EXHIBIT 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
AMONG
CORD COMMUNICATIONS, INCORPORATED,
CORD ACQUISITION CO.,
XXXX XXXXXXXX,
XXXX XXXXXXXX,
XXXX XXXX
AND
WESTOWER CORPORATION
TABLE OF CONTENTS
Page
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ARTICLE 1. THE MERGER................................................ 1
1.1 Merger.................................................... 1
1.2 Articles of Incorporation................................. 2
1.3 Bylaws.................................................... 2
1.4 Directors and Officers.................................... 2
ARTICLE 2. CONVERSION AND EXCHANGE OF STOCK.......................... 2
2.1 Merger Terms.............................................. 2
2.2 Stock Portion of Merger Consideration..................... 2
2.3 Earnout................................................... 3
2.4 Closing................................................... 4
ARTICLE 3. DEFAULT................................................... 5
3.1 Default at Closing........................................ 5
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CORD AND THE
CORD STOCKHOLDERS......................................... 5
4.1 Organization Standing and Qualification................... 5
4.2 Capitalization............................................ 6
4.3 Stock Ownership........................................... 6
4.4 No Subsidiaries, Partnerships or Joint Ventures........... 6
4.5 Financial Statements, etc................................. 6
4.6 Title to Properties....................................... 7
4.7 Tax Matters............................................... 7
4.8 Litigation and Labor Matters.............................. 8
4.9 Insurance................................................. 8
4.10 Patents, Trademarks, and Copyrights....................... 9
4.11 Contracts and Commitments................................. 9
4.12 Absence of Undisclosed Liabilities........................10
4.13 Absence of Default........................................11
4.14 Existing Condition........................................11
4.15 Validity of Contemplated Transactions.....................11
4.16 Restrictions..............................................11
4.17 Compliance with Laws......................................11
4.18 Disclosure................................................12
4.19 Transactions with Affiliates..............................12
4.20 Bank Accounts and Officers................................12
4.21 Environmental Liabilities.................................12
4.22 CORD's Employees..........................................13
(i)
4.23 Employee Benefit Plans....................................14
4.24 Investment Representations................................15
4.25 Information Related to Westower...........................16
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF WESTOWER
AND SUB...................................................16
5.1 Organization, Good Standing and Authority.................16
5.2 Financial Statements......................................16
5.3 Validity of Contemplated Transaction......................16
5.4 Material Changes..........................................17
5.5 Disclosure................................................17
ARTICLE 6. COVENANTS.................................................17
6.1 Conduct of Business Pending Closing.......................17
6.2 Business in the Ordinary Course...........................17
6.3 Accounting and Credit Changes.............................17
6.4 Capitalization, Options and Dividends.....................17
6.5 Encumbrance of Assets.....................................17
6.6 Employment Agreements.....................................17
6.7 Real Property Acquisitions, Dispositions and Leases.......18
6.8 Litigation During Interim Period..........................18
6.9 Access....................................................18
6.10 Good Will.................................................18
6.11 Exclusive Rights to Westower..............................18
ARTICLE 7. POST-CLOSING COVENANTS....................................18
7.1 Benefit Plans.............................................18
7.2 Bonuses...................................................19
7.3 Personal Guarantees.......................................19
7.4 Board Position............................................19
7.5 Continuing Independence...................................20
7.6 Registration Rights.......................................20
7.7 Employment Agreements....................................20
7.8 Covenant Not to Compete...................................21
7.9 Authorized Capital Stock of Westower......................22
ARTICLE 8. INDEMNIFICATION...........................................22
8.1 Indemnification by Buechley Stockholders..................22
8.2 Indemnification by Westower and Sub.......................23
8.3 Indemnification Procedure.................................23
(ii)
ARTICLE 9. CONDITIONS PRECEDENT TO WESTOWER'S AND SUB'S
OBLIGATIONS...............................................24
9.1 Representations and Warranties............................24
9.2 Compliance with Agreements................................24
9.3 Opinion of Counsel........................................24
9.4 Material Damage...........................................25
9.5 Employment Agreements.....................................25
ARTICLE 10. CONDITIONS PRECEDENT TO CORD STOCKHOLDERS' OBLIGATIONS....25
10.1 Representations and Warranties............................25
10.2 Compliance with Agreements................................26
10.3 Material Damage...........................................26
10.4 Employment Agreements.....................................26
ARTICLE 11. MISCELLANEOUS.............................................26
11.1 Broker and Finder's Fees..................................26
11.2 Survival of Representations and Warranties................26
11.3 Expenses..................................................27
11.4 Announcements.............................................27
11.5 Further Actions and Assurances............................27
11.6 Counterparts..............................................27
11.7 Contents of Agreement; Parties in Interest................27
11.8 Washington Law to Govern..................................27
11.9 Section Headings and Gender...............................27
11.10 Schedules.................................................27
11.11 Notices...................................................27
11.12 Confidential Information..................................28
(iii)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is entered as of the 31st day of August,
1998 by and among CORD COMMUNICATIONS INCORPORATED, a California corporation
("CORD"), XXXX XXXXXXXX and XXXX XXXXXXXX (the "Xxxxxxxx Stockholders"), being
the owners of all the issued and outstanding shares of capital stock of CORD,
XXXX XXXX ("Xxxx" and together with Xxxx Xxxxxxxx and Xxxx Xxxxxxxx, the "CORD
Stockholders"), CORD ACQUISITION CO., a Washington corporation ("Sub"), and
WESTOWER CORPORATION, a Washington corporation ("Westower").
RECITALS:
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A. Xxxx Xxxxxxxx owns 582 shares of common stock of CORD, Xxxx Xxxxxxxx
owns 291 shares of common stock of CORD, and Xxxx will, as of Closing, own 22.38
shares of common stock of CORD, the aggregate amount of such stock being
sometimes referred to as the "CORD Stock."
B. Sub is a wholly owned subsidiary of Westower. The CORD Stockholders
desire to cause CORD to merge with and into Sub and thereby convert all of the
CORD Stock owned by them into cash and shares of common stock, $.01 par value,
of Westower (the "Westower Stock"), upon and subject to the terms and conditions
hereinafter set forth.
C. CORD, Sub and Westower intend the merger to be a reorganization within
the meaning of Internal Revenue Code (S) 368(a).
AGREEMENTS
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NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations and agreements herein contained, it is hereby
covenanted and agreed by and among the parties that they shall carry out and
consummate the following Agreement and Plan of Merger (the "Agreement"):
ARTICLE 1.
THE MERGER
1.1 Merger. Upon the filing of Articles of Merger with the appropriate
filing offices in the States of California and Washington, in the form attached
to this Agreement as Exhibit 1.1, CORD shall be merged with and into Sub (the
"Merger"), the separate existence of CORD shall cease, and Sub shall survive as
a corporation under the name "CORD Communications, Inc.," organized under and
governed by the laws of the State of Washington. From that time, Sub shall
possess all the rights, privileges, immunities, and franchises of each of CORD
and Sub, all property
belonging to CORD shall be transferred to and vested in Sub without further act
or deed; Sub shall be responsible for all liabilities of each of CORD and Sub,
all in the manner and with the effect set forth in California General
Corporation Law (S)(S)1108 et seq. and RCW (S)(S) 23B.11, et seq.
1.2 ARTICLES OF INCORPORATION. The Articles of Incorporation of Sub in
effect immediately prior to the Merger shall be amended to change the name of
the corporation in Article 1 thereof to "Cord Communications, Inc.," and, as so
amended, shall be the Articles of Incorporation of the surviving corporation
until amended in accordance with applicable law.
1.3 BYLAWS. The Bylaws of Sub in effect immediately prior to the Merger
shall be the Bylaws of the surviving corporation until amended in accordance
with applicable law.
1.4 DIRECTORS AND OFFICERS. The Board of Directors of the surviving
corporation shall initially consist of Xxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxx
XxXxxxxxx, Xxxxxx X. Xxxxx, S. Xxx Xxxxxxx, Xxxxx Xxxxx and Xxxx Xxxx, who shall
hold office in each case until their successors are elected and qualified. The
initial officers of the surviving corporation shall be:
Xxxx Xxxxxxxx President
Xxxx Xxxxxxxx Vice President
Xxxxx Xxxxx Vice President, Treasurer and
Secretary
Each officer shall hold office in accordance with the Bylaws of the surviving
corporation.
ARTICLE 2.
CONVERSION AND EXCHANGE OF STOCK
2.1 MERGER TERMS. In the Merger, each outstanding share of CORD Stock
shall be converted into and become the right to receive: (a) $5,584.22 in cash;
plus (b) 242.79 shares of Westower Stock; plus (c) up to 388.47 shares of
Westower Stock pursuant to the terms of the earnout formula contained in Section
2.3 of this Agreement (collectively, the "Merger Consideration").
2.2 STOCK PORTION OF MERGER CONSIDERATION. For purposes of calculating
the number of shares of Westower Stock to be delivered for each share of CORD
Stock, the Westower Stock has been valued at $23.00 per share, which was the
price on the date the terms of the Merger were agreed to by the parties. No
fractional shares of Westower Stock will be issued. The number of shares to be
issued to any CORD Stockholder will be rounded downward to the nearest whole
share and cash will be paid in lieu of any fraction at the rate of $23.00 per
share.
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2.3 Earnout.
(a) Within 15 days after EBITDA (hereinafter defined) is determined, Sub
and Westower shall deliver to the CORD Stockholders the portion of the
Merger Consideration deliverable pursuant to Section 2.1(c) (the
"Earnout"). The Earnout shall be, for each share of CORD Stock, a
number of shares of Westower Stock equal to the product of .00025902
multiplied by EBITDA for the period from September 1, 1998 through
August 31, 1999 (the "Earnout Period"), subject to the limitation that
in no event shall the Earnout for each share of CORD Stock exceed
388.47 shares of Westower Stock; provided, however, that in the event
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that the authorized number of shares of Westower Stock is not
increased as contemplated by Section 7.9 hereof, Westower may at its
option replace up to 194.23 shares of Westower Stock with cash at the
rate of $23.00 per share of Westower Stock. The term "EBITDA" shall
mean the net income of CORD (for the portion of the Earnout Period
prior to the Merger) and Sub (for the portion of the Earnout Period
after the Merger), determined in accordance with generally accepted
accounting principles, as utilized by CORD for its fiscal year ended
June 30, 1998, consistently applied, plus, to the extent deducted in
determining net income, interest, income taxes, depreciation and
amortization. In addition, for purposes of this Agreement, (i) EBITDA
of the Sub shall be computed without giving effect to the Merger and
any accounting adjustments caused thereby and any expenses as a result
of the Merger will be excluded (including audit expenses to the extent
increased above normal audit expenses); (ii) EBITDA shall not be
reduced by bonuses paid to Sub employees as set forth in Section 7.2
hereof; (iii) EBITDA shall not be reduced for severance payments made
by CORD or Sub to Xxxx pursuant to Xxxx'x post-Closing severance
agreement as set forth in Disclosure Schedule 4.14; (iv) EBITDA shall
not be reduced by Westower for overhead costs attributable to Westower
incurred by Sub; (v) all transactions between CORD and Sub and
Westower and its subsidiaries and affiliates shall be adjusted to an
arm's-length price for sales or leases of property or provision of
services to the extent that the price paid is less than the price that
would otherwise be charged by or to CORD in a transaction with an
independent third party; and (vi) extraordinary and nonrecurring gains
(including tax refunds) and extraordinary and nonrecurring losses not
related to operations shall be excluded; provided that gains and
losses from projects of the nature associated with CORD's core
business shall not be considered nonrecurring.
(b) Westower will determine the Earnout within forty-five (45) days
following the last day of the Earnout Period and deliver prompt notice
of such amount to the CORD Stockholders (the "Earnout Notice") with
supporting documentation. The CORD Stockholders shall have the right
to inspect, audit and make extracts from all of the records, files and
books of account of Westower relating to the Earnout for purposes of
verifying the amount of the Earnout at reasonable times during
business hours, upon advance notice to Westower.
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(c) The CORD Stockholders shall have thirty (30) days from the receipt of
the Earnout Notice to notify Westower if they dispute the amount of
the Earnout. If Westower has not received notice of any such dispute
within such 30-day period, the Earnout shall be final. If, however,
CORD Stockholders have delivered notice of such a dispute to Westower
within such 30-day period, then Westower's independent accountants
shall select a mutually agreeable partner at an independent accounting
firm that has not represented any of the parties hereto within a
period of two (2) years and is one of the five largest accounting
firms in the United States (the "New Accounting Firm") to review the
Earnout, the books of Sub and the Earnout Notice to determine the
amount, if any, that the Earnout is in error. The New Accounting Firm
shall make its determination of the Earnout (the "Revised Earnout")
within thirty (30) days of its selection. The Revised Earnout shall be
final and binding on the parties hereto, and, upon such determination,
the Earnout shall be adjusted accordingly. The costs of the New
Accounting Firm shall be borne by Westower if the Revised Earnout is
higher than the Earnout as originally calculated and by the CORD
Stockholders in all other cases.
(d) If, on or prior to the date the Earnout is paid, Westower should split
or combine the Westower Stock, or pay a stock dividend or other stock
distribution in Westower Stock or any other security, or otherwise
change the Westower Stock into other securities, or make any dividend
or distribution on the Westower Stock, then the number of shares of
Westower Stock issuable as payment of the Earnout will be
appropriately adjusted to reflect such split, combination, dividend or
other distribution or change.
(e) All actions and determinations by the CORD Stockholders with respect
to the Earnout shall be taken and made by Xxxx Xxxxxxxx as
representative of the CORD Stockholders, or, in the event of his death
or disability, Xxxx Xxxxxxxx.
2.4 CLOSING. The closing (the "Closing") of the Merger shall take place
at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 0000 Xxx Xxxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 at 2:00 p.m. on August 31, 1998 (the "Closing
Date"). At the Closing, the CORD Stockholders shall deliver, (i) free and clear
of all liens and encumbrances, claims and other charges thereon of every kind,
the certificate(s) for the shares of CORD Stock in negotiable form, duly
endorsed in blank or with separate stock transfer powers attached; (ii) signed
Employment Agreements, as described in Section 7.7 of this Agreement; (iii) a
signed Registration Rights Agreement, as described in Section 7.6 of this
Agreement; (iv) the signed Articles of Merger, as described in Section 1.1 of
this Agreement; and (v) the other deliveries required by this Agreement. At
Closing, Westower shall deliver (i) the cash portion of the Merger
Consideration, in immediately available funds; (ii) the number of shares of
Westower Stock determined under Section 2.2 of this Agreement, free and clear of
all liens and encumbrances, claims and charges thereon of every kind,
represented by certificates or an irrevocable direction to Westower's transfer
agent to deliver such shares; (iii) a signed Registration Rights Agreement, as
described in Section 7.6 of this Agreement; (iv) signed
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Employment Agreements, as described in Section 7.7 of this Agreement; (v) the
signed Articles of Merger, as described in Section 1.1 of this Agreement; and
(vi) the other deliveries required by this Agreement. If certificates for the
Westower Stock are not delivered at Closing, certificates shall be delivered to
the CORD Stockholders as soon as they are made available by Westower's transfer
agent.
ARTICLE 3.
DEFAULT
3.1 DEFAULT AT CLOSING. If CORD or any of the CORD Stockholders, on one
hand, or Westower and Sub, on the other hand, fails or refuses to consummate the
transactions described in this Agreement, the other at its option, may refuse to
complete the transaction and thereby terminate all of its obligations hereunder.
Such refusal shall not limit any remedies available to the parties for breach of
this Agreement.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
OF CORD AND THE CORD STOCKHOLDERS
To induce Westower and Sub to enter into this Agreement and consummate the
transactions contemplated hereby, CORD and each of the Buechley Stockholders,
jointly and severally, and, with respect to Sections 4.3, 4.15, 4.24 and 4.25 as
they apply to Xxxx, Xxxx represent and warrant to Westower that, except as set
forth in the Schedules, the statements contained in this Article 4 are true and
complete:
4.1 ORGANIZATION STANDING AND QUALIFICATION. CORD is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, and has all requisite corporate power and authority to perform its
business as presently conducted and to own and lease the properties used in
connection therewith. A complete and correct copy of the Articles of
Incorporation and all amendments thereto of CORD certified by the Secretary of
State of California and a complete and correct copy of its Bylaws and all
amendments thereto, certified by its Secretary, have been delivered to Westower
at least 5 days prior to the date hereof. CORD is duly qualified to do business
and is in good standing to do business as a foreign corporation in [list], which
----
constitute all jurisdictions in which the failure to so qualify would have a
material adverse effect on CORD's business or the ownership of its property.
4.2 CAPITALIZATION. The total authorized capital stock of CORD consists
of 1,000,000 shares of common stock, $1.00 par value. As of Closing, 895.38
shares of common stock will be issued and outstanding, all of which will be
validly issued, fully paid and non-assessable. There are no shares of preferred
stock outstanding.
5
4.3 STOCK OWNERSHIP. The CORD Stockholders will be, as of Closing, the
lawful owners of record and beneficially of the number of shares of CORD Stock
set forth in Recital A of this Agreement, free and clear of all liens and
encumbrances, claims and charges of every kind.
4.4 NO SUBSIDIARIES, PARTNERSHIPS OR JOINT VENTURES. CORD owns no equity
interest in any corporation, joint venture, partnership or other entity.
4.5 FINANCIAL STATEMENTS, ETC.
(a) Financial Statements. CORD has delivered to Westower copies of the
following financial statements:
(i) Balance sheets. Balance sheets of CORD as of June 30, 1998
(unaudited), June 30, 1997 (audited by Xxxx Xxxxx LLP) and June
30, 1996 (unaudited), which balance sheets together with any notes
to the financial statements present fairly the financial condition
and assets and liabilities of CORD as of their respective dates in
accordance with generally accepted accounting principles
consistently applied except as may be otherwise disclosed therein.
The balance sheet as of June 30, 1998 is hereinafter referred to
as the " 1998 Balance Sheet."
(ii) Statements of Income, etc. A statement of income of CORD for the
fiscal year ended June 30, 1998 (unaudited) and statements of
income, changes in stockholders' equity and cash flows of CORD for
the fiscal years ended June 30, 1997 (audited by Xxxx Xxxxx LLP)
and June 30, 1996 (unaudited), which statements, together with any
notes to the respective statements of income present fairly the
income, changes in stockholders' equity and cash flows of CORD for
the said periods in accordance with generally accepted accounting
principles consistently applied except as may be otherwise
disclosed therein.
(b) Accounts Receivable. The accounts receivable of CORD as set forth on
the 1998 Balance Sheet and all accounts receivable arising subsequent
to June 30, 1998 did and will arise in the ordinary course of business
and represent bona fide obligations of the persons or entities from
whom they are due.
(c) Other Assets. The prepaid expenses and other unused assets of CORD as
shown on the 1998 Balance Sheet or arising thereafter prior to Closing
represent amounts which will benefit CORD in future periods. All
material tangible assets owned and used by CORD in its future
operations were reflected in the 1998 Balance Sheet.
(d) Fixed Assets. The fixed assets of CORD are stated at cost in the 1998
Balance Sheet. The reserves for depreciation and amortization provided
against these assets have
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been established in accordance with the notes to the financial
statements and are adequate to reduce any idle fixed assets to net
realizable value.
4.6 TITLE TO PROPERTIES. CORD has good and marketable title to all of its
properties and assets reflected in the 1998 Balance Sheet (except properties and
assets sold or otherwise disposed of since June 30, 1998 in the normal and
ordinary course of business), free and clear of all mortgages, liens, pledges,
charges or other encumbrances of any nature whatsoever; except (i) any
mortgages, liens, pledges, charges or other encumbrances disclosed in the 1998
Balance Sheet; (ii) liens for current taxes not yet due and payable, or (iii)
encumbrances disclosed in Schedule 4.6. All equipment owned or used by CORD is,
with minor exceptions, in good operating repair.
4.7 TAX MATTERS. Except as set forth in the attached Schedule 4.7:
(a) CORD has filed all Tax Returns (as hereinafter defined) that it was
required to file. All such Tax Returns were correct and complete. All
Taxes (as hereinafter defined) owed by CORD (whether or not shown on
any Tax Return) have been paid or properly accrued. CORD is not
currently the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where CORD does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no liens on any of
the assets of CORD that arose in connection with any failure (or
alleged failure) to pay any Tax.
(b) CORD has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
independent contractor or other third party.
(c) There is no dispute or claim concerning any Tax Liability of CORD
either (1) claimed or raised by any authority in writing or (2) as to
which any CORD Stockholder or any employee responsible for Tax matters
of CORD has knowledge. No Tax Returns filed with respect to CORD have
been audited or currently are the subject of audit. CORD has delivered
to Westower correct and complete copies of all federal and state
income Tax Returns filed by CORD since June 30, 1995 and all related
examination reports and statements of deficiencies, if any.
(d) CORD has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) The unpaid Taxes of CORD did not, as of June 30, 1998, exceed the
reserve for Tax liability set forth on the face of the 1998 Balance
Sheet.
(f) For purposes of this Agreement, "Tax" means any federal, state, local,
or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code
7
section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
(g) "Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
4.8 LITIGATION AND LABOR MATTERS. Except as provided for and disclosed in
the 1998 Balance Sheet or disclosed in Schedule 4.8 hereto:
(a) There is no litigation, proceeding or governmental investigation
pending or, to the knowledge of the Buechley Stockholders, threatened
against CORD, its properties or its business;
(b) CORD is not in default with respect to any order, writ, injunction or
decree of any court or federal state, municipal or governmental
department, commission, board, bureau, agency or instrumentality;
(c) CORD has not committed, and neither the Buechley Stockholders nor CORD
have received any notice of or claim that CORD has committed any
unfair labor practice under applicable federal or state law; and
(d) To the knowledge of the Buechley Stockholders, there are no facts that
could furnish the basis for a valid claim that could be brought
against CORD in litigation or arbitration.
4.9 INSURANCE. CORD is insured under various policies of fire, liability
and other forms of insurance, as set forth in Schedule 4.9 hereto, which
policies are valid and enforceable in accordance with their terms and, in the
opinion of the Buechley Stockholders, provide adequate insurance for the
business of CORD and its assets and properties. Such policies or substantially
equivalent policies have been effect for at least five years. CORD shall
continue to carry such policies or similar policies during the pendency of this
Agreement. Any outstanding claims under such policies are described in Schedule
4.9 hereto. There is no liability for retrospective insurance premium
adjustments for any period prior to the date hereof.
4.10 PATENTS, TRADEMARKS, AND COPYRIGHTS. Schedule 4.10 attached hereto
sets forth all patents, patent applications, registered trademarks, registered
service marks, trademarks and service xxxx applications, unregistered trademarks
and service marks, copyrights and copyright applications, owned or filed by CORD
or in which CORD has an interest and the nature of such interest. No other
patent, trademark, service xxxx, copyright or license is necessary to permit
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the business of CORD to be conducted as it is now conducted. No person, firm or
corporation has any proprietary, financial or other interest in any such
patents, patent applications, registered trademarks, registered service marks,
trademarks and service xxxx applications, unregistered trademarks and service
marks, copyrights and copyright applications, and there are no violations by
others of any rights of CORD thereunder. To the knowledge of the Buechley
Stockholders, CORD is not infringing on any patent, trademark, or service xxxx,
or copyright or otherwise violating the rights, of any third party, and no
proceedings have been instituted or are pending, or to the knowledge of the CORD
Stockholders are threatened, and no claim has been received by CORD, alleging
any such violation. CORD is not a party to or bound by any license agreement
requiring the payment by CORD of any royalty payment, except as set forth in
Schedule 4.11 hereto.
4.11 CONTRACTS AND COMMITMENTS. Except as listed and identified in
Schedule 4.11 hereto or contemplated by this Agreement, CORD is not a party to
any written or oral:
(a) contract or commitment with any person or former director or employee
or consultant;
(b) contract or commitment with any labor union or employee group;
(c) contract or commitment for the future purchase of, or payment for, raw
materials, supplies or products, that individually total $50,000 or
more;
(d) contract or commitment to sell or supply products or to perform
services that individually total $50,000 or more without the ability
on the part of CORD to increase such price or to cancel the contract
or commitment without any liability on the part of CORD;
(e) contract or commitment continuing over a period of more than six
months from the date of this Agreement;
(f) representative or sales agency contract or commitment;
(g) lease under which it is either lessor or lessee (other than the assets
leased pursuant to leases listed on Schedule 4.11, there are no other
material assets or properties necessary or utilized in the business
and operations of CORD that are not owned by CORD);
(h) bonus, pension, profit sharing, retirement, stock purchase, stock
option hospitalization, insurance, vacation pay or any similar plan or
practice, including but not limited to any welfare benefit plan as
defined in Section 3.1 of the Employee Retirement Income Security Act,
formal or informal, in effect with respect to any of CORD's employees
or former employees (collectively, the "Plans");
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(i) contract or commitment for the borrowing of money or other agreement
or arrangement for a line of credit;
(j) contract or commitment for any charitable contribution;
(k) contract or commitment for capital expenditures in excess of $50,000;
(l) contract or commitment for limiting or restraining it from engaging in
any lines of business with any person, firm, corporation or any other
entity;
(m) contract not made in the ordinary course of business; or
(n) license agreement.
Except as stated in Schedule 4.11 hereto and for delays, minor failures to
meet specifications or other minor defaults which are normal in the conduct of
the business between CORD and other parties to the above contracts, CORD has
complied with the provisions thereof, is not in default thereunder, and to the
knowledge of the Buechley Stockholders, all other parties to the above contracts
have complied with the provisions thereof, are not in default thereunder, and no
event has occurred which but for the passage of time or the giving of notice
would constitute a default thereunder.
4.12 ABSENCE OF UNDISCLOSED LIABILITIES. There are no material liabilities
or obligations of CORD of any nature whatsoever, whether accrued, absolute,
contingent, known or unknown, or otherwise, including, but not limited to, any
tax liabilities due or to become due, and no Buechley Stockholder knows of any
basis for assertion against CORD of any such liability or obligation except (i)
as identified on schedules to this Agreement, (ii) to the extent reflected in
the 1998 Balance Sheet and not heretofore paid or discharged and (iii) accounts
payable and accrued expenses incurred, consistently with past business practice,
in or as a result of the normal and ordinary course of business since June 30,
1998.
4.13 ABSENCE OF DEFAULT. Except as set forth in Schedule 4.13, CORD is not
in default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained in any debenture or note, or
contained in any conditional sale or equipment trust agreement, or loan or other
borrowing agreement to which CORD is a party.
4.14 EXISTING CONDITION. Except as disclosed in Schedule 4.14 hereto,
since June 30, 1998, there has not been (i) any material adverse change in the
financial condition or in the operations, business or properties of CORD; (ii)
any material damage, destruction or loss, whether or not covered by insurance,
affecting the operations, business or properties of CORD; (iii) any declaration,
setting aside or payment of any dividend, or any distribution in respect of
capital stock of CORD, or any redemption, purchase or other acquisition of any
kind of any shares of CORD; (iv) any increase in the compensation payable by
CORD to any of its officers, directors or employees;
10
(v) any change in the terms of any bonus, insurance, pension or other benefit
plan for or with any officer, director or employee which increases amounts paid,
payable to or to become payable thereunder; or (vi) any complaints or other
concerns which have been brought to the attention of the Buechley Stockholders
and which relate to CORD's labor relations.
4.15 VALIDITY OF CONTEMPLATED TRANSACTIONS. Neither the execution and
delivery of this Agreement nor the consummation of the transactions provided for
herein will violate any agreement to which CORD or the CORD Stockholders are a
party or by which it or any of them is bound or any law, order or decree or any
provision of the Articles of Incorporation, Charter or Bylaws of CORD. The CORD
Stockholders have full legal authority to execute and deliver this Agreement and
to consummate and perform the transactions contemplated hereby, and this
Agreement constitutes the valid obligation of the CORD Stockholders legally
binding upon them in accordance with its terms.
4.16 RESTRICTIONS. CORD is not subject to any charter or any other
corporate restriction or any judgment, order, writ, injunction or decree, which
materially and adversely affects or, so far as the Buechley Stockholders can now
foresee, may in the future materially and adversely affect, the business,
operations prospect, properties, assets, or condition, financial or otherwise,
of CORD.
4.17 COMPLIANCE WITH LAWS. CORD has complied with and is not in default
under, or in violation of, any federal, state or local laws, ordinances, rules,
regulations or orders (including without limitation any safety, health or trade
laws, ordinances, rules, regulations or orders) applicable to the operations,
business or properties of CORD which materially and adversely affects or, so far
as the Buechley Stockholders can now foresee, may in the future materially
affect, the business, operations, prospects, properties or assets or condition,
financial or otherwise, of CORD.
4.18 DISCLOSURE. No representation by CORD or the CORD Stockholders in
this Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary to make any statement herein not misleading.
4.19 TRANSACTIONS WITH AFFILIATES. No director, officer or stockholder of
CORD owns or during the last two years has owned, directly or indirectly, or
has, or during the last two years has had, an ownership interest in any
business, corporate or otherwise, which is a party to, or in any property which
is the subject of, any business arrangement or relationship of any kind with
CORD except as described in Schedule 4.19 hereto.
4.20 BANK ACCOUNTS AND OFFICERS. Schedule 4.20 hereto contains a true and
correct list of the name and location of each bank in which CORD has an account,
each safety deposit box or custody agreement and the names of the persons
authorized to draw thereon or to withdraw therefrom, and also sets forth the
names of all directors and officers of CORD.
4.21 ENVIRONMENTAL LIABILITIES. Except as disclosed on Schedule 4.21
attached hereto, in the operation of the business of CORD at any time prior to
the Closing Date, including but not limited to the ownership or operation of any
real properties, CORD: (a) has not been in material
11
violation of any common law or any federal foreign, state or local laws,
regulations, statutes or ordinances relating to personal injury arising out of
Hazardous Substances (as such term is hereinafter defined) or protection of the
environment (collectively, the "Environmental Laws"); (b) possesses all of the
material permits, licenses, approvals and identification numbers required under
any Environmental Laws for the operation of each of CORD's offices,
manufacturing or warehouse facilities and communication sites (collectively, the
"Facilities") in the manner in which any such facility is presently operated;
(c) is in compliance in all material respects with all permits, licenses and
approvals required by any of the Environmental Laws for the operation of each of
the Facilities in the manner in which each such facility is currently being
operate, except for such non-compliance as would not be reasonably expected to
lead to imposition of penalties or similar sanctions by regulatory agencies; (d)
is not aware of any conditions that will affect the continued validity after the
Closing Date of all such permits, licenses and approvals required by any
Environmental Laws for the operation of any of the Facilities in the manner in
which it is currently being operated; (e) is not aware of the existence of any
pending or threatened suits, proceedings, investigations or claims with respect
to sites of, or the operations conducted at any of the Facilities relating to
the enforcement of any Environmental Laws or to determine the existence of any
environmental liabilities; (f) is not aware of the existence of any pending or
threatened suits, proceedings or claims by any third parties for damages or
injunctive relief arising out of the presence of any emissions, discharges,
releases or threatened releases, storage, transportation or the handling of
pollutants, contaminants, regulated wastes or hazardous wastes (collectively,
the Hazardous Substances) on or off the sites of any of the Facilities allegedly
caused, directly or indirectly, by the operations of CORD at any such facility;
(g) is not aware of the existence of any citizen complaint relating to the site
of any of the Facilities or the operations of CORD at any such facility; (h)
other than normal wear and tear on equipment that may alter its performance, is
not aware of any existing circumstances that may interfere with the continued
compliance with any existing permit, license or approval required by statute or
regulations for the operation of any of the Facilities in the manner in which it
is presently operated, except for such non-compliance as would not be reasonably
expected to lead to imposition of penalties or similar sanctions by regulatory
agencies; (i) is not aware of the occurrence of any spill discharge, deposit or
other release of any Hazardous Substances, in excess of reportable quantities
under Federal or state environmental laws and which has led or is likely to lead
to enforcement actions by governmental agencies, at any of the Facilities
caused, directly or indirectly, by CORD; (j) is not aware of any asbestos
conditions at any of the Facilities; (k) is not aware of any transformers,
fixtures or other electrical equipment containing PCB's installed in, affixed to
or located at any of the Facilities; (l) is not aware of any storage tanks for
petroleum or hazardous substances located at any of the Facilities, whether
above ground, underground or within a structure; (m) is not aware of any current
or prior use of the premises of the Facilities which would give rise to
liability under any Environmental Laws; and (n) is not aware of any potential
liability under any Environmental Laws arising out of any pre-Closing
utilization of or operations at any of the Facilities by CORD or other third
parties and has not been placed on notice of any claim of any governmental
agency or other regulatory body claiming violation of any Environmental Laws or
requiring any remediation or cleanup with respect to any of the Facilities or
requiring any change in the means or methods of operation of any such facility.
12
4.22 CORD'S EMPLOYEES. Schedule 4.22 attached hereto sets forth a list of
CORD's employees, their positions and rates of compensation. Except as
disclosed on Schedule 4.11 attached hereto, there are no outstanding claims for
wages, vacations, or other benefits or compensation of any type or description,
whether currently payable or deferred under any defined benefit pension plan,
any defined contribution pension plan, any implied or deemed employee benefit or
plan, or any welfare plan or otherwise or any other policy, program or practice,
whether formal or informal, by any of CORD's employees or any other individuals
covered by or eligible under such plans or programs, other than wages that will
become due for current pay periods and/or benefits that have accrued through the
Closing Date and will become payable in the future. There are no existing or,
to the knowledge of the Buechley Stockholders, threatened claims by any of
CORD's employees with respect to any applicable Workers' Compensation, worker
health or safety, equal employment opportunity or discrimination, wage and hour,
wrongful discharge, personnel or other employment related statutes, laws or
common law rights of any type or description. Except as disclosed on Schedule
4.11 attached hereto, there is no collective bargaining agreement in existence
between CORD and a collective bargaining representative for any of CORD's
employees, and during the one (1) year period immediately preceding the date of
this Agreement, there has not been any union organizing activities or
proceedings involving, or any petitions for election of or demands for
recognition by, a labor union or labor organization as the exclusive bargaining
agent for any of CORD's employees. CORD had not received notice of any
proceeding involving CORD currently pending before the National Labor Relations
Board, including but not limited to any wherein a labor organization is seeking
representation of any of CORD's employees.
4.23 EMPLOYEE BENEFIT PLANS.
(a) Each of the Plans has been administered in compliance with its terms
and all filing, reporting, disclosure and other requirements of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")
and the requirements of the Code have been materially satisfied with
respect to each of the Plans.
(b) No "withdrawal liability" (as that term is used in Section 4201 of
ERISA) has been or is reasonably expected to be assessed against CORD,
nor is CORD otherwise aware of any facts or circumstances that could
lead to assessment of withdrawal liability, nor has CORD been notified
by any multi-employer plan (as that term is defined in Section
4001(a)(3) or ERISA) that such multi-employer plan is in
reorganization or insolvency within the meaning of Section 4241 or
Section 4245 of ERISA or that such multi-employer plan intends to
terminate or has terminated under Section 4041A of ERISA. CORD has not
withdrawn, either partially or completely, from any multi-employer
plans.
(c) Neither any of the Plans nor any trust created thereunder, nor any
trustee or administrator thereof, has engaged in a "prohibited
transaction" (as such term is defined in Section 406 of ERISA) in
connection with which any of the Plans, any such trust, or any trustee
or administrator thereof, or any party dealing with the Plans
13
or any such trust could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975
of the Code.
(d) CORD is not aware and has received no notice that it has incurred any
liability to the Pension Benefit Guaranty Corporation ("PBGC") with
respect to any of the Plans or with respect to any other employee
benefit plan maintained or contributed to by CORD that has been
terminated or otherwise discontinued prior to the date of this
Agreement. The PBGC has not instituted proceedings to terminate any of
the Plans. CORD has not received any notice of and has no knowledge of
a "reportable event" (within the meaning of Section 4043(b) of ERISA).
(e) Full payment has been made of all amounts which CORD is required to
pay under the terms of each of the Plans as a contribution to the
Plans as of the last day of the most recent fiscal year of each of the
Plans ended prior to the date of this Agreement. None of the Plans nor
any trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent
fiscal year of each of the Plans ended prior to the date of this
Agreement or the most recent contribution date as required under the
terms of any such Plans if later.
(f) Each of the Plans is in compliance in all material respects with
applicable federal, state and local laws, including but not limited to
ERISA. Each of the Plans that is intended to be "qualified" has been
administered in accordance with the requirements of Section 401(a) of
the Code, and a determination letter has been received from the IRS
with respect to qualification of such Plans, and no facts or
circumstances exist which would adversely affect the qualified status
of the Plans.
4.24 INVESTMENT REPRESENTATIONS. Each CORD Stockholder, by executing this
Agreement, represents and warrants to Westower that such CORD Stockholder is
acquiring the Westower Stock hereunder for his own account for investment, with
no present intention of reselling or otherwise distributing the same, except (i)
pursuant to an offering of shares duly registered under the Securities Act of
1933, as amended, (the "Securities Act") or (ii) under other circumstances which
in the opinion of counsel acceptable to Westower does not require registration
under the Securities Act and applicable state securities laws. Westower agrees
that Xxxxx Xxxxxx Xxxxxxxx LLP is acceptable counsel. Each CORD Stockholder
further covenants and represents that none of the Westower Stock that will be
issued to him pursuant to this Agreement will be offered, sold, assigned,
pledged, transferred, or otherwise disposed of by him except after full
compliance with all of the applicable provisions of the Securities Act and the
rules and regulations thereunder and applicable state securities laws. Until
and unless Westower receives the legal opinion referenced above, the CORD
Stockholders hereby confer full authority upon Westower to instruct its transfer
agent not to transfer any of the Westower Stock. The CORD Stockholders
acknowledge that Westower shall place a stop transfer order against the transfer
of the Westower Stock owned by them
14
until they deliver the opinion required by this Section. All stock certificates
representing the Westower Stock shall be endorsed with the following restrictive
legend:
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
CORPORATION HAS RECEIVED AN OPINION OF COUNSEL ACCEPTABLE TO
THE CORPORATION 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.
4.25 INFORMATION RELATED TO WESTOWER. Each CORD Stockholder is an
"accredited investor" as defined in Rule 501 under the Securities Act. Each
CORD Stockholder has received and had an opportunity to review Westower's Post-
Effective Amendment No. 1 to its Registration Statement on Form SB-2 and Form 8-
K/A filed with the SEC on August 7, 1998 and August 15, 1998, respectively (the
"Westower SEC Filings"). Each CORD Stockholder acknowledges that Westower has
made available to the CORD Stockholders the opportunity to ask questions and
receive answers concerning Westower and the Westower Stock and to obtain any
additional information which Westower possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy of such
additional information and/or the Westower SEC Filings. Each CORD Stockholder
possesses such knowledge and experience in financial and business matters or has
been advised by such persons who do possess such knowledge that he is capable of
evaluating the merits and risks of the investment in Westower Stock contemplated
by this Agreement.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF WESTOWER AND SUB
Westower and Sub represent and warrant to the CORD Stockholders that the
statements contained in this Section 5 are true and correct:
5.1 ORGANIZATION, GOOD STANDING AND AUTHORITY. Westower and Sub are
corporations duly organized, validly existing and in good standing under the
laws of the State of Washington and have full corporate power and authority to
own their properties and assets and to carry on their
15
business as it has been and is conducted. The execution of this Agreement and
the consummation of the transactions contemplated hereby are within the
corporate power of Westower and Sub and have been duly authorized by all
necessary corporate and other action. This Agreement constitutes, and will
constitute when delivered in accordance with the terms hereof, a valid
obligation of Westower and Sub legally binding upon them in accordance with its
terms. The Westower Stock to be delivered to the CORD Stockholders as part of
the Merger Consideration when issued and delivered will be validly issued, fully
paid and non assessable.
5.2 FINANCIAL STATEMENTS. The financial statements of Westower contained
in the Westower SEC Filing have been prepared in accordance with generally
accepted accounting principles and present fairly the financial position of
Westower as of the respective balance sheet dates and results of operations and
cash flows of Westower for the periods then ended.
5.3 VALIDITY OF CONTEMPLATED TRANSACTION. Neither the execution and
delivery of this Agreement nor the consummation of the transactions provided for
herein will violate any agreement to which Westower or Sub is a party or by
which either is bound, or any law, order or decree or any provisions of their
respective Articles of Incorporation or Bylaws.
5.4 MATERIAL CHANGES. Except as disclosed in the Westower SEC Filing,
there has not been, since May 31, 1998, (i) any event, occurrence or series of
events or occurrences that have had, or are reasonably expected to have, a
material adverse effect on Westower's business, (ii) any declaration, setting
aside or payment of any dividend or distribution in respect of capital stock of
Westower, or (iii) any redemption, purchase or other acquisition of any kind of
any shares of Westower other than redemption of outstanding warrants.
5.5 DISCLOSURE. No representation by Westower or Sub in this Agreement
contains any untrue statement of a material fact or omits to state any material
fact necessary to make any statement herein not misleading.
ARTICLE 6.
COVENANTS
6.1 CONDUCT OF BUSINESS PENDING CLOSING. CORD and the CORD Stockholders
agree that, pending the Closing and except as otherwise approved by Westower:
6.2 BUSINESS IN THE ORDINARY COURSE. Except with respect to its
arrangements with Xxxx described on Schedule 4.14, CORD shall refrain from
engaging in transactions other than in the ordinary course of business. CORD
shall also refrain from entering into any transaction involving a capital
expenditure (including any borrowings in connection with such transaction) of
more than $10,000 or the disposal of any property or asset (other than inventory
in the ordinary course of business) with a value of more than $10,000.
16
6.3 ACCOUNTING AND CREDIT CHANGES. CORD shall not make any changes in its
accounting procedures and practices or its credit criteria from those in
existence at July 1, 1998.
6.4 CAPITALIZATION, OPTIONS AND DIVIDENDS. CORD shall not amend its
Articles of Incorporation and, except for the issuance of 22.38 shares of CORD
stock to Xxxx Xxxx immediately prior to Closing, it shall not issue or
reclassify or alter any shares of outstanding or unissued shares of its capital
stock, it shall not grant options, warrants, or other rights of any kind to
purchase, or agree to issue any shares of its capital stock; it shall not
purchase or redeem or otherwise acquire for a consideration any shares of its
capital stock and shall not declare, pay, set aside or make any dividends or
other distributions or payments in respect of its capital stock.
6.5 ENCUMBRANCE OF ASSETS. CORD shall not mortgage, pledge or encumber
any of its properties or assets.
6.6 EMPLOYMENT AGREEMENTS. Except as contemplated by this Agreement, CORD
shall refrain from entering into any employment agreements, and shall keep in
effect its present salary administration program (including pension plans and
other fringe benefits). Notwithstanding the foregoing CORD may continue its
process of revising and updating current employment agreements as their terms
expire provided that they are on substantially the same terms.
6.7 REAL PROPERTY ACQUISITIONS, DISPOSITIONS AND LEASES. CORD shall
refrain from acquiring or agreeing to acquire, or disposing or agreeing to
dispose of, real estate and from entering into or agreeing to enter into leases
of real estate or equipment for a period in excess of one year.
6.8 LITIGATION DURING INTERIM PERIOD. CORD will promptly advise Westower
in writing of the commencement or threat against CORD of any claim, litigation,
proceeding or tax audit whether or not covered by insurance when the amount
claimed is in excess of $ 10,000.
6.9 ACCESS. Subject to the confidentiality obligations contained in this
Agreement, Westower and its officers, attorneys, accountants and representatives
shall be permitted to examine the property, books and records of CORD, and its
title to any real estate, and such officers, attorneys, accountants and
representatives shall be afforded access to such property, books, records and
titles, and the Buechley Stockholders will upon request furnish Westower with
any information reasonably required in respect to CORD's property, assets, and
business and will provide Westower with copies of any contract, document or
instrument listed in any Schedule hereto.
6.10 GOOD WILL. CORD will use its best efforts to preserve the good will
of its customers and suppliers and others having business relations with it.
6.11 EXCLUSIVE RIGHTS TO WESTOWER. The Buechley Stockholders, individually
and collectively, will not enter into discussions or negotiations with any other
party with a view to (i) the sale of the CORD Stock, (ii) a merger between CORD
and another party or, (iii) a sale of all or
17
substantially all of the assets of CORD for a period of 30 days from the date of
execution of this Agreement without prior notice to and the consent of Westower.
ARTICLE 7.
POST-CLOSING COVENANTS
7.1 BENEFIT PLANS.
(a) CORD's current employee benefit plans described in Schedule 4.11 shall
be continued by the Sub after the Closing. Westower and Sub shall have
the right at any time to modify or terminate any employee benefit
plans but, during the Earnout Period, only with the approval of the
Buechley Stockholders. Eligible employees of Sub shall be entitled to
participate in an employee stock option plan of Westower as it may
exist from time to time; provided that the decision whether to have
any such plan, the terms of any such plan and the decision to grant
options to any particular employees shall be determined solely by
Westower. Subject to compliance with applicable securities laws,
Westower also agrees to adopt a plan whereby 100 shares of Westower
Stock shall be issuable to each CORD employee who completes at least
one year of service with Sub.
(b) Xxxx Xxxxxxxx shall have the right to recommend to the committee of
Westower's Board of Directors that administers Westower's stock option
plan the identities of employees to receive options pursuant to the
Westower Corporation 1998 Stock Incentive Compensation Plan or such
successor plan as Westower and its stockholders may adopt (the "Plan")
and the number of shares to be subject to the options for each such
employee, such options to be effective and priced on the date of
grant; provided, however, that the total number of options granted
pursuant to the terms of this provision will in no event confer on
such Sub employees any rights to purchase an aggregate of more than
21,738 shares of Westower common stock, plus, when and if additional
shares of Westower Stock are issued in connection with the Earnout, an
additional number of shares equal to 10% of the shares issued in the
Earnout. Subject to approval by such committee, all options granted to
Sub employees will be exercisable within ten (10) years from the date
of grant and shall vest as follows: thirty-three percent (33%) of the
total shares granted on each of the first and second anniversaries of
the Closing Date and thirty-four percent (34%) on the third
anniversary of the Closing Date. Subject to approval by such
committee, all options granted hereunder shall constitute "incentive
stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), to the extent permitted
under the Code and applicable rulings and regulations, or nonqualified
stock options, as requested by Xxxx Xxxxxxxx.
18
7.2 BONUSES. For the 12-month period ended June 30, 1999, an amount equal
to 10% of the pre-tax income of Sub (without deduction for any allocation for
Westower overhead) may be paid as bonuses to key employees of Sub selected in
Xxxx Xxxxxxxx'x sole discretion. As reflected in Section 2.3 of this Agreement,
these bonus payments shall not reduce EBITDA for purposes of calculating the
Earnout. Bonus policies in subsequent periods shall be determined by the Board
of Directors of Sub.
7.3 PERSONAL GUARANTEES. Within 30 days after Closing, Westower shall use
its reasonable best efforts necessary to cause the release of Xxxx Xxxxxxxx and
Xxxx Xxxxxxxx from personal guarantees issued by them that are disclosed on
Schedule 4.11 to secure loans granted to CORD in the ordinary course of CORD's
business. Westower shall retain discretion over the nature of the action to be
taken, which may include the granting of replacement security or the refinancing
of the loans secured by the guarantees.
7.4 BOARD POSITION. Promptly after the Closing Date, Westower will take
such action as may be necessary to appoint Xxxx Xxxxxxxx as a member of the
Board of Directors, and Westower will nominate Xxxx Xxxxxxxx as a director at
its next Annual Meeting of Shareholders, and each subsequent Annual Meeting of
Shareholders for so long as he is an employee of Sub and Sub is a subsidiary of
Westower.
7.5 CONTINUING INDEPENDENCE.
(a) During the Earnout Period, the businesses of Sub will be operated in
the ordinary course consistent with the past practice of CORD, and
Westower will not take any actions that would materially change the
operations of Sub, including any action that would prevent Sub (i)
from conducting its business in the ordinary course or (ii) from
taking any action necessary to preserve the businesses of Sub, to keep
available to Sub its employees or to preserve Sub's relationships with
customers, suppliers and others having business with relationships
with it.
(b) In the event that Westower or Sub takes any action or omits to take
any action which has a direct, negative impact on the EBITDA of Sub
during the Earnout Period, then, in such event, the parties, in good
faith, shall make reasonable adjustments in the calculation of the
EBITDA as may be necessary to neutralize the impact of any such action
or omission. Without limiting the generality of the foregoing, this
Section 7.5 shall apply if Westower acquires Teletronics and directs
to Teletronics work that could normally be performed by CORD and that
CORD has the capacity to perform.
(c) Westower and Sub agree that separate books and records will be kept
for Sub during the Earnout Period.
(d) Westower shall, during the Earnout Period, use its reasonable best
efforts to ensure that Sub has working capital sufficient to undertake
and complete projects that are
19
normally within the scope of CORD's business and would affect EBITDA.
Westower acknowledges that in addition to paying off CORD's
outstanding credit line, the Buechley Stockholders anticipate working
capital requirements of approximately $2.5 million.
7.6 REGISTRATION RIGHTS. With respect to the Westower Stock to be
delivered to the CORD Stockholders at Closing and as payment for the Earnout,
Westower shall grant to the CORD Stockholders piggyback and demand registration
rights pursuant to a Registration Rights Agreement in substantially the form
attached to this Agreement as Exhibit 7.6.
7.7 EMPLOYMENT AGREEMENTS. Westower shall cause Sub to enter into
Employment Agreements with Xxxx Xxxxxxxx and Xxxx Xxxxxxxx in substantially the
form attached hereto as Exhibit 7.7.
7.8 COVENANT NOT TO COMPETE.
(a) Xxxx Xxxxxxxx and Xxxx Xxxxxxxx agree that for a period of two (2)
years from the date of termination of their employment with Sub for
any reason, whether with or without cause, neither will, except as
expressly permitted hereunder, directly or indirectly (i) operate,
develop or own any interest other than the ownership of less than 5%
of the equity securities of a publicly traded company in any business
engaged in the wireless communications industry or communications
tower construction industry (a "Business"); (ii) compete with
Westower, Sub or their subsidiaries and affiliates in the operation or
development of any Business within North America (Canada, Mexico, and
the United States of America); (iii) with the exception of Sub, be
employed by any business which owns, manages, or operates a Business;
(iv) interfere with, solicit, disrupt or attempt to disrupt any past,
present or prospective relationship, contractual or otherwise, between
Sub, or its subsidiaries or affiliates, and any customer, client,
supplier or employee of Sub, or its subsidiaries or affiliates; or (v)
solicit any employee of Sub, or its subsidiaries or affiliates, to
leave their employment with Sub or its subsidiaries or affiliates, as
the case may be, or hire any such employee to work for a Business.
Xxxx Xxxxxxxx and Xxxx Xxxxxxxx shall not be entitled to circumvent
the provisions of this Section 7.8 by entering into a relationship
with a Business as a consultant, director, advisor, or otherwise,
which has the effect of competing with Sub, its affiliates or
subsidiaries.
(b) If a judicial determination is made that any of the provisions of
Section 7.8(a) constitute an unreasonable or otherwise unenforceable
restriction, such provisions shall be rendered void only to the extent
that such judicial determination finds such provisions to be
unreasonable or otherwise unenforceable. In this regard, the parties
hereto hereby agree that any judicial authority construing this
Agreement shall be empowered to sever any portion of the territory or
prohibited business activity from the coverage of Section 7.8(a) and
to apply the provisions of Section 7.8(a) to the
20
remaining portion of the territory or the remaining business
activities not so severed by such judicial authority. The time period
during which the prohibitions set forth in Section 7.8(a) shall apply
shall be tolled and suspended during all violations of Section 7.8(a).
(c) The Buechley Stockholders specifically acknowledge and agree that the
restrictions set forth in this Section 7.8 are reasonable and
necessary to protect the legitimate interests of Westower and Sub and
that Westower and Sub would not have undertaken the Merger in the
absence of such restrictions. Xxxx Xxxxxxxx and Xxxx Xxxxxxxx further
acknowledge and agree that any violation of the provisions of this
Section 7.8 will result in irreparable injury to Westower and Sub,
that the remedy at law for any violation or threatened violation of
such Section will be inadequate and that in the event of any such
breach, Westower or Sub, in addition to any other remedies or damages
available at law or in equity, shall be entitled to temporary
injunctive relief before trial from any court of competent
jurisdiction as a matter of course and to permanent injunctive relief
without the necessity of proving actual damages. The existence of any
claim or cause of action on the part of Xxxx Xxxxxxxx or Xxxx Xxxxxxxx
against Westower or Sub, whether arising from this Agreement or
otherwise, shall not constitute a defense to the granting or
enforcement of this injunctive relief. If Westower or Sub is required
to enforce any of its rights under this Agreement, Westower or Sub
shall be entitled to recover from Xxxx Xxxxxxxx or Xxxx Xxxxxxxx, as
applicable, all reasonable attorneys' fees, court costs and other
expenses incurred by Westower or Sub in connection with the
enforcement of those rights.
(d) The Buechley Stockholders will cooperate fully (including delivery of
representation letters in a form customarily required of management)
with independent auditors designated by Westower to allow such
auditors to audit financial statements of CORD referred to in Section
4.5 and deliver an opinion thereon as required by the rules and
regulations of the SEC.
7.9 AUTHORIZED CAPITAL STOCK OF WESTOWER. Westower agrees to use all
reasonable efforts to amend its Articles of Incorporation to increase the
authorized number of shares of common stock of Westower to at least 20,000,000
shares and to submit such an amendment to a vote of its shareholders at the next
meeting of shareholders.
ARTICLE 8.
INDEMNIFICATION
8.1 Indemnification by Buechley Stockholders. Subject to the limitations
set forth in this Section 8.1, the Buechley Stockholders shall, jointly and
severally, indemnify and hold harmless Westower, Sub and their respective
officers, directors, agents, employees and affiliates against and
21
in respect of any and all claims, suits, demands, liabilities, damages, losses,
costs and expenses arising out of or otherwise in respect of:
(a) any breach of any representation, warranty or covenant contained in
this Agreement or in any certificate or other instrument furnished on
behalf of CORD or by the CORD Stockholders, and
(b) any and all actions, suits, proceedings, audits, judgments, costs and
legal and other expenses incident to any of the foregoing or to the
enforcement of this Section 8.1;
provided, however, that the Buechley Stockholders shall not be liable to
Westower or Sub under this Agreement for any breach of a representation or
warranty that was not set forth in a claim (including a contingent claim that
sets forth the facts on which a claim may be made in the future to the extent
then known) presented in writing to the Buechley Stockholders pursuant to
Section 11.11 within (i) two years after Closing in the case of any
representation or warranty except those set forth in Sections 4.2, 4.3, 4.7 and
4.21, (ii) four years in the case of the representations and warranties set
forth in Section 4.21, and (iii) the expiration of the applicable statute of
limitations in the case of Sections 4.2, 4.3 and 4.7. Notwithstanding anything
to the contrary herein, the Buechley Stockholders shall be liable, responsible
or obligated to indemnify Westower and Sub for claims for breach of a
representation or warranty under this Section 8.1, only if the aggregate amount
of such claims exceeds $10,000. The total liability and responsibility of the
Buechley Stockholders under this Section 8.1 shall be limited to the aggregate
Merger Consideration received by the CORD Stockholders under this Agreement.
Payment for indemnification by the Buechley Stockholders may be made in their
discretion by cash or the return of Westower Stock. The value of Westower Stock
shall be its average closing price per share on the American Stock Exchange or
other principal market on which it is traded for the 10 trading days preceding
such payment.
8.2 Indemnification by Westower and Sub. Westower and Sub shall indemnify
and hold harmless the Buechley Stockholders against and in respect of any and
all liability, damage, loss, cost and expenses arising out of or otherwise in
respect of any personal guarantees referred to in Section 7.3 hereof.
8.3 Indemnification Procedure. Promptly after the receipt by any party
hereto of notice of any claim or the commencement of any action or proceeding by
any third party, such party will, if a claim with respect thereto is to be made
against any party obligated to provide indemnification (the "Indemnifying
Party") pursuant to Section 8.1 or 8.2, give such Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
Indemnifying Party shall have the right, at its option and upon posting a bond
or other security equal to such claims, to compromise or defend, at its own
expense and by its counsel, any matter involving the asserted liability of the
party seeking such indemnification. Such notice, and opportunity to defend,
shall be a condition precedent to any liability of the Indemnifying Party under
the indemnification agreements contained in this Article 8. If any Indemnifying
Party shall undertake to compromise or defend any such asserted liability, it
shall promptly notify the party seeking indemnification of its
22
intention to do so, and the party seeking indemnification agrees to cooperate
fully with the Indemnifying Party and its counsel in the compromise of, or
defense against any such asserted liability. In any event, the indemnified party
shall have the right at its own expense to participate in the defense of such
asserted liability.
ARTICLE 9.
CONDITIONS PRECEDENT TO WESTOWER'S AND SUB'S OBLIGATIONS
All obligations of Westower and Sub under this Agreement are subject to
the fulfillment, prior to or at the Closing, of each of the following
conditions:
9.1 REPRESENTATIONS AND WARRANTIES. The CORD Stockholders'
representations and warranties contained in this Agreement or in any Schedule,
list, certificate or document delivered pursuant to the provisions hereof shall
be true in all material respects at and as of the time of Closing as though made
at and as of such time (except to the extent that they are stated therein to be
true as of some other date) and the CORD Stockholders shall have delivered to
Westower and Sub a certificate dated the Closing Date and signed by them to such
effect.
9.2 COMPLIANCE WITH AGREEMENTS. The CORD Stockholders and CORD shall have
complied with all agreements and conditions required by this Agreement to be
performed by them prior to or at the Closing, and the CORD Stockholders shall
have delivered to Westower and Sub a certificate dated the Closing Date and
signed by them to such effect.
9.3 OPINION OF COUNSEL. The CORD Stockholders shall have delivered to
Westower and Sub an opinion of their counsel Xxxxx Xxxxxx Xxxxxxxx LLP, dated as
of the Closing Date and in form and substance satisfactory to Westower and
based, as to factual matters, on certificates of CORD Stockholders to the effect
that:
(a) Each of the CORD Stockholders is the lawful owner of record and
beneficially of all the number of shares of CORD Stock set forth in
the recitals of this Agreement, free and clear of any liens and
encumbrances, equities and claims.
(b) This Agreement constitutes the valid obligations of the CORD
Stockholders legally binding upon them in accordance with its terms,
and upon filing of Articles of Merger as set forth in this Agreement,
CORD will be merged with and into Sub as provided in this Agreement.
(c) To the knowledge of such counsel, CORD is not a party to, or bound by
any written or oral contract or agreement which grants to any person
an option or right of first refusal or other right to acquire at any
time, or upon the happening of any stated events, shares of the
capital stock of CORD.
23
(d) CORD's authorized capital stock consists of 1,000,000 shares of common
stock, $1.00 par value, of which 895.38 shares are validly issued,
outstanding, fully paid and non-assessable as of Closing.
(e) CORD is a corporation duly organized, validly existing and in good
standing under the laws of the State of California, and has the
corporate power to perform its business as presently conducted and to
own and lease the properties used in connection therewith. CORD is
duly qualified to do business and is in good standing in all
jurisdictions specified in this Agreement.
(f) The consummation of the transactions contemplated by this Agreement
will not result in a breach of any term of or constitute a default
under the Articles of Incorporation or Bylaws of CORD, or, to the
knowledge of such counsel, any indenture, agreement, instrument or
understanding known to such counsel to which CORD or the CORD
Stockholders are a party or by which it or any of them is bound.
(g) CORD has good and marketable title to the properties described in the
1998 Balance Sheet subject to no liens or other encumbrances except
those listed in phrases (i)-(iii) of said Subsection 4.6 and Schedule
4.6. The opinion required by this Subsection shall be based solely
upon matters which have come to such counsel's attention and which are
contained in any judgment, federal tax lien or financing statement
searches in respect of CORD.
9.4 MATERIAL DAMAGE. The business and properties of CORD, taken as a
whole, shall not have been and shall not be threatened to be materially
adversely affected in any way as a result of fire, explosion, earthquake,
disaster, accident, labor dispute, flood, drought, embargo, riot, civil
disturbance, uprising, activity of armed forces or act of God or public enemy.
9.5 EMPLOYMENT AGREEMENTS. The Employment Agreements with those persons
referred to in Section 7.7 shall have been executed and delivered.
ARTICLE 10.
CONDITIONS PRECEDENT TO CORD STOCKHOLDERS' OBLIGATIONS
All obligations of the CORD Stockholders under this Agreement are subject
to the fulfillment, prior to or at the Closing, of each of the following
conditions:
10.1 REPRESENTATIONS AND WARRANTIES. Westower's and Sub's representations
and warranties contained in this Agreement or in any certificate or document
delivered pursuant to the provisions hereof shall be true at and as of the time
of Closing as though made at and as of such time (except to the extent that they
are stated therein to be true as of some other date) and Westower and
24
Sub shall have delivered to the CORD Stockholders a certificate dated as of
Closing and signed by its Chief Executive Officer or Chief Operating Officer to
such effect.
10.2 COMPLIANCE WITH AGREEMENTS. Westower and Sub shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed by it prior to or at the Closing, and shall have delivered to the CORD
Stockholders a certificate dated as of Closing and signed by its Chief Executive
Officer or Chief Operating Officer to such effect.
10.3 MATERIAL DAMAGE. The business and properties of Westower and its
subsidiaries then as a whole shall not have been and shall not be threatened to
be, affected in any way materially adverse to its subsidiaries taken as a whole
as a result of fire, explosion, earthquake, disaster, accident, labor dispute,
flood, drought, embargo, riot, civil disturbance, uprising, activity of armed
forces or act of God or public enemy.
10.4 EMPLOYMENT AGREEMENTS. The employment agreements with those persons
referred to in Section 7.7 shall have been executed and delivered.
ARTICLE 11.
MISCELLANEOUS
11.1 BROKER AND FINDER'S FEES. Except for the engagement of JMW Capital,
which has been disclosed to Westower, the CORD Stockholders represent and
warrant to Westower and Sub that they have not engaged or dealt with any broker
for a fee or commission in respect to the execution of this Agreement or the
consummation of the transactions contemplated hereby. The fees and expenses of
JMW Capital shall be solely the obligation of and shall be paid by the CORD
Stockholders. Westower and Sub represent and warrant to the CORD Stockholders
and CORD that neither they nor any corporate affiliate has engaged or dealt with
any broker or other person who may be entitled to any brokerage fee or
commission in respect of the execution of this Agreement or the consummation of
the transactions contemplated hereby. Each of the parties hereto shall
indemnify and hold the others harmless against any and all claims, losses,
liabilities or expenses which may be asserted against such other parties as a
result of such first mentioned party's dealings, arrangements or agreements with
any such broker or person.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements, made by Westower, Sub and the CORD Stockholders in
this Agreement or pursuant hereto shall survive the Closing and continue in
full force and effect for a period of two years, except that the representations
and warranties of the CORD Stockholders contained in Sections 4.2, 4.3 and 4.7
will survive the Closing until the expiration of applicable statute of
limitations and the representations and warranties of CORD and the CORD
Stockholders contained in Section 4.21 will survive the Closing and continue in
full force and effect for four years after Closing. Notwithstanding any
investigations or audit conducted before or after Closing, the parties shall be
entitled to rely upon the representations and warranties set forth in this
Agreement.
25
11.3 EXPENSES. The CORD Stockholders and CORD shall bear their own
expenses, and Westower and Sub shall bear their expenses, in connection with the
transactions contemplated hereby; provided, however, the fees and expenses of
-------- -------
Xxxxx, Xxxxxx & Xxxxxxxx LLP shall be borne by the CORD Stockholders to the
extent that they exceed $40,000.
11.4 ANNOUNCEMENTS. All parties shall cooperate with each other as to the
timing and content of any announcements of the transactions contemplated hereby
to the general public or to employees, customers and suppliers.
11.5 FURTHER ACTIONS AND ASSURANCES. Westower, Sub, CORD and the CORD
Stockholders will execute and deliver any and all documents, and will cause any
and all other action to be taken, either before or after Closing, which may be
necessary or proper to effect or evidence the provisions of this Agreement and
the transactions contemplated hereby.
11.6 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which is an original and the CORD Stockholders may become a party hereto
by executing a counterpart hereof. This Agreement and any counterpart so
executed shall be deemed to be one and the same instrument. It shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
11.7 CONTENTS OF AGREEMENT; PARTIES IN INTEREST. This Agreement sets forth
the entire understanding of the parties. Any previous agreements or
understandings between the parties regarding the subject matter hereof are
merged into and superseded by this Agreement. All representations, warranties,
covenants, terms, conditions and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
legal representatives, successors and assigns of the CORD Stockholders, Westower
and Sub.
11.8 WASHINGTON LAW TO GOVERN. This Agreement shall be construed and
enforced in accordance with the laws of the State of Washington.
11.9 SECTION HEADINGS AND GENDER. The section headings herein have been
inserted for convenience of reference only and shall in no way modify or
restrict the terms or provisions hereof. The use of the masculine pronoun herein
when referring to any party has been for convenience only and shall be deemed to
refer to the particular party intended regardless of the actual gender of such
party.
11.10 SCHEDULES. All Schedules referred to in this Agreement are intended
to be and are hereby specifically made a part of this Agreement.
11.11 NOTICES. All notices, requests and other communications which are
required or permitted hereunder shall be sufficient if given in writing and
delivered personally or by registered
26
or certified mail, postage prepaid, or by facsimile followed by an original
signed copy, as follows: (or to such other addresses as shall be set forth in a
notice given in the same manner):
If to Westower or Sub: Westower Corporation
0000 XX 00xx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No. (000) 000-0000
With Copy to: Xxxxx X. Xxxxxxxxx Esq.
Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
If to CORD: c/o Xxxx Xxxxxxxx
0000 Xxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Facsimile No. (000) 000-0000
If to CORD Stockholders: Xxxx Xxxxxxxx
00000 XX Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xxxx Xxxxxxxx
X.X. Xxx 000
Xxxxx, XX 00000
Xxxx Xxxx
0000 Xxxxxxxx Xxxxx
Xxxx Xxx, XX 00000
If to CORD or CORD Stockholders
With Copy to: Xxxx X. Xxxxxxxx, Esq.
Xxxxx Xxxxxx Xxxxxxxx LLP
Suite 2300
0000 X.X. Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
11.12 Confidential Information. Westower and its corporate affiliates and
its representatives agree to hold in confidence any information not generally
available to the public received by them from CORD or the CORD Stockholders
pursuant to the terms of this Agreement. Similarly, CORD and the CORD
Stockholders and their representatives agree to hold in confidence any
information not generally available to the public received by them from
Westower. If this Agreement is terminated for any reason, each of the parties
and their corporate affiliates and
27
representatives will continue to hold such information in confidence and will,
to the extent requested by the other party, promptly return all written
materials furnished pursuant hereto. Neither party to this Agreement shall use
information received from the other for any purpose other than evaluating the
merits and risks of the transaction contemplated by this Agreement.
28
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
Westower Corporation
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Xxxxxx X. Xxxxx, Chairman
CORD Acquisition Co.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Title: President
CORD Communications, Incorporated
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Xxxx Xxxxxxxx, Vice President
CORD STOCKHOLDERS:
/s/ Xxxx Xxxxxxxx
--------------------------------------------
Xxxx Xxxxxxxx
/s/ Xxxx Xxxx
--------------------------------------------
Xxxx Xxxx
/s/ Xxxx Xxxxxxxx
--------------------------------------------
Xxxx Xxxxxxxx
29
List of Schedules and Exhibits
------------------------------
Schedule 4.6 Encumbrances
Schedule 4.7 CORD's Deferred Tax Liability
Schedule 4.8 Litigation and Labor Matters - Exceptions
Schedule 4.9 Insurance
Schedule 4.10 Intellectual Property
Schedule 4.11 Contracts and Commitments
Schedule 4.13 Absence of Default
Schedule 4.14 Existing Condition Exceptions
Schedule 4.19 Transactions with Affiliates
Schedule 4.20 Bank Accounts and Officers Information
Schedule 4.21 Environmental Liabilities
Schedule 4.22 Employees, Positions and Compensation
30
Exhibit 1.1
Form of Articles of Merger
ARTICLES OF MERGER
OF
CORD COMMUNICATIONS, INCORPORATED
(A CALIFORNIA CORPORATION)
INTO
CORD ACQUISITION CO.
(A WASHINGTON CORPORATION)
Pursuant to the provisions of the RCW (S)23B.11.050 of the Washington
Business Corporation Act, the undersigned corporations do hereby make and
execute these Articles of Merger for the purpose of merging Cord Communications
Incorporated, a California corporation, into Cord Acquisition Co., a Washington
corporation (the "Merger").
A. The Plan of Merger is as follows:
1. The Merger. The name of each corporation to be merged is Cord
----------
Communications Incorporated, a California corporation ("Cord"), and Cord
Acquisition Co., a Washington corporation ("Sub"). The name of the surviving
corporation shall be changed to Cord Communications, Inc.
2. Conversion and Exchange of Stock.
--------------------------------
(a) Merger Terms. In the Merger, each outstanding share of common
------------
stock of Cord (the "Cord Stock") shall be converted into and become the
right to receive: (a) $5,584.22 in cash; plus (b) 242.79 shares of common
stock, $.01 par value, of Westower Corporation, a Washington corporation
(the "Westower Stock"); plus (c) up to 388.47 shares of Westower Stock
pursuant to the terms of the earnout formula contained in Section 2.3 of
the Agreement and Plan of Merger dated as of August 31, 1998 (the "Merger
Agreement") among Cord, Xxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxx Xxxx, Sub and
Westower (collectively, the "Merger Consideration").
(b) Stock Portion of Merger Consideration. For purposes of
-------------------------------------
calculating the number of shares of Westower Stock to be delivered for each
share of Cord Stock, the Westower Stock has been valued at $23.00 per
share, which was the price on the date the terms of the Merger were agreed
to by the parties. No fractional shares of Westower Stock will be issued.
The number of shares to be issued to any Cord Stockholder will be
rounded downward to the nearest whole share and cash will be paid in lieu
of any fraction at the rate of $23.00 per share.
(c) Earnout.
-------
(1) Within 15 days after EBITDA (hereinafter defined) is
determined, Sub and Westower shall deliver to each of Xxxx Xxxxxxxx,
Xxxx Xxxxxxxx and Xxxx Xxxx (collectively, the "Cord Stockholders")
the portion of the Merger Consideration deliverable pursuant to
Section 2.1(c) of the Merger Agreement (the "Earnout"). The Earnout
shall be, for each share of Cord Stock, a number of shares of Westower
Stock equal to the product of .00025902 multiplied by EBITDA for the
period from September 1, 1998 through August 31, 1999 (the "Earnout
Period"), subject to the limitation that in no event shall the Earnout
for each share of Cord Stock exceed 388.47 shares of Westower Stock;
provided, however, that in the event that the authorized number of
-------- -------
shares of Westower Stock is not increased as contemplated by Section
7.9 of the Merger Agreement, Westower may at its option replace up to
194.23 shares of Westower Stock with cash at the rate of $23.00 per
share of Westower Stock. The term "EBITDA" shall mean the net income
of Cord (for the portion of the Earnout Period prior to the Merger)
and Sub (for the portion of the Earnout Period after the Merger),
determined in accordance with generally accepted accounting
principles, as utilized by Cord for its fiscal year ended June 30,
1998, consistently applied, plus, to the extent deducted in
determining net income, interest, income taxes, depreciation and
amortization. In addition, for purposes of the Merger Agreement, (i)
EBITDA of the Sub shall be computed without giving effect to the
Merger and any accounting adjustments caused thereby and any expenses
as a result of the Merger will be excluded (including audit expenses
to the extent increased above normal audit expenses); (ii) EBITDA
shall not be reduced by bonuses paid to Sub employees as set forth in
Section 7.2 of the Merger Agreement; (iii) EBITDA shall not be reduced
for severance payments made by Cord or Sub to Xxxx pursuant to Xxxx'x
post-Closing severance agreement as set forth in Disclosure Schedule
4.14 of the Merger Agreement; (iv) EBITDA shall not be reduced by
Westower for overhead costs attributable to Westower incurred by Sub;
(v) all transactions between Cord and Sub and Westower and its
subsidiaries and affiliates shall be adjusted to an arm's-length price
for sales or leases of property or provision of services to the extent
that the price paid is less than the price that would otherwise be
charged by or to Cord in a transaction with an independent third
party; and (vi) extraordinary and nonrecurring gains (including tax
refunds) and extraordinary and nonrecurring losses not related to
operations shall be excluded; provided that gains and losses from
projects of the nature associated with Cord's core business shall not
be considered nonrecurring.
2
(2) Westower will determine the Earnout within forty-five (45)
days following the last day of the Earnout Period and deliver prompt
notice of such amount to the Cord Stockholders (the "Earnout Notice")
with supporting documentation. The Cord Stockholders shall have the
right to inspect, audit and make extracts from all of the records,
files and books of account of Westower relating to the Earnout for
purposes of verifying the amount of the Earnout at reasonable times
during business hours, upon advance notice to Westower.
(3) The Cord Stockholders shall have thirty (30) days from the
receipt of the Earnout Notice to notify Westower if they dispute the
amount of the Earnout. If Westower has not received notice of any such
dispute within such 30-day period, the Earnout shall be final. If,
however, Cord Stockholders have delivered notice of such a dispute to
Westower within such 30-day period, then Westower's independent
accountants shall select a mutually agreeable partner at an
independent accounting firm that has not represented any of the
parties hereto within a period of two (2) years and is one of the five
largest accounting firms in the United States (the "New Accounting
Firm") to review the Earnout, the books of Sub and the Earnout Notice
to determine the amount, if any, that the Earnout is in error. The New
Accounting Firm shall make its determination of the Earnout (the
"Revised Earnout") within thirty (30) days of its selection. The
Revised Earnout shall be final and binding on the parties hereto, and,
upon such determination, the Earnout shall be adjusted accordingly.
The costs of the New Accounting Firm shall be borne by Westower if the
Revised Earnout is higher than the Earnout as originally calculated
and by the Cord Stockholders in all other cases.
(4) If, on or prior to the date the Earnout is paid, Westower
should split or combine the Westower Stock, or pay a stock dividend or
other stock distribution in Westower Stock or any other security, or
otherwise change the Westower Stock into other securities, or make any
dividend or distribution on the Westower Stock, then the number of
shares of Westower Stock issuable as payment of the Earnout will be
appropriately adjusted to reflect such split, combination, dividend or
other distribution or change.
(5) All actions and determinations by the Cord Stockholders with
respect to the Earnout shall be taken and made by Xxxx Xxxxxxxx as
representative of the Cord Stockholders, or, in the event of his death
or disability, Xxxx Xxxxxxxx.
3. Articles of Incorporation. The Articles of Incorporation of Sub in
-------------------------
effect immediately prior to the Merger shall be amended to change the name of
the corporation in Article 1 thereof to "Cord Communications, Inc.," and, as so
amended, shall be the Articles of Incorporation of the surviving corporation
until amended in accordance with applicable law.
3
4. Bylaws. The Bylaws of Sub in effect immediately prior to the Merger
------
shall be the Bylaws of the surviving corporation until amended in accordance
with applicable law.
5. Directors and Officers. The Board of Directors of the surviving
----------------------
corporation shall initially consist of Xxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxx
XxXxxxxxx, Xxxxxx X. Xxxxx, S. Xxx Xxxxxxx, Xxxxx Xxxxx and Xxxx Xxxx, who shall
hold office in each case until their successors are elected and qualified. The
initial officers of the surviving corporation shall be:
Xxxx Xxxxxxxx President
Xxxx Xxxxxxxx Vice President
Xxxxx Xxxxx Vice President, Treasurer and
Secretary
Each officer shall hold office in accordance with the Bylaws of the surviving
corporation.
B. The Effective Time of the Merger shall be the date on which these Articles
of Merger are filed with the Secretary of State for the State of Washington.
C. The Plan of Merger was not required to be adopted by the shareholders of
Sub. The Plan of Merger was adopted by the Cord stockholders on August 31,
1998.
[Execution Page Follows]
4
Dated: August 31, 1998 CORD COMMUNICATIONS, INCORPORATED
By:_____________________________________
Xxxx Xxxxxxxx
Vice President
CORD ACQUISITION, CO.
By:_____________________________________
Xxxxxx X. Xxxxx
President
5
Exhibit 7.6
Form of Registration Rights Agreement
See Exhibit 2.2 of the Company's Current Report on Form 8-K
Exhibit 7.7
Form of Employment Agreements
See Exhibits 2.3 and 2.4 of the Company's Current Report on Form 8-K
