EXHIBIT 2.4
FIRST AMENDMENT
TO
PARTNERSHIP INTEREST OPTION AGREEMENT
This First Amendment to Partnership Interest Option Agreement (this
"First Amendment"), dated and effective as of October ___, 1996, constitutes the
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first amendment to that certain Partnership Interest Option Agreement (the
"Agreement"), dated as of May 3, 1996, by and among Xxxxx Communications, Inc.,
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a Delaware corporation ("ACI"), Xxxxx Acquisition Sub, Inc., a Texas corporation
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("Merger Sub"), Xxxxxx X. Box ("Box"), Xxxxx X. Xxxxxxx, Xx. ("Xxxxxxx," and
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collectively with Box, the "Partners," or individually, a "Partner").
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ARTICLE 1
DEFINITIONS AND CONSTRUCTION
SECTION 1.1 DEFINITIONS OF CERTAIN TERMS. Except as otherwise expressly
provided or unless the context otherwise requires, the all terms defined in the
Agreement, whenever used in this First Amendment, shall have the respective
meanings assigned to them in the Agreement for all purposes of this First
Amendment, and include the plural as well as the singular.
SECTION 1.2 RULES OF CONSTRUCTION. The rules of construction set forth
in Section 7.2 of the Agreement are incorporated by reference herein to the same
extent and as fully as if set forth in their entirety in this First Amendment.
ARTICLE 2
AMENDMENTS TO AGREEMENT
SECTION 2.1 AMENDMENT OF SECTION 1.3. Section 1.3 of the Agreement is
hereby amended and restated to read in its entirety as follows:
SECTION 1.3 EXERCISE PRICE. Upon exercise of the Option as herein
provided, and in consideration for the sale, assignment, transfer and conveyance
by the Partners of the Partners' Partnership Interests to Merger Sub pursuant
thereto as herein provided, Merger Sub shall deliver, or cause to be delivered,
to the Partners, pro rata in accordance with their respective Partnership
Interests, at the Closing (as hereinafter defined) the following:
(i) certified or bank cashiers' checks in the aggregate amount
of $596,296.00;
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(ii) promissory notes (collectively, the "Notes"), in the form
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attached hereto as Annex I, in the aggregate principal amount of
$540,926.00, which Notes will bear interest at the rate of 10% per
annum from and after the Closing Date until maturity, and which Notes
will provide that the principal and all interest accrued thereon will
be due and payable in full in one installment of principal and all
accrued interest on the date which is six months following the Closing
Date; and
(iii) 212,963 shares (collectively, the "ACI Shares") of the
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Common Stock, par value $0.01 per share (the "ACI Common Stock"), of
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ACI.
In addition, Merger Sub shall deliver, or cause to be delivered, to
Bank One, Texas, N.A., as escrow agent (the "Escrow Agent"), an additional
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170,000 shares (collectively, the "Escrow Shares") of ACI Common Stock to be
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held in escrow (the "Escrow") pursuant to the terms of the Escrow Agreement (the
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"Escrow Agreement") in the form attached hereto as Annex II. The Escrow Shares
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will be released to the Partners, pro rata in accordance with their respective
Partnership Interests, on April 30, 1998, 1999, and 2000 (each a "Release
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Date"), in accordance with the provisions hereinafter set forth. For the purpose
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of determining the number of Escrow Shares to be released on any Release Date,
the following definitions shall apply: the term "AFTER-TAX EARNINGS" shall be
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deemed to mean the product obtained by multiplying (i) the result obtained by
subtracting (A) the lesser of (1) the sum of clause (B)(2) plus clause (B)(3),
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or (2) $250,000, from (B) the sum of (1) the Partnership's audited pre-tax
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earnings (as determined by ACI's Auditors, whose determination shall be final
and binding on the parties) for any applicable year, plus (2) any amortization
of goodwill included in such earnings, plus (3) any allocation of ACI's
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corporate overhead or similar corporate charges of ACI included in such
earnings, by (ii) .60; the term "MULTIPLE OF EARNINGS VALUE" shall mean, for any
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applicable period, the product obtained by multiplying (i) 15 by (ii) the
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Partnership's AFTER-TAX EARNINGS for the applicable year; the term "BASE VALUE"
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shall mean (i) for the year ending December 31, 1997 - $3,861,000; (ii) for the
year ending December 31, 1998 - the greater of (A) the MULTIPLE OF EARNINGS
VALUE for the year ending December 31, 1997, or (B) $3,861,000; and (iii) for
the year ending December 31, 1999 - the greater of (A) the MULTIPLE OF EARNINGS
VALUE for the year ending December 31, 1997, (B) the MULTIPLE OF EARNINGS VALUE
for the year ending December 31, 1998, or (C) $3,861,000; and the term "TARGET
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VALUE" shall mean, for any applicable year, the result, if a positive number,
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obtained by subtracting (i) the BASE VALUE for the applicable year from (ii) the
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MULTIPLE OF EARNINGS VALUE for the applicable year. On the 1998 and 1999 Release
Dates up to a maximum of 85,000 Escrow Shares shall be eligible for release from
Escrow. If on either the 1998 or 1999 Release Date less than 85,000 Escrow
Shares shall be released from Escrow pursuant to the provisions hereof, then, in
each such event, a number of Escrow Shares equal to the difference between
85,000 Escrow
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Shares and the actual number of Escrow Shares released from Escrow on each such
Release Date pursuant to the provisions hereof shall be eligible for release
from Escrow pursuant to the provisions hereof on the 2000 Release Date. On the
2000 Release Date the maximum number Escrow Shares that shall be eligible for
release from Escrow pursuant to the provisions hereof shall be the lesser of the
sum of the Escrow Shares not released from Escrow pursuant to the provisions
hereof on the 1998 and 1999 Release Dates, or 170,000 Escrow Shares. If, in
performing the calculations hereinafter set forth for any applicable year, the
MULTIPLE OF EARNINGS VALUE shall be less than the BASE VALUE, then no Escrow
Shares shall be released from Escrow on the applicable Release Date.
The actual number of Escrow Shares to be released on any Release Date
shall be equal to the lesser of 85,000 Escrow Shares, or the number of Escrow
Shares determined by multiplying (i) .46 by (ii) the result obtained by dividing
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(A) the result obtained by multiplying (1) .08 by (2) the TARGET VALUE for the
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applicable year by (B) $3.00. By way of illustration, the formula would be
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applied as set forth in the examples on Annex III hereto.
In the event the Partnership shall cease to be a direct or indirect
subsidiary of ACI, whether through the disposition of ACI's ownership of the
Partnership, the sale of all or substantially all the assets of the Partnership
as a going concern, spinoff, or otherwise, the Partners shall, on the day
preceding the effective date of any such transaction, immediately become fully
vested in any and all shares of ACI Common Stock still held in escrow at such
time for release based upon the audited pre-tax earnings for years not then
completed, and all such fully vested shares of ACI Common Stock shall be
released from escrow to the Partners on or before the consummation of any such
transaction. Any Escrow Shares not released to the Partners pursuant hereto
shall be released from Escrow and delivered to ACI on or before the 2000 Release
Date.
To secure the Partners' obligations under Section 4.1 of this
Agreement, at the Closing, 100,000 shares of the ACI Shares shall be delivered
by ACI to the Escrow Agent to be held in escrow for a period of six months
following the Closing. The terms of such escrow shall be set forth in a separate
escrow agreement in substantially the form of the Escrow Agreement attached as
Exhibit A to the HOLD Merger Agreement, appropriately modified as herein
contemplated. ACI will cause its auditors to prepare financial statements for
the Partnership as of the Closing Date to determine compliance with
representations and warranties and to determine whether the Partnership has
suffered any material adverse change to its financial or business condition.
Attached hereto as Annex IV are true and correct copies of the balance sheet of
the Partnership as at September 30, 1996, and the statement of income for the
Partnership for the nine months then ended.
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SECTION 2.2 AMENDMENT OF SECTION 1.4. Section 1.4 of the Agreement is
hereby amended and restated to read in its entirety as follows:
SECTION 1.4 REGISTRATION RIGHTS. The Partners shall have
"piggy-back" registration rights upon the terms, and subject to the
conditions, as those set forth in the form of Registration Rights
Agreement attached as Exhibit B to the HOLD Merger Agreement. At the
Closing, the parties will execute and deliver a separate form of
Registration Rights Agreement containing substantially equivalent
provisions.
SECTION 2.3 AMENDMENT OF SECTION 1.5. Section 1.5 of the Agreement is
hereby amended and restated in its entirety to read as follows:
SECTION 1.5 EXERCISE OF OPTION; TERM. The Option shall become
fully exercisable on and as of the date hereof and shall remain fully
exercisable until 6:00 p.m., Central Standard Time, on November 15,
1996 (the "Option Term"). Upon the terms, and subject to the
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conditions, hereof, ACI may exercise the Option in whole, but not in
part, at any time before the expiration of the Option Term by giving
written or oral notice (the "Option Exercise Notice") to the Partners.
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SECTION 2.4 AMENDMENT OF SECTION 1.6. The Agreement is hereby amended
to delete Section 1.6 in its entirety.
SECTION 2.5 AMENDMENT OF SECTION 1.7. The Agreement is hereby amended
to delete Section 1.7 in its entirety.
SECTION 2.6 AMENDMENT OF SECTION 2.2. The first sentence of Section 2.2
of the Agreement is hereby amended to delete the words "or the Second Option, as
the case may be," therefrom. Section 2.2 of the Agreement is also hereby amended
to delete the last sentence of Section 2.2 in its entirety therefrom.
SECTION 2.7 AMENDMENT OF SECTION 3.1.1. The fourth sentence of Section
3.1.1 of the Agreement is hereby amended to delete the words "or the Second
Option" therefrom.
SECTION 2.8 AMENDMENT OF SECTION 4.4. The first sentence of Section 4.4
of the Agreement is hereby amended by inserting a period after the word "Option"
and deleting the balance of the sentence.
SECTION 2.9 AMENDMENT OF SECTION 4.5. The Agreement is hereby amended
by deleting Section 4.5 in its entirety therefrom.
SECTION 2.10 AMENDMENT OF SECTION 4.6. The Agreement is hereby amended
by deleting Section 4.6 in its entirety therefrom.
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SECTION 2.11 AMENDMENT OF SECTION 4.7. Section 4.7 of the Agreement is
hereby renumbered as Section 4.5 and is hereby amended and restated to read in
its entirety as follows:
SECTION 4.7 LINE OF CREDIT. ACI will use its reasonable best
efforts to arrange for a minimum $10,000,000 revolving credit facility
to be used primarily for factoring and in the growth of the
Partnership, $2,000,000 of which will be available to the Partnership
within one month following the Closing Date, and the remainder of which
will be available to the Partnership within six months following the
Closing Date. As a condition to arranging such financing, the Partners,
together with the other partners of the Partnership, shall have made,
or caused to be made, a subordinated loan to the Partnership of
$1,000,000, which loan shall not be payable on or before a date that is
one year following the Closing Date, and which loan shall bear interest
at a rate not to exceed prime plus 2% per annum.
SECTION 2.12 AMENDMENT TO ADD A NEW SECTION 4.6. The Agreement is
hereby amended to add a new Section 4.6 thereto, which shall read in its
entirety as follows:
SECTION 4.6 CONDITIONS TO OBLIGATIONS OF ACI AND MERGER SUB.
The obligations of ACI and Merger Sub to consummate the transactions
contemplated hereby shall be subject to the fulfillment (or waiver by
ACI) on or prior to the Closing Date of the following conditions, which
the Partners agree to use reasonable good faith efforts to cause to be
fulfilled. The conditions to the obligations of ACI and Merger Sub
under the Partnership Interest Purchase Agreement to consummate the
transactions contemplated by the Partnership Interest Purchase
Agreement shall have been fulfilled (or waived by ACI and Merger Sub)
and, concurrently with the Closing, the transactions contemplated by
the Partnership Interest Purchase Agreement shall have been
consummated. ACI and Merger Sub shall have received each of the
following agreements, in each case duly executed by the other parties
thereto: (i) an Employment Agreement (the "Xxxxxxx Employment
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Agreement"), in the form attached hereto as Exhibit A, pursuant to
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which Xxxxxxx shall be employed by the Partnership; (ii) an Employment
Agreement (the "Box Employment Agreement"), in the form attached hereto
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as Exhibit B, pursuant to which Box shall be employed by the
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Partnership; and (iii) Releases, in substantially the form attached as
Exhibit G to the HOLD Merger Agreement, appropriately modified to
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reflect the transactions contemplated hereby, executed by each Partner.
ARTICLE 3
AGREEMENT; MISCELLANEOUS
SECTION 3.1 AGREEMENT RATIFIED AND CONFIRMED. Except as expressly
amended by this First Amendment, the Agreement is in full force and effect, no
party has notice of any event or default or breach of any representation,
warranty or covenant by any other party, and the
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Agreement, as amended by this First Amendment, is hereby ratified, confirmed and
reaffirmed for all purposes and in all respects.
SECTION 3.2 HEADINGS. The headings contained in this First Amendment
are for purposes of convenience only and shall not affect the meaning or
interpretation of this First Amendment.
SECTION 3.3 COUNTERPARTS. This First Amendment may be executed in
several counterparts, each of which shall be deemed an original and all of which
together constitute one and the same instrument.
SECTION 3.4 GOVERNING LAW, ETC. This First Amendment shall be governed
by in all respects, including as to validity, interpretation and effect, by the
internal laws of the State of Texas, without giving effect to the conflict of
laws rules thereof.
SECTION 3.5 AMENDMENT. No amendment or modification of this First
Amendment shall be valid or binding unless set forth in writing and duly
executed by the party against whom enforcement of the amendment or modifications
sought.
SECTION 3.6 AMENDMENT OF PARTNERSHIP INTEREST PURCHASE AGREEMENT. This
First Amendment shall not become effective until such time as the Partnership
Interest Purchase Agreement shall have been amended in form, scope and substance
satisfactory to ACI in its sole and absolute discretion.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK. THE
SIGNATURES OF THE PARTIES BEGIN ON THE FOLLOWING PAGE.]
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SIGNATURE PAGE
TO
FIRST AMENDMENT
TO
PARTNERSHIP INTEREST OPTION AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed this First Amendment
as of the date first above written.
XXXXX COMMUNICATIONS, INC.
By:________________________________
Xxxxxxx X. Xxxxxx, III
Chairman of the Board
XXXXX ACQUISITION SUB, INC.
By:________________________________
Xxxxxxx X. Xxxxxx, III
Chairman of the Board
PARTNERS
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Xxxxxx X. Box
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Xxxxx X. Xxxxxxx, Xx.
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