockholders if action is being taken by written consent. In the
event that the Company is in default in the payment of two or more semi-annual
dividends, the holders of the Series C Preferred Stock would have the right,
voting as a class, to elect a majority of the directors of the Company, and the
holders of the Common Stock would have the right to elect the remaining
directors. The right of the holders to elect a majority of the directors of the
Company would continue until dividends are paid for at least two consecutive
semi-annual periods, after which the right to elect directors shall revert to
the Common Stock and the Series C Preferred Stock, voting as a single class.
The holders of Series C Preferred Stock are entitled to receive annual
dividends in the amount of $72.50 per share, payable semi-annually on January 15
and July 15 of each year ($36.25 semi-annually). The first four semi-annual
dividend payments (July 15, 1997 through and including January 15, 1999) to be
made with respect to Series C Preferred Stock may be made, in the sole
discretion of the Board of Directors, in cash or, in full or in part, by issuing
shares of Series C Preferred Stock. Thereafter all dividend payments made with
respect to the Series C Preferred Stock are payable in cash. Upon the conversion
of any shares of Series C Preferred Stock, the holder shall be entitled to
receive unpaid dividends declared prior to the date of the conversion if the
holder owned the Series C Preferred Stock on the record date, but shall not be
entitled to receive any accumulated, accrued and unpaid dividends with respect
to the shares so converted.
The Company may, upon 30 days' written notice to the holders, redeem
all or any portion of the Series C Preferred Stock at any time after March 30,
1999 at a cash redemption price of $1,000 per share plus accrued but unpaid
dividends. However, the Company may redeem the Series C Preferred Stock only if
the average closing price of the Common Stock during the 20 consecutive trading
days prior to the notice of redemption is not less than 150% of the conversion
price (initially $16.62 per share, subject to adjustment). In case of the
redemption of a part only of the outstanding shares of Series C Preferred Stock,
the shares so to be redeemed shall be selected pro rata. Redeemed shares shall
be cancelled and revert to authorized but unissued shares of preferred stock
undesignated as to series.
Commencing on April 1, 2006 and continuing until March 31, 2007, each
holder of shares of the Series C Preferred Stock may, from time to time, during
such period, at such holder's option, cause the Company to redeem for cash, out
of funds legally available therefore, up to an aggregate of one-half of all
shares of Series C Preferred Stock owned by such holder on April 1, 2006.
Commencing on April 1, 2007, each holder of shares of Series C Preferred Stock
may, from time to time thereafter, at such holder's option, cause the Company to
redeem for cash, out of funds legally available therefore, some or all of such
holder's shares of Series C Preferred Stock. The redemption price for each share
of Series C Preferred Stock shall be $1,000 per share, plus, in each case, all
declared and unpaid dividends, if any.
13.
<PAGE> 15
The Series C Preferred Stock has a preference in liquidation over the
holders of Common Stock of $1,000 per share plus accrued and unpaid dividends.
ANTI-TAKEOVER PROVISIONS
The provisions of the Certificate and the Bylaws of the Company (the
"Bylaws") summarized in the succeeding paragraphs may be deemed to have
anti-takeover effects and may delay, defer or prevent a tender offer or takeover
attempt that a stockholder might consider to be in such stockholder's best
interests, including those attempts that might result in a premium over the
market price for the shares held by stockholders.
Amendment of Certain Provisions of the Certificate of Incorporation and
Bylaws. The Certificate provides that the affirmative vote of the holders of at
least 66-2/3% of the total voting power of all outstanding securities of the
Company then entitled to vote generally in the election of directors, voting
together as a single class, is required to amend certain provisions of the
Certificate, including those provisions relating to the number, election and
term of directors; the removal of directors and the filling of vacancies;
indemnification of directors, officers and others; and the supermajority voting
requirements in the Certificate. The Certificate further provides that the
Bylaws may be amended by the Board of Directors or by an affirmative vote of the
holders of not less than 66-2/3% of the total voting power of all outstanding
securities of the Company then entitled to vote generally in the election of
directors, voting together as a single class. These voting requirements will
have the effect of making more difficult any amendment by stockholders, even if
a majority of the Company's stockholders believes that such amendment would be
in their best interests.
Classified Board of Directors. The Certificate divides the Board of
Directors into three classes of directors serving staggered three-year terms. As
a result, approximately one-third of the Board of Directors will be elected at
each annual meeting of stockholders.
The classification of directors and provisions in the Certificate that
limit the ability of stockholders to increase the size of the Board of Directors
without the vote of at least 66-2/3% of the total voting power of all
outstanding voting securities, together with provisions in the Certificate that
limit the ability of stockholders to remove directors and that permit the
remaining directors to fill any vacancies on the Board, will have the effect of
making it more difficult for stockholders to change the composition of the Board
of Directors. As a result, at least two annual meetings of stockholders may be
required for the stockholders to change a majority of the directors, whether or
not a change in the Board of Directors would be beneficial to the Company and
its stockholders and whether or not a majority of the Company's stockholders
believes that such a change would be desirable.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the Board of Directors, of candidates for election as directors. The Company may
reject a stockholder proposal or nomination that is not made in accordance with
such procedures.
Section 203 of the Delaware General Corporation Law/Provisions in
Certificate of Incorporation. Subject to certain exclusions summarized below,
Section 203 of the Delaware General Corporation law ("Section 203") prohibits
any Interested Stockholder from engaging in a "business combination" with a
Delaware corporation for three years following the date such person became an
Interested Stockholder. Interested Stockholder generally includes (i) any person
who is the beneficial owner of 15% or more of the outstanding voting stock of
the corporation and (ii) any person who is an affiliate or associate of the
corporation and who held 15% or more of the outstanding voting stock of the
corporation at any time within three years before the date on which such
person's status as an Interested Stockholder is determined. Subject to certain
exceptions a "business combination" includes, among other things: (i) any merger
or consolidation involving the corporation; (ii) the sale, lease, exchange,
mortgage, pledge, transfer or other disposition of assets having an aggregate
market value equal to 10% or more of either the aggregate market value of all
assets of the corporation determined on a consolidated basis or the aggregate
market value of all the outstanding stock of the corporation; (iii) any
transaction that results in the issuance or transfer by the corporation of any
stock of the corporation to the Interested Stockholder, except pursuant to a
transaction that effects a pro rata distribution to all stockholders of the
corporation; (iv) any transaction involving the corporation that has the effect
of increasing the proportionate share of the stock of any class or series, or
securities convertible into the stock of any class or series, of the corporation
that is owned directly or indirectly by
14.
<PAGE> 16
the Interested Stockholder; and (v) any receipt by the Interested Stockholder of
the benefit (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the
corporation.
Section 203 does not apply to a business combination if: (i) before a
person became an Interested Stockholder, the board of directors of the
corporation approved the transaction in which the Interested Stockholder became
an Interested Stockholder or the business combination; (ii) upon consummation of
the transaction that resulted in the person becoming an Interested Stockholder,
the Interested Stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commences (other than
certain excluded shares); or (iii) following a transaction in which the person
became an Interested Stockholder, the business combination is (a) approved by
the board of directors of the corporation and (b) authorized at a regular or
special meeting of stockholders (and not by written consent) by the affirmative
vote of the holders of at least 66-2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.
In addition to the restrictions imposed on certain business
combinations by Section 203, the Certificate contains certain provisions which
require that certain business combinations with an interested stockholder must
be approved by the affirmative vote of the holders of at least 66 2/3% of the
outstanding voting stock, unless (a) with respect to business combinations that
do not involve payment of cash or other consideration to the Company's
stockholders, such business combination is approved by (i) a majority of
directors who were directors at the time of the Company's incorporation or are
not interested stockholders and became directors prior to the time the
interested stockholder became an interested stockholder, or (ii) a majority of
the shares held by stockholders other than the interested stockholder, and (b)
with respect to other business combinations, the interested stockholder provides
"fair" consideration to the stockholders (with the fairness determined in
accordance with the provisions of the Certificate), and (c) certain other
conditions are satisfied.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon by
Troy & Gould Professional Corporation, Los Angeles, California. Troy & Gould
Professional Corporation owns 33,686 shares of Common Stock.
EXPERTS
The audited consolidated financial statements contained in the Annual
Report on Form 10-K of Western Water Company for the year ended March 31, 1996
and incorporated in this Prospectus by reference, have been so incorporated in
reliance on the reports of Harlan & Boettger, independent public accountants,
given on the authority of said firm as experts in auditing and accounting.
15.
<PAGE> 17
No dealer, salesman or other person has been authorized to give any
information or make any representations, other than those contained in this
Prospectus, in connection with the offering hereby, and, if given or made, such
information and representations must not be relied upon as having been
authorized by the Company or the Selling Securityholders. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any
securities to any person in any State or other jurisdiction in which such offer
or solicitation is 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 or the facts herein set
forth since the date hereof.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Available Information.................... 2
Incorporation of Certain
Documents by Reference................. 2
The Company.............................. 4
Risk Factors............................. 6
Use of Proceeds........................... 9
Selling Securityholders................... 9
Plan of Distribution..................... 12
Description of Securities................ 12
Legal Matters............................ 15
Experts.................................. 15
</TABLE>
10,350 Shares of Series C Convertible
Redeemable Preferred Stock
899,074 Shares of Common Stock
WESTERN WATER COMPANY
_______________
PROSPECTUS
_______________
June ___, 1997
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates that expenses in connection with the distribution
described in this Registration Statement will be as follows. All expenses
incurred with respect to the distribution will be paid by the Company, and such
amounts, with the exception of the Securities and Exchange Commission
registration fees, are estimates.
<TABLE>
<S> <C>
SEC registration fee..................................$ 4,320
Nasdaq listing fees................................... 7,500
Accounting fees and expenses.......................... 1,000
Legal fees and expenses............................... 5,000
Miscellaneous......................................... 1,000
-------
Total..............................................$18,820
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 102(b)(7) of the General Corporation Law of the
State of Delaware (the "GCL"), the Certificate of Incorporation of the Company
eliminates the liability of the Company's directors to the Company or its
stockholders, except for liabilities related to breach of duty of loyalty,
actions not in good faith, and certain other liabilities.
The Certificate of Incorporation, and the Bylaws of the Company provide
for the indemnification of directors and officers to the fullest extent
permitted by the GCL.
Section 145 of the GCL authorizes indemnification when a person is made
a party to any proceeding by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or was serving as a
director, officer, employee or agent of another enterprise, at the request of
the corporation, and if such person acted in good faith and in a manner
reasonably believed by him or her to be in, or not opposed to, the best
interests of the corporation. With respect to any criminal proceeding, such
person must have had no reasonable cause to believe that his or her conduct was
unlawful. If it is determined that the conduct of such person meets these
standards, he or she may be indemnified for expenses incurred and amounts paid
in such proceeding if actually and reasonably incurred by him or her in
connection therewith.
If such a proceeding is brought by or on behalf of the corporation
(i.e., a derivative suit), such person may be indemnified against expenses
actually and reasonably incurred if he or she acted in good faith and in a
manner reasonably believed by him or her to be in, or not opposed to, the best
interests of the corporation. There can be no indemnification with respect to
any manner as to which such person is adjudged to be liable to the corporation;
however, a court may, even in such case, allow such indemnification to such
person for such expenses as the court deems proper. Where such person is
successful in any such proceeding, he or she is entitled to be indemnified
against expenses actually and reasonably incurred by him or her. In all other
cases, indemnification is made by the corporation upon determination by it that
indemnification of such person is proper because such person has met the
applicable standard of conduct.
The registration rights agreement between the Company and the Selling
Securityholders provides that the Company shall indemnify the Selling
Securityholders, and the Selling Securityholders shall indemnify the Company and
the officers and directors of the Company, for certain liabilities, including
certain liabilities under the Securities Act.
(i)
<PAGE> 19
ITEM 16. EXHIBITS
The following exhibits, which are furnished with this Registration
Statement or incorporated by reference, are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
4.1 Form of Common Stock certificate.(1)
4.2 Form of Series C Convertible Redeemable Preferred Stock
certificate.
4.3 Certificate of Designations for Series C Convertible Redeemable
Preferred Stock.
5.1 Opinion of Troy & Gould Professional Corporation.
23.1 Consent of Harlan & Boettger.
23.2 Consent of Troy & Gould Professional Corporation (contained in
Exhibit 5.1).
24.1 Power of Attorney (contained in Part II).
99.1 Agreement for Sale of Water Rights and Option to Sell Water Rights,
dated July 25, 1996, between the Company and Golden West.(2)
99.2 Form of Stock Purchase Agreement for the purchase and sale of
Series C Convertible Redeemable Preferred Stock.
</TABLE>
- --------------
(1) Previously filed as Exhibit 4.1 to the Company's Form 10 filed on
August 9, 1990, which exhibit is hereby incorporated herein by
reference.
(2) Previously filed as Exhibit 99 to the Company's Registration Statement
(File No. 333-10367) on Form S-3 filed on August 16, 1996, which
exhibit is hereby incorporated herein by reference.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, 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.
(b) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(ii)
<PAGE> 20
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a post-effective amendment to
this Registration Statement.
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
provided, however, that (i) and (ii) do not apply if the Registration Statement
is on Form S-3, and the information required to be included in a post-effective
amendment is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(iii)
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of San Diego, State of California, on June 6, 1997.
WESTERN WATER COMPANY
By /s/ PETER L. JENSEN
-----------------------------------
Peter L. Jensen, President
POWER OF ATTORNEY
The officers and directors of Western Water Company, whose signatures
appear below, hereby constitute and appoint Peter L. Jensen and Ronald I. Simon,
and each of them, their true and lawful attorneys and agents, each with power to
act alone, to sign, execute and cause to be filed on behalf of the undersigned
any amendment or amendments, including post-effective amendments, to this
Registration Statement of Western Water Company on Form S-3. Each of the
undersigned does hereby ratify and confirm all that said attorneys and agents
shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following person in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ PETER L. JENSEN Director, President and Chief June 6, 1997
- ------------------------- Executive Officer (Principal)
Peter L. Jensen Executive Officer)
/s/ RONALD I. SIMON Chief Financial Officer June 6, 1997
- ------------------------- (Principal Financial
Ronald I. Simon and Accounting Officer)
/s/ JOHN H. HUSTON Director, Vice President June 6, 1997
- --------------------------
John H. Huston
Director June 6, 1997
- --------------------------
Scott Katzmann
/s/ WILLIAM D. WATT Director June 6, 1997
- ---------------------------
William D. Watt
</TABLE>
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
4.1 Form of Common Stock certificate.(1)
4.2 Form of Series C Convertible Redeemable Preferred Stock
certificate.*
4.3 Certificate of Designations for Series C Convertible Redeemable
Preferred Stock.
5.1 Opinion of Troy & Gould Professional Corporation.*
23.1 Consent of Harlan & Boettger.
23.2 Consent of Troy & Gould Professional Corporation (contained in
Exhibit 5.1).*
24.1 Power of Attorney (contained in Part II).
99.1 Agreement for Sale of Water Rights and Option to Sell Water
Rights, dated July 25, 1996, between the Company and Golden
West.(2)
99.2 Form of Stock Purchase Agreement for the purchase and sale of
Series C Convertible Redeemable Preferred Stock.
</TABLE>
- --------------
* To be filed by amendment.
(1) Previously filed as Exhibit 4.1 to the Company's Form 10 filed on
August 9, 1990, which exhibit is hereby incorporated herein by
reference.
(2) Previously filed as Exhibit 99 to the Company's Registration Statement
(File No. 333-10367) on Form S-3 filed on August 16, 1996, which
exhibit is hereby incorporated herein by reference.
<PAGE> 1
EXHIBIT 4.3
WESTERN WATER COMPANY
CERTIFICATE OF DESIGNATIONS
-----------------
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
------------------
Western Water Company (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware does hereby
certify that pursuant to the provisions Section 151 of the General Corporation
Law of the State of Delaware, its Board of Directors, by unanimous written
consent dated April 10, 1997 adopted the following resolution, which resolution
remains in full force and effect as of the date hereof:
WHEREAS, the Board of Directors of the Corporation (the "Board of
Directors") is authorized, within the limitations and restrictions stated in the
Corporation's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), to fix by resolution or resolutions the designation, powers,
preferences, voting rights and other rights of each series of preferred stock,
and the qualifications, limitations or restrictions thereof, and such other
subjects or matters as may be fixed by resolution or resolutions of the Board of
Directors under the General Corporation Law of Delaware;
WHEREAS, the Corporation has previously designated a series of
preferred stock called Series B Convertible Redeemable Preferred Stock ("Series
B Preferred Stock") and authorized 15,000 shares with a value of $1,000 per
share of such Series B Preferred Stock; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to authorize and fix the terms of a new series of
preferred stock and the number of shares constituting such series:
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized such
series of preferred stock on the terms and with the provisions herein set forth:
1. DESIGNATION OF SERIES. The designation of such series of preferred stock is
Series C Convertible Redeemable Preferred Stock ("Series C Preferred Stock").
The number of shares constituting such series is 15,000, with a value of $1,000
per share for the purpose of calculating dividends and amounts payable upon
liquidation, dissolution or winding up ("stated value"). Shares of Series C
Preferred Stock redeemed or purchased by the Corporation shall be canceled and
shall revert to authorized but unissued shares of preferred stock undesignated
as to series.
2. DIVIDENDS. The holders of the outstanding Series C Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, dividends at the annual rate of 7.25% of the
stated value per share of Series C Preferred Stock. Such dividends shall be
payable semi-annually, on the
<PAGE> 2
fifteenth day of January and July (each of such dates being a "Dividend Payment
Date"). The first four semi-annual payments made with respect to Series C
Preferred Stock may be made, subject to the terms hereof, at the option of and
in the sole discretion of, the Board of Directors, in cash or, in full or in
part, by issuing fully paid and nonassessable shares of Series C Preferred Stock
such that the stated value of the shares of Series C Preferred Stock plus the
amount of cash dividend paid in part, if any, is equal to the amount of the cash
dividend which would otherwise be paid on such Dividend Payment Date if such
dividend were paid entirely in cash, after which all payments made with respect
to the Series C Preferred Stock shall be in cash. The issuance of such shares of
Series C Preferred Stock (plus the amount of cash dividends, if any, paid
together therewith) shall constitute full payment of such dividend. In no event
shall an election by the Board of Directors to pay dividends, in full or in
part, in cash on any of the first four semi-annual Dividend Payment Dates
preclude the Board of Directors from electing either such alternative in respect
of all or any portion of any subsequent dividend in the first four semi-annual
payments. Declared but unpaid dividends shall not bear interest.
3. VOTING
a. Voting Rights. The holders of Series C Preferred Stock shall be
entitled to vote upon all matters presented to the stockholders, together with
the holders of Common Stock as one class, except as otherwise required by law.
Each share of Series C Preferred Stock shall entitle the holder thereof to that
number of votes equal to the number of shares of Common Stock into which one
share of Series C Preferred Stock would have been convertible, if such
conversion had taken place on the record date set for determining stockholders
entitled to vote at a meeting or the date of the consent of stockholders if
action is being taken by written consent.
b. Voting Rights on Default. If the Corporation fails to pay in whole
or in part two or more semi-annual dividends on the Series C Preferred Stock as
provided for in Paragraph 2 hereof, the Series C Preferred Stock shall have the
right to elect the smallest number of directors constituting a majority of the
authorized number of directors of the Corporation, and the holders of the Common
Stock shall have the right to elect the remaining directors. Such right in the
Series C Preferred Stock shall continue until dividends shall have been declared
and paid or set apart for at least two consecutive semi-annual periods, after
which the exclusive right to elect directors shall revert to the Common Stock
and the Series C Preferred Stock voting as a single class, subject to renewal of
the voting right of the Series C Preferred Stock from time to time in the event
of the nonpayment of dividends as described above. At any time after the right
to elect directors is vested in the Series C Preferred Stock, and at any time
after the exclusive right to elect directors shall revert to the Common Stock
and the Series C Preferred Stock, the holders of 5% or more of the outstanding
shares of Series C Preferred Stock or Common Stock, as the case may be, have a
right to call a special meeting of stockholders for the purpose of electing all
of the members of the board of directors, such right to be exercisable by
delivering a request in writing for the calling of the special meeting to the
President or Secretary, or to the Chairman of the Board or a Vice President if
there be
2.
<PAGE> 3
such. The officer receiving the request shall forthwith cause notice to be given
to the stockholders entitled to vote that a meeting will be held at a time
requested by the person or persons calling the meeting, not less than 35 or more
than 90 days after the receipt of the request. Upon the election of directors by
the Series C Preferred Stock at a special meeting, the terms of all persons who
were directors immediately prior thereto shall terminate and the directors
elected by the Series C Preferred Stock together with those elected at the
special meeting by the Common Stock shall constitute the directors of the
Corporation until the next annual meeting. Upon the election of directors by the
Common Stock and the Series C Preferred Stock at a special meeting after the
exclusive right to elect directors has reverted to the Common Stock and the
Series C Preferred Stock, the terms of all persons who were directors
immediately prior thereto shall terminate and the directors elected by the
Common Stock and Series C Preferred Stock, at the special meeting shall
constitute the directors of the Corporation until the next annual meeting.
4. LIQUIDATION, DISSOLUTION OR WINDING UP. In the event of a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, the
holders of Series C Preferred Stock shall be entitled to receive out of the
assets of the Corporation, whether such assets are capital or surplus of any
nature, an amount per share of Series C Preferred Stock equal to the stated
value of such share of Series C Preferred Stock and a further amount equal to
any dividends declared and unpaid thereon, if any, as provided in Paragraph 2
hereof, to the date that payment is made available to the holders of Series C
Preferred Stock, and no more, before any payment shall be made or any assets
distributed to the holders of shares of Common Stock.
If upon such liquidation, dissolution or winding up, the assets thus
distributed among the holders of the Series C Preferred Stock shall be
insufficient to permit the payment to such stockholders of the full preferential
amounts aforesaid, then the entire assets of the Corporation to be distributed
shall be distributed ratably among the holders of Series C Preferred Stock.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, subject to the provisions of the Corporation's
Certificate of Incorporation, as amended, and to all of the preferential rights
of the holders of Series C Preferred Stock on distribution or otherwise, the
holders of Common Stock shall be entitled to receive, ratably, all remaining
assets of the Corporation.
A consolidation or merger of the Corporation with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Corporation, shall not be deemed to be a liquidation, dissolution or
winding up within the meaning of this Paragraph 4.
5. CONVERSION RIGHTS. The holder of any shares of Series C Preferred
Stock shall have the right at any time commencing from the date of issuance to
convert any of his or her shares of Series C Preferred Stock into duly
authorized, validly issued, fully
3.
<PAGE> 4
paid and nonassessable shares of Common Stock of the Corporation at the
Conversion Price, as defined herein, and upon the terms set forth herein.
6. CONVERSION PRICE. Each share of Series C Preferred Stock shall be
converted into a number of shares of Common Stock determined by dividing (i)
$1,000 by (ii) the Conversion Price in effect on the Conversion Date. The
Conversion Price at which shares of Common Stock shall initially be issuable
upon conversion of the shares of Series C Preferred Stock shall be $16.62 per
share. The Conversion Price shall be subject to further adjustment as set forth
in Paragraph 8 hereof. No payment or adjustment shall be made for any dividend
or other distribution that is payable on the Common Stock issued upon such
conversion.
7. CONVERSION PROCEDURE. The holder of any shares of the Series C
Preferred Stock may exercise his or her right to convert such shares into shares
of Common Stock by surrendering for such purpose to the Corporation, at its
principal office or at such other office or agency maintained by the Corporation
for that purpose, a certificate or certificates representing the shares of
Series C Preferred Stock to be converted, accompanied by a written notice
stating that such holder elects to convert all or a specified whole number of
such shares in accordance with the provisions of this Paragraph 7 and specifying
the name or names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. In case such notice shall specify a
name or names other than that of such holder, such notice shall be accompanied
by payment of all transfer taxes payable upon the issuance of shares of Common
Stock in such name or names. As promptly as practicable, and in any event within
ten business days after the surrender of such certificates and the receipt of
such notice relating thereto and, if applicable, payment of all transfer taxes,
the Corporation shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable shares
of Common Stock to which the holder of the Series C Preferred Stock so converted
shall be entitled and (ii) if less than the full number of shares of the Series
C Preferred Stock evidenced by the surrendered certificate or certificates are
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates less
the number of shares converted. Such conversions shall be deemed to have been
made at the close of business on the date of giving of such notice and of such
surrender of the certificate or certificates representing the shares of the
Series C Preferred Stock to be converted so that the rights of the holder
thereof shall cease except for the right to receive Common Stock in accordance
herewith, and the converting holder shall be treated for all purposes as having
become the record holder of such Common Stock at such time.
Shares of the Series C Preferred Stock may not be converted after the
close of business of the fifth business day preceding the date fixed for
redemption of such shares pursuant to Paragraph 13 hereof.
Upon conversion of any shares of the Series C Preferred Stock, the
holder thereof shall not be entitled to receive any accumulated, accrued or
unpaid dividends in respect
4.
<PAGE> 5
of the shares so converted, provided that such holder shall be entitled to
receive any dividends on such shares of the Series C Preferred Stock declared
prior to such conversion if such holder held such shares on the record date
fixed for the determination of holders of the Series C Preferred Stock entitled
to receive payment of such dividend.
8. CONVERSION PRICE ADJUSTMENTS. The Conversion Price shall be
subject to adjustment from time to time upon the occurrence of certain events as
follows:
a. Stock Dividends, Subdivisions, Reclassifications or Combinations. If
the Corporation shall (i) declare a dividend or make a distribution in shares of
Common Stock, (ii) subdivide or reclassify the outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the Conversion Price
in effect at the time of the record date of such dividend or distribution on the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any shares of Series C Preferred
Stock surrendered for conversion after such date shall be entitled to receive
the number of shares of Common Stock which he or she would have owned or been
entitled to receive had such Series C Preferred Stock been converted immediately
prior to such date. Successive adjustments in the Conversion Price shall be made
whenever any event specified above shall occur.
b. Other Distributions. In case the Corporation shall fix a record date
for the making of a distribution to all holders of shares of Common Stock, (i)
of shares of any class of capital stock of the Corporation other than shares of
Common Stock, or (ii) of evidences of indebtedness of the Corporation, or (iii)
of assets (excluding cash dividends or distributions, and dividends or
distributions referred to in subparagraph 8(a) hereof), or (iv) of rights or
warrants entitling the holders of Common Stock to subscribe for or purchase
shares of Common Stock at less than the Trading Price, as defined in Paragraph
13 hereof, on the record date fixed to determine stockholders entitled to
subscribe or purchase; in each such case, the Conversion Price in effect
immediately prior thereto shall be reduced immediately thereafter to the price
determined by dividing (1) an amount equal to the difference resulting from (A)
the number of shares of Common Stock outstanding on such record date multiplied
by the Conversion Price per share on such record date, less (B) the fair market
value (as determined by the Board of Directors in their reasonable discretion)
of said shares or evidences of indebtedness or assets or rights or warrants to
be so distributed by (2) the number of shares of Common Stock outstanding on
such record date. Such adjustment shall be made successively whenever such a
record date is fixed. In the event that such distribution is not so made, the
Conversion Price then in effect shall be readjusted, effective as of the date
when the Board of Directors determines not to distribute such shares, evidences
of indebtedness, assets, rights or warrants, as the case may be, to the
Conversion Price which was in effect prior to the fixing of the record date
(subject to any adjustments made pursuant to this Paragraph 8 since such record
date).
5.
<PAGE> 6
c. Rounding of Calculations; Minimum Adjustment. All calculations under
this Paragraph 8 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. No adjustment in the Conversion
Price shall be made if the amount of such adjustment would be less than $0.05,
but any such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any subsequent adjustment
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $0.05 or more.
d. Adjustments for Consolidation, Merger, etc. In case the Corporation,
(i) shall consolidate with or merge into any other person and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) shall
permit any other person to consolidate with or merge into the Corporation and
the Corporation shall be the continuing or surviving person, but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other person or cash or any other
property, (iii) shall transfer all or substantially all of its properties or its
assets to any other person, or (iv) shall effect a capital reorganization or
reclassification of the Common Stock (other than a capital reorganization or
reclassi- fication resulting in the issue of additional shares of Common stock
for which adjustment is provided in this Paragraph 8); then, and in each such
case, proper provision shall be made so that each share of Series C Preferred
Stock then outstanding shall be converted into, or exchanged for, one share of
preferred stock of the acquiring corporation entitling the holder thereof to all
of the rights (including voting rights), powers, privileges and preferences with
respect to the acquiring corporation to which the holder of a share of Series C
Preferred Stock is entitled with respect to the Corporation, and being subject
with respect to the acquiring corporation to the qualifications, limitations and
restrictions to which a share of Series C Preferred Stock is subject with
respect to the Corporation.
e. Issue or Sale of Shares Below Market Price.
(i) In the event the Corporation at any time or from time
to time shall issue or sell (or be deemed to have issued or sold) additional
shares of Common Stock, other than as a dividend in Paragraph b. above and other
than upon a subdivision or combination of shares of Common Stock as provided in
Paragraph a. above, without consideration or for a consideration per share less
than the Market Price (as defined below) of the date of such issuance, then and
in each case the then Conversion Price shall be reduced, as of the opening of
business on the date of such issue or sale, to a price determined by multiplying
that Conversion Price by a fraction the numerator of which shall be (A) the
number of shares of Common Stock outstanding at the close of business on the day
next preceding the date of such issue or sale plus (B) the number of shares of
Common Stock which the aggregate consideration received by the Corporation for
the total number of additional shares of Common Stock so issued would purchase
at such Market Price, and the denominator of which shall be the number of shares
of Common Stock outstanding at the close of business on the date of such issue
or sale after giving effect to the issuance of such additional shares of Common
Stock. For the purposes hereof, the "Market Price" of the Common Stock shall be
closing sales price
6.
<PAGE> 7
of the Common Stock (or the average of the last bid and asked prices of the
Common Stock is the Common Stock is not listed or admitted to trade on and
exchange or system that publishes daily closing prices) on the date immediately
prior to the date of the issuance.
(ii) For the purpose of making any adjustment in the
Conversion Price or number of shares of Common Stock purchasable on conversion
of Series C Preferred Stock as provided in clause (i) of this Paragraph e., the
consideration received by the Corporation for any issue or sale of securities
shall, (A) to the extent it consists of cash, be computed at the sales price
before deduction of any expenses payable by the Corporation and any underwriting
or similar commissions, compensations, or concessions paid or allowed by the
Corporation in connection with such issue or sale, (B) to the extent it consists
of property other than cash, be computed at the fair market value of that
property as determined in good faith by the Board of Directors of the
Corporation, irrespective of any accounting treatment; provided, however, that
the aggregate fair market value of such non-cash and cash consideration shall
not exceed the Market Price of the shares of Common Stock, and (C) if additional
shares of Common Stock, "Convertible Securities" (as hereinafter defined) or
rights or options to purchase either additional shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Corporation for a consideration which covers
both, be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors of the Corporation
to be allocable to such additional shares of Common Stock, Convertible
Securities or rights or options.
(iii) For the purpose of the adjustment provided for in
clause (i) of this Paragraph e., if at any time or from time to time the
Corporation shall issue any rights or options (other than options granted to the
Corporation's officers, directors, employees or agents under the Corporation's
stock option plans or otherwise) for the purchase of, or stock or other
securities convertible into or exchangeable for, additional shares of Common
Stock (such convertible stock or securities being hereinafter referred to as
"Convertible Securities"), then, in each case, if the "Effective Price" (as
hereinafter defined) of such rights, options or Convertible Securities shall be
less than the Market Price, the Corporation shall be deemed to have issued at
the time of the issuance of such rights or options or Convertible Securities the
maximum number of additional shares of Common Stock issuable upon exercise,
conversion or exchange thereof and to have received as consideration for the
issuance of such shares an amount equal to the total amount of the
consideration, if any, received by the Corporation for the issuance of such
rights or options or Convertible Securities, plus, in the case of such options
or rights, the minimum amounts of consideration, if any, payable to the
Corporation upon the exercise of such options or rights, and, in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Corporation for such Convertible Securities, plus the minimum amount of
consideration, if any, payable to the Corporation upon the conversion or
exchange of such Convertible Securities. "Effective Price" for this purpose
shall mean the quotient determined by dividing the total of all of such
consideration by such maximum number of additional shares of Common Stock. No
further adjustment
7.
<PAGE> 8
of the Conversion Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be made as a result of the actual issuance of
additional shares of Common Stock on the exercise of any such rights or options
or the conversion or exchange of any such Convertible Securities.
If any such rights or options or the conversion privilege represented
by any such Convertible Securities shall expire without having been exercised,
the Conversion Price adjusted upon the issuance of such rights, options or
Convertible Securities shall be readjusted to the Conversion Price which would
have been in effect had an adjustment been made on the basis that the only
additional shares of Common Stock so issued were the additional shares of Common
Stock, if any, actually issued or sold on the exercise of such rights or options
or rights of conversion of such Convertible Securities, and such additional
shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Corporation upon such exercise, plus the consideration,
if any, actually received by the Corporation for the granting of all such rights
or options, whether or not exercised, plus the consideration received for
issuing or selling the Convertible Securities actually converted plus the
consideration, if any, actually received by the Corporation (other than by
cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities.
9. VOLUNTARY ADJUSTMENT. The Corporation may make, but shall not be
obligated to make, such decreases in the Conversion Price so as to increase the
number of shares of Common Stock into which the Series C Preferred Stock may be
converted, in addition to those required by Paragraph 8 hereof, as it considers
to be advisable in order to avoid federal income tax treatment as a dividend of
stock or stock rights.
10. RESERVATION OF SHARES OF COMMON STOCK FOR CONVERSION.
The Corporation shall at all times reserve and keep available out of its
authorized and unissued shares of Common Stock such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
shares of Series C Preferred Stock that are then outstanding.
11. NOTICE OF ADJUSTMENT OF CONVERSION PRICE. Whenever the Conversion
Price is adjusted as herein provided, the Corporation shall forthwith file with
any transfer agent or agents for the Series C Preferred Stock, if any, and at
the principal office of the Corporation, a statement signed by the President or
a Vice President and by the Chief Financial Officer or the Secretary of the
Corporation setting forth the adjusted Conversion Price. The statement so filed
shall be open to inspection by any holder of record of shares of Series C
Preferred Stock. The Corporation shall also, at the time of filing any such
statement, mail notice to the same effect to the holders of shares of Series C
Preferred Stock at their addresses appearing on the books of the Corporation or
supplied by such holder to the Corporation for the purpose of notice.
12. FRACTIONAL SHARES IN CONVERSION. The Corporation shall not be
required to issue fractions of shares of Common Stock on the conversion of
Series C
8.
<PAGE> 9
Preferred Stock. If any fraction of a share of Common Stock would be issuable
upon the conversion of a share, except for the provisions hereof, the
Corporation shall purchase such fraction for an amount in cash equal to the
Trading Price (as defined in Paragraph 13 hereof) multiplied by such fraction.
If more than one certificate for shares of Series C Preferred Stock shall be
presented for conversion at any one time by the same registered holder, the
number of shares of Common Stock which shall be issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of Common Stock
issuable upon conversion of the shares so presented. All calculations under this
Paragraph 12 shall be made to the nearest one-hundredth of a share.
13. REDEMPTION. Commencing on April 1, 1999, shares of the Series C
Preferred Stock may be redeemed, in whole or in part at any time at the option
of the Corporation by resolution of its Board of Directors, for cash at $1,000
per share; plus, in each case, all declared and unpaid dividends thereon, if
any, to the redemption date. However, the Corporation may not redeem the Series
C Preferred Stock unless the Common Stock has had a Trading Price (as
hereinafter defined in this Paragraph 13) of not less than 150% of the
Conversion Price for 20 consecutive trading days prior to the Corporation giving
notice to the holders thereof. In case of the redemption of a part only of the
outstanding shares of Series C Preferred Stock, the shares so to be redeemed
shall be selected pro rata.
At least 30 days' previous notice by mail, postage prepaid, shall be
given to the holders of record of the shares of Series C Preferred Stock to be
redeemed, such notice to be addressed to each such stockholder at the address of
such holder appearing on the books of the Corporation or given by such holder to
the Corporation for the purpose of notice, or if no such address appears or is
so given, at the place where the principal office of the Corporation is located.
Such notice shall state the date fixed for redemption and the redemption price
and shall call upon such holder to surrender to the Corporation on said date at
the place designated in the notice such holder's certificate or certificates
representing the shares to be redeemed. On or after the date fixed for
redemption and stated in such notice, each holder of shares of Series C
Preferred Stock called for redemption shall surrender the certificate evidencing
such shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the redemption price, together with
declared and unpaid dividends, if any, to the date fixed for redemption. If less
than all the shares represented by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
If such notice of redemption shall have been duly given, and if on the date
fixed for redemption funds necessary for the redemption shall be available
therefor, then, notwithstanding that the certificate evidencing any shares of
Series C Preferred Stock so called for redemption shall not have been
surrendered, all rights pertaining to such shares shall terminate, except only
the right of the holders to receive the redemption price, together with declared
and unpaid dividends thereon, if any, to the date fixed for redemption, without
interest, upon surrender of their certificates therefor.
If, after notice of redemption has been given, the Corporation
deposits, on or prior to any date fixed for redemption of shares of Series C
Preferred Stock, with any bank or
9.
<PAGE> 10
trust company in the State of California that has a combined capital and surplus
of not less than $100 million, as a trust fund, a sum sufficient to redeem, on
the date fixed for redemption thereof, the shares called for redemption, with
irrevocable instructions and authority to the bank or trust company to give the
notice of redemption thereof (or to complete the giving of such notice if
theretofore commenced) and to pay, on or after the date fixed for redemption or
prior thereto, the redemption price of the shares to their respective holders
upon the surrender of their share certificates, then from and after the date of
the deposit (although prior to the date fixed for redemption), the shares shall
no longer be outstanding, and the holders thereof shall cease to be stockholders
with respect to such shares, and shall have no rights with respect thereto
except the right to receive from the bank or trust company payment of the
redemption price of the shares without interest, upon the surrender of their
certificates therefor, and the right to convert said shares as provided herein
at any time up to but not after the close of business on the fifth day prior to
the date fixed for redemption of such shares. The deposit shall constitute full
payment of the shares to the holders thereof. Any moneys so deposited on account
of the redemption price of Series C Preferred Stock converted subsequent to the
making of such deposit shall be repaid to the Corporation forthwith upon the
conversion of such shares of Series C Preferred Stock. Any interest accrued on
any funds so deposited shall be the property of, and paid to, the Corporation.
If the holders of Series C Preferred Stock so called for redemption shall not,
at the end of two years from the date fixed for redemption thereof, have claimed
any funds so deposited, such bank or trust company shall thereupon pay over to
the Corporation such unclaimed funds, and such bank or trust company shall
thereafter be relieved of all responsibility in respect thereof to such holders
and such holders shall look only to the Corporation for payment of the
redemption price.
The term "Trading Price" shall be the average for the 20 consecutive
trading days immediately prior to the date requiring a determination of the
prices determined as follows: (i) If the Common Stock is listed or admitted to
trade on a national securities exchange, on the Nasdaq National Market System
("NMS"), or on the Nasdaq SmallCap Market ("SmallCap"), the closing price of the
Common Stock on the composite tape of the principal national securities exchange
on which the Common Stock is so listed or admitted to trade or on the NMS or
SmallCap systems, as the case may be; (ii) If the Common Stock is not listed or
admitted to trade on an exchange or a system that publishes daily closing
prices, the average of the last bid and asked prices of the Common Stock quoted
on such other trading system.
14. OPTIONAL REDEMPTION. Commencing on April 1, 2006 and continuing until
March 31, 2007, each holder of shares of the Series C Preferred Stock may, from
time to time, during such period, at such holder's option, cause the Corporation
to redeem for cash, out of funds legally available therefore, up to an aggregate
of one-half of all shares of Series C Preferred Stock owned by such holder on
April 1, 2006. Commencing on April 1, 2007, each holder of shares of Series C
Preferred Stock may, from time to time thereafter, at such holder's option,
cause the Corporation to redeem for cash, out of funds legally available
therefore, some or all of such holder's shares of Series C Preferred Stock. The
redemption price for each share of Series C Preferred Stock shall be $1,000
10.
<PAGE> 11
per share, plus, in each case, all declared and unpaid dividends, if any, on
such redeemed shares through the date of redemption. Each holder of shares of
Series C Preferred Stock may exercise his rights to have such shares redeemed
pursuant to this Section 14 by surrendering for such purpose to the Corporation,
at its principal office or at such other office or agency maintained by the
Corporation for such purpose, a certificate or certificates representing the
shares to be redeemed accompanied by a written notice stating that such holder
elects to have redeemed the specified whole number of such shares in accordance
with the provisions of this Section 14 and, if less than the full number of
shares evidenced by the surrendered certificates are being redeemed, specifying
the name or names in which such holder wishes the certificates for the balance
of such shares to be issued. Within 10 calendar days after the surrender of such
certificate or certificates and the receipt of the required written notice
relating thereto, the Corporation shall deliver or cause to be delivered to the
holder (a) the redemption price of the shares being so redeemed and (b) if less
than the full number of shares evidenced by the surrendered certificate or
certificates are being redeemed, any certificate or certificates, of like tenor,
for the full number of shares evidenced by the surrendered certificate or
certificates, less the number of shares redeemed. Any redemption notice
delivered pursuant to this Section 14 shall be irrevocable for 30 days. During
such 30-day period, or until the date on which the redemption price is paid,
whichever is earlier, the shares tendered to the Corporation for redemption
shall not be convertible by the holder pursuant to Section 5, but shall
otherwise be entitled to all rights and privileges contained in this Certificate
of Designations.
15. MUTILATED OR MISSING PREFERRED STOCK CERTIFICATES. If any
of the Series C Preferred Stock certificates shall be mutilated, lost, stolen or
destroyed, the Corporation shall issue, in exchange and substitution for and
upon cancellation of the mutilated Series C Preferred Stock certificate, or in
lieu of and in substitution for the Series C Preferred Stock certificate lost,
stolen or destroyed, a new Series C Preferred Stock certificate of like tenor
and representing an equivalent amount of shares of Series C Preferred Stock, but
only upon receipt of evidence of such loss, theft or destruction of such Series
C Preferred Stock certificate and indemnity, if requested.
16. REISSUANCE OF PREFERRED STOCK. Shares of Series C Preferred Stock that
have been issued and reacquired in any manner, including shares purchased or
redeemed or exchanged, shall (upon compliance with any applicable provisions of
the laws of the State of Delaware) have the status of authorized and unissued
shares of preferred stock undesignated as to series and may be redesignated and
reissued as part of any series of preferred stock other than the Series C
Preferred Stock.
17. BUSINESS DAY. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that banks are not open in the State of
California, such payment, redemption or exchange shall be made on the
immediately succeeding day on which such banks are open.
11.
<PAGE> 12
18. HEADINGS OF SUBDIVISIONS. The headings of various subdivisions hereof
are for convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.
19. SEVERABILITY OF PROVISIONS. If any right, preference or limitation of
the Series C Preferred Stock set forth in these resolutions and the Certificate
of Designations filed pursuant hereto (as such resolution may be amended from
time to time) is invalid, unlawful or incapable of being enforced by reason of
any rule of law or public policy, all other rights, preferences and limitations
set forth in this resolution (as so amended) which can be given effect without
the invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
20. NOTICE TO THE COMPANY.
All notices and other communications required or permitted to be given
to the Corporation hereunder shall be made by courier to the Corporation at its
principal executive offices located at 4660 La Jolla Village Drive, Suite 825,
San Diego, California 92122, Attention: President. Minor imperfections in any
such notice shall not affect the validity thereof.
21. LIMITATIONS.
Except as may otherwise be required by law, the shares of Series C
Preferred Stock shall not have any powers, preferences or relative,
participating, optional or other special rights other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Corporation.
12.
<PAGE> 13
IN WITNESS WHEREOF, Western Water Company, has caused this certificate
to be executed by Edward Beeman, as Chief Financial Officer, and attested by
Jennifer H. Harris, as Assistant Secretary, this ___ day of April, 1997.
WESTERN WATER COMPANY
By_____________________________
Name: Edward Beeman
Title: Chief Financial Officer
Attest:
________________________
Name: Jennifer H. Harris
Title: Assistant Secretary
13.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Western Water Company:
We consent to the use of our report incorporated herein by reference and to the
reference of our firm under the heading "Experts" in the Prospectus.
Harlan & Boettger
San Diego, California
June 6, 1997
<PAGE> 1
EXHIBIT 99.2
WESTERN WATER COMPANY
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into as of this _______ day of ________ 1997 by and among Western Water Company,
a Delaware corporation (the "Company"), and the purchaser identified on the
signature page hereof and on Exhibit A hereto (the "Purchaser").
WHEREAS, pursuant to a Private Offering Memorandum (the "Memorandum"),
the Company is offering for sale (the "Offering") a minimum of 4,000 shares of
its Series C Convertible Redeemable Preferred Stock, the terms and conditions of
which are set forth in the Certificate of Designations (Exhibit B) (the
"Preferred Stock") and a maximum of 12,000 shares of Preferred Stock to a
limited number of Accredited Investors (as defined in Rule 501 of Regulation D);
and
WHEREAS, the Preferred Stock is being offered for sale in reliance upon
exemptions from registration and qualification under federal and state
securities laws; and
WHEREAS, the Purchaser desires to acquire the number of shares of
Preferred Stock set forth on Exhibit A hereto;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
1. Sale and Purchase of the Preferred Stock. Subject to the terms and
conditions hereof and in reliance upon the representations and warranties
contained herein, the Company hereby agrees to sell to the Purchaser, and the
Purchaser agrees to purchase from the Company, the number of shares of Preferred
Stock of the Company set forth on Exhibit A (the "Stock") for the purchase price
set forth on Exhibit A.
2. Closing. The initial closing (the "First Closing") of the sale and
purchase of the Preferred Stock offered pursuant to the Offering shall take
place on or before February 21, 1997, or on such other date as the Company and
Credit Suisse First Boston ("First Boston"), the financial adviser to the
Company in connection with the Offering, shall mutually determine. The Company
and First Boston may continue to offer for sale shares of the Preferred Stock
and may sell additional shares of the Preferred Stock at one or more additional
closings (the "Additional Closings") at such place and on such dates as the
Company and First Boston shall determine; provided, that (i) the total number of
shares of the Preferred Stock sold, when added to the shares of Preferred Stock
sold at the First Closing, does not exceed 12,000 shares of the Preferred Stock,
and (ii) no Additional Closing shall take place after March 31, 1997. The
Company will execute and deliver to the Purchaser, or to the Purchaser's
representative, a stock certificate or
1.
<PAGE> 2
certificates dated as of the date of the First Closing or any Additional
Closing, as the case may be, registered in the name specified in Exhibit A, and
representing the number of shares of the Stock being purchased by the Purchaser,
against delivery to the Company of a bank cashier's check or a confirmation of
wire transfer of funds in the amount set forth in Exhibit A in payment of the
total purchase price of the Stock being purchased by the Purchaser. The First
Closing and each of the Additional Closings, if any, are hereinafter
collectively referred to as the "Closing," and the date of the First Closing and
each such Additional Closing, if any, is hereinafter referred to as the "Closing
Date."
3. Representations and Warranties by the Company. Except as disclosed
in the Memorandum, the Company represents and warrants to the Purchaser that as
of the date hereof and, unless otherwise specified, again as of the Closing
Date:
3.1 Organization, Good Standing, etc.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite corporate power and authority to own its properties and to
carry on business now being conducted.
(b) The Company is duly qualified, licensed or
domesticated as a foreign corporation in good standing in each jurisdiction in
which the nature of the business conducted by it or the properties owned, leased
or operated by it make such qualification, licensing or domestication necessary
and failure to be so qualified, licensed or domesticated would have a material
adverse effect upon the Company. Without limiting the foregoing, the Company has
complied with all material laws and regulations and received all material
permits, authorizations and clearances required from all governmental agencies
to permit it to collect and sell water taken from its properties.
3.2 Capital Stock. The authorized capital stock of the
Company consists of (i) 20,000,000 shares of common stock, par value $.001 per
share (the "Common Stock"), of which, as of January 31, 1997, there were
8,092,326 shares issued and outstanding; and (ii) 1,000,000 shares of preferred
stock, par value $.001 per share, of which, other than the shares issued and
sold in connection with the Offering, no shares are issued or outstanding. All
issued and outstanding shares of Common Stock of the Company are duly
authorized, validly issued, fully paid and nonassessable. Except as set forth in
the Memorandum, there are no outstanding options, warrants, rights, convertible
securities or other agreements or plans under which the Company may become
obligated to issue, sell or transfer shares of its capital stock or other
securities.
3.3 Authority Relative to this Agreement. The execution,
delivery and performance of, and compliance with, this Agreement and the sale
and issuance of the Preferred Stock have been duly authorized by all necessary
corporate action on the part of the Company, and this Agreement is a valid and
binding agreement of the Company,
2.
<PAGE> 3
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or other laws
relating to or affecting the enforcement of creditors' rights generally and
general principles of equity (whether enforcement is sought by proceedings in
equity or at law). No consent, license, approval or authority of, or
registration or declaration with, any governmental authority, bureau or agency
is required in connection with the execution, delivery and performance of this
Agreement by the Company or the issuance of the Preferred Stock hereunder,
except under Regulation D under the Act and applicable state securities laws.
Neither the execution nor the delivery of this Agreement nor the consummation of
the transactions contemplated hereby will conflict with, or, with or without the
giving of notice or passage of time, result in a breach of the terms, conditions
or provisions of, or constitute a default under, or result in the imposition of
any lien or encumbrance upon any asset or property of the Company pursuant to,
any applicable law, administrative regulation or judgment, order or decree of
any court or governmental body, any contract or agreement to which the Company
is a party or by which it or any of its properties, assets or rights is bound or
affected, or the Certificate of Incorporation or Bylaws of the Company. Upon
delivery of the Stock under this Agreement and payment of the purchase price
thereof, good and marketable title thereto, free and clear of all pledges,
liens, claims, encumbrances and restrictions, except for the transfer
restrictions set forth in Sections 4.1 and 4.6 of this Agreement, will pass to
the Purchaser. At the time of delivery, the Stock will be duly authorized,
validly issued, fully paid and non-assessable.
3.4 Tax Returns and Audits. All required federal, state
and material local tax returns of the Company have been filed, and all federal,
state and local taxes required to be paid with respect to such returns have been
paid or due provision for the payment thereof has been made and the Company is
not delinquent in the payment of any such tax or in the payment of any
assessment or governmental charge. The Company does not have any tax deficiency
proposed or assessed against it and has not executed any waiver of any statute
of limitations on the assessment or collection of any tax. None of the Company's
federal income tax returns nor any state or local income or franchise tax return
has been audited by governmental authorities in a manner to bring such audit to
the Company's attention.
3.5 Financial Statements. Included in the Memorandum as
Appendix B and Appendix C thereto are certain financial statements, including
the audited balance sheets of the Company as of March 31, 1996 and 1995, the
audited statements of operations for the years ended March 31, 1996, 1995 and
1994, the consolidated balance sheets as of September 30, 1996 (unaudited) and
March 31, 1996, and the consolidated statement of operations for the three
months ended September 30, 1996 and 1995 (unaudited). Accompanying this
Agreement is a copy of the Company's quarterly report for the period ending
December 31, 1996, which report contains unaudited financial statements for the
period ending December 31, 1996, which financial statements, together with the
financial statements included in the Memorandum are herein collectively referred
to as the "Financial Statements". The Financial Statements are complete and
accurate and present fairly the financial position of the Company and the
results of its operations
3.
<PAGE> 4
and cash flow, all as of the dates of such Financial Statements. At the
respective dates of the balance sheets referred to in this Section 3.5, the
Company did not have any material liability or obligation of any nature, whether
accrued, absolute, fixed or contingent, and whether due or to become due, that,
in accordance with GAAP applied on a consistent basis, should have been shown or
reflected in the balance sheets but were not, except for the omission of notes
in unaudited balance sheets with respect to contingent liabilities that in the
aggregate did not materially exceed those so reported in the latest audited
balance sheets included in the Financial Statements and that were substantially
the same type as so reported. Since December 31, 1996, there has been no change
in the business or condition (financial or otherwise) of the Company which is
materially adverse to the Company or to its business, operations, prospects or
condition (financial or otherwise).
3.6 Litigation. There are no legal actions, suits,
arbitrations, investigations or any other legal, administrative or governmental
proceedings pending or, to the knowledge of the Company, threatened against the
Company, its properties, assets or business, which, if decided adversely, would
have a material adverse effect upon the business, properties, operations,
prospects or condition (financial or otherwise) of the Company. The Company is
not in default with respect to any judgment, order or decree of any court or any
governmental agency or instrumentality.
3.7 Title to Properties and Encumbrances. All property,
including real and personal property (tangible or intangible) that is used in
the business or operations of the Company as now conducted and which is
reflected in the Financial Statements, is owned, leased or licensed by the
Company. The Company has good and marketable title to all of its material
properties and assets, including, without limitation, the properties and assets
reflected in the Financial Statements, except for property disposed of in the
ordinary course of business since the date of the Financial Statements, subject
to no mortgage, pledge, lien, charge, security interest, encumbrance or
restriction, except (a) those which are shown and described in the Financial
Statements or the notes thereto and (b) those which do not materially affect the
value of or interfere with the uses made of such properties and assets.
3.8 Securities Laws. Based in part upon the
representations and warranties contained in Section 4 of this Agreement, and on
similar representations made to the Company by all other purchasers of Preferred
Stock, no consent, authorization, approval, permit or order of, or filing with,
any governmental or regulatory authority is required under current laws and
regulations in connection with the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Stock, other than the filing of a
Notice on Form D under the Act and the qualification thereof, if required, under
applicable state securities laws, which qualification has been or will be
effected as a condition of these sales. Under the circumstances contemplated
hereby, the offer, issuance, sale and delivery of the Stock will not under
current laws and regulations require compliance with the prospectus delivery or
registration requirements of the Act.
4.
<PAGE> 5
3.9 Compliance With Other Instruments. The Company is
not in violation of its Certificate of Incorporation or its Bylaws, nor is it in
violation of, or in default under, any material lien, indenture, mortgage,
lease, agreement, instrument, commitment or arrangement, or subject to any
restriction which would prohibit the Company from entering into or performing
its obligations under this Agreement.
3.10 Licenses. The Company holds all material licenses
that are required to be held by the Company or which are necessary to permit the
Company to carry on its business as now conducted and proposed to be conducted.
3.11 Disclosure. Neither the Memorandum, nor any
representation or warranty in this Agreement or in any writing furnished or to
be furnished pursuant hereto or in connection herewith, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact required to be stated therein or herein or necessary to make the
statements therein or herein not misleading as of the date of this Agreement.
4. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants that:
4.1 Investment Intent. The Stock (and the Common Stock
into which it is convertible) being acquired by the Purchaser hereunder is being
acquired for its own account and not with the view to, or for resale in
connection with, any distribution other than resales made in compliance with the
registration and prospectus delivery requirements of the Act. The Purchaser
understands that neither the Stock nor the Common Stock into which the Stock is
convertible has been registered under the Act by reason of exemptions from the
registration and prospectus delivery requirements of the Act available pursuant
to Sections 3(b) or 4(2) thereof, that such shares must be held indefinitely
unless such shares are registered under the Act or unless any transfer is exempt
from registration, and that the reliance of the Company and others upon this
exemption is predicated in part upon this representation and warranty by the
Purchaser. The Purchaser understands that, unless registered, the Purchaser may
not sell the Stock or the Common Stock into which the Stock is convertible
pursuant to Rule 144, promulgated under the Act by the Securities and Exchange
commission (the "Commission"), prior to the expiration of a two-year period
after the date the Purchaser acquires the Stock, and that any sales pursuant to
Rule 144 are limited in amount and can only be made in full compliance with the
provisions of Rule 144, which include specific requirements that the Company is
then providing certain information to the public with respect to its business
and financial affairs.
4.2 Residence and Qualification as an Accredited
Investor. The state or jurisdiction in which the Purchaser's principal residence
or principal office is located is the state or jurisdiction set forth as the
Purchaser's address in Exhibit A. The Purchaser is an Accredited Investor within
the meaning of Rule 501 under the Act and has such knowledge and experience in
financial and business matters that the Purchaser
5.
<PAGE> 6
is capable of evaluating the merits and risks of the investment to be made
hereunder by the Purchaser.
4.3 Acts and Proceedings. This Agreement has been duly
authorized by all necessary action on the Purchaser's part and has been duly
executed and delivered by the Purchaser, and is valid and binding agreement upon
the Purchaser enforceable in accordance with its terms.
4.4 Receipt of Information. The Purchaser has received
(i) the Memorandum, including all appendices thereto, and (ii) a copy of the
Certificate of Designations of Western Water Company that fixes and determines
the rights, preferences, privileges and restrictions relating to the Preferred
Stock, and has read and is familiar with the terms and provisions thereof. The
Purchaser has had access to all of the Company's material books and records and
access to the Company's officers has been provided to the Purchaser or to the
Purchaser's qualified agents. The Purchaser has not read or relied upon any
newspaper articles about the Company in making the investment in Preferred Stock
hereunder.
4.5 Exhibit A. All of the statements made by the
Purchaser in Exhibit A are true and complete in all material respects as of the
date hereof. The Purchaser agrees to promptly notify the Company prior to the
Closing, in writing, of any material change to any of the statements or
information set forth in Exhibit A. Absent such notification, the issuance of
the Stock shall be deemed to be an automatic affirmation by the Purchaser of the
truth, completeness and accuracy of the statements and information set forth in
Exhibit A. The Purchaser understands and acknowledges that the Company is
relying upon the truth, completeness and accuracy of the information set forth
in this Section 4 and in Exhibit A in complying with its obligations under
applicable securities laws.
4.6 Legend. The Purchaser acknowledges and agrees that
the certificates representing the Stock, and the certificates representing the
Common Stock into which the Stock may be converted, shall bear the following (or
substantially equivalent) legend on the face or reverse side thereof:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SAID ACT OR UNLESS SOLD PURSUANT TO RULE 144
PROMULGATED UNDER SAID ACT, OR UNLESS, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
PROVISIONS OF SAID ACT.
6.
<PAGE> 7
Any stock certificate issued at any time in exchange or substitution for any
certificate bearing such legend shall also bear such (or substantially
equivalent) legend unless, in the, opinion of counsel for the Company, the
securities represented thereby need no longer be subject to restrictions
pursuant to the Act or applicable state securities laws. The Company shall not
be required to transfer on its books any certificate for securities in violation
of the provisions of such legend.
5. Registration. Promptly after the later of the First Closing
or the last of any Additional Closings, the Company shall commence preparing and
shall thereafter file with the Commission, as soon as practicable, a
registration statement under the Act on Form S-3 covering all of the Preferred
Stock issued in connection with the Offering (including the Stock acquired by
the Purchaser), all shares of Preferred Stock that may be issued to the
Purchaser pursuant to Paragraph 2 of the Certificate of Designations, and all of
the Common Stock into which such Preferred Stock is convertible (such Preferred
Stock and Common Stock is hereinafter collectively referred to as the
"Registered Stock"), and the Company shall use its best efforts to cause such
registration statement to be declared effective by the Commission under the Act
as soon as practicable. In the event that the Preferred Stock issuable pursuant
to Paragraph 2 of the Certificate of Designations and/or the Common Stock
issuable upon the conversion of such shares of Preferred Stock cannot be
included in the foregoing Form S-3 registration statement, the Company agrees to
file an additional registration statement on Form S-3 to register such
additional shares of Preferred Stock and/or Common Stock within five business
days after the issuance of shares of Preferred Stock under Paragraph 2 of the
Certificate of Designations. The provisions of this Section 5 shall apply to the
initial Form S-3 registration statement and to any other Form S-3 registration
statement filed pursuant to this Section 5. Thereafter, the Company shall use
its best efforts to keep such registration statement effective until the earlier
to occur of: (i) the third anniversary of the latest Closing Date hereunder,
(ii) all of the original purchasers of the Registered Stock have sold all of
their registered stock in public sales, or (iii) such Registered Stock is exempt
pursuant to Rule 144 under the Act; and the Company shall file amendments to the
registration statement and otherwise comply with all applicable federal and
state securities laws and regulations as necessary and as promptly as possible
to permit continuing sales by the original purchasers during the period the
registration statement is required to be effective hereunder.
5.1 Registration Procedures. In connection with the
foregoing registration of the Registered Stock under the Act, the Company will:
(a) Furnish to the original purchasers of the
Registered Stock and to brokers or dealers effecting transactions in the shares
of the Registered Stock on behalf of such purchasers such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such purchasers, brokers or dealers may reasonably
request in order to facilitate the public sale of such securities;
7.
<PAGE> 8
(b) Use its reasonable best efforts to register or
qualify the securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating holders
may reasonably request, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(c) Promptly notify the security holders
participating in such registration of the time when such registration statement
has become effective or when a supplement to any prospectus included in such
registration statement has been filed;
(d) Notify such purchasers promptly of any request by
the Commission for the amending or supplementing of such registration statement
or prospectus or for additional information;
(e) Promptly advise such purchasers of the issuance
of any stop order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.
5.2 Expenses.
(a) With respect to each inclusion of shares of the
Stock in a registration statement pursuant to this Section 5, any and all fees,
costs and expenses of or incidental to, or incurred in connection with such
registration (as specified in paragraph (b) below) shall be borne by the
Company; provided, however, that any security holders participating in such
registration shall bear their pro rata share of any commissions and transfer
taxes.
(b) The fees, costs and expenses of or incidental to
each such registration to be borne by the Company as provided in paragraph (a)
above shall include, without limitation, all registration, fees, printing
expenses, fees and disbursements of counsel and accountants for the Company, and
all legal fees and disbursements and other expenses of complying with state
securities or blue sky laws of any jurisdictions in which the securities to be
offered are to be registered or qualified, fees and disbursements of one counsel
for all of the original purchasers of the Registered Stock, and any other
expenses reasonably incurred by them not expressly included above. All such
fees, costs and expenses shall be paid, or reimbursed by the Company to the
purchasers of Preferred Stock, as and when such fees, costs and expenses are
incurred, against documentation evidencing the incurrence thereof.
(c) Except as set forth in this Section 5, nothing in
this Agreement shall obligate the Company to undergo an audit other than as
required under
8.
<PAGE> 9
rules of the Commission applicable to the Company or to keep any registration
statement filed pursuant to this Agreement current and effective.
5.3 Indemnification.
(a) The Company shall indemnify, hold harmless and
defend each holder of shares of Registered Stock which shares are included in a
registration statement pursuant to the provisions of this Section 5, any
underwriter (as defined in the Act), and each person, if any, who controls such
holder or underwriter within the meaning of the Act, from and against, and will
reimburse such holder or underwriter and each such controlling person with
respect to, any and all loss, damage, liability (joint and several), cost and
expense (as and when incurred), including without limitation, the costs of
investigation and defense of any legal action, proceeding or investigation, to
which such holder or underwriter or any such controlling person may become
subject under the Act, the Securities Exchange Act of 1934, as amended, or
otherwise, insofar as such losses, damages, liabilities, costs or expenses (i)
are caused by, arise out of, or are based upon any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto or any
other document incident to the registration of the Registered Stock under the
Act or the qualification of the Registered Stock under any state securities
laws, (ii) arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or (iii) arise out of or are based upon any federal or state
securities law, rule or regulation applicable to the Company and relating to
action or inaction by the Company in connection with any such registration or
qualification; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by such holder, such underwriter or such controlling person in writing
specifically for use in the preparation thereof.
(b) Each holder of shares of the Registered Stock
which are included in a registration pursuant to the provisions of this Section
5 will indemnify and hold harmless the Company, any controlling person and any
underwriter from and against, and will reimburse the Company, any controlling
person and any underwriter with respect to, any and all loss, damage, liability,
cost or expense to which the Company or any controlling person and/or any
underwriter may become subject under the Act, the Securities Exchange Act of
1934, as amended, or otherwise, insofar as such losses, damages, liabilities,
costs or expenses are caused by any untrue or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or, any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the
9.
<PAGE> 10
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in strict conformity with
written information furnished by such holder specifically for use in the
preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section 5.3 of notice
of the commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, if the defendants in any action include both the
indemnifying party and the indemnified party and if there is a conflict of
interest which would prevent counsel for the indemnifying party from also
representing the indemnified party, or any of the indemnified parties have
available to them defenses or counterclaims not available to the indemnifying
party even though this does not result in a conflict of interest, the
indemnified parties shall have the right to select one separate counsel to
participate in the defense of such action on behalf of all such indemnified
party or parties at the expense of the Company. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the proviso of
the preceding sentence, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
6. Opinion of Company's Counsel. Upon the later of the First
Closing or the last Additional Closings, if any, Troy & Gould Professional
Corporation, counsel to the Company, shall deliver to First Boston, as
representative of all of the purchasers of the Preferred Stock sold in the
Offering an opinion, dated as of the Closing Date, substantially in the form set
forth as Exhibit C hereto.
7. Survival of Representations and Warranties, Etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the sale and purchase of the Stock and payment
therefor. All statements contained
10.
<PAGE> 11
in any certificate, instrument or other writing delivered by or on behalf of the
Company pursuant hereto or in connection with or in contemplation of the
transactions herein contemplated shall constitute representations and warranties
by the Company hereunder.
8. Parties in Interest. Except as otherwise expressly provided
herein, all the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, whether so expressed or not, and, in particular,
shall inure to the benefit of and be enforceable by the holder or holders at the
time of any of the Stock.
9. Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
10. Choice of Law. It is the intention of the parties that the
validity of this Agreement, the construction of its terms and the interpretation
of the rights and duties of the parties hereunder shall be governed by the laws
of the State of California without regard to the principles of conflicts of laws
thereof.
11. Counterparts. This Agreement may be executed concurrently in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
WESTERN WATER COMPANY,
a Delaware corporation
By:_________________________
Name:
Title:
PURCHASER
[INSERT NAME]
By:_________________________
Name:
Title:
12.
<PAGE> 13
EXHIBIT A
INVESTOR QUESTIONNAIRE
All statements made herein by the Purchaser will be kept strictly
confidential. However, by signing the Agreement, the Purchaser agrees that the
Company and its agents may present the statements made herein to such parties as
the Company and its agents deem appropriate if called upon to establish the
Company's entitlement to a private offering exemption under the Act or any
applicable state securities law.
[Print or type your responses]
1. Name:_________________________________________________________________
Type of entity if other than individual:
Date of birth or year of organization:________________________________
Social Security or Federal Tax ID No.:________________________________
2. Home address or, if other than an individual, principal office address:
______________________________________________________________________
______________________________________________________________________
Telephone number:_____________________________________________________
3. I am subscribing for______Shares of Stock
Purchase price per share of the Stock $ 1,000
4.* Employer:_____________________________________________________________
Nature of business:___________________________________________________
Position:_____________________________________________________________
Business Address:_____________________________________________________
Business Phone Number: ______________________________________________
- -----------------
* This question is to be answered by individuals only.
13.
<PAGE> 14
5. I am an accredited investor (as defined in the Act) because (check each
appropriate description):
____ I am a natural person whose individual net worth, or joint net
worth with my spouse, exceeds $1,000,000.
____ I am a natural person who had individual income exceeding
$200,000 in each of the two most recent years or joint income
with my spouse exceeding $300,000 in each of those years and I
have a reasonable expectation of reaching the same income
level in the current year.
____ I am a broker-dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934.
____ I am an organization described in Section 501(c)(iii) of the
Internal Revenue Code, a corporation, a Massachusetts or
similar trust, or partnership, not formed for the specific
purpose of acquiring the Preferred Stock offered hereby, with
total assets exceeding $5,000,000.
____ I am (i) an insurance company as defined in Section 2(13) of
the Act, (ii) an investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in Section 2(a)(48) of that Act, (iii) a
Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958, or (iv) a plan
established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees,
with total assets in excess of $5,000,000.
____ I am a trust, not formed for the specific purpose of acquiring
the Preferred Stock offered hereby, with total assets
exceeding $5,000,000 and whose purchase is directed by a
"sophisticated person," as defined in Rule 506(b)(2)(ii) of
Regulation D under the Act.
____ I am an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 and (i)
investment decisions for such plan are made by a plan
fiduciary, as defined in Section 3(21) of such Act, which is a
bank, savings and loan association, insurance company or
registered investment advisor or (ii) such plan has total
assets exceeding $5,000,000 or (iii) if a
14.
<PAGE> 15
self-directed plan, investment decisions are made solely by
accredited investors.
____ I am an entity in which all of the equity owners are
accredited investors.
________________________________________
Type or print name of Purchaser
Certificates representing the Stock should be registered under the following
name:
_________________________________________
Type or print name to appear on stock certificate
15.
