<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM F-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONSOLIDATED WATER CO. LTD.
(Exact name of Registrant as specified in charter)
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<S> <C>
CAYMAN ISLANDS, B.W.I. NONE
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or registration)
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TRAFALGAR PLACE, WEST BAY ROAD
P.O. BOX 1114GT
GRAND CAYMAN, CAYMAN ISLANDS, B.W.I.
(345) 945-4277
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
JEFFREY M. PARKER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CONSOLIDATED WATER CO. LTD.
TRAFALGAR PLACE, WEST BAY ROAD,
P.O. BOX 1114GT
GRAND CAYMAN, CAYMAN ISLANDS, B.W.I.
(345) 945-4277
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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Copies to:
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<S> <C>
LESLIE J. CROLAND, P.A. JUSTIN P. KLEIN, ESQ.
STEEL HECTOR & DAVIS LLP BALLARD SPAHR ANDREWS & INGERSOLL, LLP
200 SOUTH BISCAYNE BOULEVARD, 40TH FLOOR 1735 MARKET STREET, 51ST FLOOR
MIAMI, FL 33131-2398 PHILADELPHIA, PA 19103
(305) 577-7000 (215) 864-8606
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
reasonably practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, 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, check the following box [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED
AMOUNT MAXIMUM PROPOSED AMOUNT OF
TITLE OF EACH TO BE OFFERING PRICE AGGREGATE REGISTRATION
CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
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<S> <C> <C> <C> <C>
Ordinary shares, par value C.I.$1.00 977,500 $7.1875 $7,025,781.25 $1,854.81
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(1) Includes 127,500 ordinary shares that the underwriters have the option to
purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
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 Securities and Exchange Commission, acting
pursuant to such Section 8(a), may determine.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
HAVE FILED A REGISTRATION STATEMENT WITH THE SECURITIES AND EXCHANGE
COMMISSION RELATING TO THIS OFFERING. WE MAY NOT SELL THESE SECURITIES
UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS
ORDINARY SHARES
LOGO OF
CONSOLIDATED WATER CO. LTD.
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We are selling 770,000 ordinary shares and the selling shareholder is selling
80,000 ordinary shares. We will not receive proceeds from the ordinary shares
sold by the selling shareholders.
Our ordinary shares are quoted on the Nasdaq National Market under the symbol
CWCO. On , 2000, the last reported sale price of the ordinary shares
on Nasdaq was per share.
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BEFORE INVESTING, YOU SHOULD REVIEW THE "RISK FACTORS" BEGINNING ON PAGE 6.
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<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Consolidated Water.............................. $ $
Proceeds to the Selling Shareholder......................... $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to 127,500
additional ordinary shares on the same terms and conditions as the ordinary
shares purchased in this offering solely to cover over-allotments, if any.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Janney Montgomery Scott LLC and First Security Van Kasper, on behalf of the
underwriters of this offering, expect to deliver the ordinary shares on or about
, 2000 in Philadelphia, Pennsylvania. The sale of the ordinary
shares is subject to a number of conditions.
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JANNEY MONTGOMERY SCOTT LLC FIRST SECURITY VAN KASPER
The date of this prospectus is , 2000
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[INSIDE COVER PHOTOGRAPH]
<PAGE> 4
TABLE OF CONTENTS
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<S> <C>
PROSPECTUS SUMMARY.......................................... 1
SUMMARY FINANCIAL INFORMATION............................... 4
FORWARD LOOKING STATEMENTS.................................. 5
RISK FACTORS................................................ 6
USE OF PROCEEDS............................................. 10
PRICE RANGE OF ORDINARY SHARES.............................. 10
DIVIDEND POLICY............................................. 10
CAPITALIZATION.............................................. 11
SELECTED FINANCIAL INFORMATION.............................. 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 13
BUSINESS.................................................... 20
MANAGEMENT.................................................. 27
PRINCIPAL AND SELLING SHAREHOLDERS.......................... 33
CAYMAN ISLANDS TAXATION AND FOREIGN EXCHANGE REGULATIONS.... 34
DESCRIPTION OF SECURITIES................................... 35
UNDERWRITING................................................ 37
LEGAL MATTERS............................................... 38
EXPERTS..................................................... 38
WHERE YOU CAN FIND MORE INFORMATION......................... 38
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE ORDINARY SHARES,
INCLUDING OVER-ALLOTMENT AND EFFECTING SYNDICATE COVERING TRANSACTIONS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
------------------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE ORDINARY SHARES
ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M OF THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
i
<PAGE> 5
PROSPECTUS SUMMARY
This summary calls your attention to selected information in this
prospectus, but may not contain all the information that is important to you.
Unless otherwise indicated, all the information contained in this prospectus
assumes that the underwriters will not exercise their over-allotment option. To
understand this offering fully and for a more complete description of this
offering, you should read this entire document carefully, including particularly
the "RISK FACTORS" section, as well as the documents we have referred you to in
the section called "WHERE YOU CAN FIND MORE INFORMATION." Unless otherwise
indicated, all dollar amounts listed in this prospectus are in United States
Dollars and any references to "$" or "U.S.$" are to United States Dollars.
References in this prospectus to "CI$" are to Cayman Islands Dollars.
OUR BUSINESS
Our company, Consolidated Water Co. Ltd., provides potable water to the
Seven Mile Beach and West Bay areas of Grand Cayman Island. We currently operate
in these areas under an exclusive license from the Cayman Islands government.
The Cayman Islands government, through Water Authority-Cayman, supplies water to
parts of Grand Cayman Island which are not within our licensed area. We obtain
water from two reverse osmosis desalination plants on Grand Cayman, which we own
along with substantially all of the 63-miles of our distribution infrastructure.
Our plants are equipped with efficient, state-of-the-art technology, and we
consistently provide high quality water to our customers. We have been operating
our desalinization facilities on Grand Cayman Island since 1973 and have been
using reverse osmosis technology since 1989. There is no natural supply of fresh
water in the Cayman Islands.
For the year ended December 31, 1999, we supplied 401 million U.S. gallons
of water to hotels, residential customers, condominiums, other commercial
customers and government facilities. For the year ended December 31, 1999, our
revenues increased to $8.2 million and our net income increased by approximately
17% to $1.9 million. There are no income taxes in the Cayman Islands. In October
1999, we doubled our dividend to ordinary shareholders from $0.16 per share to
$0.32 per year, payable on a quarterly basis. We expect to continue increasing
our dividend as our earnings grow.
Considerable development is taking place on Grand Cayman Island, and
particularly in our licensed areas, to accommodate both the growing local
population and increased tourism. In the year 2000, four new hotel developments
providing for approximately 540 additional rooms have opened or are scheduled to
open within our exclusive service area. The Cayman Islands are a major
international banking and financial center. According to the Cayman Islands
government, the population of the Cayman Islands was approximately 20,000
persons in 1984 and is estimated to be approximately 40,000 persons in 1999. The
rate of tourism in the Cayman Islands has increased on average 8% annually over
the past 10 years. From June 1989 through December 1999, stay-over tourist
arrivals have increased from 210,000 persons in 1989 to 395,000 persons in 1999,
and cruise-ship arrivals have increased from 404,000 persons in 1989 to
1,036,000 persons in 1999.
Although we are currently only operating in the Cayman Islands, we believe
that our potential market consists of any location where there is a need for
potable water. According to the information contained in the Paul Simon book
"Tapped Out: The Coming World Crisis in Water and What We Can Do About It"
(C)1998, the world's population of 5.9 billion will double in the next 40 to 90
years and the per capita world water consumption is growing twice as fast as the
world's population. The world's supply of water, however, is relatively
constant. The desalination of ocean water, either through distillation or
reverse osmosis, is widely regarded as the most viable alternative to fresh
water in areas with an insufficient natural supply. We believe our experience in
the development and operation of reverse osmosis desalination plants provides us
with a significant ability to expand our operations beyond the Cayman Islands.
We are currently in discussions with the Bahamian government and developers in
North and South Bimini, Bahamas to provide potable water to these islands.
1
<PAGE> 6
OUR STRATEGY
There are three key elements to our growth strategy:
WE INTEND TO CONTINUE DEVELOPING OUR PRODUCTION AND DISTRIBUTION
INFRASTRUCTURE AND PROVIDING HIGH QUALITY POTABLE WATER TO OUR LICENSED
AREA IN THE CAYMAN ISLANDS. Primarily as a result of new customers, our
revenues have increased from $3,166,751 in 1989 to $8,249,988 in 1999,
representing a compound annual growth rate of approximately 10%. In
addition to other measures, we have increased our margins by managing our
West Bay production facility and by increasing the energy efficiency of our
plants. Similarly in January 2005, we will begin managing our Governor's
Harbour production facility in Seven Mile Beach.
WE INTEND TO EXPAND OUR OPERATIONS TO MARKETS OUTSIDE THE CAYMAN
ISLANDS WHERE THERE IS A NEED FOR POTABLE WATER, INCLUDING THE BAHAMAS. We
are currently in various stages of discussion to supply water in several
new markets and may pursue these opportunities either on our own or through
joint ventures. So far, we have focused on various locations throughout the
Caribbean and Central America.
WE ALSO INTEND TO EXPAND OUR EXISTING AND FUTURE OPERATIONS INTO
COMPLEMENTARY SERVICES, SUCH AS WASTEWATER. Prior to the installation of a
central wastewater system by the Cayman Islands government, we provided
wastewater services on Grand Cayman Island, and we intend to use this
expertise to provide such services as we expand outside of the Cayman
Islands.
RECENT DEVELOPMENTS
During the first quarter of this year, several new developments were
completed in our exclusive service area. These developments include a 132-room
Sunshine Suites Hotel, a 100-room Comfort Suites Hotel and Phase I, consisting
of 76 suites, of the 152-suite Grand Caymanian Beach Club time-share resort. For
the three months ended March 31, 2000, water pumped through our distribution
system to customers increased by approximately 7.5% compared with the same
period in 1999. We expect the growth in water pumped through our distribution
system to have a positive impact on operating results for the first quarter of
2000.
OUR ADDRESS AND TELEPHONE NUMBER
Our company, formerly known as Cayman Water Company Limited, was
incorporated in August 1973 under the laws of the Cayman Islands. Our registered
office is located at Trafalgar Place, West Bay Road, Grand Cayman Island. Our
mailing address is P.O. Box 1114GT, Grand Cayman, Cayman Islands, British West
Indies and our telephone number is (345) 945-4277.
2
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THE OFFERING
Ordinary shares offered:
By our company................................ 770,000
By the selling shareholder.................... 80,000
Total................................ 850,000
Ordinary shares outstanding before this
offering........................................ 3,072,615
Ordinary shares to be outstanding after this
offering........................................
Nasdaq National Market symbol................... CWCO
Ordinary shares 52-week price range (through
, 2000)....................................
Current annualized dividend rate................ $0.32 per share
Use of Proceeds:................................ We will use the net proceeds
of this offering to retire
$2.1 million of existing
debt, for implementation of
our growth strategy and for
capital expenditures and
general corporate purposes.
Over-allotment Option........................... We granted the underwriters
of this offering up to
127,500 ordinary shares.
3
<PAGE> 8
SUMMARY FINANCIAL INFORMATION
The following summary financial information is based on our financial
statements which have been prepared in accordance with International Accounting
Standards, referred to as IAS. This information is expressed in U.S. dollars and
is taken from our audited financial statements. The diluted earnings per share
were not required to be stated for the fiscal years ended December 31, 1996 and
1995. You should read this summary financial information together with the more
detailed financial statements and related notes beginning on page F-1 of this
prospectus.
There are no income taxes in the Cayman Islands.
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<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
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1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total income.................. $ 8,249,988 $ 8,187,714 $ 7,468,726 $ 6,365,207 $ 5,934,433
Direct expenses............... 4,624,422 5,095,373 4,806,552 4,231,853 3,961,185
Indirect expenses............. 1,678,967 1,435,345 1,316,534 995,180 705,204
Net income.................... 1,946,599 1,656,996 1,247,754 1,138,174 868,044
Diluted earnings per share.... 0.61 0.52 0.40 -- --
Basic earnings per share...... 0.64 0.54 0.42 0.40 0.38
Dividends per share........... 0.20 0.16 0.14 0.12 0.10
BALANCE SHEET DATA:
Total assets.................. $16,850,076 $16,005,118 $15,139,192 $14,676,450 $13,570,230
Current liabilities........... 2,306,079 1,515,971 1,499,865 1,371,345 2,661,795
Long term debt and other long
term liabilities........... 2,014,352 2,882,319 3,154,255 3,802,951 4,442,719
Stockholders' equity.......... 12,529,645 11,606,828 10,485,072 9,502,154 6,465,716
</TABLE>
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<PAGE> 9
FORWARD LOOKING STATEMENTS
We discuss in this prospectus and in documents which we have incorporated
into this prospectus by reference matters which are not historical facts, but
which are "forward-looking statements." We intend these forward looking
statements to qualify for safe harbor from liability established by the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include, but are not limited to, our future plans, objectives, expectations and
events, assumptions and estimates about our company and our industry in general.
The forward-looking statements in this prospectus reflect what we currently
anticipate will happen. What actually happens could differ materially from what
we currently anticipate will happen. We are not promising to make any public
announcement when we think forward looking statements in this prospectus are no
longer accurate whether as a result of new information, what actually happens in
the future or for any other reason.
Important matters that may affect what will actually happen include, but
are not limited to, tourism in the Cayman Islands, scheduled new construction
within our licensed area, the U.S. and Cayman Islands economies, regulatory
matters, weather conditions in the Cayman Islands, availability of capital for
expansion of our operations, and other factors described in the "RISK FACTORS"
section below as well as elsewhere in this prospectus.
5
<PAGE> 10
RISK FACTORS
We have described for you below some risks involved in investing in the
ordinary shares which we offer under this prospectus. A word of caution: this is
not a complete list of every risk. You should carefully consider each of the
following factors and all of the information both in this prospectus and in the
other documents we refer you to in the section called "WHERE YOU CAN FIND MORE
INFORMATION."
WE RELY ON AN EXCLUSIVE LICENSE IN THE CAYMAN ISLANDS WHICH MAY NOT BE
RENEWED IN THE FUTURE AND UNDER WHICH WE MUST OBTAIN PRIOR APPROVAL FOR AN
INCREASE IN OUR RATES FOR ANY REASON OTHER THAN INFLATION. We presently operate
as a public water utility under an exclusive license originally issued to us in
December 1979 by the government of the Cayman Islands. We own our production
infrastructure and substantially all of our distribution infrastructure.
Our license expires on July 11, 2010. If we are not in default of any terms
of the license, we have a right of first refusal to renew the license on terms
that are no less favorable than those which the government offers to a third
party. Nevertheless, we cannot assure you that the government will renew our
license or that we will be able to negotiate a new license on satisfactory
terms.
Under our license, we must obtain prior approval from the Cayman Islands
government to increase our rates for any reason other than inflation. Our
ability to raise our rates is limited by this requirement, including potential
delays and costs involved in obtaining government approval for a rate increase.
OUR BUSINESS IS AFFECTED BY TOURISM, WEATHER CONDITIONS, THE CAYMAN ISLANDS
ECONOMY AND THE U.S. ECONOMY. Tourist arrivals and weather conditions on the
Cayman Islands impact the demand for our water. Normally, the highest demand is
in the first two quarters of each calendar year, which corresponds with the high
tourist season. Lowest demand for water arises in the third quarter of each
calendar year, which corresponds with the period with the most rainfall and the
least tourist arrivals. Approximately 75% of tourists to the Cayman Islands come
from the U.S. In addition, development activity in the Cayman Islands often
decreases during downturns in the U.S. economy, which is tracked by the Cayman
Islands economy. Accordingly, a significant downturn in tourist arrivals to the
Cayman Islands or in the U.S. economy for any reason would be detrimental to our
revenues and operating results. As a result of the seasonal nature of our
operations, the revenues and profitability we achieve in any one quarter is not
indicative of our expected profitability for a full fiscal year.
WE MAY HAVE DIFFICULTY ACCOMPLISHING OUR GROWTH STRATEGY WITHIN AND OUTSIDE
OF THE CAYMAN ISLANDS. Even though we have an exclusive license for our present
service area, our ability to expand our service area in the Cayman Islands is
limited at the discretion of the Cayman Islands government.
Further, part of our long-term growth strategy is to expand our water
supply and distribution operations to locations outside the Cayman Islands, such
as the Bahamas. Our expansion into new locations depends on our ability to
identify suitable new service territories and to obtain necessary permits and
licenses to operate in these territories.
Although we believe that the proceeds from this offering will satisfy our
capital requirements for expansion in the Cayman Islands for the next twelve
months, we will need additional financing to further expand our operations
elsewhere. We cannot make any assurances to you that we will be able to obtain
the additional financing which we may need to expand our operations on
satisfactory terms, if at all.
Our expansion to territories outside the Cayman Islands includes
significant risks, including, but not limited to, the following:
- regulatory risks, including government relations difficulties, local
regulations and currency controls;
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- risks related to operating in foreign countries, including political
instability, reliance on local economies, environmental or geographical
problems, shortages of materials and skilled labor; and
- risks related to development of new operations, including assessing the
demand for water, engineering difficulties and inability to begin
operations as scheduled.
If our expansion plans are successful, we may have difficulties in managing
our growth outside the Cayman Islands, which are currently the center of our
operations. Expanding our operations to areas outside the Cayman Islands will
require us to hire and train new personnel, expand our management information
systems and control our operating expenses. We cannot currently estimate the
costs required or assure you that any new operations outside the Cayman Islands
will attain or maintain profitability or that the results from these new
operations will not negatively impact our overall profitability.
OUR OPERATIONS IN THE CARIBBEAN COULD BE HARMED BY HURRICANES. The Cayman
Islands, like the rest of the Caribbean, are susceptible to damage from
hurricanes. A significant hurricane could cause major damage to our equipment
and properties and the properties of our customers, including the large tourist
properties in the Seven Mile Beach area. This would result in decreased revenues
from water sales until the damaged equipment and properties are repaired and the
tourism industry returned to the status quo before the hurricane.
WE ARE NOT FULLY INSURED AGAINST HURRICANE DAMAGE. The Cayman Islands have
been directly hit by one hurricane since we began operations in 1973, and the
damage to our properties and equipment was minimal. We are not fully insured on
our underground water distribution system or the Governor's Harbour reservoirs
which are constructed from earthen berms, although we are fully insured on all
of our other above-ground property and equipment including our reverse osmosis
equipment, machinery, other equipment, buildings and the West Bay reservoir
tanks at their estimated replacement value. We will evaluate our needs and
obtain the insurance coverage that we believe is necessary for any new
operations outside the Cayman Islands. A severe hurricane which resulted in
major damage to our properties and equipment could have a material adverse
affect on our operating results.
WE COULD BE NEGATIVELY AFFECTED BY POTENTIAL GOVERNMENT ACTIONS AND
REGULATIONS. There is always a possibility that the government may issue
legislation or adopt new regulations:
- restricting foreign ownership of our company;
- providing for the expropriation of our assets by the government;
- providing for nationalization of public utilities by the government;
- providing for different water quality standards;
- resulting in unilateral changes to or renegotiation of our exclusive
license; or
- causing currency exchange fluctuations or devaluations or changes in tax
laws.
SERVICE OF PROCESS AND ENFORCEMENT OF LEGAL PROCEEDINGS AGAINST US IN THE
UNITED STATES MAY BE DIFFICULT TO OBTAIN. Service of process on our company and
our directors and officers, nine out of twelve of whom reside outside the United
States, may be difficult to obtain within the United States. Also, since
substantially all of our assets are located in the Cayman Islands, any judgment
obtained in the United States against us may not be collectible within the
United States.
Civil liabilities under the Securities Act of 1933 or the Securities
Exchange Act of 1934 for original actions instituted outside the Cayman Islands
may or may not be enforceable. There is no reciprocal enforcement of foreign
judgments between the United States and the Cayman Islands, so foreign judgments
originating from the United States are not directly enforceable in the Cayman
Islands.
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<PAGE> 12
A prevailing party in a United States proceeding against us or our officers
or directors would have to initiate a new proceeding in the Cayman Islands using
the United States judgment as evidence of the party's claim. Any action would
have to overcome available defenses in the Cayman Islands courts, including, but
not limited to:
- lack of competent jurisdiction in the United States courts (including
competent jurisdiction according to the rules of private international
law currently in effect in the Cayman Islands);
- lack of due service of process in the United States proceeding;
- that United States judgments or their enforcement are contrary to the
law, public policy, natural justice, security or sovereignty of the
Cayman Islands;
- that United States judgments were obtained by fraud or conflict with any
other valid judgment in the same matter between the same parties; and
- that proceedings between the same parties in the same matter were pending
in a Cayman Islands court at the time the lawsuit was instituted in the
United States court.
A United States judgment awarding remedies unobtainable in any action in
the courts of the Cayman Islands (for example, treble damages, which would
probably be regarded as penalties), probably would not be enforceable under any
circumstances.
WE RELY HEAVILY ON THE EFFORTS OF SEVERAL KEY EMPLOYEES. Our success
depends upon the abilities of our executive officers. In particular, the loss of
the services of Jeffrey Parker, our Chairman and Chief Executive Officer, or
Peter Ribbins, our President and Chief Operating Officer, at any time could be
detrimental to our operations and our continued success. Although Messrs. Parker
and Ribbins have entered into employment agreements extending until December 31,
2001 and August 19, 2000, respectively, which extend automatically every year
for an additional one-year term, we cannot guarantee that Mr. Parker or Mr.
Ribbins will continue to work for us during the term of their agreements. Also,
none of our employees have entered into non-compete agreements with us.
PROVISIONS IN OUR ARTICLES OF ASSOCIATION, REQUIREMENTS OF GOVERNMENT
APPROVAL AND AN OPTION DEED ADOPTED BY OUR BOARD OF DIRECTORS MAY DISCOURAGE A
CHANGE IN CONTROL OF OUR COMPANY AND MAY MAKE IT MORE DIFFICULT FOR YOU TO SELL
YOUR ORDINARY SHARES. An issuance or transfer of a number of shares which (a)
exceeds 5% of the issued shares of our company, or (b) would, upon registration,
result in any shareholder owning more than 5% of the issued shares, requires the
prior approval of the Cayman Islands government.
It may be difficult for a shareholder to acquire more than 5% of our shares
and be able to influence significantly our board of directors or obtain a
controlling equity interest in our company and change our management and
policies.
Our articles of association include provisions which may discourage or
prevent a change in control of our company. For instance, our board of directors
consists of three groups. Each group serves a staggered term of three years
before the directors in the group are up for re-election. Also, the board of
directors may refuse to register any transfer of shares on our books. This
provision of the articles of association ensures that the board of directors is
not legally obligated to register a share transfer which would cause us to be in
breach of the government license as discussed above. Our board of directors has
never refused to approve the registration of the transfer of shares.
We have also adopted an option deed, which is similar to a poison pill. The
option deed will discourage a change in control of our company by causing
substantial dilution to a person or group who attempts to acquire our company on
terms not approved by the board of directors.
As a result of these provisions which discourage or prevent an unfriendly
or unapproved change in control of our company, you may not have an opportunity
to sell your ordinary shares at a higher market price, which, at least
temporarily, typically accompanies attempts to acquire control of a company
through a tender offer, open market purchases or otherwise.
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WE ARE IN TECHNICAL BREACH OF THE TERMS OF OUR LICENSE. As stated above,
our license requires that the Cayman Islands government approves in advance any
issuance or transfer of ordinary shares which represents more than 5% of the
issued shares, or which would increase the ownership of any shareholder above 5%
of the issued shares of our company.
More than 5% of our issued and outstanding shares are and in the future may
be registered in the name of Cede and Co. Cede and Co. is the nominee for the
Depository Trust Company, otherwise know as DTC, which is a clearing agency for
shares held by participating banks and brokers. We are probably in breach of our
license for failing to get prior approval for Cede and Co.'s shareholdings. In
addition, the shares being offered by this prospectus will be registered with
the DTC, which likely further violates our license. We may be in breach of our
license for failing to get prior approval for prior public and private offerings
of our shares.
We have advised the government of these potential technical breaches on
numerous occasions and have requested that the government modify our license. As
of the date of this prospectus, the government has not made any determination as
to our request to modify the license. We cannot give you any assurances that the
government will either modify the license or refrain from exercising its rights
under the license with respect to our possible breach of this clause.
Our license requires the Cayman Islands government to give us notice of and
an opportunity to cure a breach. If the government finds that we are in breach,
we believe we could remedy this breach by electing that the shares no longer be
DTC eligible. However, this election likely would adversely affect interest in
our shares by banks, brokers, market makers, investors and other persons who
wish to hold the shares in street name through DTC. This would impair the
liquidity and market for our shares.
If we cannot remedy a breach of our license, the government may appoint a
person to operate our business on an interim basis. We may then apply to the
government for reinstatement of our license. If the license is not reinstated,
the government may appoint a new licensee to service the licensed area using all
or a portion of our existing production and distribution systems. In this case,
the government would have to compensate us for taking any of our assets, based
upon the value of those assets as a unit of production excluding goodwill as
determined by three appointed appraisers. No assurance can be given that the
interim operator will manage the business successfully or that the price paid by
the government would reflect the growth potential of our company. In addition,
there can be no assurance that you would receive a cash dividend from such
proceeds in the event of a government purchase.
THERE MAY BE A RISK OF VARIATION IN CURRENCY EXCHANGE RATES. Although we
report our results in United States dollars, the majority of our revenue is
earned in Cayman Islands dollars. The Cayman Islands dollar is presently fixed
at US$1=CI$0.83.. The rate of exchange has been fixed since 1974. As a result,
we do not hedge against any exchange rate risk associated with our reporting in
United States dollars. However, if the fixed exchange rate becomes a floating
exchange rate, our results of operations could be affected.
SHARES ELIGIBLE FOR FUTURE SALE UNDER RULE 144 OF THE SECURITIES ACT MAY
ADVERSELY AFFECT THE MARKET PRICE OF THE ORDINARY SHARES. Before this offering,
there were 3,072,615 ordinary shares issued and outstanding. With the exception
of ordinary shares held by officers, directors, ten percent shareholders and
other affiliates of our company, all or substantially all of the shares may be
immediately sold without registration under the Securities Act of 1933. These
shares may be sold under Rule 144(k) or under the exemption provided by Section
4(1) of the Securities Act for transactions by any person other than an issuer,
underwriter or dealer.
In addition, the estimated 904,915 ordinary shares held by our affiliates
are eligible for resale in compliance with Rule 144 of the Securities Act. Any
substantial sale of the ordinary shares under Rule 144, or otherwise, may have
an adverse effect on the market price of the ordinary shares.
9
<PAGE> 14
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of 770,000 ordinary
shares offered by our company in this prospectus, after deducting underwriters'
discounts and commissions and estimated offering expenses, will be
$ ($ if the underwriters exercise the over-allotment option
in full), assuming an offering price of $ per share. We will not
receive any proceeds from the sale of the ordinary shares by the selling
shareholder. We intend to use the net proceeds from this offering to retire
approximately $2.1 million of existing debt, for implementation of our growth
strategy and for capital expenditures and general corporate purposes. We have
not yet determined how we will allocate the remaining proceeds among capital
expenditures, implementation of our growth strategy and general corporate
purposes. The existing debt which we plan to pay off with the proceeds of this
offering is part of a total lending facility issued to us by the Royal Bank of
Canada, which consists of a revolving line of credit bearing interest at New
York Prime plus 1% and term loans bearing interest at LIBOR plus 1.5%. The $2.1
million which we will pay off consists of $1.5 million drawn down under the
revolving line of credit and a $600,000 term loan we entered into in December
1998, which matures in January 2009. Of the $2.1 million debt, we used
approximately $700,000 for expansion of our West Bay plant, approximately
$700,000 for piping of a by-pass extension and the remaining $700,000 for our
share repurchase program. Of the amount which we used to repurchase our shares,
approximately $494,000 was used to repurchase shares from a shareholder whose
assets were being liquidated. As of October 26, 1999, we suspended the
open-market repurchase of our shares. The total cost of expansion of the West
Bay plant, piping of the by-pass extension and repurchase of our shares was
approximately $2.7 million, $600,000 of which has already been repaid.
PRICE RANGE OF ORDINARY SHARES
Our ordinary shares are listed on the Nasdaq National Market and trade
under the symbol "CWCO." On March 31, 2000, we had 568 holders of record of the
ordinary shares. Listed below for the periods indicated are the high and low
closing sale prices for the ordinary shares on the Nasdaq National Market and
the cash dividends declared per share.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND PER SHARE
----- ----- ------------------
<S> <C> <C> <C>
1998
First Quarter........................................ $6.00 $5.00 $.04
Second Quarter....................................... 8.38 5.63 .04
Third Quarter........................................ 6.75 6.00 .04
Fourth Quarter....................................... 8.38 5.69 .04
1999
First Quarter........................................ 8.00 6.50 .04
Second Quarter....................................... 7.81 7.05 .04
Third Quarter........................................ 7.50 6.75 .04
Fourth Quarter....................................... 7.38 6.00 .08
2000
First Quarter........................................ 7.13 6.00 .08
Second Quarter (through 4/12/00)..................... 7.25 6.38
</TABLE>
DIVIDEND POLICY
We have paid cash dividends on our ordinary shares since 1985. The board of
directors' policy has been to pay cash dividends out of accumulated profits on a
quarterly basis if funds are available. As of February 29, 2000, our board of
directors has established a policy, although not a binding obligation, that,
subject to annual review by the board of directors, our company will maintain a
dividend pay-out ratio in the range of 50% to 60% of net income. However, our
payment of any future cash dividends will still depend upon our earnings,
financial condition, capital demand and other factors. The board of directors
declares and approves all interim dividends. However, the final dividend in each
year, if any, is recommended by the board of directors and must be, and has
always been, approved by our shareholders before distribution.
10
<PAGE> 15
CAPITALIZATION
The following table lists our company's capitalization as of December 31,
1999 and as adjusted to give effect to the sale of the ordinary shares offered
by this prospectus. You should read this table together with the financial
statements which are included in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------------------
ACTUAL AS ADJUSTED
---------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT
----------- ------- --------- -------
<S> <C> <C> <C> <C>
Long Term Bank Indebtedness:................... $ 1,926,786 13.3%
Other Long Term Liabilities:................... 87,566 0.6% 87,566 0.6%
Stockholders' Equity:
Ordinary Shares, par value CI$1.00 per share;
9,900,000 authorized; 3,072,615 shares
issued and outstanding (3,262,467 less
189,852 shares repurchased)............... 3,687,138 25.5% 0.0%
Redeemable Preference Shares, par value
CI$1.00 per share; 100,000 shares
authorized; 41,058 issued and
outstanding............................... 49,270 0.3% 49,270 0.3%
Additional Paid in Capital less excess over
par value for shares repurchased.......... 1,614,339 11.2% 0.0%
Retained Earnings............................ 7,104,523 49.1% 7,104,523 49.1%
----------- ----- --------- ----
Stockholders' Equity......................... 12,455,270 86.1% 7,153,793 49.4%
----------- ----- --------- ----
Total Capitalization................. 14,469,622 100.0% 7,241,359 50.0%
=========== ===== ========= ====
</TABLE>
The ordinary shares and additional paid in capital at December 31, 1999
have been adjusted for the exercise of warrants for 100,000 ordinary shares and
the repurchase of 79,100 ordinary shares in the first quarter of 2000. The
capitalization after this offering excludes an aggregate of 282,156 ordinary
shares issuable upon exercise of stock options and warrants outstanding at
December 31, 1999 at exercise prices ranging from $2.50 to $7.875 per share.
The table above presents the $227,822 par value of shares repurchased as
allocated to "Ordinary Shares" and the $1,087,856 excess over the par value paid
for shares repurchased as allocated to "Additional Paid in Capital." Shares
repurchased are presented as a line item called "Treasury Shares" in our
financial statements in this prospectus.
11
<PAGE> 16
SELECTED FINANCIAL INFORMATION
The following selected financial data is based on our financial statements
which have been prepared in accordance with International Accounting Standards,
referred to as IAS. This information is expressed in U.S. dollars and is taken
from our audited financial statements. The diluted earnings per share were not
required to be stated for the fiscal years ended December 31, 1996 and 1995. You
should read this selected financial information together with the more detailed
financial statements and related notes beginning on page F-1 of this prospectus.
There are no income taxes in the Cayman Islands.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total income.................. $ 8,249,988 $ 8,187,714 $ 7,468,726 $ 6,365,207 $ 5,934,433
Direct expenses............... 4,624,422 5,095,373 4,806,552 4,231,853 3,961,185
Indirect expenses............. 1,678,967 1,435,345 1,316,534 995,180 705,204
Exceptional item.............. -- -- 97,886 -- 400,000
Net income.................... 1,946,599 1,656,996 1,247,754 1,138,174 868,044
Diluted earnings per share.... 0.61 0.52 0.40 -- --
Basic earnings per share...... 0.64 0.54 0.42 0.40 0.38
Dividends per share........... 0.20 0.16 0.14 0.12 0.10
BALANCE SHEET DATA:
Total assets.................. $16,850,076 $16,005,118 $15,139,192 $14,676,450 $13,570,230
Current liabilities........... 2,306,079 1,515,971 1,499,865 1,371,345 2,661,795
Long term debt and other long
term liabilities........... 2,014,352 2,882,319 3,154,255 3,802,951 4,442,719
Stockholders' equity.......... 12,529,645 11,606,828 10,485,072 9,502,154 6,465,716
</TABLE>
12
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Our objective is to provide water services in areas where the supply of
potable water is scarce and where the use of reverse osmosis technology to
produce potable water is economically feasible. We have been operating our
business on Grand Cayman Island since 1973 and have been using reverse osmosis
technology to convert seawater to potable water since 1989. There is no natural
supply of fresh water on the Cayman Islands. We are currently in discussions
with the Bahamian government and developers in North and South Bimini, Bahamas
to operate reverse osmosis plants and provide potable water to these islands.
For the year ended December 31, 1999, our net income increased by
approximately 17% to $1,946,599. There are no income taxes in the Cayman
Islands. In October 1999, we doubled our dividend to ordinary shareholders from
$0.16 per share to $0.32 per year, payable on a quarterly basis. As of February
29, 2000, our board of directors has established a policy that our company will
maintain a dividend pay-out ratio in the range of 50% to 60% of net income. This
policy is subject to modification by our board of directors. We expect to
continue increasing our dividend as our earnings grow.
We currently operate under an exclusive license from the Cayman Islands
government to provide potable water in Seven Mile Beach and West Bay, Grand
Cayman Island. We obtain water from two reverse osmosis plants on Grand Cayman,
which together are capable of producing 1.8 million U.S. gallons per day, or
approximately 657 million U.S. gallons per year. We own our reverse osmosis
plants and substantially all of the 63-miles of our underground distribution
infrastructure. For the year ended December 31, 1999, we supplied 401 million
U.S. gallons of water to hotels, residential customers, condominiums, other
commercial customers and government facilities.
Considerable development is taking place on Grand Cayman Island, and
particularly in our licensed areas, to accommodate both the growing local
population and increased tourism. Because our license requires us to supply
water to developments in our licensed area, the planning department of the
Cayman Islands government routinely advises us of proposed developments in our
licensed area. This advance notice allows us to manage our production capacity
to meet anticipated demand. We believe that we have or have contracted for a
sufficient supply of water to meet the foreseeable future demand.
We installed our first reverse osmosis plant in December 1989 at Governor's
Harbour, located in the Seven Mile Beach area, through a water purchase
agreement with Ocean Conversion (Cayman) Ltd. Under the agreement, Ocean
Conversion operates the plant, and we must purchase a minimum volume of water
from Ocean Conversion. In addition, Ocean Conversion has to provide to us
additional volumes of water upon demand up to a fixed level, and any excess on a
best efforts basis. The agreement requires a plant capacity of 1.1 million U.S.
gallons per day, which is the maximum capacity of the plant. We make installment
payments to Ocean Conversion against the cost of the plant as part of the
purchase price of the water provided to us by them. As of March 31, 2000, the
remaining installment payments owed to Ocean Conversion totaled $234,065, and
are scheduled to be completed by December 31, 2000. The agreement expires on
December 31, 2004, at which time we will have fulfilled our obligations under
the agreement and we will be the sole owner and sole operator of the plant. Upon
expiration of our agreement with Ocean Conversion, we expect that our operating
costs at Governor's Harbour will decrease significantly.
In 1995, we installed our second reverse osmosis seawater conversion plant,
this one at our West Bay site, and entered into a water purchase agreement with
United States Filter Corporation. Under this agreement, United States Filter
Corporation operated and maintained the plant until November 1998, when we paid
off the balance due for the plant and terminated the water purchase agreement.
We now own and are responsible for operation and maintenance of the West Bay
plant. This plant is capable of producing 710,000 U.S. gallons per day of
potable water.
13
<PAGE> 18
OUR OPERATIONS UNDER THE LICENSE
The Cayman Islands government issued us an exclusive operational license
under The Water (Production and Supply) Law of 1979. The license gives us the
exclusive right to process potable water from seawater and then sell and
distribute that water by pipeline to Seven Mile Beach and West Bay, Grand Cayman
Island. The original twenty-year license was renegotiated in 1990 and extended
to expand our service area to include West Bay. The license terminates, unless
further renewed, on July 11, 2010.
Two years prior to the expiration of the license, we have the right to
negotiate with the government to extend the license for an additional term.
Unless we are in default under the license, the government may not grant a
license to any other party without first offering the license to us on terms
that are no less favorable than those which the government offers to a third
party.
We must provide, within our licensed area, any requested piped water
service which, in the opinion of the executive council of the Cayman Islands
government, is commercially feasible. Where supply is not considered
commercially feasible, we may require the potential customer to contribute
toward the capital costs of pipe laying. We then repay these contributions to
the customer, without interest, by way of a discount of 10% on future billings
for water sales until this indebtedness has been repaid. We have been installing
additional pipeline when we consider it to be commercially feasible, and the
Cayman Islands government has never objected to our determination regarding
commercial feasibility.
Under the license, we pay a royalty to the government of 7.5% of our gross
potable water sales revenue. The base selling price of water under the license
presently varies between $18.32 and $21.98 per 1,000 U.S. gallons, depending
upon the type and location of the customer and the monthly volume of water
purchased. The license provides for an automatic adjustment for inflation on an
annual basis, subject to temporary limited exceptions, and an automatic
adjustment for the cost of electricity on a monthly basis. The government
reviews and approves the calculations of the price adjustments for inflation and
electricity costs.
If we want to increase our prices for any reason other than inflation, we
have to request prior approval of the executive council of the Cayman Islands
government. If the parties fail to agree, the matter is referred to arbitration.
The last price increase that we requested, other than automatic inflation
adjustments since 1990, was granted in full in June 1985.
RESIDENTIAL AND COMMERCIAL OPERATIONS
We enter into standard contracts with hotels, condominiums and other
properties located in our licensed area to provide potable water to such
properties. We currently have agreements on differing terms and rates to supply
potable water to the 309-room Marriott Hotel and the 343-room Westin Hotel, and
to supply non-potable water to the SafeHaven Golf Course. We intend to enter
into standard contracts with four new hotel developments consisting of an
aggregate of approximately 540 additional rooms scheduled to open in 2000. We
bill on a monthly basis based on meter readings. Receivables are typically
collected within 30 or 35 days after the billing date and receivables not
collected within 45 days subject the customer to disconnection from our water
service. In 1999, we collected 99.9% of our receivables. Customers who have had
their service disconnected must pay re-connection charges.
In the Seven Mile Beach area, our primary customers are the hotels and
condominium complexes which serve the tourists. In the West Bay area, our
primary customers are residential homes. Occasionally, we also supply to, or buy
from, on an as-needed basis, the Water Authority-Cayman, which serves the
business district of George Town and other parts of Grand Cayman Island.
WASTEWATER SERVICES
We began providing sewerage services on Grand Cayman in 1973. The Cayman
Islands government, through Water Authority-Cayman, constructed a public
sewerage system in part of the
14
<PAGE> 19
Seven Mile Beach area where Governor's Harbour is located. On September 1, 1988,
Water Authority-Cayman began processing sewage delivered by our pipelines and
lift stations in that area. We stopped our processing of sewage on that date.
Water Authority-Cayman currently directly bills our former sewerage customers
for its services. We have advised Water Authority-Cayman that on December 31,
2000 we will formally transfer ownership of the sewerage system operations to
the Governor's Harbour Homeowners' Association.
DEMAND FOR WATER IN THE CAYMAN ISLANDS
In the past, demand on our pipeline distribution has varied throughout the
year. However, an increase in year-round tourism in recent years has created
more uniform demand for water throughout the year. Demand depends upon the
number of tourists visiting the Cayman Islands and the amount of rainfall during
any particular time of the year. Traditionally the highest demand arises in the
first two quarters of the calendar year which corresponds with the high tourist
season and the lowest demand arises in the third quarter of the year which
corresponds with the period with the most rainfall and the least amount of
tourist arrivals. In general, 75% of tourists come from the United States. Our
operating results in any particular quarter are not indicative of the results to
be expected for the full fiscal year. The table below lists the total volume of
water we supplied on a quarterly basis for the years ended December 31, 1999,
1998, 1997 and 1996 to all our customers.
<TABLE>
<CAPTION>
1999 1998 1997 1996
------- ------- ------- -------
(in thousands of U.S. gallons)
<S> <C> <C> <C> <C>
First Quarter..................................... 107,031 109,255 100,853 85,998
Second Quarter.................................... 113,007 108,334 98,473 86,559
Third Quarter..................................... 90,888 90,950 87,483 81,241
Fourth Quarter.................................... 90,421 92,011 89,941 74,666
------- ------- ------- -------
Total................................... 401,347 400,550 376,750 328,464
======= ======= ======= =======
</TABLE>
RECENT DEVELOPMENTS
During the first quarter of this year, several new developments were
completed in our exclusive service area. These developments include a 132-room
Sunshine Suites Hotel, a 100-room Comfort Suites Hotel and Phase I, consisting
of 76 suites, of the 152-suite Grand Caymanian Beach Club time-share resort. For
the three months ended March 31, 2000, water pumped through our distribution
system to customers increased by approximately 7.5% compared with the same
period in 1999. We expect the growth in water pumped through our distribution
system to have a positive impact on operating results for the first quarter of
2000.
TOTAL INCOME
Our total income includes pipeline sales income, other income and interest
income. Pipeline sales income derives from water sales to our customers and to
Water Authority-Cayman. Other income consists of monthly meter rental charges,
sales of water to trucks which deliver to customers not connected to our
pipeline, connection charges for new customers and re-connection charges for
delinquent accounts. In April 1999, we settled a dispute with the owner of the
Hyatt Hotel and the developer of the Britannia development, who supplied water
to the Hyatt Hotel, a hotel located within our Seven Mile Beach license area.
Accordingly, other income also consists of settlement fee payments for the
supply of water to the Britannia development by the Hyatt Hotel, which has its
own water production facility. Interest income relates to interest derived from
excess cash balances placed on term deposit.
EXPENSES
Expenses include direct production expenses and our indirect, or general
and administrative expenses. Direct production expenses include royalty payments
to the Cayman Islands government,
15
<PAGE> 20
electricity and chemical expenses, payments to Ocean Conversion relating to
operation of the Governor's Harbour plant, production equipment and facility
depreciation costs, equipment maintenance and expenses and operational staff
costs. Indirect, or general and administrative expenses, consist primarily of
salaries and employee benefits for personnel, administrative office lease
payments, legal and professional expenses and financing costs. There are no
income taxes in the Cayman Islands.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998.
Total Income
Total income increased by 1% from $8,187,714 to $8,249,988 for the years
ended December 31, 1998 and 1999, respectively. Total income increased despite
the closure of two hotels in May and August 1998 consisting of a total of 350
rooms to the Seven Mile Beach area. The decline in available hotel rooms, in
addition to year 2000 concerns over the Christmas 1999 period, contributed to a
corresponding decrease in tourist arrivals during the year. In addition, our
automatic inflation adjustment led to a slight decrease in prices for most of
our customers in the West Bay and Seven Mile Beach areas. The decline in
pipeline sales in the Seven Mile Beach area, however, was more than offset by an
increase in sales volume to new West Bay customers and new revenues from the
Britannia settlement. Total pipeline sales in the Seven Mile Beach area
decreased by 3% from $5,391,455 to $5,231,465 for the years ended December 31,
1998 and 1999, respectively. Total pipeline sales in the West Bay area increased
by 15% from $1,960,392 to $2,248,931 for the years ended December 31, 1998 and
1999, respectively.
Expenses
Direct expenses decreased by 9% from $5,095,373 to $4,624,422 for the years
ended December 31, 1998 and 1999, respectively. Direct expenses decreased
primarily due to the termination of the United States Filter contract, which
immediately decreased costs at the West Bay plant. As a percentage of total
income, direct expenses decreased from 62% of total income to 56% for the years
ended December 31, 1998 and 1999, respectively.
Indirect expenses increased by 17% from $1,435,345 to $1,678,967 for the
years ended December 31, 1998 and 1999, respectively, primarily due to
substantial legal costs incurred in the first quarter of 1999. These legal costs
principally relate to the final settlement of the Britannia development lawsuit
in April 1999. All legal costs were expensed as incurred. Other indirect costs,
such as executive and administrative staff costs, rent and utilities, increased
in line with inflation. As a percentage of total income, indirect expenses
increased from 18% of total income to 20% of total income for the years ended
December 31, 1998 and 1999, respectively.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997.
Total Income
Total income increased by 9.6% from $7,468,726 to $8,187,714 for the years
ended December 31, 1997 and 1998, respectively. Total income increased primarily
as a result of increased pipeline sales volume in both the Seven Mile Beach and
West Bay areas, which reflected an increase in tourist arrivals and additional
new residential customers. Our automatic inflation adjustment led to a slight
increase in prices for most of our customers in the West Bay and Seven Mile
Beach areas. Total pipeline sales in the Seven Mile Beach area increased by 7%
from $5,019,010 to $5,391,455 for the years ended December 31, 1997 and 1998,
respectively. Total pipeline sales in the West Bay area increased by 18% from
$1,666,854 to $1,960,392 for the years ended December 31, 1997 and 1998,
respectively. In addition, in the first quarter of 1998, sales to Water
Authority-Cayman were $120,146 in 1998 compared to $16,508 in 1997.
16
<PAGE> 21
Expenses
Direct expenses increased by 6% from $4,806,552 to $5,095,373 for the years
ended December 31, 1997 and 1998, respectively, primarily due to severance
payments related to the closure of our vapor compression plant. Cost and
operating efficiencies of our reverse osmosis plants caused us to complete the
closing of our vapor compression plants in 1998. As a percentage of total
income, direct expenses decreased from 64% of total income to 62% for the years
ended December 31, 1997 and 1998, respectively.
Indirect expenses increased by 9% from $1,316,534 to $1,435,345 for the
years ended December 31, 1997 and 1998, respectively. Indirect expenses
increased due to significant legal and professional costs in connection with the
Britannia development dispute and other non-recurring matters such as the cost
of establishing our option deed. As a percentage of total income, indirect
expenses remained consistent at 18% of total income for the years ended December
31, 1997 and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
We generate cash from our plant operations at West Bay and Seven Mile
Beach, from the sale of our shares and our two bank loans. Cash flow from
operating activities was provided by our plant operations, and is impacted by
operating and maintenance expenses, the timeliness and adequacy of rate
increases, excluding automatic adjustments to our rates for inflation and
electricity costs, and various factors affecting tourism in the Cayman Islands,
such as weather conditions and the economy. We use cash to fund our operations
in the Cayman Islands, to make payments under our operating agreement with Ocean
Conversion for our Governor's Harbour plant, to expand our infrastructure, to
pay dividends, to repay principal on our loans and to repurchase our shares when
appropriate.
OPERATING ACTIVITIES
Cash from operating activities in 1999 was $2,717,605, compared to
$2,570,558 in 1998. This increase was primarily due to an increase in net income
from operations. We expect cash from operating activities to increase in 2000 as
we begin to generate customer revenues from four new hotels scheduled to open in
our Seven Mile Beach license area in 2000. The construction of these new hotels
is scheduled to be completed in 2000.
INVESTING ACTIVITIES
Cash used in investing activities in 1999 was $1,541,448, compared to
$2,184,783 in 1998. In November 1998, we terminated our water purchase agreement
with United States Filter Corporation and fully repaid our capital lease
obligations at a total cost of $1,027,567. In 1999, investing activities
consisted primarily of purchase of property, plant and equipment.
As of December 31, 1997, the remaining book value of the vapor compression
equipment previously used by our company was written down to zero, and this
amount was recorded as an exceptional item in the 1997 Statement of Income and
Retained Earnings. Efforts to dispose of the remaining equipment either intact
or for scrap were completed in 1998. Amounts raised from this process were not
material.
FINANCING ACTIVITIES
Cash used in financing activities in 1999 was $1,995,718, compared to
$725,008 in 1998. On December 3, 1998, our shareholders approved a share
repurchase program. As of December 31, 1999, we had repurchased 110,752 ordinary
shares at an average cost of $7.44 per share, and on January 6, 2000 we
repurchased 79,100 shares at $6.25 per share from a shareholder whose assets
were being liquidated. As of October 26, 1999, we suspended the open-market
repurchase of our shares.
17
<PAGE> 22
Our West Bay and Governor's Harbour plants were financed by an increase in
our long-term purchase obligation. We financed the expansion of the water
distribution system in the West Bay area with a $2,500,000 loan issued by the
European Investment Bank and our existing credit facility with the Royal Bank of
Canada. The interest rate on the European Investment Bank loan is the bank's
prevailing lending rate at the time of draw-down less a subsidy of 4%. As of the
date of this prospectus, $1,568,116 is outstanding under the European Investment
Bank loan. The total lending facility from the Royal Bank of Canada comprises a
revolving line of credit with a limit of $1,500,000 and term loans with a limit
of $4,000,000. As of January 6, 2000, a term loan of $1,000,000 has been drawn
down and is being repaid over a five-year period. We made an accelerated payment
of $200,000 against this loan in 1999 using excess operating cash flow. The
Royal Bank of Canada lending facility and the European Investment Bank loan are
secured by all of our land and other assets. We expect to use the proceeds of
this offering to pay down outstanding amounts under the Royal Bank of Canada
facility.
From the profits which we generated in 1999, we paid out three quarterly
dividends of $.04 per share per quarter and a dividend of $.08 per share for the
final quarter, compared to $.04 per share per quarter in 1998.
IMPACT OF INFLATION
There has been little variation in the consumer price index for the Cayman
Islands in the past five years, ranging between 155 and 180, based on a base
point of 100 in September 1984. We believe that the impact of inflation and
changing prices on our net income will not be material. In addition, under the
terms of the license, there is an automatic price adjustment for inflation on an
annual basis, subject to temporary exceptions.
EXCHANGE RATE
The official exchange rate for conversion of Cayman Islands Dollars into
United States Dollars has been fixed since 1974 at US$1.00 to CI$.83.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not currently transact business in any foreign countries and have not
engaged in any currency hedging activities to date. We do not use derivative
financial instruments for speculative trading purposes and to date have not been
a party to any financial instruments or contracts that expose us to material
market risk.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
We will be subject to the following changes in International Accounting
Standards which will become effective for the year ending December 31, 2000.
Revised IAS 10 contains new guidelines regarding recognition of
post-balance sheet events, including dividends. We have not yet adopted revised
IAS 10 and it is not expected to have any effect on our financial statements.
IAS 37 specifies criteria for recognition of provisions, contingent
liabilities and contingent losses. It contains guidelines for determining when
an enterprise that has a present legal or constructive obligation as a result of
past events should recognize a provision. We have not yet adopted IAS 37 and it
is not expected to have any effect on our financial statements.
IAS 38 specifies criteria for the recognition of intangible assets, such as
internally generated intangible assets. We have not yet adopted IAS 38, but will
have to do so for the fiscal year ending December 31, 2000. IAS 38 will have a
significant effect on our financial statements for the fiscal year ending
December 31, 2000 due to a required expensing of $115,888 for organizational
costs, which do not qualify as an intangible asset under IAS 38.
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<PAGE> 23
We will be subject to the following changes in International Accounting
Standards which will become effective for the year ending December 31, 2001.
IAS 39 requires all financial assets and financial liabilities to be
recognized on a company's balance sheet, including all derivatives. It increases
the use of fair value as a measurement of financial instruments, but does not
require this in all cases. IAS 39 supplements the disclosure requirements of IAS
32. We have not yet adopted IAS 39 and it is not expected to have any effect on
our financial statements.
DIFFERENCES BETWEEN IAS AND U.S. GAAP
Our financial statements are prepared in accordance with International
Accounting Standards, referred to as IAS. IAS differs from U.S. generally
accepted accounting principles, referred to as U.S. GAAP, in four major ways.
The major differences involve asset treatment of land, treatment of dividends
payable, fixed asset impairment, and the recognition of stock option
compensation expense. Of these differences, stock option compensation expense
most significantly affects the net income in our historical financial
statements. Compensation costs are generally calculated as the difference
between fair value of shares of stock at the option grant date and consideration
received. Under IAS, stock options, option purchase and award plans are
recognized when effected, whereas in U.S. GAAP, they are recognized as an
expense over the periods in which the employee performs services. Under U.S.
GAAP, we would have been required to recognize stock option compensation expense
of $260,994, $205,063, $135,352, $176,542 and $423,584 for the fiscal years
ended December 31, 1999, 1998, 1997, 1996 and 1995, respectively.
Correspondingly, under U.S. GAAP, stockholders' equity would be $11,778,229,
$10,933,391, $10,128,822, $8,595,315 and $5,676,189 for the fiscal years ended
December 31, 1999, 1998, 1997, 1996 and 1995, respectively. We expect that any
future adjustment due to stock option compensation expense will be immaterial
because we have amended the employment agreements with Jeffrey Parker and Peter
Ribbins so that the exercise price of any future stock options issued to these
persons will be at the prevailing market price. Please refer to the notes to our
financial statements beginning on page F-8 of this prospectus for a discussion
of recent U.S. GAAP Accounting Pronouncements.
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<PAGE> 24
BUSINESS
INTRODUCTION
Our company was incorporated in August 1973 in the Cayman Islands. Our
objective is to provide water services in areas where the supply of potable
water is scarce. In addition, we have expertise in providing wastewater
services. We currently provide potable water by pipeline from two reverse
osmosis seawater conversion plants in Grand Cayman Island to the most populated
areas of Grand Cayman. We supply potable water to business, residential and
tourist properties and government facilities in our licensed area, including any
new developments which are constructed in this area. In addition, we are in
discussions with parties in the Bahamas to operate reverse osmosis seawater
conversion plants which would provide water to developments on those islands.
MARKET AND SERVICE AREA
Although we are currently only operating in the Cayman Islands, we believe
that our potential market consists of any location where there is a need for
potable water. According to the information contained in the Paul Simon book
"Tapped Out: The Coming World Crisis in Water and What We Can Do About It"
(C)1998, the world's population of 5.9 billion will double in the next forty to
ninety years and the per capita world water consumption is growing twice as fast
as the world's population. The world's supply of water, however, is relatively
constant. While water sufficiency problems are not nearly as severe in the
United States as in most nations, three major states, California, Texas and
Florida, are already facing water supply problems. These states and most
water-deficient nations in the world all have access to huge amounts of ocean
water, yet cannot economically process major quantities for consumption. The
desalination of ocean water, either through distillation or reverse osmosis, is
widely regarded as the most viable alternative to fresh water in areas with an
insufficient natural supply. We believe our experience in the development and
operation of reverse osmosis desalination plants provides us with a significant
opportunity to successfully expand our operations beyond the Cayman Islands.
The current market which we service under our license consists of Seven
Mile Beach and West Bay, Grand Cayman Island, two of the three most populated
areas in the Cayman Islands. Under a separate license from the Cayman Islands
government, we also supply non-potable water to irrigate a golf course in the
Cayman Islands. Our plants and water distribution system are equipped with
efficient, state-of-the-art technology, and we consistently provide high quality
water to our customers. The Cayman Islands government, through Water
Authority-Cayman, supplies water to parts of Grand Cayman Island which are not
within our licensed area. Our service area is shaded in black in the map below.
[INSERT MAP OF GRAND CAYMAN ISLAND (WILL SHOW OUR LICENSED AREA)]
According to the Economics and Statistics Office of the Cayman Islands
government, the population of the Cayman Islands was approximately 20,000
persons in 1984 and is estimated to be approximately 40,000 persons in 1999. The
rate of tourism in the Cayman Islands has increased on average 8% annually over
the past 10 years, with total visitor arrivals at a record 1.4 million persons
in 1999. From June 1989 through December 1999, stay-over tourist arrivals have
increased from 210,000 persons in 1989 to 395,000 persons in 1999, and
cruise-ship arrivals have increased from 404,000 persons in 1989 to 1,036,000
persons in 1999.
As of March 2000, several new developments have been completed in our
exclusive service area. These developments include a 132-room Sunshine Suites
Hotel, a 100-room Comfort Suites Hotel and
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<PAGE> 25
a 152-suite Grand Caymanian Beach Club time-share resort, which has opened phase
I (76 suites). Phase II is currently under construction. In addition, a new
231-room Holiday Inn is scheduled to open in October 2000.
GROWTH STRATEGY
Our growth strategy is as follows:
WE INTEND TO CONTINUE DEVELOPING OUR PRODUCTION AND DISTRIBUTION
INFRASTRUCTURE AND PROVIDING HIGH QUALITY POTABLE WATER TO OUR LICENSED AREA IN
THE CAYMAN ISLANDS. We intend to increase our customer base and revenues in the
Cayman Islands by providing water service on the most cost-efficient basis to
new residential, commercial and tourist properties that are being developed in
our exclusive licensed area. Primarily as a result of new customers, our total
income has increased from $3,166,751 in 1989 to $8,249,988 in 1999, representing
a compound annual growth rate of approximately 10%.
WE INTEND TO EXPAND OUR OPERATIONS TO MARKETS OUTSIDE THE CAYMAN ISLANDS
WHERE THERE IS A NEED FOR POTABLE WATER, INCLUDING, BUT NOT LIMITED TO, THE
BAHAMAS. We are currently in various stages of discussion to supply several
different markets. We may pursue these opportunities either on our own or
through joint ventures. So far we have focused on various locations throughout
the Caribbean and Central America where there is a limited supply of potable
water.
WE ALSO INTEND TO EXPAND OUR EXISTING AND FUTURE OPERATIONS INTO
COMPLEMENTARY SERVICES, SUCH AS WASTEWATER SERVICES, WHICH WE HAVE PROVIDED IN
THE PAST. Prior to the installation of a central wastewater system by the
Cayman Islands government, we provided wastewater services on Grand Cayman
Island. Since we have expertise in wastewater services, we may provide these
services to areas to which we expand outside of the Cayman Islands.
THE BAHAMAS
On April 21, 1997, we signed a letter of intent to supply potable water to
a Bahamian company, which is owned by a United States developer who plans to
build a multi-purpose resort development called Bimini Bay Resort on 700 acres
in North Bimini Island.
We have created a wholly-owned Bahamian subsidiary, Commonwealth Water
Limited, which has entered into a 10-year agreement with the Bimini Bay Resort
developer to supply water to the development. After development of the water
plant on North Bimini and the conveyance of the land where the plant is located
from the developer to our subsidiary, the developer will be issued 20% of the
shares of our subsidiary and may convert these shares into our ordinary shares
based on a conversion formula. As of the date of this prospectus, the developer
has not begun construction of the development in North Bimini.
Our Bahamian subsidiary has all government approvals necessary to conduct
operations in the Bahamas. However, we are still in discussions to finalize
agreements with the Bahamian Water and Sewage Commission which would give us an
exclusive franchise to provide potable water to the Bimini Bay development and a
water sale agreement to supply potable water to the remainder of the Bimini
Islands. We are currently looking at other possibilities in the Bahamas,
including providing wastewater treatment to the Bimini Bay development.
WATER SUPPLY AND PRODUCTION
Our primary sources of potable water are our two reverse osmosis seawater
conversion plants. Our Governor's Harbour facility consists of 3.2 acres,
including 485 feet of waterfront and a 8,745 square foot building which contains
the water treatment facility. We own two storage reservoirs with a total
capacity of 2.0 million U.S. gallons of water and the land at our Governor's
Harbour site. The property surrounding the facility has yet to be fully
developed, although these areas are beginning to be developed for residential
and tourist accommodations.
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<PAGE> 26
The primary components of the Governor's Harbour plant are:
- five feedwater supply wells that average a depth of 140 feet. The
combined pumping capability is approximately 3,750 U.S. gallons per
minute;
- two positive displacement pumps with a pumping capacity of 410 U.S.
gallons per minute each;
- two "back up" centrifugal pumps with a rated capacity of 300 U.S. gallons
per minute each;
- 77 vessels (measuring approximately 265" in length and 8" in diameter)
each housing six spiral wound (measuring approximately 40" in length and
8" in diameter) seawater membranes;
- a work exchanger energy recovery system;
- an air scrubber to remove the hydrogen sulfide from the product water,
which is capable of scrubbing approximately 800 U.S. gallons of water per
minute; and
- Paragon TNT v5.0 control software on Gateway Hardware with I/O System
Opto 22 and Optomux interface controller.
The current capacity of the Governor's Harbour plant is 1.1 million U.S.
gallons per day, which is in excess of the minimum quantities of water which
Ocean Conversion must supply to us under the water conversion agreement. Since
the plant began production of water, it has consistently produced at or near its
capacity. In the year 2000, we will purchase water from Ocean Conversion at a
base monthly fee of $45,152 plus an additional quantity fee of $4.57 per 1,000
U.S. gallons for each 1,000 U.S. gallons supplied to us.
Our West Bay site consists of 6.1 acres in West Bay. In August 1994, we
retained United States Filter Corporation to design and build this plant and
then we paid off the obligations on the plant and terminated the operating
contract in November 1998. The plant began operating on June 1, 1995 and was
expanded in February 1998 and February 2000. On this site, we have a 2,600
square foot building which houses our water production facilities, a 2,400
square foot building which houses the potable water distribution pumps, a water
quality testing laboratory, office space and water storage capacity consisting
of two 1.0 million U.S. gallon potable water tanks. The current production
capacity of the West Bay plant is 710,000 U.S. gallons per day.
The primary components of this plant are:
- three feedwater supply wells that average a depth of 140 feet. The
combined pumping capability is approximately 2,250 U.S. gallons per
minute;
- two positive displacement pumps with a pumping capacity of 386 U.S.
gallons per minute each;
- 43 vessels (measuring approximately 280" in length and 8" in diameter)
each housing seven spiral wound seawater membranes (measuring
approximately 40" in length and 8" in diameter);
- one hydraulic turbo energy recovery system;
- one work exchanger energy recovery system;
- an air scrubber to remove the hydrogen sulfide from the product water,
which is capable of scrubbing 1,000 U.S. gallons of water per minute; and
- Allen Bradley SLC PIC500/RS Logix Ladder Logic Control computer hardware
and GUI Wintelligent View on Windows 3.51 Industrial PC Interfaced with
PLC software to control the operation of the plant.
Although not required by local government regulations, we operate our water
plants in accordance with guidelines of the Cayman Islands Department of
Environment. Under these guidelines, our plants may not have emissions of
hydrogen sulfide at levels greater than 20 milligrams per liter at the exit of
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<PAGE> 27
the air scrubbers. Our potable water also meets the guidelines of the World
Health Organization and the U.S. Safe Drinking Water Act. In addition, noise
levels at our plants cannot exceed the standards established by the U.S.
Occupational Safety and Health Act. To date, we have not received any complaints
from any regulatory authorities concerning hydrogen sulfide emissions or noise
levels at our plants.
Feedwater for the reverse osmosis units is drawn from deep wells with
associated pumps on the property. Wastewater is discharged into brine wells on
the property below the level of the feedwater intakes.
Electricity to our plants is supplied by Caribbean Utilities Co. Ltd., a
publicly-traded utility company. At both sites, we maintain a diesel driven,
standby generator with sufficient capacity to operate our distribution pumps and
other essential equipment during any temporary interruptions in the electricity
supply.
In the event of an emergency, our distribution system is connected to the
George Town distribution system of Water Authority-Cayman. We can also purchase
water, if available, from a plant servicing the Hyatt Hotel in Grand Cayman,
which presently has excess production capacity. In order to efficiently maintain
our equipment, we have purchased water for brief periods of time from both Water
Authority-Cayman and the water plant servicing the Hyatt Hotel. We have also
sold potable water to these entities, and in the case of Water Authority-Cayman,
supplied substantial quantities of water almost continuously over a seven-month
period in late 1993 and early 1994.
WATER DISTRIBUTION
Our pipeline system covers the Seven Mile Beach and West Bay areas of Grand
Cayman and consists of approximately 63 miles of PVC pipeline. We extend our
distribution system periodically as property developments are completed. We have
a main pipe loop covering a major part of the Seven Mile Beach area. We place
extensions of smaller diameter pipe off our main pipe to service new
developments in our service area. This system of building branches from the main
pipe keeps our construction costs low and allows us to provide service to new
areas in a timely manner. We are currently installing a main pipe along a new
bypass road to service future developments, which will provide an additional
supply loop at the southern end of the Seven Mile Beach area.
For major developments in our service areas, most internal roads are
private until the development has been completed. Developers are responsible for
laying the pipeline within the development at their own cost but in accordance
with our specifications. When the development is completed, the developer then
transfers operation and maintenance of the pipeline to us.
We have a comprehensive layout of our pipeline system which is maintained
in a computer aided design (CAD) system. This system is integrated with digital
aerial photographs and a computer generated hydraulic model and allows us to
accurately locate pipes and equipment in need of repair and maintenance. It also
helps us to plan extensions of and upgrades to our existing pipeline system.
The following table shows, for each of the fiscal years ended December 31,
1999, 1998, 1997, 1996, and 1995, our total number of customer connections at
the end of each period and metered sales of water for that period:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Number of Customers...................... 2,606 2,347 2,069 1,826 1,649
Miles of Pipeline........................ 63 62 57 55 52
Metered Sales (in thousands of U.S.
gallons):
Commercial............................. 308,949 315,980 300,350 265,140 239,000
Residential............................ 86,712 80,150 72,393 60,261 69,963
Government facilities.................. 5,686 4,420 4,007 3,064 2,971
Total.......................... 401,347 400,550 376,750 328,465 311,934
</TABLE>
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You should note that the table above does not precisely represent the
actual number of customers we service. In hotels and condominiums, we may only
have one customer, which is the operator of the hotel or the condominium, but we
actually supply water to all of the units within that hotel or condominium
development. Of the customers indicated in the table above, as of 1999, 51% were
residential, 48% were hotels, condominiums and other commercial customers and 1%
were government facilities.
We have a separate license from the Cayman Islands government and a
five-year agreement with a developer to supply on demand a minimum of 48 million
U.S. gallons of non-potable water per year on a take or pay basis to irrigate an
18-hole golf course.
Before 1991, any owner of property within our licensed area could install
water making equipment for its own use. Since 1991, that option is only
available to private residences, although water plants then in existence could
be maintained but not replaced or expanded. When the Marriott Hotel was built in
1990 in our licensed area, the developer installed its own reverse osmosis
equipment. On February 4, 1994, we entered into an agreement with the owner of
the Marriott Hotel to supply water to the Marriott Hotel at our standard tariff
rates.
In 1995, we entered into a 10-year agreement with the owner of the Westin
Hotel. This agreement requires us to supply up to 60,000 U.S. gallons per day on
a monthly basis to the hotel at a discount to our standard tariff rates and to
supply any additional demand on a best efforts basis. The Westin Hotel maintains
storage capacity on-site, assists pressurization with on-site repumping
facilities and has provided us with a letter of credit which covers the cost of
45 days' of water supply.
OUR TECHNOLOGY
The conversion of saltwater to potable water is called desalination. There
are two primary forms of desalination: distillation and reverse osmosis. Both
methods are used throughout the world and technologies are improving to lower
the costs of production. Reverse osmosis is a separation process in which the
water from a pressurized saline solution is separated from the dissolved
material by passing it over a semi-permeable membrane. A significant energy
source is needed to pressurize the salinated, or feed, water for pretreatment,
which consists of fine filtration and the addition of precipitation inhibitors.
Pre-treatment removes suspended solids, prevents salt precipitation and keeps
the membranes free of microorganisms. Next, a high-pressure pump enables the
water actually to pass through the membrane, while salts are rejected. The feed
water is pumped into a closed vessel where it is pressurized against the
membrane. As a portion of the feed water passes through the membrane, the
remaining feed water increases in salt content. This remaining feed water is
discharged without passing through the membrane in order to prevent the
pressurized feed water from continuing to increase in salt concentration. As the
discharged feed water leaves the pressure vessel, its energy is captured by an
energy recovery device which is used to pressurize incoming feed water. The
final step is post-treatment, which consists of stabilizing the water, removing
hydrogen sulfide and adjusting the pH and chlorination to prepare it for
distribution.
We use reverse osmosis technology to convert seawater to potable water. We
believe that this technology is the most effective and efficient conversion
process. However, we are always seeking ways to maximize efficiencies in our
current processes and to investigate new more efficient processes to convert
seawater to potable water. The equipment at our plants is among the most energy
efficient available and we monitor and maintain our equipment in this manner. As
a result of our many years of experience in water conversion, we believe that we
have an expertise in the development and operation of desalination plants which
is easily transferable to locations outside the Cayman Islands.
COMPETITION
We do not compete with other utilities within our licensed area. Although
we have been granted an exclusive franchise for our present service area, our
ability to expand our service area is limited at the discretion of the
government. At the present time, we are the only non-municipal public water
utility on
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Grand Cayman. The Cayman Islands government, through Water Authority-Cayman,
supplies water to parts of Grand Cayman which are not within our licensed area.
To implement our growth strategy outside the Cayman Islands, we will
compete with companies such as Ionics Inc., Vivendi and Azurix Corp. These
companies, among others, currently operate in areas in which we would like to
expand our operations, maintain world-wide operations and have greater
financial, managerial and other resources than our company.
THE CAYMAN ISLANDS
The Cayman Islands comprise three islands, Grand Cayman, Little Cayman and
Cayman Brac, located approximately 460 miles south of Miami, Florida. The three
islands have a total area of approximately 100 square miles.
GOVERNMENT
The Cayman Islands are a British Overseas Territory of the United Kingdom
and have had a stable political climate since 1670, when the Cayman Islands were
ceded to England by the Treaty of Madrid. The Queen of England appoints the
governor of the Cayman Islands to make laws with the advice and consent of the
legislative assembly. There are 15 elected members of the legislative assembly
and three members appointed by the governor from the Civil Service. The
Executive Council is responsible for day-to-day government operations. The
Executive Council consists of five ministers who are chosen by the legislative
assembly from its 15 popularly-elected members, and the three Civil Service
members. The governor has reserved powers and the United Kingdom retains full
control over foreign affairs and defense. The Cayman Islands are a common law
jurisdiction and have adopted a legal system similar to that of the United
Kingdom.
CUSTOMS DUTIES AND TAXES
We are exempt from, or receive concessionary rates of, customs duties on
capital expenditures on plant and major consumable spares and supplies imported
into the Cayman Islands as follows:
- there are no income taxes in the Cayman Islands;
- we do not pay any import duty or taxes on permeator membranes, electric
pumps and motors and chemicals which we purchase;
- we pay 10% of the cost, including insurance and transportation to the
Cayman Islands, of other plant and associated materials and equipment to
manufacture or supply water in Seven Mile Beach or West Bay.
GOVERNMENT REGULATION
Water Authority-Cayman is a statutory body which acts pursuant to the
provisions of The Water Authority Law, 1982. Water Authority-Cayman advises the
executive council of the Cayman Islands government regarding issuance and
administration of licenses under The Water (Production and Supply) Law of 1979,
which is the law under which we obtained our license.
Water Authority-Cayman monitors our operations on a continuing basis,
including the quality of the water which we supply. Our operations are also
monitored by the government's Environmental Health Department, which tests our
water supply on a regular basis, as well as the Public Works Department,
Planning Department and Fire Service with respect to our pipeline construction
and other matters.
EMPLOYEES
We presently have 30 employees, four of whom are executive and management
personnel and six are engaged in administrative and clerical positions. The
remaining staff are engaged in plant maintenance and operations, pipe laying and
repair, leak detection, new customer connections, meter
25
<PAGE> 30
reading and laboratory analysis of water quality. Our employees are not parties
to a collective bargaining agreement. We consider our relationship with our
employees to be good.
FACILITIES
In addition to the properties which we own where our water plants are
located, we lease approximately 3,200 square feet of space for our executive
offices at Trafalgar Place, West Bay Road, Grand Cayman Island. We have a
two-year lease with extension provision on this property.
Our Governor's Harbour site consists of a waterfront portion. This
waterfront portion is not essential to our operations. We initially bought this
property to enhance the value of the entire Governor's Harbour site if we
decided to sell the site or develop it for other purposes. We purchased this
water frontage in 1992 from Hurricane Hideaway Ltd. At the same time, we
purchased Hurricane Hideaway Ltd., which owns certain development rights and
which is now a wholly-owned subsidiary of our company. We value our holdings in
Hurricane Hideaway Ltd. at CI$1.00 for balance sheet purposes. We believe that
our properties are suitable for the conduct of our current operations for the
foreseeable future.
Even though all properties on the Cayman Islands must comply with
government building codes, a large hurricane could cause significant damage to
our equipment and our customers' properties. We carry business interruption
insurance for an indemnity period of 12 months and employers'
liability/workmen's compensation insurance. Ocean Conversion, the current
operator of our Governor's Harbour plant, insures the plant for all
risks-material damage at its own expense. We and Ocean Conversion share equally
in the cost of public/product liability coverage for the plant. We also maintain
all risks or third party damage insurance in appropriate amounts on our motor
vehicles. We believe that we carry adequate insurance to cover any foreseeable
losses.
BREACH OF LICENSE
Our license requires us to obtain prior government approval for an issuance
or transfer of shares which (a) exceeds 5% of the issued shares of our company,
or (b) would, upon registration, result in any shareholder's owning more than 5%
of the issued shares. More than 5% of our ordinary shares are registered in the
name of Cede and Co., the nominee for the Depository Trust Company, which is a
clearing agency for shares held by participating banks and brokers. We do not
believe that these shareholdings by Cede and Co. constitute a breach of the
intent of the license. We believe that the purpose of this clause of the license
is to allow the government to approve significant shareholders of our company.
Cede and Co. and Depository Trust Company, however, act solely as the nominee
for banks and brokers, and have no beneficial ownership in the ordinary shares.
Nevertheless, our Cayman Islands' counsel has advised us that these
shareholdings by Cede & Co., which were not approved by the government, are
probably a technical breach of our license.
In August and September 1994, we completed an offering of 400,000 ordinary
shares under Rule 504 of Regulation D of the Securities Act of 1933. In
September 1995, we completed a private placement of 100,000 ordinary shares plus
warrants to subscribe for an additional 100,000 ordinary shares under Regulation
S of the Securities Act 1933. In April 1996, we completed a public offering of
515,000 ordinary shares. Based upon the advice of our Cayman Islands' legal
counsel, we determined that the license did not require the government's
approval to complete these offerings.
However, if a court determined that the government's approval of these
offerings was required under the license, we would be in breach of the license.
Our Cayman Islands' legal counsel has advised us that to make this
determination, a court would have to disagree with our interpretation of the
license and dismiss several defenses which would be available to us. These
defenses include acquiescence and waiver on the part of the government with
respect to these offerings. As of the date of this prospectus, the government
has not taken any action with respect to this matter.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceeding.
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<PAGE> 31
MANAGEMENT
OUR DIRECTORS AND EXECUTIVE OFFICERS
Under our license with the Cayman Islands government, the Cayman Islands
government must approve all of our executive officers and directors. This table
lists information concerning our executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH CONSOLIDATED WATER
---- --- --------------------------------
<S> <C> <C>
Jeffrey M. Parker.......................... 55 Chairman of the Board of Directors and
Chief Executive Officer
Peter D. Ribbins........................... 52 Director, President and Chief Operating
Officer
Gregory S. McTaggart....................... 36 Vice President - Operations
Alexander S. Bodden........................ 35 Vice President - Finance and Secretary
J. Bruce Bugg, Jr.......................... 45 Vice Chairman of the Board of Directors
Brian E. Butler............................ 50 Director
Hal N. Carr................................ 78 Director
Richard L. Finlay.......................... 41 Director
Clarence B. Flowers, Jr.................... 44 Director
Frederick W. McTaggart..................... 37 Director
Wilmer Pergande............................ 60 Director
Raymond Whittaker.......................... 46 Director
</TABLE>
JEFFREY M. PARKER has been a director of our company since 1980, the
Chairman of the Board since 1982 and Chief Executive Officer since 1994. In
addition to serving as our Chief Executive Officer and Chairman of the Board,
Mr. Parker is a Chartered Accountant and practices as Moore Stephens in the
Cayman Islands, a member of Moore Stephens International Ltd. From 1993 to 1995,
Mr. Parker served as a director of The International Desalination Association
representing the Caribbean & Latin America. Mr. Parker received his ACA
designation as a chartered accountant in England in 1967, and his FCA
designation in 1977.
PETER D. RIBBINS is our President and Chief Operating Officer and has
served as a director since 1989. Mr. Ribbins joined our company in 1983 as its
General Manager, a position he held until 1989 when he was appointed Managing
Director. He was appointed President and Chief Operating Officer in 1994. Mr.
Ribbins obtained his B.S. degree in Kinanthropology from the University of
Ottawa, Canada in 1971.
GREGORY S. MCTAGGART is our Vice President-Operations. Mr. McTaggart joined
our company in January 1991 as our resident engineer and has served in his
current capacity since October 1994. For three years before joining us, Mr.
McTaggart worked for the Caribbean Utilities Company as a mechanical engineer.
Mr. McTaggart obtained his B.S. degree in Mechanical Engineering from the
Georgia Institute of Technology in 1986. Mr. McTaggart is the brother of
Frederick W. McTaggart, a director of our company.
ALEXANDER S. BODDEN is our Vice President-Finance and Secretary. Mr. Bodden
joined our company in July 1993 as Financial Controller and was appointed
Secretary in April 1994 and Vice President-Finance in October 1994. Before
joining our company, Mr. Bodden worked with Price Waterhouse in the Audit and
Business Services division. Mr. Bodden obtained his B.A. (Hons), in Accounting
and Finance from the City of London University in 1985 and his ACA designation
as a Chartered Accountant in England in 1990.
J. BRUCE BUGG, JR. has been our Vice-Chairman of the Board since April
1998. Mr. Bugg is also and has been since 1997, the Chairman of the Board of
Directors and Chief Executive Officer of Argyle
27
<PAGE> 32
Investment Co., the general partner of Argyle Partners Ltd., the sole general
partner of Argyle/Cay-Water, Ltd. From 1996 to 1997, Mr. Bugg served as Vice
Chairman of First Southwest Company and Chairman of its Investment Banking
Group.
BRIAN E. BUTLER has been a director of our company since 1983. Since 1977,
Mr. Butler has been the principal of Columbus Developments Ltd., a property
development company specializing in luxury resort projects in the Cayman
Islands.
HAL N. CARR has served as a director of our company since 1980. Since 1986,
Mr. Carr has been the Chairman of Carr & Associates, a private investment firm
located in Bryan, Texas. For over 30 years prior thereto, Mr. Carr was Chairman
of Northwest Airlines and its predecessor companies. He is currently a director
of Metro Airlines and a trustee of the Texas A&M Research Foundation. In the
past, Mr. Carr has served on the board of directors of a number of corporations,
including Dahlberg, Inc., Ross Industries, First National Bank of Bryan and
United Capital Life Insurance.
RICHARD L. FINLAY has served as a director of our company since January
1995. Mr. Finlay is an attorney and partner with the Cayman Islands law firm of
Charles Adams, Ritchie and Duckworth. Before joining this firm in 1993, he
served as Director of Legal Studies of the Cayman Islands Government from 1989
to 1992. From 1983 to 1989, Mr. Finlay was a partner with the Canadian law firm
of Olive, Waller, Zinkhan and Waller. Mr. Finlay has served as the Cayman
Islands' representative to the International Company and Commercial Law Review
and is a former editor of the Cayman Islands Law Bulletin.
CLARENCE B. FLOWERS, JR. has been a director of our company since 1991. Mr.
Flowers is and has been since 1985, the principal of Orchid Development Company,
a real estate developer in the Cayman Islands. Mr. Flowers also serves as a
director of C.L. Flowers & Son, which, is the largest manufacturer of concrete
blocks in the Cayman Islands.
FREDERICK W. MCTAGGART has been a director of our company since 1998. Mr.
McTaggart is and has been since 1994, the Director of the Water
Authority-Cayman, the government-owned water utility serving certain areas of
the Cayman Islands.
WILMER PERGANDE has been a director of our company since 1978. Mr. Pergande
is the Vice-President of Special Projects of Osmonics, Inc. of Minnetonka,
Minnesota, a publicly traded company and the third largest water treatment
company in North America. Before joining Osmonics, Mr. Pergande was the Chief
Executive Officer of Licon International, Inc., a publicly traded manufacturer
of liquid processing equipment. Previously, Mr. Pergande held several executive
positions with Mechanical Equipment Company, Inc., a manufacturer of seawater
conversion equipment.
RAYMOND WHITTAKER has served as a director of our company since November
1988. Mr. Whittaker is and has been since 1984, the Managing Director of
TransOcean Bank & Trust, Ltd., a bank and trust company located in the Cayman
Islands and a subsidiary of Johnson International, Inc., a bank holding company
located in Racine, Wisconsin.
COMPOSITION OF THE BOARD OF DIRECTORS
The board of directors is organized into three groups. Each group holds
office for a three year periods and re-election of the board members is
staggered so that two-thirds of the board members are not subject to re-election
in any given year. The groups are organized alphabetically as follows:
<TABLE>
<CAPTION>
GROUP 1 GROUP 2 GROUP 3
- ------------- --------------------- -----------------
<S> <C> <C>
J. Bruce Bugg Richard Finlay Wilmer Pergande
Brian Butler Clarence Flowers, Jr Peter D. Ribbins
Hal N. Carr Frederick McTaggart Raymond Whittaker
Jeffrey M. Parker
</TABLE>
28
<PAGE> 33
Group 3 was re-elected at our annual shareholders' meeting in April 1999.
Group 2 will be proposed for re-election in 2000, Group 1 in 2001 and then Group
3 again in 2002.
Under our license, the Cayman Islands government may nominate three persons
to serve on our board of directors. We must cause one of the persons nominated
by the government to be elected as a director. Frederick W. McTaggart, the
Director of Water Authority-Cayman, is the government's nominee currently
serving as a director on our board.
On April 17, 1997, Argyle/Cay-Water, Ltd. filed an application with the
Cayman Islands government for permission to acquire up to 50% of our issued and
outstanding shares. We did not support Argyle's attempt to gain control of our
company. On July 22, 1997, the Cayman Islands government approved Argyle's
application. J. Bruce Bugg, Jr. is the sole shareholder and manager of Argyle
Investment Co., the general partner of Argyle Partners Ltd., the sole general
partner of Argyle/Cay-Water, Ltd.
On March 31, 1998, we reached an agreement with Argyle/Cay-Water, Ltd.
During the five-year term of this agreement, we agreed to appoint Mr. Bugg as
Vice Chairman of our board of directors in exchange for which Mr. Bugg and
Argyle/Cay-Water, Ltd. agreed not to acquire more than 19.9% of the ordinary
shares. Our main obligations under the agreement are to recommend to our
shareholders the appointment of Mr. Bugg (or his successor) to the board of
directors and, with several exceptions, to obtain Argyle/Cay-Water, Ltd.'s
consent before issuing any of our securities. We have obtained Argyle/Cay-Water,
Ltd.'s consent for the issuance of shares under this prospectus.
During the term of the agreement, Argyle/Cay-Water, Ltd. and Mr. Bugg may
not participate in proxy solicitation, seek to control or influence our
management, except in accordance with Mr. Bugg's duties as a director, or
challenge the validity of the option deed.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has established the following committees:
<TABLE>
<CAPTION>
EXECUTIVE COMMITTEE AUDIT COMMITTEE COMPENSATION COMMITTEE
-------------------------- ------------------------- ------------------------------
<S> <C> <C>
Peter D. Ribbins, Chairman Brian E. Butler, Chairman Raymond Whittaker, Chairman
Richard L. Finlay Hal N. Carr Peter D. Ribbins
Clarence Flowers, Jr. Raymond Whittaker Clarence B. Flowers, Jr.
Jeffrey M. Parker Wilmer Pergande
Raymond Whittaker
</TABLE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------------- ---------------------------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION UNDERLYING OPTIONS COMPENSATION
--------------------------- ---- ------- ------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey M. Parker................................ 1997 -- $59,319 11,381 $66,323
Chairman and Chief Executive Officer 1998 -- 50,872 12,440 88,699
1999 $90,000 91,262 16,570 --
Peter D. Ribbins................................. 1997 110,129 42,977 20,000
President and Chief Operating Officer 1998 113,103 44,218 20,000
1999 116,496 66,265 20,000
Alexander S. Bodden.............................. 1997 74,880 -- -- --
Vice President Finance and Secretary 1998 76,902 5,071 3,488 492
1999 93,600 10,730 8,678 --
Gregory S. McTaggart............................. 1997 74,880 -- 4,726 872
Vice President Operations 1998 76,902 5,071 7,608 1,073
1999 79,209 10,730 8,678 1,139
</TABLE>
All options granted to Jeffrey Parker and Peter Ribbins in 1997, 1998 and
1999 have an exercise price of $2.50 per share. The other compensation totaling
$155,022 which was paid to Mr. Parker in
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<PAGE> 34
1997 and 1998 was paid for services rendered to us by an accounting practice
owned by Mr. Parker. In 1999, the payment method regarding Mr. Parker's services
was changed from a payment to the accountancy practice owned by Mr. Parker to a
direct salary payment to Mr. Parker.
The other annual compensation to Alexander Bodden and Gregory McTaggart is
comprised of redeemable preference shares issued to them under our share
incentive plan. Under our share incentive plan, half of the redeemable
preference shares are issued as additional compensation at no cost to the
employee and the employee may purchase, for cash, the balance at an exercise
price of approximately 75% of the market price of the ordinary shares at the
time of issuance. These shares issued to Messrs. Bodden and McTaggart had an
issue price of $4.07 per share, $5.32 per share and $5.71 per share, in 1997,
1998 and 1999, respectively.
STOCK OPTIONS
Since April 8, 1987, we have maintained a share incentive plan for our
long-term employees who are not directors. To become eligible for the share
incentive plan, an employee must complete four years of service with us and then
retain the shares for an additional four years before he can transfer or sell
the shares. We may, at our option, offer to exchange the redeemable preference
shares issued to the employee for an equal number of freely tradable ordinary
shares at any time during the four year holding period. Within the four year
holding period, if an employee ceases to be employed by our company, our
company, at the sole discretion of the board of directors, may redeem the
redeemable shares held by that employee for less than four years at the price
which the employee originally paid for the shares.
Under the plan, employees are issued redeemable preference shares on an
annual basis at no cost based on a formula which takes into consideration the
employee's salary and the total dividend paid to ordinary shareholders as a
percentage of the total shareholder's equity in each year. In addition, the
employee is granted an option to purchase an equal number of redeemable
preference shares at approximately 75% of the average market price of the
ordinary shares. The exercise price is determined during the ten days after our
annual shareholder's meeting. This option expires, unless exercised by the
employee, within forty (40) days after the date of our annual shareholder's
meeting. Since we adopted the share incentive plan, our employees have acquired
111,795 redeemable preference shares, of which 70,736 have been redeemed for an
equal number of ordinary shares.
In 1999, we implemented a share grant plan for our directors who are not
executive officers or serving as the Cayman Islands' government representative
on our board. Under this plan, a director receives ordinary shares based upon
the number of board and committee meetings that the director attends during the
year. Each board meeting is worth the share equivalent of $1,200 fee and each
committee meeting is worth the share equivalent of a $600 fee. Attendance fees
are accumulated throughout the year and then divided by the prevailing market
price on October 1st of the preceding year to determine the number of shares to
be granted for the current year.
As a result of the share incentive plan and the share grant plan, the
directors and executive officers, as a group, are presently entitled to exercise
outstanding options to purchase a total of 6,835 ordinary shares at an average
exercise price of $6.14 per share.
EMPLOYMENT AGREEMENTS AND RELATED TRANSACTIONS
We entered into an employment agreement with Peter D. Ribbins, our
President and Chief Operating Officer. The agreement, as amended, was originally
scheduled to expire on August 19, 2000, although it extends automatically each
year for an additional one year term. If we terminate Mr. Ribbins without cause,
he is entitled to a lump sum severance payment equal to two years' salary. In
each of the five years ended December 31, 1995, 1996, 1997, 1998 and 1999, Mr.
Ribbins was granted an option to purchase 20,000 ordinary shares at an exercise
price of $2.50 per share. For each year in which Mr. Ribbins remains the
President of our company, Mr. Ribbins will be granted options to purchase an
additional 20,000 ordinary shares, and the exercise price of these options will
be equal to
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<PAGE> 35
the average of the closing market price of the ordinary shares on each of the
first seven trading days in the month of October of the year in which the
options are granted. In May 1999, Mr. Ribbins exercised options to purchase
60,000 ordinary shares. All options granted to Mr. Ribbins expire on the third
anniversary of the date of the Auditor's Report on the financial statements for
the year of grant.
We entered into an employment agreement with Jeffrey M. Parker, our
Chairman of the Board of Directors and Chief Executive Officer. Mr. Parker
devotes at least 75% of his working time to our company and the remainder of his
working time to his accountancy practice. This agreement, as amended, was
originally scheduled to expire on December 31, 2001, although it extends
automatically each year for an additional one year term. If we terminate Mr.
Parker without cause, he is entitled to a lump sum severance payment equal to
two years' salary and any unvested stock options for the year in which Mr.
Parker is terminated automatically vest and become fully exercisable. Under
prior employment agreements, in each of the four years ended December 31, 1995,
1996, 1997 and 1998, Mr. Parker was granted an option to purchase that number of
ordinary shares which was equal to 2.5% of our net profit before dividends or
extraordinary items for that year. The exercise price of these options was $2.50
per share. For each of the three years ended December 31, 1999, 2000 and 2001,
Mr. Parker has been or will be granted an option to purchase that number of
ordinary shares which equals 1% of our net profit for that year. The exercise
price of the options granted in 1999 is $2.50 per share, and the exercise price
of the options to be granted in 2000 and 2001 will be equal to the average of
the closing market price of the ordinary shares on each of the first seven
trading days in the month of October of the year in which the options are
granted. In August 1997 and March 1999, Mr. Parker exercised options to purchase
101,705 and 29,010 ordinary shares, respectively, representing all the options
that were accrued to Mr. Parker on those dates. All options granted to Mr.
Parker after March 1999 expire on the third anniversary of the date of the
Auditor's Report on the financial statements for the year of grant.
In addition to serving as our Chairman of the Board and Chief Executive
Officer, Mr. Parker owns an accountancy practice in the Cayman Islands. Until
1999, we paid the accountancy practice for services rendered to us by Mr. Parker
through his practice. In 1999, we began paying Mr. Parker directly for his
services.
We entered into an employment agreement with Alex Bodden, our Vice
President of Finance and Secretary. This agreement was originally scheduled to
expire on August 31, 2000, although it extends automatically each year for an
additional one year term. Under the agreement, if we terminate Mr. Bodden
without cause, he is entitled to a lump sum severance payment equal to one
years' salary. For each year beginning in 2000, Mr. Bodden will be granted an
option to purchase that number of ordinary shares which equals 1% of our net
profit for that year. The exercise price of the options to be granted to Mr.
Bodden will be equal to the average of the closing market price of the ordinary
shares on each of the first seven trading days in the month of October of the
year in which the options are granted. All options granted to Mr. Bodden expire
on the third anniversary of the date of the Auditor's Report on the financial
statements for the year of grant. As a result of the option grant described
above, Mr. Bodden will no longer be eligible to participate in the share
incentive plan for financial years after 1999.
We entered into an employment agreement with Gregory McTaggart, our Vice
President of Operations. This agreement was originally scheduled to expire on
August 19, 2001, although it extends automatically each year for an additional
one year term. Under the agreement, if we terminate Mr. McTaggart without cause,
he is entitled to a lump sum severance payment equal to one years' salary. For
each year beginning in 2000, Mr. McTaggart will be granted an option to purchase
that number of ordinary shares which equals 0.75% of our net profit for that
year. The exercise price of the options to be granted to Mr. McTaggart will be
equal to the average of the closing market price of the ordinary shares on each
of the first seven trading days in the month of October of the year in which the
options are granted. All options granted to Mr. McTaggart expire on the third
anniversary of the date of the Auditor's Report on the financial statements for
the year of grant. As a result of the option grant
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<PAGE> 36
described above, Mr. McTaggart will no longer be eligible to participate in the
share incentive plan for financial years after 1999.
We sell water, on commercial terms, to several trucking businesses, one of
which is partially owned by Clarence Flowers, Jr., one of our directors. In
1999, 1998 and 1997, we made sales totaling $11,621, $30,593, and $22,500,
respectively, to the business in which Mr. Flowers has an interest.
On November 17, 1998, R.J. Falkner & Company, Inc. entered into a
consulting agreement with us to provide consulting services to us. As part of
the consulting agreement, we issued to R. Jerry Falkner, a principal of R.J.
Falkner & Company, options to purchase up to 30,000 ordinary shares at an
exercise price of $7.875 per share. The options may be exercised until twelve
months after the consulting agreement is terminated.
As consideration for J. Bruce Bugg, Jr.'s services to us as Vice-Chairman
of the board of directors, we granted to Mr. Bugg options to purchase 30,000
ordinary shares at $6.00 per share, exercisable until May 1, 2002. If Mr. Bugg
remains the Vice-Chairman, we have agreed to grant to him on May 1, 2000 options
to purchase an additional 30,000 ordinary shares at $6.75 per share, which was
the market price of the ordinary shares on October 1, 1999. These additional
30,000 options will be exercisable until May 1, 2003.
INDEMNIFICATION PROVISION
We have indemnified our directors and officers from and against all
actions, proceedings, costs, charges, losses, damages and expenses incurred in
connection with their service as a director or officer. We have not indemnified
our officers or directors for actions, proceedings, costs, charges, losses,
damages and expenses incurred by these officers or directors as a result of
their wilful neglect or default of their obligations to us.
To the extent that indemnification for liabilities arising under the
Securities Act of 1933 may be available under the above provisions, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission this indemnification is against public policy as expressed
in the Securities Act of 1933 and is unenforceable.
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<PAGE> 37
PRINCIPAL AND SELLING SHAREHOLDERS
This table lists information regarding the beneficial ownership as of March
31, 2000 of our ordinary shares, of which 3,072,615 are outstanding as of March
31, 2000, and our redeemable preference shares, of which 41,058 are outstanding
as of March 31, 2000, and as adjusted to reflect the sale of the number of
ordinary shares offered in this prospectus, by:
- each person or entity that we know beneficially owns more than 5% of our
ordinary shares or redeemable preference shares;
- each of our executive officers and directors;
- all of our directors and executive officers as a group; and
- the selling shareholder.
<TABLE>
<CAPTION>
BEFORE OFFERING AFTER OFFERING
----------------------- ------------------------------
NUMBER OF PERCENTAGE PERCENTAGE
IDENTITY OF SHARES OF SHARES NUMBER OF SHARES NUMBER OF SHARES OF SHARES
TITLE OF CLASS PERSON OR GROUP OWNED OUTSTANDING BEING OFFERED OWNED OUTSTANDING
-------------- --------------- --------- ----------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ordinary Shares Argyle/Cay-Water, Ltd. 477,662 15.5% 477,662
Ordinary Shares Jeffrey M. Parker, Chairman of 157,071 5.1% 157,071
the Board
Ordinary Shares Peter D. Ribbins, Director, 223,800 7.1% 223,800
President and Chief Operating
Officer
Ordinary Shares Gregory S. McTaggart, Vice 2,000 0.1% 2,000
President Operations
Ordinary Shares Alexander S. Bodden, Vice 2,176 0.1% 2,176
President Finance and Secretary
Ordinary Shares J. Bruce Bugg, Jr., Vice Chairman 507,662 16.4% 507,662
of the Board of Directors
Ordinary Shares Brian E. Butler, Director 44,250 1.4% 44,250
Ordinary Shares Hal N. Carr, Director 42,153 1.4% 42,153
Ordinary Shares Richard L. Finlay, Director 6,100 0.2% 6,100
Ordinary Shares Clarence B. Flowers, Jr., 0 0% 0
Director
Ordinary Shares Frederick W. McTaggart, Director 0 0% 0
Ordinary Shares Wilmer Pergande, Director 200 0% 200
Ordinary Shares Raymond Whittaker, Director 19,789 0.6% 19,789
Ordinary Shares Directors and executive officers 1,005,201 31.8% 1,005,201
as a group (12 persons)
Ordinary Shares Mogal Corporation, Selling 130,500 4.2% 80,000 50,500
Shareholder
Redeemable Alexander S. Bodden, Vice 2,123 5.2% 2,123
Preference Shares President Finance and Secretary
Redeemable Abel Castillo, Operations Manager 4,531 11.0% 4,531
Preference Shares
Redeemable Gregory McTaggart, Vice President 8,516 20.7% 8,516
Preference Shares Operations
Redeemable Margaret Julier, Office Manager 4,039 9.8% 4,039
Preference Shares
Redeemable Executive officers as a group (2 10,639 25.9% 10,639
Preference Shares persons)
</TABLE>
The address for Abel Castillo, Gregory McTaggart, Margaret Julier, Jeffrey
Parker, Peter Ribbins and Alexander Bodden is as follows: c/o Consolidated Water
Co. Ltd., Trafalgar Place, West Bay Road, P.O. Box 1114GT, Grand Cayman, Cayman
Islands, B.W.I. The address for each of J. Bruce Bugg, Jr.
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<PAGE> 38
and Argyle/Cay-Water, Ltd. is c/o Argyle Investment Corp., 1500 Nations Bank
Plaza, 300 Convent Street, San Antonio, Texas 77802. The address for Brian
Butler is P.O. Box 2581GT, Grand Cayman, BWI. The address for Hal N. Carr is c/o
Carr & Associates, 4103 South Texas Avenue, Suite 209, Bryan, Texas 77802. The
address for Richard Finlay is P.O. Box 709GT, Grand Cayman, BWI. The address for
Clarence Flowers is P.O. Box 2581GT, Grand Cayman, BWI. The address for Wilmer
Pergande is 3724 Bengal Road, Gulf Breeze, Florida 32561. The address for
Raymond Whittaker is P.O. Box 1959GT, Grand Cayman, BWI. The address for Mogal
Corporation is P.O. Box 1782GT, Grand Cayman, BWI.
Unless otherwise indicated, to our knowledge, the persons named in the
table above have sole voting and investment power with respect to the shares
listed. In computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares issuable under stock options
exercisable within 60 days after March 31, 2000 are deemed outstanding for that
person but are not deemed outstanding for computing the percentage of ownership
of any other person. Of the 157,071 ordinary shares owned by Mr. Parker, Mr.
Parker shares voting and investment power with respect to 7,170 of these shares,
and 7,786 of these shares are ordinary shares underlying options granted to Mr.
Parker which may be exercised within 60 days after March 31, 2000. Of the
223,800 ordinary shares owned by Mr. Ribbins, 60,000 are ordinary shares
underlying options granted to Mr. Ribbins which may be exercised within 60 days
after March 31, 2000. Mr. Bugg is deemed the beneficial owner of the 477,662
ordinary shares held by Argyle/Cay-Water, Ltd. Of the 507,662 ordinary shares
beneficially owned by Mr. Bugg, 30,000 are ordinary shares underlying options
granted to Mr. Bugg which may be exercised within 60 days after March 31, 2000.
The 2,176 ordinary shares held by Mr. Bodden are owned by Mr. Bodden and his
wife as joint tenants, with shared voting and investment power.
SHARES ELIGIBLE FOR FUTURE SALE
We currently have 3,072,615 ordinary shares issued and outstanding. With
the exception of ordinary shares held by our officers, directors, ten percent
shareholders and other affiliates, all of these shares may be immediately sold
without registration under the Securities Act of 1933. These shares may be sold
under Rule 144(k) or under the exemption provided by Section 4(1) of the
Securities Act of 1933 for transactions by any person other than an issuer,
underwriter or dealer. In addition, the estimated 904,915 ordinary shares held
by our affiliates (as this term is defined in the Securities Act of 1933) are
eligible for resale in compliance with Rule 144.
Generally, Rule 144 permits the sale, within any three-month period, of
shares in an amount which does not exceed the greater of one percent of the
then-outstanding ordinary shares or the average weekly trading volume during the
four calendar weeks before a sale. We cannot predict the effect sales made under
Rule 144, or otherwise, may have on the then-prevailing market price of the
ordinary shares. Any substantial sale of the restricted ordinary shares under
Rule 144, or otherwise, may have a material adverse effect on the market price
of the ordinary shares.
CAYMAN ISLANDS TAXATION
AND FOREIGN EXCHANGE REGULATIONS
The Cayman Islands presently impose no taxes on profit, income, capital
gains, or appreciations of our company and no taxes are currently imposed in the
Cayman Islands on profit, income, capital gains, or appreciations of the holders
of our securities or in the nature of estate duty, inheritance, or capital
transfer tax. There is no income tax treaty between the United States and the
Cayman Islands.
A major source of revenue to the Cayman Islands government is a 7.5% or 9%
stamp tax, depending on location, on the transfer of ownership of land in the
Cayman Islands. To prevent stamp tax avoidance by transfer of the ownership of
the shares of a company which owns land in the Cayman Islands (as opposed to
transfer of the land itself), The Land Holding Companies (Share Transfer Tax)
Law was passed in 1976. The effect of this law is to charge a company which owns
land or an interest in land in the Cayman Islands a 7.5% tax on the value of its
land or interest in land attributable to each
34
<PAGE> 39
share transferred. The stamp tax calculation does not take into account the
proportion which the value of a company's Cayman land or interest bears to its
total assets and whether the intention of the transfer is to transfer ownership
of a part of a company's entire business or a part of its Cayman land or
interest. We no longer require reimbursement of this tax from transferees as we
have done in the past. We have asked the Cayman Islands government to exempt our
company from the landholding companies which have to pay the tax on disposals of
their shares. As of the date of this prospectus, the Cayman Islands government
has not ruled on our request.
We are not subject to any governmental laws, decrees or regulations in the
Cayman Islands which restrict the export or import of capital, or that affect
the remittance of dividends, interest or other payments to non-resident holders
of our securities. The Cayman Islands does not impose any limitations on the
right of non-resident owners to hold or vote the ordinary shares. There are no
exchange control restrictions in the Cayman Islands.
DESCRIPTION OF SECURITIES
The following statements are not complete. For a complete description, you
should read our Memorandum of Association and Articles of Association, which are
incorporated by reference in the registration statement.
ORDINARY SHARES
We are authorized to issue 9,900,000 ordinary shares, par value CI$1.00 per
share. At March 31, 2000, 3,072,615 ordinary shares were issued and outstanding.
Holders of ordinary shares may cast one vote for each share held of record
at all shareholder meetings. All voting is non-cumulative. Holders of more than
50% of the outstanding shares present and voting at an annual meeting at which a
quorum is present are able to elect all of our directors. Holders of ordinary
shares do not have preemptive rights or rights to convert their ordinary shares
into any other securities. All of the outstanding ordinary shares are fully paid
and non-assessable.
Holders of ordinary shares are entitled to receive ratably dividends, if
any, distributed out of our accumulated profits. Subject to the preferential
rights of holders of the redeemable preference shares, upon liquidation, all
holders of ordinary shares are entitled to participate pro rata in our assets
which are available for distribution.
REDEEMABLE PREFERENCE SHARES
We are authorized to issue 100,000 redeemable preference shares, par value
CI$1.00 per share. At March 31, 2000, 41,058 redeemable preference shares were
issued and outstanding.
Holders of redeemable preference shares may cast one vote for each share
held of record at all shareholder meetings. All voting is on a non-cumulative
basis. Upon a liquidation of our company, the redeemable preference shares rank
in preference to the ordinary shares with respect to the repayment of the par
value of redeemable preference shares plus any premium paid or credited on the
purchase of the shares. Under our share incentive plan, we may redeem any
redeemable preference shares issued to an employee. The ordinary shares and the
redeemable preference shares rank equally in all other respects.
CLASS B ORDINARY SHARES
In 1997, we adopted an option deed under which option holders may exercise
rights to purchase our class B ordinary shares, par value CI$1.00 per share. As
of the date of this prospectus, there are no class B ordinary shares issued and
outstanding.
Holders of class B ordinary shares are entitled to the same dividends paid
on ordinary shares and redeemable preference shares, and we cannot pay a
dividend on the ordinary shares without paying the same dividend on the class B
ordinary shares, and vice versa. We cannot redeem the class B ordinary shares,
and the holders of the class B ordinary shares are not entitled to any
repayments of capital upon the dissolution of our company.
35
<PAGE> 40
If we enter into a transaction in which ordinary shares are exchanged for
securities or other consideration of another company, then the class B ordinary
shares will be also be exchanged pursuant to a formula. The class B ordinary
shares and the ordinary shares rank equally in all other respects.
OUTSTANDING WARRANTS
On April 9, 1996, we issued warrants to purchase up to 50,000 ordinary
shares at $6.30 per share to the underwriter of our initial public offering. As
of the date of this prospectus, all of these warrants are issued and
outstanding. These warrants must be exercised before April 3, 2001. We have
granted the underwriter of our initial public offering one demand and unlimited
piggyback registration rights with respect to these warrants and the ordinary
shares underlying the warrants.
OPTION DEED
In 1997, in response to an attempt by Argyle/Cay Water, Ltd. to acquire up
to 50% of our company, our board of directors approved an option deed, which is
similar to a "poison pill." The option deed may delay or prevent a change in
control of our company.
The option deed grants to each holder of an ordinary and redeemable
preference share an option to purchase one one-hundredth of a class B ordinary
share at an exercise price of $37.50, subject to adjustment. If a takeover
attempt occurs, each shareholder would be able to exercise the option and
receive ordinary shares with a value equal to twice the exercise price of the
option. Under circumstances described in the option deed, instead of receiving
ordinary shares, we may issue to each shareholder cash or other equity or debt
securities of our company, or the equity securities of the acquiring company, as
the case may be, with a value equal to twice the exercise price of the option.
Takeover events that would trigger the options include a person or group
becoming the owner of 20% or more of our outstanding ordinary shares or the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer, which upon completion would result in the beneficial ownership
by a person or group of 20% or more of the outstanding ordinary shares.
Accordingly, exercise of the options may cause substantial dilution to a person
who attempts to acquire our company.
The options are attached to each ordinary share and redeemable preference
share, including any shares offered by this prospectus, and presently have no
monetary value. The options will not trade separately from our shares unless and
until they become exercisable. The options, which expire on July 31, 2007, may
be redeemed, at the option of our board of directors, at a price of CI$.01 per
option at any time until ten business days following the date that a group or
person acquires ownership of 20% or more of the outstanding ordinary shares. Any
amendment to the option deed is subject to the terms and conditions of our
agreement with Argyle/Cay-Water, Ltd. described in the section of this
prospectus entitled "MANAGEMENT -- Composition of Board of Directors."
The option deed may have certain anti-takeover effects, although it is not
intended to prevent any acquisition or business combination that is at a fair
price and otherwise in the best interests of our company and our shareholders as
determined by our board of directors. However, a shareholder could potentially
disagree with the board's determination of what constitutes a fair price or the
best interests of our company and our shareholders.
The full terms and conditions of the options are contained in an option
deed between us and our option agent, American Stock Transfer & Trust Company.
See "Where You Can Find More Information" on page 43 of this prospectus for
information on how to obtain a copy of the option deed. The above description of
the options is a summary only and does not purport to be complete. You should
read the entire option deed to understand the terms of the options.
TRANSFER AGENT
The transfer agent for the ordinary shares is American Stock Transfer &
Trust Company, New York, New York.
36
<PAGE> 41
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement among
Janney Montgomery Scott LLC, First Security Van Kasper, the other underwriters
and us, the underwriters will purchase from us and the selling shareholder the
number of ordinary shares listed below.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF ORDINARY SHARES
------------ -------------------------
<S> <C>
Janney Montgomery Scott LLC.................................
First Security Van Kasper...................................
Other underwriters [List]...................................
-------
Total.............................................
=======
</TABLE>
The underwriters are offering the ordinary shares to the public at an
offering price of $ . The underwriters must take and pay for all of
the ordinary shares offered under this prospectus if any are taken. We will pay
underwriting discounts and commissions to the underwriters of [6%] of the gross
proceeds from this offering.
We have agreed to indemnify the underwriters and their respective
affiliates, respective directors, officers, employees, agents and controlling
persons, against any and all losses, claims, damages or liabilities, joint or
several, to which any of them may become subject under any applicable federal or
state law, or otherwise, and arising out of any transactions contemplated by the
underwriting agreement. We have also agreed to pay to Janney Montgomery Scott
LLC and First Security Van Kasper a non-accountable expense allowance of $75,000
as follows:
- we paid $25,000 on November 15, 1999 when we executed an engagement
letter with Janney Montgomery Scott LLC; and
- we will pay $25,000 to each of Janney Montgomery Scott LLC and First
Security Van Kasper on the earlier of closing of this offering, or
December 31, 2000.
We have also agreed to pay all costs and expenses incident to the issuance,
purchase, sale and delivery of the ordinary shares, including,
- filing fees in connection with qualifying the ordinary shares for sale
under the laws of any states designated by underwriters;
- filing of the offering materials and underwriting documents with the
NASD; and
- any fees relating to qualification of the ordinary shares under the
securities laws of any states and other jurisdictions determined by
underwriters.
We have granted the underwriters an option, exercisable during the 30-day
period after the effective date of the registration statement for this offering,
to purchase from us at the offering price, less underwriting discounts and
commissions, up to 127,500 additional ordinary shares for the sole purpose of
covering over-allotments, if any.
In connection with this offering and in compliance with applicable
securities laws, the underwriters may over-allot, which means that they may sell
more ordinary shares than is shown on the cover of this prospectus. The
underwriters may also engage in transactions on the Nasdaq National Market which
stabilize, maintain or otherwise affect the market price of the ordinary shares
at levels above those which might otherwise prevail in the open market. These
transactions may include placing bids for the ordinary shares or purchasing the
ordinary shares for pegging, fixing or maintaining the price of the ordinary
shares or to reduce a short position created in connection with this offering. A
short position may be covered by exercising the over-allotment option described
above instead of or in addition to open market purchases. The underwriters do
not have to engage in these activities, and if they do, they may discontinue
them at any time.
37
<PAGE> 42
Under Rule 103 of Regulation M of the Securities Exchange Act of 1934, as
amended, certain underwriters, selling group members or their respective
affiliates who are qualified market makers on the Nasdaq National Market, may
engage in passive market making transactions in our ordinary shares on the
Nasdaq National Market. They may engage in these activities during the five
business days prior to the pricing of this offering before the commencement of
offers and sales of the ordinary shares. Passive market makers must comply with
volume and price limitations and must be identified as passive market makers. In
general, a passive market maker must display its bid at a price that is not
greater than the highest independent bid for the security. If all independent
bids are lowered below the passive market maker's bid, then the passive market
maker's bid must then be lowered when certain purchase limits are exceeded.
We and the underwriters do not make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of the ordinary shares. In addition, we and the
underwriters do not make any representations that the underwriters will engage
in any of these transactions or that if they do, they will not discontinue these
transactions without notice.
Under a lock-up agreement with the underwriters, our company, officers,
directors and principal shareholders may not offer or sell, without the prior
written consent of the underwriters, any of their ordinary shares or securities
convertible into ordinary shares for a period of 120 days after the effective
date of the registration statement for this offering. However, we may offer or
sell ordinary shares under our share incentive plan and other transactions
specified in the underwriting agreement.
At any time beginning on or about the end of the lock-up period, if we
decide to issue additional ordinary shares in another public offering with
Janney Montgomery Scott LLC, then we have agreed to allow Argyle/Cay-Water, Ltd.
to register some or all of its shares in such an offering.
The information in this section is just a brief summary of the principal
terms of the underwriting agreement. To find out about all of the terms and
conditions of the underwriting agreement, you should look at a copy of the
underwriting agreement, which is filed as an exhibit to the registration
statement for this offering.
LEGAL MATTERS
The validity of the ordinary shares and statements in this prospectus
concerning matters of Cayman Islands law will be passed upon by Myers & Alberga,
our and the selling shareholder's legal counsel in the Cayman Islands. Steel
Hector & Davis LLP, Miami, Florida, is acting as counsel to us and the selling
shareholder with respect to certain matters of U.S. law in connection with this
offering. Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania, is
acting as counsel for the underwriters in connection with this offering.
EXPERTS
The financial statements of our company as of December 31, 1999 and 1998
and for each of the three years in the period ended December 31, 1999 included
in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement under the Securities Act on Form F-2 covering the ordinary shares
being sold in this offering. We have not included in this prospectus all of the
information contained in the registration statement, and you should refer to the
registration statement and its exhibits for further information.
38
<PAGE> 43
You may review a copy of the registration statement, including exhibits and
schedules filed with it, at the Securities and Exchange Commission's public
reference facilities in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at their regional offices located at 7 World Trade
Center, 13th Floor, New York, New York 10048 and at the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may
also obtain copies of these materials from the Public Reference Section of the
Securities and Exchange Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. You may also find the registration
statement with exhibits, other than confidential filings, at the Securities and
Exchange Commission's Website at http://www.sec.gov.
We also file with the Securities and Exchange Commission annual reports on
Form 20-F, and furnish our shareholders an annual report before each of our
annual meetings of shareholders. Our annual reports include financial statements
prepared in accordance with generally accepted accounting principles, except as
disclosed therein. These annual financial statements are examined by our
independent accountants.
The Securities and Exchange Commission's rules let us "incorporate by
reference" the information which we file with the Securities and Exchange
Commission, which means we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus. We incorporate our Annual Report on Form
20-F for the year ended December 31, 1998 as of the date it was filed with the
Securities and Exchange Commission.
We will provide a copy of this filing to you upon request. You should
direct your oral or written request for a copy of this filing to: Consolidated
Water Co. Ltd., Trafalgar Place, West Bay Road, P.O. Box 1114GT, Grand Cayman,
Cayman Islands, British West Indies, Attention: Jeffrey M. Parker, Chief
Executive Officer (telephone: 345-945-4277). You will not be charged for copies
unless you request exhibits, for which we will charge you a minimal fee.
However, you will not be charged for exhibits in any case where the exhibit you
request is specifically incorporated by reference into another document which is
incorporated by this prospectus.
39
<PAGE> 44
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statements of Income for the Years Ended December 31, 1997,
1998 and 1999............................................. F-4
Statements of Changes in Stockholders' Equity for the Years
Ended
December 31, 1997, 1998 and 1999.......................... F-5
Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999....................................... F-6
Notes to Financial Statements............................... F-8
</TABLE>
F-1
<PAGE> 45
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Consolidated Water Co. Ltd.
In our opinion, the accompanying balance sheets and the related statements
of income, changes in stockholders' equity and cash flows present fairly, in all
material respects, the financial position of Consolidated Water Co. Ltd. (the
"Company") at December 31, 1999 and 1998, and the related income, cash flows and
changes in stockholders' equity for each of the three years in the period ended
December 31, 1999 in conformity with International Accounting Standards. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
International Accounting Standards utilized by the Company vary in certain
significant respects from accounting principles generally accepted in the United
States of America. The application of the latter affects the determination of
net income for each of the three years in the period ended December 31, 1999 and
the determination of stockholders' equity at December 31, 1999 and 1998. The
extent of these effects are summarized in Note 20.
PricewaterhouseCoopers
Grand Cayman, Cayman Islands
March 22, 2000
F-2
<PAGE> 46
CONSOLIDATED WATER CO. LTD.
BALANCE SHEETS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash at bank (Note 6)..................................... 22,146 439,032
Accounts receivable (Note 3).............................. 1,230,412 828,486
Spares stock.............................................. 94,303 68,641
Inventory of water........................................ 28,984 30,661
Prepaid expenses and other assets......................... 209,761 187,693
Current portion of deferred expenditure (Notes 2 and 7)... 90,833 1,688
----------- -----------
Total current assets.............................. 1,676,439 1,556,201
Fixed assets (Notes 4 and 13)............................... 15,157,193 14,430,785
Deferred expenditure (Note 2)............................... 16,444 18,132
----------- -----------
Total assets...................................... $16,850,076 $16,005,118
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdrafts (Note 6).................................. 651,606 60,247
Dividends payable (Note 5)................................ 266,585 257,117
Accounts payable and accrued expenses..................... 757,612 554,141
Current portion of long term purchase obligation (Note
13).................................................... 320,141 344,304
Current portion of long term debt obligation (Note 6)..... 310,135 300,162
----------- -----------
Total current liabilities......................... 2,306,079 1,515,971
Long term purchase obligation (Note 13)..................... -- 320,141
Long term debt obligation (Note 6).......................... 1,926,786 2,470,112
Security deposit (Note 14).................................. 42,482 42,482
Advances in aid of construction (Note 2).................... 45,084 49,584
----------- -----------
Total liabilities................................. 4,320,431 4,398,290
----------- -----------
Stockholders' equity
Ordinary shares (Note 7).................................. 3,794,960 3,667,466
Additional paid in capital (Note 7)....................... 2,402,195 2,276,466
Treasury shares (Note 7).................................. (821,303) (62,375)
Vested redeemable preference shares (Note 7).............. 14,801 16,930
Non-vested redeemable preference (Notes 7 and 15)......... 34,469 35,756
Retained earnings and other reserves...................... 7,104,523 5,672,585
----------- -----------
Total stockholders' equity........................ 12,529,645 11,606,828
----------- -----------
Total liabilities and stockholders' equity........ $16,850,076 $16,005,118
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 47
CONSOLIDATED WATER CO. LTD.
STATEMENTS OF INCOME
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------------------
1999 1998 1997
---------- ------------ ----------
<S> <C> <C> <C>
Income
Water sales......................................... 7,936,118 7,925,232 7,214,557
Interest income..................................... 594 28,062 53,797
Other income........................................ 285,844 204,384 170,648
Connection charges.................................. 27,432 30,036 29,724
---------- ---------- ----------
8,249,988 8,187,714 7,468,726
---------- ---------- ----------
Expenses (Note 8)
Direct expenses..................................... 4,624,422 5,095,373 4,806,552
Indirect expenses................................... 1,678,967 1,435,345 1,316,534
---------- ---------- ----------
6,303,389 6,530,718 6,123,086
---------- ---------- ----------
Net income before exceptional item.................... 1,946,599 1,656,996 1,345,640
Exceptional item (Note 4)............................. -- -- (97,886)
---------- ---------- ----------
Net income............................................ $1,946,599 $1,656,996 $1,247,754
========== ========== ==========
Basic earnings per ordinary share (Note 10)........... $ 0.64 $ 0.54 $ 0.42
========== ========== ==========
Diluted earnings per ordinary share (Note 10)......... $ 0.61 $ 0.52 $ 0.40
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 48
CONSOLIDATED WATER CO. LTD.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1999
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
VESTED NON-VESTED
ADDITIONAL REDEEMABLE REDEEMABLE
ORDINARY PAID TREASURY PREFERENCE PREFERENCE REVALUATION RETAINED
SHARES IN CAPITAL SHARES SHARES SHARES SURPLUS EARNINGS
---------- ---------- -------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at 31 December
1996...................... 3,525,290 2,230,312 -- 13,963 37,209 302,867 3,392,513
Issue of share capital (net)
(Note 7).................. 141,924 36,120 -- (5,477) (4,789) -- --
Net income for the period... -- -- -- -- -- -- 1,247,754
Dividends................... -- -- -- -- -- -- (432,614)
---------- ---------- -------- ------- ------- -------- ----------
Balance at 31 December
1997...................... 3,667,214 2,266,432 -- 8,486 32,420 302,867 4,207,653
---------- ---------- -------- ------- ------- -------- ----------
Issue of share capital (net)
(Note 7).................. 252 10,034 -- 8,444 3,336 -- --
Purchase of treasury shares
(Note 7).................. -- -- (62,375) -- -- -- --
Net income for the period... -- -- -- -- -- -- 1,656,996
Dividends................... -- -- -- -- -- -- (494,931)
---------- ---------- -------- ------- ------- -------- ----------
Balance at 31 December
1998...................... 3,667,466 2,276,466 (62,375) 16,930 35,756 302,867 5,369,718
---------- ---------- -------- ------- ------- -------- ----------
Issue of share capital (net)
(Note 7).................. 127,494 125,729 -- (2,129) (1,287) -- --
Purchase of treasury shares
(Note 7).................. -- -- (758,928) -- -- -- --
Net income for the period... -- -- -- -- -- -- 1,946,599
Dividends................... -- -- -- -- -- -- (514,661)
---------- ---------- -------- ------- ------- -------- ----------
Balance at 31 December
1999...................... $3,794,960 $2,402,195 821,303) $14,801 $34,469 $302,867 $6,801,656
========== ========== ======== ======= ======= ======== ==========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at 31 December
1996...................... 9,502,154
Issue of share capital (net)
(Note 7).................. 167,778
Net income for the period... 1,247,754
Dividends................... (432,614)
-----------
Balance at 31 December
1997...................... 10,485,072
-----------
Issue of share capital (net)
(Note 7).................. 22,066
Purchase of treasury shares
(Note 7).................. (62,375)
Net income for the period... 1,656,996
Dividends................... (494,931)
-----------
Balance at 31 December
1998...................... 11,606,828
-----------
Issue of share capital (net)
(Note 7).................. 249,807
Purchase of treasury shares
(Note 7).................. (758,928)
Net income for the period... 1,946,599
Dividends................... (514,661)
-----------
Balance at 31 December
1999...................... $12,529,645
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 49
CONSOLIDATED WATER CO. LTD.
STATEMENTS OF CASH FLOWS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------------------
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Cash receipts from customers........................ 7,845,789 8,123,768 7,214,796
Cash paid to suppliers and employees................ (5,128,184) (5,553,210) (5,173,042)
---------- ----------- -----------
Cash generated from operations...................... 2,717,605 2,570,558 2,041,754
Interest received................................... 594 28,062 53,797
Interest paid....................................... (189,278) (277,877) (301,606)
---------- ----------- -----------
Net cash from operating activities.................... 2,528,921 2,320,743 1,793,945
---------- ----------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment........... (1,543,368) (2,184,783) (1,106,820)
Proceeds from sale of equipment and assets held for
resale........................................... 1,920 -- 13,242
---------- ----------- -----------
Net cash used in investing activities................. (1,541,448) (2,184,783) (1,093,578)
---------- ----------- -----------
Cash flows from financing activities
Net proceeds from issuance of share capital......... 235,205 12,957 159,400
Cost associated with public offering................ (89,145) -- --
Repurchase of ordinary shares....................... (758,928) (62,375) --
Proceeds from term loan............................. -- 1,000,000 --
Repayment of principal on long term borrowing....... (533,353) (190,111) (184,690)
Repayments under capital lease obligations.......... (344,304) (1,027,567) (435,736)
Dividends paid...................................... (505,193) (457,912) (393,632)
---------- ----------- -----------
Net cash (used in) from financing activities.......... (1,995,718) (725,008) (854,658)
---------- ----------- -----------
Net decrease in cash and cash equivalents............. (1,008,245) (589,048) (154,291)
Cash and cash equivalents at beginning of period...... 378,785 967,833 1,122,124
---------- ----------- -----------
Cash and cash equivalents at end of period............ $ (629,460) $ 378,785 $ 967,833
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 50
FOOTNOTES TO THE STATEMENTS OF CASH FLOWS:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C> <C>
i. Cash and cash equivalents:
Cash and cash equivalents consist of:
22,146 439,032 1,082,425
Cash at bank............................................
(651,606) (60,247) (114,592)
Bank overdraft..........................................
---------- ---------- ----------
$ (629,460) $ 378,785 $ 967,833
========== ========== ==========
ii. Reconciliation of net cash from operating activities to
net income from operations:
1,946,599 1,656,996 1,247,754
Net income..............................................
Adjustments to reconcile net income to net cash from
operating activities
816,960 768,745 689,745
Depreciation............................................
-- -- 97,886
Exceptional item (Note 4)...............................
1,688 1,688 1,688
Amortization of deferred costs..........................
11,722 9,108 8,378
Preference shares issued at $nil consideration (Note
22)................................................
2,880 -- --
Ordinary shares issued at $nil consideration (Note
22)................................................
(1,920) (20,000) (1,200)
Profit from sale of fixed assets........................
Change in assets and liabilities
(23,985) (74,528) 21,725
(Increase) decrease in spares stock and inventory of
water..............................................
(423,994) (441) (218,707)
Change in accounts receivable and prepaid expenses and
other assets.......................................
198,971 (20,825) (53,324)
Increase (decrease) in accounts payable and other
liabilities and advances in aid of construction.........
---------- ---------- ----------
$2,528,921 $2,320,743 $1,793,945
Net cash from operating activities......................
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 51
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
1. PRINCIPAL ACTIVITY AND STATUS
By Special Resolution dated December 3, 1998, Cayman Water Company
Limited's name was changed to Consolidated Water Co. Ltd. (the "Company"). The
Company was incorporated as an ordinary resident company in the Cayman Islands
on August 31, 1973 to provide water distribution and sewage disposal services.
The registered and principal office of the Company is Trafalgar Place, West Bay
Road, PO Box 1114GT, Grand Cayman, Cayman Islands, British West Indies.
On December 7, 1979 the Company was granted an exclusive license by the
government of the Cayman Islands ("government") to process and supply water to
certain areas of Grand Cayman for a period of twenty years commencing February
1, 1979. On July 11, 1990 that license was replaced by a new, exclusive license
for a period of twenty years from July 11, 1990 which substantially extended the
area of supply and granted to the Company a right of first refusal on the
extension or renewal thereof. The base price of water supplied by the Company
and adjustments thereto are determined by the terms of the license which provide
for automatic inflationary increases.
With effect from September 1, 1988 sewage delivered by the Company's
Governor's Harbour system is being processed by the Water Authority. The Water
Authority is the government entity established by The Water Authority Law 1982
to provide a public water supply system in any part of the Cayman Islands. The
Water Authority has agreed under the current license not to exercise its right
to supply water in the Company's licensed areas providing the Company is not in
default under the terms of its license.
On August 21, 1997, Commonwealth Water Limited ("Commonwealth") was
incorporated with nominal share capital in the Bahamas for the purpose of
entering into a joint venture whereby Commonwealth would design, construct and
equip a plant and related facilities for the purpose of providing water to the
Bimini Islands. The Company maintains a 100% interest in Commonwealth which is
in a pre-operating stage. As at December 31, 1999, the Company had incurred
costs on behalf of Commonwealth which have been deferred (see Note 4).
2. ACCOUNTING POLICIES
The Company's financial statements have been prepared under the historical
cost convention, modified by the revaluation of land, and in accordance with
International Accounting Standards. The preparation of financial statements in
conformity with International Accounting Standards requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of the significant accounting policies:
Direct revenue and expenses: The Company bills customers monthly for
water delivered based on meter readings performed at or near each month
end. An accrual, where necessary, is made for water delivered but unbilled
at year end where readings are not performed at the year end date. This
accrual is matched with the associated direct costs of producing and
purchasing water. A connection charge is billed and recognized in income on
the initial supply of water to a new customer. The charge is set at a level
intended to defray the cost of connection of the water supply and the
installation of the required water meter.
Foreign currency translation: Monetary assets and liabilities
denominated in foreign currencies (currencies other than the United States
dollar -- see Note 21), are translated at the
F-8
<PAGE> 52
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. ACCOUNTING POLICIES -- (CONTINUED)
rates of exchange ruling at the balance sheet date. Foreign currency
transactions are translated at the rate ruling on the date of the
transaction. Net exchange gains of $36,512 (1998: $31,846; 1997: $36,494)
are included in other income.
Share and share option incentive plans: The Company issues shares
under incentive plans that form part of employees and Directors
remuneration. A compensatory expense is recorded equal to the par value of
shares issued under the schemes on the date granted. The Company grants
options to purchase ordinary shares as part of remuneration for Directors.
No compensatory expense is recognized for options granted or shares
purchased under option. On exercise of options, proceeds up to the par
value of the shares issued are credited to ordinary share capital, any
proceeds in excess of the par value of shares issued are credited to
additional paid in capital in the period in which the options are
exercised.
Treasury shares: Treasury shares are recorded at cost as a deduction
from stockholders' equity. Any profit or loss on the re-issue of these
shares is recorded directly as a movement in stockholders' equity.
Spares stock: Spares stock, which consists primarily of replacement
spares and parts, are valued at the lower of cost and net realizable value
on a first-in, first-out basis.
Deferred expenditure: Costs which can be identified as benefiting
future periods, including salaries and professional fees, are carried
forward and amortized accordingly. Legal, accounting and salary costs
relating to the license (Note 1) are being amortized over the period of the
license. In addition, incremental external costs directly attributable to
an equity transaction that are incurred at a preliminary stage of
proceedings are deferred. Such offering costs will be deducted from the
proceeds when the equity transaction is completed.
Long term purchase obligation: The Company assumes substantially all
the benefits and risks of the plant and equipment covered by the Water
Purchase Agreement (Note 13). The assets have been capitalized at the
amount specified in the agreement and the related obligation is recorded as
a liability of the Company. Interest expense is calculated based on the
outstanding balance of the purchase obligation.
Repairs and maintenance: All repair and maintenance costs are
expensed as incurred.
Cash and cash equivalents: Cash and cash equivalents comprise cash at
bank on call and cash overdrafts.
Inventory of water: Inventory of water represents the cost of
desalinated potable water produced and purchased by the Company and held in
the Company's reservoirs at year end. The value of the inventory of water
is based on the lower of average cost of producing and purchasing water
during the year and the volume of water on hand at year end or net
realizable value.
Fixed assets: Fixed assets, except land, are stated at cost less
accumulated depreciation. Land is stated at appraised value as determined
by the Directors in 1987 having regard, inter alia, to the value placed on
the land by government for share transfer tax purposes. The value of land
is appraised when in the opinion of the Directors the market value is
materially different from the carrying value. Depreciation is calculated
using a straight line method with allowance being made
F-9
<PAGE> 53
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. ACCOUNTING POLICIES -- (CONTINUED)
for estimated residual values. Rates are determined based on the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings........................ 5 to 40 years
Plant and equipment.............. 5 to 15 years
Office furniture, fixtures and
equipment...................... 3 to 10 years
Vehicles....................... 3 to 10 years
Sewage equipment............... 10 to 20 years
Leasehold improvements........... Shorter of 5 years and lease term outstanding
Distribution system.............. 3 to 40 years
</TABLE>
Advances in aid of construction: The Company recognizes a liability
in respect of advances in aid of construction when such advances are
received from certain condominium developers in the licensed area to help
defray the capital expenditure costs of the Company. These advances do not
represent a loan to the Company and are interest free. However, the Company
allows a discount of 10% on future supplies of water to these developments
until the aggregate discounts allowed are equivalent to advances received.
Such discounts are charged against advances received.
3. ACCOUNTS RECEIVABLE
Accounts receivable comprise receivables from customers and are shown net
of an allowance for doubtful accounts of $12,000 (1998: $12,000).
4. FIXED ASSETS
Certain fixed assets are pledged as collateral for certain obligations of
the Company, as more fully described in Notes 6 and 13.
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
COST/VALUATION 1999 ADDITIONS DISPOSALS 1999
- -------------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Land............................................ 778,546 -- -- 778,546
Buildings....................................... 2,090,876 5,311 -- 2,096,187
Plant and equipment............................. 6,075,182 550,499 -- 6,625,681
Distribution.................................... 10,003,880 764,883 -- 10,768,763
Sewage equipment................................ 155,477 -- -- 155,477
Office furniture, fixtures and equipment........ 393,726 143,525 -- 537,251
Vehicles........................................ 502,391 112,459 26,400 588,450
Leasehold improvements.......................... 17,658 -- -- 17,658
Lab equipment................................... 29,778 2,440 -- 32,218
----------- ---------- ------- -----------
$20,047,514 $1,579,117 $26,400 $21,600,231
=========== ========== ======= ===========
</TABLE>
F-10
<PAGE> 54
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. FIXED ASSETS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
ACCUMULATED DEPRECIATION 1999 ADDITIONS DISPOSALS 1999
- ------------------------ ----------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Buildings....................................... 612,315 73,283 -- 685,598
Plant and equipment............................. 2,338,669 347,342 -- 2,686,011
Distribution.................................... 2,060,386 307,698 -- 2,368,084
Sewage equipment................................ 144,428 5,525 -- 149,953
Office furniture, fixtures and equipment........ 188,885 51,926 -- 240,811
Vehicles........................................ 227,939 64,574 26,400 266,113
Leasehold improvements.......................... 17,657 1 -- 17,658
Lab equipment................................... 26,450 2,360 -- 28,810
----------- ---------- ------- -----------
$ 5,616,729 $ 852,709 $26,400 $ 6,443,038
=========== ========== ======= ===========
Net book value................................ $14,430,785 $15,157,193
=========== ===========
</TABLE>
Included in plant and equipment are development costs of $97,756 (1998:
$88,410) and equipment of $307,395 (1998: $252,310) incurred on behalf of
Commonwealth (see Note 1) and assets under construction of $nil (1998:
$102,822). Also included in plant and equipment is the reverse osmosis water
production plant which has been acquired under a capital lease (see Note 13).
Included in distribution are assets under construction of $486,799 (1998:
$58,279) and included in buildings are costs of $105,742 (1998: $100,429)
relating to ongoing property developments.
At December 31, 1999, the Company had outstanding commitments of $512,000
relating to the expansion of the distribution system (1998: $nil).
During 1995, following the completion of the expansion of the Company's
Governor's Harbour reverse osmosis plant capacity and the supply and
installation of a reverse osmosis plant at the Company's West Bay site, the
Company decided that the two remaining operational vapour compression units
should be taken out of service. At this time management estimated their
recoverable value, along with associated spare parts, and separately disclosed
the resulting written down value of these assets as assets held for resale.
Fair value was estimated at December 31, 1996 and 1995 based on current
ongoing negotiations for disposal held with third parties. As a result of the
limited market for the assets held for resale, the fair value was written down
to nil in 1997. The write downs of these assets to fair value have been recorded
as exceptional items. The write downs are summarized as follows:
F-11
<PAGE> 55
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. FIXED ASSETS -- (CONTINUED)
Previously included under fixed assets:
<TABLE>
<S> <C>
Plant and equipment......................................... 2,282,598
Less: accumulated depreciation.............................. (2,073,797)
-----------
208,801
-----------
Distribution................................................ 284,350
Less: accumulated depreciation.............................. (262,010)
-----------
22,340
-----------
Previously included under fixed assets...................... 231,141
Previously included under spares stock...................... 285,987
-----------
Total book value of units and spares prior to write-down.... 517,128
Excess of carrying amount over estimated fair value......... (400,000)
-----------
Assets held for resale, December 31, 1995, at estimated fair
value..................................................... 117,128
1996 sale proceeds.......................................... (7,200)
-----------
Assets held for resale, December 31, 1996, at estimated fair
value..................................................... 109,928
1997 sale proceeds.......................................... (12,042)
Further write down, charged as an exceptional item in
1997...................................................... (97,886)
-----------
Assets held for resale, December 31, 1998 and 1999, at
estimated fair value...................................... $ --
===========
</TABLE>
It is Company policy to maintain adequate insurance for loss or damage to
all fixed assets except for the underground distribution system and assets
insured by third parties under agreement.
5. DIVIDENDS PAID/PAYABLE
Quarterly dividends each of $0.04 per share were declared in respect of
both classes of shareholders on record at June 30, 1999 and September 30, 1999,
respectively. These dividends were paid during the year. In October 1999 the
Board of Directors declared a final dividend of $0.08 (1998: $0.04) per share in
respect of both classes of shareholders. In the prior year three quarterly
dividends of $0.04 per share were declared and paid in respect of both classes
of shareholders on record at June 30, 1998, September 30, 1998 and December 31,
1998 respectively. For the year ended December 31, 1997, a single interim
dividend of $0.07 and a final dividend of $0.07 per share was declared and paid
to both classes of shareholders on record at September 30, 1997 and March 31,
1998 respectively. Included in dividends payable at December 31, 1999 are
unclaimed dividends of $10,303 (1998: $9,459).
6. BANK BALANCES AND LOANS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash on hand and in current account......................... $ 22,146 $ 439,032
========== ==========
Bank overdrafts -- Royal Bank of Canada..................... $ 651,606 $ 60,247
========== ==========
European Investment Bank:
Long term debt............................................ $1,568,126 $1,770,274
========== ==========
Royal Bank of Canada:
Long term debt............................................ $ 668,795 $1,000,000
========== ==========
</TABLE>
F-12
<PAGE> 56
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. BANK BALANCES AND LOANS -- (CONTINUED)
Cash on hand and in current account is not restricted as to withdrawal or
use.
As at December 31, 1999, the total lending facility made available by the
Royal Bank of Canada comprises a revolving line of credit with a limit of
$1,000,000, bearing interest at New York Prime plus 1%, and term loans with a
limit of $4,000,000, bearing interest at LIBOR plus 1.5%. Any amounts drawn down
under the line of credit and any term loans are collateralised by a fixed and
floating charge ("the first charge") of $2,500,000 (to be increased to maximum
of $5,500,000). The fixed charge covers land owned by the Company and the
floating charge covers all other assets of the Company, except those assets
charged in connection with the Water Purchase Agreement (see Note 13). Of this
facility, a term loan of $668,795 (from initial draw down of $1,000,000) and
bank overdraft of $651,606 were outstanding at December 31, 1999 (1998:
$1,000,000 and $60,247, respectively). Based on a 10 year amortization period,
the term loan is repayable in monthly installments of $8,333 plus interest,
commencing January 1999.
During 1991, in order to fund an extension to the water distribution
system, the European Investment Bank, Luxembourg (the "bank"), agreed to loan
the US$ equivalent of 2 million European Currency Units (approximately US$2.5
million at that time). The loan is guaranteed by the Overseas Development
Administration ("ODA") of the Foreign and Commonwealth Office of the Government
of the United Kingdom and is repayable in 24 semi annual installments, which
commenced on December 20, 1994. The interest rate for the entire term is fixed
at the bank's prevailing lending rate, less a subsidy of 4% per annum, at the
date each tranche is drawn down.
The rates of interest applicable to, and the amounts of each tranche at the
current year end exchange rates are:
<TABLE>
<CAPTION>
DATE OF INTEREST
DRAWDOWN RATE
----------------- --------
<S> <C> <C> <C>
Tranche 1....................................... April 11, 1991 $ 322,814 4.25%
Tranche 2....................................... September 8, 1992 1,018,895 3.15%
Tranche 3....................................... February 12, 1992 847,727 3.45%
Tranche 4....................................... March 17, 1993 362,736 3.00%
----------
2,552,172
Capital repayments to December 31, 1999......... (984,046)
----------
Total debt obligation as at December
31, 1999............................ $1,568,126
==========
</TABLE>
Of the final tranche, the equivalent of $76,726 is repayable in pounds
sterling, as at December 31, 1999 (1998: $88,776), all other obligations under
this loan are repayable in United States dollars.
The Government of the Cayman Islands have, for a fee of 1% per annum,
provided a counter guarantee to the ODA. The Company, with the approval of the
Royal Bank of Canada, the holder of the first charge, has agreed to secure the
counter guarantee by a second charge over all assets of the Company.
F-13
<PAGE> 57
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. BANK BALANCES AND LOANS -- (CONTINUED)
Current portion of long term debt obligation
<TABLE>
<S> <C>
Royal Bank of Canada........................................ 99,996
European Investment Bank.................................... 210,139
----------
$ 310,135
==========
Long term debt obligation
Royal Bank of Canada...................................... 568,799
European Investment Bank.................................. 1,357,987
----------
$1,926,786
==========
</TABLE>
The aggregate capital repayment obligations for the next five years are as
follows:
<TABLE>
<S> <C>
2000........................................................ 310,135
2001........................................................ 320,616
2002........................................................ 331,608
2003........................................................ 343,368
2004........................................................ 355,383
2005 and thereafter......................................... 575,811
----------
$2,236,921
==========
</TABLE>
7. SHARE CAPITAL AND ADDITIONAL PAID IN CAPITAL
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Capital stock:
Authorized:
9,900,000 ordinary shares of common stock CI$1.00
each............................................. 11,880,000 11,880,000 11,880,000
100,000 redeemable preference shares of CI$1.00
each............................................. 120,000 120,000 120,000
----------- ----------- -----------
$12,000,000 $12,000,000 $12,000,000
=========== =========== ===========
Ordinary shares of common stock of CI$1.00 each issued
and fully paid:
Balance of ordinary shares at beginning of year
3,056,222 (1998: 3,056,012; 1997: 2,937,742)....... 3,667,466 3,667,214 3,525,290
Ordinary shares issued on exercise of options 89,010
(1998: nil; 1997: 101,705)......................... 106,812 -- 122,046
Ordinary shares issued under Directors share grant
plan 2,400 (1998: nil; 1997: nil).................. 2,880 -- --
Ordinary shares issued on redemption of preference
shares 14,835 (1998: 210; 1997: 16,565)............ 17,802 252 19,878
----------- ----------- -----------
Balance of ordinary shares at end of year 3,162,467
(1998: 3,056,222; 1997: 3,056,012)................. $ 3,794,960 $ 3,667,466 $ 3,667,214
=========== =========== ===========
</TABLE>
F-14
<PAGE> 58
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. SHARE CAPITAL AND ADDITIONAL PAID IN CAPITAL -- (CONTINUED)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Additional paid in capital:
Balance at beginning of year.......................... 2,276,466 2,266,432 2,230,312
Additional paid in capital from exercise of options
(see Note 15)...................................... 115,713 -- 32,330
Additional paid in capital on preference shares issued
under employee option scheme (see Note 15)......... 10,016 10,034 7,754
Redemption of preference shares issued under employee
option scheme (see Note 15)........................ -- -- (3,964)
----------- ----------- -----------
Balance at end of year................................ $ 2,402,195 $ 2,276,466 $ 2,266,432
=========== =========== ===========
Treasury shares:
Balance of treasury shares at beginning of year 8,000
(1998: nil; 1997: nil)............................. 62,375 -- --
102,752 treasury shares acquired at cost (1998: 8,000;
1997: nil)......................................... 758,928 62,375 --
----------- ----------- -----------
Balance of treasury shares at end of year 110,752
(1998: 8,000; (1997: nil).......................... $ 821,303 $ 62,375 $ --
=========== =========== ===========
Vested redeemable preference shares of CI$1.00 each
issued and fully paid (Note 15):
Balance of vested redeemable preference shares at
beginning of year 14,108 (1998: 7,072; 1997:
11,637)............................................ 16,930 8,486 13.963
Preference shares vested during the period 11,970
(1998: 7,036; 1997: 12,000)........................ 14,364 8,444 14,401
Vested preference shares redeemed and issued as
ordinary shares 13,744 (1998: nil; 1997: 16,565)... (16,493) -- (19,878)
----------- ----------- -----------
Balance of vested redeemable preference shares at end
of year 12,334 (1998: 14,108, 1997: 7,072)......... $ 14,801 $ 16,930 $ 8,486
=========== =========== ===========
Non-vested redeemable preference shares of CI$1.00 each
issued and fully paid (Note 15):
Balance of non-vested redeemable preference shares at
beginning of year 29,797 (1998: 27,016; 1997:
31,007)............................................ 35,756 32,420 37,209
Preference shares vested during the period 11,970
(1998: 7,036; 1997: 12,000)........................ (14,364) (8,444) (14,401)
Non-vested preference shares issued 11,988
(1998: 10,027; 1997: 9,556)........................... 14,386 12,032 11,468
Non-vested preference shares redeemed -- nil (1998:
nil; 1997: 1,547).................................. -- -- (1,856)
Non-vested preference shares redeemed and issued as
Ordinary shares 1,091 (1998: 210; 1997: nil)....... (1,309) (252) --
----------- ----------- -----------
Balance of non-vested redeemable preference
shares at end of year 28,724 (1998: 29,797;
1997: 27,016)................................. $ 34,469 $ 35,756 $ 32,420
=========== =========== ===========
</TABLE>
The redeemable preference shares are issued under the Company's employee
share incentive plan (Note 15) and carry the same voting and dividend rights as
ordinary shares. The redeemable preference shares are only redeemable with the
Company's agreement. In consideration for redeemed vested
F-15
<PAGE> 59
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. SHARE CAPITAL AND ADDITIONAL PAID IN CAPITAL -- (CONTINUED)
preference shares, ordinary share capital is issued on a share for share basis.
Upon liquidation of the Company, the redeemable preference shares rank in
preference to the ordinary shares to the extent of the par value of such shares
and any related additional paid in capital.
The Company entered into subscription agreements with two investment
companies on August 8, 1995 for the private placement of 100,000 "units", each
unit consisting of one ordinary share of common stock and one warrant for the
purchase of one additional ordinary share of common stock. On September 18,
1995, the Company issued 100,000 units at a price of $3.00 per unit, under these
agreements. Each warrant issued under these agreements entitles the holder to
purchase one ordinary share of common stock at a price of $4.00 per share for a
period of four years, commencing one year after the date of the agreements. The
warrants are transferable, subject to certain restrictions, and are redeemable
by the Company at $0.10 per warrant if, during the exercise period, the average
bid price of the Company's ordinary shares exceeds 150% of the exercise price of
the warrants for a period of 20 consecutive trading days. The Company has not
recognised any amounts in stockholders' equity relating to these warrants. On
exercise of warrants, proceeds up to the par value of the shares issued are
credited to ordinary share capital, any proceeds in excess of the par value of
shares issued are credited to additional paid in capital in the period in which
the warrants are exercised. As at December 31, 1999, no warrants had been
exercised or redeemed under these agreements. On January 10, 2000, 50,000
warrants were exercised.
In April 1996 the Company filed a Form F-1 registration statement with the
SEC in connection with the issue of 575,000 ordinary shares of common stock at
$5.25 per share. Under the terms of the related underwriting agreement, the
underwriter was issued a warrant to purchase 50,000 ordinary shares of common
stock at $6.30 per share, for $500 consideration which management considered to
approximate fair value. The warrants are exercisable during the four year period
commencing April 3, 1997. As at December 31, 1999, no warrants have been
exercised under this agreement.
In August 1997 the Company established a Class "B" share option plan
designed to deter coercive takeover tactics. Pursuant to this plan, holders of
ordinary shares of common stock and redeemable preference shares were granted
options which entitle them to purchase 1/100 of a share of Class "B" stock at an
exercise price of $37.50 if a person or group acquires or commences a tender
offer for 20% or more of the Company's ordinary shares of common stock. Option
holders (other than the acquiring person or group) will also be entitled to buy,
for the $37.50 exercise price, ordinary shares of the Company's common stock
with a then market value of $75.00 in the event a person or group actually
acquires 20% or more of the Company's ordinary shares of common stock. Options
may be redeemed at $0.01 under certain circumstances. 30,000 of the Company's
authorized but unissued ordinary shares have been reserved for issue as Class
"B" shares. The Class "B" shares rank pari passu with the ordinary shares of
common stock for dividend and voting rights. As at December 31, 1999, no options
have been exercised or redeemed.
On December 3, 1998 the Company established a share repurchase plan whereby
the Company may repurchase up to 10% of the number of ordinary shares
outstanding. The plan was established to repurchase shares that, in the opinion
of the Company, were undervalued in the market. As at December 31, 1999, 110,752
(1998: 8,000) ordinary shares of common stock have been repurchased at a total
cost of $821,303 (1998: $62,375). The Company intends to reissue the shares in
March 2000 as part of a public share offering.
Stockholders are advised that under the provisions of the Land Holding
Companies Share Transfer Tax Law of the Cayman Islands, transfer tax is payable
on the transfer of shares in the Company. The amount of transfer tax payable
under the provisions of this Law is computed by reference to the
F-16
<PAGE> 60
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. SHARE CAPITAL AND ADDITIONAL PAID IN CAPITAL -- (CONTINUED)
proportion of the total market value of land, as valued by the Government,
attributable to each share in issue ("the taxable value"). The tax payable by
the transferor per share transferred is at the rate of 7.5% of the taxable
value.
In December 1999, the Company commenced proceedings for the public offering
of a further 1,000,000 ordinary shares of common stock, comprising new shares,
shares held as treasury stock and shares of existing shareholders. Preliminary
incremental external costs directly attributable to the public offering totaling
$89,145 have been deferred at December 31, 1999. These offering costs will be
deducted from the proceeds when the offering is completed. The offering is
planned to be made in May 2000. On January 6, 2000, the Company purchased a
further 79,100 treasury shares at a total cost of $494,375.
8. EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Direct expenses comprise the following:
Water purchases.......................................... 2,091,321 2,579,279 2,475,498
Depreciation............................................. 760,901 714,830 653,890
Employee costs........................................... 393,415 456,676 488,470
Fuel oil................................................. -- -- 5,222
Royalties (Note 17)...................................... 560,441 570,416 492,590
Lease obligation interest................................ 58,042 193,589 209,508
Electricity.............................................. 131,344 119,674 116,546
Insurance................................................ 56,308 37,555 46,758
Other direct costs....................................... 572,650 423,354 318,070
---------- ---------- ----------
$4,624,422 $5,095,373 $4,806,552
========== ========== ==========
Indirect expenses comprise the following:
Employee costs........................................... 660,658 555,599 492,331
Interest and bank charges................................ 131,236 84,288 92,098
Depreciation............................................. 56,059 53,915 35,855
Professional fees........................................ 227,821 279,841 269,083
Insurance................................................ 41,083 29,890 61,277
Directors' fees and expenses............................. 99,760 77,011 63,847
Other indirect costs..................................... 462,350 354,801 302,043
---------- ---------- ----------
$1,678,967 $1,435,345 $1,316,534
========== ========== ==========
</TABLE>
Direct expenses relate to the production and distribution of water,
indirect expenses represent the administrative costs of the Company. During the
year the Company has capitalized $35,749 (1998: $30,319) of depreciation charges
in relation to plant and equipment specifically purchased to continue further
development of the distribution system.
9. NUMBER OF EMPLOYEES
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Number of employees at December 31......................... 30 29 26
========== ========== ==========
</TABLE>
F-17
<PAGE> 61
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
10. EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing the net profit
attributable to stockholders by the weighted average number of ordinary shares
in issue during the year, excluding the average number of ordinary shares
purchased by the Company and held as treasury shares (see Note 7).
The net income and weighted average number of ordinary shares and potential
ordinary shares figures used in the determination of the basic and diluted
earnings per ordinary share are summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income used in determination of diluted earnings per
ordinary share........................................... 1,946,599 1,656,996 1,247,754
Less:
Dividends paid on non-vested redeemable preference
shares................................................... (4,596) (4,768) (3,782)
Earnings attributable to vested redeemable preference
shares................................................... (7,817) (7,617) (2,872)
---------- ---------- ----------
Net income available to holders of ordinary shares in the
determination of basic earnings per ordinary share....... $1,934,186 $1,644,611 $1,241,100
========== ========== ==========
Weighted average number of ordinary shares used in the
determination of basic earnings per ordinary share....... 3,044,293 3,055,845 2,986,216
Plus:
Weighted average number of redeemable preference shares
outstanding during the year.............................. 44,707 40,231 42,107
Potential dilutive effect of unexercised options........... 48,954 56,596 79,048
Potential dilutive effect of unexercised warrants.......... 50,094 38,911 29,203
---------- ---------- ----------
Weighted average number of shares used for determining
diluted earnings per ordinary share...................... 3,188,048 3,191,583 3,136,574
========== ========== ==========
</TABLE>
As detailed in Note 7, 30,000 options were granted to an investment company
on December 15, 1998 with an exercise price of $7 7/8. At December 31, 1999
these options were antidilutive for the purpose of determining diluted earnings
per ordinary share.
11. RELATED PARTY TRANSACTIONS
In the two years ending December 31, 1998, the professional services of a
Director were made available to the Company through a company owned by that
Director. During 1998 the Company paid $88,699 (1997: $66,323) for such
services. Of this amount, $280 (1997: $12,653) relates to a specific capital
project and has been included as part of plant and equipment within fixed
assets. Amounts outstanding for such services at December 31, 1998 totaled
$9,739 (1997: $Nil). During the year ended December 31, 1999, these fees were
paid directly to the Director.
The Company sells water to a company in which a Director has a significant
interest. During 1999 sales totaling $11,621 (1998: $30,593; 1997: $22,500) were
made to that company. Accounts receivable for such sales at year end total $286
(1998: $464).
During the year ended December 31, 1998 the Company purchased a Seawater
Reserve Osmosis Unit ("RO Unit") from a company in which a Director is a member
of senior management. The RO Unit was acquired at a cost of $307,396 which
amount has been included in plant and equipment in Note 4.
F-18
<PAGE> 62
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. COMMITMENTS AND CONTINGENCIES
The Company has leased office space in Trafalgar Place, West Bay Road, for
a period of one year. The rental commitment for 2000 is $55,248.
The Company is subject to an ongoing obligation to supply water to new
customers within the areas in which it is licensed to operate and where the
supply of such water is considered commercially feasible.
The Company is also subject to a commitment under the Water Purchase
Agreement (Note 13).
13. WATER PURCHASE AGREEMENT
OCEAN CONVERSION (CAYMAN) LIMITED
During 1989 the Company entered into a five year water supply agreement
(the "Water Purchase Agreement") with Ocean Conversion (Cayman) Limited ("OCL"),
formerly Reliable Water Company. In 1992 this agreement was renegotiated and
extended for a further five year period to expire December 31, 1999. On October
14, 1993 the extended agreement was replaced by a new agreement, the Water
Purchase Agreement #2, expiring on the same date. That agreement required OCL to
increase the capacity of the existing plant by January 31, 1994 and to further
increase the capacity, at the request of the Company, prior to December 31, 1997
(the "scheduled date"). Both of these expansions were performed during 1994 and
on October 21, 1994, a new agreement, the Water Purchase Agreement #3, was
negotiated which expires on December 31, 2004.
The Water Purchase Agreement #3 effectively transfers the possession of the
reverse osmosis ("RO") plant to the Company in 2000, although the operation and
maintenance of the plant will be the responsibility of OCL until the termination
of the agreement on December 31, 2004. On January 1, 2005 responsibility for
operation and maintenance of the plant will be assumed by the Company. Under the
terms of the agreement, the Company must purchase a fixed minimum amount of
water annually with a portion of the monthly payments to be applied toward the
purchase of the plant. Under the terms of the original agreement, the Company
had a minimum water purchase commitment of 144 million US Gallons per annum
which was increased to 240 million US Gallons per annum with effect from January
1, 1993 under the extended agreement.
The Water Purchase Agreement #2 increased the commitment further to 260
million US Gallons per annum commencing February 1, 1994 and 280 million US
Gallons per annum commencing on the first day of the calendar month following
the scheduled date. The minimum water purchase commitment under the Water
Purchase Agreement #3 remains at 280 million US Gallons per annum until expiry
of the contract on December 31, 2004. Implicit in the agreement are financing
charges relating to the purchase of the plant over the ten year period, based on
the Company's cost of capital at
F-19
<PAGE> 63
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
13. WATER PURCHASE AGREEMENT -- (CONTINUED)
the inception of the agreement. Under the current agreement, guaranteed minimum
deliveries of water were increased and penalties for failure to supply such
minimum deliveries were also increased.
As at December 31, 1999 minimum future payments (based on the existing 280
million US Gallon annual commitment) are as follows:
<TABLE>
<S> <C>
2000...................................................... 1,670,845
2001...................................................... 1,350,704
2002...................................................... 1,350,704
2003...................................................... 1,350,704
2004...................................................... 1,350,704
-----------
Total minimum payments............................ 7,073,661
Less: payments relating to water purchases................ (6,753,520)
-----------
Total equipment purchase obligation............... 320,141
Less: current portion..................................... ( 320,141)
-----------
$ --
===========
</TABLE>
The RO plant under capital lease is included in plant and equipment in Note
4 at a gross amount of $3,550,897 and at December 31, 1999 had a net book value
of $1,253,718 (1998: $1,672,798). Amortization of the plant under capital lease
is included in the depreciation charge for each of the three years ended
December 31, 1999. Future minimum lease payments, excluding financing charges,
are $320,141. The plant is pledged as collateral for certain borrowings of OCL
under the terms of the Water Purchase Agreement. Accounts payable and accrued
expenses includes $223,213 (1998: $203,770) outstanding under the Water Purchase
Agreement.
14. CUSTOMER SUPPLY AGREEMENTS
During 1993 the Company entered into a five year agreement to supply
non-potable water to Safe Haven Limited, the developers of a golf course. On
November 1, 1997 this agreement was renegotiated and renewed for a further five
year period. Under the terms of the renewed supply agreement, the Company must
supply a minimum of 4 million US Gallons per month (48 million US Gallons per
year). The price of the water supplied is adjusted annually based on Government
Price Indices. Water sales for the year ended December 31, 1999 resulting from
the supply agreement amounted to $444,098 (1998: $422,641; 1997: $489,685). At
December 31, 1999 the Company holds a security deposit of $42,482 (1998:
$42,482) under the terms of the supply agreement.
From October 15, 1995 the Company entered into a ten year agreement to
supply a minimum of 30,000 US Gallons per day (10.95 million US Gallons per
year) of potable water to Galleon Beach Resort Limited, the operator of the
Westin Hotel which initially opened in December 1995. The price of the water
supplied is adjusted annually based on Government Price Indices, and water
supplied in excess of the monthly maximum of 60,000 US Gallons per day is
invoiced at the Company's standard tariff rate. Water sales for the year ended
December 31, 1998 resulting from this agreement amounted to $314,884 (1998:
$343,800; 1997: $294,000).
There are no other individually significant sales to customers.
F-20
<PAGE> 64
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
15. SHARE INCENTIVE PLAN, REDEEMABLE PREFERRED SHARES AND
COMPENSATORY OPTIONS
The Company maintains a share incentive plan for the benefit of eligible
employees, excluding Directors, for the purpose of compensating such employees
by way of granting redeemable preference shares for nil consideration and, in
addition, granting options to purchase preference shares at a fixed price,
determined annually, which will typically represent a discount to market value.
The amount of preference shares granted to employees is determined with
reference to each eligible individual employee's salary and dividends paid and
declared. Each employee's option to purchase preference shares must be exercised
within 40 days of the annual general meeting of the Company following the date
of grant. In order to qualify for the plan an employee must complete four years
of service with the Company. In addition, preference shares granted and issued
under option are restricted as to sale for a four year period from the date of
grant or issue and therefore do not vest with the employee until that time. The
redeemable preference shares are only redeemable with the Company's agreement.
Under the plan vested preference shares are redeemed when an employee leaves the
Company. In consideration for redeemed vested preference shares, the Company
issues ordinary share capital of common stock on a share for share basis. In
1997, 1998, and 1999 the Board of Directors offered to redeem the vested
preferred shares of shareholders remaining employed by the Company, and issue
ordinary shares of common stock on a share for share basis. Accordingly in 1999,
13,744 vested redeemable preferred shares were redeemed and a corresponding
number of ordinary shares issued (1998: nil; 1997: 16,565).
Should an employee voluntarily leave the Company within the four year
vesting period, the Company may repurchase preference shares issued and granted
at the employees purchase price (nil consideration for shares granted). In 1999,
1,091 (1998: 210) preference shares were repurchased under this provision and,
as a special concession, the Company issued 1,091 (1998: 210; 1997: nil)
replacement ordinary shares. Outstanding non-vested preference shares currently
redeemable are as follows:
<TABLE>
<CAPTION>
NO. OF SHARES REDEMPTION REDEMPTION
REDEEMABLE PRICE VALUE
------------- ---------- ----------
<S> <C> <C> <C>
Up to the year ended December 31, 2000.............. 22,075 -- --
1,992 $4.0680 8,103
2,437 $5.3175 12,959
2,220 $5.7120 12,681
------ -------
28,724 $33,743
====== =======
Up to the year ended December 31, 2001.............. 16,965 -- --
2,437 $5.3175 12,959
2,220 $5.7120 12,681
------ -------
21,622 $25,640
====== =======
Up to the year ended December 31, 2002.............. 9,768 -- --
2,220 $5.7120 12,681
------ -------
11,988 $12,681
====== =======
</TABLE>
The Company records a compensatory expense equal to the par value of shares
granted under the scheme on the date granted. No compensatory expense is
recognized for shares purchased under option. During the year, employees were
granted 9,768 (1998: 7,590) preference shares for nil consideration and
exercised options to purchase 2,220 (1998: 2,437) preference shares at $5.712
(1998: $5.3175). Subsequent to December 31, 1999, employees were granted a
further 10,431 preference
F-21
<PAGE> 65
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
15. SHARE INCENTIVE PLAN, REDEEMABLE PREFERRED SHARES AND
COMPENSATORY OPTIONS -- (CONTINUED)
shares for nil consideration and, in addition, were granted options to purchase
10,431 preference shares, the price of which will be ratified at the next Annual
General Meeting of the Company.
In 1999, the Company introduced a share grant plan which forms part of
Directors remuneration. Under the plan Directors receive a combination of cash
and shares in consideration of remuneration for their participation in Board
meetings. All Directors are eligible except Executive Officers (who are covered
by individual employment contracts) and the Government elected board member.
Shares granted are calculated with reference to a strike price which is set by
the Board of Directors on October 1 of the year preceding the share grant.
Shares granted on September 30, 1999 totaled 13,452. The strike price set on
October 1, 1998 was $6.00 (October 1, 1999 $6.75).
The Chairman and Chief Executive Officer ("CEO") is entitled to receive, as
part of the compensation for his services to the Company, options to purchase
ordinary shares. Effective for each of the five fiscal years ended December 31,
1993, the Chairman and CEO was granted the option to subscribe at par for that
number of shares which equals 5% of the net profit of the Company before
charging dividends or crediting any asset revaluation. The options were
exercisable at any time up to three months after the date of the audit report
for the period ended December 31, 1993. As at December 31, 1993 there were
76,836 shares under option. During 1994, and in consideration for the Chairman
and CEO agreeing to continue in office until December 31, 1996, whether or not
he was in fact re-elected on an annual basis, the date for exercising such
options was extended to the date three months after the date of the audit report
for the period ended December 31, 1996. No compensatory expense has been
recognized for such shares purchased under option or options granted.
In addition, the Chairman and CEO was granted the option, for each of the
three years ending December 31, 1996, to purchase ordinary shares at $2.50,
exercisable at any time up to three months after the date of the audit report
for the period ended December 31, 1996 in the amount of the lesser of (i) the
number of ordinary shares which equals 2.5% of the net income of the Company
before charging dividends or crediting any asset revaluation, or (ii) the number
of shares which, when added to the existing number of ordinary shares which the
Chairman and CEO beneficially owns, will equal 6% of the then issued ordinary
shares of the Company.
During 1995, the Chairman and CEO's contract was further revised. In
consideration for the Chairman and CEO agreeing to continue in office until
December 31, 1998, whether or not he was in fact re-elected on an annual basis,
the date for exercising such options was further extended to the date three
months after the date of the audit report for the period ended December 31,
1998. In addition, for each of the five fiscal years ended December 31, 1998 the
Chairman and CEO was granted options to purchase shares under the same terms as
the previous agreement. In August 1997 the Chairman exercised options to
purchase 101,705 ordinary shares representing all of the options that were
granted under the agreements described above in respect of all years up to and
including December 31, 1996.
On December 31, 1998, the Chairman and CEO signed a new employment contract
for three years ending December 31, 2001. Under this contract the Chairman and
CEO will be granted options, for the year ended December 31, 1999, to purchase
ordinary shares at $2.50, and for each of the two years ending December 31,
2001, to purchase ordinary shares at the average of closing market price on each
of the first seven trading days in October of that financial year, exercisable
at any time up to three years after the date of the audit report for the year of
grant, in the amount of the number of ordinary shares which equals 1% of the net
income of the Company before charging dividends or crediting any asset
revaluation.
F-22
<PAGE> 66
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
15. SHARE INCENTIVE PLAN, REDEEMABLE PREFERRED SHARES AND
COMPENSATORY OPTIONS -- (CONTINUED)
In respect of each of the three years ending December 31, 1999, the
Chairman and CEO was granted options to purchase 7,786, 16,570 and 12,440
ordinary shares, respectively, of which 7,786 remained unexercised at December
31, 1999. No compensatory expense has been recognized for such shares purchased
under option or options granted.
The President and Chief Operating Officer ("COO") was granted the option,
for each of the two years ending February 28, 1995 and 1996, to purchase
ordinary shares at $2.50, exercisable at any time before May 31, 1996 in the
amount of 20,000 ordinary shares.
The President and COO's contract was also revised during 1995 and again
during 1997. For each of the financial years ended December 31, 1996 and
thereafter whilst in office, the President and COO was granted an option to
purchase 20,000 shares under the same terms as the previous agreement. Options
granted in respect of the two years ended February 28, 1996 and the year ended
December 31, 1996 could be exercised until three months after the date of the
audit report for the period ended December 31, 1998. All options granted in
respect of the years ended February 28, 1996 have been exercised at December 31,
1999. Options granted in respect of the years ended December 31, 1997 and
thereafter may be exercised until the third anniversary of the date of the audit
report for that financial year. As at December 31, 1999, 120,000 options had
been granted, of which 60,000 remain unexercised at that date. No compensatory
expense has been recognized for such shares purchased under option or options
granted.
On July 20, 1999 as remuneration for services rendered to the Company, a
Director, was granted 30,000 options to purchase ordinary shares that may be
exercised until May 1, 2002. A further 30,000 options will be granted on May 1,
2000 that may be exercised until May 1, 2003. The strike price set for the
exercise of the options was $6.00 and $6.75 respectively. No compensatory
expense has been recognized for such options granted.
As part of an agreement for market representation, the Company issued
30,000 options to an investment company on December 15, 1998, for nil
consideration. Each option issued under this agreement entitles the holder to
purchase one ordinary share at a price of $7 7/8 for a period of two years,
commencing December 1, 1998. The fair value of the options was determined by
management to be $30,000, based on the fair value of the services to be
received. No compensatory expense is recognized of in respect of the options
granted.
Summary of options granted, exercised and outstanding:
<TABLE>
<CAPTION>
OPTIONS EXPIRY OPTIONS DATE
GRANT DATE GRANTED STRIKE PRICE DATE EXERCISED EXERCISED
---------- ------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CHAIRMAN AND CEO
December 31, 1993 and prior...................... 76,836 US$1.20 01-Jun-99 76,836 02-Aug-97
December 31, 1994................................ 4,808 US$2.50 01-Jun-99 4,808 02-Aug-97
December 31, 1995................................ 8,680 US$2.50 01-Jun-99 8,680 02-Aug-97
December 31, 1996................................ 11,381 US$2.50 01-Jun-99 11,381 02-Aug-97
December 31, 1997................................ 12,440 US$2.50 01-Jun-99 12,440 31-Mar-99
December 31, 1998................................ 16,570 US$2.50 01-Jun-99 16,570 31-Mar-99
December 31, 1999................................ 7,786 US$2.50 20-Mar-03 -- --
</TABLE>
F-23
<PAGE> 67
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
15. SHARE INCENTIVE PLAN, REDEEMABLE PREFERRED SHARES AND
COMPENSATORY OPTIONS -- (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS EXPIRY OPTIONS DATE
GRANT DATE GRANTED STRIKE PRICE DATE EXERCISED EXERCISED
---------- ------- ------------ --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PRESIDENT AND COO
February 28, 1995................................ 20,000 US$2.50 01-Jun-99 20,000 31-May-99
February 28, 1996................................ 20,000 US$2.50 01-Jun-99 20,000 31-May-99
December 31, 1996................................ 20,000 US$2.50 01-Jun-99 20,000 31-May-99
December 31, 1997................................ 20,000 US$2.50 24-Feb-01 -- --
December 31, 1998................................ 20,000 US$2.50 01-Mar-02 -- --
December 31, 1999................................ 20,000 US$2.50 20-Mar-03 -- --
OTHER DIRECTORS
July 20, 1999.................................... 30,000 US$6.00 01-May-02 -- --
NON-EMPLOYEE
December 1, 1998................................. 30,000 US$7.88 01-Dec-00 -- --
</TABLE>
Weighted average number and exercise price of options:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
PRICE PRICE PRICE
NUMBER PER NUMBER PER NUMBER PER
OF SHARE OF SHARE OF SHARE
OPTIONS US$ OPTIONS US$ OPTIONS US$
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year......................... 159,010 $3.51 92,440 $2.50 161,705 $1.88
Granted.................................................. 67,554 $4.52 74,160 $4.96 39,422 $2.78
Exerised................................................. (91,230) $2.58 (2,437) $5.32 (104,280) $1.58
Forfeited................................................ (7,548) $5.71 (5,153) $5.32 (4,407) $4.07
------- ------- --------
Outstanding at end of year............................... 127,786 $4.58 159,010 $3.51 92,440 $2.50
Exercisable at end of year............................... 127,786 $4.58 159,010 $3.51 92,440 $2.50
</TABLE>
16. TAXATION
Under current laws of the Cayman Islands, there are no income, estate,
corporation, capital gains or other taxes payable by the Company.
17. GOVERNMENT ROYALTIES
Royalty expenses incurred during the year under the terms of the license to
process and supply potable water, granted by the government, amounted to
$560,441 (1998: $570,416; 1997: $492,590). In accordance with the terms of the
license, royalties are payable at the rate of 7.5% of gross water sales,
payments are made monthly in arrears.
18. PENSION BENEFITS
A staff pension scheme commenced during June 1995 and was offered to all
employees, both full and part-time. The scheme is administered by the Cayman
Islands Chamber of Commerce and is a defined contribution plan, whereby the
Company matches the contribution of the first 5% of each participating
employee's salary. The total amount recognized as an expense under the scheme
during 1998 was $48,554 (1998: $45,537; 1997: $40,362).
F-24
<PAGE> 68
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
19. FINANCIAL INSTRUMENTS
CREDIT RISK
Financial assets which potentially subject the Company to concentrations of
credit risk consist principally of cash and accounts receivable. The Company's
cash balances are placed with high credit quality financial institutions.
Accounts receivable are presented net of an allowance for doubtful accounts.
Credit risk with respect to accounts receivable is limited due to the large
number of customers comprising the Company's customer base and the ability of
the Company to withdraw supply in the event of non-payment. Accordingly, the
Company has no significant concentration of credit risk.
INTEREST RATE RISK
The interest rates and terms of the Company's loans and Water Purchase
Agreement are presented in Notes 6 and 13 respectively.
FAIR VALUES
At December 31, 1999 and 1998 the carrying amounts of cash and short term
bank deposits and bank overdrafts, accounts receivable, accounts payable and
accrued expenses approximated their fair values due to the short term maturities
of these assets and liabilities. The Directors consider that the carrying amount
for long term debt (Note 6) due to Royal Bank of Canada approximates fair value
due to the characteristics of this debt. The fair value for long term debt due
to European Investment Bank is approximately $1,400,000 (1998: $1,600,000)
although this does not necessarily indicate that the Companys' could extinguish
this debt for an amount lower than the carrying value. Fair value of this long
term debt for which no market value is readily available is determined by the
Company using predetermined future cash flows discounted at an estimated current
incremental rate of borrowing for a similar liability. In establishing an
estimated incremental rate, the Company has evaluated the existing transactions,
as well as comparable industry and economic data and other relevant factors such
as pending transactions, subsequent events and the amount the Company would have
to pay a credit worthy third party to assume the liability, with the creditors
legal consent.
20. SUMMARY OF GAAP ACCOUNTING DIFFERENCES
Material differences between the financial statements as prepared under
International Accounting Standards ("IAS") and financial statements prepared in
accordance with accounting principles generally accepted in the United States
("US GAAP") are as follows:
i. As detailed in Note 15, redeemable preference shares are issued under
the Company's employee option scheme, and ordinary shares are granted
under the Directors share grant plan. In addition, the Chairman and
CEO, the President and COO, another Director of the Company and a
non-employee have been granted options to purchase ordinary shares.
Under US GAAP, compensation costs in stock option, purchase and award
plans granted to employees and non-employees are recognized as an
expense over the periods in which the services are performed. For the
purpose of determining US GAAP accounting differences, compensation
costs have been calculated according to the methodology outlined in
APB
F-25
<PAGE> 69
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
20. SUMMARY OF GAAP ACCOUNTING DIFFERENCES -- (CONTINUED)
Opinion No. 25. The table below summarizes the pro forma effect if
FASB Statement No. 123, the alternative applicable standard, were
adopted:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income............................................. $1,498,105 $1,451,975 $1,133,678
Basic earnings per ordinary share under................ $ 0.49 $ 0.47 $ 0.38
Diluted earnings per ordinary share.................... $ 0.47 $ 0.45 $ 0.36
</TABLE>
Weighted average fair value per share under FAS 123 for options
granted during the year with an exercise price below market price on
the date of grant:
<TABLE>
<S> <C> <C> <C>
Chairman and CEO............................................ $4.07 $4.48 3.29
President and COO........................................... $4.07 $4.48 3.29
Other Executive director.................................... $3.69 -- --
Employees................................................... $1.84 $2.07 0.92
----- ----- -----
Overall weighted average.................................... $3.80 $4.33 $2.87
</TABLE>
In calculating the fair value for these options under FASB Statement
No. 123 the Black-Scholes model was used with the following weighted
average assumptions:
<TABLE>
<S> <C> <C> <C>
Exercise price........................................... $ 4.37 $ 2.68 $ 2.78
Grant date market value.................................. $ 6.98 $ 7.02 $ 5.36
Risk free interest rate.................................. 5.75% 4.75% 5.66%
Expected life............................................ 2.8 years 0.4 years 1.3 years
Expected volatility...................................... 72.55% 29.32% 78.09%
Expected dividend yield.................................. 3.46% 2.28% 2.62%
</TABLE>
Weighted average fair value per share under FAS 123 for shares issued
during the year below market price on the date of grant:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
FAIR FAIR FAIR
VALUE VALUE VALUE
NUMBER PER NUMBER PER NUMBER PER
OF SHARE OF SHARE OF SHARE
SHARES US$ SHARES US$ SHARES US$
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Employee share incentive plan........................ 9,768 $5.83 7,590 $4.58 6,982 $4.90
Directors share grant plan........................... 2,400 $6.75 -- -- -- --
------- ----- ------- ----- -------- -----
Overall weighted average............................. 12,168 $6.01 7,590 $4.58 6,982 $4.90
</TABLE>
ii. Statement of Position 98-5 "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5") requires start up costs to be expensed as
incurred rather than deferred as currently allowed by International
Accounting Standards ("IAS"). As a result of this, certain costs
previously deferred have to be expensed under US GAAP. With the
introduction of IAS 38, effective for periods beginning on or after
July 1, 1999, International Accounting Standards for such costs will
become aligned with the requirements of SOP 98-5 in the financial
statements of the Company for the year ending December 31, 2000. The
costs expensed relate to deferred expenditure of $18,132 and costs of
$97,756 relating to Commonwealth (Note 4).
iii. Included in fixed assets is land which is stated at appraised value
as determined by the Board of Directors in 1987 (Note 2). As a
result, the valuation of land includes unrealized capital
F-26
<PAGE> 70
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
20. SUMMARY OF GAAP ACCOUNTING DIFFERENCES -- (CONTINUED)
gains of $302,867, which have been accounted for within stockholders'
equity for each of the two years ended December 31, 1999 and 1998.
Under US GAAP, this unrealized capital gain would not be recorded and
land would be carried at historical cost.
iv. Under US GAAP, liabilities relating to dividends are not recognized
until declared by the full Board of Directors.
v. In 1995, the Company elected to adopt early the provisions of FASB
Statement No. 121. This statement requires that assets to be disposed
of be measured at the lower of carrying amount or fair value less cost
to sell. In 1995, management decided to take the Company's two vapour
compression units permanently out of service and recorded an
impairment write-down of $400,000, as described in Note 4. In 1997,
the remaining balance of $97,886 was written down to nil value. In
adopting the provisions of the Statement, the Company is fully in
compliance with the relevant International Accounting Standards. Under
US GAAP, the fixed asset impairment would be included in operating
income.
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income under IAS....................................... $1,946,599 $1,656,996 $1,247,754
Description of items that affect reported income:
i. Recognition of stock option compensation expenses (see
Note i.)............................................... (260,994) (205,063) (135,352)
ii. Start up costs expensed as a result of the adoption of
SOP 98-5 (see Note ii)................................. (115,888) -- --
---------- ---------- ----------
Net income under US GAAP................................... $1,569,717 $1,451,933 $1,112,402
========== ========== ==========
Basic earnings per ordinary share under US GAAP............ $ 0.51 $ 0.47 $ 0.37
========== ========== ==========
Diluted earnings per ordinary share under US GAAP.......... $ 0.49 $ 0.45 $ 0.35
========== ========== ==========
</TABLE>
There are no other items of comprehensive income as envisaged under FASB
Statement No. 130 and, accordingly, no statement of comprehensive income is
included.
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Stockholders' equity under IAS.............................. $12,529,645 $11,606,828
Description of items that affect Stockholders equity:
i. Recognition of stock option compensation expenses (see
Note i.)............................................... (332,591) (434,255)
ii. Expensing of previously deferred start up costs (see
Note ii.).............................................. (115,888) --
iii. Reversal of recognition of unrealized capital gains
(see Note iii.)....................................... (302,867) (302,867)
iv. Reversal of dividends payable (see Note iv.)........... -- 123,685
----------- -----------
Stockholders' equity under US GAAP..................... $11,778,299 $10,993,391
=========== ===========
</TABLE>
Under US GAAP, FASB Statement No. 71 provides guidance in respect of the
treatment of costs of certain regulated operations. The Company does not fall
within the criteria for this statement to apply.
The Company has determined that the provisions of FASB Statement No. 133
"Accounting for Derivative Instruments and Hedging Activities" are not
applicable to the Company's operations. The Company does not have any
off-balance sheet financing arrangements, including swaps and other derivative
instruments.
F-27
<PAGE> 71
CONSOLIDATED WATER CO. LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
21. REPORTING CURRENCY
Effective December 31, 1994, the Company changed its reporting currency
from the Cayman Islands dollar to the United States dollar pursuant to
amendments to S-X Rule 3-19 of the United States Securities Exchange Commission.
The reason for the change in reporting currency was to provide existing and
potential United States investors with financial information which does not
require conversion into United States dollars. It is the intention of the
Company to declare and pay dividends in United States dollars. The exchange rate
between the Cayman Islands dollar and the United States dollar has been fixed
during all periods presented at CI$1.00 to US$1.20.
22. SIGNIFICANT NON-CASH TRANSACTIONS
The Company made the following significant non-cash transactions:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ -------
<S> <C> <C> <C>
Preference shares issued to employees an $Nil consideration
(9,768, 7,590 and 6,982 shares respectively) (Note 14)... $11,722 $9,108 $ 8,378
======= ====== =======
Redemption of vested preferred shares and issue of
replacement ordinary shares at $Nil consideration
(14,835, 210 and 16,565 shares respectively) (Note 14)... $17,802 $ 252 $19,878
======= ====== =======
Ordinary shares issued under the Directors share grant plan
at $Nil consideration (2,400, nil and nil respectively)
(Note 15)................................................ $ 2,880 $ -- $ --
======= ====== =======
Write down of vapor compression unites (Note 4)............ $ -- $ -- $97,886
======= ====== =======
</TABLE>
F-28
<PAGE> 72
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS DOES NOT
OFFER TO SELL ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE
INFORMATION IN THIS PROSPECTUS IS CURRENT AS OF THE DATE SHOWN ON THE COVER
PAGE.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
ORDINARY SHARES
LOGO OF
CONSOLIDATED WATER CO. LTD.
-------------------
PROSPECTUS
-------------------
JANNEY MONTGOMERY SCOTT LLC
FIRST SECURITY VAN KASPER
The date of this prospectus is , 2000
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Below is an itemized statement of all expenses in connection with the
securities to be registered hereunder:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $1,854.81
NASD Filing Fee............................................. $1,202.58
Non-Accountable Expense Allowance........................... $
Legal Fees.................................................. $
Nasdaq National Market Listing Fee.......................... $
Transfer Agent Fees and Expenses............................ $
Blue Sky Qualification Fees and Expenses.................... $
Printing Fees and Expenses.................................. $
Accounting Fees and Expenses................................ $
Miscellaneous Fees and Expenses............................. $
---------
Total:............................................ $
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 40 of our Articles of Association, as amended, provides for the
indemnification of directors, officers and other persons associated with our
company as follows:
The directors and officers of Consolidated Water Co. Ltd. (the
"Company") and any trustee for the time being acting in relation to any of
the affairs of the Company and every former director, officer, or trustee
and their respective heirs, executors, administrators and personal
representatives (each of such persons being referred to in this Article as
"indemnified party") shall be indemnified out of the assets of the Company
from and against all actions, proceedings, costs, charges, losses, damages
and expenses which they or any of them shall or may incur or sustain by
reason of any act done or omitted in or about the execution of their duties
in their respective offices or trusts, except any which an indemnified
party shall incur or sustain by or through his own wilful neglect or
default; no indemnified party shall be answerable for the acts, omissions,
neglects or defaults of any other director, officer, or trustee, or for
joining in any receipt for the sake of conformity, or for the solvency or
honesty of any banker or other persons with whom any moneys or effects
belonging to the Company may be lodged or deposited for safe custody, or
for any insufficiency of any security upon which any monies of the Company
may be invested, or for any other loss or damage due to any such cause as
aforesaid or which may happen in or about the execution of his office or
trust unless the same shall happen through the wilful neglect or default of
such indemnified party.
II-1
<PAGE> 74
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
1. Form of Underwriting Agreement among Consolidated Water Co.
Ltd. and the underwriters.
3.1 Amended and Restated Memorandum of Association of
Consolidated Water Co. Ltd., dated December 4, 1998
(incorporated by reference to the exhibit filed as part of
our Form 20-F for the fiscal year ended December 31, 1998,
Commission File No. 0-25248).
3.2 Amended and Restated Articles of Association of Consolidated
Water Co. Ltd., dated December 4, 1998 (incorporated by
reference to the exhibit filed as part of our Form 20-F for
the fiscal year ended December 31, 1998, Commission File No.
0-25248).
5.1 Opinion and Consent of Myers & Alberga (to be filed by
amendment to this Registration Statement).
10.1 License Agreement, dated July 11, 1990, between Cayman Water
Company Limited and the Government of the Cayman Islands
(incorporated herein by reference to the exhibit filed as a
part of our Form 20-F dated December 7, 1994, Commission
File No. 0-25248).
10.2 First Amendment to License Agreement, dated September 18,
1990, between Cayman Water Company Limited and the
Government of the Cayman Islands. (incorporated herein by
reference to the exhibit filed as a part of our Form 20-F
dated December 7, 1994, Commission File
No. 0-25248).
10.3 Second Amendment to License Agreement, dated February 14,
1991, between Cayman Water Company Limited and the
Government of the Cayman Islands. (incorporated herein by
reference to the exhibit filed as a part of our Form 20-F
dated December 7, 1994, Commission File
No. 0-25248).
10.4 License Agreement, dated October 26, 1992, between Cayman
Island Government-Portfolio of Communications, Works and
Agriculture and Cayman Water Company Limited for the supply
of non-potable water to SafeHaven Ltd. (incorporated herein
by reference to the exhibit filed as a part of our Form 20-F
dated December 7, 1994, Commission File No. 0-25248).
10.5 Amendment to License Agreement, dated November 12, 1992,
between Cayman Island Government -- Portfolio of
Communications, Works and Agriculture and Cayman Water
Company Limited for the supply of non-potable water to
SafeHaven Ltd. (incorporated herein by reference to the
exhibit filed as a part of our Form 20-F dated December 7,
1994, Commission File
No. 0-25248).
10.6 Service Agreement, dated October 27, 1992, between Cayman
Water Company Limited and SafeHaven Ltd. (incorporated
herein by reference to the exhibit filed as a part of our
Form 20-F dated December 7, 1994, Commission File No.
0-25248).
10.7 Amendment to Service Agreement, dated November 25, 1992,
between Cayman Water Company Limited and SafeHaven Ltd.
(incorporated herein by reference to the exhibit filed as a
part of our Form 20-F dated December 7, 1994, Commission
File No. 0-25248).
10.8 Amendment to Service Agreement, dated September 4, 1995,
between Cayman Water Company Limited and SafeHaven Ltd.
(incorporated herein by reference to the exhibit filed as a
part of our Registration Statement on Form F-1 dated March
26, 1996, Commission File No. 333-00038).
10.9 Water Purchase Agreement #2, dated October 14, 1994, between
Cayman Water Company Limited and Ocean Conversion (Cayman)
Limited. (incorporated herein by reference to the exhibit
filed as a part of our Form 20-F dated December 7, 1994,
Commission File No. 0-25248).
10.10 Water Purchase Agreement #3, dated October 21, 1994, between
Cayman Water Company Limited and Ocean Conversion (Cayman)
Limited. (incorporated herein by reference to the exhibit
filed as a part of our Form 20-F dated December 7, 1994,
Commission File No. 0-25248).
</TABLE>
II-2
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10.11 Employment Contract, dated August 19, 1997, between Cayman
Water Company Limited and Peter D. Ribbins.
10.12 Amendment and Rectification of Engagement Agreement, dated
October 26, 1999, between Consolidated Water Co. Ltd. and
Peter D. Ribbins.
10.13 Second Amendment of Engagement Agreement, dated March 21,
2000, between Consolidated Water Co. Ltd. and Peter D.
Ribbins.
10.14 Engagement Agreement, dated December 30, 1998 between
Consolidated Water Co. Ltd. and Jeffrey Parker.
10.15 Amendment of Engagement Agreement, dated October 26, 1999,
between Consolidated Water Co. Ltd. and Jeffrey Parker.
10.16 Second Amendment of Engagement Agreement, dated March 21,
2000, between Consolidated Water Co. Ltd. and Jeffrey
Parker.
10.17 Employment Contract, dated August 19, 1998, between Cayman
Water Company Limited and Gregory Scott McTaggart.
10.18 First Amendment to Employment Contract, dated April 17,
2000, between Consolidated Water Co. Ltd. and Gregory Scott
McTaggart.
10.19 Employment Contract, dated August 31, 1997, between Cayman
Water Company Limited and Alexander S. Bodden.
10.20 First Amendment to Employment Contract, dated April 17,
2000, between Consolidated Water Co. Ltd. and Alexander S.
Bodden.
10.21 Letter Agreement, dated August 2, 1999, between Consolidated
Water Co. Ltd. and J. Bruce Bugg.
10.22 Specimen Service Agreement, between Cayman Water Company
Limited and consumers (incorporated herein by reference to
the exhibit filed as part of our Registration Statement on
Form F-1 dated March 26, 1996).
10.23 Specimen Share Incentive Scheme Participation Agreement
between Cayman Water Company Limited and employees.
(incorporated herein by reference to the exhibit filed as a
part of our Form 20-F, dated December 7, 1994, Commission
File No. 0-25248).
10.24 Summary Share Grant Plan for Directors.
10.25 Agreement, dated March 31, 1998, among Argyle/Cay-Water
Limited, J. Bruce Bugg and Cayman Water Company Limited
(incorporated herein by reference to the exhibit filed as
part of our Form 20-F for the fiscal year ended December 31,
1997, Commission File No. 0-25248).
10.26 Option Deed, dated August 6, 1997, between Cayman Water
Company Limited and American Stock Transfer & Trust Company
(incorporated herein by reference to the exhibit filed on
our Form 6-K, dated August 7, 1997, Commission File No.
0-25248).
10.27 Stock Option Agreement, dated December 15, 1998, between
Consolidated Water Co. Ltd. and
R. Jerry Falkner.
10.28 Agreement, dated April 20, 1999, among Consolidated Water
Co. Ltd., Ellesmere Britannia Ltd., Cayman Hotel & Golf,
Inc. and Hyatt Britannia Corporation (incorporated herein by
reference to the exhibit filed on our Form 20-F, for the
fiscal year ended December 31, 1998, Commission File No.
0-25248).
10.29 Settlement Agreement, dated April 20, 1999, among
Consolidated Water Co. Ltd., Ellesmere Britannia Ltd.,
Cayman Hotel & Golf, Inc. and Hyatt Britannia Corporation
(incorporated herein by reference to the exhibit filed on
our Form 20-F, for the fiscal year ended December 31, 1998,
Commission File No. 0-25248).
10.30 Consulting Agreement, dated November 17, 1998, between
Cayman Water Company Limited and R.J. Falkner & Company,
Inc.
</TABLE>
II-3
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10.31 -- Agreement, dated November 12, 1997, between Commonwealth
Water Limited, Cayman Water Company Limited and RAV Bahamas
Limited.
10.32 -- Agreement, dated July 24, 1995, between Cayman Water Company
Limited and Galleon Beach Resort Limited.
10.33 -- Agreement, dated February 9, 1994, between Cayman Water
Company Limited and Widar Ltd.
10.34 -- Credit Facility Agreement, dated December 30, 1998, between
Consolidated Water Co. Ltd. and Royal Bank of Canada.
10.35 -- Finance Contract, dated October 3, 1991, between European
Investment Bank and Cayman Water Company Limited
(incorporated herein by reference to the exhibit filed as
part of our Form 20-F, dated December 7, 1994, Commission
File No. 0-25248).
10.36 -- Warrant issued to Joseph Roberts & Co., Inc. (incorporated
herein by reference to the exhibit filed as part of our
Registration Statement on Form F-1 dated March 26, 1996,
Commission File No. 333-00038).
23 -- Consent of PricewaterhouseCoopers.
24 -- Power of Attorney (see page II-5).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to which the prospectus is sent or
given, (i) the registrant's latest filing on Form 20-F, Form 40-F, or Form 10-K;
and any filing on Form 10-Q, Form 8-K or Form 6-K incorporated by reference into
the prospectus; and (ii) the latest annual report to security holders that is
incorporated by reference in this prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in this prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 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 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 of 1933 and will be governed by the final adjudication of such issue.
II-4
<PAGE> 77
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 F-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in Grand Cayman, Cayman Islands, on the 20th day of April, 2000.
CONSOLIDATED WATER CO. LTD.
By: /s/ JEFFREY M. PARKER
------------------------------------
Jeffrey M. Parker, Chairman and
Chief
Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We the undersigned officers and directors of Consolidated Water Co. Ltd.,
hereby severally constitute and appoint Jeffrey M. Parker and Peter Ribbins, or
any one of them, our true and lawful attorneys and agents, to do any and all
acts and things and to execute any and all instruments which said attorneys and
agents may deem necessary and advisable to enable Consolidated Water Co. Ltd. to
comply with the Securities Act of 1933, and any rules, regulations and
requirements of the Securities and Exchange Commission in connection with this
registration statement, including, specifically, but without limitation, to sign
for us in our names in the capacities indicated below, this registration
statement, any and all amendments and exhibits to this registration statement,
and any and all applications and other documents to be filed with the Securities
and Exchange Commission pertaining to the registration of the securities covered
hereby.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JEFFREY M. PARKER Chairman of the Board of April 20, 2000
- ----------------------------------------------------- Directors and Chief Executive
Jeffrey M. Parker Officer
/s/ PETER D. RIBBINS President, Chief Operating April 20, 2000
- ----------------------------------------------------- Officer and Director
Peter D. Ribbins
/s/ ALEXANDER S. BODDEN Vice President-Finance and April 20, 2000
- ----------------------------------------------------- Secretary
Alexander S. Bodden
/s/ GREGORY MCTAGGART Vice President-Operations April 20, 2000
- -----------------------------------------------------
Gregory McTaggart
Vice-Chairman of the Board of
- ----------------------------------------------------- Directors
J. Bruce Bugg, Jr.
/s/ BRIAN E. BUTLER Director April 20, 2000
- -----------------------------------------------------
Brian E. Butler
</TABLE>
II-5
<PAGE> 78
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
Director
- -----------------------------------------------------
Hal N. Carr
/s/ RICHARD L. FINLAY Director April 20, 2000
- -----------------------------------------------------
Richard L. Finlay
/s/ CLARENCE B. FLOWERS, JR. Director April 20, 2000
- -----------------------------------------------------
Clarence B. Flowers, Jr.
Director
- -----------------------------------------------------
Frederick W. McTaggart
/s/ WILMER PERGANDE Director April 20, 2000
- -----------------------------------------------------
Wilmer Pergande
/s/ RAYMOND WHITTAKER Director April 20, 2000
- -----------------------------------------------------
Raymond Whittaker
</TABLE>
II-6
<PAGE> 1
800,000 SHARES
CONSOLIDATED WATER CO. LTD
ORDINARY SHARES
-------------------
UNDERWRITING AGREEMENT
-------------------
Philadelphia, Pennsylvania
______, 2000
JANNEY MONTGOMERY SCOTT LLC
Representative of the Several
Underwriters Named in Schedule II Hereto
1801 Market Street
Philadelphia, PA 19103
FIRST SECURITY VAN KASPER
Representative of the Several
Underwriters Named in Schedule II thereto
600 California Street
Suite 1700
San Francisco, CA 94108
Ladies and Gentlemen:
Consolidated Water Co. Ltd., a Cayman Island corporation
("CWCO"), proposes to sell to Janney Montgomery Scott LLC and First Security Van
Kasper (the "Representatives") and the several other underwriters named in
Schedule II hereto (together with the Representatives, the "Underwriters")
770,000 Ordinary Shares, par value C.I. $1.00 per share ("Ordinary Shares"), of
CWCO and the persons named in Part A of Schedule I hereto (the "Selling
Shareholders") propose to sell to the Underwriters an aggregate of 80,000
Ordinary
1
<PAGE> 2
Shares. The Ordinary Shares to be sold to the Underwriters by CWCO and the
Selling Shareholders are referred to herein as the "Firm Shares." The respective
amounts of the Firm Shares to be purchased by the several Underwriters are set
forth opposite their names in Schedule II hereto. The Firm Shares shall be
offered to the public at a public offering price of $____ per Firm Share (the
"Offering Price").
In order to cover over-allotments in the sale of the Firm
Shares, the Underwriters may purchase for the Underwriters' own accounts up to
127,500 additional Ordinary Shares from CWCO. Such 127,500 additional Ordinary
Shares are referred to herein as the "Optional Shares." If any Optional Shares
are purchased, the Optional Shares shall be purchased for offering to the public
at the Offering Price and in accordance with the terms and conditions set forth
herein. The Firm Shares and the Optional Shares are referred to collectively
herein as the "Shares."
1. REPRESENTATIONS AND WARRANTIES OF CWCO. CWCO represents and warrants
to, and agrees with, the several Underwriters that:
(a) CWCO has prepared, in conformity with the requirements of
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations (the "Regulations") of the Securities and Exchange Commission (the
"SEC") under the Act in effect at all applicable times, and has filed with the
SEC a registration statement on Form F-2 (File No. 333-_________) and one or
more amendments thereto for the purpose of registering the Shares under the Act.
Copies of such registration statement and any amendments thereto, and all forms
of the related prospectus contained therein, have been delivered to the
Representatives. Any preliminary prospectus included in such registration
statement or filed with the SEC pursuant to Rule 424(a) of the Regulations is
hereinafter called a "Preliminary Prospectus." The various parts of such
registration statement, including all exhibits thereto and the information
contained in the form of final prospectus filed with the SEC pursuant to Rule
424(b) of the Regulations in accordance with Section 6(a) of this Agreement and
deemed by virtue of Rule 424 of the Regulations to be part of the registration
statement at the time it was declared effective, each as amended at the time the
registration statement became effective, including the information (if any)
deemed to be part of the registration statement at the time of effectiveness
pursuant to Rule 430A of the Regulations, are hereinafter collectively called
the "Registration Statement." The final prospectus in the form included in the
Registration Statement or first filed with the SEC pursuant to Rule 424(b) of
the Regulations and any amendments or supplements thereto, including the
information (if any) deemed to be part of that prospectus at the time of
effectiveness pursuant to Rule 430A of the Regulations, is hereinafter called
the "Prospectus." All references to the Registration Statement, the Preliminary
Prospectus and the Prospectus include all documents incorporated therein by
reference. If CWCO has filed an abbreviated registration statement to register
additional Ordinary Shares pursuant to Rule 462(b) under the Act (the "Rule 462
Registration Statement"), then any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462 Registration Statement.
2
<PAGE> 3
(b) The Registration Statement has become effective under the
Act, and the SEC has not issued any stop order suspending the effectiveness of
the Registration Statement or preventing or suspending the use of the
Preliminary Prospectus, nor has the SEC instituted or threatened to institute
proceedings with respect to such an order. No stop order suspending the sale of
the Shares in any jurisdiction designated by the Representatives as provided for
in Section 6(f) hereof has been issued, and no proceedings for that purpose have
been instituted or threatened. CWCO has complied in all material respects with
all requests of the SEC, or requests of which CWCO has been advised of any state
or foreign securities commission in a state or foreign jurisdiction designated
by the Representatives as provided for in Section 6(f) hereof, for additional
information to be included in the Registration Statement, any Preliminary
Prospectus or the Prospectus. Each Preliminary Prospectus conformed to all the
requirements of the Act and the Regulations as of its date in all material
respects and did not as of its date contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except the foregoing shall not apply to statements in
or omissions from any Preliminary Prospectus in reliance upon and in conformity
with information supplied to CWCO in writing by or on behalf of any Underwriter
through the Representatives expressly for use therein. The Registration
Statement, on the date on which it was declared effective by the SEC (the
"Effective Date") and when any post-effective amendment thereof shall become
effective, and the Prospectus, at the time it is filed with the SEC including,
if applicable, pursuant to Rule 424(b), and on the Closing Date (as defined in
Section 4 hereof) and any Option Closing Date (as defined in Section 5(b)
hereof), conformed and will conform in all material respects to all the
requirements of the Act and the Regulations, and did not and will not, on any of
such dates, include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements in or omissions from the Registration Statement or the
Prospectus made in reliance upon and in conformity with information furnished to
CWCO in writing by or on behalf of any Underwriter through the Representatives
expressly for use therein.
(c) The documents incorporated by reference into the
Prospectus pursuant to Item 12 of Form F-2 under the Act, at the time they were
filed with the SEC, complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended ("Exchange Act") and the
Exchange Act Rules and Regulations and did not contain any untrue statement of
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(d) CWCO is a corporation duly organized, validly existing and
in good standing under the laws of the Cayman Islands, with all necessary power
and authority, corporate and otherwise, and all required licenses, permits,
certifications, registrations, approvals, consents and franchises to own or
lease and operate its properties and to conduct its current business as
described in the Prospectus, and to execute, deliver and perform this Agreement,
except where
3
<PAGE> 4
the failure to obtain such licenses, permits, certifications, registrations,
approvals, consents and franchises would not have a material adverse effect on
the general affairs, properties, condition (financial or otherwise), results of
operations, shareholders' equity, business or prospects (collectively, the
"Business Conditions"). Commonwealth Water Ltd., a corporation incorporated in
the Bahamas ("Commonwealth") is a subsidiary of CWCO. Commonwealth is a
corporation duly organized, validly existing and in good standing under the laws
of the Bahamas and currently has no operations and is not conducting any
business. CWCO is duly qualified to do business as a foreign corporation, and is
in good standing, in all jurisdictions in which such qualification is required,
except where the failure to so qualify would not have a material adverse effect
on CWCO's Business Conditions.
(e) All of the outstanding shares of capital stock of CWCO
have been duly authorized and validly issued, are fully paid and non-assessable;
and no options, warrants or other rights to purchase, agreements or other
obligations to issue, or other rights to convert any obligations into, shares of
capital stock or ownership interests in CWCO or securities convertible into or
exchangeable for capital stock of, or other ownership interests in, CWCO is
outstanding except as disclosed in the Prospectus. CWCO does not own any stock
or other interest whatsoever, whether equity or debt, in any corporation,
partnership or other entity, other than CWCO's ownership of Commonwealth and
Hurricane Hideaway Marina Ltd., a Cayman Islands corporation.
(f) This Agreement has been duly authorized, executed and
delivered by CWCO and constitutes its legal, valid and binding obligation,
enforceable against CWCO in accordance with its terms, except as enforcement may
be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to applicability of
general principles of equity and except, as to this Agreement, as rights to
indemnity and contribution may be limited by federal and state securities laws
or principles of public policy.
(g) The execution, delivery and performance of this Agreement
and the transactions contemplated herein, do not and will not, with or without
the giving of notice or the lapse of time, or both, (i) conflict with any term
or provision of CWCO's Memorandum of Association or Articles of Association;
(ii) result in a breach of, constitute a default under, result in the
termination or modification of, result in the creation or imposition of any
lien, security interest, charge or encumbrance upon any of the properties of
CWCO or require any payment by CWCO or impose any liability on CWCO pursuant to,
any contract, indenture, mortgage, deed of trust, commitment or other agreement
or instrument to which CWCO is a party or by which any of its properties are
bound or affected other than this Agreement, except as disclosed in the
Prospectus; (iii) assuming compliance with Blue Sky laws and the rules of the
National Association of Securities Dealers, Inc. (the "NASD") applicable to the
offer and sale of the Shares, violate any law, rule, regulation, judgment, order
or decree of any government or governmental agency, instrumentality or court,
domestic or foreign, having jurisdiction over CWCO or any of its properties or
business; or (iv) result in a breach, termination or lapse of
4
<PAGE> 5
CWCO's corporate power and authority to own or lease and operate its properties
and conduct its business, except as disclosed in the Prospectus.
(h) At the date or dates indicated in the Prospectus, CWCO had
the duly authorized and outstanding capitalization set forth in the Prospectus
under the caption "Capitalization" and will have, as of the issuance of the Firm
Shares on the Closing Date, the as adjusted capitalization set forth therein as
of the date indicated in the Prospectus. On the Effective Date, the Closing Date
and any Option Closing Date, there will be no options or warrants or other
outstanding rights to purchase, agreements or obligations to issue or agreements
or other rights to convert or exchange any obligation or security into, capital
stock of CWCO or securities convertible into or exchangeable for capital stock
of CWCO, except as described in the Prospectus or the grant of options after the
date of the Prospectus under option plans of the Company. The information in the
Prospectus insofar as it relates to all outstanding options and other rights to
acquire securities of CWCO as of the Effective Date and immediately prior to the
Closing Date and any Option Closing Date is true and correct in all material
respects.
(i) The currently outstanding shares of CWCO's capital stock
have been duly authorized and are validly issued, fully paid and non-assessable,
and none of such outstanding shares of CWCO's capital stock has been issued in
violation of any preemptive rights of any security holder of CWCO. The holders
of the outstanding shares of CWCO's capital stock are not subject to personal
liability solely by reason of being such holders. All previous offers and sales
of the outstanding shares of CWCO's capital stock, whether described in the
Registration Statement or otherwise, were made in conformity with applicable
federal, state and foreign securities laws. The authorized capital stock of
CWCO, including, without limitation, the outstanding Ordinary Shares, the Shares
being issued, and the outstanding options to purchase shares of the Ordinary
Shares conform in all material respects with the descriptions thereof in the
Prospectus, and such descriptions conform in all material respects with the
instruments defining the same.
(j) When the Shares have been duly delivered against payment
therefor as contemplated by this Agreement, the Shares will be validly issued,
fully paid and non-assessable, and the holders thereof will not be subject to
personal liability solely by reason of being such holders. The certificates
representing the Shares are in proper legal form under, and conform in all
respects to the requirements of, the Cayman Islands. Neither the filing of the
Registration Statement nor the offering or sale of Shares as contemplated by
this Agreement gives any security holder of CWCO any rights for or relating to
the registration of any Ordinary Shares or any other capital stock of CWCO or
any rights to convert or have redeemed or otherwise receive anything of value
with respect to any other security of CWCO.
(k) No consent, approval, authorization, order, registration,
license or permit of, or filing or registration with, any court, government,
governmental agency, instrumentality or other regulatory body or official is
required for the valid and legal execution, delivery and performance by CWCO of
this Agreement and the consummation of the transactions
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contemplated hereby or described in the Prospectus, except (i) such as may be
required for the registration of the Shares under the Act, the Exchange Act, and
for compliance with the applicable state securities or Blue Sky laws or the
Bylaws, rules and other pronouncements of the NASD, (ii) such as have been
obtained under the laws and regulations of jurisdictions outside the United
States which the Shares are offered and (iii) as disclosed in the Prospectus.
(l) The Ordinary Shares (including the Shares) are registered
pursuant to Section 12(g) of the Exchange Act. The issued and outstanding shares
of the Ordinary Shares are included for quotation on the Nasdaq National Market.
To CWCO's knowledge, no other person has taken any action designed to cause, or
likely to result in, the termination of the registration of the Ordinary Shares
under the Exchange Act. CWCO has not received any notification that the SEC or
the Nasdaq is contemplating terminating such registration or inclusion.
(m) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of or references to contracts,
agreements or other documents, are accurate in all material respects and present
or summarize fairly, in all material respects, the information required to be
disclosed under the Act or the Regulations, and there are no contracts,
agreements or other documents, instruments or transactions of any character
required to be described or referred to in the Registration Statement or
Prospectus or to be filed as exhibits to the Registration Statement that have
not been so described, referred to or filed, as required.
(n) Each contract or other instrument (however characterized
or described) to which CWCO is a party or by which any of its properties or
business is bound or affected and which is material to the conduct of CWCO's
business, has been duly and validly executed by CWCO, and, to the knowledge of
CWCO, by the other parties thereto. Each such contract or other instrument is in
full force and effect and is enforceable in all material respects against the
parties thereto in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and subject to applicability of
general principles of equity, and CWCO is not, and to the knowledge of CWCO, no
other party is, in default thereunder, and except as disclosed in the
Prospectus, no event has occurred that, with the lapse of time or the giving of
notice, or both, would constitute a default under any such contract or other
instrument. All necessary consents under such contracts or other instruments to
the disclosure in the Prospectus with respect thereto have been obtained.
(o) The consolidated financial statements of CWCO (including
the notes thereto) filed as part of any Preliminary Prospectus, the Prospectus
and the Registration Statement present fairly, in all material respects, the
financial position of CWCO as of the respective dates thereof, and the results
of operations and cash flows of CWCO for the periods indicated therein, all in
conformity with generally accepted accounting principles. The supporting notes
included in the Registration Statement fairly state in all material respects the
information required to be stated therein in relation to the financial
statements taken as a whole. The financial information included in the
Prospectus under the captions "Prospectus Summary -
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<PAGE> 7
Summary Consolidated Financial Information," and "Selected Financial
Information" presents fairly the information shown therein and has been compiled
on a basis consistent with that of the audited financial statements included in
the Registration Statement. The unaudited pro forma adjustments to financial
information included in the Registration Statement have been properly applied to
the historical amounts in the compilation of that information to reflect the
sale by CWCO and the Selling Shareholders of 850,000 Ordinary Shares offered
thereby at an assumed offering or actual price set forth in the Preliminary
Prospectus or the Prospectus, as the case may be, and the application of the
estimated net proceeds to CWCO therefrom.
(p) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as otherwise
stated therein, there has not been (i) any material adverse change (including,
whether or not insured against, any material loss or damage to any material
assets), or development involving a prospective material adverse change, in the
Business Conditions of CWCO; (ii) any material adverse change, loss, reduction,
termination or non-renewal of any material contract to which CWCO is a party;
(iii) any transaction entered into by CWCO not in the ordinary course of its
business that is material to CWCO; (iv) any dividend or distribution of any kind
declared, paid or made by CWCO on its capital stock, except for and to the
extent described in the Prospectus; (v) any liabilities or obligations, direct
or indirect, incurred by CWCO that are material to CWCO; (vi) any change in the
capitalization of CWCO; or (vii) any change in the indebtedness of CWCO that is
material to CWCO. CWCO does not have any contingent liabilities or obligations
that are material and that are not expressly disclosed in the Prospectus.
(q) CWCO has not distributed, and will not distribute, any
offering material in connection with the offering and sale of the Shares other
than the Registration Statement, a Preliminary Prospectus, the Prospectus and
other material, if any, permitted by the Act and the Regulations. Neither CWCO
nor any of its officers, directors or affiliates has taken, nor shall CWCO or
such persons take, any action designed to, or that might be reasonably expected
to, cause or result in stabilization or manipulation of the price of the
Ordinary Shares.
(r) CWCO is not required to file any tax returns with any
taxing authority, foreign or domestic.
(s) PricewaterhouseCoopers, which has given its report on
certain financial statements included as part of the Registration Statement, is
a firm of independent certified public accountants as required by the Act and
the Regulations with respect to CWCO.
(t) CWCO is not in violation of, or in default under, any of
the terms or provisions of (i) its Memorandum of Association or Articles of
Association or similar governing instruments and (ii) except as disclosed in the
Prospectus (A) any indenture, mortgage, deed of trust, contract, commitment or
other agreement or instrument to which it is a party or by which it or any of
its assets or properties is bound or affected, (B) any law, rule, regulation,
judgment, order or decree of any government or governmental agency,
instrumentality or court, domestic or
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foreign, having jurisdiction over it or any of its properties or business, or
(C) any license, permit, certification, registration, approval, consent or
franchise.
(u) Except as expressly disclosed in the Prospectus, there are
no claims, actions, suits, protests, proceedings, arbitrations, investigations
or inquiries pending before, or, to CWCO's knowledge, threatened or contemplated
by, any governmental agency, instrumentality, court or tribunal, domestic or
foreign, or before any private arbitration tribunal to which CWCO is or may be
made a party that could reasonably be expected to affect the validity of any of
the outstanding Ordinary Shares, or that, if determined adversely to CWCO would,
in any case or in the aggregate, result in any material adverse change in the
Business Conditions of CWCO, nor to CWCO's knowledge is there any reasonable
basis for any such claim, action, suit, protest, proceeding, arbitration,
investigation or inquiry. There are no outstanding orders, judgments or decrees
of any court, governmental agency, instrumentality or other tribunal enjoining
CWCO from, or requiring CWCO to take or refrain from taking, any action, or to
which CWCO or its properties, assets or business are bound or subject.
(v) CWCO owns, or possesses adequate rights to use, all
patents, patent applications, trademarks, trademark registrations, applications
for trademark registration, trade names, service marks, licenses, inventions,
copyrights, know-how (including any unpatented and/or unpatentable proprietary
or confidential technology, information, systems, design methodologies and
devices or procedures developed or derived from or for CWCO's business), trade
secrets, confidential information, processes and formulations and other
proprietary information necessary for, used in, or proposed to be used in, the
conduct of the business of CWCO as described in the Prospectus (collectively,
the "Intellectual Property"). To CWCO's knowledge, CWCO has not infringed, is
not infringing and CWCO has not received any notice of conflict with, the
asserted rights of others with respect to the Intellectual Property that,
individually or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could materially adversely affect the Business Conditions of
CWCO, and CWCO knows of no reasonable basis therefor. To the knowledge of CWCO,
no other parties have infringed upon or are in conflict with any Intellectual
Property. CWCO is not a party to, or bound by, any agreement pursuant to which
royalties, honorariums or fees are payable by CWCO to any person by reason of
the ownership or use of any Intellectual Property.
(w) CWCO has good and marketable title to all property
described in the Prospectus as being owned by it, free and clear of all
mortgages, liens, security interests, charges or encumbrances and the like,
except such as are expressly described or referred to in the Prospectus or such
as do not materially adversely affect the Business Conditions or the conduct of
the business of CWCO as described in the Prospectus. Except as disclosed in the
Prospectus, CWCO has insured its property against loss or damage by fire or
other casualty, in amounts reasonably believed by CWCO to be adequate, and
maintains insurance against such other risks as management of CWCO deems
appropriate. All real and personal property leased by CWCO as described or
referred to in the Prospectus, is held by CWCO, under valid leases which are in
full force and effect. The executive offices and facilities of CWCO (the
"Premises"), and all
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operations presently or formerly conducted thereon by CWCO or any predecessors
thereof, are now and, since CWCO began to use such Premises, always have been
and, to the knowledge of CWCO prior to when CWCO began to use such Premises,
always had been, in compliance with all federal, state and local statutes,
ordinances, regulations, rules, standards and requirements of the common law or
the law of the Cayman Islands thereof concerning or relating to industrial
hygiene and the protection of health and the environment (collectively, "the
Environmental laws"), except to the extent that any failure in such compliance
would not materially adversely affect the Business Conditions of CWCO. To the
knowledge of CWCO, the facilities of CWCO produce water of sufficient quality
and quantity to supply the current and planned customers and service areas of
CWCO, and are not subject to any restriction on groundwater withdrawal under any
federal, state or local law, regulation, rule, order or permit, except as
expressly described in the Prospectus or as provided in the Cayman Islands
allocation permits and licenses and such as do not materially adversely affect
the Business Conditions or the conduct of the business of CWCO as described in
the Prospectus. To the knowledge of CWCO, there are no conditions on, about,
beneath or arising from the Premises, in close proximity to the Premises or at
any other location that might give rise to liability, the imposition of a
statutory lien or require a removal of offensive material or clean-up, under any
of the Environmental laws, or affect the quality of the groundwater withdrawn by
CWCO, and that would materially adversely affect the Business Conditions of CWCO
except as described in the Prospectus. Except as expressly disclosed in the
Prospectus, or which will not materially adversely affect the Business
Conditions of CWCO (i) CWCO has not received notice nor has knowledge of any
claim, demand, investigation, regulatory action, suit or other action instituted
or threatened against CWCO or any portion of the Premises or any parcel in close
proximity to the Premises relating to any of the Environmental laws and (ii)
CWCO has not received any notice of material violation, citation, complaint,
order, directive, request for information or response thereto, notice letter,
demand letter or compliance schedule to or from any governmental or regulatory
agency arising out of or in connection with "hazardous substances" (as defined
by applicable Environmental laws) on, about, beneath, arising from or generated
at the Premises, near the Premises or at any other location.
(x) CWCO maintains a system of internal accounting controls
sufficient to provide reasonable assurances that: (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary in order to permit preparation of
financial statements in accordance with generally accepted accounting principles
and to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(y) CWCO and each of its subsidiaries and affiliates (the
"Employers") have established, maintain, contribute to, are required to
contribute to, are a party to, or are bound by contractual commitments with
respect to, certain pension, retirement, or profit-sharing plans, deferred
compensation, bonus, or other incentive plans, or medical, vision, dental, or
other health
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and welfare benefit plans, or life insurance or disability plans, or any other
employee benefit plans, programs, arrangements, agreements, or understandings
(the "Plans").
With respect to each of the Plans:
(i) The terms of each of the Plans are in
writing, and each of the Plans has been maintained and administered in
accordance with its terms and any applicable collective bargaining agreements.
(ii) Each of the Plans has been maintained and
administered in compliance with all regulations, rules, standards and
requirements of the common law or the law of the Cayman Islands thereof
concerning the establishment, funding, taxation and administration of such
Plans, including without limitation any such laws governing the conduct of the
trustees, fiduciaries or administrators of such Plans (collectively, the
"Employee Benefits Laws") except to the extent any failure in such compliance
would not adversely affect the Business Conditions of CWCO. None of the Plans
are subject to the Employee Retirement Income Security Act of 1974 as amended
("ERISA").
(iii) None of the Plans is a defined benefit
pension plan, under which the Employer is obligated to fund, or contribute to
the funding of, the payment of a defined retirement benefit based on an
employee's accumulated compensation, service or other factors.
(iv) None of the Plans provides retiree life or
retiree health insurance, except as may be required by applicable Employee
Benefits laws.
(v) There are no actions, suits or claims (other
than routine claims for benefits in the ordinary course) pending or, to CWCO's
knowledge, threatened, and to CWCO's best knowledge, there are no facts which
could give rise to any such actions, suits or claims (other than routine claims
for benefits in the ordinary course).
(vi) All contributions and/or insurance premiums
required to be paid as of the Closing Date by the Employers with respect to such
Plans have been paid.
(vii) The Employers have made all disclosures to
participants and to governmental authorities, including tax filings as
applicable, with respect to such Plans as may be required by applicable Employee
Benefits law.
(z) No labor dispute exists with CWCO's employees, and to
CWCO's knowledge, no such labor dispute is threatened. CWCO has no knowledge of
any existing or threatened labor disturbance by the employees of any of the
principal suppliers, contractors or customers of CWCO that would materially
adversely affect the Business Conditions of CWCO. None of CWCO's employees is
covered by a collective bargaining agreement and no union organizing activity
exists with respect to any of such employees.
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(aa) CWCO has not incurred any liability for any finder's fees
or similar payments in connection with the transactions contemplated herein
other than as disclosed in the Prospectus.
(bb) CWCO is familiar with the Investment Company Act of 1940,
as amended (the "1940 Act"), and the rules and regulations thereunder, and has
in the past conducted, and CWCO intends to conduct, its affairs in such a manner
as to ensure that it will not be an "investment company" within the meaning of
the 1940 Act and the rules and regulations thereunder.
(cc) No statement, representation, warranty or covenant made
by CWCO in this Agreement or in any certificate or document required by this
Agreement to be delivered to the Representatives is, or as of the Closing Date
or any Option Closing Date will be, inaccurate, untrue or incorrect in any
material respect. No transaction has occurred or is proposed between or among
CWCO and any of its respective officers, directors or shareholders or any
affiliate of the foregoing, or any affiliate of the foregoing that is required
to be described in and is not described in the Registration Statement and the
Prospectus.
(dd) Neither CWCO, nor any officer, director, employee,
partner, agent or other person acting on behalf of CWCO has, directly or
indirectly, given or agreed to give any money, property or similar benefit or
consideration to any customer or supplier (including any employee or agent of
any customer or supplier) or official or employee of any agency or
instrumentality of any government (foreign or domestic) or political party or
candidate for office (foreign or domestic) or any other person who was, is or in
the future may be in a position to affect the Business Conditions of CWCO or any
actual or proposed business transaction of CWCO that (i) could subject CWCO to
any liability (including, but not limited to, the payment of monetary damages)
or penalty in any civil, criminal or governmental action or proceeding that
would have a material adverse effect on the Business Conditions of CWCO or (ii)
with respect to CWCO or any officer or director thereof, violates any law, rule
or regulation to which CWCO is subject.
Any certificate signed by any officer of CWCO in such capacity
and delivered to the Representatives or to counsel for the Underwriters pursuant
to this Agreement shall be deemed a representation and warranty by CWCO as the
case may be, to the several Underwriters as to the matters covered thereby.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each
Selling Shareholder severally represents and warrants to each Underwriter that:
(a) Such Selling Shareholder now has, and on the Closing Date
and any Option Closing Date will have, good and marketable title to the Shares
to be sold by such Selling Shareholder, free and clear of any lien, claim,
security interest or other encumbrance, including, without limitation, any
restriction on transfer.
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(b) Such Selling Shareholder now has, and on the Closing Date
and any Option Closing Date will have, full legal right, power and
authorization, and any approval required by law, to sell, assign, transfer and
deliver such Shares in the manner provided in this Agreement, and upon delivery
of and payment for such Shares hereunder, the several Underwriters will acquire
good and marketable title to such Shares free and clear of any lien, claim,
security interest, or other encumbrance.
(c) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling Shareholder
and are the valid and binding agreements of such Selling Shareholder enforceable
against such Selling Shareholder in accordance with their terms.
(d) Neither the execution and delivery of this Agreement or
the Custody Agreement by or on behalf of such Selling Shareholder nor the
consummation of the transactions herein or therein contemplated by or on behalf
of such Selling Shareholder requires any consent, approval, authorization or
order of, or filing or registration with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required under the Act or such as may be required under state
securities or Blue Sky laws governing the purchase and distribution of the
Shares) or conflicts or will conflict with or constitutes or will constitute a
breach of, or default under, or violates or will violate, any agreement,
indenture or other instrument to which such Selling Shareholder is a party or by
which such Selling Shareholder is or may be bound or to which any such Selling
Shareholder's property or assets is subject, or any statute, law, rule,
regulation, ruling, judgment, injunction, order or decree applicable to such
Selling Shareholder or to any property or assets of such Selling Shareholder.
(e) The Registration Statement and the Prospectus, insofar as
they relate to such Selling Shareholder, do not and will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(f) Such Selling Shareholder does not have any actual
knowledge or any reason to believe that the Registration Statement or the
Prospectus (or any amendment or supplement thereto) contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(g) The representations and warranties of such Selling
Shareholder in the Custody Agreement are, and on the Closing Date and any Option
Closing Date will be, true and correct.
(h) Such Selling Shareholder has not taken, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or
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manipulation of the price of the Common Shares to facilitate the sale or resale
of the Shares, except as described in the Prospectus.
3. PURCHASE AND SALE OF FIRM SHARES. On the basis of the
representations, warranties, covenants and agreements contained herein, but
subject to the terms and conditions set forth herein, CWCO and the Selling
Shareholders shall sell the Firm Shares to the several Underwriters at the
Offering Price less the Underwriting Discounts and Commissions shown on the
cover page of the Prospectus, and the Underwriters, severally and not jointly,
shall purchase from CWCO and the Selling Shareholders on a firm commitment
basis, at the Offering Price less the Underwriting Discounts and Commissions
shown on the cover page of the Prospectus, the respective amounts of the Firm
Shares set forth opposite their names on Schedule II hereto. In making this
Agreement, each Underwriter is contracting severally and not jointly, and except
as provided in Sections 5 and 13 hereof, the agreement of each Underwriter is to
purchase only that number of Shares specified with respect to that Underwriter
in Schedule II hereto. The Underwriters shall offer the Shares to the public as
set forth in the Prospectus.
4. PAYMENT AND DELIVERY. Payment for the Firm Shares shall be made by
certified or official bank check or checks payable to the order of CWCO and each
of the Selling Shareholders in New York Clearing House (next day) funds, at the
offices of Janney Montgomery Scott LLC, 1801 Market Street, Philadelphia,
Pennsylvania, or in immediately available funds wired to such accounts as CWCO
may specify (with all costs and expenses incurred by the Underwriters in
connection with such settlement in immediately available funds, to be borne by
CWCO), against delivery of the Firm Shares to the Representatives at the offices
of Janney Montgomery Scott LLC, 1801 Market Street, Philadelphia, Pennsylvania
for the respective accounts of the Underwriters. Such payment and delivery will
be made at 10:00 a.m., Philadelphia, Pennsylvania time, on the third business
day after the date of this Agreement, or at such other time on the same or such
other date, not later than seven business days thereafter as shall be designated
in writing by the Representatives. Such time and date are referred to herein as
the "Closing Date." The certificates representing the Firm Shares to be sold and
delivered will be in such denominations and registered in such names as the
Representatives request not less than two full business days prior to the
Closing Date, and will be made available to the Representatives for inspection,
checking and packaging at the Philadelphia correspondent office of CWCO's
transfer agent not less than one full business day prior to the Closing Date.
5. OPTION TO PURCHASE OPTIONAL SHARES.
(a) For the purposes of covering any over-allotments in
connection with the distribution and sale of the Firm Shares as contemplated by
the Prospectus, on the basis of the representations, warranties, covenants and
agreements contained herein, but subject to the terms and conditions herein set
forth, the several Underwriters are hereby granted an option by CWCO to purchase
all or any part of the Optional Shares (the "Over-allotment Option"). The
purchase price to be paid for the Optional Shares shall be the Offering Price
less the Underwriting
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Discounts and Commissions shown on the cover page of the Prospectus. The
Over-allotment Option granted hereby may be exercised by the Representatives on
behalf of the several Underwriters as to all or any part of the Optional Shares
at any time and from time to time within 30 days after the date of the
Prospectus. No Underwriter shall be under any obligation to purchase any
Optional Shares prior to an exercise of the Over-allotment Option.
(b) The Over-allotment Option granted hereby may be exercised
by the Representatives on behalf of the several Underwriters by giving notice to
CWCO by a letter sent by registered or certified mail, postage prepaid, telex,
telegraph, telegram or facsimile (such notice to be effective when received),
addressed as provided in Section 15 hereof, setting forth the number of Optional
Shares to be purchased, the date and time for delivery of and payment for the
Optional Shares and stating that the Optional Shares referred to therein are to
be used for the purpose of covering over-allotments in connection with the
distribution and sale of the Firm Shares. If such notice is given at least two
full business days prior to the Closing Date, the date set forth therein for
such delivery and payment shall be not earlier than the Closing Date. If such
notice is given after two full business days prior to the Closing Date, the date
set forth therein for such delivery and payment shall be a date selected by the
Representatives not later than five full business days after the exercise of the
Over-allotment Option. The date and time set forth in such a notice is referred
to herein as an "Option Closing Date," and a closing held pursuant to such a
notice is referred to herein as an "Option Closing." Upon each exercise of the
Overallotment Option, and on the basis of the representations, warranties,
covenants and agreements herein contained, and subject to the terms and
conditions herein set forth, the several Underwriters shall become severally,
but not jointly, obligated to purchase from CWCO the number of Optional Shares
specified in each notice of exercise of the Over-allotment Option (allocated
among them in accordance with Section 5(c) hereof).
(c) The number of Optional Shares to be purchased by each
Underwriter pursuant to each exercise of the Over-allotment Option shall be the
number that bears the same ratio to the aggregate number of Optional Shares
being purchased through such Over-allotment Option exercise as the number of
Firm Shares opposite the name of such Underwriter in Schedule II hereto bears to
the total number of all Firm Shares. Notwithstanding the foregoing, the number
of Optional Shares purchased and sold pursuant to each exercise of the
Overallotment Option shall be subject to such adjustment as the Representatives
may approve to eliminate fractional shares and subject to the provisions for the
allocation of Optional Shares purchased for the purpose of covering
over-allotments set forth in the agreement entered into by and among the
Underwriters in connection herewith (the "Agreement Among Underwriters").
(d) Payment for the Optional Shares shall be made to CWCO, by
certified or official bank check payable to the order of CWCO, in New York
Clearing House (next day) funds, at the offices of Janney Montgomery Scott LLC,
1801 Market Street, Philadelphia, Pennsylvania, such other place as shall be
agreed upon by CWCO and the Representatives, or in immediately available funds
wired to such accounts as CWCO may specify (with all costs and expenses incurred
by the Underwriters in connection with such settlement in immediately
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<PAGE> 15
available funds, to be borne by CWCO), against delivery of the Optional Shares
to the Representatives at the offices of Janney Montgomery Scott LLC, 1801
Market Street, Philadelphia, Pennsylvania, for the respective accounts of the
Underwriters. The certificates representing the Optional Shares to be issued and
delivered will be in such denominations and registered in such names as the
Representatives request upon reasonable notice prior to such Option Closing
Date, and will be made available to the Representatives for inspection, checking
and packaging at the Philadelphia correspondent office of CWCO's transfer agent
at a reasonable time in advance of such Option Closing Date.
6. CERTAIN COVENANTS AND AGREEMENTS OF CWCO. CWCO covenants and agrees
with the several Underwriters as follows:
(a) If Rule 430A of the Regulations is employed, CWCO will
timely file the Prospectus pursuant to and in compliance with Rule 424(b) of the
Regulations and will advise the Representatives of the time and manner of such
filing.
(b) CWCO will not file or publish any amendment or supplement
to the Registration Statement, Preliminary Prospectus or Prospectus at any time
before the completion (in the opinion of the Underwriters' counsel) of the
distribution of the Shares by the Underwriters that is not (i) in compliance
with the Regulations and (ii) approved by the Representatives (such approval not
to be unreasonably withheld or delayed).
(c) CWCO will advise the Representatives immediately, and
confirm such advice in writing, (i) when any post-effective amendment to the
Registration Statement is filed with the SEC under Rule 462(c) under the Act or
otherwise, (ii) any Rule 462(b) Registration Statement is filed, (iii) of the
receipt of any comments from the SEC concerning the Registration Statement, (iv)
when any post-effective amendment to the Registration Statement becomes
effective, or when any supplement to the Prospectus or any amended Prospectus
has been filed, (v) of any request of the SEC for amendment or supplementation
of the Registration Statement or Prospectus or for additional information, (vi)
during the period when the Prospectus is required to be delivered under the Act
and Regulations, of the happening of any event as a result of which the
Registration Statement or the Prospectus would include an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein not misleading, (vii) during the period noted in clause (vi) above, of
the need to amend the Registration Statement or supplement the Prospectus to
comply with the Act, (viii) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, and (ix) of the suspension of the qualification of any of the Shares
for offering or sale in any jurisdiction in which the Underwriters intend to
make such offers or sales, or the initiation or threatening of any proceedings
for any of such purposes known to CWCO. CWCO will use its best efforts to
prevent the issuance of any such stop order or of any order preventing or
suspending such use, and if any such order is issued, to obtain as soon as
possible the lifting thereof.
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(d) CWCO has delivered to the Representatives, without charge,
as many copies of each Preliminary Prospectus as the Representatives have
reasonably requested. CWCO will deliver to the Representatives, without charge,
from time to time during the period when delivery of the Prospectus is required
under the Act, such number of copies of the Prospectus (as supplemented or
amended) as the Representatives may reasonably request. CWCO hereby consents to
the use of such copies of the Preliminary Prospectus and the Prospectus for
purposes permitted by the Act, the Regulations and the securities or Blue Sky
laws of the states or foreign jurisdictions in which the Shares are offered by
the several Underwriters and by all dealers to whom Shares may be sold, both in
connection with the offering and sale of the Shares and for such period of time
thereafter as the Prospectus is required by the Act to be delivered in
connection with sales by any Underwriter or dealer. CWCO has furnished or will
furnish to the Representatives at least three original signed copies of the
Registration Statement as originally filed and of all amendments and supplements
thereto, whether filed before or after the Effective Date, at least three copies
of all exhibits filed therewith and of all consents and certificates of experts,
and will deliver to the Representatives such number of conformed copies of the
Registration Statement, including financial statements and exhibits, and all
amendments thereto, as the Representatives may reasonably request.
(e) CWCO will comply with the Act, the Regulations, the
Exchange Act and the rules and regulations thereunder so as to permit the
continuance of sales of and dealings in the Shares for as long as may be
necessary to complete the distribution of the Shares as contemplated hereby.
(f) CWCO will furnish such information and pay such filing
fees and other expenses as may be required, including reasonable legal fees
which such legal fees shall not exceed $20,000, and otherwise cooperate in the
registration or qualification of the Shares, or exemption therefrom, for
offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions in which the Representatives
determine to offer the Shares, after consultation with CWCO, and will file such
consents to service of process or other documents necessary or appropriate in
order to effect such registration or qualification; provided, however, that no
such qualification shall be required in any jurisdiction where, solely as a
result thereof, CWCO would be subject to taxation or qualification as a foreign
corporation doing business in such jurisdiction where it is not now so qualified
or to take any action which would subject it to service of process in suits,
other than those arising out of the offering or sale of the Shares, in any
jurisdiction where it is not now so subject. CWCO will, from time to time,
prepare and file such statements and reports as are or may be required to
continue such qualification in effect for so long a period as is required under
the laws of such jurisdictions for such offering and sale. CWCO will furnish
such information and pay such filing fees and other expenses as may be required,
and otherwise cooperate in the listing of the Shares on the Nasdaq National
Market. CWCO will, from time to time, prepare and file such statements and
reports as are or may be required to continue such qualification in effect for a
period of three years from the Effective Date; provided, however, that CWCO may
cause the Ordinary Shares to be ineligible for registration in the name of Cede
and Co., which, among other things, acts as the nominee for
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the Depository Trust Company, solely for the purpose of complying with the terms
of CWCO's Licence to Produce Potable Water from Seawater and Distribute by Means
of Pipes issued by the Government of the Cayman Islands (the "Licence").
(g) Subject to Section 6(b) hereof, in case of any event
(occurring at any time within the period during which, in the opinion of counsel
for the Underwriters, a prospectus is required to be delivered under the Act or
the Regulations), as a result of which any Preliminary Prospectus or the
Prospectus, as then amended or supplemented, would contain, in the opinion of
counsel for the Underwriters, an untrue statement of a material fact, or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, or, if it
is necessary at any time to amend any Preliminary Prospectus or the Prospectus
to comply with the Act or the Regulations or any applicable securities or Blue
Sky laws, CWCO promptly will prepare and file with the SEC, and any applicable
state and foreign securities commission, an amendment, supplement or document
that will correct such statement or omission or effect such compliance and will
furnish to the several Underwriters such number of copies of such amendments,
supplements or documents (in form and substance satisfactory to the
Representatives and counsel for the Underwriters) as the Representatives may
reasonably request. For purposes of this Section 6(g), CWCO will provide such
information to the Representatives, the Underwriters' counsel and counsel to
CWCO as shall be necessary to enable such persons to consult with CWCO with
respect to the need to amend or supplement the Registration Statement,
Preliminary Prospectus or Prospectus or file any document, and shall furnish to
the Representatives and the Underwriters' counsel such further information as
each may from time to time reasonably request.
(h) CWCO will make generally available to its security holders
not later than 45 days after the end of the period covered thereby, an earnings
statement of CWCO (which need not be audited unless required by the Act or the
Regulations) that shall comply with Section 11(a) of the Act and Rule 158
thereunder and cover a period of at least 12 consecutive months beginning not
later than the first day of CWCO's fiscal quarter next following the Effective
Date (or, if later, the effective date of the Rule 462(b) Registration
Statement).
(i) For a period of three years from the Effective Date, CWCO
will deliver to the Representatives and, upon request, to each of the
Underwriters: (i) a copy of each report or document, including, without
limitation, reports on Forms 6-K, 8-K, 20-F, 10-K and 10-Q filed with the SEC on
the dates required and (or such similar forms as may be designated by the SEC),
registration statements and any exhibits thereto, filed or furnished to the SEC
or any securities exchange or the NASD, on the date each such report or document
is so filed or furnished; (ii) as soon as practicable, copies of any reports or
communications (financial or other) of CWCO mailed to its security holders; and
(iii) every material press release in respect of CWCO or its affairs that is
released or prepared by CWCO.
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(j) During the course of the distribution of the Shares, CWCO
will not take, directly or indirectly, any action designed to, or that could
reasonably be expected to, cause or result in stabilization or manipulation of
the price of the Ordinary Shares.
(k) CWCO has caused each person listed on Schedule III hereto
to execute an agreement (a "Lock-up Agreement") in form and substance
satisfactory to the Representatives and the Underwriters' counsel which provides
that for a period of 120 days from the date of the final Prospectus, as amended
or supplemented, such persons will not, without the prior written consent of the
Representatives, directly or indirectly, sell, offer or contract to sell or
grant any option to purchase or otherwise dispose of any shares of the Ordinary
Shares (or any securities convertible into or exercisable or exchangeable for
any shares of the Ordinary Shares). CWCO has delivered such agreements to the
Representatives prior to the date of this Agreement. Appropriate stop transfer
instructions will be issued by CWCO to the transfer agent for the Ordinary
Shares, and a copy of such instructions will be delivered to the
Representatives.
(l) For a period of 120 days after the Effective Date, CWCO
will not, without the prior written consent of the Representatives, offer, sell,
contract to sell or otherwise dispose of any Ordinary Shares or any securities
convertible into or exercisable for any Ordinary Shares or grant options to
purchase any Ordinary Shares, except (i) the issuance of Ordinary Shares upon
the exercise of currently outstanding options and warrants as described in the
Prospectus, and (ii) the grant of options to purchase Ordinary Shares under
CWCO's currently outstanding stock option plans and the issuance of the Ordinary
Shares upon the exercise thereof.
(m) For a period of three years from the Effective Date, CWCO
will use all reasonable efforts to maintain the listing of the Ordinary Shares
(including, without limitation, the Shares) on the Nasdaq National Market or on
a national securities exchange; provided, however, that CWCO may cause the
Ordinary Shares to be ineligible for registration in the name of Cede and Co.,
which, among other things, acts as the nominee for the Depository Trust Company,
solely for the purpose of complying with the terms of the Licence.
(n) CWCO will, at its sole cost and expense, supply and
deliver to the Representatives and the Underwriters' counsel, within a
reasonable period from the Closing Date, transaction binders in such number and
in such form and content as the Representatives reasonably request.
(o) CWCO will use the net proceeds from the sale of the Shares
to be sold by it hereunder substantially in accordance with the description set
forth in the Prospectus.
(p) As of the Closing Date, CWCO will file or cause to be
filed reports on Form 10-Q and Form 10-K with the SEC on the dates required. As
of the Closing Date, CWCO will also prepare or cause to be prepared proxy
statements in compliance with applicable rules and regulations of the SEC,
except for the filing requirements. CWCO shall provide copies of
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such reports and proxy statements to the Representatives upon request for a
period of three years from the Closing Date.
(q) Prior to the next general meeting of the shareholders of
CWCO, the Board of Directors will adopt a resolution recommending an amendment
to the Articles of Association to allow the Directors of CWCO to decline to
register a transfer of shares only in the event that such transfer would violate
the terms of the Licence. At the next general meeting of shareholders, the Board
of Directors of CWCO will propose and recommend such amendment to the Articles
of Association of CWCO permitting the Board of Directors to decline to register
a transfer of shares only in the event that such transfer would violate the
terms of the Licence.
(r) If at any time within two years after the Closing Date,
CWCO plans to effect a public offering of the Ordinary Shares by CWCO or any
shareholder, CWCO shall provide written notice (the "Notice") of such plan to
Janney Montgomery Scott LLC ("Janney"). Janney has ten (10) business days after
receipt of the Notice to advise CWCO in writing (the "Response") of its
willingness to act as underwriter. If within 20 business days after CWCO's
receipt of the Response, Janney and CWCO are unable to agree upon the
compensation to be paid by CWCO to Janney and/or the terms and conditions of the
public offering, CWCO may engage a third party to act as underwriter in
connection with the public offering; provided, however, that CWCO shall not
agree to pay such underwriter compensation substantially similar to or greater
than that proposed by Janney and/or agree to terms and conditions of the public
offering that are substantially similar to or more favorable to the underwriter
than those proposed by Janney.
(s) As of the Effective Date, CWCO will issue all option
grants at no less than the market price of the Ordinary Shares.
(t) After the Effective Date, CWCO intends to maintain a
dividend pay-out ratio of 50-60%, provided that CWCO's Board of Directors
determines that such dividend pay-out ratio is in the best interests of the
company.
7. AGREEMENTS OF THE SELLING SHAREHOLDERS. Each of the Selling
Shareholders severally agrees with the several Underwriters as follows:
(a) Such Selling Shareholder will cooperate to the extent
reasonably necessary to cause the registration statement or any post-effective
amendment thereto to become effective at the earliest possible time.
(b) Such Selling Shareholder will pay all Federal and other
taxes, if any, on the transfer or sale of the Shares being sold by the Selling
Shareholder to the Underwriters.
(c) Such Selling Shareholder will do or perform all things
reasonably required to be done or performed by the Selling Shareholder prior to
the Closing Date or any Option
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Closing Date, as the case may be, to satisfy all conditions precedent to the
delivery of his or its Shares pursuant to this Agreement.
(d) Such Selling Shareholder has executed or will execute a
Lock-up Agreement as provided in Section 6(k) above and will not sell, contract
to sell or otherwise dispose of any Ordinary Shares, except for the sale of
Shares to the Underwriters pursuant to this Agreement and except as otherwise
provided in such Lock-up Agreement, prior to the expiration of 120 days after
the date of the Prospectus, without the prior written consent of the
Representatives.
(e) Except as stated in this Agreement and in the Preliminary
Prospectus and the Prospectus, such Selling Shareholder will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Ordinary
Shares to facilitate the sale or resale of the Shares.
(f) Such Selling Shareholder will advise the Representatives
promptly, and if requested by the Representatives, will confirm such advice in
writing, within the period of time referred to in Section 6(g) hereof, of any
change in CWCO's condition (financial or other), business, prospects,
properties, net worth or results of operations or of any change in information
relating to such Selling Shareholder or CWCO or any new information relating to
CWCO or relating to any matter stated in the Prospectus or any amendment or
supplement thereto which comes to the attention of such Selling Shareholder that
suggests that any statement made in the Registration Statement or the Prospectus
(as then amended or supplemented, if amended or supplemented) is or may be
untrue in any material respect or that the Registration Statement or Prospectus
(as then amended or supplemented, if amended or supplemented) omits or may omit
to state a material fact or a fact necessary to be stated therein in order to
make the statements therein not misleading in any material respect, or of the
necessity to amend or supplement the Prospectus (as then amended or
supplemented, if amended or supplemented) in order to comply with the Act or any
other law.
8. PAYMENT OF FEES AND EXPENSES.
(a) Whether or not the transactions contemplated by this
Agreement are consummated and regardless of the reason this Agreement is
terminated in accordance with its terms, CWCO will pay or cause to be paid, and
bear or cause to be borne, all costs and expenses incident to the performance of
the obligations of CWCO and the Selling Shareholders under this Agreement,
including: (i) the fees and expenses of the accountants and counsel for CWCO
incurred in the preparation of the Registration Statement and any post-effective
amendments thereto (including financial statements and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; (ii)
printing and mailing expenses associated with the Registration Statement and any
post-effective amendments thereto, any Preliminary Prospectus, the Prospectus,
this Agreement, the Agreement Among Underwriters and related documents as may be
required in connection with the offering, purchase, sale,
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issuance or delivery of the Shares and the Preliminary Blue Sky Memorandum (and
any supplement thereto); (iii) the costs and expenses (other than fees and
expenses of the Underwriters' counsel, except such fees incurred in connection
with Blue Sky and NASD filings or exemptions as provided herein) incident to the
authentication, issuance, sale and delivery of the Shares to the Underwriters;
(iv) the fees, expenses and all other costs of qualifying the Shares for sale
under the securities or Blue Sky laws of those states or foreign jurisdictions
in which the Shares are to be offered or sold, including the reasonable fees and
expenses of Underwriters' counsel and such local counsel as may have been
reasonably required and retained for such purpose; (v) the fees, expenses and
other costs of, or incident to, securing any review or approvals by or from the
NASD, including the reasonable fees and expenses of the Underwriters' counsel;
(vi) the filing fees of the SEC; (vii) the cost of furnishing to the
Underwriters copies of the Registration Statement, Preliminary Prospectuses and
Prospectuses as herein provided; (viii) CWCO's travel expenses in connection
with meetings with the brokerage community and institutional investors; (ix) the
costs and expenses associated with settlement in same day funds (including, but
not limited to, interest or cost of funds expenses), if desired by CWCO; (x) any
fees or costs payable to the Nasdaq National Market as a result of the offering;
(xi) the cost of printing certificates for the Shares; (xii) the costs and
charges of any transfer agent; (xiii) the reasonable costs of advertising the
offering, including, without limitation, with respect to the placement of
"tombstone" advertisements in publications selected by the Representatives;
(xiv) all taxes, if any, on the issuance, delivery and transfer of the Shares
sold by CWCO; and (xv) all other costs and expenses reasonably incident to the
performance of CWCO's obligations hereunder that are not otherwise specifically
provided for in this Section 8(a); provided, however, that, except as
specifically set forth in Section 8(c) hereof, the Underwriters shall be
responsible for their out-of-pocket expenses, including those associated with
meetings with the brokerage community and institutional investors, other than
CWCO's travel expenses, and the fees and expenses of their counsel for other
than with respect to Blue Sky and NASD matters.
(b) CWCO shall pay as due any state or foreign registration,
qualification and filing fees and any accountable out-of-pocket disbursements in
connection with such registration, qualification or filing in the states and
foreign jurisdictions in which the Representatives determine to offer or sell
the Shares.
(c) As of the Closing Date, CWCO shall have paid to Janney
Montgomery Scott LLC and First Security Van Kasper a non-accountable expense
allowance in the amount of $50,000 and $25,000, respectively.
(d) If (i) the Underwriters are willing to proceed with the
offering, and the transactions contemplated by this Agreement are not
consummated because CWCO elects not to proceed with the offering for any reason
or (ii) the Representatives terminate this Agreement pursuant to Section 12(b)
hereof, then CWCO will pay to the Representatives the amount provided in Section
8(c).
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9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligation of each
Underwriter to purchase and pay for the Firm Shares that it has agreed to
purchase hereunder on the Closing Date, and to purchase and pay for any Optional
Shares as to which it exercises its right to purchase under Section 5 on an
Option Closing Date, is subject at the date hereof, the Closing Date and any
Option Closing Date to the continuing accuracy and fulfillment of the
representations and warranties of CWCO and the Selling Shareholders, to the
performance by CWCO and the Selling Shareholders of their covenants and
obligations hereunder, and to the following additional conditions:
(a) If required by the Regulations, the Prospectus shall have
been filed with the SEC pursuant to Rule 424(b) of the Regulations within the
applicable time period prescribed for such filing by the Regulations. On or
prior to the Closing Date or any Option Closing Date, as the case may be, no
stop order or other order preventing or suspending the effectiveness of the
Registration Statement (including any document incorporated by reference
therein) or the sale of any of the Shares shall have been issued under the Act
or any state or foreign securities law, and no proceedings for that purpose
shall have been initiated or shall be pending or, to the Representatives'
knowledge or the knowledge of CWCO, shall be contemplated by the SEC or by any
authority in any jurisdiction designated by the Representatives pursuant to
Section 6(f) hereof. Any request on the part of the SEC or any state or foreign
securities authority for additional information shall have been complied with to
the reasonable satisfaction of counsel for the Underwriters.
(b) All corporate proceedings and other matters incident to
the authorization, form and validity of this Agreement, the Shares and the form
of the Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall be
satisfactory in all material respects to counsel for the Underwriters. CWCO
shall have furnished to such counsel all documents and information that they may
have reasonably requested to enable them to pass upon such matters. The
Representatives shall have received from the Underwriters' counsel, Ballard
Spahr Andrews & Ingersoll, LLP an opinion, dated as of the Closing Date and any
Option Closing Date, as the case may be, and addressed to the Representatives
individually and as Representatives of the several Underwriters, which opinion
shall be satisfactory in all respects to the Representatives.
(c) The Representatives shall have received a copy of an
executed Lock-up Agreement from each person listed on Schedule III hereto.
(d) The Representatives shall have received at or prior to the
Closing Date from the Underwriters' counsel a memorandum or summary, in form and
substance satisfactory to the Representatives, with respect to the qualification
for offering and sale by the Underwriters of the Shares under the securities or
Blue Sky laws of such jurisdictions designated by the Representatives pursuant
to Section 6(f) hereof.
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(e) On the Closing Date and any Option Closing Date, there
shall have been delivered to the Representatives signed opinions of Steel Hector
& Davis LLP and Myers & Alberga, counsel for CWCO and the Selling Shareholders,
dated as of each such date and addressed to the Representatives individually and
as Representatives of the several Underwriters to the effect set forth in
EXHIBITS A AND B hereto or to such effect as is otherwise reasonably
satisfactory to the Representatives.
(f) At the Closing Date and any Option Closing Date: (i) the
Registration Statement and any post-effective amendment thereto and the
Prospectus and any amendments or supplements thereto shall contain all
statements that are required to be stated therein in accordance with the Act and
the Regulations and in all material respects shall conform to the requirements
of the Act and the Regulations, and neither the Registration Statement nor any
post-effective amendment thereto nor the Prospectus and any amendments or
supplements thereto shall contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; (ii) since the respective dates as
of which information is given in the Registration Statement and any
post-effective amendment thereto and the Prospectus and any amendments or
supplements thereto, except as otherwise stated therein, there shall have been
no material adverse change in the Business Conditions of CWCO from that set
forth therein, whether or not arising in the ordinary course of business; (iii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus or any amendment or supplement thereto, there shall
have been no event or transaction, contract or agreement entered into by CWCO
other than in the ordinary course of business and as set forth in the
Registration Statement or Prospectus, that has not been, but would be required
to be, set forth in the Registration Statement or Prospectus; (iv) since the
respective dates as of which information is given in the Registration Statement
and any post-effective amendment thereto and the Prospectus and any amendments
or supplements thereto, there shall have been no material adverse change, loss,
reduction, termination or non-renewal of any contract to which CWCO is a party,
that has not been, but would be required to be set forth in the Registration
Statement or Prospectus; and (v) no action, suit or proceeding at law or in
equity shall be pending or threatened against CWCO that would be required to be
set forth in the Prospectus, other than as set forth therein, and no proceedings
shall be pending or threatened against or directly affecting CWCO before or by
any federal, state or other commission, board or administrative agency wherein
an unfavorable decision, ruling or finding would materially adversely affect the
Business Conditions of CWCO.
(g) The Representatives shall have received at the Closing
Date and any Option Closing Date certificates of the Chief Executive Officer and
the Chief Financial Officer of CWCO dated as of the date of the Closing Date or
Option Closing Date, as the case may be, and addressed to the Representatives,
individually and as Representatives of the several Underwriters, to the effect
that (i) the representations and warranties of CWCO in this Agreement are true
and correct, as if made at and as of the Closing Date or the Option Closing
Date, as the case may be, and that CWCO has complied with all the agreements,
fulfilled all the covenants and satisfied all the conditions on its part to be
performed, fulfilled or satisfied at or
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prior to the Closing Date or the Option Closing Date, as the case may be, and
(ii) the signers of the certificate have carefully examined the Registration
Statement and the Prospectus and any amendments or supplements thereto, and the
conditions set forth in Section 9(g) hereof have been satisfied.
(h) At the time this Agreement is executed and at the Closing
Date and any Option Closing Date the Representatives shall have received a
letter, dated the date of delivery thereof, addressed to the Representatives,
individually and as Representatives of the several Underwriters, in form and
substance satisfactory to the Representatives in all respects (including,
without limitation, the non-material nature of the changes or decreases, if any,
referred to in clause (iii) below) from PricewaterhouseCoopers:
(i) confirming they are independent certified
public accountants within the meaning of the Act and the Regulations, and
stating that the section of the Registration Statement under the caption
"Experts" is correct insofar as it relates to them;
(ii) stating that, in their opinion, the
consolidated financial statements, schedules and notes of CWCO audited by them
and included in the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Regulations;
(iii) stating that, on the basis of specified
procedures, which included a reading of the latest available unaudited interim
consolidated financial statements of CWCO (with an indication of the date of the
latest available unaudited interim financial statements), a reading of the
minutes of the meetings of the shareholders and the Board of Directors of CWCO
and the Audit Committee of the Board and inquiries to certain officers and other
employees of CWCO responsible for operational, financial and accounting matters
and other specified procedures and inquiries, nothing has come to their
attention that would cause them to believe that (A) the unaudited consolidated
financial statements of CWCO included in the Registration Statement and related
schedules, if any, (I) do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Regulations, or (II)
were not fairly presented in conformity with generally accepted accounting
principles or statutory accounting practices on a basis substantially consistent
with that of the audited Consolidated Financial Statements and related schedules
included in the Registration Statement; or (B) at a specified date not more than
five business days prior to the date of such letter, there was any change in the
capital stock (other than the issuance of Ordinary Shares upon the exercise of
options in the Prospectus, the Ordinary Shares of CWCO's outstanding, increase
in long-term debt of CWCO or any decrease in consolidated net current assets or
shareholders equity of CWCO as compared with the amounts shown in the December
31, 1999 audited balance sheets of CWCO included in the Registration Statement
or that for the periods from December 31, 1999 to the date of the latest
available unaudited financial statements of CWCO, if any, and to a specified
date not more than five days prior to the date of the letter, there were any
decreases, as compared to the corresponding periods in the prior year, in
operating income or total or per share
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amounts of net income, except in all instances for changes, decreases or
increases that the Registration Statement discloses have occurred or may occur
and except for such other changes, decreases or increases which the Underwriters
shall in their sole discretion accept.
(iv) stating that they have compared specific
dollar amounts (or percentages derived from such dollar amounts), numbers of
shares and other numerical data and financial information set forth in the
Registration Statement that have been specified by the Representatives prior to
the date of this Agreement (in each case to the extent that such dollar amounts,
percentages and other information is derived from the general accounting records
subject to the internal controls of CWCO's accounting system, or has been
derived directly from such accounting records by analysis or comparison or has
been derived from other records and analyses maintained or prepared by CWCO)
with the results obtained from the application of readings, inquiries and other
appropriate procedures set forth in the letter, and found them to be in
agreement.
All financial statements and schedules included in material
incorporated by reference into the Prospectus shall be deemed included in the
Registration Statement for purposes of this subsection.
(i) There shall have been duly tendered to the Representatives
for the respective accounts of the Underwriters, certificates representing all
of the Shares to be purchased by the Underwriters on the Closing Date or Option
Closing Date, as the case may be.
(j) The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
(k) All corporate and other proceedings and other matters
incident to the authorization, form and validity of this Agreement, the Custody
Agreement and the form of the Registration Statement and Prospectus and all
other legal matters related to this Agreement and the transactions contemplated
hereby shall be reasonably satisfactory in all respects to counsel to the
Underwriters. CWCO and the Selling Shareholders shall have furnished to such
counsel all documents and information that they shall have reasonably requested
to enable them to pass upon such matters.
(l) At the Closing Date and any Option Closing Date, the
Representatives shall have been furnished such additional documents, information
and certificates as they shall have reasonably requested.
All such opinions, certificates, letters and documents shall
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Representatives and the Underwriters'
counsel. CWCO and the Selling Shareholders shall furnish the Representatives
with such conformed copies of such opinions, certificates, letters and other
documents as they shall reasonably request. If any condition to the
Underwriters'
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obligations hereunder to be fulfilled prior to or at the Closing Date or any
Option Closing Date, as the case may be, is not fulfilled, the Representatives
may on behalf of the several Underwriters, terminate this Agreement with respect
to the Closing Date or such Option Closing Date, as applicable, or, if they so
elect, waive any such conditions which have not been fulfilled or extend the
time for their fulfillment. Any such termination shall be without liability of
the Underwriters to CWCO or the Selling Shareholders.
10. INDEMNIFICATION AND CONTRIBUTION.
(a) CWCO and each Selling Shareholder, jointly and severally,
shall indemnify and hold harmless each Underwriter, and each person, if any, who
controls each Underwriter within the meaning of the Act, against any and all
loss, liability, claim, damage and expense whatsoever, including, but not
limited to, any and all reasonable expenses incurred in investigating, preparing
or defending against any litigation, commenced or threatened, or any claim
whatsoever or in connection with any investigation or inquiry of, or action or
proceeding that may be brought against, the respective indemnified parties,
arising out of or based upon any breach of CWCO's or any Selling Shareholder's
representations and warranties made in this Agreement or any untrue statements
or alleged untrue statements of material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, any application or
other document filed in any jurisdiction in order to qualify all or any part of
the Shares under the securities laws thereof or filed with the SEC or the NASD
(in this Section 10 collectively called "application"), or the omission or
alleged omission from any of the foregoing of a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing indemnity shall not apply in respect of
any statement or omission made in reliance upon and in conformity with written
information furnished to CWCO by any Underwriter through the Representatives
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereto, or in any application or in
any communication to the SEC, as the case may be; and further provided, however,
that the indemnification contained in this Section 10(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter (or to
the benefit of any person controlling such Underwriter) on account of any such
loss, claim, liability or expense arising from the sale of the Shares by such
Underwriter to any person if a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the Act and the
regulations thereunder, and the untrue statement or alleged untrue statement or
omission or alleged omission of a material fact contained in such Preliminary
Prospectus was corrected in the Prospectus, provided that CWCO has delivered the
Prospectus to the several Underwriters in requisite quantity on a timely basis
to permit such delivery or sending. The obligations of CWCO and the Selling
Shareholders under this Section 10(a) will be in addition to any liability CWCO
and the Selling Shareholders may otherwise have.
(b) Each Underwriter, severally and not jointly, shall
indemnify and hold harmless CWCO, each of the directors of CWCO, each of the
officers of CWCO who shall have signed the Registration Statement, each Selling
Shareholder, and each other person, if any, who
26
<PAGE> 27
controls CWCO or a Selling Shareholder within the meaning of the Act to the same
extent as the foregoing indemnities from CWCO and the Selling Shareholders to
the several Underwriters, but only with respect to any and all loss, liability,
claim, damage or expense resulting from statements or omissions, or alleged
statements or omissions, if any, made in any Preliminary Prospectus,
Registration Statement or Prospectus or any amendment or supplement thereof or
any application in reliance upon, and in conformity with written information
furnished to CWCO by any Underwriter through the Representatives expressly for
use in any Preliminary Prospectus, the Registration Statement or Prospectus or
any amendment or supplement thereof or any application, as the case may be. The
obligations of each Underwriter under this Section 10(b) will be in addition to
any liability which such Underwriter may otherwise have.
(c) If any action, inquiry, investigation or proceeding is
brought against any person in respect of which indemnification may be sought
pursuant to Section 10(a) or (b) hereof, such person (hereinafter called the
"indemnified party") shall, promptly after notification of, or receipt of
service of process for, such action, inquiry, investigation or proceeding,
notify in writing the party or parties against whom indemnification is to be
sought (hereinafter called the "indemnifying party") of the institution of such
action, inquiry, investigation or proceeding. The indemnifying party, upon the
request of the indemnified party, shall assume the defense of such action,
inquiry, investigation or proceeding, including, without limitation, the
employment of counsel (reasonably satisfactory to such indemnified party) and
payment of expenses. No indemnification provided for in this Section 10 shall be
available to any indemnified party who shall fail to give such notice if the
indemnifying party does not have knowledge of such action, inquiry,
investigation or proceeding to the extent that such indemnifying party has been
materially prejudiced by the failure to give such notice, but the omission to so
notify the indemnifying party shall not relieve the indemnifying party otherwise
than under this Section 10. Such indemnified party shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action or if the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party or if such indemnified party or parties shall have been
advised by counsel that there may be a conflict between the positions of the
indemnifying party or parties and of the indemnified party or parties or that
there may be legal defenses available to such indemnified party or parties
different from or in addition to those available to the indemnifying party or
parties, in any of which events the indemnified party or parties shall be
entitled to select counsel to conduct the defense to the extent determined by
such counsel to be necessary to protect the interests of the indemnified party
or parties, and the reasonable fees and expenses of such counsel shall be borne
by the indemnifying party. The indemnifying party shall be responsible for the
fees and disbursements of only one such counsel so engaged by the indemnified
party or parties. Expenses covered by the indemnification in this Section 10
shall be paid by the indemnifying party as they are incurred by the indemnified
party. No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action in
respect of which any indemnified party is or could have been a party and
indemnity could have been sought
27
<PAGE> 28
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action and does not include a statement as
to or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party. Anything in this Section 10 to the contrary
notwithstanding an indemnifying party shall not be liable for any settlement of
a claim effected without its written consent, which consent shall not be
unreasonably withheld.
(d) If the indemnification provided for in this Section 10 is
unavailable or insufficient to hold harmless an indemnified party under Section
10(a) or (b) hereof in respect of any losses, liabilities, claims, damages or
expenses (or actions, inquiries, investigations or proceedings in respect
thereof) referred to therein, except by reason of the failure to give notice as
required in Section 10(c) hereof (provided that the indemnifying party does not
have knowledge of the action, inquiry, investigation or proceeding and to the
extent such party has been materially prejudiced by the failure to give such
notice), then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, liabilities,
claims, damages or expenses (or actions, inquiries, investigations or
proceedings in respect thereof in such proportion as is appropriate to reflect
the relative benefits received by CWCO and the Selling Shareholders on the one
hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of CWCO and the Selling Shareholders on the one hand and the Underwriters
on the other in connection with the statements or omissions which resulted in
such losses, liabilities, claims or expenses (or actions, inquiries,
investigations or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by CWCO and the Selling
Shareholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by CWCO and the Selling Shareholders bears to the
total underwriting discount and commissions received by the Underwriters, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
CWCO or the Selling Shareholders on the one hand or the Underwriters on the
other hand and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
CWCO, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section
10(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to above in
this Section 10(d). The amount paid or payable by an indemnified party as a
result of the losses, liabilities, claims, damages or expenses (or actions,
inquiries, investigations or proceedings in respect thereof) referred to above
in this Section 10(d) shall be deemed to include
28
<PAGE> 29
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 10(d), (i) the provisions of the
Agreement Among Underwriters shall govern contribution among Underwriters, (ii)
no Underwriter (except as provided in the Agreement Among Underwriters) shall be
required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, and (iii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this Section 10(d) to contribute are several in proportion to their individual
underwriting obligations and not joint.
11. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. Except as
the context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Date and any Option Closing Date. All such
representations, warranties and agreements of the Underwriters, CWCO and the
Selling Shareholders, including, without limitation, the indemnity and
contribution agreements contained in Section 10 hereof and the agreements
contained in Sections 8, 11 and 12 hereof, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter, the Company and each Selling Shareholder or any controlling person
thereof, and shall survive delivery of the Shares and termination of this
Agreement, whether before or after the Closing Date or any Option Closing Date.
12. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION HEREOF.
(a) This Agreement shall become effective at 10:00 a.m.,
Philadelphia, Pennsylvania time, on the first business day following the
Effective Date or at the time of the public offering by the Underwriters of the
Shares, whichever is earlier, except that the provisions of Sections 8, 10, 11
and 12 hereof shall be effective upon execution hereof. The time of the public
offering, for the purpose of this Section 12, shall mean the time when any of
the Shares are first released by the Underwriters for offering by dealers. The
Representatives, CWCO and the Selling Shareholders may prevent the provisions of
this Agreement (other than those contained in Sections 8, 10, 11 and 12) hereof
from becoming effective without liability of any party to any other party,
except as noted below, by giving the notice indicated in Section 12(c) hereof
before the time the other provisions of this Agreement become effective.
(b) The Representatives shall have the right to terminate this
Agreement at any time prior to the Closing Date or any Option Closing Date as
provided in Sections 9 and 13 hereof or if any of the following have occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
Business Conditions of CWCO, whether or not arising in the ordinary course of
business, that would, in the Representatives' reasonable opinions, make the
offering or delivery of the Shares
29
<PAGE> 30
impracticable; (ii) any outbreak of hostilities or other national or
international calamity or crisis or material change in economic, political or
financial market conditions if the effect on the financial markets of the United
States of such outbreak, calamity, crisis or change would, in the
Representatives' reasonable opinions, make the offering or delivery of the
Shares impracticable; (iii) any suspension or limitation of trading generally in
securities on the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market or the over-the-counter market or any setting of minimum
prices for trading or the promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority that in
the Representatives' reasonable opinions materially and adversely affects
trading on such exchange or the over-the-counter market; (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
the Representatives' reasonable opinions materially and adversely affects or
will materially or adversely affect the business or operations of CWCO; (v)
declaration of a banking moratorium by the United States, New York or
Pennsylvania authorities; (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs that in
the Representatives' reasonable opinions has a material adverse effect on the
securities markets in the United States; or (vii) trading in any securities of
CWCO shall have been suspended or halted by NASD or the SEC.
(c) If the Representatives elect to prevent this Agreement
from becoming effective or to terminate this Agreement as provided in this
Section 12, the Representatives shall notify CWCO and the Selling Shareholders
hereof promptly by telephone, telex, telegraph, telegram or facsimile, confirmed
promptly by letter. Such notice shall specify the sections of this Agreement
relied upon by the Representatives to terminate this Agreement.
13. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or
their obligation to purchase Firm Shares or Optional Shares hereunder, and if
the Firm Shares or Optional Shares with respect to which such default relates do
not exceed in the aggregate 10% of the number of Firm Shares or Optional Shares,
as the case may be, that all Underwriters have agreed to purchase on the
relevant Closing Date or Option Closing Date, then the Representatives may make
arrangements satisfactory to CWCO for the purchase of such Firm Shares by other
persons, including any of the Underwriters, but if no such arrangements are made
by the relevant Closing Date or Option Closing Date, such Firm Shares or
Optional Shares to which the default relates shall be purchased severally by the
non-defaulting Underwriters in proportion to their respective commitments
hereunder.
(b) If such default relates to more than 10% of the Firm
Shares or Optional Shares, as the case may be, the Representatives may in their
discretion arrange for another party or parties (including a non-defaulting
Underwriter) to purchase such Firm Shares or Optional Shares to which such
default relates, on the terms contained herein. In the event that the
Representatives do not arrange for the purchase of the Firm Shares or Optional
Shares to which a
30
<PAGE> 31
default relates as provided in this Section 13, this Agreement may be terminated
by the Representatives or by CWCO without liability on the part of the
non-defaulting several Underwriters (except as provided in Section 10 hereof) or
CWCO (except as provided in Sections 8 and 10 hereof); provided that if such
default occurs with respect to Optional Shares after the Closing Date, this
Agreement will not terminate as to the Firm Shares or any Optional Shares
purchased prior to such termination. Nothing herein shall relieve a defaulting
Underwriter of its liability, if any, to the other several Underwriters, to CWCO
and to Selling Shareholders for damages occasioned by its default hereunder.
(c) If the Firm Shares or Optional Shares to which the default
relates are to be purchased by the non-defaulting Underwriters, or are to be
purchased by another party or parties, the Representatives or CWCO shall have
the right to postpone the Closing Date or any Option Closing Date, as the case
may be, for a reasonable period but not in any event exceeding seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and CWCO agrees to file promptly any amendment to the Registration
Statement or supplement to the Prospectus that in the opinion of counsel for the
Underwriters may thereby be made necessary. The terms "Underwriters" and
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 13 with like effect as if it had originally been a party to
this Agreement with respect to such Firm Shares and/or Optional Shares.
14. INFORMATION FURNISHED BY UNDERWRITERS. The statement set forth on
the last paragraph at the bottom of the cover page of the Prospectus regarding
the terms of the Offering by the Underwriters, the legends below the table of
contents on page ___ of the Prospectus regarding stabilization and passive
market making, the identity of the Underwriters set forth in the first paragraph
under the heading "Underwriting", the concession and reallowance figures
appearing in the _______ paragraph under the caption "Underwriting", the
representations with respect to stabilization activities in the _______
paragraph under the heading "Underwriting," the _______ paragraph under the
caption "Underwriting" regarding passive market making and discretionary
authority in the _______ paragraph under the heading "Underwriting" constitute
the only written information furnished by reference or on behalf of any
Underwriter referred to in Sections 1(b) and 10 hereof.
15. NOTICE. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, (i) if sent to any Underwriter,
shall be mailed, delivered, telexed, telegrammed, telegraphed or telecopied and
confirmed to such Underwriter, c/o Janney Montgomery Scott LLC, 1801 Market
Street, Philadelphia, Pennsylvania 19103, Attention: Mr. William L.
Rulon-Miller, facsimile number (215) 665-6197 and c/o First Security Van Kasper,
600 California Street, Suite 1700, San Francisco, California 94108, attention:
____________________, facsimile number __________, with a copy to Ballard Spahr
Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103,
Attention: Justin P. Klein, Esquire, facsimile number (215) 864-8999; (ii) if
sent to CWCO, shall be mailed, delivered, telexed, telegrammed, telegraphed or
telecopied and confirmed to Consolidated Water
31
<PAGE> 32
Co. Ltd, Trafalgar Place, West Bay Road, P.O. Box 1114GT, Grand Cayman, B.W.I.,
Attention: Jeffrey M. Parker, facsimile number (345) 949-2957, with a copy to
Steel Hector & Davis LLP, 2000 South Biscayne Boulevard, Miami, Florida
33131-2398, Attention: Leslie J. Croland, P.A., facsimile number (305) 577-7001;
and (iii) if sent to the Selling Shareholders, shall be mailed, delivered,
telexed, telegrammed, telegraphed or telecopied and confirmed to
________________________.
16. PARTIES. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the several Underwriters, CWCO, the Selling Shareholders
and the controlling persons, directors and officers thereof, and their
respective successors, assigns, heirs and legal representatives, and no other
person shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any provision
herein contained. The terms "successors" and "assigns" shall not include any
purchaser of the Shares merely because of such purchase.
17. DEFINITION OF BUSINESS DAY. For purposes of this Agreement,
"business day" means any day on which the Nasdaq National Market is opened for
trading.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and all such counterparts will constitute one and the same
instrument.
19. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and performed entirely within such Commonwealth.
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<PAGE> 33
If the foregoing correctly sets forth your understanding of
our agreement, please sign and return to CWCO the enclosed duplicate hereof,
whereupon it will become a binding agreement in accordance with its terms.
Very truly yours,
CONSOLIDATED WATER CO. LTD
By:
---------------------------------------
Jeffrey M. Parker
Chairman, Chief Executive Officer
Each of the Selling Shareholders named in
Schedule I hereto
By:
---------------------------------------
Attorney-in-Fact
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
JANNEY MONTGOMERY SCOTT LLC
As Representative of the Several Underwriters
named in Schedule II hereto
By: JANNEY MONTGOMERY SCOTT LLC
By:
------------------------------
Authorized Representative
FIRST SECURITY VAN KASPER
As Representative of the Several Underwriters
named in Schedule II hereto
By: FIRST SECURITY VAN KASPER
By:
------------------------------
Authorized Representative
33
<PAGE> 34
SCHEDULE I
PART A - FIRM SHARES NUMBER OF
SELLING SHAREHOLDERS FIRM SHARES
- -------------------- -----------
Mogal Corporation 80,000
-------
Total 80,000
I-1
<PAGE> 35
SCHEDULE II
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
- ----------- ----------------------
Janney Montgomery Scott LLC _________
First Security Van Kasper _________
Total _________
II-1
<PAGE> 36
SCHEDULE III
Persons Who Are to Deliver Lock-Up Agreements
Lock-Up Agreements are to be delivered by the following persons and
entities immediately prior to the time the SEC declares the Registration
Statement effective:
Jeffrey M. Parker
Peter D. Ribbins
Alexander S. Bodden
Gregory McTaggart
J. Bruce Bugg, Jr.
Brian Butler
Hal N. Carr
Richard Finlay
Clarence Flowers, Jr.
Frederick McTaggart
Wilmer Pergande
Raymond Whittaker
Mechanical Equipment Company, Inc.
Mogal Corporation
Argyle/Cay-Water, Ltd.
III-1
<PAGE> 37
EXHIBIT A
Matters to be Covered in the Opinions of
Steel Hector & Davis LLP and Myers & Alberga
Counsel for CWCO
1. CWCO has been duly organized and is validly existing as a
corporation in good standing under the laws of the Cayman Islands with corporate
power and authority to own its properties and conduct its business as described
in the Prospectus; CWCO is qualified to transact business in all jurisdictions
where the failure to qualify would have a material adverse effect upon the
business of CWCO.
2. CWCO has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus; the authorized
shares of the Ordinary Shares have been duly authorized and validly issued and
are fully paid and non-assessable; all of the Firm Shares and the Optional
Shares (together, the "Shares") conform to the description thereof contained in
the Prospectus; certificates for the Shares are in due and proper form; the
Shares to be sold by CWCO pursuant to this Agreement have been duly authorized
and will be validly issued, fully paid and non-assessable when issued and paid
for as contemplated by this Agreement; and no preemptive rights of shareholders,
by operation of law, or to the knowledge of such counsel, by contract exists
with respect to any of the Shares or the issue and sale thereof.
3. The Registration Statement has become effective under the
Act, and no stop order proceedings with respect thereto have been instituted or
are pending or, to the best knowledge of such counsel, threatened under the Act.
4. The Registration Statement, the Preliminary Prospectus, the
Prospectus and each amendment or supplement thereto and each document
incorporated by reference therein, comply as to form in all material respects
with the requirements of the Act and the Exchange Act, as applicable, and the
applicable rules and regulations thereunder (except that such counsel need
express no opinion as to the financial statements, schedules and other financial
information included or incorporated by reference therein).
5. The statements under the caption "Description of Capital
Stock" in the Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, are accurate summaries in all
material respects and fairly present the information called for with respect to
such documents and matters.
6. Such counsel does not know of any contracts or documents
required to be filed as exhibits to, or incorporated by reference in, the
Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed, incorporated by reference or described as
required, and such required contracts and documents as are summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
A-1
<PAGE> 38
7. There are no material legal proceedings pending or to the
best knowledge of such counsel, threatened against CWCO except as set forth in
the Prospectus.
8. This Agreement has been duly authorized, executed and
delivered by CWCO. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Memorandum of Association or Articles of
Association of CWCO, or any agreement or instrument known to such counsel to
which CWCO is a party or by which it may be bound, and it will not create a lien
or encumbrance upon any property of CWCO or violate any law or governmental
ordinance, order or regulation, except to the extent that such conflict, lien,
encumbrance or violation would have no material adverse effect on CWCO.
9. No approval, consent, order or authorization by any
regulatory, administrative or other governmental body is necessary in connection
with the execution and delivery of this Agreement and the consummation of the
transactions herein contemplated (other as may be required by the NASD or by
State securities and Blue Sky laws as to which such counsel need express no
opinion).
10. To the knowledge of such counsel, CWCO has all requisite
licenses, permits, certifications, registrations, approvals, consents,
franchises required for the conduct of their respective businesses and except as
disclosed in the Prospectus with respect to the license, and is in compliance
with the foregoing in all material respects.
11. CWCO is not an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations thereunder.
* * * * * * * * * * * * * *
In addition to the matters set forth above, such opinion shall
also include a statement to the effect that such counsel has participated in the
preparation of the Registration Statement and the Prospectus, including review
and discussion of the contents thereof, and while such counsel (for the purposes
of this paragraph) in not passing upon the accuracy or completeness of the
statements contained in the Registration Statement or the Prospectus, in the
course of such review and discussion, no facts came to the attention of such
counsel that would cause such counsel to have reason to believe that (a) the
Registration Statement or any post-effective amendment thereto on the date it
became effective, contained any untrue statement of a material fact or omitted
to state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, or that (b) the
Prospectus on the Effective Date, on the date it was filed pursuant to Rule
424(b) and on the Closing Date or Option Closing Date, as the case may be,
contains any untrue statement of material fact or omits to state any material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; except that with respect to both clause
(a) and (b)
A-2
<PAGE> 39
above such counsel need express no opinion with respect to the financial
statements, schedules and the notes thereto included in the Registration
Statement or the Prospectus.
The foregoing opinion may be limited to the laws of the United
States and the laws of the Cayman Islands. Such counsel may rely as to questions
of fact upon the representations of CWCO set forth in this Agreement and upon
certificates of officers of CWCO and of government officials, all of which
certificates must be satisfactory in form and scope to counsel for the
Underwriters.
A-3
<PAGE> 40
EXHIBIT B
Matters to be Covered in the Opinion of
Steel Hector & Davis LLP
Counsel for the Selling Shareholders
1. This Agreement and the Custody Agreement have each been
duly executed and delivered by or on behalf of each of the Selling Shareholders
and are valid, legal and binding agreements of each Selling Shareholder
enforceable against each Selling Shareholder in accordance with their terms,
except as enforcement of rights to indemnity and contribution hereunder may be
limited by Federal or state securities laws or principles of public policy and
subject to the qualification that the enforceability of each Selling
Shareholder's obligations hereunder and thereunder may be limited by bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium, and other laws
relating to or affecting creditors' rights generally and by general equitable
principles.
2. To the best knowledge of such counsel, each Selling
Shareholder has full legal right, power and authorization, and any approval
required by applicable federal and __________________ law (other than any
approval required under the applicable state securities or blue sky laws, as to
which such counsel need express no opinion), to sell, assign, transfer and
deliver valid title to the Shares to be sold by such Selling Shareholder in the
manner provided by this Agreement.
3. To the best knowledge of such counsel, the execution and
delivery of this Agreement and the Custody Agreement by the Selling Shareholders
and the consummation of the transactions contemplated hereby and thereby will
not conflict with, violate, result in a breach of or constitute a default under
the terms or provisions of any agreement, indenture, mortgage or other
instrument to which any Selling Shareholder is a party or by which any of them
or any of their assets or property is bound, or any court order or decree or any
law, rule, or regulation applicable to any Selling Shareholder or to any of the
property or assets of any Selling Shareholder.
4. Upon delivery to the Underwriters of the Shares to be sold
by each of the Selling Shareholders pursuant to this Agreement against payment
therefor as contemplated herein, the Underwriters, assuming they have purchased
the Shares in good faith and without notice of any adverse claim and assuming
that there are no events or circumstances peculiar to any individual Underwriter
which might result in any adverse claim, will acquire such Shares free and clear
of any adverse claim.
B-1
<PAGE> 1
Exhibit 10.11
EMPLOYMENT CONTRACT
THIS AGREEMENT is made the 19th day of August 1997 BETWEEN CAYMAN WATER COMPANY
LIMITED, a Cayman Islands company having its registered office at Trafalgar
Place, West Bay Road, P.O. Box 1114, George Town, Grand Cayman, B.W.I. ("the
Company")
AND
PETER D. RIBBINS of P.O. Box 1114, George Town, Grand Cayman, B.W.I. ("The
President")
IT IS AGREED as follows:-
Employment
1 The President is engaged as President and Chief Operating Officer ("the
Capacities") of the Company for three (3) years commencing on the 19 of
August 1997 but subject to the extension provisions set out in clause
19 and subject to the termination provisions set out in clauses 16 and
17.
Remuneration
2 The President's salary is fixed until 31st December, 1997 at CI$
91,774.56 per annum payable monthly in arrears, less deductions (other
than for Medical Insurance) and other payments which the Company is by
law entitled or required to deduct from an employee's remuneration.
3 The President's salary will be reviewed as of each January 1st by
the Company's Board of Directors ("the Board") who may grant an
increase but shall not reduce the Presidents salary below the level set
out in Clause 2 hereof.
4 Further, for each completed financial year, beginning with the
financial year 1997, during which the President serves in the
Capacities, not later than 28th. February following the end of each
financial year, the President will be paid a bonus of:-
(a) 2.5% of the net profits of the Company calculated before
charging this bonus and before charging dividends or crediting
any amount accruing from the re-valuation of the Company's
assets, plus
(b) 5% of the amount by which the net profits of the Company,
determined as aforesaid, for that financial year exceed the
highest annual net profit determined in the same manner earned
by the Company in any prior financial year.
5 Further, subject to any approvals of Government which may be necessary
at the time at which the option is exercised, for each of the financial
years ending after 31st December, 1996, during which the President
serves for the full year in the capacities, the President shall be
granted an option to purchase at a price of US$2.50 per share payable
in cash in full on exercise of the option the lesser of:_
(a) 20,000 Ordinary shares of the Company, or
<PAGE> 2
(b) that number of Ordinary shares which, when added to the then
existing number of Ordinary shares which the President then
beneficially owns will equal 6% of all Ordinary shares then
issued by the Company
6 (1) The periods for exercise of the options to purchase shares in
the Company which have already vested under the President's
previous employment contracts with the Company in respect of
the years ended 28th February, 1995 and 1996 and the financial
year ended 31 December 1996, expire at the close of the
Company's business on the ninetieth day after the date of the
Auditors Report on the Financial Statements for the year
ending 31st December, 1998
(2) the options granted pursuant to Clause 5 shall be exercisable
by the President as follows :-
(a) Options vested in respect of the financial years
ending 31st December, 1997 and 1998 may be
exercised at any time after they vest and before the
close of the Company's business on the ninetieth day
after the date of the Auditors Report on the
Financial Statements for the year ending 31st
December, 1998.
(b) Options vested in respect of the financial year ended
31st December, 1999 and each financial year
thereafter may be exercised at any time after they
vest and before the close of the Company's business
on the day before the third anniversary of the date
of the Auditors Report on the Financial Statements
for that financial year.
Area
7 The President's work will be performed mainly in West Bay, Grand
Cayman. The Company reserves the right to transfer the President to any
other place of business which it may establish in the Cayman Islands.
Responsibilities
8 The President must devote substantially the whole of his time to the
Company's business and must use his best endeavours to promote the
Company's interest and welfare. Except where such information is a
matter of public record or when required to do so by law he must not
either before or after this Agreement ends disclose to any person any
information relating to the Company or its customers or any
confidential information of which he becomes possessed while acting in
the Capacities.
9 The President must perform the duties commonly performed by a chief
operating officer and also the duties reasonably required of and
assigned to him in his position as President and must discharge his
duties in accordance with the directions of the Board. The President
must perform his duties under this Agreement during normal business
hours from Mondays to Fridays inclusive (save on bank holidays) but he
accepts that his duties, which include travelling on the Company's
business both within the Cayman Islands and abroad, may from time to
time require work to be undertaken on Saturdays, Sundays and bank and
public holidays. The President must report to the Chairman of the
Board, diligently follow and implement all management policies and
decisions which the Board communicates to him, prepare and forward in a
timely manner all reports and accountings the Board requests and
generally be responsible for the effective operation of the Company in
accordance with pre-agreed financial and operating budgets. The
President will not directly or indirectly engage in any activities or
work which are deemed by the Board to be detrimental to the best
interests of the Company. Provided however the Company consents to the
President's
<PAGE> 3
continued involvement in the following activities:-
(a) share holder/director - HW Holdings Ltd.
(b) share holder/director - Eats Limited
(c) share holder/director - Psgetti's Limited
(d) share holder/director - FCM Ltd:-
10 In case of inability to work due to illness or injury, the President
must notify the Company immediately and produce a medical certificate
for any absence longer than ten working days. The Company may have the
President examined by a doctor approved by it. The President agrees to
submit to any medical examination which the Company requires.
11 The President will be entitled to up to ten (10) days sick leave per
year without a medical certificate.
Holidays
12 The President is entitled during every twelve (12) month period of
employment to the following holidays during which his remuneration will
continue to be payable:
(a) all public holidays in the Cayman Islands, and
(b) four (4) weeks' vacation at a time to be approved by the
Chairman of the Board.
Reimbursement of Expenses
13 All expenses for which the President claims reimbursement must be
within pre-approved budgets. Subject to this, the Company must
reimburse the President for the cost of entertaining the Company's
customers and travelling on the Company's business on the production of
the necessary vouchers or on the President's proving to the Company's
satisfaction the amount that he has spent for those purposes, even
though he is unable to produce vouchers.
Non-Solicitation
14 The President must not at any time while he is acting in the Capacities
or afterwards either on his own account or for any other person, firm
or company solicit, interfere with or endeavour to entice away from the
Company any person, firm or company who at any time during or at the
date when his employment ends were customers of or in the habit of
dealing with the Company.
Company Documents
15 All books, records, notes, files, memoranda, reports, customer lists
and other documents, and all copies of them relating to the Company's
business which the President keeps, prepares or conceives or which
become known to him or which are delivered or disclosed to or by any
means come into his possession, and all the Company's property and
equipment are and will remain the Company's sole and exclusive
property. If the President's employment is terminated for any reason
whether voluntarily or involuntarily, or if the Company at any time
requests, he must promptly deliver to the Company the originals and all
copies of all relevant documents that are in his possession, custody or
control, and any other property belonging to the Company.
<PAGE> 4
Termination
16 This Agreement will end and, except to the extent previously accrued,
all rights and obligations under it of the Company and the President
shall cease if any of the following events occurs:-
(a.) The President dies.
(b.) The President is adjudicated bankrupt or makes any composition
with his creditors.
(c.) The President gives six (6) months written notice to the
Company to terminate this Agreement
17 The Company may by notice end this Agreement with immediate effect if:-
(a.) The President conducts himself in a manner which would justify
immediate dismissal in accordance with the Labour Law
(b.) through physical or mental illness the President is unable to
discharge his duties for sixty (60) successive days, as to
which a certificate by any doctor appointed by the Company
shall be conclusive.
(c) The Company gives written notice to the President and pays to
him a sum equal to twice the President's annual salary as
described in clause 2 or as increased in accordance with
clause 3, for the year in which such termination takes place.
18 In the event that the Company terminates this agreement in accordance
with clause 17 (c) hereof:-
(a) any unvested options to purchase shares in the Company, as
described in clause 5, in respect of the financial year in
which the termination takes place shall automatically vest on
a pro rata basis proportional to the ratio which the period of
employment up to the date of termination bears to that
calendar year.
(b) the Company shall remain obliged to keep all benefits,
including but not limited to medical insurance and pension
contributions, to which the President was entitled as at the
date of his termination paid and available to the President
for a period of two (2) years from the date of termination.
Extension
19 In the absence of a written agreement to the contrary, on 1st. August
of each year, the term of this Agreement shall be automatically
extended upon the same terms by a period of one year.
Notices
20 Any notice to be served under this Agreement must be in writing and
will be deemed duly served if in the case of one addressed to the
Company it is sent by registered post or left at the Company's
registered office, or in the case of one sent to the President it is
handed to him personally or is delivered to his last known residential
address in the Cayman Islands.
<PAGE> 5
A notice sent by post will be deemed to be served on the third day
following the date on which it is posted.
Previous Agreements Superseded
21. This Agreement supersedes all prior contracts and understandings
between the parties and may not be changed or terminated orally, and no
change, termination or attempted waiver of any of its provisions will
be binding unless in writing and signed by the party against whom it is
sought to be enforced.
Clause Headings
22. The clause headings are included for convenience only and have no legal
effect.
Applicable Law and Jurisdiction
23. This Agreement will be construed and the legal relations between the
parties determined in accordance with the laws of the Cayman Islands
and the parties agree to submit to the jurisdiction of the Cayman
Islands Courts. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid, but
if any provision of this Agreement or the application of it is
prohibited or held to be invalid, that prohibition or invalidity will
not affect any other provision, or the application of any other
provision which can be given effect without the invalid provision or
application, and to this end the provisions of this Agreement are
declared to be severable.
EXECUTED by and on behalf of CAYMAN WATER COMPANY
CAYMAN WATER COMPANY LIMITED LIMITED
by
in the presence of
/s/ [illegible] Per: /s/ Raymond Whittaker
- ----------------------------------- -------------------------------
Witness
EXECUTED by PETER DANIEL RIBBINS
in the presence of:-
/s/ Tracy Beitz /s/ Peter Daniel Ribbins
- ----------------------------------- ------------------------------------
Witness PETER DANIEL RIBBINS
<PAGE> 1
Exhibit 10.12
AMENDMENT AND RECTIFICATION OF ENGAGEMENT AGREEMENT
THIS AGREEMENT is made this 26 day of October, 1999.
BETWEEN: CONSOLIDATED WATER LTD., a Cayman Islands company having its
registered office at Trafalgar Place, West Bay Road, P.O.
Box 1114GT, Grand Cayman, B.W.I. (the "Company")
AND: PETER D. RIBBINS of P.O. Box 1114,
George Town, Grand Cayman, B.W.I.
(the "President")
WHEREAS:
A. The Company and the President entered into an employment contract dated
the 19th of August 1997 (the "Engagement Agreement").
B. The parties are desirous of amending and/or rectifying the same in
accordance with the terms of this Agreement.
NOW IN CONSIDERATION of the mutual covenants contained herein the parties agree
that the Engagement Agreement shall be amended and/or rectified as follows:
1. By deleting clause 5 and substituting the following:
"FURTHER, SUBJECT TO ANY APPROVALS OF GOVERNMENT WHICH MAY BE
NECESSARY AT THE TIME AT WHICH THE OPTION IS EXERCISED, FOR
EACH OF THE FINANCIAL YEARS ENDING AFTER 31st DECEMBER 1996,
PROVIDED (SUBJECT TO PARAGRAPH 18 OF THIS AGREEMENT), THAT THE
PRESIDENT SERVES IN THE CAPACITIES FOR THE ENTIRETY OF SUCH
YEAR, ON DECEMBER 31 OF SUCH YEAR, THE PRESIDENT SHALL BE
GRANTED AN OPTION TO PURCHASE 20,000 ORDINARY SHARES OF THE
COMPANY AT A PRICE PER SHARE PAYABLE IN CASH IN FULL ON THE
EXERCISE OF THE OPTION AS FOLLOWS,
(a) FOR EACH OF THE FINANCIAL YEARS ENDING DECEMBER 31, 1997,
1998 AND 1999, US$2.50 PER SHARE; AND
(b) FOR EACH OF THE FINANCIAL YEARS THEREAFTER, US$6.00
PER SHARE.
2 By deleting clause 6(2) in its entirety and substituting the following:
<PAGE> 2
THE OPTIONS GRANTED PURSUANT TO CLAUSE 5 IN RESPECT OF THE
FINANCIAL YEARS ENDING DECEMBER 31, 1997 AND THEREAFTER MAY
BE EXERCISED BY THE PRESIDENT AT ANY TIME AFTER THEY VEST AND
BEFORE THE CLOSE OF THE COMPANY'S BUSINESS ON THE DAY BEFORE
THE THIRD ANNIVERSARY OF THE DATE OF THE AUDITOR'S REPORT ON
THE FINANCIAL STATEMENTS FOR THE RELEVANT FINANCIAL YEAR. "
2 By adding the following as clause 6(3):
"PROVIDED THAT THE OPTIONS GRANTED PURSUANT TO CLAUSE 5 MAY
NOT BE EXERCISED IF OR TO THE EXTENT THAT, IMMEDIATELY
FOLLOWING THE EXERCISE, THE PRESIDENT WOULD BENEFICIALLY OWN
MORE THAN 6% OF ALL ORDINARY SHARES THEN ISSUED BY THE
COMPANY."
3 By adding the following as clause 6(4):
"THE OPTIONS GRANTED PURSUANT TO CLAUSE 5 MAY NOT BE ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE PRESIDENT WITHOUT
THE PROPER WRITTEN CONSENT OF THE COMPANY."
4 The parties have acknowledged that the Engagement Agreement shall
remain binding And effective in accordance with its terms except as
expressly amended hereby.
THE PARTIES HERETO HAVE hereunto set their hands and seals the day and date
first above written.
SIGNED AND SEALED in the presence of: ) CONSOLIDATED WATER CO. LTD.
)
)
) /s/ Wilmer Pergande
) ------------------------------------
)
)
/s/ Fredrick McTaggart ) /s/ Alexander Stephen Bodden
- --------------------------------------) ------------------------------------
witness
SIGNED AND SEALED in the presence of: )
)
)
)
)
/s/ C.B. Flowers ) /s/ Peter D. Ribbins
- --------------------------------------) -------------------------------------
witness Peter D. Ribbins
2
<PAGE> 1
Exhibit 10.13
SECOND AMENDMENT OF ENGAGEMENT AGREEMENT
THIS AGREEMENT is made this 21 day of March, 2000
BETWEEN: CONSOLIDATED WATER CO. LTD., a Cayman Islands company having its
registered office at Trafalgar Place, West Bay Road, P.O.
Box 1114GT, Grand Cayman, B.W.I. (the "Company")
AND: PETER D. RIBBINS of 67 Jellicoe Quay, Governor's Harbour, P.O.
Box 800GT, Grand Cayman, B.W.I. (the "President")
WHEREAS:
A. The Company and the President entered into an engagement agreement
dated the 19 of August 1997 that was amended by an amendment of
engagement agreement dated the 26th of October 1999 (the "Engagement
Agreement").
B. The parties are desirous of amending the same in accordance with the
terms of this Agreement.
NOW IN CONSIDERATION of the mutual covenants contained herein the parties agree
that the Engagement Agreement shall be amended and/or rectified as follows:
1. Clause 5 shall be amended by deleting the same and substituting the
following;
"Further, subject to any approvals of Government which may be
necessary at the time at which the option is exercised, for
each of the financial years ending after 31st December 1996,
provided (subject to paragraph 18 of this agreement, that the
President serves in the Capacities for the entirety of such
year, on December 31 of such year, the President shall be
granted an option to purchase 20,000 Ordinary shares of the
Company at a price per share payable in cash in full on the
exercise of the option as follows;
(a) for each of the financial years ending December 31,
1997, 1998 and 1999, US$2.50 per share; and
(b) for each of the financial years thereafter, the
average of the closing market price of the Company's
Ordinary shares on each of the first seven trading
days in the month of October of that financial year".
2. By deleting Clause 6(3)
3. By Deleting Clause 6(4)
The parties have acknowledged that the Engagement Agreement shall
remain binding and effective in accordance with its terms except as
expressly amended hereby.
<PAGE> 2
THE PARTIES HERETO have set their hands and seals the day and date first above
written.
SIGNED AND SEALED in the presence of:) CONSOLIDATED WATER CO. LTD.
)
)
) /s/ C.B. Flowers
) ------------------------------------
)
/s/ R.L. Finlay ) /s/ Alexander Stephen Bodden
- -------------------------------------) ------------------------------------
witness
SIGNED AND SEALED in the presence of:)
)
)
)
)
/s/ R.L. Finlay ) /s/ Peter D Ribbins
- -------------------------------------) ------------------------------------
witness Peter D Ribbins
2
<PAGE> 1
Exhibit 10.14
ENGAGEMENT AGREEMENT
THIS AGREEMENT is made the 30th day of December 1998
BETWEEN: CONSOLIDATED WATER Co. LTD.,
a Cayman Islands company having its registered office at
Trafalgar Place, West Bay Road
P.O. Box 1114 GT, Grand Cayman, B.W.I. ("the Company")
AND JEFFREY M. PARKER
of 81, Drake Quay, Governors Harbour,
P. 0. Box 1782GT, Grand Cayman, B.W.I.
("the Chairman")
IT IS HEREBY AGREED:
Engagement
1. The Chairman, in his capacity, inter alia, as as accountant, is engaged
as Chairman and Chief Executive Officer ("the Capacities") of the
Company for three (3) years commencing on the 1st day of January, 1999
but subject to the extension provisions set out in Clause 22 hereof and
subject to the termination provisions set out in Clauses 19 and 20
hereof.
2. For the avoidance of doubt, the Chairman is engaged hereunder as an
Officer and not as an employee of the Company.
Remuneration
3. The Chairman's remuneration will be CI$75,000 per annum, payable
monthly in arrears.
4. In addition, the Company will pay the full cost of providing Medical
Insurance, as generally provided for the Company's employees from time
to time, for the Chairman and his spouse.
5. In addition, the Company will make contributions to a pension scheme,
of the Chairman's choice but approved pursuant to the National Pensions
Law (1998 Revision) of the Cayman Islands, in the same manner and on
the same basis as it makes, from time to time, in respect of its
employees.
<PAGE> 2
6. The Chairman's remuneration will be reviewed by the Company's Board of
Directors ("the Board") if more than three quarters of the Chairman's
time is being consistently devoted to the Company's business and
otherwise annually and the Board may grant an increase but, unless the
Chairman's responsibilities pursuant to Clauses 11 and 12 hereof shall
have been reduced by mutual consent, shall not reduce the Chairman's
remuneration below the level set out in Clause 3 hereof.
7. Further, for each completed financial year, beginning with the
financial year 1999, during which the Chairman serves in the
Capacities, not later than 28th February following the end of each
financial year, the Chairman will be paid a bonus of:-
(a) 1.5% of the net profits of the Company for that year
calculated before charging this bonus and before charging
dividends or crediting any amount accruing from the
re-evaluation of the Company's assets, plus
(b) 15% of the amount by which the net profits of the Company,
determined as aforesaid, for that financial year exceed the
highest annual net profit, determined in the same manner,
earned by the Company in any prior financial year.
8. Further, subject to any approvals of Government which may be necessary
at the time at which the option is exercised, for each of the three
financial years ending December 31, 2001 during which the Chairman
serves for the full year in the Capacities, on December 31st of each
year, the Chairman shall be granted an option to purchase, at a price
of US$6.00 per share payable in cash in full on exercise of the option,
the lesser of:-
(a) a number of shares which equals the number of US$ which
represents 1% of the net profit of the Company, calculated as
aforesaid, for that financial year or
(b) that number of Ordinary shares which, when added to the then
existing number of Ordinary Shares which the Chairman
beneficially owns will equal 6% of all Ordinary Shares then
issued by the Company.
9. The options granted pursuant to Clause 8 may be exercised by the
Chairman at any time after they are granted and before the close of
business on the day before the third anniversary of the date of the
Auditor's Report on the financial statements for the year of the grant.
<PAGE> 3
Area
10. The Chairman's work will be performed mainly from his office at 81,
Drake Quay, Governors Harbour, Grand Cayman.
Responsibilities
11. The Chairman must devote not less than three-quarters of his time to
the Company's business and must use his best endeavors to promote the
Company's interests and welfare. Except where such information is a
matter of public record or when required to do so by law, the Chairman
must not, either before or after this Agreement ends, disclose to any
person any information relating to the Company or its customers of
which he becomes possessed while acting in the Capacities.
12. The Chairman must perform the duties commonly performed by a Chief
Executive Officer and also the duties reasonably required of and
assigned to him as Chairman of the Board of Directors of the Company.
He must discharge his duties in accordance with the directions of the
Board. The Chairman must perform his duties during normal business
hours on Mondays to Fridays inclusive (save on bank holidays) but it is
agreed that, subject to the overall requirement that the Chairman will
devote three quarters of his time to the affairs of the Company, he is
not required to devote three quarters of his time on each and every
working day. The Chairman accepts that his duties, which include
travelling on the Company's business, both within the Cayman Islands
and abroad,, may from time to time require work to be undertaken on
Saturdays, Sundays, bank and public holidays. The Chairman must
recommend to the Board of Directors of the Company appropriate
financial and operating policies for the Company and must report to the
Board, diligently follow and implement all policies and decisions which
the Board communicates to him and prepare and forward, in a timely
manner, all reports and accountings reasonably requested by the Board.
The Chairman will not, directly or indirectly, engage in any activities
or work which are deemed by the Board to be detrimental to the best
interests of the Company. The Board hereby consents to the Chairman's
continued involvement in the following activities:-
(a) Principal - Moore Stephens, Chartered Accountants
(b) Shareholder/Managing Director - FCM Ltd and its subsidiary
companies.
<PAGE> 4
13. In case of inability to work due to illness or injury, the Chairman
must notify the Company immediately and produce a medical certificate
for any absence longer than ten working days. The Company may have the
Chairman examined by a doctor approved by it. The Chairman agrees to
submit to any medical examination that the Company requires.
14. The Chairman is entitled to up to ten- (10) day's sick leave per year
without a medical certificate.
Holidays
15. The Chairman is entitled, during every calendar year to the following
holidays during which his remuneration will continue to be payable:-
(a) all public holidays in the Cayman Islands, and
(b) four (4) weeks vacation to be taken at a time to be approved
by the Board.
Reimbursement of Expenses
16. All expenses for which the Chairman claims reimbursement must be in
accordance with any policies established by the Board from time to time
and must be within the operating budgets approved by the Board. The
company must reimburse the Chairman for the costs incurred by the
Chairman in his performance of the Capacities on production of the
necessary vouchers or, if he is unable to produce vouchers, on the
Chairman proving, to the Company's satisfaction, the amount he has
spent for those purposes.
Non-Solicitation
17. The Chairman must not, at any time during the currency of this
Agreement or after it ends, either for his own account or for the
account of any other person, firm or company, solicit, interfere with
or endeavor to entice away from the Company any person, firm or company
who, at any time during the currency of this Agreement or on the date
when this Agreement ends, were employees, customers or suppliers of, or
we in the habit of dealing with, the Company.
Company Documents
18. All books, records, notes, files, memoranda, reports, customer lists
and other documents, and all copies of them, relating to the Company's
business which the Chairman keeps, prepares or conceives or which
<PAGE> 5
become known to him or which are delivered or disclosed to him or
which, by any means come into his possession, and all the Company's
property and equipment are and will remain the Companys sole and
exclusive property. If this Agreement is terminated for any reason,
whether voluntarily or involuntarily, or if the company at any time
requests, the Chairman must promptly deliver to the Company the
originals and all copies of all relevant documents that are in his
possession, custody or control together with any other property
belonging to the Company.
Termination
19. This Agreement will end and, except to the extent previously accrued,
all rights and obligations of both parties under it shall cease if any
of the following events occurs:
(a) The Chairman dies.
(b) The Chairman is adjudicated bankrupt or makes any composition
with his creditors.
(c) The Chairman gives six (6) months written notice of
termination to the Company.
20. The Company may, by written notice, end this Agreement with immediate
effect if:-
(a) The Chairman conducts himself in a manner that would justify
immediate dismissal of an employee in accordance with the
Labour Law.
(b) Through physical or mental illness, the Chairman is unable to
discharge his duties for sixty (60) successive days, as to
which a certificate by any doctor appointed by the Company
shall be conclusive.
(c) The Company pays to the Chairman a sum equal to the greater of
twice the Chaiman's annual remuneration, for the year in which
such termination takes place, as described in Clause 2 hereof
or as increased in accordance with Clause 6 hereof.
21. If the Company terminates this Agreement in accordance with Clause 20c
hereof:-
(a) Any unvested options to purchase shares in the Company, in
accordance with Clause 8 hereof, for the year in which such
termination takes place shall automatically vest pro rata to
the date of termination.
<PAGE> 6
(b) The Company shall remain obligated to keep all benefits,
including, but not limited to medical insurance and pension
contributions, to which the Chairman was entitled as at the
date of termination, paid and available to the Chairman for a
period of two (2) years from the date of termination.
Extension
22. In the absence of a written agreement to the contrary, on January 1st,
each year, the term of this Agreement shall automatically be extended,
upon the same terms, by a period of one year.
Notices
23. Any notice to be served under this Agreement must be in writing and
shall be deemed to be duty served if it is handed personally to the
Secretary of the Company or to the Chairman as the case may be, or if
it is sent by registered post to the address at the head of this
Agreement. A notice sent by post shall be deemed to be served on the
third day following the date on which it was posted.
Previous Agreements Superceded
24. This Agreement supersedes all prior contacts and understandings between
the parties and may not be changed or terminated orally. No change or
attempted waiver of any of the provisions hereof shall be binding
unless in writing and signed by the party against whom it is sought to
be enforced.
Headings
25. The headings herein are included for convenience only and have no legal
effect
Applicable Law and Jurisdiction
26. This Agreement shall be construed and the legal relations between the
parties determined in accordance with the laws of the Cayman Islands to
the jurisdiction of the courts of which the parties hereby agree to
submit. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid. If any
provision of this Agreement or the application of it is prohibited or
is held to be invalid, that prohibition or invalidity shall not affect
any other provision, or the application of any other provision which
can be given effect without the
<PAGE> 7
invalid provision or prohibited application and, to this end, the
provisions of this Agreement are declared to be severable.
EXECUTED by and on behalf of CONSOLIDATED WATER CO.
CONSOLIDATED WATER CO LTD LTD.
By:
In the presence of:
/s/ Wilmer Pergande
- --------------------------------------- ----------------------------------
Witness [illegible] Chair-Compensation Committee
CWC Ltd.
EXECUTED by JEFFREY M. PARKER
In the presence of:
/s/ Peter D. Ribbins /s/ Jeffrey M. Parker
- --------------------------------------- ----------------------------------
Witness Jeffrey M. Parker
<PAGE> 1
Exhibit 10.15
AMENDMENT OF ENGAGEMENT AGREEMENT
THIS AGREEMENT is made this 26th day of October , 1999.
BETWEEN: CONSOLIDATED WATER LTD., a Cayman Islands company having its
registered office at Trafalgar Place, West Bay Road, P.O. Box 11
14GT, Grand Cayman, B.W.I. (the "Company")
AND: JEFFREY M. PARKER of 81 Drake Quay,
Governor's Harbour, P.O. Box 1782, Grand
Cayman, B.W.I. (the "Chairman")
WHEREAS:
A. The Company and the Chairman entered into an engagement agreement dated the
30th of December 1998 (the "Engagement Agreement").
B. The parties are desirous of amending the same in accordance with the terms
of this Agreement.
NOW IN CONSIDERATION of the mutual covenants contained herein the parties agree
that the Engagement Agreement shall be amended and/or rectified as follows:
1. Clause 8 shall be amended by deleting the same and substituting the
following:
"FURTHER, SUBJECT TO ANY APPROVALS OF GOVERNMENT WHICH MAY BE
NECESSARY AT THE TIME AT WHICH THE OPTION IS EXERCISED, FOR
EACH OF THE THREE FINANCIAL YEARS ENDING DECEMBER 31, 1999,
DECEMBER 31, 2000 AND DECEMBER 31, 2001 RESPECTIVELY, PROVIDED
(SUBJECT TO PARAGRAPH 21 OF THIS AGREEMENT) THAT THE CHAIRMAN
SERVES IN THE CAPACITIES FOR THE ENTIRETY OF SUCH YEAR, ON
DECEMBER 31 OF SUCH YEAR, THE CHAIRMAN SHALL BE GRANTED AN
OPTION TO PURCHASE, AT A PRICE PER SHARE of US$6.00, PAYABLE
IN CASH IN FULL ON THE EXERCISE OF THE OPTION, A NUMBER OF
ORDINARY SHARES EQUAL TO THE NUMBER OF US$ WHICH REPRESENTS
1% OF THE NET PROFIT OF THE COMPANY CALCULATED AS AFORESAID
FOR THAT FINANCIAL YEAR. "
2. By amending CLAUSE 9 by re-labelling the existing clause 9(a) and
adding the following sentence:
"PROVIDED THAT THE OPTIONS GRANTED PURSUANT TO CLAUSE 8 MAY
NOT BE EXERCISED IF OR TO THE EXTENT THAT, IMMEDIATELY
FOLLOWING THE EXERCISE, THE CHAIRMAN WOULD BENEFICIALLY OWN
MORE THAN 6% OF ALL ORDINARY SHARES THEN ISSUED BY THE
COMPANY. "
3. By adding the following as clause 9(b):
"THE OPTIONS GRANTED PURSUANT TO CLAUSE 8 MAY NOT BE ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF BY THE CHAIRMAN WITHOUT
THE PRIOR WRITTEN CONSENT OF the COMPANY."
<PAGE> 2
4. The parties have acknowledged that the Engagement Agreement shall
remain binding and effective in accordance with its terms except as
expressly amended hereby.
THE PARTIES HERETO have hereunto set their hands and seals the day and date
first above written.
SIGNED AND SEALED in the presence of: ) CONSOLIDATED WATER
) LTD.
)
) /s/ Wilmer Pergande
) ---------------------------------
)
/s/ Peter D. Ribbins ) /s/ Aledander Stephen Bodden
- --------------------------------------) ---------------------------------
witness )
SIGNED AND SEALED in the presence of: )
)
)
)
)
/s/ C.B. Flowers ) /s/ Jeffrey M. Parker
- --------------------------------------) ---------------------------------
witness Jeffrey M. Parker
<PAGE> 1
Exhibit 10.16
SECOND AMENDMENT OF ENGAGEMENT AGREEMENT
THIS AGREEMENT is made this 21st day of March, 2000
BETWEEN: CONSOLIDATED WATER CO. LTD., a Cayman Islands company having its
registered office at Trafalgar Place, West Bay Road, P.O. Box 1114GT,
Grand Cayman, B.W.I. (the "Company")
AND: JEFFREY M. PARKER of 81 Drake Quay, Governor's Harbour, P.O. Box
1782GT, Grand Cayman, B.W.I. (the ""Chairman")
WHEREAS:
A. The Company and the Chairman entered into an engagement agreement dated
the 30th of December 1998 that was amended by an amendment of
engagement agreement dated the 26th of October 1999 (the "'Engagement
Agreement').
B. The parties are desirous of amending the same in accordance with the
terms of this Agreement.
NOW IN CONSIDERATION of the mutual covenants contained herein the parties agree
that the Engagement Agreement shall be amended and/or rectified as follows:
1. Clause 8 shall be amended by deleting the same and substituting the
following;
"8(a) Further, subject to any approvals of Government which may be
necessary at the time at which the option is exercised, for
each of the three financial years ending December 31, 1999,
December 31, 2000 and December 31, 2001 respectively, provided
(subject to paragraph 21 of this Agreement) that the Chairman
serves in the Capacities for the entirety of such year, on
December 31 of such year, the Chairman shall be granted an
option to purchase, at the "Exercise Price", payable in cash
in full on the exercise of the option, a number of Ordinary
Shares equal to the number of US$ which represents 1% of the
net profit of the Company calculated as aforesaid for that
financial year.
8(b) The Exercise Price shall be:
(i) In respect of the financial year ended December 31,
1999, US$2.50
(ii) In respect of subsequent financial years, the average
of the closing market price of the Company's Ordinary
shares on each of the first seven trading days in the
month of October of that financial year."
<PAGE> 2
2. By deleting the following sentence from existing clause 9(a)
"Provided that the options granted pursuant to Clause 8 may not be
exercised if or to the extant that, immediately following the exercise,
the Chairman would beneficially own more than 6% of all Ordinary shares
then issued by the Company"
3. The parties have acknowledged that the Engagement Agreement shall
remain binding and effective in accordance with its terms except as
expressly amended hereby.
THE PARTIES HERETO have set their hands and seals the day and date first above
written.
SIGNED AND SEALED in the presence of:) CONSOLIDATED WATER CO. LTD.
)
)
) /s/ C.B. Flowers
) ---------------------------------
)
)
/s/ R.L. Finlay ) /s/ Alexander Stephen Bodden
- -------------------------------------) ---------------------------------
witness
SIGNED AND SEALED in the presence of:)
)
)
)
)
)
)
/s/ R.L. Finlay ) /s/ Jeffrey M. Parker
- -------------------------------------) ----------------------------------
witness Jeffrey M. Parker
2
<PAGE> 1
Exhibit 10.17
EMPLOYMENT CONTRACT
THIS AGREEMENT is made the 19th day of August 1998
BETWEEN CAYMAN WATER COMPANY LIMITED, a Cayman Islands company having its
registered office at Trafalgar Place, West Bay Road, P.O. Box 1114, George Town,
Grand Cayman, B.W.I. ("the Company")
AND
GREGORY SCOTT MCTAGGART of P.O. Box 1114, George Town, Grand Cayman, B.W.I.
("The Vice President")
IT IS AGREED as follows:-
Employment
1 The Vice President is engaged as Vice President - Operations ("the
Capacities") of the Company for three (3) years commencing on the 19
August 1998 but subject to the extension provisions set out in clause
19 and subject to the termination provisions set out in clauses 16, 17
and 18.
Remuneration
2 The Vice President's salary is fixed until 31st. December, 1998 at
CI$64,085 per annum, payable monthly in arrears, less deductions
(other than for Medical Insurance) and other payments which the Company
is by law entitled or required to deduct from an employee's
remuneration.
3 The Vice President's salary will be reviewed as of each January 1st.
by the Company's Board of Directors ("the Board") who may grant an
increase but shall not reduce the Vice Presidents salary below the
level set out in Clause 2 hereof.
4 Further, for each completed financial year, beginning with the
financial year 1998, during which the Vice President serves in the
Capacities, not later than 28th. February following the end of each
financial year, the Vice President will be paid a bonus of:-
(a) 2.5% of the amount by which the net profits of the Company,
determined as aforesaid, for that financial year exceed the
highest annual net profit determined in the same manner earned
by the Company in any prior financial year.
5 The Company will be obliged to maintain medical insurance coverage, as
per the National Health Insurance Law, for the Vice President whilst he
remains in the employ of the Company.
6 The Company will be obliged to make pension contributions, as per the
Pensions Law, on behalf of the Vice President whilst he remains in the
employ of the Company.
<PAGE> 2
Area
7 The Vice President's work will be performed mainly in West Bay, Grand
Cayman. The Company reserves the right to transfer the Vice President
to any other place of business which it may establish in the Cayman
Islands.
Responsibilities
8 The Vice President must devote substantially the whole of his time to
the Company's business and must use his best endeavours to promote the
Company's interest and welfare. Except where such information is a
matter of public record or when required to do so by law he must not
either before or after this Agreement ends disclose to any person any
information relating to the Company or its customers or any
confidential information of which he becomes possessed while acting in
the Capacities.
9 The Vice President must perform the duties commonly performed by Vice
President-Operations and also the duties reasonably required of and
assigned to him in his position as Vice President and must discharge
his duties in accordance with the directions of the Board. The Vice
President must perform his duties under this Agreement during normal
business hours from Mondays to Fridays inclusive (save on bank
holidays) but he accepts that his duties, which include travelling on
the Company's business both within the Cayman Islands and abroad, may
from time to time require work to be undertaken on Saturdays, Sundays
and bank and public holidays. The Vice President must report to the
President, diligently follow and implement all management policies and
decisions which the President communicates to him, prepare and forward
in a timely manner all reports and accountings the President requests.
The Vice President will not directly or indirectly engage in any
activities or work which are deemed by the Board to be detrimental to
the best interests of the Company. Subject to any such directions and
restrictions, the Vice President will be invested with the following
powers and responsibilities:
(a) responsible for the oversight of all day to day operations of
the Company including water production, distribution, finished
water treatment, water quality monitoring, new service
installations, new pipe installations, water audit and leak
detection, scheduled maintenance, and emergency repairs;
(b) responsible for the administration of the West Bay Plant, the
Distribution Department, the New Works Department, the
Governors Harbour Plant, the Laboratory and the Water Audit
and Leak Detection Department;
(c) responsible for liaison with the Company's bulk water
suppliers on all day to day operational matters, including
demand / production coordination, scheduled and unschedules
plant down time and water quality issues;
(d) responsible for all Company engineering resources and tasks
including engineering support for all Operations Departments
and Administration, project coordination and management foe
all new works projects including pipeline additions and
improvements, water production capacity expansion, water
storage expansion and all ancillary Company equipment;
(e) responsible for the oversight of the production, maintenance
and revisions of all Company engineering drawings, including
buildings, site and Distribution System record drawings;
<PAGE> 3
(f) responsible for liaison with Administration on future demand
forecasting, budgeting and planning capital improvements for
production and distribution of water;
(g) responsible for monthly reporting to the Board through the
President on Operations and Engineering matters;
(h) responsible for all Company computer administration including
hardware maintenance, software maintenance, network
maintenance, hardware and software upgrades, back ups and
trouble shooting;
10 In case of inability to work due to illness or injury, the Vice
President must notify the Company immediately and produce a medical
certificate for any absence longer than ten working days. The Company
may have the Vice President examined by a doctor approved by it. The
Vice President agrees to submit to any medical examination which the
Company requires.
11 The Vice President will be entitled to up to ten (10) days sick leave
per year without a medical certificate.
Holidays
12 The Vice President is entitled during every twelve (12) month period of
employment to the following holidays during which his remuneration will
continue to be payable:-
(a) all public holidays in the Cayman Islands, and
(b) four (4) weeks' vacation at a time to be approved by the
President.
Reimbursement of Expenses
13 All expenses for which the Vice President claims reimbursement must be
within pre-approved budgets. Subject to this, the Company must
reimburse the Vice President for the cost of entertaining the Company's
customers and travelling on the Company's business on the production of
the necessary vouchers or on the Vice President's proving to the
Company's satisfaction the amount that he has spent for those purposes,
even though he is unable to produce vouchers.
Non-Solicitation
14 The Vice President must not at any time while he is acting in the
Capacities or afterwards either on his own account or for any other
person, firm or company solicit, interfere with or endeavour to entice
away from the Company any person, firm or company who at any time
during or at the date when his employment ends were customers of or in
the habit of dealing with the Company.
<PAGE> 4
Company Documents
15 All books, records, notes, files, memoranda, reports, customer lists,
computer files and other documents, and all copies of them, relating to
the Company's business which the Vice President keeps, prepares or
conceives or which become known to him or which are delivered or
disclosed to or by any means come into his possession, and all the
Company's property and equipment are and will remain the Company's sole
and exclusive property. If the Vice President's employment is
terminated for any reason whether voluntarily or involuntarily, or if
the Company at any time requests, he must promptly deliver to the
Company the originals and all copies of all relevant documents that are
in his possession, custody or control, and any other property belonging
to the Company.
Termination
16 This Agreement will end and, except to the extent previously accrued,
all rights and obligations under it of the Company and the Vice
President shall cease if any of the following events occurs:-
(a.) The Vice President dies.
(b.) The Vice President is adjudicated bankrupt or makes any
composition with his creditors.
(c.) The Vice President gives three (3) months written notice to
the Company to terminate this Agreement.
17 The Company may by notice end this Agreement with immediate effect if:-
(a.) The Vice President conducts himself in a manner which would
justify immediate dismissal in accordance with the Labour Law.
(b.) through physical or mental illness the Vice President is
unable to discharge his duties for sixty (60) successive days,
as to which a certificate by any doctor appointed by the
Company shall be conclusive.
(c) If Company gives written notice to the Vice President and pays
to him a sum equal to the Vice President's annual salary as
described in clause 2 or as increased in accordance with
clause 3 , for the year in which such termination takes place.
18
(b) the Company shall remain obliged to keep all benefits,
including but not limited to medical insurance and pension
contributions, to which the Vice President was entitled as at
the date of his termination paid and available to the Vice
President for a period of one year from the date of
termination.
Extension
19 In the absence of a written agreement to the contrary, on 1st. August
of each year, the term of this Agreement shall be automatically
extended upon the same terms by a period of one year.
<PAGE> 5
Notices
20 Any notice to be served under this Agreement must be in writing and
will be deemed duly served if in the case of one addressed to the
Company it is sent by registered post or left at the Company's
registered office, or in the case of one sent to the Vice President it
is handed to him personally or is delivered to his last known
residential address in the Cayman Islands. A notice sent by post will
be deemed to be served on the third day following the date on which it
is posted.
Previous Agreements Superseded
21 This Agreement supersedes all prior contracts and understandings
between the parties and may not be changed or terminated orally, and no
change, termination or attempted waiver of any of its provisions will
be binding unless in writing and signed by the party against whom it is
sought to be enforced.
Clause Headings
22 The clause headings are included for convenience only and have no legal
effect.
Applicable Law and Jurisdiction;
23 This Agreement will be construed and the legal relations between the
parties determined in accordance with the laws of the Cayman Islands
and the parties agree to submit to the jurisdiction of the Cayman
Islands Courts. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid, but
if any provision of this Agreement or the application of it is
prohibited or held to be invalid, that prohibition or invalidity will
not affect any other provision, or the application of any other
provision which can be given effect without the invalid provision or
application, and to this end the provisions of this Agreement are
declared to be severable.
EXECUTED by and on behalf of CAYMAN WATER COMPANY
CAYMAN WATER COMPANY LIMITED LIMITED
by
in the presence of:-
/s/ Alexander Stephen Bodden Per: /s/ Peter D. Ribbins
- --------------------------------- -------------------------------
Witness
EXECUTED by GREGORY SCOTT MCTAGGART
in the presence of :
/s/ Alexander Stephen Bodden /s/ Gregory S. McTaggart
- --------------------------------- -----------------------------------
Witness Gregory S. McTaggart
<PAGE> 1
Exhibit 10.18
FIRST AMENDMENT OF THE EMPLOYMENT CONTRACT
THIS AGREEMENT made this 17 day of April, 2000
BETWEEN: CONSOLIDATED WATER CO. LTD. (formerly Cayman Water
Company Limited), a Cayman Islands company having its registered
office at Trafalgar Place, West Bay Road, P.O. Box 1114GT, Grand
Cayman, B.W.I. (the "Company")
AND: GREGORY SCOTT McTAGGART of Ocean Club Condominiums, P.O.
Box 1114GT, Grand Cayman, B.W.I. (the "Vice President")
WHEREAS:
A. The Company and the Vice President entered into an employment contract
dated the 19th August, 1998 (the "Employment Contract").
B. The parties are desirous of amending the same in accordance with the
terms of this Agreement.
NOW IN CONSIDERATION of the mutual covenants contained herein the parties agree
that the Employment Contract shall be amended and/or rectified as follows:
1. Renumbering existing Clause 4 as 4(A) and adding the following
as Clauses 4(B), 4(C), 4(D) and 4(E)
4(B) Further, commencing in the financial year 2000 and for each
year thereafter, subject to any approvals of Government which
may be necessary at the time at which the option is exercised,
the Vice President shall be granted an option to purchase, at
the "Exercise Price", payable in cash in full on the exercise
of the option, a number of Ordinary Shares equal to the number
of US$ which represents .75% of the net profit of the Company
calculated as aforesaid for that financial year.
4(C) The "Exercise Price" shall be the avenge of the closing market
price of the Company's Ordinary shares on each of the first
seven trading days in the month of October of that financial
year."
4(D) The options granted pursuant to Clause 4(B) may be exercised
by the Vice President at any time after they vest and before
the close of the Company's business the day before the third
anniversary of the date of the Auditors Report on the
Financial Statements for the relevant financial year.
<PAGE> 2
4(E) For the avoidance of doubt, it is hereby agreed that the Vice
President shall be entitled to participate in and to receive
Redeemable Preference Shares pursuant to his participation in
the Employee Share Incentive Plan, in respect of the financial
year 1999, during the calendar year 2000 but not thereafter.
2. The parties have acknowledged that the Employment Contract shall remain
binding and effective in accordance with its terms except as expressly
amended hereby.
THE PARTIES HERETO have set their hands and seals the day and date first above
written.
SIGNED AND SEALED in the presence of:
)
)
)
)
)
/s/ Peter D. Ribbins ) /s/ J.M. Parker
- ------------------------------------ ------------------------------------
witness Consolidated Water Co. Ltd.
SIGNED AND SEALED in the presence of:
)
)
)
)
)
/s/ Peter D. Ribbins ) /s/ Gregory Scott McTaggart
- ------------------------------------ ------------------------------------
witness Gregory Scott McTaggart
2
<PAGE> 1
Exhibit 10.19
EMPLOYMENT CONTRACT
THIS AGREEMENT is made the 31st day of August 1997, BETWEEN CAYMAN WATER COMPANY
LIMITED, a Cayman Islands company having its registered office at Trafalgar
Place, West Bay Road, P.O. Box 1114, George Town, Grand Cayman, B.W.I. ("the
Company")
AND
ALEXANDER STEPHEN BODDEN of P.O. Box 1114, George Town, Grand Cayman,
B.W.I. ("The Vice President")
IT IS AGREED as follows:
Employment
1. The Vice President is engaged as Vice President - Finance, Company
Secretary and Investment Relations Officer ("the Capacities") of the
Company for three (3) years commencing on the 31 August 1997 but
subject to the extension provisions set out in clause 18 and subject to
the termination provisions set out in clauses 14, 15 and 16.
Remuneration
2. The Vice President's salary is fixed until 31st December, 1997 at
CI$ 62,400.00 per annum, payable monthly in arrears, less deductions
(other than for Medical Insurance) and other payments which the Company
is by law entitled or required to deduct from an employee's
remuneration.
3. The Vice President's salary will be reviewed as of each January 1st. by
the Company's Board of Directors ("the Board") who may grant an
increase but shall not reduce the Vice President's salary below the
level set out in Clause 2 hereof
4. Further, for each completed financial year, beginning with the
financial year 1997, during which the Vice President serves in the
Capacities, not later than 28th. February following the end of each
financial year, the Vice President will be paid a bonus of:-
(a) 2.5% of the amount by which the net income of the Company,
calculated before charging this bonus and all other bonus's of
the executive officers of the Company and before charging
dividends or crediting any amount accruing from the re-
valuation of the Company's assets, for that financial year
exceed the highest annual net income determined in the same
manner earned by the Company in any prior financial year.
5. The Company will make a contribution of 5% of salary to an approved
Pension Plan in the Cayman Islands which will match the first 5%
contribution made by the Vice President to the same Pension Plan. If
the legal matching minimum increases above 5% the Company will adjust
the contribution to comply with the increased legal minimum. If the
legal matching minimum decreases below 5% the Company will continue to
make a contribution of a minimum 5%.
<PAGE> 2
Area
6. The Vice President's work will be performed mainly in West Bay, Grand
Cayman. The Company reserves the right to transfer the Vice President
to any other place of business which it may establish in the Cayman
Islands.
Responsibilities
7. The Vice President must devote substantially the whole of his time to
the Company's business and must use his best endeavours to promote the
Company's interest and welfare. Except where such information is a
matter of public record or when required to do so by law he must not
either before or after this Agreement ends disclose to any person any
information relating to the Company or its customers or any
confidential information of which he becomes possessed while acting in
the Capacities.
8. The Vice President must perform the duties commonly performed by the
Vice President Finance, Company Secretary and Investor Relations
Officer and also the duties reasonably required of and assigned to him
in his position as Vice President and must discharge his duties in
accordance with the directions of the Board. The Vice President must
perform his duties under this Agreement during normal business hours
from Mondays to Fridays inclusive (save on bank holidays) but he
accepts that his duties, which include travelling on the Company's
business both within the Cayman Islands and abroad, may from time to
time require work to be undertaken on Saturdays, Sundays and bank and
public holidays. The Vice President must report to the President,
diligently follow and implement all management policies and decisions
which the President communicates to him, prepare and forward in a
timely manner all reports and accountings the President requests. The
Vice President will not directly or indirectly engage in any activities
or work which are deemed by the Board to be detrimental, to the best
interests of the Company. Any involvement in other activities will be
subject to prior mutual agreement between the Vice President and the
Board. Subject to any such directions and restrictions, the Vice
President will be invested with the following powers and
responsibilities
A. FINANCIAL
1. All aspects of the Accounting function of Cayman Water Company
Limited (CWC) - including the preparation of monthly,
quarterly and annual financial statements for presentation to
the Board of Directors (BOD) and for annual statutory and
other audits.
2. Preparation of annual and other budgets and projections as
required by the BOD.
3. Preparation and submission of all reports and returns, as is
necessary, to the US Securities and Exchange Commission, the
National Association of Security Dealers, the Cayman Islands
Government and any other regulatory body as is necessary.
4. Liaison with the NASD/NASDAQ Stock Market and any other stock
market on which the Company's stock is listed on all matters
concerning the stock listing as appropriate.
5. Cash / Treasury Management of CWC funds.
6. Project Appraisal as and when required.
7. Any other financial duties and projects as requested by the
BOD.
<PAGE> 3
B. COMPANY SECRETARY
1. Maintenance of CWC`s Register of Shareholders in conjunction
with CWC's Transfer Agents and Registrars.
2. Preparation and distribution of minutes for the following
meetings
a) All General Meetings of CWC.
b) Meetings of the Full Board of Directors.
c) Meetings of the Executive Committee of the BOD.
d) Meetings of the Audit Committee of the BOD.
e) Meetings of any other duly appointed committee as
directed by the BOD.
3. Arrangement of all General Meetings and Audit Committee
meetings of CWC.
4. Distribution of Quarterly and other reports/releases to
Shareholders and Brokers.
5. Payment of Dividends to the Shareholders of CWC.
6. Preparation and submission of all reports and returns, as is
necessary, to the US Securities and Exchange Commission, the
National Association of Security Dealers, the Cayman Islands
Government and any other regulatory body as is necessary.
7. Any other company secretarial duties and projects as requested
by the BOD.
C. INVESTOR RELATIONS OFFICER
1. Dealing with all Market Maker / Broker / Investor enquiries
directed to CWC.
2. Liaison with external Financial Public Relation consultants as
hired by the BOD and the provision of appropriate information
to same.
3. Any other Investor Relations duties as requested by the BOD.
D. ADMINISTRATION
1. Overall supervision of the day-to-day operation of CWC's
offices with full responsibility for the duties of the Office
Manager as described in that position's job description.
2. Implementation of any new policies and human resource
programmes as directed by the BOD.
E. GENERAL
1. Supervision of all staff necessary for the performance of all
duties as described above.
2. Any other duty / function as requested by the Chairman &
C.E.O., the President & C.O.O. and/or the BOD.
9. In case of inability to work due to illness or injury, the Vice
President must notify the Company immediately and produce a medical
certificate for any absence longer than ten working days. The Company
may have the Vice President examined by a doctor approved by it. The
Vice President agrees to submit to any medical examination which the
Company requires.
<PAGE> 4
10. The Vice President will be entitled to up to ten (10) days sick leave
per year without a medical certificate.
Holidays
11. The Vice President is entitled during every twelve (12) month period of
employment to the following holidays during which his remuneration will
continue to be payable:
(a) all public holidays in the Cayman Islands, and
(b) four (4) weeks' vacation at a time to be approved by the
President.
Reimbursement of Expenses
12. All expenses for which the Vice President claims reimbursement must be
within pre approved budgets. Subject to this, the Company must
reimburse the Vice President for the cost of entertaining the Company's
customers and travelling on the Company's business on the production of
the necessary vouchers or on the Vice President's proving to the
Company's satisfaction the amount that he has spent for those purposes,
even though he is unable to produce vouchers.
Non-Solicitation
13. The Vice President must not at any time while he is acting in the
Capacities or afterwards either on his own account or for any other
person, firm or company solicit, interfere with or endeavour to entice
away from the Company any person, firm or company who at any time
during or at the date when his employment ends were customers of or in
the habit of dealing with the Company.
Company Documents
14. All books, records, notes, files, memoranda, reports, customer lists,
computer files and other documents, and all copies of them, relating to
the Company's business which the Vice President keeps, prepares or
conceives or which become known to him or which are delivered or
disclosed to or by any means come into his possession, and all the
Company's property and equipment are and will remain the Company's sole
and exclusive property. If the Vice President's employment is
terminated for any reason whether voluntarily or involuntarily, or if
the company at any time requests, he must promptly deliver to the
Company the originals and all copies of all relevant documents that are
in his possession, custody or control, and any other property belonging
to the Company.
Termination
15. This Agreement will end and, except to the extent previously accrued,
all rights and obligations under it of the Company and the Vice
President shall cease if any of the following events occurs:-
(a.) The Vice President dies.
(b.) The Vice President is adjudicated bankrupt or makes any
composition with his creditors.
(c.) The Vice President gives three (3) months written notice to
the Company to terminate this Agreement.
<PAGE> 5
16. The Company may by notice end this Agreement with immediate effect
if:-
(a.) The Vice President conducts himself in a manner which would
justify immediate dismissal in accordance with the Labour Law
(b.) through physical or mental illness the Vice President is
unable to discharge his duties for sixty (60) successive days,
as to which a certificate by any doctor appointed by the
Company shall be conclusive.
(c) The Company gives written notice to the Vice President and
pays to him a sum equal to the Vice President's annual salary
as described in clause 2 or as increased in accordance with
clause 3, for the year in which such termination takes place.
17.
(b) the Company shall remain obliged to keep all benefits,
including but not limited to medical insurance and pension
contributions, to which the Vice President was entitled as at
the date of his termination paid and available to the Vice
President for a period of one year from the date of
termination.
Extension
18. In the absence of a written agreement to the contrary, on 1st. August
of each year, the term of this Agreement shall be automatically
extended upon the same terms by a period of one year.
Notices
19. Any notice to be served under this Agreement must be in writing and
will be deemed duly served if in the case of one addressed to the
Company it is sent by registered post or left at the Company's
registered office, or in the case of one sent to the Vice President it
is handed to him personally or is delivered to his last known
residential address in the Cayman Islands. A notice sent by post will
be deemed to be served on the third day following the date on which it
is posted.
Previous Agreements Superseded
20. This Agreement supersedes all prior contracts and understandings
between the parties and may not be changed or terminated orally, and no
change, termination or attempted waiver of any of its provisions will
be binding unless in writing and signed by the party against whom it is
sought to be enforced.
Clause Headings
21. The clause headings are included for convenience only and have no legal
effect.
Applicable Law and Jurisdiction;
22. This Agreement will be construed and the legal relations between the
parties determined in accordance with the laws of the Cayman Islands
and the parties agree to submit to the jurisdiction of the Cayman
Islands Courts. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid, but
if any provision of this Agreement or the application of it is
prohibited or held to be invalid, that
<PAGE> 6
prohibition or invalidity will not affect any other provision, or the
application of any other provision which can be given effect without
the invalid provision or application, and to this end the provisions of
this Agreement are declared to be severable.
EXECUTED by and on behalf of CAYMAN WATER COMPANY
CAYMAN WATER COMPANY LIMITED LIMITED
by
in the presence of:-
/s/ Tracy Beitz Per: /s/ Peter D. Ribbins
- --------------------------------- -----------------------------------
Witness Peter D. Ribbins
President
EXECUTED by ALEXANDER STEPHEN BODDEN
in the presence of:-
/s/ Tracy Beitz /s/ Alexander Stephen Bodden
- --------------------------------- -----------------------------------
Witness Alexander Stephen Bodden
<PAGE> 1
Exhibit 10.20
FIRST AMENDMENT OF THE EMPLOYMENT CONTRACT
THIS AGREEMENT is made this 17th day of April, 2000
BETWEEN: CONSOLIDATED WATER CO. LTD. (formerly Cayman Water
Company Limited), a Cayman Islands company having its registered
office at Trafalgar Place, West Bay Road, P.O. Box 1114GT,
Grand Cayman. B.W.I. (the "Company")
AND: ALEXANDER STEPHEN BODDEN of P.O. Box 1114GT, Grand
Cayman, B.W.I. (the "Vice President")
WHEREAS:
A. The Company and the Vice President entered into an employment contract
dated the 31st
B. August 1997 (the "Employment Contract").
C. The parties are desirous of amending the same in accordance with the
terms of this Agreement.
NOW IN CONSIDERATION of the mutual covenants contained herein the parties agree
that the Employment Contract shall be amended and/or rectified as follows:
1. Renumbering existing Clause 4 as 4(A) and adding the following as
Clauses 4(B), 4(C), 4(D) and 4(E);
4(B) Further, commencing in the financial year 2000 and for each year
thereafter, subject to any approvals of Government which may be
necessary at the time at which the option is exercised, the Vice
President shall be granted an option to purchase, at the "Exercise
Price", payable in cash in full on the exercise of the option, a number
of Ordinary Shares equal to the number of US$ which represents 1% of
the net profit of the Company calculated as aforesaid for that
financial year.
4(C) The "Exercise Price" shall be the average of the closing market price
of the Company's Ordinary shares on each of the first seven trading
days in the month of October of that financial year."
4(D) The options granted pursuant to Clause 4(B) may be exercised by the
Vice President at any time after they vest and before the close of the
Company's business the day before the third anniversary of the date of
the Auditors Report on the Financial Statements for the relevant
financial year.
<PAGE> 2
4(E) For the avoidance of doubt, it is hereby agreed that the Vice President
shall be entitled to participate in and to receive Redeemable
Preference Shares pursuant to his participation in the Employee Share
Incentive Plan, in respect of the financial year 1999, during the
calendar year 2000 but not thereafter.
2. The parties have acknowledged that the Employment Contract shall remain
binding and effective in accordance with its terms except as expressly
amended hereby.
THE PARTIES HERETO have set their hands and seals the day and date first above
written.
SIGNED AND SEALED in the presence of:
)
)
)
)
)
/s/ Peter D. Ribbins ) /s/ J.M. Parker
- ------------------------------------ ------------------------------------
witness Consolidated Water Co. Ltd.
SIGNED AND SEALED in the presence of:
)
)
)
)
)
/s/ Peter D. Ribbins ) /s/ Alexander Stephen Bodden
- ------------------------------------ ------------------------------------
witness Alexander Stephen Bodden
2
<PAGE> 1
Exhibit 10.21
CONSOLIDATED
August 2, 1999 WATER
VIA FAX: 1 210 224 6491
J. Bruce Bugg, Jr. Esq.,
Dear Bruce,
This fax is to confirm the options granted to you by the Board on July 20, 1999
in consideration of your continuing to act as Vice Chairman of the Company to
May 1, 2001 and of your assuming responsibility for leading certain initiatives,
agreed between you and the Board, in furtherance of the expansion of the
Company.
Date of Grant # Ordinary Shares Exercise Price Exercise Period
- ------------- ----------------- -------------- ---------------
July 20, 1999 30,000 US$6 to May 1, 2002
May 1, 2000 30,000 Market Oct 1, 99 to May 1, 2003
The Board expressed a desire to be kept informed of progress. If a decision is
needed between Board or Executive Committee Meetings, then a paper can be
circulated. Otherwise, a brief summary presented to each meeting would be
helpful.
The Board appreciates your efforts to date on behalf of the Company and I,
personally, look forward to continuing to work with you.
Yours sincerely,
CONSOLIDATED WATER CO. LTD.
/s/ Jeffrey M. Parker
- ---------------------------------------
Jeffrey M. Parker Chairman & C.E.O.
CONSOLIDATED WATER CO. Ltd, PO BOX 1114 GT, GRAND CAYMAN BRITISH WEST INDIES,
TEL: (345) 945 4277, FAX: (345) 945 2957, E-MAIL [email protected]
<PAGE> 1
Exhibit 10.24
DIRECTORS SHARES GRANT PLAN SUMMARY
- -----------------------------------
o All Directors eligible except Executive Officers who are covered by
individual employment contracts and the Government Representative.
o Strike Price set each October 1 for the following year to September 30.
o Director accumulated $ fee equivalent during the year based on
attendance at the following meetings:
Full board meeting - $1200
All Sub-Committee meetings - $600
o Total $ fee accumulated during the year is then divided by the strike
price to determine entitlement as of Each October 1.
o Automatic issue of shares prior to December 31 each year.
o These are not options, they are for Ordinary Shares, no holding period.
Example
- -------
Director attends - 4 Full Board Meetings = $4,800
- 8 Sub Committee Meetings = $4,800
------
Total $ fee accumulated $9,600
======
Strike Nee on preceding October 1 - $6.75
Entitlement - 9600/6.75 = 1,422 shares entitlement
========================
This Plan, as amended was approved unanimously by the Board of Directors at
their meeting on 20 April, 1999.
/s/ Alexander S. Bodden
- ---------------------------------------
Alexander S. Bodden
Vice President Finance
Company Secretary
<PAGE> 1
Exhibit 10.27
CONSOLIDATED WATER CO. LTD.
STOCK OPTION AGREEMENT
1. GRANT OF OPTIONS. As of the 15th day of December, 1998, Consolidated
Water Co. Ltd. (the "Company") in consideration of that certain
Contract, dated November 17, 1998, between the Company and R. J.
Falkner and Company, Inc. (the "Contract") hereby grants to R. Jerry
Falkner (the "Optionee'") stock options ("Options") to acquire 30,000
Ordinary Shares of CI$1.00 par value, of the Company ("Shares") at an
exercise price of US$7.875 per share. The Options may be exercised in
whole or in part from time to time, at any time until twelve (12)
months after the Contract is terminated (the ""Expiration Date").
2. EXERCISE OF OPTIONS. To exercise all or part of the Options, the
Optionee shall deliver to the Company written notice of such exercise,
substantially in the form of Schedule I attached, indicating the number
of Shares with respect to which the Optionee desires to exercise the
Options, such notice to be accompanied by full payment of the aggregate
exercise price of the Shares as to which the Options are exercised.
Unless otherwise agreed in writing by the Company, the option price of
any Shares purchased shall be paid in cash, by certified or official
bank check, or by money order. On or as soon as practicable following
the date of exercise, but in no event less than ten (10) days following
such exercise, of all or part of the Options, the Company shall deliver
to the Optionee a certificate or certificates representing the Shares
acquired pursuant to any such exercise. The Optionee shall not be
deemed to be a holder of any Shares subject to the Options unless and
until a certificate for such Shares has been issued to the Optionee
under the terms of this Agreement, and no adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record
date is prior to the date any such certificate is issued, except as
expressly provided in Section 3 hereof.
3. ADJUSTMENTS
a. If at any time while any unexercised options are outstanding,
the outstanding Shares of the Company are changed into or
exchanged for a different number or kind of Shares or other
securities of the Company or of another corporation by reason
of any reorganization, merger, consolidation,
recapitalization, reclassification, change in par value, stock
split-up, combination of shares or dividend payable in capital
stock, or the like, then appropriate adjustment shall be made
in the number and kind of Shares with respect to which the
Options are exercisable and in the
<PAGE> 2
exercise price per Share with respect to the Options. Except
as otherwise expressly provided in the preceding sentence, the
issuance by the Company of shares of its capital stock of any
class, or securities convertible into shares of capital stock
of any class, either in connection with direct sale or upon
the exercise of rights or warrants to subscribe therefor, or
upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with
respect to the number of or exercise price of Shares then
subject to outstanding Options granted hereunder.
b. Nothing herein shall affect in any manner the right or power
of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other
changes in the company's capital structure or its business;
(ii) any merger or consolidation of the Company; (iii) any
issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to
the Options; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or part
of the assets or business of the Company; or (vi) any other
corporate act or proceeding whether of a similar character or
otherwise.
c. For all purposes of this Agreement, the term "Shares" shall
mean and include the Shares, together with any securities
issued or exchanged with respect to the Shares upon any
recapitalization, reclassification, merger, consolidation,
spin-off, partial or complete liquidation, stock dividend or
split-up or a combination of the securities of the Company.
4. ISSUANCE OF SHARES. As a condition of the issuance of Shares upon
exercise of the Option, R. J. Falkner and Company, Inc. shall be
rendering such services described in the Contract, or, if the Contract
has been terminated, those services shall have been rendered and the
Company may require the Optionee to enter into such agreements or
undertakings, if any, as the Company may deem necessary or advisable
to assure compliance with any law or regulation then in effect,
including, but not limited to (i) a representation and warranty by the
Optionee to the Company, at the time any Option is exercised, that he
is acquiring the Shares to be issued to him for investment and not with
a view to, or for sale in connection with, the distribution of any such
Shares, (ii) a representation, warranty and/or agreement to be bound by
any legends that are, in the opinion of the Company, necessary or
appropriate to comply with the provisions of any securities law deemed
by the Company
<PAGE> 3
to be applicable to the issuance of the Shares and which are endorsed
upon the Share certificates and (iii) a representation and warranty by
the Optionee to the Company, at the time any Option is exercised, that,
if the total of the number of Shares that the Optionee then owns
together with the number of Shares in respect of which the Option is
being exercised exceeds 5% of the total number of Shares then issued by
the Company, the Optionee has obtained the approval of the Governor in
Council of the Cayman Islands.
5. NONTRANSFERABILITY. The options granted hereunder shall not be
transferable by the Optionee otherwise than by will or the laws of
descent and distribution and during the lifetime of the Optionee are
exercisable only by the Optionee.
6. TERMINATION OF OPTION. At the close of business on the Expiration Date,
any unexercised portion of the Option shall automatically and without
notice terminate and become null and void.
7. INVESTMENT INTENT. The shares underlying the Options (the "underlying
Shares") being received shall be purchased solely for the Optionee's
own account for investment purposes only and not for the account of any
other person and not for distribution, assignment or resale to others,
unless distribution, assignment or resale is in compliance with all
applicable laws. No other person has a direct or indirect beneficial
interest in the Options of the Underlying Shares. Optionee has not
subdivided the beneficial ownership of the Options or the Underlying
Shares with any other person.
8. REGISTRATION RIGHT. The Company shall file for registration of the
Underlying Shares with the Securities and Exchange Commission ("SEC")
upon the earlier to occur of: (a) when the Company registers any of its
equity securities with the SEC and the form to be used for such
registration may be used to register the Underlying Shares, or (b) the
Expiration Date, or as soon as practicable, but not more than three
months, thereafter, if the Company's Board of Directors determines, in
good faith and in its reasonable business judgement, that (i) such
registration would require the public disclosure of material non-public
information concerning any pending or ongoing material transaction or
negotiations involving the Company which, in the opinion of the
Company's legal counsel, is not yet required to be publicly disclosed,
and (ii) such disclosure would materially interfere with such
transaction or negotiations or have a materially adverse effect on the
Company. The Company may only postpone such registration after the
Expiration Date so long as the Company diligently and in good faith
continues to pursue such transaction or negotiations throughout the
period of such postponement.
<PAGE> 4
The Company shall provide written notice to the Optionee as soon as
practicable (but in no event less than 30 days) before its initial
filing of a registration statement with the SEC, which notice shall (a)
specify the kind and number of securities to be registered and the
proposed offering price or prices and distribution arrangements; and
(b) include such other information that at the time and under the
circumstances would be appropriate to include in such notice. All
expenses reasonably related to the registration of the Underlying
Shares shall be paid by the Company.
9. NOTICES. Any notice under this Stock Option Agreement shall be in
writing and shall be deemed to have been duly given when delivered
personally or when deposited in the mail, registered, postage prepaid,
and addressed, in the case of the Company, to the Company's Secretary
at its Principal executive offices; P. 0. Box 1114, Grand Cayman,
B.W.I. and, in the case of the Optionee, to P.O. Box 1230, Crested
Butte, Colorado 81224, U.S.A., subject to the right of either party to
designate some other address at any time hereafter in a notice
satisfying the requirements of this Section.
10. ENTIRE AGREEMENT. This Stock Option Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings,
both oral and written, between the parties hereto with respect to the
subject matter.
11. MISCELLANEOUS. This Stock Option Agreement shall be governed by and
construed in accordance with the laws of the Cayman Islands. Each party
hereby consents to the personal jurisdiction of all courts of the
Cayman Islands.
Date of Agreement: 20 JANUARY, 1999
CONSOLIDATED WATER CO. LTD.
By: /s/ Jeffrey M. Parker
-----------------------------------
Jeffrey M. Parker, Chairman and
Chief Executive Officer
OPTIONEE
/s/ R. Jerry Falkner
---------------------------------------
R. Jerry Falkner
<PAGE> 5
SCHEDULE 1
Date:
Consolidated Water Co. Ltd.
P. 0. Box 1114
Grand Cayman, B.W.I.
Attention: Board of Directors
Re: Exercise of Stock Options
Dear Sir or Madam:
Please be advised that pursuant to the Stock Option Agreement ("Stock
Option"), dated as of December 15, 1998 between Consolidated Water Co. Ltd. (the
"Company") and the undersigned ("Optionee"), Optionee hereby exercises the stock
option ("Option") in the amount of ________________ ordinary shares of the
Company and herewith tenders the following
_______________________________________________________________________________
having an aggregate value of ________________________________ (US$___________)
in payment for such ordinary shares. Capitalized terms not otherwise defined
herein are defined as set forth in the Stock Option.
Optionee requests _______________ stock certificates for such shares
issued in the name of ____________________ whose address is ___________________
and whose social security number is ______________.
Optionee hereby acknowledges, warrants and represents the following:
(1) Optionee's acknowledgments, representations, warranties and
agreements contained in the Stock option are true, complete
and accurate as of the date of this letter.
(2) The Option is presently exercisable and as such, has vested
and has not expired.
(3) Optionee is presently and has been in full compliance with all
the terms, conditions and provisions of the Stock Option.
Sincerely,
Optionee
<PAGE> 1
Exhibit 10.30
RJ FALKNER
AND
COMPANY
Investment Research
and Financial Communications
================================================================================
CONTRACT
Customer Cayman Water Company, Ltd.
Date: November 17, 1998
Term of Contract: One Year
Contract Begins: December 1, 1998
********************************************************************************
The undersigned, acting on behalf of CAYMAN WATER COMPANY, INC. ("the
customer"), hereby contracts with R. J. Falkner & Company, Inc., for a period of
not less than one year, for the provision of consulting services to include the
following:
(1) The preparation of at least two "Research Profile" reports during the next
twelve months;
(2) Distribution of such reports to the brokerage community, money managers,
mutual funds, and individual investors, upon request, or as instructed by the
customer, along with exposure of such reports on the STREETNET investor
information site on the Internet..
(3) Assistance in the writing and editing of shareholder communiques, annual
reports, etc., in order to optimize their effectiveness in conveying the
messages desired by management;
(4) The handling of all logistics involving the release of news to the financial
media and to the investment community, including "blast fax" exposure to brokers
and money managers;
(5) Interfacing with Nasdaq Stock Watch to assure that new releases are
distributed in accordance with appropriate regulations, and that Nasdaq is
notified in advance of pending news releases:
(6) Distribution of such communiques to the brokerage community, institutional
and individual investors, and research analysts at over 5,000 firms throughout
the U. S., Europe, and Canada;
(7) Telephone and personal meetings with individual investor groups,
regional/national brokerage firms, and/or institutional investors, when
appropriate;
(8) Arrangement of management presentations to stockbroker groups, research
analysts, and/or portfolio managers, on a selective basis, in various cities
around the U. S. and Canada; and
(9) Any other services involving investor relations, upon request (at an hourly
rate, when appropriate).
A Cash retainer fee for these services will be payable at the rate of $2.500 per
month, in advance. In addition to such monthly retainer, the customer will be
invoiced for reimbursement of expenses directly incurred in the provision of
P.O. Box 1230 Crested Butte, CO 81224
(970) 349-0846 ** Fax (970) 349-0852
<PAGE> 2
these services on a monthly basis. Such expenses will primarily involve
publishing, printing and postage costs related to the distribution of "Research
Profile" reports and shareholder communiques; telephone calls placed on the
customer's behalf, and travel expenses required to visit the customer and/or for
trips to visit brokerage firms/investor groups/institutions on behalf of the
customer (such trip expenses are pro-rated among several customers).
Documentation of these expenses will be provided on each monthly invoice, and
the customer agrees to reimburse R. J. Falkner & Company, Inc. for such expenses
within 30 days following receipt of such invoices.
In addition to the cash compensation outlined above, R. Jerry Falkner (as an
individual) will be granted an option to purchase 30,000 shares of CAYMAN WATER
COMPANY, LTD. common stock, with such option to be issued no later than December
15, 1998. This option shall expire twelve months after the termination of any
formal working relationship between Cayman Water Company, Ltd. and R. J. Falkner
& Company, Inc. The exercise price on the option will be equivalent to the
market price of the common stock on the closing transaction price, as reported
by Nasdaq, on December 15, 1998. Customer hereby agrees to register the shares
underlying this option whenever any other shares are registered with the SEC, or
within twelve months of the "start date" of this contact, whichever occurs
sooner.
This contract may be canceled by the Customer after twelve months, upon written
notice to be received by R. J. Falkner & Company within a ten-day period ending
December 1, 1999. If such notice is not forthcoming, the services of R. J.
Falkner & Company, Inc. will continue on a month-to-month basis. At any time
after completion of the initial one-year term of the contract's starting date,
either party may cancel the services of R. J. Falkner & Company, Inc. upon 60
days' written notice. If the customer chooses to terminate the services of R. J.
Falkner & Company, Inc. prior to December 1, 1999, customer agrees to pay R. J.
Falkner & Company, Inc. all advance retainer fees for the months remaining in
the initial twelve-month term of the contract, plus unreimbursed expenses.
In the event of dispute, the prevailing party will be entitled to recover its
costs, including reasonable attorney's fees.
The parties acknowledge that this contract is entered into in the state of
Colorado and that performance of the contract will be accomplished in the states
of Colorado and Texas.
This contract cannot be assigned without the agreement of both parties.
Signed:
J. Bruce Bugg, Jr.
- -----------------------------------
J. Bruce Bugg, Jr.
Vice Chairman of the Board
CAYMAN WATER COMPANY, LTD.
R. Jerry Falkner
- -----------------------------------
R. Jerry Falkner, CFA
President
R. J. Falkner & Company, Inc.
Date: 11/17/98
----------------
Note- Please retain one original copy of this contract for your records, and
return one original copy to R. J. Falkner & Company, Inc.
<PAGE> 1
Exhibit 10.31
AN AGREEMENT made the 12th day of November, 1997
BETWEEN: COMMONWEALTH WATER LTD.
A Bahamian Company ("CW")
AND: RAV BAHAMAS LTD.
A Bahamian Company carrying on business: as Bimini
Bay Resort ("the Customer")
WHEREAS
A. The Customer is desirous of obtaining a supply of potable water Water")
to its development known as Bimini Bay Resort ("the Property")
B. The Customer intends to enter into an agreement ("the WSC Agreement")
with the Water & Sewerage Commission of the Government of the
Commonwealth of the Bahamas ("Government") for the supply of Water for
the islands of North Bimini and South Bimini excluding Bimini Bay
Resort.
C. The parties have agreed that CW will be the exclusive vehicle to be
used for the provision of potable water to any other area of the
Commonwealth of the Bahamas.
THE PARTIES AGREE that:
1. The Customer shall assign to CW all its rights and obligations under
the WSC Agreement. CW will supply Water to Government in accordance
therewith.
2. Not later than ninety (90) days from the date of this Agreement ("the
Effective Date") CW will commence to supply Water by pipe to the
Property and to Government on the terms and conditions specified in
this Agreement.
To that end, CW will, inter alia, provide for the following items:
<PAGE> 2
a) Water supply wells
b) Brine water disposal wells
c) Buildings, plant and machinery necessary to provide all
required gallonage of Water during the pendency of this
Agreement.
d) Back-up power supply for the distribution pumps and fuel to
operate the same
e) De-oderizing equipment and chemicals to meet the Customer's
reasonable requirements as to odor elimination
f) Potable Water storage facilities for a minimum of three days
of maximum production
together referred to as "the Plant"
3. CW will bill the Customer monthly for Water. The Customer must pay
invoices in full on the later of:
a) ten (10) days after the invoice date, or
b) the 25th day of the month following the month to which the
invoice relates.
CW will bill Government in accordance with the terms of the WSC
Agreement
4. CW must supply at least one main meter for Water supplied to the
Property and one main meter for Water supplied to Government in
accordance with Clause 9.
CW will bill the Customer and Government based on the readings of the
main meters.
The Customer and Government may supply and install individual meters
within the Property and the remainder of the islands of North and South
Bimini but it will be their responsibility to deal with any tenants,
guests or individual property owners.
<PAGE> 3
5. CW need not supply Water either to the Customer or to Government if:-
a) The Customer or Government does not pay the charges payable by
either of them under this Agreement by the due date.
b) This Agreement cannot be carried out because of force majeure
which includes , without limitation, hurricane, windstorm,
fire, flood or other acts of God, accident, explosion, war,
strike, lockout, labour trouble, expropriation by Governmental
authority, regulation, orders or requests of Governmental
agencies or inability by the exercise of reasonable diligence
to obtain supplies, materials or power.
6. The Customer will convey to CW the land on which the Plant is situated
("the Land") and CW will issue as consideration therefor that number of
shares of CW which equal 20% of the issued shares of CW.
The Customer will give CW such rights of access to the Land as are
necessary for constructing, maintaining and operating the Plant BUT CW
must repair any damage done by its servants or agents in the exercise
of those rights of access.
7. (a) The Customer must pay CW at its offices for Water supplied at
the rates specified in the Schedule and in this Agreement
adjusted annually as provided in Clause 12 of this Agreement.
Commencing twelve (12) months after the effective date the
Customer will be subject to minimum monthly charges specified
in the Schedule.
(b) Subject to clause 17 the Customer must pay the minimum monthly
charges even if it makes no use at all of CW's supply of Water
or if it uses less than the specified minimum quantity per
month.
<PAGE> 4
8. The Plant provided by CW shall be capable of producing the following
volumes of Water:-
a) During the six calendar months following the Effective Date -
50,000 United States gallons per day;
b) Thereafter 100,000 United States Gallons per day for the
customer.
c) The gallonage required by Government pursuant to the WSC
Agreement.
d) No later than one hundred and eighty (180) days after first
receiving notice from the Customer, that gallonage per day
requested by the Customer.
9. CW must furnish, fix and maintain in good repair meters for determining
the quantity of water used by the Customer or Government. If any meter
is damaged by the Customer or Government, or their servants or
invitees, CW must repair or replace the meter but at the Customer's or
Government's expense as the case may be. CW will charge the Customer or
Government for Water used based on the average Water consumption of the
previous twelve (12) months when the defective meter was working pro
rata for the period when the meter was not recording.
10. Subject as stated in the Schedule, CW must deliver Water to the
Property and to Government on terms and conditions set out in this
Agreement.
11. The quality of water that CW supplies must be within the present
standards established by the American Water Works Association (AWWA)
guidelines for potable water but must not exceed a maximum of 417 mg./L
total dissolved solids with a pH of between 7.0 and 7.5 at any given
time, as well as meeting, if not exceeding, the minimum water quality
standards for the Government of the Bahamas and the World Health
Organization (WHO).
<PAGE> 5
12. CW will adjust its charges per 1,000 United States gallons, as set out
in the Schedule, as follows:-
(a) On January 1 in each year the water charge per 1,000 US
gallons to be supplied in that calendar year will be adjusted
to the figure obtained by reference to the following formula:
US$4.35 X USPPIL + US$3.40 X BCPIL
---------------- ---------------
USPPI96 BCP196
For the purposes of this clause:
USPPIL is the United States Producer Price Index for Industrial
Commodities as at the preceding September 30th and USPPI96 is that
index at September 30, 1996, and
BCPIL is the Bahamas Consumer Price Index at the preceding September
30th and BCP196 is that index at September 30, 1996 BUT if the Bahamas
Government does not produce a Consumer Price Index at any relevant
date, the United States Government Consumer Price Indices must be used.
(b) Monthly, as an Energy Adjustment Factor in respect of any
change in the cost of electricity by reference to the
following formula:
EAF = 16 x (ET - EB)
For the purpose of this clause:
EAF is the US$ amount to be added to or subtracted from the Water
Tariff Base Rate per 1,000 United States gallons.
ET is the average cost in US$ per KWH of electricity during the
previous month.
<PAGE> 6
EB is US$0.17 being the cost of electricity per KWH as at the date of
this Agreement.
13. From the Effective Date CW will supply Water to the storage facilities,
presently of at least one million US gallons capacity provided by the
Customer.
The Customer may cease to provide storage facilities for CW upon giving
160 days written notice of his intention so to do whereupon CW will
construct new storage facilities of at least that capacity on the Land.
14. All pipes for Water supply beyond the main meters referred to in clause
4 will be the responsibility of the Customer or Government as the case
may be.
The Customer and Government must, at their expense, install a lock down
shut off type valve on their side of their meter.
The design of the Water distribution system on the Property and
drawings of its reticulation system shall be undertaken and provided by
CW in accordance with the requirements of the Water and Sewerage
Commission of the Bahamas and the Customer shall supply necessary
topographical and/or aerial surveys to CW for this purpose.
15. Notwithstanding that CW has connected any Water supply to a hydrant or
sprinkler system on the Property, it is expressly agreed that CW will
be under no obligation to provide Water for fire fighting purposes, at
any time whatever or under any circumstances, and will only supply
Water for those purposes if it is able to do so, and will not be liable
for any damage to the Property whatever caused by fire or any related
cause.
16. Subject to Clause 10, the term of this Agreement is 10 years from the
Effective Date, renewable for like periods of time at the option of the
Customer upon not less than six months notice.
<PAGE> 7
17. In the event that CW fails to supply the volumes set out in Clause 8 or
fails to meet the quality requirements set out in Clause 11 and fails
to remedy any breach of its obligations under those clauses within a
reasonable time after the Customer has given written notice to CW, the
Customer may require CW to vacate the Land and the Plant and may
operate the Plant itself or appoint some other person to operate it.
In the event that the Customer exercises its rights under this clause,
the Land and the Plant shall be valued by three (3) qualified valuers,
one appointed by the Customer, one by CW and a third agreed on by the
two (2) so appointed. The Customer and CW shall accept the agreed
valuation (which shall exclude any amount attributable to or in respect
of goodwill whether arising from the existence of this Agreement or
otherwise, but shall be determined as if the Land and the Plant form a
unit of production) and within a period of one year from the date of
the valuation the Customer shall pay the amount thereof to CW whereupon
neither party shall have any further claim against the other.
18. This Agreement shall be construed in accordance with the Laws of the
Commonwealth of the Bahamas.
<PAGE> 8
SCHEDULE
Minimum Water pressure 30 lbs per square inch
WATER TARIFF BASE RATE
- ----------------------
Rate applies to volume supplied in the billing period
Water charge - US$7.75 per 1,000 US
gallons
MINIMUM MONTHLY VOLUME CHARGE
- -----------------------------
For the first twelve (12) calendar
months after the Effective Date - Nil
Thereafter - 80% of the volume specified by the
customer as per clause 8 multiplied
by the number of days in the calendar
month
<PAGE> 9
Signed by the CUSTOMER RAV BAHAMAS LTD
in the presence of:
/s/ S. Bodie /s/ Gerardo Capo
- ----------------------------------- --------------------------------------
Signed on behalf of COMMONWEALTH WATER LTD
in the presence of:
/s/ J.M. Parker Per /s/ Peter D. Ribbins
- ----------------------------------- ----------------------------------
<PAGE> 10
MEMORANDUM UNDERSTANDING
The parties hereto, Commonwealth Water Limited, a Bahamian company and Cayman
Water Company Limited, a Cayman company, and/or assigns, and RAV Bahamas Ltd., a
Bahamian company, and/or assigns, do hereby enter into this Memorandum of
Understanding this 12 Day of November, 1997.
The parties recognize that on the date thereof they have agreed upon Articles of
Association for Commonwealth Water Limited, and a water distribution agreement
for the supply of water to the Island of North Bimini in the Commonwealth of the
Bahamas and that further RAV Bahamas Ltd. and Cayman Water Company Limited are
the initial shareholders of Commonwealth Water Limited.
To further recognize and clarify prior agreements contained in Letters of
Intent, and/or Understanding dated 21 April, 1997 and 16 October, 1997 the
parties agree to the following:-
1) The convertibility feature granted unto RAV Bahamas, and/or assigns, to
convert their shares of stock of Commonwealth Water Limited into shares of stock
of Cayman Water Company Limited, which is a publicly traded company on the
NASDAQ stock exchange, as described in the Letter of Understanding of 16
October, 1997, is hereby adopted and incorporated herein and a true copy of said
letter of 16 October, 1997 is attached hereto.
2) That the initial capital contribution made by RAV Bahamas Ltd. and Cayman
Water Company Limited as stated in the Letter of Intent of 21 April, 1997 will
provide sufficient funds for the establishment of a water plant and support
facilities (not including a storage tank(s)) which will be capable of producing
200,000 US gallons of potable water per day. Any funds required to increase
production capacity will be provided or secured by Cayman Water Company Limited
through either borrowing from third parties, institutional financing or retained
earnings, all without in anyway diminishing the stock ownership position of RAV
Bahamas Ltd. in Commonwealth Water Limited, with the proviso that said funds
provided or secured by Cayman Water Company Limited shall be treated as a loan
on the books and records of Commonwealth Water Limited. Should RAV Bahamas
assist in providing said additional required funds and/or join in the borrowing
of funds from third parties including institutional lenders, then RAV Bahamas
will be credited with having made a shareholder loan on the books and records of
Commonwealth Water Limited.
<PAGE> 11
In witness whereof the parties hereto have executed this Memorandum of
Understanding the day and date above written.
COMMONWEALTH WATER LIMITED
by: /s/ Peter D. Ribbins
--------------------------------------
Authorized signatory
CAYMAN WATER COMPANYY LIMITED
by: /s/ J.M. Parker
--------------------------------------
RAV BAHAMAS LTD
by: /s/ Gerardo Capo
-------------------------------------
Gerardo Capo
<PAGE> 12
CAYMAN
WATER
16 October 1997
Mr. Anwer Sunderji
Chairman & C.E.O.
Fidelity Bank & Trust FAX 242-326-3000
51 Frederick St.
Nassau, Bahamas
Dear Anwer,
In our telephone conversation last week you asked that we prepare agreements for
signature.
A basic draft of our Supply Agreement was sent to Gerry some weeks ago. Attached
is a final version, subject to your approval, "filling in the blanks" in the
draft with information reflecting the position as we understand it.
As Jeff Parker advised you at your last meeting Commonwealth Water Limited (CW)
was incorporated on 21 August 1997 but at the present it has only a brief,
standard Memorandum and Articles of Association. Our Letter of Intent with Gerry
dated 21 April 1997 sets out our understanding of how CW is to be funded and
operated and, as a first step towards getting CW into shape we will send, by
courier, revised articles which we propose should be adopted to replace the
existing ones. We would appreciate any comments you may have and we will then
have them vetted by a Bahamian lawyer to ensure they comply with the Law.
We will need to know the names, addresses and occupations of the persons who are
to be directors appointed by RAV Bahamas Ltd. (RAV). The only other point from
the Letter of Intent not yet covered is the basis of conversion option we will
offer RAV. We have given this considerable thought. The object of the exercise,
as we see it, is to keep us "all on the same side" and ensure that RAV benefits
from the profitability which we hope the Bahamas will bring to a combined Cayman
Water. We would therefore suggest a conversion option based on the following
terms:-
1) The option can be exercised starting 3 years after the effective date
of the Water Supply Agreement between CW and RAV.
2) At the time at which the option is exercised there must be in place a
water supply agreement with RAV, or others to whom RAV has sold
property, for total volumes and upon terms no less favorable to CW than
the initial agreement, with at least five years to run to its expiry.
3) The formula for determining the number of Cayman Water shares which RAV
would receive should be:-
(AP * EPSCW * RAVCW) / CP = SHSCAY
EPSCAY ....../2
CAYMAN WATER COMPANY LIMITED, PO BOX 1114, GRAND CAYMAN, BRITISH WEST INDIES,
TEL: (345) 945 4277, FAX: (345) 1945 4191, E-MAIL [email protected]
<PAGE> 13
Mr. Anwer Sunderji
16 October 1997
page 2
WHERE:-
RAVCW = Number of Commonwealth Water shares owned by RAV.
EPSCW = Fully diluted Earnings per Share of Commonwealth Water for
the preceding financial year as audited.
AP = Average closing daily price of Cayman Water shares during the
preceding financial year on the Nasdaq stock market.
EPSCAY = Fully diluted Earnings per share of Cayman Water for the
preceding financial year as audited.
CP = Closing daily price of Cayman Water shares on the Nasdaq stock
market for the day on which notice to exercise is given.
SHSCAY = Number of Cayman Water shares.
Let us know your thoughts on this formula.
Obviously we are going to have to "jump" when this deal starts to roll. We would
come to the Bahamas to get the Company organization set up when we know we have
a deal on the water supply.
Yours sincerely,
Cayman Water Company Limited
Peter Ribbins
President & C.O.O.
cc. G. Capo Esq.
<PAGE> 1
Exhibit 10.32
AN AGREEMENT made the 24th day of July, 1995,
BETWEEN: CAYMAN WATER COMPANY LIMITED,
a Cayman company ("CWC")
AND: GALLEON REACH RESORT LIMITED,
carrying on business as WESTIN HOTEL ("the Consumer")
THE PARTIES AGREE that:
1. This Agreement will come into effect on a date not later than October
15, 1995, ("the effective date"), specified by the Consumer by notice
delivered to CWC at least thirty days before the effective date.
2. CWC will supply potable water by pipe to the Customer's property known
as "The Westin Hotel" ("the Property") on the terms and conditions
specified in this Agreement and in the Schedule.
3. For the purpose of this Agreement, the Customer is deemed to be the
owner or his agent of the Property to which CWC is to supply water.
The Consumer must settle bills of account for the supply of water
within the prescribed periods.
CWC must bill the Consumer monthly for water supplied. The Consumer
must pay invoices in full on the later of:
a. ten (10) days after the invoice date, or
b. the 25th day of the month following the month in respect of
which the invoice relates.
The Consumer must pay interest on overdue amounts at the rate of 1%
over the New York prime rate for U.S. dollars quoted by the Royal Bank
of Canada, Grand Cayman main branch, calculated from the due date to
the date of payment, with monthly rests.
4. CWC must supply at least one main meter to the Property in accordance
with clause 9. The Consumer may supply and install individual meters
within the Property. CWC will bill the Customer based on the readings
of the main meter or meters and it will be the Customer's
responsibility to deal with any tenants or guests.
5. CWC need not supply water if:
1
<PAGE> 2
(1) the Consumer does not pay the charges payable under this
Agreement by the due date or
(2) there is any deficiency in CWC's source of supply of water due
to any contingency affecting its machinery, and works or due
to any accidental or other interruption of its water supply.
6. CWC will have such rights of access to the Property as are necessary
for constructing, maintaining and operating its water supply BUT it
must repair any damage done by its servants or agents in the exercise
of those rights of access.
7. (1) The Consumer must pay CWC at its offices at P.O. Box 1114,
Grand Cayman, for water supplied at the rates specified in the
Schedule and in this Agreement adjusted annually as provided
in this Agreement. The rate specified in the Schedule includes
a royalty of 7.5% payable to the Government of the Cayman
Islands ("Government"). If CWC obtains any concession from
Government on this royalty in respect of water which it
supplies to the Consumer, CWC must give the Consumer a
corresponding rebate in the rates. The Consumer is also
subject to the minimum monthly charges specified in the
Schedule.
(2) Except during the first twelve calendar months of this
Agreement, the Consumer must pay minimum charges even if it
makes no use at all of CWC's water supply or if it uses less
than the specified minimum quantity per month.
8. CWC must supply at least an average of thirty thousand (30,000) United
States gallons of water per day in every calendar month or such other
amount as the parties agree. The maximum amount of water that CWC must
supply:
(1) in any 24 hour period is sixty thousand (60,000) United States
gallons; and
(2) in any calendar month is sixty thousand (60,000) United States
gallons multiplied by the number of days in that calendar
month.
If the Consumer draws more than 60,000 United States gallons in any 24
hour period, or more than the number of United States gallons specified
in (2) of this clause in any calendar month, CWC may in its discretion
disconnect the supply. CWC will bill any volume of water which the
Consumer draws in any month in excess of the contractual maximum at the
then prevailing rate in CWC's Seven Mile Beach licence area.
9. CWC must furnish, fix and maintain in good repair a meter or meters
for determining the quantity of water used by the Consumer. The
Consumer must pay the rental specified in the Schedule for the use of
the meter or meters, which will remain the property of CWC. If any
meter is damaged by the Consumer, its servants, agents or invitees, CWC
must repair or replace the meter but at the Consumer's expense. CWC
2
<PAGE> 3
will charge the Consumer for water used based on the average water
consumption of the previous twelve (12) months when the defective meter
was working, pro rata for the period when the meter was not recording.
10. (a) On executing this Agreement, the Consumer must provide CWC
with a letter of credit in favour of CWC to cover a security
deposit equal to the cost of the maximum daily supply at the
date of this Agreement multiplied by fifty-five (55)
(US$41,316.00), increasing that security deposit by increasing
the letter of credit from time to time as necessary so that
the amount secured is at all times equal to the cost of the
daily maximum supply multiplied by fifty-five (55). The
Consumer must maintain the deposit in accordance with this
clause until this Agreement ends.
(b) If at any time during the subsistence of this Agreement, the
Consumer is in breach of any of its obligations under it, CWC
may make a claim under the letter of credit for the amount due
to it at that time. If CWC does so, the Consumer must do all
things necessary to restore the amount secured by the letter
of credit to the amount referred to in (a) above and (if the
letter of credit was not sufficient to satisfy the Consumer's
obligations to CWC) pay the remaining amount owing to CWC all
within seven days.
(c) If at the time, when this Agreement ends the Consumer is in
compliance with all its obligations under it, CWC must, if
necessary, release the letter of credit on request by the
Consumer and at its expense.
11. Subject as stated in the Schedule, CWC must deliver water to the
Property at the pressure, from time to time, in its water system. The
Consumer must bear the cost of constructing and operating storage and
pressure boosting facilities on the Property.
12. The quality of water that CWC supplies must be within its present
standards required by its licence which are a maximum of 500 mg/L total
dissolved solids. If at any time Government requires CWC to supply
water of a higher quality, then CWC will make an appropriate price
adjustment to the cost of water supplied, which it will agree with
Government before supplying higher quality water.
13. On January 1 in each year, CWC will adjust the water charges by the
formula based on the change in the previous year of the Cayman Islands
Government Consumer Price Index and the United States Producer Price
Index for Industrial Commodities as at each September 30, as set out in
its licence. (The Cayman Index weighs the formula by 40% and the U.S.
Index by 60%). CWC may from time to time increase its charges to the
extent permitted by its licence from the Cayman Islands Government.
14. CWC must lay the necessary water lines to the boundary of the Property
at a location to be determined by CWC. The Consumer must pay the cost
of connecting the Property
3
<PAGE> 4
to CWC's line. The connections must be made by or under the supervision
of an employee of CWC. The Consumer must not interfere with CWC water
mains, control valves or meters and must not connect any water pump or
other apparatus direct to the water line provided by CWC at any time.
15. All pipes for water supply on the Property must be fitted at the meter
with screw-down shut-off valves or equivalent at the Consumer's
expense.
16. The water supply service must be used only by the Consumer or his
tenants or guests and must not be re-sold or otherwise supplied to
third parties, either within or outside the boundaries of the Property.
17. Notwithstanding that CWC has connected any water supply to a hydrant or
sprinkler system on the Property, it is expressly agreed that CWC will
be under no obligation to provide water for fire fighting purposes, at
any time whatever or under any circumstances, and will only supply
water for those purposes if it is able to do so, and will not be liable
for any damage to the Property whatever caused by fire or any related
cause.
18. Subject to Clause 10, the term of this Agreement is ten (10) years.
19. CWC may end this Agreement at any time without notice if any amount due
to CWC under this Agreement remains unpaid seven (7) days after a
demand in writing, addressed to the Customer, has been left at the
Property.
SCHEDULE
Minimum water pressure 30 lbs. per square inch.
WATER TARIFF BASE RATES
Rates apply to amounts for the billing period.
o Water Charges US$12.52/1000 U.S. gallons (KUSG)
Minimum Monthly Charge is for 30,000 U.S. gallons per day multiplied by the
number of days in each calendar month, or such other amount as the parties
agree.
METER CHARGES
Size Monthly Rental Reconnection Fee**
---- -------------- ------------------
3/4" CI$ 3.50 CI$ 50.00
1" CI$ 5.00 CI$ 75.00
4
<PAGE> 5
1 1/2" CI$ 7.50 CI$110.00
2" CI$10.00 CI$150.00
3" CI$15.00 CI$225.00
4" CI$25.00 CI$300.00
6" CI$40.00 CI$350.00
** This charge relates to work completed by CWC employees outside the boundaries
of the Property. Any work carried out by CWC employees within the boundaries at
the Consumer's request must be charged to the Consumer at cost plus thirty
percent (30%). Such work will be undertaken entirely at CWC's discretion and
must be previously requested in writing.
PLEASE NOTE:
Under The Water (Production and Supply) Law, 1979 (Law 15 of 1979) whoever
unlawfully interferes with CWC's water system or obstructs the execution of any
works by an employee of CWC in his duties as such is guilty of an offence, and
may be liable to be fined in accordance with provisions of the Law.
SIGNED by the Consumer in the ) GALLEON BEACH RESORT LIMITED
the presence of: )
)
)
)
/s/ Mary Cooper ) Per: /s/ [illegible]
- ------------------------------- ) -------------------------------
SIGNED on behalf of CAYMAN ) CAYMAN WATER COMPANY
WATER COMPANY LIMITED ) LIMITED
in the presence of: )
)
)
)
/s/ Alexander Stephen Bodden ) Per: /s/ Peter D. Ribbins
- ------------------------------- ) -------------------------------
5
<PAGE> 1
Exhibit 10.33
AN AGREEMENT made the 9th day of February, 1994,
BETWEEN: CAYMAN WATER COMPANY LIMITED, a Cayman company
("CWC")
AND: WIDAR LTD., carrying on business as RADISSON
RESORT GRAND CAYMAN ("the Consumer")
THE PARTIES AGREE that:
1. CWC will supply potable water by pipe to the Customer's property known
as "The Radisson Hotel" ("the Property") on the terms and conditions
specified in this Agreement and in the Schedule.
2. For the purpose of this Agreement, the Customer is deemed to be the
owner or his agent of the Property to which CWC is to supply water. The
consumer must settle bills of account for the supply of water within
the prescribed periods.
3. CWC must supply one main meter to the Property in accordance with
clause 8. The Consumer may supply and install individual meters
approved by CWC within the Property. CWC will bill the Customer and it
will be the Customer's responsibility to deal with any tenants or
guests.
4. CWC need not supply water if
(1) the Consumer does not pay the charges payable under this
Agreement by the due date or
(2) there is any deficiency in CWC's source of supply of water due
to any contingency affecting its machinery, and works or due
to any accidental or other interruption of its water supply.
5. CWC will have such rights of access to the Property as are necessary
for constructing, maintaining and operating its water supply BUT it
must repair any damage done by its servants or agents in the exercise
of those rights of access.
6. (1) The Consumer must pay CWC at its offices at P.O. Box 1114,
Grand Cayman, for water supplied at the rates specified in the
Schedule. The Consumer is also subject to the minimum monthly
charges specified in the Schedule.
(2) The Consumer must pay minimum charges even if it makes no use
at all of CWC's water supply
1
<PAGE> 2
or if it uses less than the specified minimum quantity per
month.
7. CWC must supply a minimum of sixty thousand (60,000) United States
gallons of water per month. The maximum amount of water that CWC must
supply
(1) in any 24 hour period is ten thousand (10,000) United States
gallons; and
(2) in any calendar month is one hundred eighty thousand (180,000)
United States gallons.
If the Consumer draws more than 10,000 United States gallons in any 24
hour period, or 180,000 United States gallons in any calendar month,
CWC may in its discretion disconnect the supply.
8. CWC must furnish, fix and maintain in good repair a meter for
determining the quantity of water used by the Consumer. The Consumer
must pay the rental specified in the Schedule for the use of the meter,
which will remain the property of CWC. If the meter is damaged by the
Consumer, its servants, agents or invitees, the Consumer must repair or
replace the meter at its expense. CWC will charge the Consumer for
water used based on the average water consumption of the previous
twelve (12) months when The meter was working, pro rata for the period
when the meter was not recording.
9. The Consumer may end this Agreement by a written notice which will be
effective only when all money owed by the Consumer to CWC is paid in
full.
10. CWC may end this Agreement at any time without notice if any amount
due to CWC under this Agreement remains unpaid three (3) days after a
demand in writing, addressed to the Customer, has been left at the
Property.
11. CWC must lay the necessary water lines to the boundary of the Property
at a location to be determined by CWC. The Consumer must pay the cost
of connecting the Property to CWC's line. The connections must be made
by or under the supervision of an employee of CWC. The Consumer must
not interfere with CWC water mains, control valves or meters and must
not connect any water pump or other apparatus direct to the water line
provided by CWC at any time.
12. All pipes for water supply on the Property must be fitted with
screw-down shut-off valves or equivalent at the Consumer's expense.
2
<PAGE> 3
13. CWC may from time to time increase its charges to the extent permitted
by its licence from the Cayman Islands Government.
14. The water supply service must be used only by the Consumer or his
tenants or guests and must not be re-sold or otherwise supplied to
third parties, either within or outside the boundaries of the Property.
15. Notwithstanding that CWC has connected any water supply to a hydrant or
sprinkler system on the Property, it is expressly agreed that CWC will
be under no obligation to provide water for fire fighting purposes, at
any time whatever or under any circumstances, and will not be liable
for any damage to the Property whatever caused by fire or any related
cause.
3
<PAGE> 4
SCHEDULE
Seven Mile Beach Service Agreement
Minimum water pressure 30 lbs. per square inch.
Charges are payable on the last day of each calendar month.
WATER TARIFF BASE RATES
Rates apply to amounts for the billing period.
o Water Charges - CI$17.45/1000 U.S. gallons plus
Energy Adjustment Factor
Minimum Monthly Charge is for 60,000 U.S. gallons
One and one-half percent (1 1/2%) late payment charge will be added after
delinquent date.
METER CHARGES
Size Monthly Rental Reconnection Fee**
---- -------------- ------------------
3/4" CI$ 3.50 CI$ 50.00
1" CI$ 5.00 CI$ 75.00
1 1/2" CI$ 7.50 CI$110.00
2" CI$10.00 CI$150.00
3" CI$15.00 CI$225.00
4" CI$25.00 CI$300.00
6" CI$40.00 CI$350.00
** This charge relates to work completed by CWC employees outside
the boundaries of the Property. Any work carried out by CWC employees within the
boundaries at the Consumer's request must be charged to the Consumer at cost
plus thirty percent (30%). Such work will be undertaken entirely at CWC's
discretion and must be previously requested in writing.
PLEASE NOTE:
Under The Water (Production and Supply) Law, 1979 (Law 15 of 1979) whoever
unlawfully interferes with CWC's water system or obstructs the execution of any
works by an employee of CWC in his duties as such is guilty of an offence, and
may be liable to be fined in accordance with provisions of the Law.
SIGNED by the Consumer in )
the presence of: )
)
) /s/ T.M. Parchment
) ---------------------------------
)
/s/ Joseph Yung )
- --------------------------------- )
4
<PAGE> 5
SIGNED on behalf of CAYMAN ) CAYMAN WATER COMPANY LIMITED
WATER COMPANY LIMITED in the )
presence of: )
)
) Per: /s/ Sharon Ebanks
) --------------------------------
)
/s/ T.M. Parchment )
- --------------------------------- )
5
<PAGE> 1
Exhibit 10.34
ROYAL BANK
OF CANADA
- --------------------------------------------------------------------------------
P. 0. Box 245
George Town, Grand Cayman
Cayman Islands, B.W.I.
Tel: (345) 949-4600 Fax: (345) 949-7396
Telex: CP 4244
December 30, 1998
PRIVATE & CONFIDENTIAL
Consolidated Water Co. Ltd
Box 1114
Grand Cayman, B.W.1
ATTENTION: ALEX BODDEN
Dear Sir:
RE: OFFER TO FINANCE
Further to our recent discussions, and subject to the undernoted terms and
conditions, we are pleased to offer you financing as follows:
LENDER: ROYAL BANK OF CANADA (The "Bank")
BORROWER: Consolidated Water Co. Ltd. (The "Borrower")
AMOUNT: Segment 1) $1,000,000 - Overdraft, revolving
Segment 2) $1,000,000 - Term Loan
Segment 3) $1,500,000 - Term loan
Segment 4) $1,500,000 - Term loan
CURRENCY: All dollar amounts in this letter refer to United States
funds, unless otherwise specified.
PURPOSE: Segment 1) General Operating purposes
Segment 2) Term out outstanding overdraft
Segment 3) Office Building
Segment 4) 40% interest in Sea Tec Belize Ltd.
Page 1 of 9
<PAGE> 2
INTEREST RATES: Segment 1) USD Prime + 1%/KYD Prime + 1%
Segment 2) Libor + 1.50%
Segment 3) Libor + 1.50%
Segment 4) Libor + 1.50%
The Borrower shall pay interest monthly in arrears on
Prime-based facilities at the annual rate set out above
calculated on a daily basis and based on the actual number of
days elapsed in the period for which interest is being
calculated divided by 365. The annual rates of interest to
which the rates calculated in accordance with the foregoing
provisions are equivalent, are the rates so determined
multiplied by the actual number of days in a one year period
calculated from the first day on which interest is to be
calculated and divided by 365. These rates apply after as well
as before maturity, default, and judgement, with interest on
overdue interest at the same rate as on the principal.
Libor loans:
------------
Interest on Libor loans shall be payable on each Libor
interest date. The yearly rates of interest to which the rates
determined in accordance with the Libor provisions of this
agreement are equivalent, are rates so determined multiplied
by the actual number of days in a year and divided by 360.
SERVICE PRICING: a) A non-refundable fee of $12,500 (1/2%) will be charged to
cover the administration involved in setting up the
loans (Segments 2 & 4).
b) Any temporary excesses and additional credit requirements
are subject to approval and may be assessed a fee of up to
1%, minimum $500.
c) Any requests for amendments to the Borrower's current line
of credit may be assessed a fee in the minimum amount of
$500 per occasion.
Page 2 of 9
<PAGE> 3
REPAYMENT: Segment 1) Revolving; repayment in full upon demand,
Segment 2) Consecutive monthly principal payments of $8,333
plus interest (5 year term, 10 year amortization).
Segment 3) Consecutive monthly principal payments of $12,500
plus interest (5 year term, 10 year amortization).
Segment 4) Consecutive monthly principal payments of $12,500
plus interest (5 year term, 10 year amortization).
PROHIBITED INTEREST - Nothing in this agreement shall be
construed as obliging the Borrower to pay any interest,
charges or other expenses as provided by this agreement or in
any other security agreement related thereto in excess of what
is permitted by law.
PREPAYMENTS: Segment 1) may be prepaid in whole or part without penalty.
Segments 2) 3) & 4) May only be repaid at maturity. (maturity
of each term, i.e., 30 days, 60 days, 90 days etc.)
SECURITY: GENERAL SECURITY FOR ALL LOANS
Certified copy of directors' resolutions, bylaws, legal
opinions and attendant documents as may be requested by the
Bank.
Fixed & floating charge debenture for USD$1,106,000, (To be up
stamped to USD$5,500,000) with fixed charge covering West
Bay Beach North, Block 11D, Parcel 8 and floating charge
covering all other assets of the Borrower.
Guarantee & Postponement of Claim in favour of Consolidated
Water Co. Ltd. signed by Cayman Water Company Limited.
Page 3 of 9
<PAGE> 4
INSURANCE: The Borrower will lodge with the Bank comprehensive insurance
policies satisfactory to the Bank, covering buildings,
equipment and inventory with loss made payable firstly to the
Bank.
In addition, Construction and All Risk insurance is also to be
assigned with loss payable to Royal Bank during the
construction period of the office building (Segment 3).
LIFE INSURANCE: The Borrower acknowledges that loans are not life insured.
REPRESENTATIONS,
WARRANTIES &
ACKNOWLEDGMENTS: The Borrower represents and warrants to the Bank that:
1) it is a corporation validly incorporated and subsisting
under the laws of Cayman Islands, and that it is duly
registered or qualified to carry on business in all
jurisdictions where the character of the properties owned
by it or the nature of its business transacted makes such
registration or qualification necessary;
2) the execution and delivery of this Agreement has been duly
authorized by all necessary actions and does not (i)
violate any law or, any provision of the charter or any
unanimous shareholders agreement to which it is subject
or, (ii) result in a breach of, a default under, or the
creation of any encumbrance on the properties and assets
of it under any agreement or instrument to which it or any
of its properties and assets may be bound or affected.
3) There is no provision in the Borrower's articles, bylaws
or any unanimous shareholder agreement respecting the
ability of the Borrower to:
a) borrow money upon the credit of the Borrower;
b) issue, reissue, sell or pledge debt obligations of the
Borrower;
Page 4 of 9
<PAGE> 5
c) give a guarantee on behalf of the Borrower to secure
performance of an obligation to any person; and
d) mortgage, hypothecate, pledge or otherwise create a
security interest in all or any property of the
Borrower, owned or subsequently acquired, to secure
any debt obligation of the Borrower.
4) The Borrower is in compliance with all applicable
statutes, regulations, orders and bylaws enacted or
adopted for the protection and conservation of the natural
environment.
5) The Borrower has obtained all certificates, approvals,
permits, consents, orders and directions required
concerning the installation or operation of any machinery,
equipment or facility constituting assets of the Borrower
or required concerning any land of the Borrower, or
required concerning any structure, activity or facility on
or in any land of the Borrower, and the Borrower is not
aware of any circumstance which might give rise to the
revocation of any such certificates, approvals, permits,
consents, orders and directions or the implementation of
further orders or directions relating to the above which
might affect the land or the business of the Borrower
which the Borrower has not disclosed fully in writing to
the Bank.
COVENANTS: The Borrower, by accepting this Offer, agrees:
1) to deliver to the Bank such financial and other
information as the Bank may reasonably request from time
to time, including, without limiting the generality of the
foregoing, any information that the bank may require
relating to the state of Year 2000 readiness of the
Borrower.
2) not to grant or create any security interest, lien, charge
or encumbrance affecting any of its properties or assets,
except for any security
Page 5 of 9
<PAGE> 6
interest granted to secure an obligation created solely
for the purchase of additional fixed assets required for
the efficient operation of its business with any such
security to cover only the assets purchased.
3) Debt to Equity shall not exceed 0.85.
"Equity" is defined as the total of share capital,
contributed surplus, retained earnings and postponed
shareholder loans MINUS intangible assets and amounts owed
to the Borrower by shareholders/associated companies.
4) to maintain a Debt Servicing ratio of not less than 1.25.
All covenants in this agreement or any other agreement between
the Borrower and the Bank or other documentation or security
will remain in force for the benefit of the Bank at all times
before and after the making of advances hereunder and/or the
taking of security pursuant hereto.
OTHER CONDITIONS: If the Bank chooses to grant forbearance or a waiver of any
of the terms and conditions of this letter, this action will
not affect the Bank's ability to act on any subsequent breach
or default or the rights of the Bank resulting therefrom.
EVIDENCE OF
INDEBTEDNESS: The Bank shall open and maintain at the Branch of Account,
accounts and records evidencing the Borrowings made available
to the Borrower by the Bank under this agreement. The Bank
shall record the principal amount of such Borrowings, the
payment of principa1 and interest on account of the loans, and
all other amounts becoming due to the Bank under this
agreement.
The Bank's accounts and records constitute, in the absence of
manifest error, PRIMA FACIE evidence of the indebtedness of
the Borrower to the Bank pursuant to this agreement.
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<PAGE> 7
The Borrower authorizes and directs the Bank to automatically
debit, by mechanical, electronic or manual means, any bank
account of the Borrower for all amounts payable under this
agreement, including but not limited to, the repayment of
principal and the payment of interest, fees and all charges
for the keeping of such account.
EVENTS OF
DEFAULT: Without limiting the Bank's right to make demand for payment
at any time on demand loans, the Bank may immediately withdraw
the Borrower's right to further borrow under this agreement,
demand immediate repayment of all amounts outstanding,
together with outstanding accrued interest and realize on all
or any portion of the security granted to the Bank if any of
the following events of default occur:
1) Failure of the Borrower to pay any principal, interest or
other amounts when due pursuant to this agreement;
2) Failure of the Borrower to observe or perform any
covenant, condition or provision in this agreement or
other documentation or security;
3) If the Borrower becomes insolvent, commits an act of
bankruptcy, makes an assignment of property for the
benefit of its creditors, or enters into a bulk sale of
its assets without the prior written approval of the Bank;
4) If any proceeding is taken with respect to a compromise or
arrangement with the creditors of the Borrower, including
under the Companies' Creditors Arrangement Act or to have
the Borrower declared bankrupt or wound up, or to have a
Receiver or Receiver Manager appointed of any part of the
mortgaged property or if any encumbrancer takes possession
of any part thereof;
Page 7 of 9
<PAGE> 8
5) There occurs, in the sole opinion of the Bank:
(a) a material adverse change in the financial condition
of the Borrower; or
(b) an unacceptable change in ownership of the Borrower;
or
(c) legal implications detrimental to the affairs of the
Borrower;
CONDITIONS
PRECEDENT: The obligation of the Bank to make these credit facilities
available to the Borrower is subject to and conditional upon:
All security and/or documentation being completed and
registered in form and substance satisfactory to the Bank.
PREDISBURSEMENT All regulatory approvals are to be in place prior to
CONDITIONS: advancing funds (Segment 3)
An Engineering firm, Architect or Quantity Surveyor must
certify budget adequacy, completeness of plans, compliance to
codes, adequacy of structure. Electrical & mechanical systems
and review and approve budget survey and construction schedule
prior to each construction draw.
REVISION DATE: Without limiting any rights the Bank may have to demand
payment, these credit facilities will be subject to review at
the Bank's discretion and at least annually.
LEGAL COSTS: All legal costs, fees, expenses, etc. incurred in establishing
these credit facilities, preparation and maintenance of
security and documentation are for account of the Borrower.
ACCEPTANCE: This offer expires if not accepted in writing by January 31st,
unless extended in writing by the Bank.
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<PAGE> 9
Please acknowledge your acceptance of the above terms and conditions by signing
the attached copy of this Offer to Finance in the space provided below and
returning to the undersigned. This Offer to Finance cancels and supersedes any
previous offers.
Yours truly,
ROYAL BANK OF CANADA
/s/ G. C. Plamondon
----------------------------------------
G.C. PLAMONDON
Sr. Assistant Manager
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<PAGE> 1
PricewaterhouseCoopers
P.O. Box 258GT
British American Centre
Grand Cayman B.W.I.
Telephone (345) 949 7000
Telecopier (345) 949 7352/949 8154
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form F-2 of our
report dated March 22, 2000 relating to the financial statements of
Consolidated Water Co. Ltd, which appear in such Registration Statement. We
also consent to the references to us under the heading "Experts" in such
Registration Statement.
/s/ PricewaterhouseCoopers
- ----------------------------
PricewaterhouseCoopers
Cayman Island
April 20, 2000
