Offering Circular

OFFERING CIRCULAR
BEST ROAD MUTUAL WATER CO., INC.
SERVING THE FOLLOWING SUBDIVISIONS IN SAN BENITO COUNTY:
HEATHERWOOD, TRACT #226
FOX HILLS ESTATES, TRACT #240
FISCHER, Parcel Map page 94, Book 8

Dated: March 1, 1996

Summary

This mutual water company stock is offered for BEST ROAD MUTUAL WATER CO., INC. a California non-profit mutual corporation, which shall provide domestic water services to three (3) subdivisions:

A. The Heatherwood Subdivision, a 29 lot subdivision, commonly known as “Tract #226, which map was filed for record in the office of the recorder of the County of San Benito, State of California, which 29 lots are situated in Hollister in the unincorporated area of San Benito County.

B. The Fox Hills Estates Subdivision, a 15 lot subdivision, commonly known as “Tract #240, which map was filed for record in the office of the recorder of the County of San Benito, State of California, which 15 lots are situated in Hollister in the unincorporated area of San Benito County.

C. The Fischer Subdivision, a 4 lot subdivision, commonly known as Book 8 of parcel map, page 94, which 4 lots are situated in Hollister in the unincorporated area of San Benito County.
The Certificate of Membership represents one share ownership in this mutual water company, which is acquired by purchasing a lot in any one of the three (3) above-named subdivisions. Upon the purchase of each lot with such certificate running as part of the title to the lot, the purchaser shall acquire certain obligations to this mutual water company. These obligations are described in this Offering Circular.

THIS OFFERING CIRCULAR IS PROVIDED FOR YOUR OWN PROTECTION AND CONTAINS A SUMMARY OF ONLY CERTAIN MATERIAL INFORMATION REGARDING YOUR OBLIGATIONS AND RIGHTS IF YOU ACQUIRE AN INTEREST IN BEST ROAD MUTUAL WATER CO., INC.

THIS OFFERING CIRCULAR, AND ALL CONTRACTS AND AGREEMENTS, SHOULD BE READ CAREFULLY IN THEIR ENTIRETY FOR AN UNDERSTANDING OF ALL RIGHTS AND OBLIGATIONS GIVEN YOU AS A PURCHASER OF A CERTIFICATE OF MEMBERSHIP IN SUCH MUTUAL WATE COMPANY, AND THOSE OF THE MUTUAL WATER COMPANY TO YOU.

THIS OFFERING OF MUTUAL WATER COMPANY SHARES IS PURSUANT TO A PERMIT ISSUED UNDER SECTION 25113, CALIFORNIA CORPORATIONS CODE, BY THE COMMISSIONER OF CORPORATIONS. SUCH PERMIT DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE COMMISSIONER OF CORPORATIONS, NOR A FINDING BY THE COMMISSIONER THAT THE INFORMATION PROVIDED HEREIN IS TRUE, COMPLETE AND NOT MISLEADING.

THE SALE OF THE UNITS OFFERED HEREUNDER HAS NOT BEEN REGISTERED OR QUALIFIED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION AND QUALIFICATION PROVISIONS OF THE SECURITIES ACT OF 1933. ACCORDINGLY, THIS CIRCULAR HAS NOT BEEN FILLED WITH, NOR REVIEWED BY THE SECURITIES AND EXCHANGE COMMISSION. THE OFFERING OF THE SECURITIES DESCRIBED HEREIN IS LIMITED STRICTLY TO PERSONS WHO ARE ACQUIRING A LOT IN ANY OF THE ABOVE THREE (3) SUBDIVISIONS.

THIS OFFERING DOES NOT CONTAIN ANY UNTRUE STATEMENT OF A MATEIAL FACT NOR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS MADE IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS OF THE DOCUMENTS PURPORTED TO BE SUMMARIZED HEREIN, AND REPERENCE SHOULD BE MADE TO THE DOCUMENTS THEMSELVES FOR CORRECT UNDERSTANDING, HOWEVER.

The names and address of the agent in the State of California authorized to receive service of process for Beat Road Mutual Water Co., Inc., is ROBERT LARSEN, 445-Y RESERVATION ROAD, MARINA, CA. 93933.

OFFERING CIRCULAR FOR BEST ROAD MUTUAL WATER CO., INC.

1.   Best Road Mutual Water Co., Inc., - Heatherwood, Fox Hill Estates and Fischer subdivisions: Best Road Mutual Water Co., Inc., is a non-profit mutual benefit corporation organized under the non-profit mutual benefit corporation law of the State of California, to serve the Heatherwood, Fox Hills Estate and Fischer Subdivisions. The specific purpose of this corporation is to develop, distribute, supply and deliver water for domestic uses to its members, at cost, and to no one except its members, or to the State, or any department or agency thereof , or to any school district, at cost. Pursuant to the bylaws of the water company, its members must be owners of lots in one of the three (3) subdivisions, Heatherwood, Fox Hills Estates, and Fischer, as legally described in the summary above.

    Ownership interests in this mutual water company are represented by certificates of membership, none of which has been issued, and which certificates will only be issued, and which certificates will only be issued as escrows close on the sale of each lot in one of the three (3) named subdivisions. Attached as exhibits to this offering circular are a copy of the Articles of incorporation (A), the Bylaws (B) and a blank Certificate of Membership (C).

2.   Water Supply, Distribution and Fire Protection System: The water system has been developed to service all three (3) subdivisions, to provide domestic water services to 48 lots, having an average size of 5 acres per lot, for a total developed area of approximately 240 acres. There is adequate water, through the water supply developed to supply all three (3) subdivisions.

     There are two (2) wells, each having the capacity to produce the maximum day demand on its own without pumping from the other well. The wells pump at the rate of 35 gallons per minute into the storage tank through a manganese green sand filter, which filter is automatically regenerated with potassium permanganate. Chlorination is not provided. The treatment process is designed to reduce iron, manganese and hydrogen sulfate odors to acceptable levels. After treatment, the treated water is discharged into the system and stored. The storage tank is 124,000 gallons. For details, see the Engineer’s report, attached hereto and incorporated herein as Exhibit D.

THIS SYSTEM IS NOT DESIGNED TO PROVIDE IRRIGATION OR STOCK WATER, NOR IS IT DESIGNED TO HANDLE EXTENSIVE LANDSCAPING. THE ENGINEER’S REPORT INDICATES THAT THE SYSTEM HAS BEEN DESIGNED FOR NORMAL PEAK DOMESTIC AND FIRE REQUIREMENTS, WITHOUT CONSIDERATION FOR IRRIGATION DEMAND. SHOULD IRRIGATION USE BE ESTABLISHED, SPECIAL SCHEDULING WOULD HAVE TO BE TAKEN INTO CONSIDERATION.

3.   Opinion of Engineer: David K. Fuller, of WWD Corporation, 203B Calle del Place, Monterey, CA 93940 has done the necessary reports and given the necessary opinions for this installation, including that the water supply, distribution, and fire protection system will adequately and safely meet the total requirements for all water consumers under maximum consumption. Concurrently, David K. Fuller has also certified that the mutual water company has been designed in accordance with design and construction standards set by the State of California. David K. Fuller has consented in writing to the use of his opinion in this offering circular.

4. Area to be serviced: Best Road Mutual Water Co. Inc., intends to service the three (3)subdivisions named, containing 48 lots, and no other area.

5. Activities Other than the Delivery of Water Contemplated: No other activities are contemplated at this time for the mutual water company, though pursuant to its Articles of incorporation, such other activities could be undertaken if, pursuant to the bylaws, the members so determine. Since the corporation is a mutual benefit corporation, its activities would be limited to activities legal to such a corporation.

6. Rights and Duties of Members: Each certificate of membership represents one lot and therefore one vote in Best Road Mutual Water Co. Inc. The rights and duties are set forth in the company’s Bylaws, and summarized, consist of the following:

A. Rights:
(i) Each certificate of membership has one vote, regardless of the number of owners of the real estate.
(ii) Members elect the Board of Directors, which in turn runs the mutual water company and elects officers to perform the day to day management of the company.
(iii) Members set the terms of the Bylaws, amending the Bylaws by a majority of the voting power of the company.

B. Duties:

(i) The Board of Directors assesses each lot in Best Road Mutual Water Co. Inc., for the installation, depreciation, maintenance and operation of the pipelines and water system owned by the company. The Board, in levying such assessments, sets rates that are sufficient to create and build a fund which will replace the system at the time it outlives its useful life. Each member is responsible for the payment of such assessments. Failure to any member to pay any assessment when due may constitute a forfeiture of the right to use water from the water system.

(ii) Each member is responsible for the repair and maintenance of his or her own service line, the 1-1/2 inch line from the boundary of his or her property to the residence of the member.

(iii) Each member has the responsibility to comply with the rules and regulations of the company with respect to the water distribution and fire system as set by the Board of Directors and its Officers.

C. Membership: The memberships may not be sold separately from the right to water evidenced by the membership.

7. Sale of Water: The Articles of incorporation provide that Best Road Mutual Water Co. Inc., may supply and deliver water only to its members, or to the State, or to any agency or department thereof, or any school district, at cost. By the terms of the Bylaws, this means at the present time water may only be sold to members who own real estate in any of the three (3) named subdivisions. The Bylaws, however, may be amended by a majority vote of the members in the future to expand the scope of the water company, thus allowing water to be sold to members not owing real estate in the service area.

8. Prohibition of Issuance of Fractional Shares: The Bylaws provide that there shall be no fractional shares issued (see Article Eleven, Section 4, at page 16 of the Bylaws, Exhibit B attached hereto).

9. Quality of Water: The County of San Benito Health Department has certified that the California Office of Drinking Water has issued a permit for the water system serving the three (3) subdivisions (see Exhibit F). The exact chemical analysis of the water is contained in the Engineer’s Report.

10. Limitation on Salaries: The Bylaws of Best Road Mutual Water Co. Inc., provide in Article Six, Section 4, and Article Thirteen, Section 4, reasonable limitations on the salaries paid to persons operating or employed by Best Road Mutual Water Co. Inc., including officers and directors.

11. Transferability of Membership Certificates: Membership Certificates may only be transferred with the transfer and assignment of the lot of land to which it is appurtenant.

12. Voting Rights: Each certificate of membership has one vote, regardless of the number of owners of that parcel to which the certificate of membership is attached.

13. Access to Books and Records: The books and records of Best Road Mutual Water Co. Inc., are accessible by members. These records consist of the membership certificate book, the books of account, the Bylaws and minutes of proceedings of member’s and director’s meetings, and of the executive, if any, and other committees of the directors. All these records are open to inspection upon written demand of any member at any reasonable time and for a purpose reasonably related to his or her interest as a member. These books and records shall be exhibited at any time when required by the demand of 10% of the agent, or an attorney, and shall include the right to make extracts. Demand of inspection other than at a membership meeting shall be made in writing upon the President, Secretary or General Manager, if any, of Best Road Mutual Water Co. Inc..

14. Contemplated Expansion of the System: The system is not going to be expanded.

15. Sub dividers Duties for Maintenance, Repair and Replacement of System: The water distribution and fire protection system has been transferred from the developers to the mutual water company by a Contract for Acquisition (Exhibit G). Paragraph 5 of that contract specifies that the developers will pay to the mutual water company monthly a proportional part of repair and replacement fund according to the number of lots owned or controlled by the developers to the total number of lots in the subdivisions. Initially, this means that all monthly costs will be borne by the developers until the close of the first escrow. As escrows close, the developers will be relieved from their duties proportionately to the number of lots sold. See paragraph 17 hereafter for a detailed operating budget for the first six (6) months of operation, which includes estimated monthly fees to be charged.

16. Repair and Replacement Fund: In accordance with the Bylaws, Article Twelve, Section 2, a repair and replacement fund will be established. The establishment of a repair and replacement fund is reflected in the financial operating budget for the first six (6) months. The purpose of this fund is to assess owners at a rate sufficient to create and build a fund which will both repair and replace the system as is necessary, and when the system outlives its useful life. “Useful life” is set on the recommendation of the engineer in the Engineers Report, at page 5 of Report #1 (Exhibit D). The cost of the maintenance of the system is anticipated by the Engineer to be $7,700.00 per year. The Engineers Report indicates a useful life of different portions of the system, ranging from 10 to 40 years, as set forth at page 5 of Report #1 (Exhibit D). Since the system’s cost of $313,700.00has to be amortized with the anticipated inflationary rate of 7% per annum over the original cost of the system, pursuant to the report, this will cost 2,710.00 per month, or $32,516.00 per year to amortize. The budget reflects the total sum needed for maintenance, repair and replacement of the water supply, distribution and fire protection system. It reflects $677.00 per lot for this purpose.

17. Operating Budget: The detailed operating budget for the first year of operation, beginning with March 1, 1996 is as follows (See Engineer’s Report, Exhibit D):

A. Normal maintenance …………….$   2,400.00 per year
B. Trouble shooting ……………………$   1,800.00 per year
C. Chemicals (KMN04)………………..$       800.00 per year
D. Energy (Power)………………………$    1,500.00 per year
E. Lease telephone lines……………..$   1,200.00 per year
F. Replacement fund…………………..$ 24,816.00 per year
Total costs for first year……………….$ 32,516.00

Cost per lot per year (48 lots) rounded to nearest dollar…..$ 677.00

18. Summary of Exhibits Attached:
A. Articles of Incorporation
B. Bylaws
C. Certificate of Membership
D. Engineers Report
E. Letter from Fire Marshall
F. Letter from Health Department
G. Contract for Acquisition

BEST ROAD MUTUAL WATER COMPANY, INC.

OFFERING CIRCULAR

EXHIBIT A

ARTICLES OF INCORPORATION
BEST ROAD MUTUAL WATER COMPANY, INC.

ARTICLES OF INCORPORATION
OF
BEST ROAD MUTUAL WATER CO. INC.

ARTICLE ONE
NAME

The name of this corporation is BEST ROAD MUTUAL WATER CO. INC.

ARTICLE TWO
PURPOSE

A. This corporation is a non-profit mutual benefit corporation, organized under the Nonprofit Mutual Benefit Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under such law.

B. The specific purpose of this corporation is to develop, distribute, supply and deliver water for domestic and irrigation uses, or any one of such uses, to its members at cost, and to no one except its members, or to the State, or any agency or department thereof, or to any school district, or to any other mutual water company at cost.

ARTICLE THREE
AGENT FOR SERVICE OF PROCESS

The name and address in the State of California of this corporation’s initial agent for service of process is LYNN PENNINGTON, 3601 Caldwell Drive, Suite A, Soquel, CA 95073.

I hereby declare that I am the person who executed the forgoing Articles of Incorporation, at Soquel, California, on the 4th day of April, 1990, Which execution is my act and deed.

     Signed
     _____________________________
     LYNN PENNINGTON