FIRST AMENDMENT
PURCHASE AGREEMENT
This first amendment to the Purchase Agreement dated August
19, 1995, by and between C&L Acquisitions Corporation, a Nevada
corporation ("Acquisition"), Xxxxx Xxxx, Xxxxx X'Xxxxxx and Xxx
Xxxxx (together collectively referred to as the "Shareholders") who
together are all of the Shareholders of Valley Communications,
Incorporated, a California corporation ("VCI").
W I T N E S S E T H
WHEREAS, the above named Parties entered into a Purchase
Agreement on the 14th day of August 1995, and
WHEREAS, the Parties wish to amend said Purchase Agreement as
hereinafter described,
NOW THEREFORE, it is agreed as follows:
A. Section 1.2(iv) of the Purchase Agreement is hereby amended in
its entirety to read as follows:
(iv) Pretax Operating Profits. Pretax Operating Profits
are earnings before taxes and Operating Interest, and
before extraordinary gains or losses for the year or
period involved, prepared in accordance with generally
accepted accounting principles ("GAAP") consistently
applied and consistent with those accounting methods used
in the preparation of the Closing Financial Statement
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under section 6.7 hereof. Management fees charged to VCI
by Acquisition or its affiliates in any fiscal year shall
be $100,000 which shall include, but is not limited to,
tax preparation, internal audits, year-end audit,
participation as necessary in union negotiations,
financial assistance in negotiation with lenders for an
appropriate line of credit, board meetings and
acquisition assistance for VCI; provided that such
management fee shall be prorated for the partial fiscal
year from the date of closing through the end of such
year. Items of expense incurred by VCI as a direct
result of this acquisition shall not reduce Pre-Tax
Operating Profit. Interest on Sub-Debt (as defined in
1.4(a) herein) shall be a charge in determining Pretax
Operating Profits. Interest, other than Sub-Debt
interest ("Operating Interest"), in excess of 1% of
annual sales shall also be a charge in determining Pretax
Operating Profits. (See example in Exhibit 1.2(iv)
attached.
B. Section 1.4(a) of the Purchase Agreement is hereby amended in
its entirety to read as follows:
(a) Any shareholder or combination of shareholders of
VCI owning 10% or more of the common stock of VCI shall
have the right to require VCI to pay quarterly dividends
in the amount of the lesser of $1,300,000 (prorated for
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any period less than one fiscal year) or the After-Tax
Operating Profit of VCI for such period, provided that
such dividend payment (i) does not reduce the net worth
of VCI below One Million-Four Hundred Thousand Dollars
($1,400,000), (ii) does not render VCI insolvent or
otherwise impair its capital, (iii) does not violate any
agreement with creditors of VCI, and (iv) is not in
contravention of otherwise applicable laws. VCI may sell
subordinated notes (Sub-Debt) in amounts not to exceed
the amount of dividends paid by VCI after the date of
Closing; such Sub-Debt shall be due in five years and
bearing interest at 25% per annum with interest payments
due quarterly. Such Sub-Debt shall be offered to all
shareholders in proportion to their percentage ownership
of the common stock of VCI, provided that if any
shareholder declines to purchase any such note, the note
shall be offered to all shareholders who did purchase
notes in proportion to their relative holdings of common
stock of VCI.
C. Article II(c) of the Stockholders Agreement is hereby amended
in its entirety to read as follows:
(c) A trust (including a Trust Account or an XXX Trust
as defined below) created for the benefit of
himself, his spouse, his issue and/or the spouses
of his issue; or
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D. The first sentence of Section 1.4(c) of the Purchase Agreement
is hereby amended to read as follows:
(c) In the event that during the term of the Employment
Contracts attached hereto as Exhibits 1.4(c)(1),
1.4(c)(2) and 1.4(c)(3), a Shareholder voluntarily
terminates his employment with VCI, or if he is
terminated by VCI pursuant to Sub-paragraphs 6(c), 6(d)
and 6(e) of the Employment Contract, such Shareholder
will be required to sell at VCI's option, such
Shareholder's interest in VCI.
E. Section 1.4(e) of the Purchase Agreement is stricken in its
entirety.
F. Section 1.4(f) of the Purchase Agreement shall be amended to
change its section number to Section 1.4(e).
G. Section 4.2(d) of the Purchase Agreement shall be amended to
read as follows:
(d) Acquisition shall have executed a Security Agreement
in substantially the form of Exhibit 1.3 representing a
pledge of Acquisition's shares of VCI to secure the
obligations of Acquisition under the Note referred to in
paragraph 1.2(b) hereafter and such Security Agreement
shall terminate upon payment of such Note.
H. The last line of Section 6.7 on Page 40 of the Purchase
Agreement shall be amended to read as follows:
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paragraph 2.1(k) herein, provided however that any
inventory
I. Section 8.1(b) of the Purchase Agreement shall be amended to
read as follows:
(b) Shareholders shall enter into Employment Agreements
with VCI, the form of which is attached hereto as
Exhibits 1.4(c)(1), 1.4(c)(2) and 1.4(c)(3).
J. The following shall be added to paragraph 6(3) of the
Employment Contracts (Exhibits 1.4(c)(1), 1.4(c)(2):
In the event that there are fewer than three Shareholders
remaining at the time of termination of employee's
employment, pursuant to paragraph 6(c), 6(d), or 6(e),
one such Shareholder, together with all of the directors
appointed by acquisition, must agree on such termination.
K. Section 7.2 of the Shareholders Agreement (Exhibit 1.4) shall
be amended to read as follows:
Pretax Operating Profits. The term "Pretax Operating
Profits" as used herein shall mean earnings before taxes
and Operating Interest, and before extraordinary gains or
losses for the year or period involved, prepared in
accordance with generally accepted accounting principles
("GAAP") consistently applied and consistent with those
accounting methods used in the preparation of the Closing
Financial Statement under section 6.7 hereof. Management
fees charged to Company by Acquisition or its affiliates
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in any fiscal year shall be $100,000 which shall include,
but is not limited to, tax preparation, internal audits,
year-end audit, participation as necessary in union
negotiations, financial assistance in negotiation with
lenders for an appropriate line of credit, board meetings
and acquisition assistance for Company; provided that
such management fee shall be prorated for the partial
fiscal year (from the date of closing) through the end of
such fiscal year. Items of expense incurred by Company
as a direct result of this acquisition shall not be
included. Interest on Sub-Debt (as defined in 1.4(a)
herein) shall be a charge in determining Pretax Operating
Profits. Interest, other than Sub-Debt interest
("Operating Interest"), in excess of 1% of annual sales
shall also be a charge in determining Pretax Operating
Profits. (See example in Exhibit 1.2(iv) attached.
L. Article XV of the Shareholders Agreement (Exhibit 1.4) shall
be amended in its entirety to read as follows:
Any shareholder or combination of shareholders of Company
owning 10% or more of the common stock of Company shall
have the right to require Company to pay annual dividends
in the amount of the lesser of $1,300,000 (prorated for
any period less than one fiscal year) or the After-Tax
Operating Profit of Company for such period, provided
that such dividend payment (i) does not reduce the net
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worth of Company below One Million-Four Hundred Thousand
Dollars ($1,400,000), (ii) does not render Company
insolvent or otherwise impair its capital, (iii) does not
violate any agreement with creditors of Company, and (iv)
is not in contravention of otherwise applicable laws.
M. Article V of the Stockholders Agreement is hereby amended by
appending at the end of such Article V the following:
This Article V shall not affect the right or obligations
of any Stockholder to sell shares pursuant to other
agreements, including but limited to, any employment
agreement between a Stockholder and the Company.
N. Article VIII of the Stockholders Agreement is hereby amended
by deleting therefrom the following clause:
"...subject to discounts for minority interest,"
O. Article XV of the Stockholders Agreement is hereby amended by
deleting Section 15.2 thereof and by redesignating Section
15.1 as merely Article XV.
P. Section 18.9 of the Stockholders Agreement is hereby amended
by deleting the word "Wisconsin" and inserting in it place the
word "California."
Q. Section 18.14 of the Stockholders Agreement is hereby amended
to read as follows:
Sales by Company. The Company may sell stock in the
Company to persons who would not otherwise constitute a
Permitted Transferee (as defined in Article II hereof
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only):
(a) upon unanimous approval of the Company's Board
of Directors, or
(b) as part of an offering of shares of the
Company through an underwriter.
Except as specifically amended above, the Purchase Agreement
shall remain unchanged.
Dated this 20th day of November, 1995.
C&L ACQUISITION CORPORATION
("Acquisition")
By: \s\ Sydney X. Xxxxx, Secretary
SHAREHOLDERS
\s\ Xxxxx Xxxx
\s\ Xxxxx X'Xxxxxx
\s\ Xxx Xxxxx
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