As filed with the Securities and Exchange Commission on August 5, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
under the
SECURITIES ACT OF 1933
WESTOWER CORPORATION
(Name of small business issuer in its charter)
Washington 1623 91-1825860
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization)Classification Code Number) Identification Number)
Westower Corporation
7001 NE 40th Avenue
Vancouver, Washington 98661
(360) 750-9355
(Address and telephone number of principal
executive offices and principal place of business)
Calvin J. Payne
Westower Corporation
7001 NE 40th Avenue
Vancouver, Washington 98661
(360) 750-9355
(Name, address and telephone number of agent for service)
Copies of all communications to:
Thomas W. Hughes, Esq.
Maurice J. Bates, Esq. Lisa N. Tyson, Esq.
Maurice J. Bates L.L.C. Winstead Sechrest & Minick P.C.
8214 Westchester Drive, Suite 500 1201 Elm Street, Suite 5400
Dallas, Texas 75225 Dallas, Texas 75201
(214) 692-3566 (214) 745-5201
214) 987-2091 FAX (214) 745-5390 FAX
Approximate date of proposed sale to public: As soon as practicable
after the effective date of the Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective 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 delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
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 the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
<PAGE>
Continued from previous page
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Each Maximum Maximum
Class of Security Amount Offering Aggregate Amount of
To Be to be Price Per Offering Regsitration
Registered Registered Security Price Fee
Units 1,150,000 $7.50 $8,625,000 $1,725
Common Stock, par
value $0.01 (2) 1,150,000 (2) (2) (2)
Redeemable Common Stock
Purchase Warrants (2) 1,150,000 (2) (2) (2)
Common Stock, par
value $0.01 (3) 1,150,000 $9.00 $10,350,000 $2,070
Underwriter's Warrants (4) 100,000 $0.01 $100 $1
Units Underlying the
Underwriter's Warrants 100,000 $9.00 $900,000 $180
Common Stock, par
value $0.01(5) 100,000 (5) (5) (5)
Redeemable Common Stock
Purchase Warrants 100,000 (5) (5) (5)
Common Stock, par
value $0.01(6) 100,000 $9.00 $900,000 $180
Total $4,156
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Included in the Units. No additional registration fee is required.
(3) Issuable upon exercise of Redeemable Common Stock Purchase Warrants.
Pursuant to Rule 416 there are also registered an indeterminate number of
shares of Common Stock, which may be issued pursuant to the anti-dilution
provisions applicable to the Redeemable Common Stock Purchase Warrants, the
Underwriter's Warrants and the Redeemable Common Stock Purchase Warrants
issuable under the Underwriter's Warrants.
(4) Underwriter's Warrants to purchase up to 100,000 Units, consisting of an
aggregate of 100,000 shares of Common Stock and 100,000 Warrants.
(5) Included in the Units underlying the Underwriter's Warrants. No additional
registration fees are required.
(6) Issuable upon exercise of Redeemable Common Stock Purchase Warrants under-
lying the Underwriter's Units.
<PAGE>
Westower Corporation
Showing Locations in Prospectus of Required Information
Form SB-2 Item and Caption Location in Prospectus
1. Front of Registration Statement
and Outside Front Cover of Prospectus
Cover of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus Inside Front and Outside Back Cover
Pages;
3. Summary Information and
Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page; Underwriting
6. Dilution Dilution
7. Selling Security Holders Principal and Selling Shareholders
8. Plan of Distribution Outside Front Cover Page; Underwriting
9. Legal Proceedings Business
10. Directors, Executive Officers,
Promoters and Control Persons Management
11. Security Ownership of Certain
BeneficialOwners and Management Principal and Selling Shareholders
12. Description of Securities Description of Securities
13. Interest of Named Experts
and Counsel Legal Matters; Experts
14. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities Underwriting
15. Organization Within Last 5 Years *
16. Description of Business Business
17. Management's Discussion and
Analysis or Plan of Operation Management's Discussion and Analysis
or Plan of Operation
18. Description of Property Business
19. Certain Relationships and
Related Transactions Certain Relationships and Related
Transactions
20. Market for Common Equity
and Related Stockholder Matters Risk Factors; Discription of
Securities; Shares Eligible for Future
Sale
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure *
24. Imdemnification of Directors
and Officers Management
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* Not Applicable
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 5, 1997
PROSPECTUS
Westower Corporation
1,000,000 Units
Consisting of 1,000,000 Shares of Common Stock and
1,000,000 Redeemable Common Stock Purchase Warrants
Westower Corporation (the "Company") is hereby offering 1,000,000
Units, each unit (the "Unit") consisting of one share (the "Shares") of Common
Stock, $0.01 par value (the " Common Stock"), and one Redeemable Common Stock
Purchase Warrant (the "Warrants") . The Units, the Shares and the Warrants
offered hereby are referred to collectively as the "Securities." The Shares and
Warrants included in the Units may not be separately traded until ,1998 [six
months after the date of this Prospectus], unless earlier separated upon three
days' prior written notice from National Securities Corporation (the
"Representative") to the Company. Each Warrant entitles the holder thereof to
purchase one share of Common Stock at an exercise price of $9.00 per share,
commencing at any time after the Common Stock and Warrants become separately
tradable and until ,2002 [five years from the date of this Prospectus].
Commencing on [six months from the date of this Prospectus], the Warrants are
subject to redemption by the Company at $0.05 per Warrant at any time on thirty
days prior written notice, provided that the closing price quotation for the
Common Stock has equalled or exceeded $15.00 for ten consecutive trading days.
The Warrant exercise price is subject to adjustment under certain circumstances.
See "Description of Securities."
Prior to this offering, there has been no public market for the
Securities, and there can be no asssurance that an active market will develop.
It is currently anticipated that the initial public offering price of the Units
will be $7.50 per Unit. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price. The Company
has applied to list the Units , Common Stock and Warrants on the American Stock
Exchange under the symbols "WTCU" ,"WTC" and "WTCW", respectively. There can be
no assurance that the application for listing on the American Stock Exchange
will be approved.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 6 HEREOF CONCERNING THE COMPANY AND THIS OFFERING.
PROSPECTIVE INVESTORS SHOULD ALSO CONSIDER THE FACT THAT THEIR INVESTMENT WILL
RESULT IN IMMEDIATE SUBSTANTIAL DILUTION. SEE "DILUTION." THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
Per Unit..... $7.50 $0.75 $6.75
Total (2)(3)....... $7,500,000 $750,000 $6,750,000
(1) In addition, the Company has agreed to pay the Representative, a 2.00%
nonaccountable expense allowance and to sell to the Underwriter warrants
exerciseable for four years commencing one year from the date of this
Prospectus to purchase 100,000 Units at 120% of the public offering price
(the "Underwriter's Warrants"). The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933 , as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting estimated expenses of $500,000 payable by the Company,
including the Representative's 2.00% nonaccountable expense allowance.
(3) Certain Selling Shareholders (the "Selling Shareholders") have granted to
the Underwriters an option, exercisable within 45 days from the date of
this Prospectus, to purchase up to 150,000 Units, on the same terms set
forth above, solely for the purpose of covering over-allotments, if any.
The Shares included in the Units which are subject to the Underwriter's
over-allotment option will be purchased from the Selling Shareholders, and
the Company will not receive any proceeds from the sale of such Shares. The
Warrants included in the Units which are subject to the Underwriter's
over-allotment option will be issued by the Company. If the Underwriter's
over-allotment option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to
Selling Shareholders will be $8,625,000, $862,500, $6,750,000 and
$1,012,500. See "Principal and Selling Shareholders" and "Underwriting."
The Securities are being offered, subject to prior sale, when, as and
if delivered to and accepted by the Underwriters and subject to approval of
certain legal matters by counsel and subject to certain other conditions. The
Underwriter reserves the right to withdraw, cancel or modify the offering
without notice and to reject any order, in whole or in part. It is expected that
delivery of Common Stock and Warrant certificates will be made against payment
therefor at the offices of the Underwriter in Seattle, Washington on or about ,
1997.
National Securities Corporation The
Date of this Prospectus is , 1997.
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of offer to buy nor shall there be any sale of these securities in
any state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
<PAGE>
ADDITIONAL INFORMATION
The Company has not previously been subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2, including any amendments
thereto (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock, reference is made
to the Registration Statement and the exhibits and schedules thereto. Statements
made in this Prospectus regarding the contents of any contract or document filed
as an exhibit to the Registration Statement are not necessarily complete and, in
each instance, reference is hereby made to the copy of such contract or document
so filed. Each such statement is qualified in its entirely by such reference.
The Registration Statement and the exhibits and the schedules thereto filed with
the Commission may be inspected, without charge, at the office of the Commission
at Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549. Copies of such
materials may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission at http://www.sec.gov.
As a result of this offering, the Company will become subject to the
reporting requirements of the Exchange Act, and in accordance therewith will
file periodic reports, proxy statements and other information with the
Commission. The Company will furnish its shareholders with annual reports
containing audited consolidated financial statements certified by independent
public accountants following the end of each fiscal year, proxy statements and
quarterly reports containing unaudited consolidated financial information for
the first three quarters of each fiscal year following the end of such fiscal
quarter.
The Company has applied to list the Securities on the American Stock
Exchange. If the Company's application is accepted, then reports, proxy
statements and other information concerning the Company will be available for
inspection at the principal office of the American Stock Exchange at 86 Trinity
Place, New York, New York, 10006. There is no assurance the Securities will be
accepted for listing.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including notes thereto)
appearing elsewhere in this Prospectus. Unless otherwise indicated, the
information herein is presented on the basis that the Underwriter's
over-allotment option and the Underwriter's warrants are not exercised. The
Securities offered hereby involve a high degree of risk. Investors should
carefully consider the information set forth under "Risk Factors."
The Company
Westower Corporation ("Westower" or the "Company") was incorporated in
Washington State in June 1997 for the purpose of acquiring Westower Holdings
Ltd., a Wyoming corporation ("Holdings") which owns all of the outstanding stock
of Westower Communications Ltd., a British Columbia Canada corporation and
Westower Communications Inc., a Washington corporation. Westower and its
wholly-owned subsidiaries are collectively referred to herein as the "Company."
The Company designs, builds and maintains wireless communications
transmitting and receiving facilities for providers of wireless communication
services, including U. S. Cellular, Western Wireless, Cantel, AT&T, Sprint
Cellular, and Microcell. These facilities are presently constructed for use with
microwave, cellular telephone, pager, and specialized mobile radio technologies.
Although bids for the installation or modification of communications facilities
are normally requested on a fixed price basis, the Company will, if requested,
provide such services on a time and materials basis. A contract for the
installation of cellular transmitting and receiving facilities may require the
Company to develop the location, including roads and grading, to install the
tower antennae and lines, assemble electronic components and to test the
installation's equipment. In such instances, the Company subcontracts road or
cement work required under the contract, performing the balance of the work with
its own employees. The service provider supplies most of the material used in
the installation process, and the Company's major cost is the cost of its
employees and subcontracted labor. Demand for the Company's services often
exceeds its ability to supply those services, and in such situations the Company
subcontracts with smaller enterprises to provide work normally performed by the
Company. Subcontracting permits the Company to evaluate the subcontractor's
quality and review the subcontractor as a potential candidate for acquisition.
The Company commenced business in 1990 as Westower Communications Ltd. and
emphasized design, construction, maintenance and modification of microwave and
cellular towers for telephone, broadcast and utility companies. The Company
continues these activities, but with the advent of cellular telephones and
personal communication systems ("PCS"), now designs and installs rooftop and
other transmission and receiving facilities. A portion of the Company's revenues
is still derived from installation of microwave facilities and the installation
of related electronic equipment. However, the rapid growth of the use of
cellular telephones has resulted in the installation of cellular transmitting
and receiving facilities being an increasingly significant component of
revenues. The Company is also a partner in a limited partnership which owns
communication towers which are leased to a telephone company.
The Company's strategy will be to capitalize on the demand for wireless
infrastructure building and implementation services by continuing to expand its
workforce and geographic presence in the marketplace. To accomplish these
objectives, the Company intends to (i) continue its geographic expansion by
opening new regional offices when demand for the Company's services or
acquisition opportunities make such expansion feasible, (ii) continue to enhance
its indigenous new employee hiring, training and retention programs as a method
for attracting, training and retaining new, highly skilled workers, and (iii)
continue to seek to acquire other companies engaged in the wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services businesses that have good reputations
for quality service and highly skilled workers.
The Company's principal operations are in Washington, Oregon, Idaho,
British Columbia, Alberta, and Canada's Northern Territories. The Company's
headquarters are located at 7001 NE 40 Avenue, Vancouver, Washington 98661. The
telephone number at that location is (360) 750-9355, and its fax number is (360)
750-9354.
3
<PAGE>
The Offering
Securities offered hereby................... 1,000,000 Units, each Unit
consisting of one share of Common Stock and one Warrant, each Warrant entitling
the holder to purchase one share of Common Stock at a price of $ 9.00 per share
until _______ , 2002 [5 years after the date of this Prospectus]. See
"Description of Securities."
Description of the Warrants The Warrants are not immediately exercisable and are
not transferable separately from the Shares until _______, 1998 [six months
after the date of this Prospectus]. The Warrants are redeemable by the Company
at $0.05 per Warrant under certain conditions. See "Description of Securities."
Common Stock to be outstanding after the Offering........................
4,000,000 Shares (1)(2)
Warrants to be outstanding after the Offering.......................
1,000,000 Warrants (2)(3)
Use of Proceeds............................. Acquisitions, working capital
and other general corporate purposes. See "Use of Proceeds."
Risk Factors................................ The Securities offered hereby
are speculative and involve a high degree of risk and should not be purchased by
investors who cannot afford the loss of their entire investment. See "Risk
Factors."
Proposed American Stock Exchange Symbols
Units................................... "WTC.U"
Common Stock............................ "WTC"
Warrants................................ "WTC.WS"
- -------
(1) Does not include 400,000 shares of Common Stock reserved for issuance upon
exercise under the Company's stock option plan. See "Management - Benefit
Plan."
(2) Does not include an aggregate up to 1,350,000 shares issuable upon exercise
of (i) the Warrants (ii) the Underwriter's over-allotment option and (iii)
the Underwriter's Warrants.
(3) Does not include up to 150,000 Warrants issuable upon exercise of the
Underwriter's over-allotment option or the 100,000 Warrants underlying the
Underwriter's Warrants.
4
<PAGE>
Selected Financial Information
The following selected financial data has been derived from the audited
balance sheet of the Company as of February 28, 1997, audited income statements
for the two years ended February 28, 1997 and unaudited financial statements for
the three months ended May 31, 1997 and 1996. This selected financial data
should be read in conjunction with the financial statements of the Company and
the related notes thereto included elsewhere in this Prospectus. See "Financial
Statements."
Year Ended February 28, Three Months Ended
May 31,
1996 1997 1996 1997
---- ---- ---- ----
Operating Data:
Construction Revenues $5,267,095 $11,718,679 $1,881,332 $3,288,173
Costs of Construction 3,963,383 8,661,692 1,361,943 2,385,913
General and Administrative 847,172 1,175,980 200,805 325,923
----------- ----------- --------- ----------
Earnings before the following:(1) 456,540 1,881,007 318,584 576,337
Management bonuses 117,530 756,293
Income tax 93,055 422,349 124,000 219,000
----------- ----------- --------- ----------
Net income $245,955 $702,365 $194,584 $357,337
Earnings Per Share $0.08 $0.23 $0.06 $0.12
Balance Sheet Data:
February 28, May 31, May 31,
1997 1997 1997
----------- ------------ ---------
(unaudited) As Adjusted (3)
Working capital $ (196,789) $ 67,543 $ 5,762,070
Current assets 2,455,175 3,732,278 9,426,805
Current liabilities 2,651,964 3,664,735 3,664,735
Total assets 4,076,584 5,490,287 11,184,814
Total liabilities 3,373,320 4,399,861 3,844,388
Shareholders equity 703,264 1,090,426 7,340,426
Shares Outstanding 3,000,000 (2) 3,000,000 (2) 4,000,000
- -------
(1) Earnings before management bonuses are disclosed because such bonuses were
primarily determined for income tax planning purposes associated with
private companies and are not indicative of future operations.
Plan."
(2) Does not include 400,000 shares of Common Stock reserved for issuance upon
exercise under the Company's stock option plan. See "Management - Benefit
(3) Adjusted to reflect the sale of the Units offered by this prospectus at an
assumed offering price of $7.50 per Unit and application of the net
proceeds of $6,250,000.
5
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN ADDITION TO
THE OTHER INFORMATION SET FORTH IN THE PROSPECTUS BEFORE PURCHASING THE
SECURITIES OFFERED HEREBY.
Dependence On The Wireless Communications Industry
The Company is dependent on the continued growth, viability and
financial stability of its customers, which are in turn substantially dependent
on the continued growth, viability and financial stability of the wireless
communications industry. The wireless communications industry is highly
competitive and has been characterized by rapid technological and regulatory
change. Examples of recent technological changes include the advent or continued
rapid development of new or enhanced wireless communications technologies such
as PCS, Enhanced Specialized Mobile Radio and satellite-based wireless
communications technologies. These technological changes could reduce, delay or
make unnecessary the expansion or construction of new wireless communications
networks, which in turn could render the Company's products and services
obsolete or noncompetitive or otherwise reduce the demand for such products and
services. An example of regulatory changes affecting the industry include the
enactment of the Telecommunications Act of 1996 which is expected to cause
significant changes in existing regulation of the telecommunications industry
that are intended to promote the competitive development of new services, to
expand public availability of telecommunications services and to streamline
regulation of the industry. In addition, many of the Company's customers are
affected by general economic conditions. Any downturn or other disruption of the
wireless communications industry caused by adverse competitive developments,
technological changes, government regulation or other factors would have a
material adverse affect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Dependence Upon Key Personnel
The business of the Company is substantially dependent on the efforts of
Calvin J. Payne, its President and Chief Executive Officer, and S. Roy Jeffrey
its Chief Operating Officer. The Company does not have an employment contract
with Mr. Payne or Mr. Jeffrey and the loss of either would have a material
adverse effect on the Company's operations. Although the Company has agreed to
obtain key-man insurance in the face amount of $3,000,000 on the lives of Mr.
Payne and Mr. Jeffrey, there can be no assurance that it will be able to obtain
such insurance or that such amount will be sufficient to compensate the Company
for the loss of either individual's services. See "Management." Acquisitions
The Company plans to grow through acquisitions. The success of this
strategy is strongly affected by personnel in the acquired organization
satisfactorily continuing employment with the Company after the acquisition. The
Company plans to utilize employment agreements in connection with acquisitions.
However, there can be no assurance that employees of an acquired enterprise will
remain with the Company or perform satisfactorily as employees of the Company.
At present, the Company is not engaged in the negotiation of any such
acquisitions and there is no assurance and no representation is made that the
Company will be successful in the negotiations of any acquisitions and, if so,
on terms that will be beneficial to the Company.
Employee Turnover
Employees of the Company travel extensively away from home. In
addition, the industry's work requires long hours and often requires working at
heights. These aspects of the industry's work environment contribute to a high
rate of employee turnover, particularly with inexperienced employees. The
Company is developing training programs and additional hiring procedures to
reduce employee turnover. Part of the Company's acquisition program is to
acquire similar businesses and retain their experienced work force that is
familiar with the nature of the industry's work environment. See "Business -
Employees."
6
<PAGE>
Mobile Communications Health Risk
Recently, certain consumers have alleged that serious health risks have
resulted from the use of portable mobile communications devices. Motorola and
other equipment manufacturers have made public announcements indicating their
belief that no health risks exist from using mobile communications devices and
Motorola has made public certain internal company studies supporting this
position. In addition, there has been recent litigation involving
electromagnetic radiation, however, there has been no convincing evidence to
support the contention that exposure to electromagnetic fields causes
demonstrable health risks. The actual or perceived health risk of mobile
communications devices could adversely affect mobile communications service
providers through reduced subscriber growth rate and reduced network usage per
subscriber, thus reducing the need for the Company's services.
Siting Moratoria
Some local and state regulators have opposed the construction of new
antenna sites citing alleged health risks associated with radio frequency,
aesthetics, or other reasons. Furthermore, some property owners have refused the
installation of antennas on their property because of the potential reaction of
tenants to alleged health risks. Industry sources estimate there are currently
200 proposed antenna sites which are delayed due to local or state moratoria or
delays. The Federal Communications Commission ("FCC") is expected to propose
guidelines in this regard. However, there is no assurance any FCC guidelines
will be effective in removing moratoria or eliminating delays. The moratoria and
delays could adversely affect wireless communication providers which would also
adversely affect the Company's growth.
Competition
Historically, the industry for wireless infrastructure building and
implementation services has been highly competitive but also highly fragmented.
As such, most participants in this industry have been relatively small firms of
three to fifty employees. However, the Company has also faced competition in the
market for wireless infrastructure building and implementation services from
wireless communications equipment manufacturers which provide such services in
conjunction with the sale of wireless communications equipment. While the
industry continues to be comprised predominately of these smaller firms, over
the past two years, the increased demand for wireless infrastructure building
and implementation services has motivated other competitors to enter the market.
These new competitors include, but are not limited to, traditional, non-wireless
engineering and construction companies and non-wireless subcontractors who have
begun to enter the market either alone or in conjunction with wireless equipment
manufacturers. In addition, the Company faces competition in the market for
wireless infrastructure electrical design and engineering services from
stand-alone electrical engineering and design firms, other providers of wireless
infrastructure building and implementation services and wireless communications
equipment manufacturers. Many of these new competitors as well as many of the
Company's historical competitors have significantly greater financial and other
resources than the Company. As demand for wireless infrastructure building and
implementation services increases, the Company expects that more non-traditional
competitors will enter the market and provide increased competition to the
Company. See "Business - Competitive Environment."
Government Regulation
The wireless communications industry is subject to regulation by state
regulatory agencies, the FCC, the Canadian Radio and Telecommunications
Commission, Congress, the courts and other governmental bodies. There can be no
assurance that any of these governmental bodies will not adopt or change
regulations or take other actions that would adversely affect the wireless
communications industry and the Company's business, financial condition and
results of operations.
In addition, the Federal Telecommunications Act of 1996 is expected to
cause significant changes in existing regulation of the telecommunications
industry that are intended to promote the competitive development of new
services, to expand public availability of telecommunications services and to
streamline regulation of the industry. These changes include requirements that
local exchange carriers must: (i) permit other competitive carriers, which may
include many wireless communications service providers, to interconnect to their
networks; (ii) establish reciprocal compensation agreements with competitive
carriers to terminate traffic on each other's networks and (iii) offer resale of
their local loop facilities. The implementation of these requirements by the FCC
and state authorities potentially involves numerous changes in established rules
and policies that could adversely affect the wireless communications industry
and the Company's business, financial condition and results of operations.
7
<PAGE>
In addition, the construction and installation of wireless transmitting
and receiving facilities are often subject of state or local zoning, land use
and other regulation. Such regulation may include zoning, environmental and
building permit approvals or other state or local certification. The
Telecommunications Act of 1996 provides that state and local authority over the
placement, construction and modification of personal wireless services
(including cellular, and other cellular mobile radio services ("CMRS") and
unlicensed wireless services) shall not prohibit or have the effect of
prohibiting personal wireless services or unreasonably discriminate among
providers of functionally equivalent services. Although state and local zoning
authorities retain their rights over land use, their actions cannot have the
effect of banning wireless services or picking and choosing among similar
wireless providers.
Changing Technology
Wireless telecommunications generally, and cellular telephone services
and personal communications systems in particular, are relatively new
technologies. Presently cellular telephones are predominately based on analog
technologies. Management expects a transition to digital cellular telephone
technologies will continue to be implemented in the near future. The Company
constructs facilities used in wireless communications, regardless of the
technology implemented, and plans to construct facilities for use in wireless
communications regardless of which new technology emerges. However, there can be
no assurance that the Company will adapt in the future as it has in the past to
new technologies, that any new technology will require the services of the
Company, or that any new technology will not reduce or adversely modify the
services that the Company is able to provide. In addition, new technologies may
require different disciplines or skills than those presently possessed by
existing employees and the costs and delay incurred in training or hiring new
employees may have a material adverse effect on the operations of the Company.
Transactions with Affiliates
The Company has engaged in a number of transactions with affiliates.
While management believes that the transactions with affiliates are at prices
believed to be reasonable and fair, such transactions could give rise to
preferential treatment. The Company anticipates that transactions with
affiliates will continue, but that in the future, all such transactions will be
approved by the disinterested directors of the Company's Board. See "Certain
Relationships and Related Transactions."
Absence of Prior Public Market - American Stock Exchange Listing
Prior to this offering, there has been no public market for the Common
Stock or the Warrants. The Company has applied to have its securities listed on
the American Stock Exchange. Such listing, if granted, does not imply that a
meaningful, sustained market for the Common Stock or Warrants will develop.
There can be no assurance that an active trading market for the Common Stock or
Warrants offered hereby will develop or, if it should develop, will continue.
There is no assurance the Company's securities will be approved for listing.
Risk of Redemption of Warrants
Commencing six months from the date of this Prospectus, the Company may
redeem the Warrants for $.05 per Warrant, provided that the closing sale price
of the Common Stock on the American Stock Exchange has been at least $15.00 for
ten consecutive trading days ending within fifteen days of the notice of
redemption. Notice of redemption of the Warrants could force the holders
thereof: (i) to exercise the Warrants and pay the exercise price at a time when
it may be disadvantageous or difficult for the holders to do so, (ii) to sell
the Warrants at the current market price when they might otherwise wish to hold
the Warrants, or (iii) to accept the redemption price, which is likely to be
less than the market value of the Warrants at the time of the redemption. See
"Description of Securities - Warrants."
Investors May Be Unable to Exercise Warrants
For the life of the Warrants, the Company will use its best efforts to
maintain a current effective registration statement with the Commission relating
to the shares of Common Stock issuable upon exercise of the Warrants. If the
Company is unable to maintain a current registration statement the Warrant
holders would be unable to exercise the Warrants and the Warrants may become
valueless. Although the Underwriters have agreed to not knowingly sell the
Warrants in any jurisdiction in which the shares of Common Stock issuable upon
exercise of the Warrants are not registered, exempt from registration or
otherwise qualified, a purchaser of the Warrants may relocate to a jurisdiction
in which the shares of Common Stock underlying the Warrants are not so
registered or qualified. In addition, a
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purchaser of the Warrants in the open
market may reside in a jurisdiction in which the shares of Common Stock
underlying the Warrants are not registered, exempt or qualified. If the Company
is unable or chooses not to register or qualify or maintain the registration or
qualification of the shares of Common Stock underlying the Warrants for sale in
all of the states in which the Warrantholders reside, the Company would not
permit such Warrants to be exercised and Warrant holders in those states may
have no choice but to either sell their Warrants or let them expire. Prospective
investors and other interested persons who wish to know whether or not shares of
Common Stock may be issued upon the exercise of Warrants by Warrant holders in a
particular state should consult with the securities department of the state in
question or send a written inquiry to the Company.
See "Description of Securities - Warrants."
Arbitrary Determination of Offering Price
The public offering price for the Units offered hereby was determined
by negotiation between the Company and the Representative, and should not be
assumed to bear any relationship to the Company's asset value, net worth or
other generally accepted criteria of value. Recent history relating to the
market prices of newly public companies indicates that the market price of the
Securities following this offering may be highly volatile. See "Underwriting."
Immediate Substantial Dilution
The Company's current shareholders acquired their shares of Common
Stock at a cost substantially below the price at which such shares are being
offered in this offering. In addition, the initial public offering price of the
shares of Common Stock included in the Units being offered in this offering will
be substantially higher than the current book value per share of Common Stock.
Consequently, investors purchasing shares of Common Stock included in the Units
being offered in this offering will incur an immediate and substantial dilution
of their investment insofar as it relates to the resulting book value of Common
Stock after completion of this offering. See "Dilution."
Payment of Dividends
The Company has never paid cash dividends on the Common Stock, and does
not anticipate that it will pay cash dividends in the foreseeable future. The
payment of dividends by the Company will depend on its earnings, financial
condition and such other factors as the Board of Directors of the Company may
consider relevant. The Company currently plans to retain any earnings to provide
for the development and growth of the Company. See "Dividend Policy."
Shares Eligible for Future Sale
Upon completion of this Offering, the Company's current shareholders
will own 3,000,000 shares of Common Stock, which will represent 75.0% of the
then issued and outstanding shares of Common Stock (71.3% if the Underwriter's
Over-allotment Option is exercised in full). 3,000,000 of such restricted
securities have been held for more than two years and will be eligible for
resale under Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"), subject to volume limitations, beginning 90 days after the
date of this Prospectus (2,850,000 if the over-allotment option is exercised in
full). Sales of significant amounts of Common Stock by current shareholders in
the public market after this offering could adversely affect the market price of
the Common Stock. See "Shares Eligible for Future Sale" and "Principal and
Selling Shareholders."
Use of Proceeds for Unspecified Acquisitions
The Company intends to utilize substantially all of the net proceeds of
this offering for the purpose of acquisitions, joint ventures and other similar
business opportunities. Under Washington law, transactions of this nature do not
require shareholder approval except when accomplished through a merger or
consolidation. Accordingly, purchasers in this offering will necessarily rely to
a large degree upon the judgment of management of the Company in the utilization
of the net proceeds of this offering. The Company does not now have any
agreements or commitments with respect to any specific transactions, and
management has not established specific criteria to be used in making the
determination as to how to invest these proceeds. See "Business-Recent
Developments" and "Use of Proceeds."
Substantial Shares of Common Stock Reserved
The Company has reserved 400,000 shares of Common Stock for issuance to
key employees, officers, directors and consultants pursuant to the Company's
Stock Option Plan. The existence of these options and any
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other options or
warrants may prove to be a hindrance to future equity financing by the Company.
Further, the holders of such options may exercise them at a time when the
Company would otherwise be able to obtain additional equity capital on terms
more favorable to the Company. See " Management - Stock Option Plan."
Effect of Outstanding Warrants and Underwriter's Warrants.
Until the date five (5) years following the date of this Prospectus,
the holders of the Warrants and Underwriter's Warrants are given an opportunity
to profit from a rise in the market price of the Common Stock, with a resulting
dilution in the interests of the other shareholders. The shares of Common Stock
underlying the Underwriter's Warrants have certain registration rights. Further,
the terms on which the Company might obtain additional financing during that
period may be adversely affected by the existence of the Warrants and
Underwriter's Warrants. The holders of the Warrants and Underwriter's Warrants
may exercise the Warrants and Underwriter's Warrants at a time when the Company
might be able to obtain additional capital through a new offering of securities
on terms more favorable than those provided herein. The Company has agreed that,
under certain circumstances, it will register under federal and state securities
laws the Underwriter's Warrants and/or the securities issuable thereunder.
Exercise of these registration rights could involve substantial expense to the
Company at a time when it could not afford such expenditures and may adversely
affect the terms upon which the Company may obtain financing. See "Description
of Securities" and "Underwriting."
Representative's Influence on the Market
A significant amount of the securities offered hereby may be sold to
customers of the Representative. Such customers subsequently may engage in
transactions for the sale or purchase of such securities through or with the
Representative. Although it has no obligation to do so, the Representative may
otherwise effect transactions in such securities. Such market making activity
may be discontinued at any time. If it participates in the market, the
Representative may exert a dominating influence on the market, if one develops,
for the securities described in this Prospectus. The price and liquidity of the
Common Stock and Warrants may be significantly affected by the degree, if any,
of the Representative's participation in such market.
In addition, the Company has agreed to solicit exercises of the
Warrants solely through the Representative and to pay the Representative certain
compensation in connection therewith. Unless the Representative complies with
Rule 10b-6A under the Securities Exchange Act of 1934 (the "Exchange Act") or is
granted an exemption by the Commission from Rule 10b-6 promulgated under the
Exchange Act, the Representative will be prohibited from engaging in any market
making activities with regard to the Company's securities for the period from
two or nine business days (or such other applicable period as Rule 10b-6 may
provide) prior to any solicitation of the exercise of the Warrants until the
latter of the termination of such solicitation activity or the termination (by
waiver or otherwise) of any right that the Representative may have to receive a
fee for the exercise of the Warrants following such solicitation. As a result,
the Representative may be unable to continue to provide a market for the
Company's securities during such periods while the Warrants are exercisable. See
"Description of Securities-Warrants" and "Underwriting."
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USE OF PROCEEDS
The net proceeds of this offering to the Company are anticipated to be
$6,250,000, assuming a public offering price of $7.50 per Unit and after
deducting $500,000 of expenses relating to the offering. The Underwriter's
over-allotment option will be fulfilled with shares held by the Selling
Shareholders See "Principal and Selling Shareholders." The Company intends to
use the net proceeds as follows:
Amount %
Debt and Liabilities Retirement (1) $ 555,473 9%
Capital Assets (2) 400,000 6%
Working Capital (3) 5,294,527 85%
------------- -----
$ 6,250,000 100%
- ---------------
(1) $352,000 of such debt has an interest rate of 5%, and the remaining
$203,473 is interest free. All $555,473 is owed to officers and directors of the
Company. See "Certain Relationships and Related Transactions."
(2) The Company intends to use up to $400,000 of the proceeds of this
offering to construct buildings on land it currently owns and intends to open an
office in the Seattle, Washington area.
(3) The Company may also use a portion of the proceeds from this offering
to take advantage of future business opportunities as a part of its expansion
plans, although the Company has not identified any specific businesses it
intends to acquire and has not entered into negotiations with respect to any
acquisitions. Pending application of the net proceeds of this offering, the
Company may invest the net proceeds from this offering in interest-bearing
savings accounts, United States Government obligations, certificates of deposit
or short-term interest-bearing securities.
DIVIDEND POLICY
The Company does not anticipate paying dividends on the Common Stock at
any time in the foreseeable future. The Company's Board of Directors currently
plans to retain earnings for the development and expansion of the Company's
business. Any future determination as to the payment of dividends will be at the
discretion of the Board of Directors of the Company and will depend on a number
of factors including future earnings, capital requirements, financial conditions
and such other factors as the Board of Directors may deem relevant.
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DILUTION
As of May 31, 1997, the pro forma net tangible book value of the
Company was $7,312,707 or $1.83 per share of Common Stock. The historical net
tangible book value of the Company was $1,026,616 or $.34 per share of Common
Stock. The net tangible book value of the Company is the aggregate amount of its
tangible assets less its total liabilities. The net tangible book value per
share represents the total tangible assets of the Company, less total
liabilities of the Company, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale of 1,000,000 Units (1,000,000
shares of Common Stock and 1,000,000 Warrants) at an assumed offering price per
Unit of $7.50, or $7.50 per share of Common Stock (no value assigned to the
Warrants) and the application of the estimated net proceeds therefrom, the pro
forma net tangible book value per share would increase from $0.34 to $1.83. This
represents an immediate increase in net tangible book value of $1.49 per share
to current shareholders and an immediate dilution of $5.67 per share to new
investors or 75.6%, as illustrated in the following table:
Public offering price per Share $7.50
Net tangible book value per Share before this offering $0.34
Increase per share attributable to new investors 1.49
-----
Adjusted net tangible book value per share after this offering $1.83
Dilution per share to new investors $5.67
Percentage dilution 75.6%
The following table sets forth as of May 31, 1997, (i) the number of
shares of Common Stock purchased from the Company, the total consideration paid
to the Company and the average price per share paid by the current shareholders,
and (ii) the number of shares of Common Stock included in the Units to be
purchased from the Company and total consideration to be paid by new investors
(before deducting underwriting discounts and other estimated expenses) at an
assumed offering price of $7.50 per share.
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
Current shareholders 3,000,000 75.0% 30,000 .4% $ .01
New investors 1,000,000 25.0% 7,500,000 99.6% $ 7.50 (3)
--------- ------ --------- -----
Total 4,000,000(1)100.0% 7,530,000(2) 100.0%
========= ===== ========= =====
- --------
(1) Does not include a total of 1,750,000 shares of Common Stock issuable upon
the exercise of: (i) the Warrants or the Underwriter's Warrants, (ii) the
Underwriter's over-allotment option, or (iii) available employee stock
options. To the extent that these options and warrants are exercised, there
will be further share dilution to new investors.
(2) Sales by certain Selling Shareholders upon exercise of the Underwriter's
over-allotment option will reduce the number of shares of Common Stock
owned by current shareholders to 2,850,000 or 71.25% of the total number of
shares to be outstanding after the offering and will increase the number of
shares held by new investors to 1,150,000 or 28.75% of the total number of
shares to be outstanding after the offering. See "Principal and Selling
Shareholders."
(3) This amount assumes the attribution of the Unit purchase price solely
to the Common Stock included in each Unit. See "Use of Proceeds."
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CAPITALIZATION
The following table sets forth the pro forma short-term debt and
capitalization of the Company as of May 31, 1997 and as adjusted to give effect
to the sale of 1,000,000 Units offered hereby and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."
May 31, 1997
(Unaudited) As Adjusted
Short-term debt:
Current portion of notes payable and
capital lease obligations .................. $ 316,246 $ 316,246
---------- ----------
Total short-term debt..................... $ 316,246 $ 316,246
========== ==========
Long-term debt:
Notes payable and capital lease obligations . $ 179,653 $ 179,653
Related party notes payable.................. 555,473
---------- ----------
Total long-term debt......................... 735,126 179,653
Shareholder's equity:
Common Stock, $0.01 par value,
10,000,000 shares authorized, 3,000,000
shares issued and outstanding,
4,000,000 as adjusted (1) (2).............. 30,000 40,000
Additional paid in capital................... 6,240,000
Foreign currency transaction adjustment...... 26,777 26,777
Retained earnings............................ 1,033,649 1,033,649
--------- ----------
Total shareholder's equity................. 1,090,426 7,340,426
--------- ----------
Total capitalization ...................... $1,825,552 $7,520,079
========== ==========
- -------
(1)Does not include 400,000 shares of Common Stock reserved for issuance upon
exercise under the Company's stock option plan. See "Management-Benefit Plan"
(2)Does not include an aggregate up to 1,350,000 shares issuable upon exercise
of (i) the Warrants (ii) the Underwriter's over-allotment option and (iii)
the Underwriter's Warrants.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in connection with the Company's
Consolidated Financial Statements, related notes and other financial information
included elsewhere in this Prospectus
Results of Operations
Over the three years ended February 28, 1997, the Company increased net
revenues by 250% to $11.7 million from $3.3 million, decreased costs of revenues
as a percentage of revenues by 4.2% and decreased selling general and
administrative expenses as a percentage of revenues from 14.3% to 9.7%. Until
this Offering, the Company was a private corporation and declared large bonuses
to management which were primarily income tax motivated.
The following table presents, as a percentage of net revenues, certain
financial data for the Company for the periods indicated:
Years Ended February Three Months Ended May
1997 1996 1995 1997 1996
Contract revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of revenues 73.9 75.2 78.1 72.6 72.4
Gross profit 26.1 24.8 21.9 27.4 27.6
Selling, general and
administrative expenses 9.7 14.7 14.3 9.5 10.1
Management bonuses 6.5 2.2 -- -- --
Operating income 9.9 7.9 7.7 17.9 17.5
Interest expense 0.3 1.4 2.0 0.4 0.6
Income taxes 3.6 1.8 0.9 6.7 6.6
Net income 6.0 4.7 4.7 10.8 10.3
Comparison of Quarters Ended May 31, 1996 and May 31, 1997
Net revenues for the first quarter increased 74.8% or $1,406,841 from the
first quarter in the previous year due to continued buildup of PCS networks.
Gross profit for the quarter ended May 31, increased to $902,260 in fiscal
1998, a 73.7% increase over $519,389 in the same period in fiscal 1997. This
$382,871 increase is attributable to the 74.8% increase in net sales. Gross
profit margins for the quarter were virtually unchanged (about 27.5% )
reflecting continued strong demand.
Selling, general and administrative expenses for the quarter ended May 31,
1997 increased by approximately 65.0% or $123,045 to $312,411 in 1997 as
compared to $189,366 for the same quarter in 1996. This increase reflects
increased staffing to manage the growth in sales.
Operating income improved from $318,584 in the first quarter of fiscal 1997
to $576,337 for the same period in 1998. Correspondingly, net income for the
first quarter of 1998 improved by $162,753 from $194,584 in 1997 to $357,337 in
1998. This change in profitability reflects the Company's revenue growth.
Comparison of the Years Ended February 29, 1996 and February 28, 1997
Net revenues in 1997 increased 122.5% or $6,451,584 from the previous
fiscal year. This increase is attributable to the buildup of PCS networks in
Oregon, Washington and British Columbia. This increase in net sales is directly
related to the growing demand for wireless communication.
Gross profit for 1997 increased 134.5% over 1996, reflecting the higher
sales volume in 1997. Gross profit margins increased from 24.8% in 1996 to 26.1%
in 1997. This modest increase is attributable to continued strong demand for the
Company's services.
Selling, general and administrative expenses increased $360,146, or 46.5%,
to $1,134,404 for the year ended February 28, 1997. This increase reflects
additional expenditures made in personnel to obtain and sustain higher sales
levels in 1997.
Interest expense decreased by 43.0% from $72,914 in 1996 to $41,576 in
1997, reflecting a decrease in notes payable and capital lease obligations in
1997 and the fact that the Company did not use its operating loan facilities in
1997.
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Operating income before interest and management bonuses was $1,922,583 in
1997, an increase of $1,393,129 or 263.1% compared to 1996. The increase is due
to the increase in sales, the modest increase in gross profit percentage,
reduced by an increase in selling, general and administrative expenses.
Prior to this offering, the Company was privately held. The Company reduced
income by declaring and paying bonuses to its principals. These bonuses were
primarily tax-motivated. Bonuses increased by $638,763 or 543.5% in 1997
compared to 1996.
Comparison of the Years Ended February 28, 1995 and February 29, 1996
Net revenues in 1996 increased 57.1%, or $1,914,074 from the previous
fiscal year. This increase is attributable to the buildup of cellular networks
in Oregon, Washington and British Columbia.
Gross profit for 1996 increased 77.3% over 1995, reflecting the higher
sales volume and an improvement of 2.9% (as a percentage of revenues ) in gross
margin percentage. Gross margin percentage in 1996 was 24.8%; for 1995 it was
21.9%
Selling, general and administrative expenses increased by $295,947 or 61.8%
to $774,258 for the year ended February 29, 1996. As a percentage of revenues,
selling, general and administrative expenses increased slightly, from 14.3% to
14.7%. The increase is due to the additional staff hired to enable the Company
to meet increased demand for its products and services.
Interest expense was $67,881 in the 1995 fiscal year and $72,914 in 1996,
an increase of $5,033, or 7.4%. The increase in 1996 related to the Company's
use of its operating credit facilities in 1996 to fund operations.
Operating income, before interest and management bonuses, was $529,454 in
1996, an increase of $272,476, or 106% compared to 1996. The increase is due to
increased revenues, the improved profit margin, offset by higher selling,
general and administrative expenses.
The Company paid management bonuses of $117,530 in 1996 (none in 1995).
These bonuses were primarily tax-motivated and are not indicative of future
operations.
Liquidity and Capital Resources
The Company has financed its working capital requirements through
borrowings from principal shareholders and through bank debt. The Company
currently generates sufficient cash receipts from its operations to fund its
operating activities.
As of May 31, 1997, the Company had working capital of $67,543. Included in
current liabilities, is deferred income taxes of $568,712. Management does not
expect to actually pay the deferred income taxes during the next 12 months.
Cash from operations for the three months ended May 31, 1997, was $180,017,
compared to cash used in operations of $244,844 for the three months ended May
31, 1996. The difference results mainly from changes in non-cash current assets
and liabilities.
The Company has a credit facility with a bank, whereby the Company may
borrow $450,000 for working capital requirements as needed. The Company did not
use this facility during 1997 or the first quarter of fiscal 1998.
Cash from operations for the year ended February 28, 1997 was $928,947
compared to $456,380 for the prior year. The increase in cash from operations is
due primarily to increased revenues.
The Company intends to open an office in the Seattle, Washington area where
three of the largest wireless communication companies are located with a part of
the proceeds of this Offering. The Company also intends to pay $555,473 of notes
payable to principal shareholders from the proceeds of this Offering. See
"Certain Relationships And Related Transactions".
The Company's cash requirements for fiscal 1998 and in the future will
depend upon the level of sales, acquisitions, sales and marketing expenditures,
timing of expansion plans and capital expenditures. The Company
15
<PAGE>
believes that the net proceeds from this Offering, interest earned on the
proceeds, reduced interest expense obligations and anticipate revenue from
operations should be adequate for the Company's working capital requirements
over the course of the next twelve months. In the event that the Company's plans
or assumptions change or if its requirements to meet unanticipated changes in
business conditions or the proceeds of this Offering prove to be insufficient to
fund operations, the Company could be required to seek additional financing
prior to such time.
Accounting Standards
The Financial Accounting Standards Board ("FASB") periodically issues
statements of financial accounting standards. New Accounting Standards - In
February 1997, FASB issued Statement of Financial Accounting Standards (SFAS)
No. 128. The new standard replaces primary and fully diluted earnings per share
with basic and diluted earnings per share. SFAS No. 128 is required to be
adopted by the Company in the year ending February 28, 1998. Had the Company
been required to adopt SFAS No. 128 for the periods presented, the adoption
would not have impacted reported earnings per share.
In June 1997, the FASB issued SFAS No. 130 and 131. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components. SFAS No. 131 establishes standards for reporting about operating
segments, products and services, geographic areas, and major customers. The
standards become effective for fiscal years beginning after December 15, 1997.
Management plans to adopt these standards in the year ending February 28, 1999.
Management believes that provisions of SFAS No. 130 and 131 will not have a
material effect on its financial condition or reported results of operation.
16
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BUSINESS
General
The Company was organized in June 1997 to acquire all of the outstanding
stock of Holdings from the principal shareholders of Holdings, three of whom are
the officers and directors of the Company.
The Company designs, builds and maintains wireless communications
transmitting and receiving facilities for providers of wireless communication
services, including U. S. Cellular, Western Wireless, Cantel, AT&T, Sprint
Cellular, and Microcell. These facilities are presently constructed for use with
microwave, cellular telephone, pager, and specialized mobile radio technologies.
Although bids for the installation or modification of communications facilities
are normally requested on a fixed price basis, the Company will, if requested,
provide such services on a time and materials basis. A contract for the
installation of cellular transmitting and receiving facilities may require the
Company to develop the location, including roads and grading, to install the
tower antennae and lines, assemble electronic components and to test the
installation's equipment. In such instances, the Company subcontracts road or
concrete work required under the contract, performing the balance of the work
with its own employees. Approximately 50% of the Company's customers supply most
of the material used in the installation process, and the Company's major cost
is the cost of its employees and subcontracted labor. Demand for the Company's
services often exceeds its ability to supply those services, and in such
situations the Company subcontracts with smaller enterprises to provide work
normally performed by the Company. Subcontracting permits the Company to
evaluate the subcontractor's quality and review the subcontractor as a potential
candidate for acquisition.
The Company commenced business in 1990 as Westower Communications Ltd. and
emphasized design, construction, maintenance and modification of microwave and
cellular towers for telephone, broadcast and utility companies. The Company
continues these activities, but with the advent of cellular telephones and
personal communication systems ("PCS"), now designs and installs rooftop and
other transmission and receiving facilities. A portion of the Company's revenues
is still derived from installation of microwave facilities and the installation
of related electronic equipment. However, the rapid growth of the use of
cellular telephones has resulted in the installation of cellular transmitting
and receiving facilities being an increasingly significant component of
revenues. The Company is also a partner in a limited partnership which owns
communication towers which are leased to a telephone company.
The Company's strategy will be to capitalize on the demand for wireless
infrastructure building and implementation services by continuing to expand its
workforce and geographic presence in the marketplace. To accomplish these
objectives, the Company intends to (i) continue its geographic expansion by
opening new regional offices when demand for the Company's services or
acquisition opportunities make such expansion feasible, (ii) continue to enhance
its indigenous new employee hiring, training and retention programs as a method
for attracting, training and retaining new, highly skilled workers, and (iii)
continue to seek to acquire other companies engaged in the wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services businesses that have good reputations
for quality service and highly skilled workers.
The Company's principal operations are in Washington, Oregon, Idaho,
British Columbia, Alberta, and Canada's Northern Territories. Management
believes that the industry is highly fragmented with many companies performing
similar kinds of work throughout North America and that no single company is
dominant in the industry. The Company intends to increase its market penetration
by acquiring one or more of these businesses and to increase its market
penetration in the Western United States and Canada, ultimately having
operations from California to Alaska.
Recent Developments
Demand for the Company's services continues to be strong. The Company has a
current backlog of approximately $5,000,000.
The Company believes the growth in demand for wireless infrastructure
building and implementation services will continue as the wireless
communications industry continues to expand and develop, fueled in part by the
introduction of new and enhanced wireless communications technologies such as
PCS, ESMR and digita1 cellular. As an example, the Company anticipates that the
1995 and 1996 FCC auctions of the A-, B- and C- Block portions of the radio
spectrum allocated by the FCC for PCS licensees will result in the build out of
significant numbers of new PCS systems over the next five to ten years. This is
due in part to the fact that the FCC has mandated that recipients of PCS
licenses adhere to five-year and 10-year
17
<PAGE>
build out requirements. Under both
five- and 10-year build out requirements, all 30 MHZ PCS licensees (which
includes holders of all of the approximately 595 A-, Band C-Block PCS licenses
awarded as of September 1, 1996) must construct facilities necessary to provide
coverage to at least one-third of the population in their service areas within
five years from the date of initial license grants. Service must be provided to
two-thirds of the population within ten (10) years. Violations of these
regulations could result in license revocations, forfeitures or fines.
The Company also anticipates that implementation of new PCS systems may
create significant wireless infrastructure building activity as new PCS
licensees pay to alter or relocate certain existing communications facilities
operated by holders of fixed microwave licenses that currently operate within
the same frequency ranges as the new PCS licensees. This is because, in an
effort to balance the competing interests of existing microwave users and newly
authorized PCS licensees, the FCC has ruled that for a period of up to five
years after the grant of a PCS license, PCS licensees may be required to share
their radio spectrum with existing fixed microwave licensees operating on the
same frequencies as those of the new PCS licensees. In order to initiate service
within the required time frame, many of these new PCS licensees will arrange and
pay for the relocation of certain of these existing users to alternate spectrum
locations or transmission technologies.
The Industry
The Company's success is tied to the development of wireless
communications. Originally the Company constructed microwave and cellular
transmission facilities, and later expanded to include the installation of
electronic lines and components as part of the Company's services. As microwave
technology evolved and matured, the Company performed a variety of construction
and installation services relating to those new technologies, some of which
still involved microwave technology. For example, the Company upgraded the
transmission devices to accept digital or single side band technology, often
returning to previously built facilities to upgrade the equipment. Although the
Company still performs work related to short and long haul microwave technology,
this technology has diminished in use with the installation of fiber optic
technology by long distance carriers.
Presently, cellular telephones in the United States and Canada rely
predominantly on analog technology. A cellular telephone transmits a radio
signal to the closest cellular communications facility, which contains an
antenna connected by wireline or short haul microwave to a nearby switching
office that processes signals for several cellular facilities. For transmission
to a telephone that is not a mobile phone, the switching office connects the
telephone signal to a local telephone exchange. For a phone call to another
mobile telephone, the switching office locates the receiving cellular
communication facility to which the receiving telephone is connected, and
transmits the signal to that facility, completing the connection. If one or both
of the cellular telephones is moving, such as a car phone, the local switching
station hands the signal off to a different facility as the phone moves from one
area to another. The Company builds the communication facility and installs the
equipment to handle the radio wave from the cellular telephone to the facility
as well as the short haul microwave equipment connecting the facility to the
local cellular switching office.
Cellular telephones use radio frequencies to transmit to the facilities.
The number of frequencies that are available to transmit to a facility is
finite. In areas with heavy demand for cellular services, these available
frequencies become congested. To increase capacity, the number of cells is
increased, making each cell in the system smaller, covering a smaller geographic
area for the finite number of radio frequencies, but requiring significantly
more facilities.
Industry sources estimate there are about 44,000,000 cellular subscribers
in the United States in 1997 with projections of approximately 80,000,000
subscribers in the United States by 2001. Industry sources also estimate there
is a current need for more than 100,000 new antenna sites in the United States.
Competitive Environment
Presently the industry of constructing wireless and, more generally,
communications transmitting and receiving facilities is highly fragmented. The
industry consists of many small operators, often as few as three or four people
and commonly entailing a dozen or so. Most of the communications facilities in
the United States are installed by such businesses. While an individual provider
of wireless communications could easily develop its own ability to construct the
facilities, management of the Company believes that these enterprises would have
a difficult time establishing the ability on a cost effective basis and would
have a difficult time handling employees once the industry or technology
matures.
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The technology of wireless communications is shifting radically. The recent
history of electronic technology is marked by smaller, faster, less expensive
technologies replacing more cumbersome processes. There are projections that
certain digital technologies will be up to 20 times more efficient than existing
analog cellular systems, providing superior services and quality such as
Personal Communications Services and Enhanced Specialized Mobile Radio. Some of
these technologies, however, require densely located receivers that may be
located on utility poles.
Proposed satellite technologies, however, could bypass a local radio
transmission device and enable a user to transmit directly to a satellite that
retransmits the signal directly to a user. While this technology could possibly
transmit directly to a satellite, such technology would be required to struggle
with limitations on the number of frequencies available to be transmitted to a
satellite. Management of the Company believes that this technology is not yet
sufficiently defined to assess its effect on the Company.
All of the existing wireless transmission and receiving technologies, as
well as wireless transmission and receiving technologies of which the Company is
aware are being considered in developing nations to supplement or supplant
existing wireline communications techniques. The technology that is implemented
and the method in which the technology is implemented could enhance or diminish
the Company's prospects in these nations, and the Company is uncertain whether
it can exploit the opportunities that are being presented to the Company.
While there are numerous competitors in a fragmented industry, the demand
for those services is presently growing rapidly. New technologies could alter
the way in which those services are delivered and adversely affect the Company.
Other technologies could bypass the need for the Company's services. Because of
the rapid development and evolution of wireless communications, the future
market and its competitive environment cannot be accurately viewed or perhaps
anticipated in a manner that would benefit the Company. These factors could be
replayed in a variety of manners in numerous countries. There are potential
competitors, either providers of the service or traditional engineering firms,
that possess significantly greater resources, either in terms of personnel,
technology, or financial resources, than those possessed by the Company.
Employees
As of June 30, 1997, the Company had approximately 50 full time employees.
The Company considers its employee relations to be satisfactory. The Company
believes that additional staff will be required for increased marketing, sales,
development, and support functions. None of the Company's employees are
represented by a Union.
Legal Proceedings
As of June 30, 1997, the Company was not a party to any legal proceedings.
Facilities
The Company owns its office and plant facilities in Surrey, British
Columbia. The Company rents office yard and warehouse space in Vancouver,
Washington for $2,250 per month. Management believes there is an adequate supply
of facilities available for rent on a reasonable basis.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding the
Company's directors and executive officers:
Name Age Position
Calvin J. Payne 45 Chairman of the Board and Chief Executive Officer
S. Roy Jeffrey 51 Chief Operating Officer and Director
Walter Friesen 45 Senior Vice President and Director
Peter Lucas 43 Senior Vice President and Chief Financial Officer
Calvin J. Payne is a co-founder of the Company. Since inception in 1990,
Mr. Payne has managed the Company's growth in his capacity as a director,
officer and chief engineer. Mr. Payne has 22 years of experience in all aspects
of the construction of steel communication towers. He was a construction worker
and rigger in 1975, a field engineer in 1978, a design engineer in 1979,
engineering manager in charge of a tower company's Australian operations in
1983, and chief engineer of the same company's domestic operations in 1988. Mr.
Payne has engineered over 600 towers, including a 1470 foot tower in Florida
designed to withstand hurricane winds. Mr. Payne won a design award for a steel
tower erected on a mountain top site near the Alaskan-Canadian border that was
totally enclosed in fiberglass to protect the tower and antenna from wind and
ice. Mr. Payne has assisted in the writing of design standards for communication
towers in the United States, Canada, and Australia. He is a professional
engineer registered in the United States Canada and Australia. He received a
degree in civil engineering from the University of British Columbia in 1978 and
an MBA from the University of Western Australia in 1985.
S. Roy Jeffrey is a co-founder of the Company. Since inception in 1990, Mr.
Jeffrey has managed the Company's growth in his capacity as a director, officer,
and Chief Operating Officer. Mr. Jeffrey has 25 years experience in all aspects
of the supply and installation of communication towers and equipment. Mr.
Jeffrey was employed by a privately held communications company from 1972 to
1990, when he left to co-found the Company. He started as a high steel rigger,
was promoted to field supervisor and then promoted to branch manager where he
was responsible for as many as 36 office and field employees. Mr. Jeffrey
supervised or managed the supply and installation of towers in the United
States, Canada, the Caribbean, Australia, and Middle East. Mr. Jeffrey has
managed all aspects of communication site construction including permit
applications, surveys, road-building, foundations, and the supply and
installation of buildings, towers and antennas, and transmission lines. Mr.
Jeffrey has extensive experience in rigging tall towers.
Walter Friesen became Vice President of the Company in March 1994 and
managed Westower Communications Inc. in Vancouver Washington. Mr. Friesen has 21
years experience in the wireless communication industry. In 1976 he was a
broadcast transmitter technician for the Canadian Broadcasting Corporation
responsible for AM, FM, and television transmissions. In 1978, he joined a
privately held communications company where he held positions of increasing
responsibility until 1994, when he left to join the Company. Before leaving, Mr.
Friesen was Vice President of the Company's U.S. eastern field operation, with
responsibility for five branch offices, 150 employees, and $22,000,000 in annual
sales. Mr. Friesen has managed all aspects of tower construction and operation.
Mr. Friesen earned an Honors Diploma in Electronics Engineering Technology from
the Northern Alberta Institute of Technology in 1976.
Peter Lucas became Senior Vice President and Chief Financial Officer of the
Company in April 1997. From August 1995 to April 1997, Mr. Lucas served as Chief
Financial Officer of Cotton Valley Resources Corporation, a Dallas based public
oil and gas company. From May 1992 to July 1995, he served as Chief Financial
Officer of Canmax Inc., a Dallas based public company that develops software for
gas stations and convenience stores. Mr. Lucas is a member of the Canadian
Institute of Chartered Accountants. He received his professional training at
Coopers & Lybrand, which he left in 1984 to form his own tax practice. Six years
later, Mr. Lucas's practice merged with Coopers & Lybrand, with whom he was a
partner until 1992. Mr. Lucas passed the AICPA reciprocity examination in 1993,
and is experienced in domestic taxation, accounting and securities matters. He
received a bachelor of commerce degree from the University of Alberta in 1978.
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Directors of the Company are elected at each annual meeting of
shareholders. The officers of the Company are elected annually by the Board of
Directors. Officers and directors hold office until their respective successors
are elected and qualified or until their earlier resignation or removal.
Outside Directors
The Company has agreed to appoint two directors who are not officers,
employees or 5% shareholders or related to an officer, employee or 5%
shareholder upon conclusion of the offering. One of those directors will be
appointed by the Representative of the Underwriters. The other director nominee,
Ronald P. Erickson, 53, is principal of GlobalVision, LLC, an international
strategic consulting and corporate finance company, where he has been associated
since 1994. From 1984 to 1994, he was a director of Egghead Software, Inc.,
where he was an original investor. From 1990 to July 1995, Mr. Erickson was a
principal of Rutkowski, Erickson and Scott, a consulting firm which assisted
small emerging growth companies. From 1990 to July 1996, Mr. Erickson was
Chairman of the Board of Digital Data Networks, Inc. Mr. Erickson received his
B.A. in History from Central Washington University, his M.A. in American studies
from the University of Wyoming and his J.D. from the University of Denver.
Compensation of Directors
Directors who are employees of the Company will notreceive any remuneration
in their capacity as directors. Outside directors will receive $12,000 annually,
and $500 per meeting attended and related travel expenses.
Indemnification and Limitation on Liability
If available at reasonable cost, the Company intends to maintain insurance
against any liability incurred by its officers and directors in defense of any
actions to which they are made parties by any reason of their positions as
officers and directors.
Executive Compensation
The following table sets forth the compensation paid to the Company's
President Calvin J. Payne and Vice President Walter Friesen (the "Named
Executive Officers") for services rendered to the Company in all capacities for
the fiscal years ended February 28, 1997, 1996, and 1995.
Summary Compensation Table
Name and Annual Compensation All Other
Principal Position Fiscal Year Salary Bonus Compensation
Calvin J. Payne February 28, 1997 $75,000 $437,780 -
February 29, 1996 70,000 92,530 -
February 28, 1995 70,000 - -
Walter Friesen February 28, 1997 $75,000 $298,000 -
February 29, 1996 60,000 25,000 -
February 28, 1995 57,000 - -
Prior to this offering, the Company was a privately held corporation
and distributed much of its income to shareholders by way of bonuses for income
tax planning purposes. In the future, the Company intends to compensate its
officers in accordance with the recommendations of a compensation committee
consisting entirely of outside directors. The base salary for fiscal year ending
February 28, 1998 for each of Messrs Payne, Jeffrey and Friesen is $75,000 and
for Mr. Lucas is $120,000.
Employment Agreements
The Company has no employment agreements.
Stock Option Plan
The 1997 Stock Option Plan, as amended (the "Stock Option Plan") provides
for the grant to employees, officers, directors, and consultants to the Company
or any parent, subsidiary or affiliate of the Company of up to 400,000 shares of
the Company's Common Stock, subject to adjustment in the event of any
subdivision, combination, or reclassification of shares. The Stock Option Plan
will terminate in 2004. The Stock Option Plan provides for the grant
21
<PAGE>
of incentive stock options ("ISO's") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and non-qualified options at the
discretion of the Board of Directors or a committee of the Board of Directors
(the "Committee"). The exercise price of any option will not be less than the
fair market value of the shares at the time the option is granted. The options
granted are exercisable within the times or upon the events determined by the
Board or Committee set forth in the grant, but no option is exercisable beyond
ten years from the date of the grant. The Board of Directors or Committee
administering the Stock Option Plan will determine whether each option is to be
an ISO or non-qualified stock option, the number of shares, the exercise price,
the period during which the option may be exercised, and any other terms and
conditions of the option. The holder of an option may pay the option price in
(1) cash, (2) check, (3) other shares of the Company, (4) authorization for the
Company to retain from the total number of shares to be issued that number of
shares having a fair market value on the date of exercise equal to the exercise
price for the total number of shares, (5) irrevocable instructions to a broker
to deliver to the Company the amount of sale or loan proceeds required to pay
the exercise price, (6) delivery of an irrevocable subscription agreement for
the shares which irrevocably obligates the option holder to take and pay for
shares not more than 12 months after the date of the delivery of the
subscription agreement, (7) any combination of the foregoing methods of payment,
or (8) other consideration or method of payment for the issuance of shares as
may be permitted under applicable law. The options are nontransferable except by
will or by the laws of descent and distribution. Upon dissolution, liquidation,
merger, sale of stock or sale of substantially all assets, outstanding options,
notwithstanding the terms of the grant, will become exercisable in full at least
10 days prior to the transaction. The Stock Option Plan is subject to amendment
or termination at any time and from time to time, subject to certain
limitations.
The plan is administered by the Compensation Committee of the Board of
Directors, which is composed of at least two directors who are "disinterested
persons" as defined in Rule 16b-3 of the Securities Exchange Act of 1934, as
amended.
The following table sets forth information regarding exercised options
and the value of unexercised options held by the Named Executive Officers of the
Company as of June 30, 1997. No options were granted prior to March 1, 1997. In
June 1997 the Company granted 132,000 options at an exercise price of $8.25 and
24,000 options at an exercise price of $7.50 to certain key executives.
Aggregated Option Exercises in Last Fiscal Year
and FY-End Option Values
Number of Securities
Underlying Unexercised
Options at June 30, 1997
Shares Acquired Exercisable/
Name on Exercise Value Realized Unexercisable
- ---------------------- ----------- -------------- -------------
Calvin J. Payne - - 0/54,000
S. Roy Jeffrey - - 0/54,000
Walter Friesen - - 0/24,000
Peter Lucas - - 0/24,000
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership as of June 30, 1997 of the Common Stock by (a) each person
known by the Company to be a beneficial owner of more than 5% of the outstanding
shares of Common Stock and by each Selling Shareholder, (b) each director of the
Company, (c) each Named Executive Officer, and (d) all directors and executive
officers of the Company as a group. Unless otherwise noted, each beneficial
owner named below has sole investment and voting power with respect to the
Common Stock shown below as beneficially owned by him.
Shares Owned Shares Owned
Prior to offering After offering
Name and Address of Number of Percent Number of Percent
Beneficial Owner Shares Owned Owned Shares Owned Owned
Calvin J. Payne (1) (3) 1,125,000 37.50% 1,125,000 28.13%
5264 Drayton Harbour Road
Blaine, WA 98230
S. Roy Jeffrey (1) (4) 1,125,000 37.50% 1,125,000 28.13%
18375 - 67 Avenue
Surrey, British Columbia V3S 8E7
Walter Friesen(2) (5) 375,000 12.50% 375,000 9.38%
11208 N.E. 32 Avenue
Vancouver, WA 98686
Peter Lucas - - - -
670 South Pekin Road
Woodland, Washington 98674
Valdis V. Rundans(2) (6) 375,000 12.50% 375,000 9.38%
#14 - 26112 Township Road 511
Spruce Grove, Alberta T7Y 1B6
All Executive Officers and 2,628,750 87.50% 2,625,000 65.63%
Directors as a group(4 persons)(7)
- -----------
(1) If the Underwiter's over-allotment option is exercised in full, holdings
would be 1,068,750 or 26.72%.
(2) If the underwiter's over-allotment option is exercised in full, holdings
would be 356,250 or 8.91%.
(3) Includes the following shares, beneficial ownership of which is
disclaimed: 100,000 shares held by Mr.Payne's spouse and 925,000 held by
the Calvin J. Payne family trust of which Mr. Payne is sole trustee.
(4) Includes the following shares, beneficial ownership of which is
disclaimed: 100,000 shares held by Mr.Jeffrey's spouse and 925,000
held by the S. Roy Jeffrey family trust of which mr. Jeffrey is sole
trustee.
(5) Includes the following shares, beneficial ownership of which is
disclaimed: 80,000 shares held by Mr. Friesen's spouse and 215,000
held by the Walter Friesen family trust of which Mr. Friesen is sole
trustee.
(6) Includes the following shares, beneficial ownership of which is
disclaimed: 80,000 shares held by Mr. Rundans' spouse and 215,000 held
by the Valdis V. Rundans family trust of which Mr. Rundans is sole
trustee.
(7) If the underwriter's over-alloment option is exercised in full, holdings
would be 2,493,750 or 62.34%.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company purchases goods and services from Western Telecom
Construction Ltd. ("WTCL"), an Alberta corporation, controlled by Peter Jeffrey,
the brother of S. Roy Jeffrey. The Company also sells goods and services to
WTCL. Purchases amounted to $1,822,326, $805,143 and $153,949 in fiscal years
1997, 1996, and 1995 respectively and sales amounted to $554,181, $856,003 and
$556,575 in fiscal years 1997, 1996, and 1995 respectively.
The Company has a 50% interest in an Alberta limited partnership which owns
six towers which are used by a telephone company under a license granted by the
partnership. The general partner is an Alberta corporation controlled by Valdis
Rundans, who owns more than 5% of the Company's issued stock. Other partners are
an Alberta corporation controlled by Valdis Rundans' spouse and an Alberta
corporation controlled by Peter Jeffrey. The Company receives 50% of the
partnership's income and had no other transactions with the partnership during
the 1997, 1996 or 1995 fiscal years.
Approximately $555,437 of the proceeds of this offering will be used to
repay amounts due to Calvin J. Payne and his spouse, Walter Friesen, and a
corporation controlled by S. Roy Jeffrey.
The Company has extensive experience in costing the services it provides,
and management of the Company believes that its costing to affiliated entities
is consistent with its general costing. Similarly, products or services received
by the Company from affiliated entities have been at substantially the same
rates charged other enterprises. The Company has compared these rates prior to
engagement with independent quotes or with rates charged by other entities. None
of the agreements or arrangements with affiliates are subject to adjustment.
While there has been no independent determination as to the fairness of the
Company's transactions with affiliated entities, in the future all such
transactions will be approved by the disinterested members of the Board of
Directors. These contract services have been provided at what management
estimates to be market or below market rates.
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<PAGE>
DESCRIPTION OF SECURITIES
Units Each Unit consists of one share of Common Stock and one Warrant. The
Shares and the Warrants included in the Units may not be separately traded for
six months after the date of this Prospectus, unless earlier separated upon
three day's written notice from the Representative to the Company. Common Stock
The Company is authorized to issue 10,000,000 shares of Common Stock, $0.01
par value. As of June 30, 1997 there were 3,000,000 shares of Common Stock
issued. There were 4 holders of record of Common Stock, as of June 30, 1997.
The holders of outstanding shares of all classes of Common Stock are
entitled to share ratably in any dividends paid on the Common Stock when, as and
if declared by the Board of Directors out of funds legally available. Each
holder of Common Stock is entitled to one vote for each share held of record.
The Common Stock is not entitled to cumulative voting or preemptive rights and
is not subject to redemption. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in the net
assets legally available for distribution. All outstanding shares of Common
Stock are fully paid and non-assessable. Warrants
The Warrants will be issued in registered form under, governed by, and
subject to the terms of a warrant agreement (the "Warrant Agreement") between
the Company and American Stock Transfer & Trust Company as warrant agent (the
"Warrant Agent"). The following statements are brief summaries of certain
provisions of the Warrant Agreement. Copies of the Warrant Agreement may be
obtained from the Company or the Warrant Agent and have been filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part.
Each Warrant entitles the holder thereof to purchase at any time one share
of Common Stock at an exercise price of $9.00 per share at any time after the
Common Stock and Warrants become separately tradable until [five years from the
date of this Prospectus]. The right to exercise the Warrants will terminate at
the close of business on [five years from the date of this Prospectus]. The
Warrants contain provisions that protect the Warrant holders against dilution by
adjustment of the exercise price in certain events, including but not limited to
stock dividends, stock splits, reclassification or mergers. A Warrant holder
will not possess any rights as a shareholder of the Company. Shares of Common
Stock, when issued upon the exercise of the Warrants in accordance with the
terms thereof, will be fully paid and non-assessable.
Commencing six months after the date of this Prospectus, the Company may
redeem some or all of the Warrants at a call price of $0.05 per Warrant, upon
thirty (30) day's prior written notice if the closing sale price of the Common
Stock on the American Stock Exchange has equaled or exceeded $15.00 for ten (10)
consecutive days.
The Warrants may be exercised only if a current prospectus relating to the
underlying Common Stock is then in effect and only if the shares are qualified
for sale or exempt from registration under the securities laws of the state or
states in which the purchaser resides. So long as the Warrants are outstanding,
the Company has undertaken to file all post-effective amendments to the
Registration Statement required to be filed under the Securities Act, and to
take appropriate action under federal law and the securities laws of those
states where the Warrants were initially offered to permit the issuance and
resale of the Common Stock issuable upon exercise of the Warrants. However,
there can be no assurance that the Company will be in a position to effect such
action, and the failure to do so may cause the exercise of the Warrants and the
resale or other disposition of the Common Stock issued upon such exercise to
become unlawful. The Company may amend the terms of the Warrants, but only by
extending the termination date or lowering the exercise price thereof. The
Company has no present intention of amending such terms. However, there can be
no assurances that the Company will not alter its position in the future with
respect to this matter. Transfer Agent and Registrar
The Transfer Agent and Registrar for the Units, the Common Stock and the
Warrants is American Stock Transfer & Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 4,000,000 shares of
Common Stock outstanding. of these shares, 1,000,000 shares sold in this
offering (1,150,000 if the Underwriter's over-allotment option is exercised in
full) will be freely tradable in the public market without restriction under the
Securities Act, except shares purchased by an "affiliate" (as defined in the
Securities Act) of the Company. The remaining 3,000,000 shares (the "Restricted
Shares") (2,850,000 if the Underwriter's over-allotment option is exercised in
full) will be "restricted shares" within the meaning of the Securities Act and
may be publicly sold only if registered under the Securities Act or sold in
accordance with an applicable exemption from registration, such as those
provided by Rule 144 under the Securities Act.
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell Restricted Shares if at least
one year have passed since the later of the date such shares were acquired from
the Company or any affiliate of the Company. Rule 144 provides, however that
within any three-month period such person may only sell up to the greater of 1%
of the then outstanding shares of the Company's Common Stock (approximately
40,000 shares following the completion of this offering) or the average weekly
trading volume in the Company's Common Stock during the four calendar weeks
immediately preceding the date on which the notice of the sale is filed with the
Commission. Sales pursuant to Rule 144 also are subject to certain other
requirements relating to manner of sale, notice of sale and availability of
current public information. Any person who has not been an affiliate of the
Company for a period of 90 days preceding a sale of Restricted Shares is
entitled to sell such shares under Rule 144 without regard to such limitations
if at least two years have passed since the later of the date such shares were
acquired from the Company or any affiliate of the Company. Shares held by
persons who are deemed to be affiliated with the Company are subject to such
volume limitations regardless of how long they have been owned or how they were
acquired.
Without consideration of contractual restrictions described below, an
aggregate of 3,000,000 shares of Common Stock, representing 75.0% of the
outstanding shares of the Common Stock, or 2,850,000 shares representing 71.3%
if the Underwriter's over-allotment option is exercised in full will be eligible
for sale in the public market pursuant to Rule 144 after the completion of this
offering. The Company is unable to estimate the number of shares that may be
sold from time to time under Rule 144, since such number will depend upon the
market price and trading volume for the Common Stock, the personal circumstances
of the sellers and other factors. After this offering, executive officers,
directors and senior management will own 2,625,000 shares of the Common Stock
(assuming the Underwriter's over-allotment option is not exercised). The
Company's shareholders and directors have entered into an agreement with the
Underwriters providing that they will not sell or otherwise dispose of any
shares of Common Stock held by them for a period of one year after the date of
this Prospectus without the prior written consent of the Underwriters, except
for shares sold upon exercise of the Underwriter's over-allotment option. The
Company can make no prediction as to the effect, if any, that offer or sale of
these shares would have on the market price of the Common Stock. Nevertheless,
sales of significant amounts of Restricted Shares in the public markets could
adversely affect the fair market price of Common Stock, as well as impair the
ability of the Company to raise capital through the issuance of additional
equity securities.
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UNDERWRITING
Pursuant to the terms and subject to the conditions contained in the
Underwriting Agreement, the Company has agreed to sell to the Underwriters named
below, and each of the Underwriters, for whom National Securities Corporation
(the "Representative") is acting as Representative, has severally agreed to
purchase the number of Units set forth opposite its name in the following table.
Underwriters Number of Units
National Securities Corporation......................
Total................................... 1,000,000
=========
The Representative has advised the Company that the Underwriters propose to
offer the Units to the public at the initial public offering price per share set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession of not more than $0.375 per Unit, of which $0.15 may be
reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
Representative. No such reduction shall change the amount of proceeds to be
received by the Company as set forth on the cover page of this Prospectus.
The Company and the Selling Shareholders have granted to the Underwriters
an option, exercisable during the 45-day period after the date of this
Prospectus, to purchase up to 150,000 additional Units to cover over-allotments,
if any, at the same price per Unit as the Company will receive for the
1,0000,000 Units that the Underwriters have agreed to purchase. To the extent
that the Underwriters exercise such option, each of the Underwriters will have a
firm commitment to purchase approximately the same percentage of such additional
Units that the number of Units to be purchased by it shown in the above table
represents as a percentage of the 1,000,000 Units offered hereby. If purchased,
such additional Units will be sold by the Underwriters on the same terms as
those on which the 1,000,000 Units are being sold. All of the shares of Common
Stock included in these Units will be sold to the Underwriters by Selling
Shareholders, and the Company will not receive any proceeds from the sale of
such shares. The Warrants included in these Units will be issued by the Company.
See "Principal and Selling Shareholders."
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Shareholders against certain civil
liabilities, including liabilities under the Securities Act.
The holders of approximately 3,000,000 shares of the Common Stock after the
offering have agreed with the Representative that, until one year after the date
of this Prospectus, subject to certain limited exceptions, they will not sell,
contract to sell, or otherwise dispose of any shares of Common Stock, any
options to purchase shares of Common Stock, or any securities convertible into,
exercisable for or exchangeable for shares of Common Stock, owned directly by
such holders or with respect to which they have the power of disposition,
without the prior written consent of the Representative, except for shares sold
upon exercise of the Underwriter's over-allotment option. Substantially all of
such shares will be eligible for immediate public sale following expiration of
the lock-up periods, subject to the provisions of Rule 144. In addition, the
Company has agreed that until 365 days after the date of this Prospectus, the
Company will not, without the prior written consent of the Representative,
subject to certain limited exceptions, issue, sell, contract to sell, or
otherwise dispose of, any shares of Common Stock, any options to purchase any
shares of Common Stock or any securities convertible into, exercisable for or
exchangeable for shares of Common Stock other than the Company's sales of shares
in this offering, the issuance of Common Stock upon the exercise of outstanding
options or warrants or the issuance of options under its employee stock option
plan. See "Shares Eligible for Future Sale."
The Underwriters have the right to offer the Securities offered hereby only
through licensed securities dealers in the United States who are members of the
National Association of Securities Dealers, Inc. and may allow such dealers such
portion of its ten (10%) percent commission as the Underwriter may determine.
27
<PAGE>
The Underwriters will not confirm sales to any discretionary accounts
without the prior written consent of their customers.
The Company has agreed to pay the Representative a non-accountable expense
allowance of 2.00% of the gross amount of the Units sold ($150,000 upon the sale
of the Units offered) at the closing of the offering. The Underwriter's expenses
in excess thereof will be paid by the Representative. To the extent that the
expenses of the underwriting are less than that amount, such excess shall be
deemed to be additional compensation to the Underwriter. In the event this
offering is terminated before its successful completion, the Company may be
obligated to pay the Underwriter a maximum of $25,000 on an accountable basis
for expenses incurred by the Underwriter in connection with this offering.
The Company has agreed that for a period of five years from the closing of
the sale of the Shares offered hereby, it will nominate for election as a
director a person designated by the Representative, and during such time as the
Representative has not exercised such right, the Representative shall have the
right to designate an observer, who shall be entitled to attend all meetings of
the Board and receive all correspondence and communications sent by the Company
to the members of the Board. The Representative has not yet identified to the
Company the person who is to be nominated for election as a director or
designated as an observer.
The Underwriting Agreement provides for indemnification among the Company,
the Selling Shareholders and the Underwriters against certain civil liabilities,
including liabilities under the Securities Act. In addition, the Underwriter's
Warrants provide for indemnification among the Company and the holders of the
Underwriter's Warrants and underlying shares against certain civil liabilities,
including liabilities under the Securities Act, and the Exchange Act.
Underwriter's Warrants
Upon the closing of this offering, the Company has agreed to sell to the
Underwriters for nominal consideration, the Underwriter's Warrants. The
Underwriter's Warrants are exercisable at 120% of the public offering price for
a four-year period commencing one year from the effective date of this offering.
The Underwriter's Warrants may not be sold, transferred, assigned or
hypothecated for a period of one year from the date of this offering except to
the officers of the Underwriter and their successors and dealers participating
in the offering and/or their partners or officers. The Underwriter's Warrants
will contain antidilution provisions providing for appropriate adjustment of the
number of shares subject to the Warrants under certain circumstances. The
holders of the Underwriter's Warrants have no voting, dividend or other rights
as shareholders of the Company with respect to shares underlying the
Underwriter's Warrants until the Underwriter's Warrants have been exercised.
The Company has agreed, during the four year period commencing one year
from the date of this offering, to give advance notice to the holders of the
Underwriter's Warrants or underlying securities of its intention to file a
registration statement, other than in connection with employee stock options,
mergers, or acquisitions, and in such case the holders of the Underwriter's
Warrants and underlying securities shall have the right to require the Company
to include their securities in such registration statement at the Company's
expense.
For the term of the Underwriter's Warrants, the holders thereof will be
given the opportunity to profit from a rise in the market value of the Company's
shares, with a resulting dilution in the interest of other shareholders. The
holders of the Underwriter's Warrants can be expected to exercise the
Underwriter's Warrants at a time when the Company would, in all likelihood, be
able to obtain needed capital by an offering of its unissued shares on terms
more favorable to the Company than those provided by the Underwriter's Warrants.
Such facts may adversely affect the terms on which the Company can obtain
additional financing. Any profit realized by the Underwriter on the sale of the
Underwriter's Warrants or shares issuable upon exercise of the Underwriter's
Warrants may be deemed additional underwriting compensation.
If the Representative, at its election, at any time one year after the date
of this Prospectus, solicits the exercise of the Warrants, the Company will be
obligated, subject to certain conditions, to pay the Representative a
solicitation fee equal to 5% of the aggregate proceeds received by the Company
as a result of the solicitation. No warrant solicitation fees will be paid
within one year after the date of this Prospectus. No solicitation fee will be
paid if the market price of the Common Stock is lower than the then exercise
price of the Warrants, no solicitation fee will be paid if the Warrants being
exercised are held in a discretionary account at the time of exercise, except
where prior specific approval for exercise is received from the customer
exercising the Warrants, and no solicitation fee will be
28
<PAGE>
paid unless the customer exercising the Warrants states in writing that the
exercise was solicited and designates in writing the Representative or other
broker-dealer to receive compensation in connection with the exercise. The
Representative may reallow a portion of the fee to soliciting broker-dealers.
Determination of Offering Price
The initial public offering price was determined by negotiations between
the Company and the Representative. The factors considered in determining the
public offering price include the Company's revenue growth since its
organization, the industry in which it operates, the Company's business
potential and earning prospects and the general condition of the securities
markets at the time of the offering. The offering price does not bear any
relationship to the Company's assets, book value, net worth or other recognized
objective criteria of value.
Prior to this offering, there has been no public market for the Securities,
and there can be no assurance than an active market will develop.
American Stock Exchange
The Company has applied for listing of the Securities on the American Stock
Exchange. It is anticipated that after the offering, the Securities will be
quoted on the American Stock Exchange. However, there can be no assurance that
the Securities will be listed, that a market for the Securities will develop or
if it does develop that it will be maintained.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company by Maurice J. Bates L.L.C., Dallas, Texas . Certain
legal matters in connection with the sale of the Securities offered hereby will
be passed upon for the Underwriters by Winstead Sechrest & Minick P. C., Dallas,
Texas.
EXPERTS
The financial statements as of February 28, 1997 and for each of the two
years in the period ended February 28, 1997 included in this Prospectus have
been so included in reliance on the report of Moss Adams LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
29
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants F-2
Consolidated Balance Sheet as of February 28, 1997 F-3
Consolidated Statement of Income for the years ended February 29, 1996 F-4
and February 28, 1997
Consolidated Statement of Changes in Shareholder's Equity for years ended F-5
February 29, 1996, and February 28, 1997
Consolidated Statement of Cash Flows for the years ended February 29, 1996, F-6
and February 28, 1997
Notes to Consolidated Financial Statements F-7
Consolidated Balance Sheet as of May 31, 1996 and 1997 (unaudited) F-16
Consolidated Statement of Income for the three months ended F-17
May 31, 1996 and 1997 (unaudited)
Consolidated Statement of Cash Flows for the three months ended F-18
May 31, 1996 and 1997(unaudited)
Notes to the Consolidated Financial Statements for the F-19
three months ended May 31, 1996 and 1997
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Westower Holdings Ltd. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Westower Holdings
Ltd. (a British Columbia corporation) and Subsidiaries as of February 28, 1997,
and the related consolidated statements of income, stockholders' equity, and
cash flows for the years ended February 29, 1996 and February 28, 1997. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Westower Holdings Ltd. and Subsidiaries as of February 28, 1997, and the results
of its operations and its cash flows for the years ended February 29, 1996 and
February 28, 1997 in conformity with generally accepted accounting principles.
MOSS ADAMS LLP
Bellingham, Washington
July 21, 1997
F-2
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
February 28, 1997
ASSETS
CURRENT ASSETS
Cash $ 462,292
Accounts receivable, net 1,535,734
Costs and estimated earnings in excess of billings on
uncompleted contracts (Note 3) 357,150
Inventory - parts and supplies 94,666
Prepaid expenses 5,333
----------
Total current assets 2,455,175
PROPERTY AND EQUIPMENT, net (Notes 4 and 5) 1,593,690
OTHER ASSETS 27,719
----------
TOTAL ASSETS $ 4,076,584
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable (Note 8) $ 1,335,815
Other current liabilities (Note 11) 251,850
Billings in excess of costs and estimated earnings on
uncompleted contracts (Note 3) 129,644
Current portion of long-term debt 436,258
Income taxes payable (Note 6) 148,685
Deferred income taxes (Note 6) 349,712
-------------
Total current liabilities 2,651,964
LONG-TERM DEBT, excluding current portion 49,145
NOTES PAYABLE TO RELATED PARTIES (Note 8) 672,211
-------------
Total liabilities 3,373,320
-------------
COMMITMENTS (Note 12)
STOCKHOLDERS' EQUITY (Note 9)
Common stock of no par value, 10,000 shares authorized,
200 shares issued and outstanding 175
Foreign currency translation adjustment (Note 2) 26,777
Retained earnings 676,312
-------------
Total stockholders' equity 703,264
-------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,076,584
=============
F-3
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Years Ended February 29, 1996 and February 28, 1997
1996 1997
----------- -----------
CONTRACT REVENUES EARNED $ 5,267,095 $ 11,718,679
COSTS OF REVENUES EARNED 3,963,383 8,661,692
--------- ---------
Gross profit 1,303,712 3,056,987
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 11) 774,258 1,134,404
MANAGEMENT BONUSES 117,530 756,293
-------- --------
OPERATING INCOME 411,924 1,166,290
INTEREST EXPENSE 72,914 41,576
--------- ---------
INCOME BEFORE INCOME TAXES 339,010 1,124,714
INCOME TAXES (Note 6) 93,055 422,349
------- --------
NET INCOME $ 245,955 $ 702,365
=========== ===========
EARNINGS PER SHARE $ 0.08 $ 0.23
=========== ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASED UPON CAPITAL STRUCTURE SUBSEQUENT TO
YEAR END (Notes 9 and 10) 3,000,000 3,000,000
========== ==========
F-4
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended February 29, 1996 and February 28, 1997
Foreign
Retained Currency
Common Stock Earnings Translation
Shares Amount (Deficit) Adjustment Total
BALANCE, March 1, 1995 200 $175 $(276,564) $31,333 $(245,056)
Net Income - - 245,955 - 245,955
Translation adjustment - - 2,734 (2,734) -
----- ------- ------- ------- --------
BALANCE, February 29, 1996 200 175 (27,875) 28,599 899
Net Income - - 702,365 - 702,365
Translation adjustment - - 1,822 (1,822) -
----- -------- ------- --------- ---------
BALANCE, February 28, 1997 200 $ 175 $676,312 $ 26,777 $ 703,264
===== ====== ======== ========= =========
F-5
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended February 29, 1996 and February 28, 1997
Increase (Decrease) in Cash
1996 1997
CASH FROM OPERATING ACTIVITIES
Net income $245,955 $702,365
Adjustments to reconcile net income to
net cash from operating activities
Depreciation 80,710 91,680
Deferred income taxes 60,803 246,126
Changes in operating assets and liabilities
Accounts receivable 53,955 (947,129)
Costs and estimated earnings in excess of billings on
uncompleted contracts (77,147) (170,935)
Other current assets 4,902 (96,481)
Other assets (25,287) (5,539)
Trade accounts payable (619) 826,766
Billings in excess of costs and estimated
earnings on uncompleted contracts 50,646 78,998
Other current liabilities 99,241 58,888
Income taxes payable (36,779) 143,758
--------- --------
Net cash flows from operating activities 456,380 928,497
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Sales of property and equipment 155,544 -
Purchase of property and equipment (40,801) (989,840)
--------- ----------
Net cash flows from investing activities 114,743 (989,840)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (390,599) (250,614)
Proceeds from debt incurred 65,690 368,285
------- --------
Net cash flows from financing activities (324,909) 117,671
-------- ---------
NET INCREASE IN CASH 246,214 56,328
CASH AND CASH EQUIVALENTS, beginning of year 159,750 405,964
-------- --------
CASH AND CASH EQUIVALENTS, end of year $405,964 $462,292
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Taxes paid $69,031 $32,465
======== ========
Interest paid $72,914 $41,576
======== ========
F-6
<PAGE>
WESTOWER HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 1996 and February 28, 1997
NOTE 1 - NATURE OF OPERATIONS
Westower Holdings Ltd. was incorporated in the Province of British
Columbia, Canada, and reincorporated in Wyoming in July 1997.
Westower Holdings Ltd. has two subsidiaries, Payne Holdings Ltd. and
Westower Communications Ltd. (both British Columbia corporations), and Westower
Communications Ltd. has a wholly-owned subsidiary, Westower Communications, Inc.
(a Washington Corporation). Westower Holdings Ltd., and its subsidiaries are
herein referred to as the "Company".
The Company designs, builds, installs, modifies and maintains wireless
communications transmitting and receiving facilities primarily for providers of
wireless communications services. In addition, the Company provides design,
engineering, and testing services (collectively, "wireless infrastructure design
engineering services") and site acquisition and evaluation services ("site
acquisition services") in connection with the installation and relocation of
wireless communications facilities. The Company also manufactures and sells
unmanned communications shelters designed to be located adjacent to wireless
transmitting and receiving facilities to house electrical equipment associated
with such facilities. The Company's customers are located throughout North
America, but predominantly in the western United States and Canada.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Presentation - These financial statements are presented in U.S.
currency and prepared in conformity with U.S. Generally Accepted Accounting
Principles.
(b) Principles of Consolidation - The consolidated financial statements
include the financial statements of Westower Holdings Ltd. and its wholly-owned
subsidiaries, Payne Holdings Ltd., Westower Communications Ltd. and Westower
Communications Inc. All significant intercompany balances and transactions have
been eliminated in consolidation.
As discussed in Note 7, the Company also owns a 50% interest in WTC Leasing
Partnership, an Alberta limited partnership which constructs and licenses
communication towers in western Canada. The Company's proportionate interest in
the assets, liabilities, equity, revenues, and expenses of the partnership is
included in these financial statements.
(c) Contract Revenue and Cost Recognition - Revenue from fixed-price
construction contracts is recognized on the percentage-of-completion method.
Revenues from contracts based upon time and materials are recognized based upon
revenues earned for hours worked and materials consumed. Most of the Company's
contracts are short-term and are completed in two to three months. Contract
costs include all direct material and labor costs and those indirect costs
related to contract performance. Selling, general and administrative costs are
charged to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
Costs and estimated earnings in excess of billings on uncompleted contracts
represents revenues recognized in excess of amounts billed. Billings in excess
of costs and estimated earnings on uncompleted contracts represents billings in
excess of revenues earned.
(d) Cash and Cash Equivalents - For purposes of cash flows reporting, cash
and cash equivalents consist of cash in banks and money market investments on
deposit with major Canadian and Northwest financial institutions.
(e) Accounts Receivable - The Company offers short-term credit to its
customers. Accounts receivable are considered fully collectible and are not
collateralized.
(f) Inventory - The Company's inventory of parts and supplies is stated at
the lower of cost, computed on a first-in, first-out (FIFO) basis or market.
F-7
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(g) Property, Equipment and Depreciation - Property and equipment are
stated at cost less accumulated depreciation. Improvements which increase the
useful life of property, and replacements of major components of property are
capitalized, while maintenance, repairs and minor replacements are expensed as
incurred.
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets. Estimated useful lives by major
depreciable property and equipment category are as follows: buildings rented to
others, 20 years; communication towers licensed to others, 20 years; furniture,
fixtures and equipment, 3 to 10 years; and vehicles, 5 years.
(h) Income Taxes - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
due plus the change in deferred taxes. Deferred taxes are recognized for
differences between the basis of assets and liabilities for financial statement
and income tax purposes. The differences relate primarily to the timing and
recognition of depreciation on depreciable assets and profit on uncompleted
contracts. The deferred tax amounts represent the future tax consequences of
those differences, which will either be deductible or taxable when the assets
and liabilities are recovered or settled.
(i) Translation of Foreign Currencies - Assets and liabilities of foreign
operations, where the functional currency is the local currency, are translated
in U.S. dollars at the rate of exchange in effect on the balance sheet date,
except for property and equipment, which is translated at the historical rates
of exchange in effect when the associated assets were purchased. Revenue and
expenses are translated using the average rates of exchange prevailing during
the year. Related translation adjustments are reflected in the stockholders
equity section of the consolidated balance sheet.
(j) Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles 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.
Significant estimates subject to revisions and possibly material
adjustment, upon the outcome of future unknown events include the following:
(1) Contract Revenue and Cost Recognition - A significant portion of
construction revenues and costs are based upon management's estimates
which are in turn based upon past experience, reports from the field
and economic trends and long-term agreements. Actual revenues and costs
are therefore not known until contracts are completed and all revenues
are billed and costs invoiced and accepted.
(2) Depreciation - Depreciation represents an expense allocation
matching asset costs to revenue earned over the estimated lives of
assets owned by the Company. Periodically, the Company re-evaluates the
lives and methods of depreciation applied to its property and equipment
and considers such things as general condition and utility,
technological status and economic viability. Such evaluations may
result in the Company's revision and adjustment of asset carrying
values in relatively short-term time periods.
(3) Income Taxes - The Company operates in a number of taxing
jurisdictions and endeavors to comply with all tax laws as applicable,
consistent with minimizing taxes paid by the Company where possible. To
comply with these laws the Company must allocate and prorate certain
items of revenue and expense in addition to establishing appropriate
transfer pricing policies. These allocations and policies are subject
to scrutiny and audit which may result in the Company's need to adjust
its tax accruals and provisions as a result of its interactions with
taxing authorities.
F-8
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(4) Translation Of Foreign Currencies - The Company's business
operations currently include significant operations in Canada. In
recent history the exchange rates between U.S. and Canadian currencies
have been relatively stable and translation adjustments have not been
significant. Exchange rates are affected by factors outside the
Company's control including political policies and actions and economic
trends and events. Accordingly, the values of assets and liabilities
denominated in the Canadian currency are subject to adjustment based
upon many factors.
(k) New Accounting Standards - In February 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 128. The new standard replaces primary and fully diluted earnings per share
with basic and diluted earnings per share. SFAS No. 128 is required to be
adopted by the Company in the year ending February 28, 1998. Had the Company
been required to adopt SFAS No. 128 for the periods presented, the adoption
would not have impacted reported earnings per share.
In June 1997, the FASB issued SFAS No. 130 and 131. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components. SFAS No. 131 establishes standards for reporting about operating
segments, products and services, geographic areas, and major customers. The
standards become effective for fiscal years beginning after December 15, 1997.
Management plans to adopt these standards in the year ending February 28, 1999.
Management believes that provisions of SFAS No. 130 and 131 will not have a
material effect on its financial condition or reported results of operation.
NOTE 3 - COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
The Company's costs, earnings and billings on uncompleted contracts at
February 28, 1997 are as follows:
Costs incurred on uncompleted contracts $ 4,081,377
Estimated earnings 361,435
Less billings to date (4,215,306)
------------
Total $ 227,506
=============
Included in the accompanying balance sheet
Costs and estimated earnings in excess of billings on uncompleted
Contracts $ 357,150
Billings in excess of costs and estimated earnings on uncompleted
contracts (129,644)
------------
Total $ 227,506
============
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at February 28, 1997:
Land $ 804,573
Buildings 230,661
Communication towers 140,670
Vehicles 299,424
Furniture and fixtures 151,915
Equipment 188,606
Leasehold improvements 26,341
-------------
1,842,190
Less accumulated depreciation 248,500
-------------
$ 1,593,690
==============
Depreciation expense on property, plant and equipment in 1996 and 1997 was
$80,710 and $91,680, respectively.
F-9
<PAGE>
NOTE 5 - LONG-TERM DEBT
The Company's long-term debt consists of the following at February 28,
1997:
Note payable to bank, due on demand, in Canadian dollars,
monthly principal payments of $1,764 plus interest at the
bank's prime rate (4.75%) plus 1%, and secured by a mort-
gage on land and a security agreement on all corporate assets. $211,700
Note payable to bank, due on demand, in Canadian dollars,
monthly principal payments of $2,172, plus interest at
the bank's prime rate (4.75%) plus 1% and secured by a
mortgage on land and buildings, and an assignment of
rental income. 112,548
Note payable to bank, due on demand, in Canadian dollars,
monthly principal payments of $6,713 plus interest at the
bank's prime rate (4.75%) plus 2%, and secured by an
assignment of rent, General Security Agreement on all
assets of Westower Communication Ltd. and WTC Leasing
Partnership, and personal guarantees of corporate officers. 77,596
Notes payable to bank, maturing from April 1, 1998 to
September 1, 1999, with interest at rates from 7.5% to
9.99%, monthly payments of $2,573 and secured by vehicles. 48,580
Vehicle purchase financing with interest at 9.33%, monthly
payments of $788 and secured by a vehicle. 34,979
-------
Total long-term debt 485,403
Less current portion (436,258)
--------
Long-term portion $ 49,145
========
Long-term debt matures as follows:
Year Ending
February 28,
1998 $ 436,258
1999 21,200
2000 14,862
2001 13,083
----------
$ 485,403
==========
The Company's loan agreements with banks contain covenants requiring a
subsidiary of the Company to maintain a working capital ratio of 1.25:1 and a
debt to equity ratio of 2.5:1. At February 28, 1997, both the Company and the
subsidiary were in breach of these two ratio requirements, as the consolidated
working capital ratio was .93:1 and the consolidated debt to equity ratio was
4.8:1. Under the terms of the agreements, the bank may declare a default and
call the notes if the Company is in violation of these requirements. As of July
21, 1997, the bank has not waived the ratio requirements, and the entire amount
of the bank notes of $401,844 is considered current at February 28, 1997.
NOTE 6 - INCOME TAXES
The provision for income taxes is comprised by the following:
1996 1997
---- ----
Current Canadian taxes $ 32,252 $ 43,399
Deferred Canadian taxes 60,803 248,474
Current U.S. Federal taxes - 118,712
Deferred U.S. Federal taxes (2,348)
Current State taxes - 14,112
------- --------
Total income tax provision $ 93,055 $ 422,349
========= ==========
F-10
<PAGE>
NOTE 6 - INCOME TAXES (Continued)
The total tax provision differs from the amount computed using the statutory
Federal and Canadian income tax rates as follows:
Canadian U.S. Total
Income Income Income
1996
Pretax net income $262,258 $76,752 $339,010
Statutory rates 45% 34% 43%
Tax at statutory rates 118,016 26,096 144,112
Benefit of graduated rates (24,961) - (24,961)
Effect of net operating
loss carryover - (26,096) (26,096)
Provision for income taxes 93,055 - 93,055
Effective tax rates 35% 0% 27%
Canadian U.S. Total
Income Income Income
1997
Pretax net income $766,586 $358,128 $1,124,714
Statutory rates 45% 34% 42%
Tax at statutory rates 344,963 121,964 466,927
Benefit of graduated rates (53,090) (802) (53,892)
State income taxes, net
of U.S. tax benefit - 9,314 9,314
Provision for income
taxes 291,873 130,476 422,349
Effective tax rates 38% 36% 38%
The significant components of deferred income tax expense are as follows:
1996 1997
---- ----
Canadian Taxes
Depreciation of property and equipment $1,196 $(5,772)
Revenues recognized on uncompleted contracts 59,607 254,246
--------- -----------
Subtotal deferred income tax
expense for foreign taxes 60,803 248,474
Federal taxes
Depreciation of property and equipment - (2,348)
-------- ------------
Total deferred income tax expense 60,803 $ 246,126
======== =========
The tax effects of temporary differences that give rise to significant portions
of the deferred tax liability are as follows:
1997
Property and equipment, principally
due to depreciation differences $ 1,235
Costs and estimated earnings in
excess of billings on uncompleted contracts 348,477
----------
Total deferred tax liability $ 349,712
=========
NOTE 7 - INVESTMENT IN WTC LEASING PARTNERSHIP
(a) Nature of Operation - As discussed in Note 2(b), the Company owns a 50%
interest in WTC Leasing, an Alberta limited partnership (the Partnership). The
Partnership constructed six communication towers in western Canada, and
generates substantially all revenues through license agreements with a single
wireless communication service provider.
(b) Summary Financial Information - The following is summary financial
information for the Partnership as a whole:
F-11
<PAGE>
NOTE 7 - INVESTMENT IN WTC LEASING PARTNERSHIP (Continued)
SUMMARY BALANCE SHEET
1977
Assets
Current assets $ 24,572
Property and equipment, net 334,850
-----------
Total assets $ 359,422
===========
Liabilities and Equity
Accounts payable $ 18,234
Note payable 155,194
Equity 185,994
-----------
Total liabilities and equity $ 359,422
============
SUMMARY OPERATING RESULTS
1996 1997
---- ----
Revenues $151,562 $163,076
-------- ----------
Expenses
Operating expenses 41,624 56,538
Depreciation 11,052 11,052
Interest 19,954 15,470
-------- ----------
Total expenses 72,630 83,060
-------- ----------
Pre-Tax income $ 78,932 $ 80,016
========= ==========
(c) Property and Equipment - The Partnership purchased communication towers
and related equipment shelters from the Company and from another related party
entity holding an interest in the Partnership. Property and equipment is
depreciated using the straight-line method, over a twenty-year life for towers
and shelters. Costs and accumulated depreciation for the property and equipment
is as follows:
1996 1997
---- ----
Towers $ 281,340 $ 281,340
Shelters 100,482 89,430
---------- ------------
381,822 370,770
Less accumulated depreciation (42,955) (62,046)
---------- ------------
$ 338,867 $ 308,724
============ =============
The Company periodically evaluates the remaining useful life and
recoverability of such equipment in light of the unexpired term of the Licensing
Agreements discussed in paragraph (d) below. Since the renewal of the Licensing
Agreements through the estimated 20 year life of the equipment is not
guaranteed, it is reasonably possible that the Company's estimate that it will
recover the carrying amount of the equipment from future operations will change
in the near term.
(d) Licensing Agreements - The Partnership derives 100% of its revenues
from licensing agreements, for utilization of space on the Partnership's
communication towers. Substantially all of the agreements are with one customer.
At the expiration of the agreements in 1998 and 1999, the licensee may terminate
the agreements with no further obligation, renew the agreements for a five year
term at rates to be negotiated, or negotiate to purchase the towers on which the
license is held. Management expects the licensee to either renew the agreements
at similar terms, or negotiate to purchase the towers at the expiration of the
agreements. Future minimum license revenues under the agreements are due as
follows:
1998 $ 195,180
1999 151,765
F-12
<PAGE>
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company receives consulting services from Westower Consulting, an
enterprise under common control with the Company. Charges for these services
were approximately $-0- in fiscal year 1996 and $93,500 in fiscal year 1997.
Amounts due to Westower Consulting were $36,500 at February 28, 1997. The
Company expects that payments to Westower Consulting will not continue in fiscal
year 1998 because the related services will be performed by Company employees
and officers.
The Company purchases goods and services from Western Telecom Construction
Ltd., a corporation owned by a family member of one of the stockholders of the
Company. During the years ended February 29, 1996 and February 28, 1997,
purchases by the Company from Western Telecom Construction Ltd. were $805,143
and $1,822,326, respectively. Trade accounts payable to Western Telecom were
$483,379 at February 28, 1997. The Company also sold goods and services to
Western Telecom Construction, Ltd. in the amount of $856,003 in 1996 and
$554,181 in 1997. Additionally, as discussed in Note 7(c), a portion of the cost
of communication towers was purchased from Western Telecom Construction Ltd. in
1994 for $196,626.
The Company purchased equipment shelters from WTC Buildings Ltd., a
wholly-owned subsidiary of Westower Holdings Ltd., now liquidated. At February
28, 1997 the shelters were recorded at a cost of $89,430.
Notes payable to related parties are detailed as follows:
Unsecured notes payable to a member of Company management
and his spouse, in Canadian dollars, with interest at
5% per year, and by agreement, no principal payments
required prior to June 30, 1998, thereafter due on demand. $ 452,199
Unsecured note payable to a corporation controlled
by a director, in Canadian dollars, without interest
and by agreement, no principal payments required prior
to June 30, 1998. 120,012
Unsecured note payable to a director without interest
and by agreement, no principal payments required prior
to June 30, 1998. 100,000
-------
$ 672,211
=======
As discussed in Note 9, the Company intends to raise capital through a sale
of securities to the public in 1997, the proceeds of which are intended in part
to be used to retire this existing related party debt.
NOTE 9 - SUBSEQUENT EVENTS
In June 1997, Westower Corporation was incorporated in Washington, and
subsequently acquired all the issued shares of Westower Holdings Ltd., in
exchange for 3,000,000 shares of its common stock. Westower Corporation has
10,000,000 shares of common stock authorized. In July 1997, Westower Holdings
Ltd. renounced its incorporation in British Columbia, and received a Certificate
of Incorporation in the state of Wyoming. The Company intends to raise capital
in the new Company through an underwritten public offering of 1,000,000 shares
of common stock and 1,000,000 Redeemable Common Stock Purchase Warrants
registered with the Securities and Exchange Commission on Form SB-2. Expected
gross proceeds are approximately $7,500,000.
Subsequent to year end, Westower Corporation authorized and implemented a
stock option plan for the purposes of awarding options to employees. Westower
Corporation authorized and reserved 400,000 shares for this purpose. After the
creation of the plan, options for 132,000 shares were granted to key executives
at a price of $8.25 per share and 24,000 at a price of $7.50 per share.
One-third of the options will become exercisable in January 1998, with the
second one-third exercisable in January 1999, and the final one-third
exercisable in January 2000.
Earnings per share have been presented by giving retroactive effect to the
Company's issuance of 3,000,000 shares, no shares were deemed outstanding
through stock options as the exercised price of the issued options equals or
exceeds the contemplated intial offering price.
F-13
<PAGE>
NOTE 9 - SUBSEQUENT EVENTS (Continued)
On March 31, 1997 the Company obtained a $250,000 line of credit from Hong
Kong Bank of Canada for a six-month period. The agreement contains certain
covenants and restrictions including a limitation on the payment of dividends.
NOTE 10 - EARNINGS PER SHARE
Earnings per common share are computed by dividing net income by the total
of the number of common shares outstanding assuming a retroactive issuance of
3,00,000 shares.
NOTE 11 - RETIREMENT PLAN
The Company's Washington subsidiary, Westower Communications Inc. adopted a
defined contribution retirement plan, effective January 1, 1997. The plan
contains certain participation criteria and allows for both employee and
employer discretionary contributions. The total Company funded discretionary
contribution for 1997 was $46,114.
NOTE 12 - COMMITMENTS
The Company is a guarantor on a bank loan held by WTC Leasing Partnership
(discussed further in Note 7), in the amount of $155,194 at February 28, 1997.
Fifty percent of this loan balance, or $77,597, which reflects the Company's
proportionate share of its interest in the Partnership, is reflected in the
Company's Balance Sheet, and is disclosed in Note 5. The Company is contingently
liable on the remaining $77,597 portion of the loan, which is not included on
the Company's Balance Sheet.
The Company leases office space in Washington under a noncancelable lease
expiring December 31, 1999. The following is a schedule of future minimum
noncancelable lease payments under this agreement:
Year Ending
February 28,
1998 $ 27,000
1999 27,000
2000 22,500
----------
Total $ 76,500
=========
Rent expense for the year ended February 28, 1997 was $27,450.
NOTE 13 - INFORMATION ABOUT CREDIT RISK AND BUSINESS CONCENTRATIONS
Assets for which the Company has credit risk include trade accounts
receivable, which amounted to $1,535,734 at February 28, 1997. The Company's
trade customers are concentrated in the wireless communications industry. Sales
to 12 major customers approximated 73% and 84% of total sales for the years
ended February 29, 1996 and February 28, 1997, respectively. Amounts due from
four customers approximated 73% of the total accounts receivable at February 28,
1997.
The Company expects that sales to relatively few customers will continue to
account for a high percentage of its net sales in the foreseeable future and
believes that its financial results depend in significant part upon the success
of these few customers. Although the composition of the group comprising the
Company's largest customers may vary from period to period, the loss of a
significant customer or any reduction in orders by any significant customers,
including reductions due to market, economic or competitive conditions in the
wireless communications industry, may have a material adverse effect on the
Company's business, financial condition and results of operations.
F-14
<PAGE>
NOTE 13 - INFORMATION ABOUT CREDIT RISK AND BUSINESS CONCENTRATIONS (Continued)
The following table represents approximate sales and trade accounts
receivable related to the geographic regions in which the Company operates.
1996
Total United States Canada
Sales 100% 30% 70%
=== == ==
Net Income 100% 31% 69%
=== == ==
1997
Total United States Canada
Sales 100% 40% 60%
=== == ==
Net Income 100% 32% 68%
=== == ==
Net Assets 100% 31% 69%
=== == ==
NOTE 14 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate that value.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash, accounts receivable, trade accounts payable and other current
liabilities - The carrying value amounts reported in the balance sheet for these
items approximate those accounts fair values.
Long-term Debt - The fair value of long-term debt approximates carrying
value.
Notes Payable to Related Parties - It is not practica1 to estimate fair
value of notes payable to related parties as these transactions are not arms
length.
F-15
<PAGE>
WESTOWER HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
May 31, 1996 and 1997
(Unaudited)
ASSETS
1996 1997
---- ----
CURRENT ASSETS
Cash $67,649 $377,502
Contracts receivable, net 1,265,005 2,070,690
Costs and estimated earnings
in excess of billings on
uncompleted contracts 297,776 1,062,260
Inventory (note 2) - 221,826
--------- ---------
1,630,430 3,732,278
PROPERTY AND EQUIPMENT, net 871,942 1,694,199
Other assets, net 23,740 63,810
---------- ----------
$ 2,526,112 $ 5,490,287
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $911,438 $1,400,709
Billings in excess of costs and
estimated earnings on
uncompleted contracts 149,915 997,130
Current portion of long-term debt 259,635 316,246
Bonuses payable 73,000 244,550
Income taxes 7,417 137,388
Deferred income taxes 225,238 568,712
--------- -----------
Total current liabilities 1,626,643 3,664,735
LONG-TERM DEBT 37,533 179,653
NOTES PAYABLE TO RELATED PARTIES 634,806 555,473
------------ -----------
Total liabilities 2,298,982 4,399,861
------------ ------------
STOCKHOLDERS' EQUITY
Capital Stock (note 3) 30,000 30,000
Foreign Currency Translation Adjustment 28,599 26,777
Retained Earnings 168,531 1,033,649
------------ ------------
Total stockholders' equity 227,130 1,090,426
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,526,112 $ 5,490,287
========== ===========
F-16
<PAGE>
WESTOWER HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THREE MONTHS ENDED MAY 31, 1996 AND 1997
(Unaudited)
1996 1997
------ ------
Contract Revenues Earned $ 1,881,332 $ 3,288,173
Costs of Revenues Earned 1,361,943 2,385,913
----------- ------------
Gross Profit 519,389 902,260
Selling, General and Administrative Expenses 189,366 312,411
------------ -------------
Earnings Before the Following 330,023 589,849
Interest Expense 11,439 13,512
------ ------
Earnings Before Income Taxes 318,584 576,337
Income Taxes 124,000 219,000
------------ --------------
Net Income $ 194,584 $ 357,337
============ =============
F-17
<PAGE>
WESTOWER HOLDINGS LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND 1997
(Unaudited)
1996 1997
---------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 194,584 $ 357,337
Adjustment to reconcile net earnings to net
cash provided by earnings
Depreciation and amortization 15,411 47,386
Changes in non-cash current assets
and liabilities (net) (454,839) (224,706)
---------- ---------
Net cash provided by (used in)
Operating activities (244,844) 180,017
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (87,324) (133,535)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (6,147) (162,029)
------------ -------
NET INCOME (DECREASE) IN CASH (338,315) (115,547)
CASH - beginning of period 405,964 493,049
----------- ------------
CASH - end of period $ 67,649 $ 377,502
=========== ===========
SUPPLEMENTAL DISCLOSURE
Interest paid $ 6,564 $ 8,938
============ =============
F-18
<PAGE>
WESTOWER HOLDINGS LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MAY 31, 1996 AND 1997
(Unaudited)
Notes 1: Basis of Presentation
The notes to the consolidated financial statements do not present all
disclosures required under generally accepted accounting principles but instead,
as permitted by Securities and Exchange Commission regulations, presume that
users of the interim financial statements have read or have access to the
February 28, 1997 audited consolidated financial statements and that the
adequacy of additional disclosure needed for a fair presentation may be
determined in that context.
The financial information included herein reflects all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary to a fair presentation of the results for interim periods.
The results of operations for the three-month period ended May 31, 1996 and 1997
respectively are not necessarily indicative of the results to be expected for
the full year.
Note 2: Inventory
Inventory is stated at the lower of cost and estimated net realizable value
using the first in first out method. Inventory consists of materials purchased
for future construction not associated with specific jobs.
Note 3: Capital Stock
Capital stock is presented as if Westower Corporation had existed on May
31, 1997 and had acquired Westower Holdings Ltd.
F-19
<PAGE>
No person has been authorized to give any information or to make any
representation in connection with this offering other than those contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or any Underwriter.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities other than the securities to which it relates or an
offer to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstance, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information herein is
correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
PAGE
Additional Information.................... 2
Prospectus Summary........................ 3
Risk Factors.............................. 6
Use of Proceeds........................... 11
Dividend Policy........................... 11
Dilution.................................. 12
Capitalization............................ 13
Management's Discussion and
Analysis of Financial Condition
and Results of Operation................. 14
Business.................................. 17
Management................................ 20
Principal Shareholders.................... 23
Certain Relationships
and Related Transactions............... 24
Description of Securities................. 25
Shares Eligible For Future Sale........... 26
Underwriting.............................. 27
Legal Matters............................. 29
Experts................................... 29
Index to Financial Statements............. F-1
Until ____ , 1997 (25 days from the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligations of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
1,000,000 UNITS
Each Unit Consisting of
One Share of Common Stock
and
One Redeemable Common
Stock Purchase Warrant
OFFERING PRICE
$7.50
PER UNIT
Westower
Corporation
Prospectus
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Pursuant to Section 23B.08.500 of the Washington Business Corporation Act,
a corporation may indemnify an individual made a party to a proceeding because
the individual is or was a director against liability incurred in his official
capacity with the corporation including expenses and attorneys fees. Article VII
of the Bylaws provides that the Company may indemnify and hold harmless to the
full extent permitted by applicable law each person who was or is made party to
or is threatened to be made a party to or is involved in an actual or threatened
action, suit or other proceeding, civil or criminal, by reason of the fact that
he is or was a director, officer, employee or agent of the Company against all
expenses, liabilities and losses, including attorneys fees, judgements, fines,
and ERISA excise taxes or penalties, actually or reasonably incurred or suffered
by such person in connection with any such action. Article VI of Articles of
Incorporation provides that any personal liability of a director to the
corporation or its shareholders for monetary damages for conduct as a director
is eliminated, except for any liability for any acts or omissions that involve
intentional misconduct by a director or a knowing violation of a law by a
director, for conduct violating RCW 23B.08.310, for any transaction from which
the director will personally receive a benefit in money, property, or services
to which the director is not legally entitled, or for any act or omission
occurring prior to the date when this Article becomes effective. If after this
Article becomes effective the Washington Business Corporation Act is amended to
authorize further elimination or limitation of liability of a director, then,
upon the effective date of the amendment, the liability of a director shall be
further eliminated and limited without further act to the fullest extent so
authorized. No amendment or repeal of these Articles of Incorporation shall
reduce the extent of any elimination or limitation of liability of a director
existing immediately prior to the amendment or repeal. Article VII of the
Articles of Incorporation provides for indemnification of the directors and
officers as follows:
"ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
7.1 Right to Indemnification. EACH INDIVIDUAL (including an individual's
personal representative) who was or is made a party or is threatened to be made
a party to, or is otherwise involved (including, without limitation, as a
witness) in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, investigative or by or in the right of
the corporation, or otherwise (a "Proceeding") because the individual or another
individual of whom the individual is a personal representative: (a) is or was a
director or officer of the corporation or any predecessor entity, or (b) being
or having been such a director or officer, is or was serving at the request of
the corporation or any predecessor entity as a director, officer, partner,
trustee, employee, agent, or in any other relationship or capacity whatsoever,
of any other foreign or domestic corporation, partnership, joint venture,
employee benefit plan or trust or other trust, enterprise or other private or
governmental entity, agency, board, commission, body or other unit whatsoever (
(a) and (b) collectively, an "Indemnitee")
SHALL BE INDEMNIFIED AND HELD HARMLESS by the corporation to the fullest
extent not prohibited by the Washington Business Corporation Act as the same
exists or may hereafter be amended (but, in the case or any amendment, only to
the extent that the amendment does not prohibit the corporation from providing
broader indemnification rights than prior to the amendment) IF the Indemnitee
acted in good faith and reasonably believed the Indemnitee's conduct was in the
corporation's best interests (in the case of conduct in the Indemnitee's
official capacity with the corporation) and (in all other cases) was at least
not opposed to the corporation's best interests and is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances
("Corporation's Standards for Indemnification"), WITHOUT REGARD TO the
limitations in RCW 23B.08.510 through 23B.08.550, AND WHETHER OR NOT the
Indemnitee met the standard of conduct set forth in RCW 23B.08.510 or any other
standard of conduct set forth in RCW 23B.08.500 through RCW 23B.08.580,
AGAINST ALL DIRECT AND INDIRECT EXPENSES, LIABILITIES AND LOSSES (including
but not limited to attorney fees, judgments, settlements, penalties, fines,
ERISA and employee benefit plan and other excise taxes and other taxes and
penalties, environmental and remediation expenses, settlements, penalties and
fines, and other adverse effects) that are actually incurred or suffered by the
Indemnitee in connection with the Proceeding (whether
II-1
<PAGE>
or not the basis of the Proceeding is alleged conduct, action or inaction
in an official capacity as a director, officer, partner, trustee, employee,
agent, or in any other relationship or capacity whatsoever). The indemnification
granted in the Article is a contract right and includes the right to payment by,
and the right to receive reimbursement from, the corporation of all the
Indemnitee's expenses as they are incurred, including advances in advance of
final disposition of the Proceeding. The term "expenses" as used in this Article
includes without limitation all counsel and attorneys' fees and costs.
Notwithstanding the foregoing, an advance for expenses incurred by an Indemnitee
who is a party to a Proceeding because the Indemnitee is or was a director of
the corporation or any predecessor entity shall be made in advance of final
disposition of the Proceeding only upon receipt by the corporation of (i) a
written undertaking (hereinafter an "undertaking") executed personally or on the
Indemnitee's behalf to repay the advance if and to the extent it is ultimately
determined by order of a court having jurisdiction (which determination shall
become final upon expiration of all rights to appeal, hereinafter a "final
adjudication") that the Indemnittee is not entitled to be indemnified for such
expenses under this Article, and (ii) a written affirmation by the Indemnitee of
the Indemnitee's good faith belief that the Indemnitee has net the Corporation's
Standards for Indemnification as defined in this Article for the amount claimed.
The undertaking must be an unlimited general obligation of the Indemnitee,
unsecured and without reference to financial ability to make repayment.
7.2 Court-Ordered Indemnification or Advance; Presumption. If any claim for
indemnification or advance of expenses under Section 7.1 of this Article is not
paid in full by the corporation within 30 days after a written claim has been
received by the corporation, the Indemnitee may at any time thereafter apply for
indemnification or advance of expenses to the court conducting the Proceeding or
to another court of competent jurisdiction. If the Indemnitee is successful in
whole or in part in any such application, the corporation shall also pay to
Indemnitee all the Indemnitee's expenses in connection with the application. The
Indemnitee shall be presumed to be entitled to indemnification and advances of
expenses under this Article upon the corporation's receipt of Indemnitee's
written claim (and in any application to a court for indemnification or advance
of expenses), and thereafter the corporation shall have the burden of proof to
overcome that presumption. Neither the fact that the corporation (including its
board of directors, special legal counsel or its shareholders under RCW
23B.08.550, or otherwise) did, nor the fact that the corporation (including its
board of directors, special legal counsel or its shareholders under RCW
23B.08.550, or otherwise) did not, make a determination that the Indemnitee is
or is not entitled to indemnification or advance of expenses, shall be a defense
to the application or create a presumption that the Indemnitee is not so
entitled. If the Indemnitee applies to a court having jurisdiction for
determination of the right to indemnity or advance of expenses, or amount
thereof, the court's determination shall become final upon expiration of all
rights to appeal, and such a final adjudication shall supersede any other
determination made in accordance with RCW 23B.08.550, or otherwise.
7.3 Nonexclusivity of Rights, Severability. The right to indemnification
(including but not limited to payment, reimbursement and advances of expenses)
granted in this Article is not exclusive of any other rights that any individual
may have or hereafter acquire under any statute, common law, provision of the
Articles of Incorporation or Bylaws of the corporation, agreement, vote or
resolution of shareholders or disinterested directors, or otherwise.
Notwithstanding any amendment to or repeal of this Article, any Indemnitee shall
be entitled to indemnification and advance of expenses in accordance with the
provisions of this Article with respect to any conduct, acts or omissions of the
Indemnitee occurring prior to the amendment or repeal. If any provision or term
of this Article is determined to be void or unenforceable for any reason, the
remaining provisions and terms shall remain in full force and effect.
7.4 Insurance, Contracts and Funding. The corporation may purchase and
maintain insurance, at its expense, to protect itself and any individual
(including an individual's personal representative) who is or was a director,
officer, employee or agent of the corporation or any predecessor entity or who
being or having been such a director or officer, is or was serving at the
request of the corporation or any predecessor entity as a director, officer,
partner, trustee, employee, agent, or in any other relationship or capacity
whatsoever, of any foreign or domestic corporation, partnership, joint venture,
employee benefit plan or trust or other trust, enterprise or other private or
governmental entity, agency, board, commission, body or other unit whatsoever,
against any expense, liability or loss, whether or not the corporation would
have power to indemnify the individual against the same expense, liability or
loss under the Washington Business Corporation Act, or RCW 23B.08.510 or
23B.08.520, or otherwise. The corporation may grant indemnity, and may enter
into contracts granting indemnity, to any such individual,
II-2
<PAGE>
whether or not in furtherance of the provisions of this Article, and may
create trust funds, grant security interests and use other means (including,
without limitation, letters of credit) to secure and ensure the payment of
indemnification amounts.
7.5 Partial Indemnification. If an Indemnitee is entitled to
indemnification by the corporation for some or a portion of expenses,
liabilities or losses, but not for the total amount thereof, the corporation
shall nevertheless indemnify the Indemnitee for the portion of the expenses,
liabilities and losses to which the Indemnitee is entitled.
7.6 Successors and Assigns. All obligations of the corporation to indemnify
any Indemnitee: (i) are binding upon all successors and assigns of the
corporation (including any transferee of all or substantially all of its assets
and any successor by merger or otherwise by operation of law), (ii) are binding
on and inure to the benefit of the spouse, heirs, personal representatives and
estate of the Indemnitee, and (iii) shall continue as to an Indemnitee who has
ceased to be a director, officer, partner, trustee, employee, or agent (or other
relationship or capacity) included in the definition of Indemnitee in Section
7.1 of this Article. The corporation shall not effect any sale or other transfer
of substantially all of its assets, merger, consolidation or other
reorganization unless the purchaser, transferee, successor or surviving entity
(as the case may be) agrees in writing to assume all such obligations of the
corporation."
Item 25. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the public offering by the Company of
the securities offered hereunder are as follows:
Securities and Exchange Commission Filing Fee $ 4,156
NASD Filing Fee 2,502
Blue Sky Fees and Expenses* 5,000
American Stock Exchange Application and Listing Fee* 30,000
Accounting Fees and Expenses* 40,000
Legal Fees and Expenses* 70,000
Printing* 85,000
Fees of Transfer Agents and Registrar* 5,000
Underwriters' Non-Accountable Expense Allowance 150,000
Miscellaneous* 108,342
----------
Total* $ 500,000
===========
- ----------------
* Estimated.
Item 26. Recent Sales of Unregistered Securities
The following is a summary of the only transaction by the Registrant during
the last three years involving the sale of securities which were not registered
under the Securities Act:
In June 1997, the Registrant issued 3,000,000 shares of its Common Stock to
the four shareholders of Westower Holdings Ltd. ("Ltd") in exchange for all of
the outstanding shares of Ltd. Three of the four shareholders of Ltd. were
officers and directors of that company and in the transaction became officers
and directors of the Registrant. The fourth shareholder continues as a principal
shareholder of the registrant as he was with Ltd. No underwriter was involved in
the transaction. The transaction was exempt from registration under the
Securities Act pursuant to Section 4 (2) thereunder as a transaction not
involving a public offering.
Item 27. Exhibits
Exhibit No. Item
- ----------- ----
Exhibit 1.1 Form of Underwriting Agreement.(1)
Exhibit 1.2 Form of Underwriters' Warrant Agreement.(1)
Exhibit 1.3 Form of Selected Dealer Agreement.(1)
Exhibit 1.4 Form of Agreement Among Underwriters.(1)
Exhibit 3.1 Articles of Incorporation.(1)
Exhibit 3.2 Bylaws of the Registrant(1)
Exhibit 5.1 Opinion of Maurice J. Bates LLC(2)
Exhibit 10.1 Form of Warrant Agreement.(1)
Exhibit 10.2 1997 Stock Option Plan(1)
II-3
<PAGE>
Exhibit 21.1 Subsidiaries of the Registrant.(1)
Exhibit 23.1 Consent of Moss Adams, LLP Certified Public Accountants.(1)
Exhibit 23.2 Consent of Maurice J. Bates LLC. is contained in his opinion
to be filed as Exhibit 5.1 to this registration statement.(2)
Exhibit 27.1 Financial Data Schedule (1)
(1) Filed herewith
(2) To be filed by amendment
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
(2) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(i) Include any Prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) Reflect in the Prospectus any facts or events which,
individually or together,
represent a fundamental change in the information in
the Registration Statement Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation form the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424 (b) if, in the
aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(3) For determining any liability under the Securities Act, treat
each post-effective amendment that as a new Registration
Statement of the securities offered, and the offering of the
securities at that time to be deemed to be the initial bona
fide offering
(4) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering..
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or
persons controlling 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 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
shares of the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(7) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the small
business issuer under Rule 424(b)(1), or (4) or 497(h) under
the Securities Act as part of this Registration Statement as
of the time the Commission declared it effective.
(8) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of
prospectus s anew registration statement for the securities
offered in the registration statement, and that offering of
the securities at that time as the initial bona fide offering
of those securities.
II-4
<PAGE>
SIGNATURES
In accordance with 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 SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vancouver, State of Washington on August 5,1997.
Westower Corporation.
By:/s/ Calvin J. Payne
-------------------------------------
Calvin J. Payne, Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose
signature appears below constitutes and appoints Calvin J. Payne, S. Roy
Jeffrey, and Peter Lucas, and each for them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (until revoked in writing), to sign any and all further amendments to
this Registration Statement (including post-effective amendments), and to file
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person thereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, or their substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Calvin J. Payne
- ------------------------------
Calvin J. Payne Chairman of the Board and August 5, 1997
Chief Executive Officer
(Principal Executive Officer)
/s/ S. Roy Jeffrey
- ------------------------------
S. Roy Jeffrey Director August 5, 1997
/s/ Walter Friesen
- ------------------------------
Walter Friesen Director August 5, 1997
/s/ Peter Lucas
- ------------------------------
Peter Lucas Chief Financial Officer August 5, 1997
(Principal Financial
and Accounting Officer)
<PAGE>
1,000,000 Units
WESTOWER CORPORATION
Each Unit Consisting of
One share of Common Stock and
One Redeemable Common Stock Purchase Warrant
, 1997
UNDERWRITING AGREEMENT
NATIONAL SECURITIES CORPORATION
As Representative of the Several Underwriters
c/o: National Securities Corporation
875 North Michigan Avenue
Suite 1560
Chicago, Illinois 60611
Dear Sirs:
Westower Corporation, a Washington Corporation (the "Company"),
proposes to sell, in each case to you and the other underwriters named in
Schedule I hereto (collectively, the "Underwriters"), for whom National
Securities Corporation is acting as managing underwriter and representative (the
"Representative"), in the respective amounts set forth opposite each
Underwriter's name in Schedule I hereto an aggregate of 1,000,000 units, each
Unit consisting of one share of Common Stock, $.01 par value per share, of the
Company (the "Common Stock"), and one redeemable common stock purchase warrant
(individually, a "Redeemable Warrant"), each of which entitles the holder
thereof to purchase one share of Common Stock at a price of $___. Such Units,
together with (a) the shares of Common Stock and Redeemable Common Stock
Purchase Warrant comprising such Units and (b) the shares of Common Stock
issuable upon exercise of such Redeemable Common Stock Purchase Warrant are
collectively referred to herein as the "Underwritten Securities"). The Company
and certain shareholders (the "Selling Shareholders") also propose to grant to
the Underwriters (i) the Underwriters' Option (described in Section 2(b) hereof)
to purchase up to an aggregate of 150,000 additional Units solely to cover
over-allotments in the sale of the Underwritten Securities (such additional
Units, together with (a) the shares of Common Stock and Redeemable Common Stock
Purchase Warrants comprising such additional Units and (b) the shares of Common
Stock issuable upon exercise of such Redeemable Common Stock Purchase Warrants,
are collectively referred to herein as the "Option Securities"); and (ii) the
Underwriters' Warrants (described in Section 7 hereof) to purchase 100,000
additional Units, which additional Units are identical to the Units described
above (individually, such Underwriters' Warrants and additional Units, together
with (a) the shares of Common Stock and Redeemable Common Stock Purchase
Warrants comprising such additional Units and (b) the shares of Common Stock
issuable upon exercise of such Redeemable Common Stock Purchase Warrants, are
collectively referred to herein as the ("Underwriters' Securities"). The
Underwritten Securities, the Option Securities and the Underwriters' Securities
are collectively referred to herein as the "Securities."
The terms which follow, when used in this Agreement, shall have the
meanings indicated. The term "Effective Date" shall mean each date that the
Registration Statement (as defined below) and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean the
date and time that this Agreement is executed and delivered by the parties
hereto. The term "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in Section 1(a)(i) below with respect to the offering of the
Securities, and any preliminary prospectus included in the Registration
Statement at the Effective Date that omits Rule 430A Information (as defined
below). Capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the most recent Preliminary Prospectus which predates or
coincides with the Execution Time. "Prospectus" shall mean the final prospectus
with respect to the offering of the Securities that contains the Rule 430A
Information. "Registration Statement" shall mean the registration statement
referred to in Section 1(a)(i) below, including Exhibits and Financial
Statements, in the form in which it has or shall become effective and, in the
event any post-effective amendment thereto becomes effective prior to the
Closing Date (as hereinafter defined) or any settlement date pursuant to Section
3(c) hereof, shall also mean such registration statement as so amended on such
date. Such term shall include Rule 430A Information (as defined below) deemed to
be included therein at the Effective Date as provided by Rule 430A. "Rule 424"
and "Rule 430A" refer to such rules under the Securities Act of 1933, as amended
(the "Act"). "Rule 430A Information" means information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
1. Representations and Warranties of the Company.
The Company represents and warrant to, and agrees with, each
Underwriter that:
(a) The Company meets the requirements for the use of Form
SB-2 under the Act and has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including a
related preliminary prospectus ("Preliminary Prospectus"), on Form SB-2
(Commission File No._______) (the "Registration Statement") for the
registration under the Act of the Securities. The Company may have
filed one or more amendments thereto, including related Preliminary
Prospectuses, each of which has previously been furnished to you. The
Company will next file with the Commission either, prior to
effectiveness of such Registration Statement, a further amendment
thereto (including the form of Prospectus) or, after effectiveness of
such Registration Statement, a Prospectus in accordance with Rules 430A
and 424(b)(1) or (4). As filed, such amendment and form of Prospectus,
or such Prospectus, shall include all Rule 430A Information and, except
to the extent the Representative shall agree in writing to a
modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company has advised you in
writing, prior to the Execution Time, will be included or made therein.
(b) Each Preliminary Prospectus, at the time of filing
thereof, conformed in all material respects with the applicable
requirements of the Act and the rules and regulations thereunder and
did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. If the Effective
Date is prior to or simultaneous with the Execution Time, (i) on the
Effective Date, the Registration Statement conformed in all material
respects to the requirements of the Act and the rules and regulations
thereunder and did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading, and
(ii) at the Execution Time, the Registration Statement conforms, and at
the time of filing of the Prospectus pursuant to Rule 424(b), the
Registration Statement and the Prospectus will conform, in all material
respects to the requirements of the Act and the rules and regulations
thereunder, and neither of such documents includes, or will include,
any untrue statement of a material fact or omits, or will omit, to
state a material fact required to be stated therein or necessary in
order to make the statements therein (and, in the case of the
Prospectus, in the light of the circumstances under which they were
made) not misleading. If the Effective Date is subsequent to the
Execution Time, on the Effective Date, the Registration Statement and
the Prospectus will conform in all material respects to the
requirements of the Act and the rules and regulations thereunder, and
neither of such documents will contain any untrue statement of any
material fact or will omit to state any material fact required to be
stated therein or necessary to make the statements therein (and, in the
case of the Prospectus, in the light of the circumstances under which
they were made) not misleading. The two preceding sentences do not
apply to statements in or omissions from the Registration Statement or
the Prospectus (or any supplements thereto) based upon and in
conformity with information furnished in writing to the Company by or
on behalf of any Underwriter through the Representative specifically
for use in connection with the preparation of the Registration
Statement or the Prospectus (or any supplements thereto).
(c) The Company has no subsidiaries other than those listed in
the Registration Statement as of the Effective Date.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate
power and corporate authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction in which it conducts its business or owns
property and in which the failure, individually or in the aggregate, to
be so qualified would have a material adverse effect on the properties,
assets, operations, business or condition (financial or otherwise) of
the Company ("Material Adverse Effect"). The Company has all necessary
authorizations, approvals, orders, licenses, certificates and permits
of and from all government regulatory officials and bodies, to own its
properties and conduct its business as described in the Prospectus
except where the absence of any such authorization, approval, order,
license, certificate or permit would not have a Material Adverse
Effect.
(e) The Company does not own any shares of capital stock or
any other securities of any corporation or any equity interest in any
firm, partnership, association or other entity other than as described
in the Registration Statement and ownership interests that would not
have a Material Adverse Effect.
(f) The Company's equity capitalization is as set forth in the
Prospectus; the capital stock of the Company conforms in all material
respects to the description thereof contained in the Prospectus; all
outstanding shares of Common Stock have been duly and validly
authorized and issued and are fully paid and nonassessable, and the
certificates therefor are in valid and sufficient form; there are, and,
on the Effective Date, the "Closing Date" (as defined in Section 3(a)
hereof) and any settlement date pursuant to Section 3(b) hereof, there
will be, no other classes of stock outstanding except Common Stock; all
outstanding options to purchase shares of Common Stock have been duly
and validly authorized and issued; except as described in the
Prospectus, there are, and, on the Closing Date and any settlement date
pursuant to Section 3(b) hereof, there will be, no options, warrant or
rights to acquire, or debt instruments convertible into or exchangeable
for, or other agreements or understandings to which the Company is a
party, outstanding or in existence, entitling any person to purchase or
otherwise acquire shares of capital stock of the Company; the issuance
and sale of the Securities have been duly and validly authorized and,
when issued and delivered and paid for, the Securities will be fully
paid and nonassessable and free from preemptive rights, and will
conform in all respects to the description thereof contained in the
Prospectus; the Redeemable Warrant and Underwriters' Warrant will, when
issued, constitute valid and binding obligations of the Company
enforceable in accordance with their terms and the Company has reserved
a sufficient number of shares of Common Stock for issuance upon
exercise thereof; the Redeemable Warrant and Underwriters' Warrant
will, when issued, possess the rights, privileges and characteristics
as represented in the forms Exhibits to the Registration Statement and
as described in the Prospectus; the Securities (other than the
Underwriters' Warrant) have been approved for listing on the American
Stock Exchange upon notice of issuance thereof; the certificates for
the Securities are in valid and sufficient form. Each offer and sale of
securities of the Company referred to in Item 26 of Part II of the
Registration Statement was effected in compliance with the Act and the
rules and regulations thereunder, and with all applicable blue sky
("Blue Sky") laws.
(g) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of the Company, threatened action,
suit or proceeding before any court or governmental agency, authority
or body, domestic or foreign, or any arbitrator involving the Company
of a character required to be disclosed in the Registration Statement
or the Prospectus. There is no contract or other document of a
character required to be described in the Registration Statement or
Prospectus or to be filed as an exhibit that is not described or filed
as required.
(h) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as rights of indemnity and contribution
hereunder may be limited by public policy and except as the
enforceability hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and general principles of equity.
(i) The Company has full corporate power and corporate
authority to enter into and perform its obligations under this
Agreement and to issue, sell and deliver the Securities in the manner
provided in this Agreement. The Company has taken all necessary
corporate action to authorize the execution and delivery of, and the
performance of its obligations under, this Agreement.
(j) Neither the offering, issue and sale of the Securities,
nor the consummation of any other of the transactions contemplated
herein, nor the fulfillment of the terms hereof, will conflict with or
result in a breach or violation of, or constitute a default under, or
result in the imposition of a lien on any properties of the Company or
an acceleration of indebtedness pursuant to, the Certificate of
Incorporation or bylaws of the Company, or any of the terms of any
indenture or other agreement or instrument to which the Company is a
party or by which the Company or any of its properties are bound, or
any law, order, judgment, decree, rule or regulation applicable to the
Company of any court, regulatory body, administrative agency,
governmental body, stock exchange or arbitrator having jurisdiction
over the Company. The Company is not in violation of its Certificate of
Incorporation or bylaws or in breach of or default under any of the
terms of any indenture or other agreement or instrument to which it is
a party or by which it or its properties are bound, which breach or
default would, individually or in the aggregate, have a Material
Adverse Effect.
(k) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it
any shares of capital stock in consequence of the issue and sale of the
Securities, nor does any person have preemptive rights, or rights of
first refusal or other rights to purchase any of the Securities. Except
as referred to in the Prospectus, no person holds a right to require or
participate in a registration under the Act of Common Stock or any
other equity securities of the Company.
(l) The Company has not (i) taken and will not take, directly
or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to cause or result
in, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or otherwise, stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale
of the Securities or (ii) effected any sales of shares of securities
that are required to be disclosed in response to Item 26 of Part II of
the Registration Statement (other than transactions disclosed in the
Registration Statement or the Prospectus).
(m) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is
required to be obtained or filed by or on behalf of the Company in
connection with the transactions contemplated herein, except such as
may have been obtained or made and registration of the Securities under
the Act, and such as may be required under the Blue Sky laws of any
jurisdiction in connection with the purchase and distribution of the
Securities by the Underwriters.
(n) The accountants who have certified the Financial
Statements filed or to be filed with the Commission as part of the
Registration Statement are independent accountants as required by the
Act.
(o) No stop order preventing or suspending the use of any
Preliminary Prospectus has been issued, and no proceedings for that
purpose are pending or, to the best knowledge of the Company,
threatened or contemplated by the Commission; no stop order suspending
the sale of the Securities in any jurisdiction has been issued and no
proceedings for that purpose have been instituted or, to the best
knowledge of the Company, threatened or are contemplated; and any
request of the Commission for additional information (to be included in
the Registration Statement or the Prospectus or otherwise) has been
complied with.
(p) The Company has not sustained since February 28, 1997, any
material loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree,
and, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there have not been any
changes in the capital stock or long-term debt of the Company, or any
material adverse change, or a development known to the Company that
could reasonably be expected to cause or result in a material adverse
change, in the general affairs, management, financial position,
Shareholders' equity, results of operations or prospects of the
Company, otherwise than as set forth in the Prospectus. Except as set
forth in the Prospectus, there exists no present condition or state of
facts or circumstances known to the Company involving its customers
which the Company can now reasonably foresee would have a Material
Adverse Effect or which would result in a termination or cancellation
of any agreement with any customer whose purchases, individually or in
the aggregate, are material to the business of the Company, or which
would result in any material decrease in sales to any such customer or
purchases from any supplier, or which would prevent the Company from
conducting its business as described in the Prospectus in essentially
the same manner in which it has heretofore been conducted.
(q) The Financial Statements and the related notes of the
Company included in the Registration Statement and the Prospectus
present fairly the financial position, results of operations, cash flow
and changes in Shareholders' equity of the Company and the Subsidiaries
at the dates and for the periods indicated, subject in the case of the
Financial Statements for interim periods, to normal and recurring
year-end adjustments. The Financial Statement schedules included in the
Registration Statement present fairly the information required to be
stated therein. Such Financial Statements and schedules were prepared
in conformity with the Commission's rules and regulations and in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as stated
therein. The financial information of the Company and the Subsidiaries
set forth in the Prospectus under the captions "Capitalization" and
"Management's Discussion and Analysis or Plan Operations" fairly
present, on the basis stated in the Prospectus, the information
included therein. The inventories reflected on the Financial
Statements, and thereafter acquired by the Company through the date
hereof, taken as a whole, are in all material respects of a quality and
quantity usable or salable in the normal course of the business of the
Company and the Subsidiaries at values (taken as a whole) at least
equal to the values at which such items are carried on the Financial
Statements. The values at which such inventories are carried on the
Financial Statements reflect the normal inventory valuation policy of
the Company and the Subsidiaries (including the writing down of the
value of any slow moving or obsolete inventory) of stating inventories
at the lower of cost or market on a first-in-first-out basis.
(r) The Company owns or possesses, or has the right to use
pursuant to licenses, sublicenses, agreements, permissions or
otherwise, adequate patents, copyrights, trade names, trademarks,
service marks, licenses and other intellectual property rights
necessary to carry on its business as described in the Prospectus, and,
except as set forth in the Prospectus. The Company has not received any
notice of either (i) default under any of the foregoing or (ii)
infringement of or conflict with asserted rights of others with respect
to, or challenge to the validity of, any of the foregoing which, in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, could have a Material Adverse Effect, and the Company knows of
no fact which could reasonably be anticipated to serve as the basis for
any such notice.
(s) Subject to such exceptions as are not material (A) the
Company owns all properties and assets described in the Registration
Statement and the Prospectus as being owned by it and (B) the Company
has good title to all properties and assets owned by it, free and clear
of all liens, charges, encumbrances and restrictions, except as
otherwise disclosed in the Prospectus and except for (i) liens for
taxes not yet due, (ii) mortgages and liens securing debt reflected on
the Financial Statements included in the Prospectus, (iii)
materialmen's, workmen's, vendor's and other similar liens incurred in
the ordinary course of business that are not delinquent, individually
or in the aggregate, and do not have a material adverse effect on the
value of such properties or assets to the Company, or on the use of
such properties or assets by the Company, in its respective business,
and (iv) any other liens that, individually or in the aggregate, are
not likely to result in a Material Adverse Effect. All leases to which
the Company is a party and which are material to the conduct of the
business of the Company are valid and binding and no material default
by the Company has occurred and is continuing thereunder; and the
Company enjoys peaceful and undisturbed possession under all such
material leases to which it is a party as lessee.
(t) The books, records and accounts of the Company accurately
and fairly reflect, in reasonable detail, the transactions in and
dispositions of the assets of the Company. The system of internal
accounting controls maintained by the Company is 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 to permit preparation of financial statements
in conformity 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 the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(u) Except as set forth in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company has not incurred any
liabilities or obligations, direct or contingent, or entered into any
transactions, in each case, which are likely to result in a Material
Adverse Effect, and there has not been any payment of or declaration to
pay any dividends or any other distribution with respect to the shares
of the capital stock of the Company .
(v) The Company has obtained and delivered to the
Representative the written agreements, in substantially the forms of
Exhibit A-1, attached hereto, of each of the persons listed in Exhibit
A-2 attached hereto, restricting dispositions of shares of capital
stock of the Company on the terms contained in such Exhibits.
(w) The Company is in compliance in all material respects with
all applicable laws, rules and regulations, including, without
limitation, employment and employment practices, immigration, terms and
conditions of employment, health and safety of workers, customs and
wages and hours, and is not engaged in any unfair labor practice. No
property of the Company has been seized by any governmental agency or
authority as a result of any violation by the Company or any
independent contractor of the Company of any provisions of law. There
is no pending unfair labor practice complaint or charge filed with any
governmental agency against the Company. There is no labor strike,
material dispute, slow down or work stoppage actually pending or, to
the best knowledge of the Company, threatened against or affecting the
Company; no grievance or arbitration arising out of or under any
collective bargaining agreements is pending against the Company; no
collective bargaining agreement which is binding on the Company
restricts the Company from relocating or closing any of its operations
and the Company has not experienced any work stoppage or other labor
dispute at any time.
(x) The Company has accurately, properly and timely (giving
effect to any valid extensions of time) filed all federal, state, local
and foreign tax returns (including all schedules thereto) that are
required to be filed, and has paid all taxes and assessments shown
thereon. All tax deficiencies asserted or assessed against the Company
by the Internal Revenue Service ("IRS") or any other foreign or
domestic taxing authority have been paid or finally settled with no
remaining amounts owed. Neither the IRS nor any other foreign or
domestic taxing authority has examined any tax returns of the Company.
The charges, accruals and reserves shown in the Financial Statements
included in the Prospectus in respect of taxes for all fiscal periods
to date are adequate, and nothing has occurred subsequent to the date
of such Financial Statements that makes such charges, accruals or
reserves inadequate. The Company is not aware of any proposal (whether
oral or written) by any taxing authority to adjust any tax return filed
by the Company.
(y) Except as set forth in the Prospectus, there are no
outstanding loans, advances or guaranties of indebtedness by the
Company to or for the benefit of its affiliates, or any of its officers
or directors, or any of the members of the families of any of them,
which are required to be disclosed in the Registration Statement or the
Prospectus.
(z) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(aa) Except as set forth in the Prospectus, the Company has
insurance of the types and in the amounts that it reasonably believes
is adequate for its business, including, but not limited to, casualty
and general liability insurance covering all real and personal property
owned or leased by the Company or such Subsidiary, as applicable,
against theft, damage, destruction, acts of vandalism and all other
risks customarily insured against.
(bb) The Company has not at any time (i) made any
contributions to any candidate for political office, or failed to
disclose fully any such contribution, in violation of law; (ii) made
any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi-public
duties, other than payments required or allowed by all applicable laws;
or (iii) violated, nor is it in violation of, any provision of the
Foreign Corrupt Practices Act of 1977.
(cc) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company, and the Registration Statement has been duly
executed pursuant to such authorization by and on behalf of the
Company.
(dd) All documents delivered or to be delivered by the Company
or any of its directors or officers to the Underwriters, the Commission
or any state securities law administrator in connection with the
issuance and sale of the Securities were, on the dates on which they
were delivered, and will be, on the dates on which they are to be
delivered, true, complete and correct in all material respects.
(ee) With such exceptions as are not likely to result in a
Material Adverse Effect, the Company is in compliance with all Federal,
state, foreign and local laws and regulations relating to pollution or
protection of human health or the environment ("Environmental Laws"),
there are no circumstances that may prevent or interfere with such
compliance other than as set forth in the Prospectus, and the Company
has not received any notice or other communication alleging a currently
pending violation of any Environmental Laws. With such exceptions as
are not likely to result in a Material Adverse Effect, other than as
set forth in the Prospectus, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge or disposal of any
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products, that may result in the imposition of
liability on the Company or any claim against the Company or, to the
Company's, best knowledge, against any person or entity whose liability
for any claim the Company has or may have assumed either contractually
or by operation of law, and the Company has not received any notice or
other communication concerning any such claim against the Company or
such person or entity.
(ff) Except as described in the Prospectus, the Company does
not maintain, nor does any other person maintain on behalf of the
Company, any retirement, pension (whether deferred or non-deferred,
defined contribution or defined benefit) or money purchase plan or
trust. There are no unfunded liabilities of the Company with respect to
any such plans or trusts that are not accrued or otherwise reserved for
on the Financial Statements.
(gg) Any certificates signed by an officer of the Company and
delivered to the Representative or the Underwriters or to counsel for
the Underwriters shall also be deemed a representation and warranty of
the Company to the Underwriters as to the matters covered thereby. Any
certificate delivered by the Company to its counsel for purposes of
enabling such counsel to render the opinions referred to in Section
6(b) will also be furnished to the Representative and counsel for the
Underwriters and shall be deemed to be additional representations and
warranties by the Company to the Underwriters as to the matters covered
thereby.
2. Purchase and Sale.
(a) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company and Selling
Shareholders agree to issue and sell to the Underwriters an aggregate of 150,000
Units. Each of the Underwriters agrees, severally and not jointly, to purchase
from the Company the number of Units set forth opposite its name in Schedule I
hereto. The purchase price per Unit to be paid by the several Underwriters to
the Company shall be $___ per Unit. No value shall be attributable to the
Redeemable Warrant.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company and the Selling
Shareholders hereby grants an option (the "Underwriters' Option") to the several
Underwriters to purchase, severally and not jointly, up to an aggregate of
150,000 Units, consisting of one share of Common Stock and one Common Stock
Purchase Warrant, at the purchase price of $6.75 per Unit for use solely in
covering any over-allotments made by the Representative for the account of the
Underwriters in the sale and distribution of the Underwritten Securities. The
shares of Common Stock included in such Units shall be from the Selling
Shareholders. Said Underwriters' Option may be exercised in whole or in part at
any time on or before the 45th day after the Effective Date upon written or
telegraphic notice by the Representative to the Company and Selling Shareholders
setting forth the number of Units which the several Underwriters are electing to
purchase pursuant to the Underwriters' Option and the settlement date. Delivery
of certificates for such Units by the Company and Selling Shareholders, and
payment therefor to the Company and the Selling Shareholders, shall be made as
provided in Section 3 hereof. The number of Units to be so purchased by each
Underwriter pursuant to the Underwriters' Option shall be determined by
multiplying the number of Units to be sold by the Company pursuant to the
Underwriters' Option, as exercised, by a fraction, the numerator of which is the
number of Units to be purchased by such Underwriter as set forth opposite its
name in Schedule I and the denominator of which is the total number of Units to
be purchased by all of the Underwriters as set forth on Schedule I (subject to
such adjustments to eliminate any fractional Unit purchases as the
Representative in its discretion may make).
3. Delivery and Payment.
(a) If the Underwriters' Option described in Section 2(b) hereof is
exercised on or before the third business day prior to the Closing Date (as
defined below), delivery of the certificates for the Units described in Sections
2(a) and the shares of Common Stock described in Section 2(b) hereof shall be
made by the Company and Selling Shareholders through the facilities of the
Depository Trust Company ("DTC"), and payment therefor, shall be made at the
office of the Company at _____a.m. _______ time, on______, 1997 or such later
date (not later than_____, 1997) as the Representative shall designate, which
date and time may be postponed by agreement among the Representative and the
Company or as provided in Section 9 hereof (such date, time of delivery and
payment for such Securities being herein called the ("Closing Date"). Delivery
of the certificates for such Securities to be purchased on the Closing Date
shall be made as provided in the preceding sentence for the respective accounts
of the several Underwriters against payment by the several Underwriters through
National Securities Corporation of the aggregate purchase price of such
Securities being sold by the Company, to or upon the order of the Company, by
certified or official bank check or checks drawn on or by a _______ Clearing
House bank and payable in next day funds. Certificates for such Securities shall
be registered in such names and in such denominations as the Representative may
request not less than one full business days in advance of the Closing Date. The
Company agrees to have the certificates for the Securities to be purchased on
the Closing Date available at the office of the DTC, not later than ____ a.m.
_____ time at least one business day prior to the Closing Date.
(b) If the Underwriters' Option is exercised after the third business
day prior to the Closing Date, (i) delivery of the certificates for the Units
described in Section 2(a) hereof and payment therefor will be governed by the
provisions of Section 3(a) hereof and (ii) the Company will deliver (at the
expense of the Company) on the date specified by the Representative (which shall
not be less than one nor more than five business days after exercise of the
Underwriters' Option), certificates for the Units described in Section 2(b)
hereof in such names and denominations as the Representative shall have
requested against payment at the office of National Securities Corporation of
the purchase price therefor, to or upon the order of the Company, by certified
or official bank check or checks drawn on or by a Los Angeles Clearing House
bank and payable in next day funds. If settlement for such Securities occurs
after the Closing Date, the Company will deliver to the Representative on the
settlement date for such Securities, and the obligation of the Underwriters to
purchase such Securities shall be conditioned upon receipt of, supplemental
opinions, certificates and letters confirming as of such date the opinions,
certificates and letters delivered on the Closing Date pursuant to Section 6
hereof. The Company agrees to have the certificates for the Securities to be
purchased after the Closing Date available at the office of the DTC, not later
than ____a.m. _____ time at least one business day prior to the settlement date.
4. Offering by Underwriters. It is understood that the several Underwriters
propose to offer the Securities for sale to the public as set forth in the
Prospectus.
5. Agreements. The Company agrees with the several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, and any amendment thereof, if not effective at the Execution Time, to
become effective as promptly as possible. If the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will file the Prospectus,
properly completed, pursuant to Rule 424(b) within the time period prescribed
and will provide evidence satisfactory to the Representative of such timely
filing. The Company will promptly advise the Representative (i) when the
Registration Statement shall have become effective, (ii) when any post-effective
amendment thereto shall have become effective, (iii) of any request by the
Commission for any amendment or supplement of the Registration Statement or the
Prospectus or for any additional information with respect thereto, (iv) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the receipt by the Company of any notification with
respect to the institution or threatening of any proceeding for that purpose and
(v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose. The Company
will use its best efforts to prevent the issuance of any such stop order or
suspension and, if issued, to obtain as soon as possible the withdrawal thereof.
The Company will not file any amendment to the Registration Statement or
supplement to the Prospectus without the prior consent of the Representative.
The Company will prepare and file with the Commission, promptly upon your
request, any amendment to the Registration Statement or supplement to the
Prospectus that you reasonably determine to be necessary or advisable in
connection with the distribution of the Securities by you, and will use its best
efforts to cause the same to become effective as promptly as possible. The
Company shall keep the Registration Statement current during the term of the
Redeemable Warrant.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of which
the Prospectus as then supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it otherwise shall be necessary to supplement the
Prospectus to comply with the Act or the rules or regulations thereunder, the
Company will promptly prepare and file with the Commission, subject to Section
5(a) hereof, a supplement that will correct such statement or omission or a
supplement that will effect such compliance.
(c) As soon as practicable (but not later than ________, 199_), the
Company will make generally available to its security holders and to the
Representative an earnings statement or statements (which need not be audited)
of the Company covering a period of at least twelve months after the Effective
Date (but in no event commencing later than 90 days after such date), which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 promulgated
thereunder.
(d) The Company will furnish to each of you and counsel for the
Underwriters, without charge, one signed copy of the Registration Statement and
any amendments thereto (including exhibits thereto) and to each other
Underwriter a conformed copy of the Registration Statement and any amendments
thereto (without exhibits thereto) and, so long as delivery of a prospectus by
an Underwriter or dealer may be required by the Act, as many copies of the
Prospectus and each Preliminary Prospectus and any supplements thereto as the
Representative may reasonably request. The Company will furnish or cause to be
furnished to the Representative copies of all reports on Form SR required by
Rule 463 under the Act.
(e) The Company will take all actions necessary for the registration or
qualification of the Securities for sale under the laws of such jurisdictions
within the United States and its territories as the Representative may
designate, will maintain such qualifications in effect so long as required for
the distribution of the Securities and will pay the fee of the National
Association of Securities Dealers, Inc. (the "NASD") in connection with its
review of the offering, provided that the Company shall not be required to
qualify as a foreign corporation or to consent to service of process under the
laws of any such jurisdiction (except service of process with respect to the
offering and sale of the Securities). Without limiting the foregoing, the
Company will use its best efforts to register or qualify the shares of Common
Stock underlying the Redeemable Warrant in any jurisdiction where the registered
holders of 5 % or more of such Warrant reside, and will use its best efforts to
keep such registrations or qualifications in effect during the term of the
Redeemable Warrant.
(f) The Company will apply the net proceeds from the offering received
by it in the manner set forth under the caption "Use of Proceeds" in the
Prospectus.
(g) The Company will (i) cause the Securities (other than the
Underwriters' Warrant) to be listed on American Stock Exchange, (ii) comply with
all registration, filing and reporting requirements of the Exchange Act, the
American Stock Exchange which may from time to time be applicable to the Company
and (iii) file a report of sales and use of proceeds on Form SR as required by
Rule 463 under the Act.
(h) During the five-year period commencing on the date hereof, the
Company will furnish to its Shareholders, as soon as practicable after the end
of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and unaudited quarterly
reports of earnings and will furnish to you and, upon request, to the other
Underwriters hereunder (i) concurrent with furnishing such quarterly reports to
its Shareholders, statements of income and other information of the Company for
such quarter in the form furnished to the Company's Shareholders; (ii)
concurrent with furnishing such annual reports to its Shareholders, a balance
sheet of the Company as at the end of such fiscal year, together with statements
of income and surplus and of cash flow of the Company for such fiscal year, all
in reasonable detail and accompanied by a copy of the certificate or report
thereon of its independent certified public accountants; (iii) as soon as they
are available, copies of all reports and financial statements furnished to or
filed with the Commission, the NASD, the American Stock Exchange, or any other
securities exchange; (iv) every press release and every material news item or
article in respect of the Company or its affairs which was released or prepared
by the Company; and (v) any additional information of a public nature concerning
the Company or its business that you may reasonably request. During such
five-year period, if the Company shall have active subsidiaries, the foregoing
financial statements shall be on a consolidated basis to the extent that the
accounts of the Company and its subsidiaries are consolidated, and shall be
accompanied by similar financial statements for any significant subsidiary that
is not so consolidated.
(i) The Company will maintain a transfer agent and, if necessary under
the jurisdiction of incorporation of the Company, a registrar (which may be the
same entity as the transfer agent) for the Securities.
(j) The Company will not, for a period of 90 days following the
Effective Date, without the prior written consent of the Representative, offer,
sell, contract to sell (including, without limitation, any short sale),
transfer, assign, pledge, encumber, hypothecate or grant any option to purchase
or otherwise dispose of, any capital stock, or any options, rights or warrant to
purchase any capital stock of the Company, or any securities or indebtedness
convertible into or exchangeable for shares of capital stock of the Company,
except for (i) sales of the Securities as contemplated by this Agreement and
(ii) sales of Common Stock upon the exercise of Redeemable Warrant or
outstanding options described in the Prospectus.
(k) The Company has reserved and shall continue to reserve a sufficient
number of shares of Common Stock for issuance upon exercise of the Underwriters'
Warrant and Redeemable Warrant.
6. Conditions to the Obligations of the Underwriters. The obligations of the
Underwriters to purchase the Units described in Sections 2(a) and 2(b) hereof
shall be subject to (i) the accuracy of the representations and warranties on
the part of the Company contained herein as of the Execution Time, the Closing
Date and (in the case of any Units delivered after the Closing Date) any
settlement date pursuant to Section 3(b) hereof, (ii) the accuracy of the
statements of the Company made in any certificates delivered pursuant to the
provisions hereof, (iii) the performance by the Company of its obligations
hereunder, and (iv) the following additional conditions:
(a) The Registration Statement shall have become effective (or, if a
post-effective amendment is required to be filed pursuant to Rule 430A under the
Act, such post-effective amendment shall become effective) not later than ___
p.m. _____ time, on the execution date hereof or at such later date and time as
you may approve in writing and, at the Closing Date (and any settlement date
pursuant to Section 3(b) hereof), no stop order suspending the effectiveness of
the Registration Statement or any qualification in any jurisdiction shall have
been issued and no proceedings for that purpose shall have been with.
(b) The Company shall have furnished to the Representative the opinion
of Maurice J. Bates, LLC, counsel for the Company, addressed to the Underwriters
and dated the Closing Date (and any settlement date pursuant to Section 3(b)
hereof), or other evidence satisfactory to the Representative to the effect
that:
(i) The Registration Statement has become effective under the
Act; any required filing of the Prospectus or any supplements thereto
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); to the best knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement or any qualification in any jurisdiction has been issued and
no proceedings for that purpose have been instituted or threatened; any
request from the Commission for additional information has been
complied with; the Registration Statement and the Prospectus (and any
supplements thereto) comply as to form in all material respects with
the applicable requirements of the Act and the rules and regulations
thereunder.
(ii) The Company has no subsidiaries other than those
described in the Registration Statement.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized, with full corporate
power and corporate authority to own its properties and conduct its
business as described in the Prospectus, and is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each jurisdiction in which it conducts its business or owns
property and in which the failure, individually or in the aggregate, to
be so qualified would have a Material Adverse Effect. The Company has
all necessary and material authorizations, approvals, orders, licenses,
certificates and permits of and from all government regulatory
officials and bodies, to own is properties and conduct is business as
described in the Prospectus, except where failure to obtain such
authorizations, approvals, orders, licenses, certificates or permits
would not have a Material Adverse Effect.
(iv) the Company does not own any shares of capital stock or
any other equity securities of any corporation or any equity interest
in any firm, partnership, association or other entity other than as
described in the Prospectus and ownership interests that would not have
a Material Adverse Effect.
(v) The Company has an authorized share capitalization as set
forth in the Prospectus; the capital stock of the Company conforms in
all material respects to the description thereof contained in the
Prospectus; all outstanding shares of Common Stock have been duly and
validly authorized and issued and are fully paid and nonassessable and
the certificates therefor are in valid and sufficient form; there are
no other classes of stock outstanding except Common Stock and as
described in the Prospectus; all outstanding options to purchase shares
of Common Stock have been duly and validly authorized and issued;
except as described in the Prospectus, there are no options, warrant or
rights to acquire, or debt instruments convertible into or exchangeable
for, or other agreements or understandings to which the Company is a
party, outstanding or in existence, entitling any person to purchase or
otherwise acquire any shares of capital stock of the Company; the
issuance and sale of the Securities have been duly and validly
authorized and, when issued and delivered and paid for, the Securities
will be fully paid and nonassessable and free from preemptive rights,
and will conform in all respects to the description thereof contained
in the Prospectus; the Redeemable Warrant and Underwriters' Warrant
constitute valid and binding obligations of the Company enforceable in
accordance with their terms and the Company has reserved a sufficient
number of shares of Common Stock for issuance upon exercise thereof;
the Redeemable Warrant and Underwriters' Warrant possess the rights,
privileges and characteristics as represented in the forms filed as
Exhibits to the Registration Statement and as described in the
Prospectus; the Securities (other than the Underwriters' Warrant) have
been approved for listing on the American Stock Exchange upon notice of
issuance thereof; the certificates for the Securities are in valid and
sufficient form. Each offer and sale of securities of the Company
described in Item 26 of Part II of the Registration Statement was
effected in compliance with the Act and the rules and regulations
thereunder and with all applicable Blue Sky laws.
(vi) Other than as described in the Prospectus, there is no
pending or, to the best knowledge of such counsel, threatened action,
suit or proceeding before any court or governmental agency, authority
or body, domestic or foreign, or any arbitrator involving the Company
of a character required to be disclosed in the Registration Statement
or the Prospectus that is not adequately disclosed in the Prospectus,
and, to the best knowledge of such counsel, there is no contract or
other document of a character required to be described in the
Registration Statement or the Prospectus, or to be filed as an exhibit,
which is not described or filed as required.
(vii) This Agreement has been duly authorized, executed and
delivered by the Company and constitutes the legal, valid and binding
agreement and obligation of the Company enforceable against it in
accordance with its terms (subject to standard bankruptcy and equitable
remedy exceptions, and limitations under the Act as to the
enforceability of indemnification provisions).
(viii) The Company has full corporate power and corporate
authority to enter into and perform is obligations under this Agreement
and to issue, sell and deliver the Securities in the manner provided in
this Agreement; and the Company has taken all necessary corporate
action to authorize the execution and delivery of, and the performance
of is obligations under, this Agreement.
(ix) Neither the offering, issue and sale of the Securities
nor the consummation of any other of the transactions contemplated
herein, nor the fulfillment of the terms hereof, will conflict with or
result in a breach or violation of, or constitute a default under, or
result in the imposition of a lien on any properties of the Company, or
an acceleration of indebtedness pursuant to, the Certificate of
Incorporation or bylaws of the Company, or any of the terms of any
indenture or other agreement or instrument to which the Company is a
party or by which is properties are bound, or any law, order, judgment,
decree, rule or regulation applicable to the Company of any court,
regulatory body, administrative agency, governmental body, stock
exchange or arbitrator having jurisdiction over the Company. The
Company is not in violation of is Certificate of Incorporation or
bylaws or in breach of or default under any of the terms of any
indenture or other agreement or instrument to which it is a party or by
which it or its properties are bound, which breach or default would,
individually or in the aggregate, have a Material Adverse Effect.
(x) Except as disclosed in the Prospectus, no person has the
right, contractual or otherwise, to cause the Company to issue to it
any shares of capital stock in consequence of the issue and sale of the
Securities to be sold by the Company hereunder nor does any person have
preemptive rights, or rights of first refusal or other rights to
purchase any of the Securities. Except as referred to in the
Prospectus, no person holds a right to require or participate in a
registration under the Act of Common Stock or any other equity
securities of the Company.
(xi) No consent, approval, authorization or order of, or
declaration or filing with, any court or governmental agency or body is
required to be obtained or filed by or on behalf of the Company in
connection with the transactions contemplated herein, except such as
may have been obtained or made and registration of the Securities under
the Act, and such as may be required under the Blue Sky laws of any
jurisdiction.
(xii) The Company is not in violation of or default under any
judgment, ruling, decree or order or any statute, rule or regulation of
any court or other United States governmental agency or body, including
any applicable laws respecting employment, immigration and wages and
hours, in each case, where such violation or default could have a
Material Adverse Effect. The Company is not involved in any labor
dispute, nor, to the best knowledge of such counsel, is any labor
dispute threatened.
(xiii) The Company is not an investment company subject to
registration under the Investment Company Act of 1940, as amended.
(xiv) The preparation and the filing of the Registration
Statement with the Commission have been duly authorized by and on
behalf of the Company, and the Registration Statement has been duly
executed pursuant to such authorization by and on behalf of the
Company.
(xv) The Company owns or possesses, or has the right to use
pursuant to licenses, sublicenses, agreements, permissions or
otherwise, adequate patents, copyrights, trade names, trademarks,
service marks, licenses and other intellectual property rights
necessary to carry on its business as described in the Prospectus, and,
except as set forth in the Prospectus, neither the Company n has
received any notice of either (i) default under any of the foregoing or
(ii) infringement of or conflict with asserted rights of others with
respect to, or challenge to the validity of, any of the foregoing
which, in the aggregate, if the subject of an unfavorable decision,
ruling or finding, could have a Material Adverse Effect, and counsel
knows of no facts which could reasonably be anticipated to serve as the
basis for any such notice.
In addition, such counsel shall state that such counsel has
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants of the Company
and representatives of the Underwriters at which the contents of the
Registration Statement and Prospectus were discussed and, although such counsel
is not passing upon and does not assume responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus (except as and to the extent stated in the first one
clauses of subparagraph (v) above), on the basis of the foregoing and on such
counsel's participation in the preparation of the Registration Statement and the
Prospectus, nothing has come to the attention of such counsel that causes such
counsel to believe that the Registration Statement, at the Effective Date and at
the Closing Date (and any settlement date pursuant to Section 3(b) hereof),
contained or contains any untrue statement of a material fact or omitted or
omits 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, or that the Prospectus, at the date of such Prospectus or
at the Closing Date (or any settlement date pursuant to Section 3(b) hereof),
contained or contains any untrue statement of a material fact or omitted or
omits 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 (it being understood that such counsel need express no
comment with respect to the Financial Statements and schedules and other
financial or statistical data included in the Registration Statement or
Prospectus).
References to the Prospectus in this Section 6(b) shall include any
supplements thereto.
(c) The Representative shall have received from Winstead Sechrest &
Minick, P.C., counsel for the Underwriters, an opinion dated the Closing Date
(and any settlement date pursuant to Section 3(b) hereof), with respect to the
issuance and sale of the Securities, and with respect to the Registration
Statement, the Prospectus and other related matters as the Representative may
reasonably require, and the Company shall have furnished to such counsel such
documents as they may reasonably request for the purpose of enabling them to
pass upon such matters.
(d) The Company shall have furnished to the Representative a
certificate of the Company, signed by its President and Chief Executive Officer,
and Vice President-Finance and Secretary, dated the Closing Date (and any
settlement date pursuant to Section 3(b) hereof), to the effect that each has
carefully examined the Registration Statement, the Prospectus (and any
supplements thereto) and this Agreement, and, after due inquiry, that:
(i) As of the Closing Date (and any settlement date pursuant
to Section 3(b) hereof), the statements made in the Registration
Statement and the Prospectus are true and correct and the Registration
Statement and the Prospectus do not 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, in light of the
circumstances under which they were made, not misleading.
(ii) No order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Securities under
the securities or Blue Sky laws of any jurisdiction is in effect and no
proceeding for such purpose is pending before or, to the knowledge of
such officers, threatened or contemplated by the Commission or the
authorities of any such jurisdiction; and any request for additional
information with respect to the Registration Statement or the
Prospectus on the part of the staff of the Commission or any such
authorities brought to the attention of such officers has been complied
with to the satisfaction of the staff of the Commission or such
authorities.
(iii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock or long-term debt of the Company,
except as set forth in or contemplated by the Registration Statement
and the Prospectus, (y) there has not been any material adverse change
in the general affairs, business, prospects, properties, management,
results of operations or condition (financial or otherwise) of the
Company, whether or not arising from transactions in the ordinary
course of business, in each case, other than as set forth in or
contemplated by the Registration Statement and the Prospectus, and (z)
the Company has not sustained any material interference with its
business or properties from fire, explosion, flood or other casualty,
whether or not covered by insurance, or from any labor dispute or any
court or legislative or other governmental action, order or decree,
which is not set forth in the Registration Statement and the
Prospectus.
(iv) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has been
no litigation instituted against the Company, any of its respective
officers or directors, or (to the best knowledge of such officers) any
affiliate or promoter of the Company, and since such dates there has
been no proceeding instituted or, to the best knowledge of such
officers, threatened against the Company, any of its officers or
directors, or (to the best knowledge of such officers) any affiliate or
promoter of the Company, before any federal, state or county court,
commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding could have a
Material Adverse Effect.
(v) Each of the representations and warranties of the Company
in this Agreement is true and correct in all material respects on and
as of the Execution Time and the Closing Date (and any settlement date
pursuant to Section 3(b) hereof) with the same effect as if made on and
as of the Closing Date (and any settlement date pursuant to Section
3(b) hereof).
(vi) Each of the covenants required in this Agreement to be
performed by the Company on or prior to the Closing Date (and any
settlement date pursuant to Section 3(b) hereof) has been duly, timely
and fully performed, and each condition required herein to be complied
with by the Company on or prior to the Closing Date (and any settlement
date pursuant to Section 3(b) hereof) has been duly, timely and fully
complied with.
(e) At the Execution Time and on the Closing Date (and any settlement
date pursuant to Section 3(b) hereof), Moss Adams LLP, shall have furnished to
the Representative letters, dated as of such dates, in form and substance
satisfactory to the Representative, confirming that they are independent
accountants within the meaning of the Act and the applicable rules and
regulations thereunder and stating in effect that:
(i) In their opinion, the audited Financial statements of the
Company for the fiscal year ended February 28, 1997, and the unaudited
Financial statements for the periods ended May 31, 1996 and 1997, and
the notes to the Financial Statements and Financial Statement schedules
for those periods included in the Registration Statement and the
Prospectus, comply in form in all material respects with the applicable
accounting requirements of the Act and the applicable rules and
regulations thereunder.
(ii) On the basis of a reading of the latest unaudited
Financial Statements made available by the Company, carrying out
certain specified procedures (but not an examination in accordance with
generally accepted auditing standards), a reading of the minutes of the
meetings of the Shareholders, directors and committees of the Company,
and inquiries of certain officials of the Company who have
responsibility for financial and accounting matters of the Company,
nothing came to their attention that caused them to believe that with
respect to the period subsequent to February 28, 1997, at a specified
date not more than five business days prior to the date of the letter,
(y) there were any changes in the long-term debt or capital stock of
the Company, or decreases in net current assets, net assets or
Shareholders' equity of the Company as compared with the amounts shown
on the February 28, 1997 balance sheets included in the Registration
Statement and the Prospectus or (z) there were any decreases in
reserves, sales, net income or income from operations, of the Company,
as compared with the corresponding period in the preceding year, except
for changes or decreases which the Registration Statement discloses
have occurred or may occur and except for changes or decreases, set
forth in such letter, in which case (A) the letter shall be accompanied
by an explanation by the Company as to the significance thereof unless
said explanation is not deemed necessary by the Representative and (B)
such changes or decreases and the explanation thereof shall be
acceptable to the Representative, in its sole discretion.
(iii) They have performed certain other specified procedures
as a result of which they determined that all information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company ) set forth in the
Registration Statement and the Prospectus and specified by you prior to
the Execution Time, agrees with the accounting records of the Company.
(iv) On the basis of a reading of the unaudited pro forma
balance sheet as of May 31, 1997 and the related unaudited pro forma
statements of income for the one fiscal years ended February 28, 1997,
and the three months ended May 31, 1996 and May 31, 1997, and the
procedures specified by you prior to the Execution Time, nothing came
to their attention that caused them to believe that the above described
pro forma balance sheet and statements of income had not been properly
compiled on the pro forma bases described in the notes thereto.
References to the Prospectus in this Section 6(e) shall
include any supplements thereto.
The Representative shall also have also received from Moss
Adams, a letter stating that the Company's system of internal
accounting controls taken as a whole are sufficient to meet the broad
objectives of internal accounting control insofar as those objectives
pertain to the prevention or detection of errors or irregularities in
amounts that would be material to the Financial statements of the
Company.
(f) Subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus, there shall not have been (i)
any changes or decreases from that specified in the letters referred to in
Section 6(e) hereof or (ii) any change, or any development involving a
prospective change, in or affecting the properties, assets, results of
operations, business, capitalization, net worth, prospects, general affairs or
condition (financial or otherwise) of the Company the effect of which is, in the
sole judgment of the Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Securities as contemplated by the Registration Statement and the Prospectus.
(g) On or prior to the Effective Date, the Securities shall have been
approved for listing on the American Stock Exchange.
(h) The Company shall not have sustained any uninsured substantial loss
as a result of fire, flood, accident or other calamity.
(i) The Company shall have furnished to the Representative certificate
of the Secretary of the Company certifying as to certain information and other
matters as the Representative may reasonably request.
(j) The Company shall have furnished to the Representative such further
information, certificates and documents as the Representative may reasonably
request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in any respect when and as provided in this Agreement, or if any
of the opinions and certificates mentioned above or elsewhere in this Agreement
shall not be in all respects reasonably satisfactory in form and substance to
the Representative and its counsel, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date (or any settlement date, pursuant to Section 3(b) hereof), by the
Representative. Notice of such cancellation shall be given to the Company in
writing or by telephone, facsimile or telegraph confirmed in writing.
7. Fees and Expenses and Underwriters' Warrant. The Company agrees to pay
or cause to be paid the following:
(a) the fees, disbursements and expenses of is own counsel and
accountants in connection with the registration of the Securities under the Act
and all other expenses in connection with the preparation, printing and filing
of the Registration Statement, any Preliminary Prospectus, any Prospectus, and
any drafts thereof, and amendments and supplements thereto, and the mailing and
delivery of copies thereof to the Underwriters and dealers;
(b) all expenses in connection with the qualification of the Securities
for offering under state securities laws, including the fees and disbursements
of counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky Memorandum;
(c) all filing and other fees in connection with filing with the NASD,
and complying with applicable review requirements thereof;
(d) the cost of preparing and printing certificates for the Securities;
(e) all expenses, taxes, fees and commissions, including, without
limitation, any and all fixed transfer duties sellers' and buyers' stamp taxes
or duties on the purchase and sale of the Securities and stock exchange
brokerage and transaction levies with respect to the purchase and, if
applicable, the sale of the Securities (the latter to the extent paid and not
reimbursed) (i) incident to the sale and delivery by the Company of the
Securities to the Underwriters and (ii) incident to the sale and delivery of the
Securities by the Underwriters to the initial purchasers thereof;
(f) the costs and charges of any transfer agent and registrar;
(g) the fees and expenses in connection with qualification of the
Securities for listing on the American Stock Exchange;
(h) a nonaccountable expense allowance of 2.0% of the proceeds derived
from the offering (including the Units described in Section 2(b) hereof) payable
to the Representative, and
(i) all other costs and expenses incident to the performance of the
Company's obligations hereunder which are not otherwise specifically provided
for in this Section 7.
In addition to the sums payable to the Representative as provided
elsewhere herein and in addition to the Underwriters' Option, the Underwriters
shall be entitled to receive, as partial compensation for their services, unit
purchase warrant (the "Underwriters' Warrant") for the purchase of an additional
100,000 Units. The Underwriters' Warrant shall be issued pursuant to the
Underwriters' Warrant and Registration Rights Agreement in the form of Exhibit B
attached hereto and shall be exercisable, in whole or in part, for a period of
four years commencing one year from the date of the Prospectus, at 120% of the
public offering price of the Units. The Underwriters' Warrant, including the
Redeemable Warrant issuable upon exercise thereof, shall be non-transferable for
one year from the date of issuance of the Underwriters' Warrant, except for (i)
transfers to officers or partners of the Underwriters, (ii) in connection with a
merger, consolidation or reorganization of the Company or (iii) transfers
occurring by operation of law. The terms of the Units subject to the
Underwriters' Warrant shall be the same as the Units sold to the public.
Without limiting in any respect the foregoing obligations of the
Company, which obligations shall survive any termination of this Agreement, if
the sale of the Securities provided for herein is not consummated because any
condition to the obligations of the Underwriters set forth in Section 6 hereof
is not satisfied, because of any termination pursuant to Section 10 hereof, or
because of any refusal, inability or failure on the part of the Company to
perform any agreement herein or comply with any provision hereof other than by
reason of a default by any of the Underwriters, the Company agrees to reimburse
the Underwriters, upon demand, for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the Securities to the
extent the amounts paid pursuant to Section 7(h) hereof are insufficient
therefor.
<PAGE>
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person who controls any Underwriter within the meaning of the Act or
the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in (i)
Section 1 of this Agreement, the Registration Statement, any Preliminary
Prospectus or the Prospectus, or in any amendment thereof or supplement thereto,
or (ii) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Securities under the securities or Blue Sky laws thereof or filed with the
Commission or any securities association or securities exchange, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any Underwriter through the Representative specifically for use in the
Registration Statement or Prospectus; provided further, that with respect to any
untrue statement or omission, or any alleged untrue statement or omission, made
in any Preliminary Prospectus, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling any such Underwriter) from whom the person
asserting any such losses, claims, damages, liabilities or expenses purchased
the Securities concerned to the extent that such untrue statement or omission,
or alleged untrue statement or omission, has been corrected in the Prospectus
and the failure to deliver the Prospectus was not a result of the Company's
failure to comply with its obligations under Section 5(d) hereof. The indemnity
agreement will be in addition to any liability which the Company may otherwise
have. The Company will not, without the prior written consent of each
Underwriter, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not such Underwriter or any
person who controls such Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding), unless the settlement or compromise or consent includes an
unconditional release of such Underwriter and each such controlling person from
all liability arising out of such claim, action, suit or proceeding,
satisfactory in form and substance to the Representative.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each of its directors, each of its officers who signs the
Registration Statement, and each person who controls the Company within the
meaning of the Act or the Exchange Act to the same extent as the foregoing
indemnity from the Company to each Underwriter, but only with reference to
written information relating to such Underwriter furnished to the Company by or
on behalf of such Underwriter through the Representative specifically for use in
the Registration Statement or Prospectus. The Company acknowledges that the
corporate names of the Underwriters and the information under the heading
"Underwriting" in the Prospectus and in any Preliminary Prospectus constitute
the only information furnished in writing by or on behalf of the several
Underwriters. The obligations of each Underwriter under this subsection (b)
shall be in addition to any liability which the Underwriters may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, suit or proceeding, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all expenses; but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party, unless such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. All such
expenses shall be paid by the indemnifying party as incurred by an indemnified
party. Any such indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party has agreed to pay such fees and expenses
or (ii) the indemnifying party shall have failed promptly after notice by such
indemnified party to assume the defense of such action or proceeding and employ
counsel reasonably satisfactory to the indemnified party in any such action,
suit or proceeding or (iii) the named parties in any such action or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to such
indemnified party which are different from or additional to those available to
the indemnifying party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action or proceeding on behalf of the
indemnified party or parties, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (together with appropriate local counsel) at any
time for all such indemnified parties, which firm shall be designated in writing
to the indemnifying party). Any such fees and expenses payable by the
indemnifying party shall be paid to or on behalf of the indemnified party
entitled thereto as incurred. An indemnifying party shall not be liable for any
settlement of any action or claim effected without its consent, which shall not
be unreasonably withheld.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in Section 8(a) or 8(b)
is applicable in accordance with its terms but is for any reason held by a court
to be unavailable from the indemnifying party on grounds of policy or otherwise,
the Company and the Underwriters shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) to which the
Company and one or more of the Underwriters may be subject in such proportion so
that the Underwriters are responsible in the aggregate for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the Prospectus bears to the public offering price appearing
thereon and the Company is responsible for the balance; provided, however, that
(i) in no case shall any Underwriter (except as may be provided in the Agreement
Among Underwriters relating to the offering of the Securities) be responsible
for any amount in excess of the underwriting discount applicable to the Units to
be purchased by such Underwriter hereunder and (ii) 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. For purposes of this Section 8, each person who
controls an Underwriter within the meaning of the Act shall have the same rights
to contribution as such Underwriter, and each person who controls the Company
within the meaning of the Act, each officer of the Company who shall have signed
the Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to clause (ii) of
this Section 8(d). Any party entitled to contribution will, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party or parties under this Section 8(d), notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
shall not relieve the party or parties from whom contribution may be sought from
any other obligation it or they may have hereunder or otherwise.
9. Default by an Underwriter. If any one or more Underwriters shall fail to
purchase and pay for any of the Units agreed to be purchased by such Underwriter
or Underwriters hereunder and such failure to purchase shall constitute a
default in the performance of its or their obligations under this Agreement, the
remaining Underwriters shall be obligated severally to take up and pay for (in
the respective proportions which the number of Units set forth opposite their
names in Schedule I hereto bears to the aggregate number of Units set forth
opposite the names of all the remaining Underwriters) the Units which the
defaulting Underwriter or Underwriters agreed but failed to purchase; provided,
however, that if the aggregate number of Units which the defaulting Underwriter
or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
number of Units set forth in Schedule I hereto, the remaining Underwriters shall
have the right to purchase all, but shall not be under any obligation to
purchase any, of such Units, and if such nondefaulting Underwriters do not
purchase all of such Units, this Agreement will terminate without liability to
any non-defaulting Underwriter or the Company except as otherwise provided in
Section 7. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as the Representative shall determine in order that the required
changes in the Registration Statement and the Prospectus or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the
Company or any nondefaulting Underwriter for damages occasioned by its default
hereunder.
10. Termination. This Agreement shall be subject to termination in the absolute
discretion of the Representative, by notice given to the Company prior to
delivery of and payment for the Securities, if prior to such time (a) a
suspension or material limitation in trading in securities generally on the New
York or American Stock Exchange, any over-the-counter market, the Chicago Board
Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade
shall have occurred, (b) a banking moratorium shall have been declared by
federal, New York or California state authorities, (c) the United States shall
have engaged in hostilities which shall have resulted in the declaration, on or
after the date hereof, of a national emergency or war, or (d) a change in
national or international political, financial or economic conditions or
national or international equity markets or currency exchange rates shall have
occurred, if the effect of any such event specified above is, in the sole
judgment of the Representative, so material and adverse as to make it
impractical or inadvisable to proceed with the public offering or delivery of
the Securities as contemplated by the Registration Statement and the Prospectus.
11. Representations and Indemnities to Survive. The respective agreements,
representations, warranties, indemnities and other statements of the Company,
its officers and the Underwriters set forth in, referred to in, or made pursuant
to this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or the Company or any of
the officers, directors or controlling persons referred to in Section 8 hereof,
and will survive delivery of and payment for the Securities. The provisions of
Sections 7 and 8 hereof shall survive the termination or cancellation of this
Agreement.
12. Notices. All communications hereunder will be in writing and effective
only on receipt, and will be mailed, delivered, telegraphed or sent by facsimile
transmission and confirmed:
to the Representative at:
National Securities Corporation
875 North Michigan Avenue, Suite 1560
Chicago, Illinois 60611
Attention: Steven A. Rothstein
Facsimile No. (312) 751-0769
to the Company at:
Westower Corporation
19440 Enterprise Way
Surrey, B.C. V3S 6J9
Facsimile No. (604) 533-9808
13. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers,
directors and controlling persons referred to in Section 8 hereof, and no other
person will have any right or obligation hereunder.
14. Counterparts. This Agreement may be signed in one or more counterparts,
each of which shall be an original, with the same effect as if the signatures
thereon and hereon were on the same instrument.
15. Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Illinois.
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the
Company, the Selling Shareholders and the several Underwriters.
Very truly yours,
Westower Corporation
By:
Calvin J. Payne, President
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
National Securities Corporation
By:
Steven A. Rothstein
For itself and the other several Underwriters in Schedule I to the foregoing
Agreement.
Selling Shareholders
- -------------------------
Calvin J. Payne
- -------------------------
S. Roy Jeffrey
- -------------------------
Walter Friesen
- -------------------------
Valdis V. Rundans
<PAGE>
Warrant Agreement
____, 1997
NATIONAL SECURITIES CORPORATION
As Representative of the Several Underwriters
c/o National Securities Corporation
875 North Michigan Avenue
Suite 1560
Chicago, Illinois 60611
Gentlemen:
Westower Corporation, a Washinton corporation (the "Company"), hereby
agrees to sell to you, the several underwriters, and you hereby agree to
purchase from the Company at a purchase price of $9.00, unit purchase warrants
(the "Underwriter Warrants") covering 100,000 of the Company's units (the
"Units"), each Unit consisting of one share of the Company's Common Stock (the
"Shares") and one Redeemable Common Stock Purchase Warrant (the "Warrants")
issued in accordance with the terms of a warrant agreement (the "Warrant
Agreement") dated as of, 1997 between the Company and American Stock Transfer &
Trust Company, as warrant agent (the "Warrant Agent"). The Underwriter Warrants
will be exercisable by you as to all or any lesser number of Units covered
thereby, at the Purchase Price per Unit as defined below, at any time and from
time to time on and after the first anniversary of the date hereof and ending at
5:00 pm. on the fifth anniversary of the date hereof.
Definitions.
As used herein the following terms, unless the context otherwise
requires, shall have for all purposes hereof the following meanings:
The term "Common Stock" refers to all stock of any class or classes
(however designated) of the Company, now or hereafter authorized, the holders of
which shall have the right without limitation as to amount, either to all or to
a part of the balance of current dividends and liquidating dividends after the
payment of dividends and distributions on any shares entitled to preference, and
the holders of which shall ordinarily, in the absence of contingency, be
entitled to vote for the election of a majority of the directors of the Company
(even though the right so to vote has been suspended by the occurrence of such a
contingency).
The term "Underlying Common Stock" refers to the shares of Common Stock
(or Other Securities) issuable under this Warrant Agreement pursuant to the
exercise, in whole or in part, of the Warrants or the Underwriter Warrants.
The term "Other Securities" refers to any stock (other than Units) and
other securities of the Company or any other person (corporate or otherwise)
which the holders of the Underwriter Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Underwriter Warrants,
in lieu of or in addition to Common Stock and Warrants, or which at any time
shall be issuable or shall have been issued in exchange for or in replacement of
Units or Other Securities pursuant to Section 6 below or otherwise.
The term "Registration Statement" refers to the Registration Statement
relating to the Prospectus in the form first filed with the Securities and
Exchange Commission (the "Commission") pursuant to the Rules and Regulations of
the Commission under the Securities Act of 1933, as amended (the "Act").
The term "Purchase Price" refers to the purchase price of the Units
subject to this Agreement. The Purchase Price shall equal 120% of the offering
price per Unit as set forth in the Registration Statement. The Purchase Price is
subject to adjustment as provided in Section 6 below.
The term "Warrant Stock" refers to shares of Common Stock issued upon
the exercise of the Warrants or the Underwriter's Underwriter Warrants.
The purchase and sale of the Underwriter Warrants shall take place, and the
purchase price therefore shall be paid by delivery of your check, simultaneously
with the purchase of and payment for any Units of the Company as provided in
that certain Underwriting Agreement relating to the public offering covered by
the Registration Statement.
Representations and Warranties.
The Company represents and warrants to you as follows:
Corporate Action. The Company has all requisite cooperate power and
authority, and has taken all necessary corporate action, to execute and deliver
this Agreement, to issue and deliver the Underwriter Warrants and certificates
evidencing same, and to authorize and reserve for issuance, and upon payment
from time to time of the Purchase Price to issue and deliver, the Units,
including the Common Stock and the Warrants and shares of Common Stock
Underlying the Warrants.
No Violation. Neither the execution nor delivery of this Agreement, the
consummation of the actions herein contemplated nor compliance with the terms
and provisions hereof will conflict with, or result in a breach of, or
constitute a default or an event permitting acceleration under, any of the
terms, provisions or conditions of the Certificate of Incorporation or Bylaws of
the Company or any indenture, mortgage, deed of trust, note, bank loan, credit
agreement, franchise, license, lease, permit, judgment, decree, order, statute,
rule or regulation or any other agreement, understanding or instrument to which
the Company is a party or by which it is bound.
Compliance with the Act.
Transferability of Underwriter Warrants. You agree that the Underwriter
Warrants may not be transferred, sold, assigned or hypothecated, except to (i)
persons who are officers of you; (ii) a successor to you in a merger or
consolidation; (iii) a purchaser of all or substantially all of your assets;
(iv) your shareholders in the event you are liquidated or dissolved; (v) persons
who are officers of a participating broker-dealers.
Registration of Underlying Common Stock. The Underlying Common Stock
issuable upon the exercise of the Underwriter's Underwriter Warrants have not
been registered under the Act. You agree not to make any sale or other
disposition of the Underlying Common Stock except pursuant to a new registration
statement which has become effective under the Act, setting forth the terms of
such offering, the underwriting discount and the commissions and any other
pertinent data with respect thereto, unless you have provided the Company with
an opinion of counsel reasonably acceptable to the Company that such
registration is not required.
Inclusion in Registration of Other Securities. If at any time after the
first anniversary of the effective date hereof but prior to the fifth
anniversary of the effective date hereof, the Company shall propose the
registration on an appropriate form under the Act of any shares of Common Stock
or Other Securities, the Company shall at least 30 days prior to the filing of
such registration statement give you written notice, or telegraphic or
telephonic notice followed as soon as practicable by written confirmation
thereof, of such proposed registration and, upon written notice, or telegraphic
or telephonic notice followed as soon as practicable by written confirmation
thereof, given to the Company within five business days after the giving of such
notice by the Company, shall include or cause to be included in any such
registration statement all or such portion of the Underwriter's Warrant, the
Underlying Common Stock and the Warrant Stock as you may request, provided,
however, that the Company may at any time withdraw or cease proceeding with any
such registration if it shall at the same time withdraw or cease proceeding with
the registration of such Common Stock or such Other Securities originally
proposed to be registered.
Notwithstanding any provision of this Agreement to the
contrary, if any holder of any of the Underwriter Warrants exercises his
Underwriter Warrants but shall not have included all the Underlying Common Stock
in a registration statement containing a Registration Statement which complies
with Section 10(a)(3) of the Act, which has been effective for at least 30
calendar days following the exercise of the Underwriter Warrants, the
registration rights set forth in this Subsection 3(c) shall be extended until
such time as (i)the registration statement containing such a Registration
Statement has been effective for at least 30 calendar days or (ii) in the
opinion of counsel satisfactory to you and the Company, registration is not
required under the Act or under applicable state laws for resale of the
Underlying Common Stock in the manner proposed.
Company's Obligations in Registration. In the event you timely elect to
participate in an offering by including your Underwriter's Underwriter Warrants,
the Underlying Common Stock or the Warrant Stock in a registration statement
pursuant to Subsection 3(c) above, the Company shall:
Notify you as to the filing thereof and of all amendments or supplements
thereto filed prior to the effective date thereof;
Comply with all applicable rules and regulations of the Commission;
Notify you immediately, and confirm the notice in writing, (1) when the
registration statement becomes effective, (2) of the issuance by the Commission
of any stop order or of the initiation, or the threatening, of any proceedings
for that purpose, (3) of the receipt by the Company of any notification with
respect to the suspension of qualification of the Underlying Common Stock for
sale in any jurisdiction or of the initiation, or the threatening, of any
proceedings for that purpose and (4) of the receipt of any comments, or requests
for additional information, from the Commission or any state regulatory
authority. If the Commission or any state regulatory authority shall enter such
a stop order or order suspending qualification at any time, the Company will
make every reasonable effort to obtain the lifting of such order as promptly as
practicable.
During the time when a Registration Statement is required to be
delivered under the Act during the period required for the distribution of the
Underlying Common Stock, comply so far as it is able with all requirements
imposed upon it by the Act, as hereafter amended, and by the rules and
regulations promulgated thereunder, as from time to time in force, so far as
necessary to permit the continuance of sales of or dealings in the Underlying
Common Stock. If at any time when a Registration Statement relating to the
Underlying Common Stock is required to be delivered under the Act any event
shall have occurred as a result of which, in the opinion of counsel for the
Company or your counsel, the Registration Statement relating to the Underlying
Common Stock as then amended or supplemented includes an 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, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any time to
amend such Registration Statement to comply with the Act, the Company will
promptly prepare and file with the Commission an appropriate amendment or
supplement (in form satisfactory to you).
Endeavor in good faith, in cooperation with you, at or prior to the
time the registration statement becomes effective, to qualify the Underlying
Common Stock for offering and sale under the securities laws relating to the
offering or sale of the Underlying Common Stock of such jurisdictions as you may
reasonably designate and to continue the qualifications in effect so long as
required for purposes of the sale of the Underlying Common Stock; provided that
no such qualification shall be required in any jurisdiction where, as a result
thereof, the Company would be subject to service of general process, or to
taxation as a foreign corporation doing business in such jurisdiction. In each
jurisdiction where such qualification shall be effected, the Company will,
unless you agree that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may reasonably
be required by the laws of such jurisdiction. For the purposes of this
paragraph, "good faith" is defined as the same standard of care and degree of
effort as the Company will use to qualify its securities other than the
Underlying Common Stock.
Make generally available to its security holders as soon as
practicable, but not later than the first day of the eighteenth full calendar
month following the effective date of the registration statement, an earnings
statement (which need not be certified by independent public or independent
certified public accountants unless required by the Act or the rules and
regulations promulgated thereunder, but which shall satisfy the provisions of
Section 11(a) of the Act) covering a period of at least twelve months beginning
after the effective date of the registration statement.
After the effective date of such registration statement, prepare, and
promptly notify you of the proposed filing of, and promptly file with the
Commission, each and every amendment or supplement thereto or to any
Registration Statement forming a part thereof as may be necessary to make any
statements therein not misleading in any material respect; provided that no such
amendment or supplement shall be filed if you shall object thereto in writing
promptly after being furnished a copy thereof.
Furnish to you, as soon as available, copies of any such registration
statement and each preliminary or final Registration Statement, or supplement or
amendment prepared pursuant thereto, all in such quantities as you may from time
to time reasonably request;
Make such representations and warranties to any underwriter of the
Underlying Common Stock, and use your best efforts to cause Company counsel to
render such opinions to such underwriter, as such underwriter may reasonably
request; and
Pay all costs and expenses incident to the performance of the Company's
obligations under Subsection 3(c) above and under this Subsection 3(f),
including without limitation the fees and disbursements of Company auditors,
engineers and legal counsel, of legal counsel for you and of legal counsel
responsible for qualifying the Underlying Common Stock under blue sky laws, all
filing fees and printing expenses, all expenses in connection with the transfer
and delivery of the Underlying Common Stock, and all expenses in connection with
the qualification of the Underlying Common Stock under blue sky laws provided,
however, that the Company shall not be responsible for compensation and
reimbursement of expenses to underwriters or selling agents for the included
Underlying Common Stock.
Agreements by Warrant Holder. In connection with the filing of a
registration statement pursuant to Subsection 3(c) above, if you participate in
the offering of the Underlying Common Stock by including shares owned by you,
you agree:
To furnish the Company all material information requested by the
Company concerning yourself and your holdings of securities of the Company and
the proposed method of sale or other disposition of the Underlying Common Stock
and such other information and undertakings as shall be reasonably required in
connection with the preparation and filing of any such registration statement
covering all or a part of the Underlying Common Stock and in order to ensure
full compliance with the Act; and
To cooperate in good faith with the Company and its underwriters, if
any, in connection with such registration, including placing the shares of
Underlying Common Stock to be included in such registration statement in escrow
or custody to facilitate the sale and distribution thereof.
Indemnification. The Company shall indemnify and hold harmless you and
any underwriter (as defined in the Act) for you, and each person, if any, who
respectively controls you or such underwriter within the meaning of Section 15
of the Act or Section 20(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), against any loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all expense whatsoever
reasonably incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever), joint or several,
to which any of you or such underwriter or such controlling person becomes
subject, under the Act or otherwise, insofar as such loss, liability, claim,
damage and expense (or actions in respect thereof arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in (i) a registration statement covering the Underlying Common Stock, in the
Registration Statement contained therein, or in an amendment or supplement
thereto or (ii) in any application or other document or communication (in this
Subsection collectively called "application") executed by or on behalf of the
Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Underlying Common
Stock under the securities laws thereof or filed with the Commission, or arise
out of or based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading provided, however, that the Company shall not be
obligated to indemnify in any such case to the extent that any such loss, claim,
damage, expense or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in reliance
upon, and in conformity with, written information respectively furnished by you
or such underwriter or such controlling person for use in the registration
statement, or any amendment or supplement thereto, or any application, as the
case may be.
If any action is brought against a person in respect of which
indemnity may be sought against, the Company pursuant to the foregoing
paragraph, such person shall promptly notify the Company in writing of the
institution of such action and the Company shall assume the defense of the
action, including the employment of counsel (satisfactory to the indemnified
person in its reasonable judgment) and payment of expenses. The indemnified
person 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 person or unless the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of the
action or the Company shall not have employed counsel to have charge of the
defense of the action or the indemnified person shall have reasonably concluded
that there may be defenses available to it or them which are different from or
additional to those available to the Company (in which case the Company shall
not have the right to direct the defense of the action on behalf of the
indemnified person), in any of which events these fees and expenses shall be
borne by the Company. Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of any claim
or action effected without its written consent. The Company's indemnity
agreements contained in this Subsection shall remain in full force and effect
regardless of any investigation made by or on behalf of any indemnified person,
and shall survive any termination of this Agreement. The Company agrees promptly
to notify you of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the registration
statement pursuant to Subsection 3(c) above.
If you choose to include all or a part of the Underlying
Common Stock in a public offering pursuant to Subsection 3(c), then you agree to
indemnify and hold harmless the Company and each of its directors and officers
who have signed any such registration statement, and any underwriter for the
Company (as defined in the Act), and each person, if any, who controls the
Company or such underwriter within the meaning of the Act, to the same extent as
the indemnity by the Company in this Subsection 3(f) but only with respect to
statements or omissions, if any, made in such registration statement, or any
amendment or supplement thereto, or in any application in reliance upon, and in
conformity with, written information furnished by you to the Company for use in
the registration statement, or any amendment or supplement thereto, or any
application, as the case may be. In case any action shall be brought in respect
of which indemnity may be sought against you, you shall have the rights and
duties given to the Company, and the persons so indemnified shall have the
rights and duties given to you by the provisions of the first paragraph of this
Subsection.
The Company further agrees that, if the indemnity provisions
of the foregoing paragraphs are held to be unenforceable, any holder of a
Warrant or controlling person of such a holder may recover contribution from the
Company in an amount which, when added to contributions such holder or
controlling person has theretofore received or concurrently receives from
officers and directors of the Company or controlling persons of the Company,
will reimburse such holder or controlling person for all losses, claims, damages
or liabilities and legal or other expenses; provided, however, that if the full
amount of the contribution specified in this Subsection 3(f) is not permitted by
law, then such holder or controlling person shall be entitled to contribution
from the Company and its officers, directors and controlling persons to the full
extent permitted by law.
Exercise of Underwriter Warrants; Partial Exercise.
Exercise in Full. Each Warrant may be exercised in full by the holder
thereof by surrender of the Warrant Certificate, with the form of subscription
at the end thereof duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or bank cashiers check
payable to the order of the Company, in the respective amount obtained by
multiplying the number of shares of the Underlying Common Stock represented by
the Warrant Certificate (after giving effect to any adjustment therein as
provided in Section 6 below) by the Purchase Price per share.
Partial Exercise. Each Warrant may be exercised in part by surrender of
the Warrant Certificate in the manner and at the place provided in Subsection
4(a) above, accompanied by payment, in cash or by certified or bank cashiers
check payable to the order of the Company, in the respective amount obtained by
multiplying the number of shares of the Underlying Common Stock designated by
the holder in the form of subscription attached to the Warrant Certificate by
the Purchase Price per share (after giving effect to any adjustment therein as
provided in Section 6 below). Upon any such partial exercise, the Company at its
expense will forthwith issue and deliver to or upon the order of the purchasing
holder, a new Warrant Certificate or Certificates of like tenor, in the name of
the holder thereof or as such holder (upon payment by such holder of any
applicable transfer taxes) may request calling in the aggregate for the purchase
of the number of shares of the Underlying Common Stock equal to the number of
such shares called for on the face of the Warrant Certificate (after giving
effect to any adjustment therein as provided in Section 6 below) minus the
number of such shares (after giving effect to such adjustment) designated by the
holder in the aforementioned form of subscription.
Company to Reaffirm Obligations. The Company will, at the time of any
exercise of any Warrant, upon the request of the holder thereof, acknowledge in
writing its continuing obligation to afford to such holder any rights (including
without limitation any right to registration of the shares of the Underlying
Common Stock issued upon such exercise) to which such holder shall continue to
be entitled after such exercise in accordance with the provisions of this
Agreement provided, however, that if the holder of a Warrant shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
Delivery of Certificates, etc, on Exercise.
As soon as practicable after the exercise of any Warrant in full or in
part, and in any event within twenty days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the purchasing holder thereof, a
certificate or certificates for the number of Units, Warrants and fully paid and
nonassessable shares of the Underlying Common Stock to which such holder shall
be entitled upon such exercise, plus in lieu of any fractional share to which
such holder would otherwise be entitled, cash in an amount determined pursuant
to Section 7(g), together with any other stock or other securities and property
(including cash, where applicable) to which such holder is entitled upon such
exercise pursuant to Section 6 below or otherwise.
Anti-dilution Provisions.
The Underwriter Warrants are subject to the following terms and
conditions during the term thereof:
Stock Distributions and Splits. In case (i) the outstanding shares of
the Common Stock (or Other Securities) shall be subdivided into a greater number
of shares or (ii) a dividend in Common Stock (or Other Securities) shall be paid
in respect of Common Stock (or Other Securities), the Purchase Price per share
in effect immediately prior to such subdivision or at the record date of such
dividend or distribution shall simultaneously with the effectiveness of such
subdivision or immediately after the record date of such dividend or
distribution be proportionately reduced; and if outstanding shares of Common
Stock (or Other Securities) shall be combined into a smaller number of shares
thereof, the Purchase Price per share in effect immediately prior to such
combination shall simultaneously with the effectiveness of such combination be
proportionately increased. Any dividend paid or distributed on the Common Stock
(or Other Securities) in stock or any other securities convertible into shares
of Common Stock (or Other Securities) shall be treated as a dividend paid in
Common Stock (or Other Securities) to the extent that shares of Common Stock (or
Other Securities) are issuable upon the conversion thereof.
Adjustments. Whenever the Purchase Price per share is adjusted as
provided in Subsection 6(a) above, the number of shares of the Underlying Common
Stock purchasable upon exercise of the Underwriter Warrants immediately prior to
such Purchase Price adjustment shall be adjusted, effective simultaneously with
such Purchase Price adjustment, to equal the product obtained (calculated to the
nearest full share) by multiplying such number of shares of the Underlying
Common Stock by a fraction, the numerator of which is the Purchase price per
share in effect immediately prior to such Purchase Price adjustment and the
denominator of which is the Purchase Price per share in effect upon such
Purchase Price adjustment, which adjusted number of shares of the Underlying
Common stock shall thereupon be the number of shares of the Underlying Common
Stock purchasable upon exercise of the Underwriter Warrants until further
adjusted as provided herein.
Reorganizations. In case the Company shall be recapitalized by
reclassifying its outstanding Common Stock (or Other Securities) into a stock
with a different par value or by changing its outstanding Common Stock (or Other
Securities) with par value to stock without par value, then, as a condition of
such reorganization, lawful and adequate provision shall be made whereby each
holder of a Warrant shall thereafter have the right to purchase, upon the terms
and conditions specified herein, in lieu of the shares of Common Stock (or Other
Securities) theretofore purchasable upon the exercise of the Underwriter
Warrants, the kind and amount of shares of stock and other securities receivable
upon such recapitalization by a holder of the number of shares of Common Stock
(or Other Securities) which the holder of an Underwriter Warrant might have
purchased immediately prior to such recapitalization. If any consolidation or
merger of the Company with another corporation, or the sale of all or
substantially all of its assets to another corporation, shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in this Warrant Agreement and in lieu of the shares of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such consolidation, merger or sale not taken
place, and in any such case, appropriate provision shall be made with respect to
the rights and interests of the holders of Underwriter Warrants to the end that
the provisions hereof (including without limitation provisions for adjustments
of the Purchase Price and of the number of shares purchasable and receivable
upon the exercise of the Underwriter Warrants) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof (including an immediate
adjustment, by reason of such consolidation or merger, of the Purchase Price to
the value for the Common Stock reflected by the terms of such consolidation or
merger if the value so reflected is less than the Purchase Price in effect
immediately prior to such consolidation or merger). In the event of a merger or
consolidation of the Company with or into another corporation as a result of
which a number of shares of common stock of the surviving corporation greater or
lesser than the number of shares of Common Stock of the Company outstanding
immediately prior to such merger or consolidation are issuable to holders of
Common Stock of the Company, then the Purchase Price in effect immediately prior
to such merger or consolidation shall be adjusted in the same manner as though
there were a subdivision or combination of the outstanding shares of Common
Stock of the Company. The Company will not effect any such consolidation, merger
or sale, unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument executed
and mailed or delivered to the registered holder hereof at the last address of
such holder appearing on the books of the Company, the obligation to deliver to
such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to purchase. If a
purchase, tender or exchange offer is made to and accepted by the holders of
more than of the outstanding shares of Common Stock of the Company, the Company
shall not effect any consolidation, merger or sale with the Person having made
such offer or with any Affiliate of such Person, unless prior to the
consummation of such consolidation, merger or sale the holders of Underwriter
Warrants shall have been given a reasonable opportunity to then elect to receive
upon the exercise of Underwriter Warrants either the stock, securities or assets
then issuable with respect to the Common Stock of the Company or the stock,
securities or assets, or the equivalent issued to previous holders of the Common
Stock in accordance with such offer. The term "Person" as used in this
subparagraph shall mean and include an individual, a partnership, a corporation,
a trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof. For the purposes of this subparagraph, an
"Affiliate" of any Person shall mean any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with, such
other Person. A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such corporation, whether through the ownership
of voting securities, by contract or otherwise.
Effect of Dissolution or Liquidation. In case the Company shall
dissolve or liquidate all or substantially all of its assets, all rights under
this Agreement shall terminate as of the date upon which a certificate of
dissolution or liquidation shall be filed with the Secretary of the State of
Washington (or, if the Company theretofore shall have been merged or
consolidated with a corporation incorporated under the laws of another state,
the date. upon which action of equivalent effect shall have been taken);
provided, however, that (i) no dissolution or liquidation shall affect the
rights under Subsection 6(c) of any holder of a Warrant and (ii) if the
Company's Board of Directors shall propose to dissolve or liquidate the Company,
each holder of a Warrant shall be given written notice of such proposal at the
earlier of (i) the time when the Company's shareholders are first given notice
of the proposal or (ii) the time when notice to the Company's shareholders is
first required.
Notice of Change of Purchase Price. Whenever the Purchase Price per
share or the kind or amount of securities purchasable under the Underwriter
Warrants shall be adjusted pursuant to any of the provisions of this Agreement,
the Company shall forthwith thereafter cause to be sent to each holder of a
Warrant, a certificate setting forth the adjustments in the Purchase Price per
share and/or in such number of shares, and also setting forth in detail the
facts requiring, such adjustments, including without limitation a statement of
the consideration received or deemed to have been received by the Company for
any additional shares of stock issued by it requiring such adjustment. In
addition, the Company at its expense shall within 90 days following the end of
each of its fiscal years during the term of this Agreement, and promptly upon
the reasonable request of any holder of a Warrant in connection with the
exercise from time to time of all or any portion of any Warrant, cause
independent certified public accountants of recognized standing selected by the
Company to compute any such adjustment in accordance with the terms of the
Underwriter Warrants and prepare a certificate setting forth such adjustment and
showing in detail the facts upon which such adjustment is based.
Notice of a Record Date. In the event of (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend payable out of earned surplus of the Company) or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, (ii) any capital reorganization of the Company, or any
reclassification or recapitalization of the capital stock of the Company, or any
transfer of all or substantially all of the assets of the Company to, or
consolidation or merger of the Company with or into, any other person or (iii)
any voluntary or involuntary dissolution or liquidation of the Company, then and
in each such event the Company will mail or cause to be mailed to each holder of
a Warrant a notice specifying not only the date on which any such record is to
be taken for the purpose of such dividend, distribution or right and stating the
amount and character of such dividend, distribution or right, but also the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any, as of which the holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of Common Stock (or
other Securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 20 days prior to the proposed record date therein specified.
Further Covenants of the Company.
Reservation of Stock. The Company shall at all times reserve and keep
available, solely for issuance and delivery upon the exercise of the Underwriter
Warrants, all shares of the Underlying Common Stock from time to time issuable
upon the exercise of the Warrants and the Underwriter Warrants and shall take
all necessary actions to ensure that the par value per share, if any, of the
Underlying Common Stock is, at all times equal to or less than the then
effective Purchase Price per share.
Title to Units. All Units and shares of the Underlying Common Stock
delivered upon the exercise of the Underwriter Warrants shall be validly issued,
fully paid and nonassessable; each holder of an Underwriter Warrant shall
receive good and marketable title to the Units and Underlying Common Stock, free
and clear of all voting and other trust arrangements, liens, encumbrances,
equities and claims whatsoever; and the Company shall have paid all taxes, if
any, in respect of the issuance thereof.
Listing on Securities Exchanges; Registration. If the Company at any
time shall list any Units, Common Stock or Warrants on any national securities
exchange, the Company will, at its expense, simultaneously list on such
exchange, upon official notice of issuance upon the exercise of the Underwriter
Warrants, and maintain such listing of, all Units, Warrants and shares of the
Underlying Common Stock from time to time issuable upon the exercise of the
Underwriter Warrants; and the Company will so list on any national securities
exchange, will so register and will maintain such listing of, any Other
Securities if and at the time that any securities of like class or similar type
shall be listed on such national securities exchange by the Company.
Exchange of Underwriter Warrants. Subject to Subsection 3(a) hereof,
upon surrender for exchange of any Warrant Certificate to the Company, the
Company at its expense will promptly issue and deliver to or upon the order of
the holder thereof a new Warrant Certificate or certificates of like tenor, in
the name of such holder or as such holder (upon payment by such holder of any
applicable transfer taxes) may direct, calling in the aggregate for the purchase
of the number of shares of the Underlying Common Stock called for on the face or
faces of the Warrant Certificate or Certificates so surrendered.
Replacement of Underwriter Warrants. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant Certificate and, in the case of any such loss, theft
or destruction, upon delivery of an indemnity agreement reasonably satisfactory
in form and amount to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such Warrant Certificate, the Company, at the
expense of the Warrant holder will execute and deliver, in lieu thereof, a new
Warrant Certificate of like tenor.
Reporting by the Company. The Company agrees that, if it files a
Registration Statement during the term of the Underwriter Warrants, it will use
its best efforts to keep current in the filing of all forms and other materials
which it may be required to file with the appropriate regulatory authority
pursuant to the Exchange Act, and all other forms and reports required to be
filed with any regulatory authority having jurisdiction over the Company.
Fractional Shares. No fractional shares of Underlying Common Stock are
to be issued upon the exercise of any Warrant, but the Company shall pay a cash
adjustment in respect of any fraction of a share which would otherwise be
issuable in an amount equal to the same fraction of the highest market price per
share of Underlying Common Stock on the day of exercise, as determined by the
Company.
Other Holders.
The Underwriter Warrants are issued upon the following terms, to all of
which each holder or owner thereof by the taking thereof consents and agrees as
follows: (a) any person who shall become a transferee, within the limitations on
transfer imposed by Subsection 3(a) hereof, of a Warrant properly endorsed shall
take such Warrant subject to the provisions of Subsection 3(a) hereof and
thereupon shall be authorized to represent himself as absolute owner thereof
and, subject to the restrictions contained in this Agreement, shall be empowered
to transfer absolute title by endorsement and delivery thereof to a permitted
bona fide purchaser for value; (b) each prior taker or owner waives and
renounces all of his equities or rights in such Warrant in favor of each such
permitted bona fide purchaser, and each such permitted bona fide purchaser shall
acquire absolute title thereto and to all rights presented thereby; (c) until
such time as the respective Warrant is transferred on the books of the Company,
the Company may treat the registered holder thereof as the absolute owner
thereof for all purposes, notwithstanding any notice to the contrary and (d) all
references to the word "you" in this Warrant Agreement shall be deemed to apply
with equal effect to any person to whom a Warrant Certificate or Certificates
have been transferred in accordance with the terms hereof, and where
appropriate, to any person holding Units, Warrants or shares of the Underlying
Common Stock.
Miscellaneous.
All notices, certificates and other communications from or at the
request of the Company to the holder of any Warrant shall be mailed by first
class, registered or certified mail, postage prepaid, to such address as may
have been furnished to the Company in writing by such holder, or, until an
address is so furnished, to the address of the last holder of such Warrant who
has so furnished an address to the Company, except as otherwise provided herein.
This Agreement and any of the terms hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. This
Agreement shall be construed and enforced in accordance with and governed by the
laws of the State of Illinois. The headings in this Agreement are for reference
only and shall not limit or otherwise affect any of the terms hereof. This
Agreement, together with the forms of instruments annexed hereto as Schedule I,
constitutes the full and complete agreement of the parties hereto with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on this
_____ day of ______1997, in Chicago, Illinois, by its proper corporate officers
thereunto duly authorized.
Westower Corporation
By
Calvin J. Payne, President
The above Warrant Agreement is confirmed this __ day of _____1997.
National Securities Corporation
By:
Steven A. Rothstein
<PAGE>
1,000,000Units
WESTOWER CORPORATION
Each Unit Consisting of
One share of Common Stock and
One Redeemable Common Stock Purchase Warrants
, 1997
SELECTED DEALER AGREEMENT
Dear Sirs:
National Securities Corporation ("National"), and the several
underwriters (collectively, the "Underwriters"), on whose behalf National is
acting as managing underwriter and representative (the "Representative"), have
severally agreed to purchase from Westower Corporation, a Washington corporation
(the "Company") (a) an aggregate of 1,000,000 Units, each Unit consisting of one
share of the Company's common stock, $.01 par value per share ("Common Stock"),
and one redeemable common stock purchase warrants (individually, a "Redeemable
Warrant"), each of which entitles the holder thereof to purchase one share of
Common Stock at a price of $9.00 (such Units, together with (A) the shares of
Common Stock and Redeemable Common Stock Purchase Warrants comprising the Units
and (B) the shares of Common Stock issuable upon exercise of such Redeemable
Common Stock Purchase Warrants, are collectively referred to herein as the
"Underwritten Securities"), plus (b) up to 150,00 additional Units pursuant to
an option for the purpose of covering over-allotments (such additional Units,
together with (A) the shares of Common Stock and Redeemable Common Stock
Purchase Warrants comprising such additional Units and (B) the shares of Common
Stock issuable upon exercise of such Redeemable Common Stock Purchase Warrants,
are collectively referred to herein as the "Option Securities"; the Underwritten
Securities and the Option Securities are collectively referred to herein as the
"Securities"; and the Units included in the Securities are collectively referred
to herein as the "Registered Units"), all as set forth in the Preliminary
Prospectus dated ______ 1997, as amended and supplemented from time to time, and
subject to the terms of the Underwriting Agreement referred to therein. The
Registered Units and the terms upon which they are to be offered for sale by the
several Underwriters are more particularly described in the Preliminary
Prospectus, additional copies of which will be supplied in reasonable quantities
upon request to the Underwriters.
1. Offering to Dealers. The Registered Units are to be offered to the
public by the Underwriters at the price per share set forth on the cover page of
the Preliminary Prospectus (the "Public Offering Price"). The several
Underwriters, acting through the Representative, and subject to the terms and
conditions hereof, are severally offering a portion of the Registered Units to
certain dealers (the "Dealers") as principals, at the Public Offering Price of
$7.50 per Unit, less a selling concession of $0.375 per Unit (the "Selling
Concession"). Dealers must be actually engaged in the investment banking or
securities business and be either (i) a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") who agrees that in making
sales of the Registered Units it will comply with the Rules of Fair Practice,
including Sections 8, 24 and 36 of Article m, and the Interpretation of the
Board of Governors of the NASD with respect to Free-Riding and Withholding, or
(ii) dealers with their principal place of business located outside the United
States, its territories and possessions and not registered as brokers or dealers
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), who
have agreed not to make any sales within the United States, its territories or
its possessions or to persons who are nationals thereof or residents therein,
and who agree that in making sales of the Registered Units outside the United
States, they will comply with the requirements of the Rules of Fair Practice of
the NASD, including Sections 8, 24 and 36 of Article m of such Rules, and
Section 25 of such Article as that Section applies to non-member foreign
dealers, and the Interpretation of the Board of Governors of the NASD with
respect to Free-Riding and Withholding.
Under this Agreement, the Representative shall have full authority to
take such action as it may deem advisable in respect to all matters pertaining
to the public offering of the Registered Units.
If you desire to purchase any of the Registered Units, your
confirmation should reach the Representative promptly by mail or facsimile
transmission at the office of the Representative: National Securities
Corporation, 875 North Michigan Avenue, Suite 1560, Chicago, Illinois 60611,
attention: Steven A. Rothstein, facsimile number (312) 751-0769. The
Representative reserves the right to reject subscriptions in whole or in part,
to make allotments and to close the subscription books at any time without
notice. The Registered Units allotted to you and the method and terms of the
offering of the Registered Units will be confirmed to you.
2. Offering by Dealers. Any Registered Units purchased by you under the
terms of this Agreement may be immediately reoccurred to the public in
conformity with the terms of the offering set forth herein and in the
Preliminary Prospectus, subject to the securities or blue sky laws of the
various states or other jurisdictions.
Neither you nor any other person is, or has been, authorized by the
Company or the Representative to give any information or make any representation
in connection with the sale of the Registered Units other than those contained
in the Preliminary Prospectus.
It is assumed that the Registered Units will be effectively placed for
investment. If during the term of this Agreement, the Representative shall
purchase or contract to purchase any Registered Units purchased by you
hereunder, the Representative may, at its election, either (a) require you to
repurchase such Registered Units at a price equal to the total costs of such
purchase by the Representative, including brokerage commissions, if any, and
transfer taxes on the redelivery, or (b) charge you with and collect from you an
amount equal to the Selling Concession originally allowed you with respect to
the Registered Units so purchased by you.
3. Payment and Delivery. Payment for the Registered Units that you have
agreed to purchase hereunder shall be made by you through the Depository Trust
Company ("DTC"), payable in same-day funds to the order of National Securities
Corporation at such time and on such date as National may designate, against
delivery of such Registered Units to you through he facilities of the DTC. The
above payment shall be made by you at $___ per Unit.
4. Blue Sky Matters. Upon request, you will be informed as to the
states and other jurisdictions in which the Underwriters have been advised that
the Registered Units are qualified for sale under the respective securities or
blue sky laws of such states or jurisdictions. However, neither the
Representative nor any of the other Underwriters shall have any obligation or
responsibility with respect to the right of any Dealer to sell the Registered
Units in any jurisdiction and you shall indemnify and hold harmless the
Representative and the other Underwriters and any person controlling the
Representative and the other Underwriters from and against any and all losses,
claims, damages, expenses or liabilities to which any of them may become subject
as a result of your failure to comply with the laws of any jurisdiction in
connection with the offer and the sale of Registered Units. In compliance with
the General Business law of the State of New York, it may be necessary for you
to file a Further State Notice respecting the Registered Units, in the form
required by said law, prior to offering any of the Registered Units in such
state.
5. Termination. This Agreement shall terminate when the Representative
shall have determined that the public offering of the Registered Units has been
completed and upon facsimile notice to you of such termination, or, if not
theretofore terminated, it shall terminate 45 days after the initial public
offering of the Registered Units; provided, however, that the Representative
shall have the right to extend this Agreement for a period or periods not to
exceed an additional 45 days in the aggregate upon facsimile notice to you. The
Representative may terminate this Agreement at any time without prior notice to
you. Notwithstanding termination of this Agreement, you shall remain liable for
your portion of any transfer tax or other liability that may be asserted or
assessed against the Representative, any of the other Underwriters or any of the
Dealers based upon the claim that the Dealers or any of them constitute a
partnership, an association, an unincorporated business or other separate
entity.
6. Obligations and Positions of Dealers. Notwithstanding any provision
herein, your confirmation hereof will constitute a binding obligation on your
part to purchase, upon the terms and conditions hereof, the aggregate amount of
the Registered Units reserved for you and accepted by you and to perform and
observe all the terms and conditions hereof. You are not authorized to act as
agent of the Representative or the other Underwriters in offering the Registered
Units to the public or otherwise. Nothing contained herein shall constitute the
Dealers an association or other separate entity, or partners with the
Representative or the other Underwriters, but you will be responsible for your
share of any liability or expense based on any claim to the contrary. Neither
the Representative nor the other Underwriters shall be under any liability to
you for or in respect of the value, validity or form of the Registered Units, or
the delivery of the Registered Units, or the performance by anyone of any
agreement on its part, or the qualification of the Registered Units for sale
under the laws of any jurisdiction, or for or in respect of any other matter
relating to this Agreement, except for lack of good faith and matters expressly
assumed by the Representative and the other Underwriters in this Agreement, and
no obligation on the part of the Representative or the other Underwriters shall
be implied therefrom. The foregoing provisions shall not be deemed a waiver of
any liability imposed under the Securities Act of 1933, as amended (the "Act"),
or the Exchange Act.
You agree that at any time or times prior to the termination of the
Agreement you will, upon the request of the Representative, report to the
Representative the number of Registered Units purchased by you under this
Agreement that then remain unsold by you and will, upon the request of the
Representative at such time or times, sell to the Underwriters for their
account, such number of unsold Registered Units as the Representative may
designate, at the Public Offering Price, less the Selling Concession or such
part thereof as the Representative may determine.
The Representative shall have full authority to take such actions as
they may deem advisable in respect of all matters pertaining to the offering of
the Registered Units or arising hereunder. No obligation not expressly assumed
by the Representative in this Agreement shall be implied hereby or inferred
herefrom.
7. Compliance with Securities Laws. On becoming a Dealer, and in
offering and selling the Registered Units, you agree to comply with all of the
applicable requirements of the Act and the Exchange Act. You confirm that you
are familiar with Rule 15c2-8 under the Exchange Act relating to the
distribution of preliminary and final prospectuses for securities of an issuer
and confirm that you have complied and will comply therewith with respect to the
offering of the Registered Units.
8. Stabilization and Over-Allotment. Each Underwriter has authorized
the Representative, in the discretion of the Representative, to make purchases
and sales of Registered Units, for long or short account, on such terms and at
such prices as the Representative deem advisable, to cover any short position so
incurred and to over-allot in arranging sales.
Each Underwriter has agreed that, during the term of the Agreement
Among Underwriters, or such shorter period as the Representative may determine,
it will not buy or sell any Securities of the Company except as a broker
pursuant to unsolicited orders and as otherwise provided in said Agreement.
Your attention is directed to Rule 10b-6 of the General Rules and
Regulations under the 1934 Act, which contains certain prohibitions against
trading by a person interested in a distribution until such person has completed
its participation in such distribution.
9. Notices. Any notice from you to the Representative should be mailed
or sent by facsimile transmission to the Representative at the addresses and
facsimile numbers set forth in Section 1 hereof. Any notice from the
Representative to you shall be mailed or sent by facsimile transmission to you
at the address and facsimile number set forth on the confirmation executed by
you in the form attached hereto as Exhibit A. Mailed notices shall be sent by
registered mail, return receipt requested. Notices shall be effective upon
receipt.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington without giving effect to the
choice of law or conflicts of law or principles thereof.
If you desire to purchase any Registered Units, please confirm your
agreement by signing and returning to the Representative by mail or facsimile
transmission your confirmation in the form attached hereto as Exhibit A even
though you may have previously advised the Representative thereof.
Very truly yours,
NATIONAL SECURITIES CORPORATION
By:
Steven A. Rothstein
For itself and the other several Underwriters
in Schedule I to the Underwriting Agreement
<PAGE>
1,000,000 Units
WESTOWER CORPORATION
Each Unit Consisting of
One share of Common Stock and
One Redeemable Common Stock Purchase Warrant
, 1997
AGREEMENT AMONG UNDERWRITERS
NATIONAL SECURITIES CORPORATION.
875 North Michigan Avenue
Suite 1560
Chicago, Illinois 60611
Dear Sirs:
1. Underwriting Agreement. We understand that Westower Corporation., a
Washington corporation (the "Company"), and certain Shareholders of the Company
(the "Selling Shareholders"), propose to enter into an underwriting agreement
(the "Underwriting Agreement"), with you as managing underwriter ("Managing
Underwriter") and other prospective underwriters, including ourselves, acting
severally and not jointly, providing for (a) the purchase by the Underwriters
(as defined in Section 3 hereof) of 1,000,000 Units, each Unit consisting of one
share of Common Stock, $.01 par value, of the Company ("Common Stock"), and one
redeemable common stock purchase warrant (individually, a "Redeemable Warrant"),
each of which entitles the holder thereof to purchase one share of Common Stock
at a price of $9.00 (such Units, together with (A) the shares of Common Stock
and Redeemable Common Stock Purchase Warrants comprising such Units and (B) the
shares of Common Stock issuable upon exercise of such Redeemable Common Stock
Purchase Warrants, are collectively referred to herein as the "Underwritten
Securities") and (b) the grant by the Company and the Selling Stockholder to the
Underwriters, as provided in Section 2(b) of the Underwriting Agreement, of an
option to purchase from the Company and the Selling Stockholder up to an
aggregate of 150,000 additional Units (such additional Units, together with (A)
the shares of Common Stock and Redeemable Common Stock Purchase Warrants
comprising such additional Units and (B) the shares of Common Stock issuable
upon exercise of such Redeemable Common Stock Purchase Warrants, are
collectively referred to herein as the "Option Securities") solely for the
purpose of covering over-allotments in the sale of the Underwritten Securities;
in each case, upon the conditions stated in the Underwriting Agreement, in which
we agree, in accordance with the terms thereof and subject to adjustment
pursuant to Section 9 thereof, to purchase the number of Units included within
the Underwritten Securities set forth opposite our names in Schedule I thereof
and our pro rata portion of the number of Units included within the Option
Securities, determined in accordance with Section 2(b) of the Underwriting
Agreement, with respect to which the over-allotment option is exercised. The
Underwritten Securities and the Option Securities are hereinafter referred to as
the "Securities" and the Units included therein are hereinafter referred to as
the "Registered Units."
2. Registration Statement and Prospectus. The Securities are more
particularly described in the registration statement relating thereto filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"). Amendments to such registration statement have been or may
be filed, in which, with our consent hereby confirmed, we have been or will be
named as one of the Underwriters of the Securities. Copies of the registration
statement and the related preliminary prospectus have heretofore been delivered
to us, and we confirm that they are correct insofar as they relate to us. You
are authorized to approve on our behalf any amendments or any supplements to the
registration statement, any preliminary prospectus and the prospectus which you
consider necessary or appropriate. The registration statement and related
prospectus, as amended and supplemented from time to time, are hereinafter
respectively referred to as the "Registration Statement" and "Prospectus." We
agree, if you so request, to furnish a copy of any revised preliminary
prospectus to each person to whom we have delivered a copy of any previous
preliminary prospectus. We further represent that we have delivered all
preliminary prospectuses and agree that we will deliver all final prospectuses
required for compliance with the provisions of Rule l5c2-8 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
3. Authority of Managing Underwriters. We authorize you, as Managing
Underwriter, (a) to execute and deliver on our behalf the Underwriting Agreement
in the form annexed hereto as Exhibit A, with such changes therein as in your
discretion may be necessary or advisable, including changes in those who are to
be Underwriters and in the respective number of Registered Units to be purchased
by them (but not any change in the number of Registered Units to be purchased by
us except with our consent or as provided in the Underwriting Agreement), (b) to
take such action as in your discretion may be necessary or advisable to carry
out the Underwriting Agreement, this Agreement and the transactions for the
accounts of the several Underwriters contemplated thereby and hereby, including,
in your discretion, whether to purchase any or all of the Registered Units
included within the Option Securities for the accounts of the several
Underwriters, and (c) to take such action as in your discretion may be necessary
or advisable to carry out the purchase, carrying, sale and distribution of the
Registered Units. The parties on whose behalf you execute the Underwriting
Agreement, including yourself as Managing Underwriters, are herein called the
"Underwriters."
4. Public Offering. We authorize you to supply the Company with the
information to be included in the Registration Statement and Prospectus with
respect to the terms of the offering, to determine the time of the initial
public offering after the Registration Statement becomes effective, to vary the
public offering price of the Registered Units and the concessions and discounts
to dealers after the initial public offering, and to determine all matters
relating to the advertisement of the Securities and communication with dealers
or others.
We authorize you, with respect to any Registered Units which we so agree to
purchase, to reserve for sale and to sell for our account such number of our
Registered Units as you shall determine, to securities dealers ("Dealers"),
including any of the Underwriters. We authorize you to determine the form and
manner of any communications or agreements with Dealers. If there shall be any
such agreements with Dealers, you are authorized to act as manager thereunder,
and we agree, in such event, to be governed by the terms and conditions of such
agreements to the extent we act as a Dealer. The form of Selected Dealer
Agreement attached hereto as Exhibit B is satisfactory to us. If there shall not
be any written agreements with Dealers, we agree to be governed by the terms and
conditions of such Selected Dealer Agreement to the extent we act as a Dealer.
After the Registration Statement becomes effective, you will advise us of
the number of our Registered Units not so reserved but retained by us for direct
sale. Any of our Registered Units reserved but not sold may, from time to time,
on our request and in your discretion, be released to us, and Registered Units
so released will not thereafter be deemed to be reserved, except that any time
prior to termination of the provisions of the last paragraph of this Section 4,
we will on request advise you of the number of our retained unsold Registered
Units and you may in your discretion add all or any number of such retained
unsold Registered Units to those reserved by you for sale. Sales of reserved
Registered Units to Dealers will be made at $ per Unit for the accounts of the
several Underwriters as nearly as practicable in proportion to their respective
underwriting obligations.
You may in your discretion sell to another Underwriter any of the Registered
Units so reserved for our account if you determine that such sales are advisable
for Blue Sky purposes. The transfer tax on any such sales shall be charged to
the accounts of the several Underwriters in proportion to their respective
underwriting obligations.
You, and any of the Underwriters with your consent, may make purchases and
sales of Registered Units from or to any other Underwriter at the public
offering price less a concession equivalent to all or any part of the gross
underwriting spread. You are authorized to purchase Registered Units for our
account from Dealers at the public offering price less a concession not
exceeding the concession to Dealers. We will offer to the public, in conformity
with the terms of the offering set forth in the Prospectus, our Registered Units
not reserved by you.
5. Payment and Delivery. Payment for Registered Units retained by us for
direct sale shall be made by us through the Depository Trust Company ("DTC"),
payable in same-day funds to the order of National Securities Corporation at
such time or times as you may designate, against delivery of such Registered
Units to us through the facilities of the DTC. The above payment will be made by
us at $___ per Unit; however you will promptly reimburse us the amount of $___
per Unit.
If our funds are not received by you when required, you are authorized, in
your individual capacities or as Managing Underwriter, but shall not be
obligated, to make payment pursuant to the Underwriting Agreement for our
account in accordance with the provisions of Section 6 hereof. Any such payment
by you shall not relieve us from any of our obligations hereunder or under the
Underwriting Agreement.
We authorize you to hold and deliver to Dealers, against payment, our
Registered Units reserved by you for offering to them. Upon receiving payment
for Registered Units so sold for our account, you will remit to us as promptly
as practicable the amount of $___ per Unit.
As soon as practicable after termination of the provisions referred to in
the first paragraph of Section 10 hereof, you shall deliver to us, against
payment therefor unless such has already been made, any of our Registered Units
reserved by you for sale but not sold, except that if the aggregate of all such
reserved and unsold Registered Units of all Underwriters does not exceed __% of
the total number of Registered Units, you are authorized in your discretion to
sell such Registered Units for the accounts of the several Underwriters at such
price or prices as you may determine.
6. Authority to Borrow. In connection with the purchase or carrying for our
account of any Registered Units purchased for our account under this Agreement
or the Underwriting Agreement, we authorize you, in your discretion and
individual capacity, to advance your own funds for our account, charging current
interest rates as Managing Underwriters to arrange and make loans on our behalf
and for our account, and to execute and deliver any notes or security as may be
necessary or advisable in your discretion. Any lending bank is hereby authorized
to rely upon your instructions in all matters relating to any such loan. We
shall be paid or credited with the proceeds of any such advance or loan made for
our account and shall be debited with any repayment.
You may deliver to us from time to time, for carrying purposes only, any of
our reserved Registered Units held by you for our account which have not been
sold. We will redeliver to you on demand any Registered Units so delivered to us
for carrying purposes.
7. Stabilization. We ratify and confirm your stabilization transactions, if
any, for the accounts of the several Underwriters prior to the date hereof, and
we authorize you, in your discretion, to buy and sell Registered Units in the
open market or otherwise, on a when-issued basis or otherwise, for either long
or short account, at such prices and on such terms as you may determine, and to
over-allot in arranging for sales. We authorize you in your discretion to cover
any short position incurred for the accounts of the several Underwriters
pursuant to this Section 7 by exercising the over-allotment option referred to
in Section 2(b) of the Underwriting Agreement and by buying Registered Units,
and, in lieu of delivering to the several Underwriters any of the Registered
Units held for their respective accounts pursuant to Section 4 hereof, to sell
such Registered Units for the accounts of each of the Underwriters, in each case
at such prices and on such terms as you may determine. All such purchases, sales
and over-allotments will be for the accounts of the several Underwriters as
nearly as practicable in proportion to their respective underwriting
obligations, and at no time will our net commitment under the foregoing
provisions of this paragraph, either for long or short account, exceed 15% of
our original underwriting obligations. We will take up at cost on demand any of
the Registered Units so purchased for our account and deliver on demand any of
the Registered Units sold or over-allotted for our account. In the event of
default by one or more Underwriters with respect to their obligations under this
paragraph, each nondefaulting Underwriter shall assume its proportionate share
of the obligations of such defaulting Underwriter without relieving such
defaulting Underwriter of its liability hereunder. The existence of this
provision is no assurance that the price of any of the aforesaid Registered
Units will be stabilized or that stabilizing, if commenced, will not be
discontinued at any time.
We authorize you on our behalf to maintain the records required by Rule
17a-2 of the General Rules and Regulations under the Exchange Act and to file
any reports required in connection with any transaction made by you pursuant to
this Section 7, and we agree to furnish you with any information needed for such
reports. You agree that if stabilization is undertaken you will notify the
several Underwriters promptly upon the initiation and termination of such
stabilization. We agree, if stabilization is undertaken, promptly, and in any
event, within one business days following such stabilization, to transmit to
you, the price, date and time at which such stabilizing purchase was effected.
In addition, we agree to promptly notify you of the date and time when
stabilizing was terminated.
We agree to advise you, from time to time upon your request, of the number
of Registered Units retained by or released to us and remaining unsold, and
will, upon your request, release to you for the accounts of one or more of the
several Underwriters such number of Registered Units as you may designate at
such price, not less than the net price to Dealers nor more than the public
offering price, as you may determine.
If, pursuant to the provisions of this Section 7, you purchase or contract
to purchase any Registered Units that were retained by or released to us for
direct sale, we authorize you in your discretion either to require us to
repurchase such Registered Units at a price equal to the total cost of such
purchase, including commissions and transfer tax on redelivery, to sell for our
account such Registered Units and debit or credit our account for the profit or
loss resulting from such sale, or to charge our account with an amount equal to
the concession to Dealers with respect thereto.
Upon the termination of this Agreement, you are authorized in your
discretion, in lieu of delivering to the several Underwriters any Registered
Units then held for their respective accounts pursuant to this Section 7, to
sell such Registered Units for the accounts of each of the Underwriters at such
price or prices as you may determine.
8. Open Market Transactions. We and you agree not to bid for, purchase,
attempt to induce others to purchase, or sell, directly or indirectly, any of
the Securities, including the Registered Units, for our own account or for the
accounts of customers except as brokers pursuant to unsolicited orders and as
otherwise provided in this Agreement or the Underwriting Agreement.
9. Allocation of Expenses. We authorize you to charge our account with all
transfer taxes on sales made by you for our account (except as otherwise
provided herein) and our proportionate share (based upon our underwriting
obligation) of all other expenses incurred by you in finding and developing this
public offering, and arising under the terms of this Agreement or the
Underwriting Agreement, or in connection with the purchase, carrying, sale or
distribution of the Registered Units. Your determination of the amount and
allocation of such expenses shall be final and conclusive. In the event of the
default of any Underwriter in carrying out its obligations hereunder, the
expenses arising from such default may be proportionately charged by you against
the other Underwriters not so defaulting without, however, relieving such
defaulting Underwriter from its liability therefor.
10. Termination and Settlement. The provisions of the last paragraph of
Section 4 hereof, the first sentence and fourth paragraph of Section 7 hereof,
and Section 8 hereof will terminate at the close of business 45 days after the
date of the initial public offering unless extended by you by notice to us for a
further period not exceeding an additional 45 days. Such provisions may be
terminated at such earlier time as you determine in your discretion, by notice
to us stating that such provisions are terminated.
As promptly as practicable after termination of the provisions referred to
in the first paragraph of this Section 10, our account will be settled and paid,
provided that you reserve from distribution to the several Underwriters such
amounts as you may deem advisable to cover possible additional expenses. You may
at any time make partial distribution of credit balances or call on the several
Underwriters to pay their respective debit balances. Any of our funds in your
hands may be held with your general funds without accountability for interest
and may be commingled with your general funds. Notwithstanding termination of
this Agreement or any settlement, we agree to pay (a) our proportionate share
(based on our underwriting obligation) of all expenses and liabilities which may
be incurred by or for the account of the Underwriters and (b) any transfer taxes
paid after such settlement on account of any sale or transfer for our account.
If the Underwriting Agreement shall be terminated or canceled, or if it
shall be executed but shall not become effective, our obligations hereunder
shall immediately cease and terminate except for the obligation to pay our
proportionate share of all expenses and except for obligations, if any, incurred
for our account under Section 7 hereof and our obligations under the second
paragraph of this Section 10 and under Section 14 hereof.
11. Default by Underwriters. Default by one or more Underwriters in respect
of their obligations under the Underwriting Agreement will not release us from
any of our obligations or in any way affect the liability of any defaulting
Underwriter to the other Underwriters for damages resulting from such default.
In case of such default with respect to the purchase of 10% or less of the
Registered Units included within the Underwritten Securities, we will purchase
additional Registered Units as set forth in Section 9 of the Underwriting
Agreement. If such default exceeds 10% of the Registered Units included within
the Underwritten Securities, you are authorized, but shall not be obligated, to
arrange for the purchase by other persons, who may include yourself or any
nondefaulting Underwriter, of that defaulted portion in excess of 10%. If such
arrangements are made, we will purchase Registered Units not exceeding our
original commitments under Section 9 of the Underwriting Agreement, and the
additional number of Registered Units to be purchased by the nondefaulting
Underwriters and by such other persons, if any, shall be added to our original
commitments and shall together be taken as the basis for determining the
proportionate several obligations and benefits hereunder and under the
Underwriting Agreement, but this shall in no way affect the liability of any
defaulting Underwriter for damages resulting from such default. If there is any
default as to the purchase of any portion of the Registered Units, you are
authorized, but shall not be obligated, to purchase or to arrange for the
purchase by the nondefaulting Underwriters of the defaulted portion.
12. Position of the Managing Underwriters. Except as in this Agreement
otherwise specifically provided, you shall have full authority to take such
action as you deem necessary or advisable in respect of all matters pertaining
to the Underwriting Agreement and this Agreement in connection with the
purchase, carrying, sale and distribution of the Registered Units, but you shall
be under no liability to us, except for your own lack of good faith, for
obligations expressly assumed by you in this Agreement and for any liabilities
imposed upon you by the Act. No obligations on your part shall be implied or
inferred herefrom. Authority with respect to matters to be determined by you, or
by you and the Company pursuant to the Underwriting Agreement, shall survive the
termination of this Agreement.
Nothing herein contained shall be construed as making us partners with you
or with other Underwriters or shall be construed as making the several
Underwriters an association or other separate entity, and the rights and
liabilities of ourselves and each of the other Underwriters (including you) are
several and not joint.
13. Underwriters' Warrants. We agree that the Underwriters' Warrants (as
defined in the Underwriting Agreement) shall be allocated as follows: 100% to
you as Managing Underwriters.
14. Indemnification.
(a) Each Underwriter agrees to indemnify and hold harmless each other
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act to the extent
and under the terms set forth in the Underwriting Agreement upon which each
Underwriter agrees to indemnify the Company, and the Company's respective
directors, officers and controlling persons. Such indemnity shall survive the
termination of this Agreement and any investigation made by or on behalf of any
Underwriter or any person so controlling an Underwriter.
(b) We agree that you shall be under no liability in respect of any matters
connected herewith or actions taken by you pursuant to this Agreement, except
for obligations expressly assumed by you in this Agreement. If at any time any
claim or claims shall be asserted against you, as Managing Underwriters, or
otherwise involving the Underwriters generally, relating to any preliminary
prospectus, the Prospectus, the Registration Statement, the public offering of
the Securities, any state or other securities or Blue Sky law qualification
matters, or any of the transactions contemplated by this Agreement, we authorize
you to make such investigation, to retain such counsel and to take such other
actions as you may deem necessary or desirable under the circumstances,
including settlement of any such claim or claims if such course of action shall
be recommended by counsel retained by you. We agree to pay you, upon request,
our proportionate share (based on our underwriting obligation) of all expenses
incurred by you (including, but not limited to, the disbursements and fees of
counsel retained by you) in investigating and defending against such claim or
claims, and our proportionate share (based on our underwriting obligation) of
any liability incurred by you in respect of such claim or claims, whether such
liability shall be the result of a judgment against you or the result of any
such settlement. In determining amounts payable pursuant to this Section 14(b),
any loss, claim, damage, liability or expense (i) incurred by any person
controlling any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, and (ii) for which such Underwriter actually
receives indemnification pursuant to Section 14(a) above or contribution or
indemnification pursuant to the Underwriting Agreement, shall reduce the amount
payable pursuant to this Section 14(b) by the amount so incurred and received.
If any Underwriter or Underwriters default in their obligations to make any
payments under this Section 14(b), then, without relieving such defaulting
Underwriter of its liability hereunder, each nondefaulting Underwriter shall be
obligated to pay its proportionate share of all defaulted payments.
15. Blue Sky Matters. You will not have any responsibility with respect to
the right of any Underwriter or other person to sell any of the Registered Units
in any jurisdiction, notwithstanding any information that we may furnish in that
connection. We understand that you will file a New York Further State Notice, if
required, and we authorize you to take such other action as may be necessary or
advisable to qualify the Securities for offering and sale in any jurisdiction.
16. Notices. Any notice from you to us will be deemed to have been duly
given if mailed or sent by facsimile transmission to us at our address and
facsimile number set forth below. Any notice to you shall be deemed to have been
given if mailed or sent by facsimile transmission to National Securities
Corporation, 875 North Michigan Avenue, Suite 1560, Chicago, Illinois 60611,
attention: Steven A. Rothstein, facsimile number (214) 987-2091. Mailed notices
shall be sent by registered mail, return receipt requested. Notices shall be
effective upon receipt.
17. Miscellaneous.
(a) We authorize you to file with any governmental agency any
reports required to be filed by you in connection with the transactions
contemplated by this Agreement or the Underwriting Agreement, and we will
furnish any information in our possession needed for such reports.
(b) In connection with the transactions contemplated by this
Agreement or the Underwriting Agreement, we will not advertise over our name
until after the first public advertisement made by you and then only at our own
expense and risk. We authorize you to exercise complete discretion with regard
to the first public advertisement.
(c) We hereby confirm (i) that we have examined the
Registration Statement and the Prospectus and are familiar with the proposed
further amendment thereto or final Prospectus, (ii) that the information therein
is correct and is not misleading insofar as it relates to us and (iii) that we
are willing to accept the responsibilities under the Act of an Underwriter named
in such Registration Statement. You are authorized, in your discretion, on our
behalf, to approve of or to object to any further amendments or supplements to
the Registration Statement or the Prospectus.
(d) We confirm that we are actually engaged in the investment
banking or securities business and are either (i) a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD") and our
commitment to purchase Registered Units pursuant to the Underwriting Agreement
will not result in a violation of the financial responsibility requirements of
Rule l5c3-1 under the Exchange Act, or of any similar provisions of any
applicable rules of any securities exchange to which we are subject or of any
restriction imposed upon us by any such exchange or any governmental authority
or (ii) a foreign dealer not eligible for membership in the NASD who hereby
agrees to make no sales within the United States, its territories or its
possessions (except that we may participate in sales to Dealers and others under
Section 4 hereof) or to persons who are citizens thereof or residents therein.
In making sales of Registered Units, if we are such a member, we agree to comply
with all applicable rules of the NASD, including, without limitation, the
Interpretation of the Board of Governors of the NASD with Respect to Free-Riding
and Withholding and Sections 8, 24 and 36 of Article III of the NASD's Rules of
Fair Practice, or, if we are such a foreign dealer, we agree to comply with such
Interpretation and Sections 8, 24 and 36 of such Article as though we were such
a member and Section 25 of such Article as that Section applies to a non-member
foreign dealer.
(e) We confirm that the ratio of our aggregate indebtedness to
our net capital is such that we may, in accordance with and pursuant to Rule
l5c3-1 under the Exchange Act, obligate ourselves to purchase, and purchase, the
number of Registered Units that we agree to purchase under the Underwriting
Agreement.
(f) This Agreement will be governed by, and construed in
accordance with, the laws of the State of Washington without reference to
Washington' conflict of laws rules.
(g) This Agreement may be signed in any number of counterparts
which taken together shall constitute one and the same instrument.
Very truly yours,
NAME:
By:
Address:
Facsimile.:
NAME:
By:
Address:
Facsimile No.:
NAME:
By:
Address:
Facsimile No.:
NAME:
By:
Address:
Facsimile No.:
Confirmed as of the date first written:
NATIONAL SECURITIES CORPORATION
By:
Steven A. Rothstein
<PAGE>
EXHIBIT A
Confirmation
NATIONAL SECURITIES CORPORATION 875 North Michigan Avenue, Suite 1560 Chicago,
Illinois 60611 Facsimile Number (214) 987-2091
Dear Sirs:
The undersigned hereby confirms its agreement to purchase Units of
Westower Corporation, a Washington corporation (the "Registered Units"), each
Registered Unit consisting of one share of Common Stock, $.01 par value, and one
Redeemable Common Stock Purchase Warrants, each of which entitles the holder
thereof to purchase one share of Common Stock at a price of $9.00. The purchase
price shall be $7.50 per Registered Unit, less a selling concession of $0.375
per Registered Unit, subject to the terms and conditions of the foregoing
Selected Dealer Agreement, and the undersigned agrees to take up and pay for
such Registered Units on the terms and conditions set forth in such Agreement.
The undersigned hereby acknowledges receipt of the Preliminary Prospectus
relating to the Securities (as defined in the Selected Dealer Agreement) and
confirms that in agreeing to purchase the Registered Units it has relied on said
Preliminary Prospectus and on no other statement whatsoever, written or oral.
The undersigned represents that it has complied and will comply with the
requirements of Rule 15c2-8 under the Securities Exchange Act of 1934, as
amended, with respect to the offering of the Registered Units.
The undersigned confirms that it is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") and represents
that in making sales of the Registered Units it will comply with the Rules of
Fair Practice (including Sections 8, 24 and 36 of Article m) and the
Interpretation of the Board of Governors of the NASD with respect to Free-Riding
and Withholding; alternatively, the undersigned represents that it is a foreign
dealer that is not eligible for membership in the NASD and agrees not to offer
or sell the Registered Units in the United States, its territories or its
possessions or to persons it has reason to believe are nationals thereof or
residents therein, and further agrees that in making sales of the Registered
Units outside the United States, it will comply with the requirements of the
Rules of Fair Practice (including Sections 8, 24 and 36 of Article m, and
Section 25 of such Article as that Section applies to non-member foreign
dealers) and the Interpretation of the Board of Governors of the NASD with
respect to Free-Riding and Withholding.
By:
Name:
Title:
Address:
Facsimile
Number:
Dated:_________, 1997
<PAGE>
SCHEDULE I
WESTOWER CORPORATION
Unit Purchase Warrant
Certificate Evidencing Right to Purchase
100,000 Units
This is to certify that National Securities Corporation., ("National") or
assigns, is entitled to purchase at any time or from time to time after 9 A.M.,
Chicago, Illinois time, on____, 1996 and until 9 A.M., Chicago, Illinois time,
on ________, 2002 up to the above referenced number of Units consisting of three
shares of the Company's Common Stock (the "Shares") and two Common Stock
Purchase Warrant (the "Warrants"), of Westower Corporation, a Washington
corporation (the "Company"), for the consideration specified in Subsection 1(e)
of the Warrant Agreement dated ________ 1997 between the Company and National
(the "Warrant Agreement"), pursuant to which this Warrant is issued. All rights
of the holder of this Warrant Certificate are subject to the terms and
provisions of the Warrant Agreement, copies of which are available for
inspection at the office of the Company.
The Units issuable upon the exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "Act"), and no
distribution of the Shares or Warrants issuable upon exercise of this Warrant
may be made until the effectiveness of a registration statement under the Act
covering such Units. Transfer of this Warrant Certificate is restricted as
provided in Subsection 3(a) of the Warrant Agreement.
This Warrant has been issued to the registered owner in reliance upon
written representations necessary to ensure that this Warrant was issued in
accordance with an appropriate exemption from registration under any applicable
state and federal securities laws, rules and regulations. This Warrant may not
be sold, transferred, or assigned unless, in the opinion of the Company and its
legal counsel, such sale, transfer or assignment will not be in violation of the
Act, applicable rules and regulations of the Securities and Exchange Commission,
and any applicable state securities laws.
Subject to the provisions of the Act and of such Warrant Agreement,
this Warrant Certificate and all rights hereunder are transferable, in whole or
in part, at the offices of the Company, by the holder hereof in person or by
duly authorized attorney, upon surrender of this Warrant Certificate, together
with the Assignment hereof duly endorsed. Until transfer of this Warrant
Certificate on the books of the Company, the Company may treat the registered
holder hereof as the owner hereof for all purposes.
Any Units, Warrants or Common Stock which is acquired pursuant to the
exercise of this Warrant shall be acquired in accordance with the Warrant
Agreement and certificates representing all securities so acquired shall bear a
restrictive legend reading substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE offered FOR SALE, SOLD,
TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER THE SECURITIES ACT OF 1933
AND ANY APPLICABLE STATE LAW, OR (2) AN OPINION OF COUNSEL (SATISFACTORY TO THE
CORPORATION) THAT REGISTRATION IS NOT REQUIRED.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
executed on this ___ day of ________ , 1997, in Chicago, Illinois, by its proper
corporate officer's thereunto duly authorized.
Westower Corporation
By: Attest:
Calvin J. Payne, President
<PAGE>
SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: Westower Corporation
The undersigned, the holder of the enclosed Warrant Certificate, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
Certificate for, and to purchase thereunder, _________________ Units (as defined
in the Warrant Agreement to which the form of this Subscription was attached)
and herewith makes payment of $______________ therefor, and requests that the
certificate or certificates for such shares be issued in the name of and
delivered to the undersigned.
Date:
(Signature must conform
in all respects to name
of holder as specified on
the face of the Warrant
Certificate)
(Address)
Insert the number of shares called for on the face of the Warrant
Certificate (or, in the case of a partial exercise, the portion thereof as to
which the Warrant is being exercised), in either case without making any
adjustment for additional Units or other securities or property or cash which,
pursuant to the adjustment provisions of the Warrant, may be deliverable upon
exercise.
<PAGE>
ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers unto
_______________________________ the right represented by the enclosed Warrant
Certificate to purchase ________ Units with full power of substitution in the
premises.
The undersigned represents and warrants that the transfer, in whole in
or in part, of such right to purchase represented by the enclosed Warrant
Certificate is permitted by the terms of the Warrant Agreement pursuant to which
the enclosed Warrant has been issued, and the transferee hereof, by his
acceptance of this Assignment, represents and warrants that he is familiar with
the terms of such Warrant Agreement and agrees to be bound by the terms thereof
with the same force and effect as if a signatory thereto.
Date:
(Signature must conform
in all respects to name of
holder as specified on
the face of the Warrant
Certificate)
(Address)
Signed in the presence of:
<PAGE>
ARTICLES OF INCORPORATION
OF
WESTOWER CORPORATION
ARTICLE 1
NAME
The name of this corporation is Westower Corporation. The corporation
is incorporated under Title 23B RCW, and has perpetual existence.
ARTICLE 11
SHARES
2.1 Authorized Shares. The number of shares the corporation is authorized
to issue is 10,000,000 shares of Common Stock, having a par value of $.01 per
share.
2.2 Consideration For Shares. Shares may be issued for consideration consisting
of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed, contracts for services
to be performed, or other securities of the corporation, as may be authorized
by the board of directors. The board of directors may determine that the
consideration received or to be received for the shares to be issued is
adequate; when the corporation has received the consideration so determined,
the shares issued therefor will be fully paid and nonassessable.
2.3 No Cumulative Voting. The shareholders are not entitled to cumulate
votes at any election of directors.
2.4 No Preemptive Right. The shareholders do not have any preemptive
right to acquire unissued shares or securities convertible into or carrying
a right to subscribe for or acquire shares.
ARTICLE III
REGISTERED OFFICE AND AGENT
The street address of the corporation's initial registered office is
1420 Fifth Avenue, Suite 4100, Seattle, Washington 98101-2338, and the name of
its initial registered agent at that office is LPSL Corporate Services, Inc.
<PAGE>
ARTICLE IV
INCORPORATOR
The incorporator is LPSL Corporate Services, Inc., 1420 Fifth Avenue,
Suite 4100, Seattle, Washington 98101-2338.
ARTICLE V
DIRECTORS
The number of directors will be fixed, and may be increased or
decreased, from time to time by the process specified in the bylaws. The names
and addresses of the individuals who are to serve as initial directors are:
Calvin Jay Payne, Stanley Roy Jeffrey and Walter Friesen.
ARTICLE VI
LIMITATION OF DIRECTORS' LIABILITY
Any personal liability of a director to the corporation or its
shareholders for monetary damages for conduct as a director is eliminated,
except for any liability for any acts or omissions that involve intentional
misconduct by a director or a knowing violation of law by a director, for
conduct violating RCW 23B.08.310, for any transaction from which the director
will personally receive a benefit in money, property, or services to which the
director is not legally entitled, or for any act or omission occurring prior
to the date when this Article becomes effective. If after this Article becomes
effective the Washington Business Corporation Act is amended to authorize
further elimination or limitation of liability of a director, then, upon the
effective date of the amendment, the liability of a director shall be further
eliminated and limited without further act to the fullest extent so
authorized. No amendment or repeal of these Articles of Incorporation shall
reduce the extent of any elimination or limitation of liability of a director
existing immediately prior to the amendment or repeal.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
7.1 Right to Indemnification. EACH INDIVIDUAL (including an
individual's personal representative) who was or is made a party or is
threatened to be made a party to, or is otherwise involved (including, without
limitation, as a witness) in, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, investigative or
by or in the right of the corporation, or otherwise (a "Proceeding") because
the individual or another individual of whom the individual is a personal
representative:
(a) is or was a director or officer of the corporation or
any predecessor entity, or
<PAGE>
(b) being or having been such a director or officer, is or was
serving at the request of the corporation or any predecessor entity as
a director, officer, partner, trustee, employee, agent, or in any other
relationship or capacity whatsoever, of any other foreign or domestic
corporation, partnership, joint venture, employee benefit plan or trust
or other trust, enterprise or other private or governmental entity,
agency, board, commission, body or other unit whatsoever ( (a) and (b)
collectively, an "Indemnitee")
SHALL BE INDEMNIFIED AND HELD HARMLESS by the corporation to the fullest extent
not prohibited by the Washington Business Corporation Act as the same exists or
may hereafter be amended (but, in the case or any amendment, only to the extent
that the amendment does not prohibit the corporation from providing broader
indemnification rights than prior to the amendment) IF the Indemnitee acted in
good faith and reasonably believed the Indemnitee's conduct was in the
corporation's best interests (in the case of conduct in the Indemnitee's
official capacity with the corporation) and (in all other cases) was at least
not opposed to the corporation's best interests and is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances
("Corporation's Standards for Indemnification"), WITHOUT REGARD TO the
limitations in RCW 23B.08.510 through 23B.08.550, AND WHETHER OR NOT the
Indemnitee met the standard of conduct set forth in RCW 23B.08.510 or any other
standard of conduct set forth in RCW 23B.08.500 through RCW 23B.08.580,
AGAINST ALL DIRECT AND INDIRECT EXPENSES, LIABILITIES AND LOSSES (including but
not limited to attorney fees, judgments, settlements, penalties, fines, ERISA
and employee benefit plan and other excise taxes and other taxes and penalties,
environmental and remediation expenses, settlements, penalties and fines, and
other adverse effects) that are actually incurred or suffered by the Indemnitee
in connection with the Proceeding (whether or not the basis of the Proceeding is
alleged conduct, action or inaction in an official capacity as a director,
officer, partner, trustee, employee, agent, or in any other relationship or
capacity whatsoever).
The indemnification granted in the Article is a contract right and
includes the right to payment by, and the right to receive reimbursement from,
the corporation of all the Indemnitee's expenses as they are incurred, including
advances in advance of final disposition of the Proceeding. The term "expenses"
as used in this Article includes without limitation all counsel and attorneys'
fees and costs.
Notwithstanding the foregoing, an advance for expenses incurred by an Indemnitee
who is a party to a Proceeding because the Indemnitee is or was a director of
the corporation or any predecessor entity shall be made in advance of final
disposition of the Proceeding only upon receipt by the corporation of (i) a
written undertaking (hereinafter an "undertaking") executed personally or on the
Indemnitee's behalf to repay the advance if and to the extent it is ultimately
determined by order of a court having jurisdiction (which determination shall
become final upon expiration of all rights to appeal, hereinafter a "final
adjudication") that the Indemnittee is not entitled to be indemnified for such
expenses under this Article, and (ii) a written affirmation by the Indemnitee of
the Indemnitee's good faith belief that the Indemnitee has net the Corporation's
Standards for Indemnification as defined in this Article for the amount claimed.
<PAGE>
The undertaking must be an unlimited general obligation of the Indemnitee,
unsecured and without reference to financial ability to make repayment.
7.2 Court-Ordered Indemnification or Advance; Presumption. If any claim for
indemnification or advance of expenses under Section 7.1 of this Article is
not paid in full by the corporation within 30 days after a written claim has
been received by the corporation, the Indemnitee may at any time thereafter
apply for indemnification or advance of expenses to the court conducting the
Proceeding or to another court of competent jurisdiction. If the Indemnitee is
successful in whole or in part in any such application, the corporation shall
also pay to Indemnitee all the Indemnitee's expenses in connection with the
application.
The Indemnitee shall be presumed to be entitled to indemnification and advances
of expenses under this Article upon the corporation's receipt of Indemnitee's
written claim (and in any application to a court for indemnification or advance
of expenses), and thereafter the corporation shall have the burden of proof to
overcome that presumption.
Neither the fact that the corporation (including its board of directors, special
legal counsel or its shareholders under RCW 23B.08.550, or otherwise) did, nor
the fact that the corporation (including its board of directors, special legal
counsel or its shareholders under RCW 23B.08.550, or otherwise) did not, make a
determination that the Indemnitee is or is not entitled to indemnification or
advance of expenses, shall be a defense to the application or create a
presumption that the Indemnitee is not so entitled.
If the Indemnitee applies to a court having jurisdiction for determination of
the right to indemnity or advance of expenses, or amount thereof, the court's
determination shall become final upon expiration of all rights to appeal, and
such a final adjudication shall supersede any other determination made in
accordance with RCW 23B.08.550, or otherwise.
7.3 Nonexclusivity of Rights, Severability. The right to indemnification
(including but not limited to payment, reimbursement and advances of expenses)
granted in this Article is not exclusive of any other rights that any
individual may have or hereafter acquire under any statute, common law,
provision of the Articles of Incorporation or Bylaws of the corporation,
agreement, vote or resolution of shareholders or disinterested directors, or
otherwise. Notwithstanding any amendment to or repeal of this Article, any
Indemnitee shall be entitled to indemnification and advance of expenses in
accordance with the provisions of this Article with respect to any conduct,
acts or omissions of the Indemnitee occurring prior to the amendment or
repeal. If any provision or term of this Article is determined to be void or
unenforceable for any reason, the remaining provisions and terms shall remain
in full force and effect.
7.4 Insurance, Contracts and Funding. The corporation may purchase and
maintain insurance, at its expense, to protect itself and any individual
(including an individual's personal representative) who is or was a director,
officer, employee or agent of the corporation or any predecessor entity or who
being or having been such a director or officer, is or was serving at the
request of the corporation or any predecessor entity as a director, officer,
partner, trustee, employee,
<PAGE>
agent, or in any other relationship or capacity whatsoever, of any foreign or
domestic corporation, partnership, joint venture, employee benefit plan or trust
or other trust, enterprise or other private or governmental entity, agency,
board, commission, body or other unit whatsoever, against any expense, liability
or loss, whether or not the corporation would have power to indemnify the
individual against the same expense, liability or loss under the Washington
Business Corporation Act, or RCW 23B.08.510 or 23B.08.520, or otherwise. The
corporation may grant indemnity, and may enter into contracts granting
indemnity, to any such individual, whether or not in furtherance of the
provisions of this Article, and may create trust funds, grant security interests
and use other means (including, without limitation, letters of credit) to secure
and ensure the payment of indemnification amounts.
7.5 Partial Indemnification. If an Indemnitee is entitled to
indemnification by the corporation for some or a portion of expenses,
liabilities or losses, but not for the total amount thereof, the corporation
shall nevertheless indemnify the Indemnitee for the portion of the expenses,
liabilities and losses to which the Indemnitee is entitled.
7.6 Successors and Assigns. All obligations of the corporation to indemnify any
Indemnitee: (i) are binding upon all successors and assigns of the corporation
(including any transferee of all or substantially all of its assets and any
successor by merger or otherwise by operation of law), (ii) are binding on and
inure to the benefit of the spouse, heirs, personal representatives and estate
of the Indemnitee, and (iii) shall continue as to an Indemnitee who has ceased
to be a director, officer, partner, trustee, employee, or agent (or other
relationship or capacity) included in the definition of Indemnitee in Section
7.1 of this Article. The corporation shall not effect any sale or other transfer
of substantially all of its assets, merger, consolidation or other
reorganization unless the purchaser, transferee, successor or surviving entity
(as the case may be) agrees in writing to assume all such obligations of the
corporation.
ARTICLE VIII
BYLAWS
The board of directors may adopt, amend or repeal the bylaws, or adopt
new bylaws, subject to the reserved power of the shareholders to amend or repeal
the bylaws, or adopt new bylaws, and in amending or repealing a particular bylaw
to provide expressly that the board of directors may not amend or repeal that
bylaw.
ARTICLE IX
AMENDMENT OF ARTICLES OF INCORPORATION
The corporation reserves the right from time to time to amend, alter,
change or repeal any and all provisions of its Articles of Incorporation by
majority vote of all votes entitled to be cast by the holders of the then
outstanding shares of Common Stock, in any manner now or hereafter prescribed or
permitted by statute. All rights of the shareholders, directors, and officers of
the corporation are granted subject to this reservation.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed these Articles on
________ 1997.
LPSL CORPORATE SERVICES, INC.
By: ___________________________
Hartley Paul, Vice President
REGISTERED AGENT CONSENT:
The undersigned consents to appointment as registered agent of the
corporation named above:
DATED: ___________, 1997.
LPSL CORPORATE SERVICES INC.
By: ___________________________
Hartley Paul, Vice President
Address:
1420 Fifth Avenue, Suite 4100
Seattle, Washington, 98101-2338
<PAGE>
BYLAWS
OF
WESTOWER CORPORATION
ARTICLE 1
Registered Office and Registered Agent
The registered office of the corporation shall be located in the state
of Washington at such place as may be fixed from time to time by the board of
directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office. Any change in the registered agent or register office shall be effective
upon filing such change with the office of the Secretary of State of the state
of Washington.
ARTICLE II
Shareholders' Meetings
Section 1. Annual Meetings. The annual meeting of the shareholders of
the corporation shall be held at the registered office of the corporation, or
such other place as may be designated by the notice of the meeting, during the
month of September each year, for the purpose of election of directors and for
such other business as may properly come before the meeting.
Section 2. Special Meetings. Special meetings of the shareholders of
the corporation may be called at any time by the president, or by a majority of
the board of directors, or by the holders of at least twenty-five percent (25%)
of all the votes entitled to be cast on any issue proposed to be considered at a
proposed special meeting; provided that upon qualification of the corporation as
a "public company" under the Washington Business Corporation Act, the percentage
of votes required to call a special meeting shall be thirty percent (30%). No
business shall be transacted at any special meeting of shareholders except as is
specified in the notice calling for said meeting. The board of directors may
designate any place as the place of any special meeting called by the president
or the board of directors, and special meetings called at the request of
shareholders shall be held at such place as may be determined by the board of
directors and placed in the notice of such meetings.
Section 3. Notice of Meetings. Written notice of annual or special
meetings of shareholders stating the place, day, and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be given by the secretary or persons authorized to call the
meeting to each shareholder of record entitled to vote at the meeting. Such
notice shall be given not less than ten (10) nor more than sixty (60) days prior
to the date of the meeting, except that notice of a meeting to act on (i) an
amendment to the Articles of Incorporation, (ii) a plan of merger or share
exchange, (iii) a proposed sale, lease, exchange or other disposition of
substantially all of the assets of the corporation other than in the usual or
regular course of business, or (iv) the dissolution of the corporation shall be
given no fewer than twenty (20) days nor more than sixty (60) days before the
meeting date. Notice may be transmitted by mail, private carrier or personal
delivery; telegraph or teletype; or telephone, wire or wireless equipment which
transmits a facsimile of the notice. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail addressed to the
shareholder at the shareholder's address as it appears on the stock transfer
books of the corporation.
Section 4. Waiver of Notice. Notice of the time, place, and purpose of
any meeting may be waived in writing (either before or after such meeting) and
will be waived by any shareholder by the shareholder's attendance at the meeting
in person or by proxy, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting. Any
shareholder so waiving shall be bound by the proceedings of any such meeting in
all respects as if due notice thereof had been given.
Section 5. Quorum and Adjourned Meetings. A majority of the outstanding
shares of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum a meeting of shareholders. A majority of the shares
represented at a meeting, even if less than a quorum, may adjourn the meeting
from time to time without further notice. At such reconvened meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to transact
business at such meeting and at any adjournment of such meeting (unless a new
record date is or must be set for the adjourned meeting), notwithstanding the
withdrawal of enough shareholders from either meeting to leave less than a
quorum.
Section 6. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by the shareholder's
duly authorized attorney in fact. Such proxy shall be filed with the secretary
of the corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy.
Section 7. Voting Record. After fixing a record date for a
shareholders' meeting, the corporation shall prepare an alphabetical list of the
names of all shareholders on the record date who are entitled to notice of the
shareholders' meeting. The list shall be arranged by voting group, and with each
voting group by class or series of shares, and show the address of and number of
shares held by each shareholder. A shareholder, shareholder's agent, or a
shareholder's attorney may inspect the shareholder's list, beginning ten days
prior to the shareholders' meeting and continuing through the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held during regular business hours and at the
shareholder's expense. The shareholders' list shall be kept open for inspection
during such meeting or any adjournment.
Section 8. Voting of Shares. Except as otherwise provided in the
Articles of Incorporation or in these Bylaws, every shareholder of record shall
have the right at every shareholders' meeting to one vote for every share
standing in the shareholder's name on the books of the corporation. If a quorum
exists, action on a matter, other than election of directors, is approved by a
voting group of shareholders if the votes cast within the voting group favoring
the action exceed the votes cast within the voting group opposing the action,
unless the Articles of Incorporation or the Washington Business Corporation Act
require a greater number of affirmative votes.
Section 9. Record Date For the purpose of determining shareholders
entitled to notice or to vote at any meeting of shareholders, or any adjournment
thereof, or entitled to receive payment of any dividend, the board of directors
may fix in advance a record date for any such determination of shareholders,
such date to be not more than seventy (70) days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If no record date is fixed for the determination of shareholders entitled to
notice of or to vote a meeting of shareholders, or shareholders entitled to
receive payment of a dividend, the day before the date on which notice of the
meeting is mailed or the date on which the resolution of the board of directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of shareholders. When a determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section, such determination shall apply to any adjournment thereof, unless
the board of directors fixes a new record date, which it must do if the meeting
is adjourned more than one hundred twenty (120) days after the date fixed for
the original meeting.
ARTICLE III
Directors
Section 1. General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the board of directors except as otherwise
provided by the laws of the state of Washington or in the Articles of
Incorporation.
Section 2. Number. The number of directors of the corporation is three.
The numbers of directors can be increased or decreased from time to time by the
vote of the directors or shareholders to amend this Section 2, provided that the
number of directors shall be not less than one, and provided further that no
decrease shall shorten the term of any incumbent director.
Section 3. Tenure and Qualification. At the first annual meeting of
shareholders and at each annual meeting thereafter, the shareholders of the
corporation shall elect directors. Each director shall hold office until the
next succeeding annual meeting and until his or her successor shall have been
elected and qualified. Directors need not be residents of the state of
Washington or shareholders of the corporation.
Section 4. Election. The directors shall be elected by the shareholders
at their annual meeting each year; and if, for any cause, the directors shall
not have been elected at an annual meeting, they may be elected at a special
meeting of shareholders called for that purpose in the manner provided by these
Bylaws.
Section 5. Vacancies. Vacancies in the board of directors, including
vacancies resulting from an increase in the number of directors, may be filled
by the shareholders, the board of directors, or a majority of the remaining
directors if they do not constitute a quorum.
Section 6. Resignation. Any director may resign at any time by
delivering written notice to the board of directors, its chairperson, the
president or the secretary of the corporation. A resignation shall be effective
when the notice is delivered unless the notice specifies a later effective date.
Section 7. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, the entire board of directors, or any member
thereof, may be removed, with or without cause, by a vote of the holders of a
majority of shares then entitled to vote at an election of such directors.
Section 8. Meetings.
(a) The annual meeting of the board of directors shall be held
immediately after the annual shareholders' meeting at the same place as the
annual shareholders' meeting or at such other place and at such time as may be
determined by the directors. No notice of the annual meeting of the board of
directors shall be necessary.
(b) Special meetings may be called at any time and place upon
the call of the president, secretary, or any director. Notice of the time and
place of each special meeting shall be given by the secretary or the persons
calling the meeting, by mail, private carrier, radio, telegraph, telegram,
facsimile transmission, personal communication by telephone or otherwise at
least two (2) days in advance of the time of the meeting. The purpose of the
meeting need not be given in the notice. Notice of any special meeting may be
waived in writing or by telegram (either before or after such meeting) and will
be waived by any director by attendance thereat.
(c) Regular meetings of the board of directors shall be held
at such place and on such day and hour as shall from time to time be fixed by
resolution of the board of directors. No notice of regular meetings of the board
of directors shall be necessary.
(d) At any meeting of the board of directors, any
business may be transacted, and the board may exercise all of its powers.
Section 9. Quorum and Voting.
(a) A majority of the directors shall constitute a quorum, but
a lesser number may adjourn any meeting from time to time until a quorum is
obtained, and no further notice thereof need be given.
(b) If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present at the meeting is the
act of the board of directors.
Section 10. Compensation. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board of directors and may be paid a fixed sum for attendance at each
meeting of the board of directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 11. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless:
(a) The director objects at the beginning of the meeting, or
promptly upon the director's arrival, to holding it or transacting business at
the meeting:
(b) The director's dissent or abstention from the
action taken is entered in the minutes of the meeting; or
(c) The director delivers written notice of the director's
dissent or abstention to the presiding officer of the meeting before its
adjournment or to the corporation within a reasonable time after adjournment
of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
Section 12. Committees. The board of directors, by resolution adopted
by a majority of the full board of directors, may designate one or more
committees from among its members, each of which must have two or more members
and, to the extent provided in such resolution, shall have and may exercise all
the authority of the board of directors, except that no such committee shall
have the authority to: authorize or approve a distribution except according to a
general formula or method prescribed by the board of directors; approve or
propose to shareholders action that the Washington Business Corporation Act
requires to be approved by shareholders; fill vacancies on the board of
directors or on any of its committees; amend any Articles of Incorporation
requiring shareholder approval; adopt, amend or repeal Bylaws; approve a plan of
merger requiring shareholder approval; or authorize or approve the issuance or
sale or contract for sale of shares, or determine the designation and relative
rights, preferences and limitations of a class or series of shares, except that
the board of directors may authorize a committee, or a senior executive officer
of the corporation, to do so within limits specifically prescribed by the board
of directors.
ARTICLE IV
Special Measures for Corporate Action
Section 1. Actions by Written Consent. Any corporate action required or
permitted by the Articles of Incorporation, Bylaws, or the laws under which the
corporation is formed, to be voted upon or approved at a duly called meeting of
the directors, committee of directors, or shareholders may be accomplished
without a meeting if one or more unanimous written consents of the respective
directors or shareholders, setting forth the actions so taken, shall be signed,
either before or after the action taken, by all the directors, committee
members, or shareholders, as the case may be. Action taken by unanimous written
consent is effective when the last director or committee member signs the
consent, unless the consent specifies a later effective date. Action taken by
unanimous written consent of the shareholders is effective when all consents are
in possession of the corporation, unless the consent specifies a later effective
date.
Section 2. Meetings by Conference Telephone. Members of the board of
directors, members of a committee of directors, or shareholders may participate
in their respective meetings by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time; participation in a meeting by such
means shall constitute presence in person at such meeting.
ARTICLE V
Officers
Section 1. Officers Designated. The officers of the corporation shall
be a president, a secretary and a treasurer, each of whom shall be elected by
the board of directors. Such other officers and assistant officers as may be
deemed necessary may be elected or appointed by the board of directors. Any two
or more offices may be held by the same person.
The board of directors may, in its discretion, elect a chairperson and
one or more vice-chairpersons of the board of directors; and, if a chairperson
has been elected, the chairperson shall, when present, preside at all meetings
of the board of directors and the shareholders and shall have such other powers
as the board may prescribe.
Section 2. Election, Qualification and Term of Office. Each of the
officers shall be elected by the board of directors. None of said officers need
be a director. The officers shall be elected by the board of directors at each
annual meeting of the board of directors. Except as hereinafter provided, each
of said officers shall hold office from the date of his or her election until
the next annual meeting of the board of directors and until his or her successor
shall have been duly elected and qualified.
Section 3. Powers and Duties.
(a) President. The president shall be the chief executive
officer of the corporation and, subject to the direction and control of the
board of directors, shall have general charge and supervision over its
property, business, and affairs.
(b) Secretary. The secretary shall: (1) keep the minutes of
the shareholders' and of the board of directors' meetings in one or more books
provided for that purpose; (2) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (3) be
custodian of the corporate records and of the seal of the corporation and
affix the seal of the corporation to all documents as may be required; (4)
keep a register of the post office address of each shareholder which shall be
furnished to the secretary by such shareholder; (5) sign with the president,
or a vice president, certificates for shares of the corporation, the issuance
of which shall have been authorized by resolution of the board of directors;
(6) have general charge of the stock transfer books of the corporation; and
(7) in general perform all duties incident to the office of secretary and such
other duties as from time to time may be assigned to him or her by the
president or by the board of directors.
(c) Treasurer. Subject to the direction and control of the
board of directors, the treasurer shall have the custody, control, and
disposition of the funds and securities of the corporation and shall account
for the same; and, at the expiration of his or her term of office, her or she
shall turn over to his or her successor all property of the corporation in his
or her possession.
Section 4. Assistant Secretaries and Assistant Treasurers. The
assistant secretaries, when authorized by the board of directors, may sign
with the president, or a vice president, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the board of directors. The assistant treasurers shall, respectively, if
required by the board of directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the board of directors
shall determine. The assistant secretaries and assistant treasurers, in
general, shall perform such duties as shall be assigned to them by the
secretary or the treasurer, respectively, or by the president or the board of
directors.
Section 5. Removal. The board of directors shall have the right to
remove any officer whenever in its judgment the best interests of the
corporation will be served thereby.
Section 6. Vacancies. The board of directors shall fill any office
which becomes vacant with a successor who shall hold office for the unexpired
term and until his or her successor shall have been duly elected and
qualified.
Section 7. Salaries. The salaries of all officers of the
corporation shall be fixed by the board of directors.
ARTICLE VI
Share Certificates
Section 1. Issuance, Form and Execution of Certificates. No shares of
the corporation shall be issued unless authorized by the board. Such
authorization shall include the maximum number of shares to be issued, the
consideration to be received for each share, the value of noncash consideration,
and a statement that the board has determined that such consideration is
adequate. Certificates for shares of the corporation shall be in such form as is
consistent with the provisions of the Washington Business Corporation Act and
shall state:
(a) The name of the corporation and that the corporation is
organized under the laws of this state;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of the series,
if any, which such certificate represents. They shall be signed by two
officers of the corporation, and the seal of the corporation may be affixed
thereto. Certificates may be issued for fractional shares. No certificate
shall be issued for any share until the consideration established for its
issuance has been paid.
Section 2. Transfers. Shares may be transferred by delivery of the
certificate therefor, accompanied either by an assignment in writing on the
back of the certificate, written assignment separate from certificate, or
written power of attorney to assign and transfer the same signed by the record
holder of the certificate. The board of directors may, by resolution, provide
that beneficial owners of shares shall be deemed holders of record for certain
specified purposes. Except as otherwise specifically provided in these Bylaws,
no shares shall be transferred on the books of the corporation until the
outstanding certificate thereof has been surrendered to the corporation.
Section 3. Loss or Destruction of Certificates. In case of loss or
destruction of any certificate of shares, another may be issued in its place
upon proof of such loss or destruction and upon the giving of a satisfactory
indemnity bond to the corporation. A new certificate may be issued without
requiring any bond when in the judgment of the board of directors it is proper
to do so.
ARTICLE VII
Books and Records
Section 1. Books of Account, Minutes and Share Register. The
corporation shall keep as permanent records minutes of all meetings of its
shareholders and board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, and a record of all
actions taken by a committee of the board of directors exercising the
authority of the board of directors on behalf of the corporation. The
corporation shall maintain appropriate accounting records. The corporation or
its agent shall maintain a record of its shareholders, in a form that permits
preparation of a list of the names and addresses of all shareholders, in
alphabetical order by class of shares showing the number and class of shares
held by each. The corporation shall keep a copy of the following records at
its principal office: the Articles or Restated Articles of Incorporation and
all amendments to them currently in effect; the Bylaws or Restated Bylaws and
all amendments to them currently in effect; the minutes of all shareholders'
meetings, and records of all actions taken by shareholders without a meeting,
for the past three years; its financial statements for the past three years,
including balance sheets showing in reasonable detail the financial condition
of the corporation as of the close of each fiscal year, and an income
statement showing the results of its operations during each fiscal year
prepared on the basis of generally accepted accounting principles or, if not,
prepared on a basis explained therein; all written communications to
shareholders generally within the past three years; a list of the names and
business addresses of its current directors and officers; and its most recent
annual report delivered to the Secretary of State of the state of Washington.
Section 2. Copies of Resolutions. Any person dealing with the
corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the board of directors or shareholders, when
certified by the president or secretary.
ARTICLE VIII
Bylaws
The board of directors may adopt, amend or repeal the bylaws, or adopt
new bylaws, subject to the reserved power of the shareholders to amend or
repeal the bylaws, or adopt new bylaws, and in amending or repealing a
particular bylaw to provide expressly that the board of directors may not
amend or repeal that bylaw.
<PAGE>
WESTOWER CORPORATION
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Warrant Agent
WARRANT AGREEMENT
Dated as of __________, 1997
WARRANT AGREEMENT - Page 1
TABLE OF CONTENTS
Section Page
1. Appointment of Warrant Agent........................................ 2
2. Form of Warrant..................................................... 2
3. Countersignature and Registration................................... 2
4. Transfers and Exchanges............................................. 2
5. Exercise of Warrants................................................ 3
6. Mutilated or Missing Warrants....................................... 3
7. Reservation and Registration of Common Stock........................ 4
8. Warrant Price; Adjustments.......................................... 4
9. No Fractional Interests............................................. 8
10. Notice to Warrantholders............................................ 9
11. Disposition of Proceeds on Exercise of Warrants..................... 10
12. Redemption of Warrants.............................................. 10
13. Merger or Consolidation or Change of Name of Warrant Agent.......... 11
14. Duties of Warrant Agent............................................. 11
15. Change of Warrant Agent............................................. 13
16. Identity of Transfer Agent.......................................... 13
17. Notices............................................................. 13
18. Supplements and Amendments.......................................... 14
19. Successors.......................................................... 14
20. Merger or Consolidation of the Company.............................. 14
21. Texas Contract...................................................... 14
22. Benefits of This Agreement.......................................... 14
23. Counterparts........................................................ 14
WARRANT AGREEMENT, dated as of __________, 1997, between Westower
Corporation, a Washington Corporation (hereinafter called the "Company"), and
American Stock Transfer & Trust company, as warrant agent (hereinafter called
the "Warrant Agent");
WHEREAS, the Company proposes to issue 1,000,000 Redeemable Series A
Common Stock Purchase Warrants (hereinafter called the "Series A Warrants"),
entitling the holders thereof to purchase one share of Common Stock, $.01 par
value (hereinafter called the "Common Stock") for each Warrant, in connection
with the proposed issuance by the Company of 1,000,000 Units, each Unit
consisting of one share of Common Stock and one Warrant, and the Company also
proposes to issue up to 150,000 Warrants underlying the Underwriters'
over-allotment option and 100,000 Warrants underlying a warrant to purchase
Units to be granted to the Representative of the Underwriters; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
registration, transfer, exchange and exercise of Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
2. Form of Warrant. The text of the Warrant and of the form of election to
purchase shares to be printed on the reverse thereof shall be substantially as
set forth in Exhibit A attached hereto. The Warrant Price to purchase one share
of Common Stock shall be as provided and defined in ss.8. The Warrants shall be
executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chairman of the Board or President or Vice President of
the Company, under its corporate seal, affixed or in facsimile, attested by the
manual or facsimile signature of the present or any future Secretary or
Assistant Secretary of the Company.
Warrants shall be dated as of the date of issuance thereof by the
Warrant Agent either upon initial issuance or upon transfer or exchange.
3. Countersignature and Registration. The Warrant
Agent shall maintain books for the transfer and registration of the Warrants.
The Warrants shall be countersigned by the Warrant Agent (or by any successor to
the Warrant Agent then acting as warrant agent under this Agreement) and shall
not be valid for any purpose unless so countersigned. Warrants may be so
countersigned, however, by the Warrant Agent (or by its successor as warrant
agent) and be delivered by the Warrant Agent, notwithstanding that the persons
whose manual or facsimile signatures appear thereon as proper officers of the
Company shall have ceased to be such officers at the time of such
countersignature or delivery.
4.Transfers and Exchanges. The Warrant Agent shall transfer, from time
to time after the sale of the Units, any outstanding Warrants upon the books to
be maintained by the Warrant Agent for that purpose, upon surrender thereof for
transfer properly endorsed or accompanied by appropriate instructions for
transfer. Upon any such transfer, a new Warrant shall be issued to the
transferee and the surrendered Warrant shall be cancelled by the Warrant Agent.
Warrants so cancelled shall be delivered by the Warrant Agent to the Company
from time to time. The Warrants may be exchanged at the option of the holder
thereof, when surrendered at the office of the Warrant Agent, for another
Warrant, or other Warrants of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of shares of
Common Stock. The Warrant Agent is hereby irrevocably authorized to countersign
in accordance with ss.3 of this Agreement the new Warrants required pursuant to
the provisions of this Section, and the Company, whenever required by the
Warrant Agent, will supply the Warrant Agent with Warrants duly executed on
behalf of the Company for such purpose.
5. Exercise of Warrants. Subject to the provisions of this Agreement, each
registered holder of Warrants shall have the right, which may be exercised as in
such Warrants expressed, to purchase from the Company (and the Company shall
issue and sell to such registered holder of Warrants) the number of fully paid
and nonassessable shares of Common Stock specified in such Warrants, upon
surrender of such Warrants to the Company at the office of the Warrant Agent,
with the form of election to purchase on the reverse thereof duly filled in and
signed, and upon payment to the Warrant Agent for the account of the Company of
the Warrant Price for the number of shares of Common Stock in respect of which
such Warrants are then exercised. Payment of such Warrant Price may be made in
cash, or by certified or official bank check, payable in United States dollars,
to the order of the Warrant Agent. No adjustment shall be made for any dividends
on any shares of Common Stock issuable upon exercise of a Warrant. Upon such
surrender of Warrants, and payment of the Warrant Price as aforesaid, the
Company shall issue and cause to be delivered with all reasonable dispatch to or
upon the written order of the registered holder of such Warrants and in such
name or names as such registered holder may designate, a certificate or
certificates for the number of full shares of Common Stock so purchased upon the
exercise of such Warrants. Such certificate or certificates shall be deemed to
have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such shares as of the date of the
surrender of such Warrants and payment of the Warrant Price as aforesaid;
provided, however, that if, at the date of surrender of such Warrants and
payment of the Warrant Price, the transfer books for the Common Stock or other
class of stock purchasable upon the exercise of such Warrants shall be closed,
the certificates for the shares in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened and until such date the Company shall be under no duty to deliver any
certificate for such shares; provided further, however, that the transfer books
aforesaid, unless otherwise required by law, shall not be closed at any one time
for a period longer than 20 days. The rights of purchase represented by the
Warrants shall be exercisable, at the election of the registered holders
thereof, either as an entirety or from time to time for part only of the shares
specified therein, and in the event that any Warrant is exercised in respect of
less than all of the shares specified therein, a new Warrant or Warrants will be
issued for the remaining number of shares specified in the Warrant so
surrendered, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrants pursuant to the provisions
of this Section and of ss.3 of this Agreement and the Company, whenever required
by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed
on behalf of the Company for such purpose.
6. Mutilated or Missing Warrants. In case any of the Warrants
shall be mutilated, lost, stolen or destroyed, the Company will issue and the
Warrant Agent will countersign and deliver in exchange and substitution for and
upon cancellation of the mutilated Warrant, or in lieu of and substitution for
the Warrant lost, stolen or destroyed, a new Warrant of like tenor and
representing an equivalent right or interest; but only upon receipt of evidence
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant and indemnity, if requested, also satisfactory to
them. Applicants for such substitute Warrants shall also comply with such other
reasonable regulations and pay such other reasonable charges as the Company or
the Warrant Agent may prescribe.
7. Reservation and Registration of Common Stock.
A. There have been reserved, and the Company shall at all times keep
reserved, out of the authorized and unissued shares of Common Stock, a number of
shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the Transfer Agent for the Common Stock and
every subsequent Transfer Agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid are hereby
irrevocably authorized and directed at all times to reserve such number of
authorized and unissued shares as shall be requisite for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent for
the Common Stock and with every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Warrant Agent is hereby irrevocably authorized
to requisition from time to time such Transfer Agent for stock certificates
required to honor outstanding Warrants. The Company will supply such Transfer
Agents with duly executed stock certificates for such purpose and will itself
provide or otherwise make available any cash which may be issuable as provided
in ss.9 of this Agreement. All Warrants surrendered in the exercise of the
rights thereby evidenced shall be cancelled by the Warrant Agent and shall
thereafter be delivered to the Company, and such cancelled Warrants shall
constitute sufficient evidence of the number of shares of stock which have been
issued upon the exercise of such Warrants.
B. The Company represents that it has registered under the Securities
Act of 1933 the shares of Common Stock issuable upon exercise of the Warrants
and will use its best efforts to maintain the effectiveness of such registration
by post-effective amendment during the entire period in which the Warrants are
exercisable, and that it will use its best efforts to qualify such Common Stock
for sale under the securities laws of such states of the United States as may be
necessary to permit the exercise of the Warrants in the states in which the
Units are initially qualified and to maintain such qualifications during the
entire period in which the Warrants are exercisable.
.8. Warrant Price; Adjustments.
A. The price at which Common Stock shall be purchasable upon exercise
of Warrants at any time after the Common Stock and Warrants become separately
tradable until __________, 2002 (hereinafter called the "Warrant Price") shall
be $9.00 per share of Common Stock or, if adjusted as provided in this Section,
shall be such price as so adjusted.
B. The Warrant Price shall be subject to adjustment from time to time as
follows:
(1) Except as hereinafter provided, in case the Company shall
at any time or from time to time after the date hereof issue any
additional shares of Common Stock for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of
such additional shares, or without consideration, then, upon each such
issuance, the Warrant Price in effect immediately prior to the issuance
of such additional shares shall forthwith be reduced to a price
(calculated to the nearest full cent) determined by dividing:
(a) An amount equal to (i) the total number of shares
of Common Stock outstanding immediately prior to such issuance
multiplied by the Warrant Price in effect immediately prior to
such issuance, plus (ii) the consideration, if any, received
by the Company upon such issuance, by
(b) The total number of shares of Common Stock
outstanding immediately after the issuance of such additional
shares.
(2) The Company shall not be required to make any such
adjustment of the Warrant Price in accordance with the foregoing if the
amount of such adjustment shall be less than $.25 (adjustment will be
made when cumulative adjustment equals or exceeds $0.25) but in such
case the Company shall maintain a cumulative record of the Warrant
Price as it would have been in the absence of this provision (the
"Constructive Warrant Price"), and for the purpose of computing a new
Warrant Price after the next subsequent issuance of additional shares
(but not for the purpose of determining whether an adjustment thereof
is required under the terms of this paragraph) the constructive Warrant
Price shall be deemed to be the Warrant Price in effect immediately
prior to such issuance.
(3) For the purpose of this ss.8 the following provisions shall also be
applicable:
(a) In the case of the issuance of additional shares
of Common Stock for cash, the consideration received by the
Company therefor shall be deemed to be the net cash proceeds
received by the Company for such shares before deducting any
commissions or other expenses paid or incurred by the Company
for any underwriting of, or otherwise in connection with, the
issuance of such shares.
(b) In case of the issuance (otherwise than upon
conversion or exchange of shares of Common Stock) of
additional shares of Common Stock for a consideration other
than cash or a consideration a part of which shall be other
than cash, the amount of the consideration other than cash
received by the Company for such shares shall be deemed to be
the value of such consideration as determined in good faith by
the Board of Directors of the Company, as of the date of the
adoption of the resolution of said Board, providing for the
issuance of such shares for consideration other than cash or
for consideration a part of which shall be other than cash,
such fair value to include goodwill and other intangibles to
the extent determined in good faith by the Board.
(c) In case of the issuance by the Company after the
date hereof of any security (other than the Warrants) that is
convertible into shares of Common Stock or of any warrants,
rights or options to purchase shares of Common Stock (except
the options and warrants referred to in subsection H of this
ss.8), (i) the Company shall be deemed (as provided in
subparagraph (e) below) to have issued the maximum number of
shares of Common Stock deliverable upon the exercise of such
conversion privileges or warrants, rights or options, and (ii)
the consideration therefor shall be deemed to be the
consideration received by the Company for such convertible
securities or for such warrants, rights or options, as the
case may be, before deducting therefrom any expenses or
commissions incurred or paid by the Company for any
underwriting of, or otherwise in connection with, the issuance
of such convertible security or warrants, rights or options,
plus (A) the minimum consideration or adjustment payment to be
received by the Company in connection with such conversion, or
(B) the minimum price at which shares of Common Stock are to
be delivered upon exercise of such warrants, rights or options
or, if no minimum price is specified and such shares are to be
delivered at an option price related to the market value of
the subject shares, an option price bearing the same relation
to the market value of the subject shares at the time such
warrants, rights or options were granted; provided that as to
such options such further adjustment as shall be necessary on
the basis of the actual option price at the time of exercise
shall be made at such time if the actual option price is less
than the aforesaid assumed option price. No further adjustment
of the Warrant Price shall be made as a result of the actual
issuance of the shares of Common Stock referred to in this
subparagraph (c). On the expiration of such warrants, rights
or options, or the termination of such right to convert, the
Warrant Price shall be readjusted to such Warrant Price as
would have pertained had the adjustments made upon the
issuance of such warrants, rights, options or convertible
securities been made upon the basis of the delivery of only
the number of shares of Common Stock actually delivered upon
the exercise of such warrants, rights or options or upon the
conversion of such securities.
(d) For the purposes hereof, any additional shares of
Common Stock issued as a stock dividend shall be deemed to
have been issued for no consideration.
(e) The number of shares of Common Stock at any time
outstanding shall include the aggregate number of shares
deliverable in respect of the convertible securities, rights
and options referred to in subparagraph (c) of this paragraph;
provided that with respect to shares referred to in clause (i)
of subparagraph (c), to the extent that such warrants,
options, rights or conversion privileges are not exercised,
such shares shall be deemed to be outstanding only until the
expiration dates of the warrants, rights, options or
conversion privileges or the prior cancellation thereof.
C. In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the Warrant Price in
effect immediately prior to such subdivision shall be proportionately reduced
and, in case the outstanding shares of the Common Stock of the Company shall be
combined into a smaller number of shares, the Warrant Price in effect
immediately prior to such combination shall be proportionately increased.
D. Upon each adjustment of the Warrant Price pursuant to the provisions
of this ss.8, the number of shares issuable upon the exercise of each Warrant
shall be adjusted by multiplying the Warrant Price in effect prior to the
adjustment by the number of shares of Common Stock covered by the Warrant and
dividing the product so obtained by the adjusted Warrant Price.
E. Except upon consolidation or reclassification of the shares of
Common Stock of the Company as provided for in subsection (C) hereof and except
for readjustment of the Warrant Price upon expiration of warrants, rights or
options as provided for in subparagraph (c) of paragraph 3 of subsection (B)
hereof, the Warrant Price in effect at any time may not be adjusted upward or
increased in any manner whatsoever.
F. Irrespective of any adjustment or change in the Warrant Price or the
number of shares of Common Stock actually purchasable under the several
Warrants, the Warrants theretofore and thereafter issued may continue to express
the Warrant Price per share and the number of shares purchasable thereunder as
the Warrant Price per share and the number of shares purchasable were expressed
in the Warrants when initially issued.
G. If any capital reorganization or reclassification of the capital
stock of the Company (other than a distribution of stock in accordance with
ss.10(B)) or consolidation or merger of the Company with another corporation or
the sale of all or substantially all of its assets to another corporation shall
be effected, then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the holder of each Warrant then outstanding shall thereafter have the
right to purchase and receive upon the basis and upon the terms and conditions
specified herein and in the Warrants and in lieu of the shares of the Common
Stock of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented by each such Warrant, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common stock immediately theretofore purchasable and receivable
upon the exercise of the rights represented by each such Warrant had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provisions shall be made with respect to the
rights and interest of the holder of each Warrant then outstanding to the end
that the provisions thereof (including without limitation provisions for
adjustment of the Warrant Price and of the number of shares purchasable upon the
exercise of each Warrant then outstanding) shall thereafter be applicable as
nearly as may be in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of each Warrant.
H. No adjustment of the Warrant Price shall be made in connection with
the issuance or sale of shares of Common Stock issuable pursuant to currently
outstanding options and warrants granted to officers, directors, employees,
advisory directors, or affiliates of the Company.
I. Whenever the Warrant Price is adjusted as herein provided, the
Company shall (a) forthwith file with the Warrant Agent a certificate signed by
the Chairman of the Board or the President or a Vice President of the Company
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Company, showing in detail the facts requiring such adjustment
and the Warrant Price and the number of shares of Common Stock purchasable upon
exercise of the Warrants after such adjustment and (b) cause a notice stating
that such adjustment has been effected and stating the adjusted Warrant Price
and the number of shares of Common Stock purchasable upon exercise of the
Warrants to be published at least once a week for two consecutive weeks in a
newspaper of general circulation in Dallas, Texas and in New York, New York. The
Company, at its option, may cause a copy of such notice to be sent by first
class mail, postage prepaid, to each registered holder of Warrants at his
address appearing on the Warrant register. The Warrant Agent shall have no duty
with respect to any such certificate filed with it except to keep the same on
file and available for inspection by holders of Warrants during reasonable
business hours. The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of a Warrant to determine whether any facts exist
which may require any adjustment of the Warrant Price, or with respect to the
nature or extent of any adjustment of the Warrant Price when made, or with
respect to the method employed in making such adjustment.
J. The Company may retain a firm of independent certified public
accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) selected by the Board of
Directors of the Company or the Executive Committee of said Board and approved
by the Warrant Agent, to make any computation required under this ss.8, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of any computation made under this ss.8.
K. In case at any time conditions shall arise by reason of action taken
by the Company which, in the opinion of the Board of Directors of the Company,
are not adequately covered by the other provisions of this Agreement and which
might materially and adversely affect the rights of the holders of the Warrants,
or in case at any time any such conditions are expected to arise by reason of
any action contemplated by the Company, the Board of Directors of the Company
shall appoint a firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial statements
of the Company), who shall give their opinion as to the adjustment, if any (not
inconsistent with the standards established in this ss.8), of the Warrant Price
and the number of shares of Common Stock purchasable pursuant hereto (including,
if necessary, any adjustment as to the property which may be purchasable in lieu
thereof upon exercise of the Warrants) which is, or would be, required to
preserve without dilution the rights of the holders of the Warrants. The Board
of Directors of the Company shall make the adjustment recommended forthwith upon
the receipt of such opinion or the taking of any such action contemplated, as
the case may be; provided, however, that no adjustment of the Warrant Price
shall be made which in the opinion of the accountant or firm of accountants
giving the aforesaid opinion would result in an increase of the Warrant Price to
more than the Warrant Price then in effect except as otherwise provided in
subsection E of this ss.8.
9.No Fractional Interests. The Company shall not be required to issue
fractions of shares of Common Stock on the exercise of Warrants. If any fraction
of a share of Common Stock would, except for the provisions of this Section, be
issuable on the exercise of any Warrant (or specified portions thereof), the
Company shall purchase such fraction for an amount in cash equal to the current
value of such fraction (a) computed, if the Common Stock shall be listed or
admitted to unlisted trading privileges on any national or regional securities
exchange, on the basis of the last reported sale price of the Common Stock on
such exchange on the last business day prior to the date of exercise upon which
such a sale shall have been effected (or, if the Common Stock shall be listed or
admitted to unlisted trading privileges on more than one such exchange, on the
basis of such price on the exchange designated from time to time for such
purpose by the Board of Directors of the Company) or (b) computed, if the Common
Stock shall not be listed or admitted to unlisted trading privileges, on the
basis of the average of the high and low bid prices of the Common Stock in the
Nasdaq Stock Market, on the last business day prior to the date of exercise.
10. Notice to Warrantholders.
A. Nothing contained in this Agreement or in any of the Warrants shall
be construed as conferring upon the holders thereof the right to vote or to
consent or to receive notice as stockholders in respect of the meetings of
stockholders for the election of directors of the Company or any other matters,
or any rights whatsoever as stockholders of the Company; provided, however, that
in the event that a meeting of stockholders shall be called to consider and take
action on a proposal for the voluntary dissolution of the Company, other than in
connection with a consolidation, merger or sale of all, or substantially all, of
its property, assets, business and goodwill as an entirety, then and in that
event the Company shall cause a notice thereof to be published at least once a
week for two consecutive weeks in a newspaper of general circulation in Dallas,
Texas and New York, New York, such publication to be completed at least 20 days
prior to the date fixed as a record date or the date of closing the transfer
books for the determination of the stock holders entitled to vote at such
meeting. The Company shall also cause a copy of such notice to be sent by first
class mail, postage prepaid, at least 20 days prior to said date fixed as a
record date or said date of closing the transfer books, to each registered
holder of Warrants at his address appearing on the Warrant register; but failure
to mail or receive such notice or any defect therein or in the mailing thereof
shall not affect the validity of any action taken in connection with such
voluntary dissolution. If such notice shall have been so given and if such a
voluntary dissolution shall be authorized at such meeting or any adjournment
thereof, then for and after the date on which such voluntary dissolution shall
have been duly authorized by the stockholders, the purchase rights represented
by the Warrants and other rights with respect thereto shall cease and terminate.
B. If the Company shall make any distribution on, or to holders of, its
Common Stock (or other property which may be purchasable in lieu thereof upon
the exercise of Warrants) of any property (other than a cash dividend), the
Company shall cause a notice of its intention to make such distribution to be
published at least once a week for two consecutive weeks in a newspaper of
general circulation in Dallas, Texas and New York, New York, such publication to
be completed at least 20 days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the stockholders
entitled to receive such distribution. The Company shall also cause a copy of
such notice to be sent by first class mail, postage prepaid, at least 20 days
prior to said date fixed as a record date or said date of closing the transfer
books, to each registered holder of Warrants at his address appearing on the
Warrant register; but failure to mail or to receive such notice or any defect
therein or in the mailing thereof shall not affect the validity of any action
taken in connection with such distribution.
11. Disposition of Proceeds on Exercise of
Warrants.
A. The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of shares of the Company's stock through the
exercise of such Warrants.
B. The Warrant Agent shall keep copies of this Agreement available for
inspection by holders of Warrants during normal business hours at its principal
office.
12.Redemption of Warrants.
A. At any time on or after __________, 1998, the Company may, at its
option, redeem some or all of the outstanding Warrants at $0.05 per Warrant,
upon thirty (30) days prior written notice, if the closing sale price of the
Common Stock on the American Stock Exchange or any other national securities
exchange, or the closing bid quotation on the Nasdaq Stock Market, has equaled
or exceeded $15.00 for ten (10) consecutive trading days within the 30 day
period immediately preceding the date notice of redemption is given (the
"Redemption Price"). In the event of an adjustment in the Warrant Price pursuant
to ss.8, the Redemption Price shall also be automatically adjusted.
B. The election of the Company to redeem some or all of the Warrants shall
be evidenced by a resolution of the Board of Directors of the Company.
C. Warrants may be exercised at any time on or before the date fixed for
redemption (the "Redemption Date").
D. Notice of redemption shall be given by first class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each holder of Warrants, at his address appearing in the Warrant
register.
All notices of redemption shall state:
(1) The Redemption Date;
(2) That on the Redemption Date the Redemption Price will become due and
payable upon each Warrant;
(3) The place where such Warrants are to be surrendered for redemption and
payment of the Redemption Price; and
(4) The current Warrant Price of the Warrants, the place or
places where such Warrants may be surrendered for exercise, and the
time at which the right to exercise the Warrants will terminate in
accordance with this Agreement.
E. Notice of redemption of Warrants at the election of the Company shall be
given by the Company or, at the Company's request, by the Warrant Agent in the
name and at the expense of the Company.
F. Prior to any Redemption Date, the Company shall deposit with the
Warrant Agent an amount of money sufficient to pay the Redemption Price of all
the Warrants which are to be redeemed on that date. If any Warrant is exercised
pursuant to ss.5, any money so deposited with the Warrant Agent for the
redemption of such Warrant shall be paid to the Company.
G. Notice of redemption having been given as aforesaid, the Warrants so
to be redeemed shall, on the Redemption Date, become redeemable at the
Redemption Price therein specified and on such date (unless the Company shall
default in the payment of the Redemption Price), such Warrants shall cease to be
exercisable and thereafter represent only the right to receive the Redemption
Price. Upon surrender of such Warrants for redemption in accordance with said
notice, such Warrants shall be redeemed by the Company for the Redemption Price.
13. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of ss.15 of this Agreement. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement and at
such time any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
Warrant Agent and deliver such Warrants so countersigned; and in case at the
time any of the Warrants shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor warrant agent; and in
all such cases such Warrants shall have the full force provided in the Warrant
and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrants so countersigned; and in case at that time any of the
Warrants shall not have been countersigned, the Warrant Agent may countersign
such Warrants whether in its prior name or in its changed name; and in all such
cases such Warrants shall have the full force provided in the Warrants and in
this Agreement.
14. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
A. The statements contained herein and in the Warrants shall be taken
as statements of the Company, and the Warrant Agent assumes no responsibility
for the correctness of any of the same except such as describe the Warrant Agent
or action taken or to be taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
B. The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.
C. The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it to perform any duty hereunder either itself or by or through
its attorneys, agents or employees.
D. The Warrant Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel, provided the
Warrant Agent shall have exercised reasonable care in the selection and
continued employment of such counsel.
E. The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
F. The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence or bad faith.
G. The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any cost
and expense which may be incurred, but this provision shall not affect the power
of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be enforced by the
Warrant Agent without the possession of any of the Warrants or the production
thereof at any trial or other proceeding relative thereto, and any such action,
suit or proceeding instituted by the Warrant Agent shall be brought in its name
as Warrant Agent, and any recovery of judgment shall be for the ratable benefit
of the registered holders of the Warrants, as their respective rights or
interests may appear.
H. The Warrant Agent and any stockholder, director, officer or employee
of the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become peculiarly interested in any transaction in
which the Company may be interested, or contract with or lend money to or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
I. The Warrant Agent shall act hereunder solely as agent and not in a
ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence or bad faith.
15.Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company notice
in writing, and to the holders of the Warrants notice by publication, of such
resignation, specifying a date when such resignation shall take effect, which
notice shall be published at least once a week for two consecutive weeks in a
newspaper of general circulation in Dallas, Texas and New York, New York, prior
to the date so specified. The Warrant Agent may be removed by like notice to the
Warrant Agent from the Company and by like publication. If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by the registered holder of a
Warrant (who shall, with such notice, submit his Warrant for inspection by the
Company), then the registered holder of a Warrant may apply to any court of
competent jurisdiction for the appointment of a successor to the Warrant Agent.
Any successor warrant agent, whether appointed by the Company or by such a
court, shall be a bank or trust company having its principal office, and having
capital and surplus as shown by its last published report to its stockholders,
of at least $1,000,000. After appointment, the successor warrant agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor warrant agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
file or publish any notice provided for in this Section, however, or any defect
therein, shall not affect the legality or validity of the resignation or removal
of the Warrant Agent or the appointment of the successor warrant agent, as the
case may be.
16. Identify of Transfer Agent. Forthwith upon the appointment
of any Transfer Agent for the Common Stock or of any subsequent Transfer Agent
for shares of the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such Transfer Agent.
17. Notices. Any notice pursuant to this Agreement to be given or made
by the Warrant Agent or the registered holder of any Warrant to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:
Westower Corporation
7001 NE 40 Avenue
Vancouver, Washington 98661
Attention: President
Any notice pursuant to this Agreement to be given or made by the Company or the
registered holder of any Warrant to or on the Warrant Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing by the Warrant Agent with
the Company) as follows:
American Stock Transfer & Trust Company
18. Supplements and Amendments. The Company and the Warrant
Agent may from time to supplement or amend this Agreement without the approval
of any holders of Warrants in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant Agent
may deem necessary or desirable and which shall not be inconsistent with the
provisions of the Warrants and which shall not adversely affect the interests of
the holders of Warrants.
19. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
20. Merger or Consolidation of the Company. The
Company shall not effect any consolidation or merger with, or sale of
substantially all its property to, any other corporation unless the corporation
resulting from such merger (if not the Company) or consolidation or the
corporation purchasing such property shall expressly assume, by supplemental
agreement satisfactory in form to the Warrant Agent and executed and delivered
to the Warrant Agent, the due and punctual performance and observance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company.
21. Washington Contract. This Agreement and each Warrant issued hereunder
shall be deemed to be a contract made under the laws of the State of Washington
and for all purposes shall be construed in accordance with the laws of said
State.
22. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
23. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes by deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
WESTOWER CORPORATION
By:
Calvin J. Payne, President
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:
<PAGE>
EXHIBIT A
[FORM OF WARRANT]
No. _____ For the Purchase of ___ Shares
of Common Stock
__________, 1997
WESTOWER CORPORATION
REDEEMABLE SERIES A COMMON STOCK PURCHASE WARRANT
EXERCISABLE ON OR BEFORE 5: 00 P. M. , New York City Time 2002
This Warrant Certifies that ________________________________, or registered
assigns, is the holder of __________________Warrants expiring ___________, 2002,
to purchase Common Stock, $.01 par value per share (the "Common Stock"), of
Westower Corporation a Washington corporation (the "Company"). Each Warrant
entitles the holder to purchase from the Company on or before 5:00 P. M. New
York City time, on _________2002, (subject to extensions in the sole discretion
of the Company, the "Expiration Date") on fully-paid and non-assessable share of
Common Stock of the Company at the exercise price (the "Exercise Price") of
$9.00 per share upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office or agency of the Warrant Agent in New York, New
York, but only subject to the conditions set forth herein and in the Warrant
Agreement. Payment of the Exercise Price may be made in cash or by certified
check payable to the order of the Company. As used herein "shares" refers to the
Common Stock of the Company and, where appropriate, to the other securities or
property issuable upon exercise of a Warrant as provided for in the Warrant
Agreement upon the happening of certain events set forth in the Warrant
Agreement.
No Warrant may be exercised after 5:00 P. M., New York City time, on the
Expiration Date. To the extent not exercised by such time, the Warrants shall be
cancelled and retired notwithstanding delivery of the related Warrant
Certificate. All Warrants evidenced hereby shall thereafter be void.
Reference is hereby made to the further provisions of this Warrant Certificate
set forth on the reverse in hereof and such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent
Dated: Westower CorporationInc.
By:
President
By:
Warrant Agent Secretary
By:
Authorized Officer
<PAGE>
[ FORM OF ]
ELECTION TO PURCHASE
Westower Corporation
c/o _______________________
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
shares of the stock provided for therein, and requests that certificates for
such shares shall be issued in the name of
( Please Print )
and be delivered to
at
and, if said number of shares shall not be all of the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: ,
Name of Warrantholder:
( Please Print )
Address:
Signature:
Note: The above signature must correspond with the
name as written upon the face of this
Warrant in every particular, without
alteration or enlargement or any change
whatsoever.
<PAGE>
[ FORM OF ]
ASSIGNMENT
For value received
does hereby sell, assign and transfer unto
the within Warrant, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint attorney, to transfer said
Warrant on the books of the within-named Corporation, with full power of
substitution in the premises.
Date: ,
Signature:
Note: The above signature must correspond with the
name as written upon the face of this
Warrant in every particular, without
alteration or enlargement or any change
whatsoever.
<PAGE>
1997 STOCK COMPENSATION PLAN
of
WESTOWER CORPORATION
(a Washington corporation)
* * * * *
<PAGE>
TABLE OF CONTENTS
* * *
1997 STOCK COMPENSATION PLAN
of
WESTOWER CORPORATION
SECTION SUBJECT PAGE
1. Purpose of Plan .........................................1
2. Stock Subject to the Plan..................................1
3. Administration of the Plan.................................1
(a) General .........................................1
(b) Changes in Law Applicable.........................2
4. Types of Awards Under the Plan.............................2
5. Persons to Options Shall Be Granted........................2
(a) Nonqualified Options..............................2
(b) Incentive Options.................................2
6. Factors to Be Considered in Granting Options...............3
7. Time of Granting Option....................................3
8. Terms and Conditions of Options............................3
(a) Number of Shares..................................3
(b) Type of Option....................................3
(c) Option Period.....................................3
(1) General..................................3
(2) Termination of Employment................3
(3) Cessation of Service as Director
or Advisor...............................4
(4) Disability...............................4
(5) Death....................................4
(6) Acceleration and Exercise Upon Change
of Control...............................4
(d) Option Prices.....................................5
(1) Nonqualified Options.....................5
(2) Incentive Options........................5
(3) Determination of Fair Market Value.......5
(e) Exercise of Options...............................6
(f) Nontransferability of Options.....................6
(g) Limitations on 10% Shareholders...................6
(h) Limits on Vesting of Incentive Options............6
(i) Compliance with Securities Laws...................6
(j) Additional Provisions.............................7
9. Medium and Time of Payment.................................7
10. Alternate Stock Appreciation Rights........................8
(a) Award of Alternate Stock Rights...................8
(b) Alternate Stock Rights Agreement..................8
(c) Exercise .........................................8
(d) Amount of Payment.................................8
(e) Form of Payment...................................8
(f) Termination of SAR ...............................8
(g) Effect of Exercise of SAR.........................9
(h) Effect of Exercise of Related Option..............9
(i) Nontransferability of SAR.........................9
11. Reload Options
(a) Authorization of Reload Options...................9
(b) Reload Option Amendment...........................9
(c) Reload Option Price...............................9
(d) Term and Exercise.................................9
(e) Termination of Employment.........................9
(f) Applicability of Other Sections...................9
12. Rights as a Shareholder....................................9
13. Optionee's Agreement to Serve..............................10
14. Adjustments on Changes in Capitalization...................10
(a) Changes in Capitalization.........................10
(b) Reorganization, Dissolution or Liquidation........10
(c) Change in Par Value...............................10
(d) Notice of Adjustments.............................10
(e) Effect Upon Holder of Option......................11
(f) Right of Company to Make Adjustments..............11
15. Investment Purpose.........................................11
16. No Obligation to Exercise Option or SAR....................12
17. Modification, Extension, and Renewal of Options............12
18. Effective Date of the Plan.................................12
19. Termination of the Plan....................................12
20. Amendment of the Plan......................................12
21. Withholding .........................................12
22. Indemnification of Committee...............................12
23. Application of Funds.......................................13
24. Governing Law .........................................13
<PAGE>
1997 STOCK COMPENSATION PLAN
OF
WESTOWER CORPORATION
1. Purpose of Plan. This 1997 Stock Compensation Plan ("Plan") is
intended to encourage ownership of the common stock of WESTOWER CORPORATION
("Company") by certain officers, directors, employees and advisors of the
Company or any Subsidiary or Subsidiaries of the Company (as hereinafter
defined) in order to provide additional incentive for such persons to promote
the success and the business of the Company or its Subsidiaries and to encourage
them to remain in the employ of the Company or its Subsidiaries by providing
such persons an opportunity to benefit from any appreciation of the common stock
of the Company through the issuance of stock options and related stock
appreciation rights to such persons in accordance with the terms of the Plan. It
is further intended that options granted pursuant to this Plan shall constitute
either incentive stock options ("Incentive Options") within the meaning of
Section 422 (formerly Section 422A) of the Internal Revenue Code of 1986, as
amended ("Code"), or options which do not constitute Incentive Options
("Nonqualified Options") as determined by the Committee (as hereinafter defined)
at the time of issuance of such options. Incentive Options, Nonqualified Options
and Reload Options (as defined in Section 11 hereof) are herein sometimes
referred to collectively as "Options". As used herein, the term Subsidiary or
Subsidiaries shall mean any corporation (other than the employer corporation) in
an unbroken chain of corporations beginning with the employer corporation if, at
the time of granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
2. Stock Subject to the Plan. Subject to adjustment as provided in
Section 14 hereof, there will be reserved for the use upon the exercise of
Options to be granted from time to time under the Plan, an aggregate of Four
hundred thousand (400,000) shares of the common stock, $.01 par value, of the
Company ("Common Stock"), which shares in whole or in part shall be authorized,
but unissued, shares of the Common Stock or issued shares of Common Stock which
shall have been reacquired by the Company as determined from time to time by the
Board of Directors of the Company ("Board of Directors"). To determine the
number of shares of Common Stock available at any time for the granting of
Options under the Plan, there shall be deducted from the total number of
reserved shares of Common Stock, the number of shares of Common Stock in respect
of which Options have been granted pursuant to the Plan which remain outstanding
or which have been exercised. If and to the extent that any Option to purchase
reserved shares shall not be exercised by the optionee for any reason or if such
Option to purchase shall terminate as provided herein, such shares which have
not been so purchased hereunder shall again become available for the purposes of
the Plan unless the Plan shall have been terminated, but such unpurchased shares
shall not be deemed to increase the aggregate number of shares specified above
to be reserved for purposes of the Plan (subject to adjustment as provided in
Section 14 hereof).
3. Administration of the Plan.
(a) General. The Plan shall be administered by a Compensation
Committee ("Committee") appointed by the Board of Directors, which
Committee shall consist of not less than two (2) members of the Board
of Directors who are not eligible to participate in the Plan, and have
not, for a period of at least one (1) year prior thereto been eligible
to participate in the Plan, except that if at any time there shall be
less than two (2) directors who are qualified to serve on the
Committee, then the Plan shall be administered by the full Board of
Directors. All references in this Plan to the Committee shall be deemed
to refer instead to the full Board of Directors at any time there is
not a committee of two (2) members qualified to act hereunder. The
Board of Directors may from time to time appoint members of the
Committee in substitution for or in addition to members previously
appointed and may fill vacancies, however caused, in the Committee. If
the Board of Directors does not designate a Chairman of the Committee,
the Committee shall select one of its members as its Chairman. The
Committee shall hold its meetings at such times and places as it shall
deem advisable. A majority of its members shall constitute a quorum.
Any action of the Committee shall be taken by a majority vote of its
members at a meeting at which a quorum is present. Notwithstanding the
preceding, any action of the Committee may be taken without a meeting
by a written consent signed by all of the members, and any action so
taken shall be deemed fully as effective as if it had been taken by a
vote of the members present in person at the meeting duly called and
held. The Committee may appoint a Secretary, shall keep minutes of its
meetings, and shall make such rules and regulations for the conduct of
its business as it shall deem advisable.
The Committee shall have the sole authority and power, subject
to the express provisions and limitations of the Plan, to construe the
Plan and option agreements granted hereunder, and to adopt, prescribe,
amend, and rescind rules and regulations relating to the Plan, and to
make all determinations necessary or advisable for administering the
Plan, including, but not limited to, (i) who shall be granted Options
under the Plan, (ii) the term of each Option, (iii) the number of
shares covered by such Option, (iv) whether the Option shall constitute
an Incentive Option or a Nonqualified Option or a Reload Option, (v)
the exercise price for the purchase of the shares of the Common Stock
covered by the Option, (vi) the period during which the Option may be
exercised, (vii) whether the right to purchase the number of shares
covered by the Option shall be fully vested on issuance of the Option
so that such shares may be purchased in full at one time or whether the
right to purchase such shares shall become vested over a period of time
so that such shares may only be purchased in installments, and (viii)
the time or times at which Options shall be granted. The Committee's
determinations under the Plan, including the above enumerated
determinations, need not be uniform and may be made by it selectively
among the persons who receive, or are eligible to receive, Options
under the Plan, whether or not such persons are similarly situated.
The interpretation by the Committee of any provision of the
Plan or of any option agreement entered into hereunder with respect to
any Incentive Option shall be in accordance with Section 422 of the
Code and the regulations issued thereunder, as such section or
regulations may be amended from time to time, in order that the rights
granted hereunder and under said option agreements shall constitute
"Incentive Stock Options" within the meaning of such section. The
interpretation and construction by the Committee of any provision of
the Plan or of any Option granted hereunder shall be final and
conclusive, unless otherwise determined by the Board of Directors. No
member of the Board of Directors or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan
or any Option granted under it. Upon issuing an Option under the Plan,
the Committee shall report to the Board of Directors the name of the
person granted the Option, whether the Option is an Incentive Option or
a Nonqualified Option, the number of shares of Common Stock covered by
the Option, and the terms and conditions of such Option.
(b) Changes in Law Applicable. If the laws relating to
Incentive Options or Nonqualified Options are changed, altered or
amended during the term of the Plan, the Board of Directors shall have
full authority and power to alter or amend the Plan with respect to
Incentive Options or Nonqualified Options, respectively, to conform to
such changes in the law without the necessity of obtaining further
shareholder approval, unless the changes require such approval.
4. Types of Awards Under the Plan. Awards under the Plan may
be in the form of either Options, alternate stock appreciation rights (as
described in Section 10 hereof), or a combination thereof.
5. Persons to Whom Options Shall be Granted.
(a) Nonqualified Options. Nonqualified Options shall be
granted only to officers, directors (other than "Outside Directors" of the
Company or a Subsidiary [as hereinafter defined]), employees and advisors of the
Company or a Subsidiary who, in the judgment of the Committee, are responsible
for or contribute to the management or success of the Company or a Subsidiary
and who, at the time of the granting of the Nonqualified Options, are either
officers, directors (other than Outside Directors), employees or advisors of the
Company or a Subsidiary. As used herein, the term "Outside Director" shall mean
any director of the Company or a Subsidiary who is not an employee of the
Company or a Subsidiary.
(b) Incentive Options. Incentive Options shall be granted only
to employees of the Company or a Subsidiary who, in the judgment of the
Committee, are responsible for or contribute to the management or success of the
Company or a Subsidiary and who, at the time of the granting of the Incentive
Option are either an employee of the Company or a Subsidiary. Subject to the
provisions of Section 8(g) hereof, no individual shall be granted an Incentive
Option who, immediately before such Incentive Option was granted, would own more
than ten percent (10%) of the total combined voting power or value of all
classes of stock of the Company ("10% Shareholder").
6. Factors to Be Considered in Granting Options. In making any
determination as to persons to whom Options shall be granted and as to the
number of shares to be covered by such Options, the Committee shall take into
account the duties and responsibilities of the respective officers, directors,
employees, or advisors, their current and potential contributions to the success
of the Company or a Subsidiary, and such other factors as the Committee shall
deem relevant in connection with accomplishing the purpose of the Plan.
7. Time of Granting Options. Neither anything contained in the Plan or
in any resolution adopted or to be adopted by the Board of Directors or the
Shareholders of the Company or a Subsidiary nor any action taken by the
Committee shall constitute the granting of any Option. The granting of an Option
shall be effected only when a written Option Agreement acceptable in form and
substance to the Committee, subject to the terms and conditions hereof including
those set forth in Section 8 hereof, shall have been duly executed and delivered
by or on behalf of the Company and the person to whom such Option shall be
granted. No person shall have any rights under the Plan until such time, if any,
as a written Option Agreement shall have been duly executed and delivered as set
forth in this Section 7.
8. Terms and Conditions of Options. All Options granted pursuant to
this Plan must be granted within ten (10) years from the date the Plan is
adopted by the Board of Directors of the Company. Each Option Agreement
governing an Option granted hereunder shall be subject to at least the following
terms and conditions, and shall contain such other terms and conditions, not
inconsistent therewith, that the Committee shall deem appropriate:
(a) Number of Shares. Each Option shall state the number
of shares of Common Stock which it represents.
(b) Type of Option. Each Option shall state whether
it is intended to be an Incentive Option or a Nonqualified Option.
(c) Option Period.
(1) General. Each Option shall state the date upon
which it is granted. Each Option shall be exercisable in whole
or in part during such period as is provided under the terms
of the Option subject to any vesting period set forth in the
Option, but in no event shall an Option be exercisable either
in whole or in part after the expiration of ten (10) years
from the date of grant; provided, however, if an Incentive
Option is granted to a 10% Shareholder, such Incentive Option
shall not be exercisable more than five (5) years from the
date of grant thereof.
(2) Termination of Employment. Except as otherwise
provided in case of Disability (as hereinafter defined), death
or Change of Control (as hereinafter defined), no Option shall
be exercisable after an optionee who is an employee of the
Company or a Subsidiary ceases to be employed by the Company
or a Subsidiary as an employee; provided, however, that the
Committee shall have the right in its sole discretion, but not
the obligation, to extend the exercise period for not more
than three (3) months following the date of termination of
such optionee's employment; provided further, however, that no
Option shall be exercisable after the expiration of ten (10)
years from the date it is granted and provided further, no
Incentive Option granted to a 10% Shareholder shall be
exercisable after the expiration of five (5) years from the
date it is granted.
(3) Cessation of Service as Director or Advisor. In
the event an optionee who was a director or advisor of the
Company or a Subsidiary ceases to be a director or advisor of
the Company or a Subsidiary for any reason, other than
Disability or death, prior to the full exercise of the Option,
such optionee may exercise his Option at any time within
ninety (90) days after such optionee's status as a director or
advisor of the Company or a Subsidiary is so terminated to the
extent he was entitled to exercise such Option at the date
such optionee's status as a director or advisor of the Company
or a Subsidiary terminated; provided, however, that no Option
shall be exercisable after the expiration of ten (10) years
from the date it is granted.
(4) Disability. If an optionee's employment is
terminated by reason of the permanent and total Disability of
such optionee or if an optionee who is a director or advisor
of the Company or a Subsidiary ceases to serve as a director
or advisor by reason of the permanent and total Disability of
such optionee, the Committee shall have the right in its sole
discretion, but not the obligation, to extend the exercise
period for not more than one (1) year following the date of
termination of the optionee's employment or the date such
optionee ceases to be a director or advisor of the Company or
a Subsidiary, as the case may be, subject to the condition
that no Option shall be exercisable after the expiration of
ten (10) years from the date it is granted and subject to the
further condition that no Incentive Option granted to a 10%
Shareholder shall be exercisable after the expiration of five
(5) years from the date it is granted. For purposes of this
Plan, the term "Disability" shall mean the inability of the
optionee to fulfill such optionee's obligations to the Company
or a Subsidiary by reason of any physical or mental impairment
which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less
than twelve (12) months as determined by a physician
acceptable to the Committee in its sole discretion.
(5) Death. If an optionee dies while in the employ of
the Company or a Subsidiary, or while serving as a director or
advisor of the Company or a Subsidiary, and shall not have
fully exercised Options granted pursuant to the Plan, such
Options may be exercised in whole or in part at any time
within one (1) year after the optionee's death, by the
executors or administrators of the optionee's estate or by any
person or persons who shall have acquired the Options directly
from the optionee by bequest or inheritance, but only to the
extent that the optionee was entitled to exercise such Option
at the date of such optionee's death, subject to the condition
that no Option shall be exercisable after the expiration of
ten (10) years from the date it is granted and subject to the
further condition that no Incentive Option granted to a 10%
Shareholder shall be exercisable after the expiration of five
(5) years from the date it is granted.
(6) Acceleration and Exercise Upon Change of Control.
Notwithstanding the preceding provisions of this Section 8(c),
if any Option granted under the Plan provides for either (a)
an incremental vesting period whereby such Option may only be
exercised in installments as such incremental vesting period
is satisfied or (b) a delayed vesting period whereby such
Option may only be exercised after the lapse of a specified
period of time, such as after the expiration of one (1) year,
such vesting period shall be accelerated upon the occurrence
of a Change of Control (as hereinafter defined) of the
Company, or a threatened Change of Control of the Company as
determined by the Committee, so that such Option shall
thereupon become exercisable immediately in part or its
entirety by the holder thereof, as such holder shall elect.
For the purposes of this Plan, a "Change of Control" shall be
deemed to have occurred if:
(i) Any "person", including a "group" as
determined in accordance with Section 13(d)(3) of the
Securities Exchange Act of 1934 ("Exchange Act") and
the Rules and Regulations promulgated thereunder, is
or becomes, through one or a series of related
transactions or through one or more intermediaries,
the beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of
the combined voting power of the Company's then
outstanding securities, other than a person who is
such a beneficial owner on the effective date of the
Plan and any affiliate of such person;
(ii) As a result of, or in connection with,
any tender offer or exchange offer, merger or other
business combination, sale of assets or contested
election, or any combination of the foregoing
transactions ("Transaction"), the persons who were
Directors of the Company before the Transaction shall
cease to constitute a majority of the Board of
Directors of the Company or any successor to the
Company;
(iii) Following the effective date of the Plan,
the Company is merged or consolidated with another
corporation and as a result of such merger or
consolidation less than 40% of the outstanding voting
securities of the surviving or resulting corporation
shall then be owned in the aggregate by the former
stockholders of the Company, other than (x) any party
to such merger or consolidation, or (y) any
affiliates of any such party;
(iv) A tender offer or exchange offer is
made and consummated for the ownership of securities
of the Company representing 25% or more of the
combined voting power of the Company's then
outstanding voting securities; or
(v) The Company transfers more than 50% of
its assets, or the last of a series of transfers
result in the transfer of more than 50% of the assets
of the Company, to another corporation that is not a
wholly-owned corporation of the Company. For purposes
of this subsection 8(c)(6)(v), the determination of
what constitutes more than 50% of the assets of the
Company shall be determined based on the sum of the
values attributed to (i) the Company's real property
as determined by an independent appraisal thereof,
and (ii) the net book value of all other assets of
the Company, each taken as of the date of the
Transaction involved.
In addition, upon a Change of Control, any Options
previously granted under the Plan to the extent not already
exercised may be exercised in whole or in part either
immediately or at any time during the term of the Option as
such holder shall elect.
(d) Option Prices.
(1) Nonqualified Options. The purchase price or
prices of the shares of the Common Stock which shall be
offered to any person under the Plan and covered by a
Nonqualified Option shall be the price determined by the
Committee at the time of granting of the Nonqualified Option,
which price may be less than, equal to or higher than one
hundred percent (100%) of the fair market value of the Common
Stock at the time of granting the Nonqualified Option.
(2) Incentive Options. The purchase price or prices
of the shares of the Common Stock which shall be offered to
any person under the Plan and covered by an Incentive Option
shall be one hundred percent (100%) of the fair market value
of the Common Stock at the time of granting the Incentive
Option or such higher purchase price as may be determined by
the Committee at the time of granting the Incentive Option;
provided, however, if an Incentive Option is granted to a 10%
Shareholder, the purchase price of the shares of the Common
Stock of the Company covered by such Incentive Option may not
be less than one hundred ten percent (110%) of the fair market
value of such shares on the day the Incentive Option is
granted.
(3) Determination of Fair Market Value. During such
time as the Common Stock of the Company is not listed upon an
established stock exchange, the fair market value per share
shall be deemed to be the closing sales price of the Common
Stock on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") on the day the Option is
granted, as reported by NASDAQ, if the Common Stock is so
quoted, and if not so quoted, the mean between dealer "bid"
and "ask," prices of the Common Stock in the New York
over-the-counter market on the day the Option is granted, as
reported by the National Association of Securities Dealers,
Inc. If the Common Stock is listed upon an established stock
exchange or exchanges, such fair market value shall be deemed
to be the highest closing price of the Common Stock on such
stock exchange or exchanges on the day the Option is granted
or, if no sale of the Common Stock of the Company shall have
been made on established stock exchange on such day, on the
next preceding day on which there was a sale of such stock. If
there is no market price for the Common Stock, then the Board
of Directors and the Committee may, after taking all relevant
facts into consideration, determine the fair market value of
the Common Stock.
(e) Exercise of Options. To the extent that a holder
of an Option has a current right to exercise, the Option may
be exercised from time to time by written notice to the
Company at its principal place of business. Such notice shall
state the election to exercise the Option, the number of whole
shares in respect of which it is being exercised, shall be
signed by the person or persons so exercising the Option, and
shall contain any investment representation required by
Section 8(i) hereof. Such notice shall be accompanied by
payment of the full purchase price of such shares and by the
Option Agreement evidencing the Option. In addition, if the
Option shall be exercised, pursuant to Section 8(c)(4) or
Section 8(c)(5) hereof, by any person or persons other than
the optionee, such notice shall also be accompanied by
appropriate proof of the right of such person or persons to
exercise the Option. The Company shall deliver a certificate
or certificates representing such shares as soon as
practicable after the aforesaid notice and payment of such
shares shall be received. The certificate or certificates for
the shares as to which the Option shall have been so exercised
shall be registered in the name of the person or persons so
exercising the Option. In the event the Option shall not be
exercised in full, the Secretary of the Company shall endorse
or cause to be endorsed on the Option the number of shares
which has been exercised thereunder and the number of shares
that remain exercisable under the Option and return such
Option Agreement to the holder thereof.
(f) Nontransferability of Options. An Option granted
pursuant to the Plan shall be exercisable only by the optionee
or the optionee's court appointed guardian as set forth in
Section 8(c)(4) hereof during the optionee's lifetime and
shall not be assignable or transferable by the optionee
otherwise than by Will or the laws of descent and
distribution. An Option granted pursuant to the Plan shall not
be assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise other than by Will or the laws
of descent and distribution) and shall not be subject to
execution, attachment, or similar process. Any attempted
transfer, assignment, pledge, hypothecation, or other
disposition of any Option or of any rights granted thereunder
contrary to the foregoing provisions of this Section 8(f), or
the levy of any attachment or similar process upon an Option
or such rights, shall be null and void.
(g) Limitations on 10% Shareholders. No Incentive
Option may be granted under the Plan to any 10% Shareholder
unless (i) such Incentive Option is granted at an option price
not less than one hundred ten percent (110%) of the fair
market value of the shares on the day the Incentive Option is
granted and (ii) such Incentive Option expires on a date not
later than five (5) years from the date the Incentive Option
is granted.
(h) Limits on Vesting of Incentive Options. An
individual may be granted one or more Incentive Options,
provided that the aggregate fair market value (as determined
at the time such Incentive Option is granted) of the stock
with respect to which Incentive Options are exercisable for
the first time by such individual during any calendar year
shall not exceed $100,000. To the extent the $100,000
limitation in the preceding sentence is exceeded, such option
shall be treated as an option which is not an Incentive
Option.
(i) Compliance with Securities Laws. The Plan and the
grant and exercise of the rights to purchase shares hereunder,
and the Company's obligations to sell and deliver shares upon
the exercise of rights to purchase shares, shall be subject to
all applicable federal and state laws, rules and regulations,
and to such approvals by any regulatory or governmental agency
as may, in the opinion of counsel for the Company, be
required, and shall also be subject to all applicable rules
and regulations of any stock exchange upon which the Common
Stock of the Company may then be listed. At the time of
exercise of any Option, the Company may require the optionee
to execute any documents or take any action which may be then
necessary to comply with the Securities Act of 1933, as
amended ("Securities Act"), and the rules and regulations
promulgated thereunder, or any other applicable federal or
state laws regulating the sale and issuance of securities, and
the Company may, if it deems necessary, include provisions in
the stock option agreements to assure such compliance. The
Company may, from time to time, change its requirements with
respect to enforcing compliance with federal and state
securities laws, including the request for and enforcement of
letters of investment intent, such requirements to be
determined by the Company in its judgment as necessary to
assure compliance with said laws. Such changes may be made
with respect to any particular Option or stock issued upon
exercise thereof. Without limiting the generality of the
foregoing, if the Common Stock issuable upon exercise of an
Option granted under the Plan is not registered under the
Securities Act, the Company at the time of exercise will
require that the registered owner execute and deliver an
investment representation agreement to the Company in form
acceptable to the Company and its counsel, and the Company
will place a legend on the certificate evidencing such Common
Stock restricting the transfer thereof, which legend shall be
substantially as follows:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR THE
PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT
BE OFFERED, SOLD OR TRANSFERRED UNTIL EITHER (i) A
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR
SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) THE
COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT
REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED OFFER, SALE OR
TRANSFER.
(j) Additional Provisions. The Option Agreements
authorized under the Plan shall contain such other provisions
as the Committee shall deem advisable, including, without
limitation, restrictions upon the exercise of the Option. Any
such Option Agreement with respect to an Incentive Option
shall contain such limitations and restrictions upon the
exercise of the Incentive Option as shall be necessary in
order that the option will be an "Incentive Stock Option" as
defined in Section 422 of the Code.
9. Medium and Time of Payment. The purchase price of the shares of the
Common Stock as to which the Option shall be exercised shall be paid in full
either (i) in cash at the time of exercise of the Option, (ii) by tendering to
the Company shares of the Company's Common Stock having a fair market value (as
of the date of receipt of such shares by the Company) equal to the purchase
price for the number of shares of Common Stock purchased, or (iii) partly in
cash and partly in shares of the Company's Common Stock valued at fair market
value as of the date of receipt of such shares by the Company. Cash payment for
the shares of the Common Stock purchased upon exercise of the Option shall be in
the form of either a cashier's check, certified check or money order. Personal
checks may be submitted, but will not be considered as payment for the shares of
the Common Stock purchased and no certificate for such shares will be issued
until the personal check clears in normal banking channels. If a personal check
is not paid upon presentment by the Company, then the attempted exercise of the
Option will be null and void. In the event the optionee tenders shares of the
Company's Common Stock in full or partial payment for the shares being purchased
pursuant to the Option, the shares of Common Stock so tendered shall be
accompanied by fully executed stock powers endorsed in favor of the Company with
the signature on such stock power being guaranteed. If an optionee tenders
shares, such optionee assumes sole and full responsibility for the tax
consequences, if any, to such optionee arising therefrom, including the possible
application of Code Section 424(c), or its successor Code section, which negates
any nonrecognition of income rule with respect to such transferred shares, if
such transferred shares have not been held for the minimum statutory holding
period to receive preferential tax treatment.
10. Alternate Stock Appreciation Rights.
(a) Award of Alternate Stock Rights. Concurrently with or
subsequent to the award of any Option to purchase one or more shares of
Common Stock, the Committee may in its sole discretion, subject to the
provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the optionee with respect to each
share of Common Stock covered by an Option ("Related Option"), a
related alternate stock appreciation right ("SAR"), permitting the
optionee to be paid the appreciation on the Related Option in lieu of
exercising the Related Option. A SAR granted with respect to an
Incentive Option must be granted together with the Related Option. A
SAR granted with respect to a Nonqualified Option may be granted
together with or subsequent to the grant of such Related Option.
(b) Alternate Stock Rights Agreement. Each SAR shall
be on such terms and conditions not inconsistent with this Plan as
the Committee may determine and shall be evidenced by a written
agreement executed by the Company and the optionee receiving the
Related Option.
(c) Exercise. An SAR may be exercised only if and to the
extent that its Related Option is eligible to be exercised on the date
of exercise of the SAR. To the extent that a holder of a SAR has a
current right to exercise, the SAR may be exercised from time to time
by written notice to the Company at its principal place of business.
Such notice shall state the election to exercise the SAR, the number of
shares in respect of which it is being exercised, shall be signed by
the person so exercising the SAR and shall be accompanied by the
agreement evidencing the SAR and the Related Option. In the event the
SAR shall not be exercised in full, the Secretary of the Company shall
endorse or cause to be endorsed on the SAR and the Related Option the
number of shares which have been exercised thereunder and the number of
shares that remain exercisable under the SAR and the Related Option and
return such SAR and Related Option to the holder thereof.
(d) Amount of Payment. The amount of payment to which an
optionee shall be entitled upon the exercise of each SAR shall be equal
to 100% of the amount, if any, by which the fair market value of a
share of Common Stock on the exercise date exceeds the fair market
value of a share of Common Stock on the date the Option related to said
SAR was granted or became effective, as the case may be; provided,
however, the Company may, in its sole discretion, withhold from such
cash payment any amount necessary to satisfy the Company's obligation
for withholding taxes with respect to such payment. For this purpose,
the fair market value of a share of Common Stock shall be determined as
set forth in Section 8(d) hereof.
(e) Form of Payment. The amount payable by the Company to an
optionee upon exercise of a SAR may be paid in shares of Common Stock,
cash or a combination thereof. The number of shares of Common Stock to
be paid to an optionee upon such optionee's exercise of SAR shall be
determined by dividing the amount of payment determined pursuant to
Section 10(d) hereof by the fair market value of a share of Common
Stock on the exercise date of such SAR. For purposes of this Plan, the
exercise date of a SAR shall be the date the Company receives written
notification from the optionee of the exercise of the SAR in accordance
with the provisions of Section 10(c) hereof. As soon as practicable
after exercise, the Company shall either deliver to the optionee the
amount of cash due such optionee or a certificate or certificates for
such shares of Common Stock. All such shares shall be issued with the
rights and restrictions specified herein.
(f) Termination of SAR. Except as otherwise provided in case
of Disability (as defined in Section 8(c)(4) hereof) or death, no SAR
shall be exercisable after an optionee ceases to be an employee,
director or advisor of the Company or Subsidiary; provided, however,
that the Committee shall have the right in its sole discretion, but not
the obligation, to extend the exercise period for not more than three
(3) months following the date such optionee ceases to be an employee,
director or advisor of the Company or a Subsidiary; provided further,
that the Committee may not extend the period during which an optionee
may exercise a SAR for a period greater than the period during which an
optionee may exercise the Related Option. If an optionee's position as
an employee, director or advisor of the Company is terminated due to
the Disability or death of such optionee, the Committee shall have the
right, in its sole discretion, but not the obligation, to extend the
exercise period applicable to the SAR for a period not to exceed the
period in which the optionee may exercise the Option related to said
SAR as set forth in Sections 8(c)(4) and 8(c)(5) hereof, respectively.
(g) Effect of Exercise of SAR. The exercise of any SAR shall
cancel and terminate the right to purchase an equal number of shares
covered by the Related Option.
(h) Effect of Exercise of Related Option. Upon the exercise or
termination of any Related Option, the SAR with respect to such Related
Option shall terminate to the extent of the number of shares of Common
Stock as to which the Related Option was exercised or terminated.
(i) Nontransferability of SAR. A SAR granted pursuant to this
Plan shall be exercisable only by the optionee or the optionee's court
appointed guardian as set forth in Section 8(c)(4) hereof during the
optionee's lifetime and, subject to the provisions of Section 10(f)
hereof, shall not be assignable or transferable by the optionee. A SAR
granted pursuant to the Plan shall not be assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise) and
shall not be subject to execution, attachment, or similar process. Any
attempted transfer, assignment, pledge, hypothecation, or other
disposition of any SAR or of any rights granted thereunder contrary to
the foregoing provisions of this Section 10(i), or the levy of any
attachment or similar process upon a SAR or such rights, shall be null
and void.
11. Reload Options.
(a) Authorization of Reload Options. Concurrently with the
award of Nonqualified Options and/or the award of Incentive Options to
any participant in the Plan, the Committee may authorize reload options
("Reload Options") to purchase for cash or shares that number of shares
of Common Stock equal to the sum of:
(1) The number of shares of Common Stock
used to exercise the underlying Nonqualifying Option or
Incentive Option; and
(2) To the extent authorized by the Committee, the
number of shares of Common Stock used to satisfy any tax
withholding requirement incident to the exercise of the
underlying Nonqualifying Option or Incentive Options.
The grant of a Reload Option will become effective upon the exercise of
the underlying Nonqualifying Option, Incentive Option or Reload Option
through the use of shares of Common Stock held by the optionee for at
least 12 months. Notwithstanding the fact that the underlying option
may be an Incentive Option, a Reload Option is not intended to qualify
as an "incentive stock option" under Section 422 of the Code.
(b) Reload Option Amendment. Each Option Agreement shall state
whether the Committee has authorized Reload Options with respect to the
underlying Nonqualifying Option and/or Incentive Option. Upon the
exercise of an underlying Option or Incentive Option, the Reload Option
will be evidenced by an amendment to the underlying Option Agreement.
(c) Reload Option Price. The option price per share of Common
Stock deliverable upon the exercise of a Reload Option shall be the
fair market value of a share of Common Stock on the date the grant of
the Reload Option becomes effective.
(d) Term and Exercise. Each Reload Option is fully exercisable
six months from the effective date of grant. The term of each Reload
Option shall be equal to the remaining option term of the underlying
Nonqualifying Option and/or Incentive Option.
(e) Termination of Employment. No additional Reload Options
shall be granted to optionees when Nonqualifying Options, Incentive
Option and/or Reload Options are exercised pursuant to the terms of
this Plan following termination of the optionee's employment.
(f) Applicability of Other Sections. To the extent not
inconsistent with the foregoing provisions of this Section, the other
Sections of this Plan pertaining to Options, including Sections 5, 8,
and 9, are incorporated herein by this reference thereto as through
fully set forth herein.
12. Rights as a Shareholder. The holder of an Option or a SAR shall
have no rights as a shareholder with respect to the shares covered by the Option
or SAR until the due exercise of the Option, Related Option, or SAR and the date
of issuance of one or more stock certificates to such holder for such shares. 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 such stock certificate is issued, except as
provided in Section 14 hereof.
13. Optionee's Agreement to Serve. Each employee receiving an Option
shall, as one of the terms of the Option Agreement agree that such employee will
remain in the employ of the Company or Subsidiary for a period of at least one
(1) year from the date on which the Option shall be granted to such employee;
and that such employee will, during such employment, devote such employee's
entire time, energy, and skill to the service of the Company or a Subsidiary as
may be required by the management thereof, subject to vacations, sick leaves,
and military absences. Such employment, subject to the provisions of any written
contract between the Company or a Subsidiary and such employee, shall be at the
pleasure of the Board of Directors of the Company or a Subsidiary, and at such
compensation as the Company or a Subsidiary shall reasonably determine. Any
termination of such employee's employment during the period which the employee
has agreed pursuant to the foregoing provisions of this Section 13 to remain in
employment that is either for cause or voluntary on the part of the employee
shall be deemed a violation by the employee of such employee's agreement. In the
event of such violation, any Option or Options held by such employee, to the
extent not theretofore exercised, shall forthwith terminate, unless otherwise
determined by the Committee. Notwithstanding the preceding, neither the action
of the Company in establishing the Plan nor any action taken by the Company, a
Subsidiary or the Committee under the provisions hereof shall be construed as
granting the optionee the right to be retained in the employ of the Company or a
Subsidiary, or to limit or restrict the right of the Company or a Subsidiary, as
applicable, to terminate the employment of any employee of the Company or a
Subsidiary, with or without cause.
14. Adjustments on Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action
by the Shareholders of the Company, the number of shares of Common
Stock covered by the Plan, the number of shares of Common Stock covered
by each outstanding Option, and the exercise price per share thereof
specified in each such Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
of the Company resulting from a subdivision or consolidation of shares
or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such shares effected
without receipt of consideration by the Company after the date the
Option is granted, so that upon exercise of the Option, the optionee
shall receive the same number of shares the optionee would have
received had the optionee been the holder of all shares subject to such
optionee's outstanding Option immediately before the effective date of
such change in the number of issued shares of the Common Stock of the
Company.
(b) Reorganization, Dissolution or Liquidation. Subject to any
required action by the Shareholders of the Company, if the Company
shall be the surviving corporation in any merger or consolidation, each
outstanding Option shall pertain to and apply to the securities to
which a holder of the number of shares of Common Stock subject to the
Option would have been entitled. A dissolution or liquidation of the
Company or a merger or consolidation in which the Company is not the
surviving corporation, shall cause each outstanding Option to terminate
as of a date to be fixed by the Committee (which date shall be as of or
prior to the effective date of any such dissolution or liquidation or
merger or consolidation); provided, that not less than thirty (30) days
written notice of the date so fixed as such termination date shall be
given to each optionee, and each optionee shall, in such event, have
the right, during the said period of thirty (30) days preceding such
termination date, to exercise such optionee's Option in whole or in
part in the manner herein set forth.
(c) Change in Par Value. In the event of a change in the
Common Stock of the Company as presently constituted, which change is
limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par
value, the shares resulting from any change shall be deemed to be the
Common Stock within the meaning of the Plan.
(d) Notice of Adjustments. To the extent that the adjustments
set forth in the foregoing paragraphs of this Section 14 relate to
stock or securities of the Company, such adjustments, if any, shall be
made by the Committee, whose determination in that respect shall be
final, binding and conclusive, provided that each Incentive Option
granted pursuant to this Plan shall not be adjusted in a manner that
causes the Incentive Option to fail to continue to qualify as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
The Company shall give timely notice of any adjustments made to each
holder of an Option under this Plan and such adjustments shall be
effective and binding on the optionee.
(e) Effect Upon Holder of Option. Except as hereinbefore
expressly provided in this Section 14, the holder of an Option shall
have no rights by reason of any subdivision or consolidation of shares
of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class by
reason of any dissolution, liquidation, merger, reorganization, or
consolidation, or spin-off of assets or stock of another corporation,
and any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to the
Option. Without limiting the generality of the foregoing, no adjustment
shall be made with respect to the number or price of shares subject to
any Option granted hereunder upon the occurrence of any of the
following events:
(1) The grant or exercise of any other options which
may be granted or exercised under any qualified or
nonqualified stock option plan or under any other employee
benefit plan of the Company whether or not such options were
outstanding on the date of grant of the Option or thereafter
granted;
(2) The sale of any shares of Common Stock in the
Company's initial or any subsequent public offering,
including, without limitation, shares sold upon the exercise
of any overallotment option granted to the underwriter in
connection with such offering;
(3) The issuance, sale or exercise of any warrants to
purchase shares of Common Stock whether or not such warrants
were outstanding on the date of grant of the Option or
thereafter issued;
(4) The issuance or sale of rights, promissory notes
or other securities convertible into shares of Common Stock in
accordance with the terms of such securities ("Convertible
Securities") whether or not such Convertible Securities were
outstanding on the date of grant of the Option or were
thereafter issued or sold;
(5) The issuance or sale of Common Stock upon
conversion or exchange of any Convertible Securities, whether
or not any adjustment in the purchase price was made or
required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible
Securities were outstanding on the date of grant of the Option
or were thereafter issued or sold; or
(6) Upon any amendment to or change in the terms of
any rights or warrants to subscribe for or purchase, or
options for the purchase of, Common Stock or Convertible
Securities or in the terms of any Convertible Securities,
including, but not limited to, any extension of any expiration
date of any such right, warrant or option, any change in any
exercise or purchase price provided for in any such right,
warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable
for Common Stock or any change in the rate at which any
Convertible Securities are convertible into or exchangeable
for Common Stock.
(f) Right of Company to Make Adjustments. The grant of an
Option pursuant to the Plan shall not affect in any way the right or
power of the Company to make adjustments, reclassification,
reorganizations, or changes of its capital or business structure or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
15. Investment Purpose. Each Option under the Plan shall be granted on
the condition that the purchase of the shares of stock thereunder shall be for
investment purposes, and not with a view to resale or distribution; provided,
however, that in the event the shares of stock subject to such Option are
registered under the Securities Act or in the event a resale of such shares of
stock without such registration would otherwise be permissible, such condition
shall be inoperative if in the opinion of counsel for the Company such condition
is not required under the Securities Act or any other applicable law,
regulation, or rule of any governmental agency.
16. No Obligation to Exercise Option or SAR. The granting of an Option
or SAR shall impose no obligation upon the optionee to exercise such Option or
SAR.
17. Modification, Extension, and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Committee and
the Board of Directors may modify, extend or renew outstanding Options granted
under the Plan, or accept the surrender of outstanding Options (to the extent
not theretofore exercised). Neither the Committee nor the Board of Directors
shall, however, modify any outstanding Options so as to specify a lower price or
accept the surrender of outstanding Options and authorize the granting of new
Options in substitution therefor specifying a lower price. Notwithstanding the
foregoing, however, no modification of an Option shall, without the consent of
the optionee, alter or impair any rights or obligations under any Option
theretofore granted under the Plan.
18. Effective Date of the Plan. The Plan shall become effective on the
date of execution hereof, which date is the date the Board of Directors approved
and adopted the Plan ("Effective Date"); provided, however, if the Shareholders
of the Company shall not have approved the Plan by the requisite vote of the
Shareholders, within twelve (12) months after the Effective Date, then the Plan
shall terminate and all Options theretofore granted under the Plan shall
terminate and be null and void.
19. Termination of the Plan. This Plan shall terminate as of the
expiration of ten (10) years from the Effective Date. Options may be granted
under this Plan at any time and from time to time prior to its termination. Any
Option outstanding under the Plan at the time of its termination shall remain in
effect until the Option shall have been exercised or shall have expired.
20. Amendment of the Plan. The Plan may be terminated at any time by
the Board of Directors of the Company. The Board of Directors may at any time
and from time to time without obtaining the approval of the Shareholders of the
Company or a Subsidiary, modify or amend the Plan (including such form of Option
Agreement as hereinabove mentioned) in such respects as it shall deem advisable
in order that the Incentive Options granted under the Plan shall be "Incentive
Stock Options" as defined in Section 422 of the Code or to conform to any change
in the law, or in any other respect which shall not change: (a) the maximum
number of shares for which Options may be granted under the Plan, except as
provided in Section 14 hereof; or (b) the option prices other than to change the
manner of determining the fair market value of the Common Stock for the purpose
of Section 8(d) hereof to conform with any then applicable provisions of the
Code or regulations thereunder; or (c) the periods during which Options may be
granted or exercised; or (d) the provisions relating to the determination of
persons to whom Options shall be granted and the number of shares to be covered
by such Options; or (e) the provisions relating to adjustments to be made upon
changes in capitalization. The termination or any modification or amendment of
the Plan shall not, without the consent of the person to whom any Option shall
theretofore have been granted, affect that person's rights under an Option
theretofore granted to such person. With the consent of the person to whom such
Option was granted, an outstanding Option may be modified or amended by the
Committee in such manner as it may deem appropriate and consistent with the
requirements of this Plan applicable to the grant of a new Option on the date of
modification or amendment.
21. Withholding. Whenever an optionee shall recognize compensation
income as a result of the exercise of any Option or SAR granted under the Plan,
the optionee shall remit in cash to the Company or Subsidiary the minimum amount
of federal income and employment tax withholding which the Company or Subsidiary
is required to remit to the Internal Revenue Service in accordance with the then
current provisions of the Code. The full amount of such withholding shall be
paid by the optionee simultaneously with the award or exercise of an Option or
SAR, as applicable.
22. Indemnification of Committee. In addition to such other rights of
indemnification as they may have as Directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceedings, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his duties; provided that within sixty (60) days after institution of any such
action, suit or proceeding a Committee member shall in writing offer the Company
the opportunity, at its own expense, to pursue and defend the same.
23. Application of Funds. The proceeds received by the Company
from the sale of Common Stock pursuant to Options granted hereunder will be
used for general corporate purposes.
24. Governing Law. This Plan shall be governed and construed
in accordance with the laws of the state of incorporation of the Company.
EXECUTED this 20th day of June, 1997.
WESTOWER CORPORATION
By: ______________________________
Calvin J. Payne,
President
ATTEST:
- ------------------------------
Peter Lucas,
Secretary
<PAGE>
Exhibit 21
Subsidiaries of the Registrant
Westower Corporation
State or
Jurisdiction Other Jurisdictions
Name (1) of Incorporation Which Qualified Amount Owned
- -------- ---------------- --------------- ------------
Westower Holdings
Ltd. Wyoming Oregon 100%
Westower
Communications,
Inc Washington None 100%
Westower
Communications
Ltd. British Columbia, Canada
Alberta, 100%
Saskatchewan,
_________________ Canada
(1) No assumed names.
INDEPEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders
Westower Holdings Ltd. and Subsidiaries
We consent to the use in this Registration Statement of Westower Corporation on
Form SB-2 of our report dated July 21, 1997, appearing in the Prospectus, which
is part of this Registration Statement.
We also consent to the references to us under the headings "Experts" in such
Prospectus.
/s/ MOSS ADAMS LLP
MOSS ADAMS LLP
Bellingham, Washington
July 31, 1997
<PAGE>
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