Exhibit 2.6
AMENDMENT NO. 1 TO
STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO THE STOCK PURCHASE AGREEMENT ("Agreement") is
made as of __________, 2000, by and among Xxxx, Xxxxxx & Associates, Inc., a
Delaware corporation ("Xxxx Xxxxxx"), Group-IPEX, Inc. ("IPEX"), Xxxxx X. Xxxxxx
and Xxxxxxxx Xxxxxx (the "Shareholders").
R E C I T A L S
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WHEREAS, the Company, IPEX, and the Shareholders entered into that
certain Stock Purchase Agreement, dated as of December 20, 1997 (the
"Agreement");
WHEREAS, pursuant to Section 10.1 of the Agreement, the Agreement may
not be amended except by a writing executed by the parties thereto; and
WHEREAS, each of the parties thereto desire to amend the Agreement to
provide for a modification to the earn-out provision.
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Section 1.6 of the Agreement be, and it hereby is, amended and
restated to read in full as follows:
1.6 Subsequent Payments. Subject to offset pursuant to Section
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1.4 and 1.6(f) hereof and pursuant to the indemnification provisions set forth
in Article VIII hereof, Purchaser shall pay to the Shareholders up to an
aggregate amount of Three Million Three Hundred Seventy-Five Thousand Dollars
($3,375,000) in cash, payable by check or wire transfer in three (3) payments
(collectively, the "Subsequent Payments"), based upon the achievement of
certain milestones over a three (3) year period ending December 31, 2000 (the
"Earnout Period") as follows:
(a) The subsequent payment corresponding to the twelve
(12) month period ending December 31, 1998, the first year of the Earnout
Period, shall be calculated by multiplying the Maximum Earnout Payment Per
Year by the First Year Factor (the "First Subsequent Payment"). If the First
Year Factor is greater than one (1), the First Subsequent Payment shall equal
the Maximum Earnout Payment Per Year. However, if the First Year Factor is
less than one (1), then the First Subsequent Payment shall be calculated on a
pro-rata basis. In addition, if the First Year Factor is less than one (1),
then the difference between the Maximum Earnout Payment and the product that
results from multiplying the Maximum Earnout Payment Per Year by the First
Year Factor shall be added to the amount of the Second Subsequent Payment, if
any. The date of the First Subsequent Payment, if any, shall be not later than
August 31, 1999.
(b) The subsequent payment corresponding to the twelve
(12) month period ending December 31, 1999, the second year of the Earnout
Period, shall be calculated by multiplying the Maximum Earnout Payment by the
Second Year Factor (the "Second Subsequent Payment"). If the Second Year
Factor is greater than one (1), the Second Subsequent Payment shall equal the
Maximum Earnout Payment Per Year plus any additional amounts as set forth in
Section 1.6(a) above. However, if the Second Year Factor is less than one (1),
then the Second Subsequent Payment shall be calculated on a pro-rata basis and
shall include any additional amounts as set forth in Section 1.6(a) above. In
addition, if the Second Year Factor is less than one (1), then the difference
between the Maximum Earnout Payment and the product that results from
multiplying the Maximum Earnout Payment Per Year by the Second Year Factor
shall be added to the amount of the Third Subsequent Payment, if any. The date
of the Second Subsequent Payment, if any, shall be not later than February 10,
2000, subject to adjustment as set forth in Section 1.6(e) herein.
(c) The subsequent payment corresponding to twelve (12)
month period ending December 31, 2000, the third and final year of the Earnout
Period, shall be calculated by multiplying the Maximum Earnout Payment by the
Third Year Factor (the "Third Subsequent Payment"). If the Third Year Factor
is greater than one (1), the Third Subsequent Payment shall equal the Maximum
Earnout Payment Per Year, plus any additional amounts as set forth in Section
1.6(b) above. If the Third Year Factor is less than one (1), then the Third
Subsequent Payment shall be calculated on a pro-rata basis and shall include
any additional amounts as set forth in Section 1.6(b) above. The date of the
Third Subsequent Payment, if any, shall be not later than February 10, 2001,
subject to adjustment as set forth in Section 1.6(e) herein.
(d) By way of example, if (i) Base Revenue equals
$7,000,000; (ii) First Year Achieved Revenue equals $9,500,000; (iv) Second
Year Achieved Revenue equals $13,000,000; and (v) Third Year Achieved Revenue
equals $18,500,000, then the amount of the First Subsequent Payment payable to
the Shareholders would be $1,071,428.57, the amount of the Second Subsequent
Payment would be $1,102,040.82 and the amount of the Third Subsequent Payment
would be $1,201,530.61. The calculations that support this example are as set
forth on Exhibit A, attached hereto.
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(e) For purposes of calculating the Subsequent Payments,
revenue from contractors placed through Purchaser (including any subsidiary or
parent thereof or any affiliate thereof), those placed through other entities
and those placed directly by the Company shall be included. If such
contractors are placed through an entity other than Purchaser (including any
subsidiary or parent thereof or any affiliate thereof), then the Company's
xxxx rate shall be included. For placements made through Purchaser (including
any subsidiary or parent thereof or any affiliate thereof), a thirty percent
(30%) discount to Purchaser's xxxx rate shall be assumed in determining First
Year Achieved Revenue, Second Year Achieved Revenue and Third Year Achieved
Revenue. Only revenue which is actually collected will be included in the
calculation of the Subsequent Payments. With respect to the first year of the
Earnout Period, only revenue earned during the twelve (12) month period ending
December 31, 1998 and collected through August 31, 1999 shall be included in
the First Subsequent Payment calculation. With respect to the second year of
the Earnout Period, the Second Subsequent Payment calculation shall include
(i) revenue earned during the twelve (12) month period ending
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December 31, 1999 and collected through January 31, 2000 and (ii) revenue
earned during the twelve (12) month period ending December 31, 1998 and
collected from September 1, 1999 through January 31, 2000. Any A/R over 90
days as of January 31, 2000 shall not be included for purposes of the Second
Subsequent Payment calculation, provided however, that on April 30, 2000
Purchaser will recalculate the Second Subsequent Payment by including any
revenue collected from February 1, 2000 through April 30, 2000 and shall make
a corresponding "settlement payment" to the Shareholders for the difference.
Such settlement payment shall be made no later than May 10, 2000. With respect
to the third year of the Earnout Period, the Third Subsequent Payment
calculation shall include (i) revenue earned during the twelve (12) month
period ending December 31, 2000 and collected through January 31, 2001 and
(ii) revenue earned during the twenty-four (24) month period ending December
31, 1999 and collected from May 1, 2000 through January 31, 2001. Any A/R over
90 days as of January 31, 2001 shall not be included for purposes of the Third
Subsequent Payment calculation, provided however, that on June 30, 2001
Purchaser will recalculate the Third Subsequent Payment by including any
revenue collected from February 1, 2001 through June 30, 2001 and shall make a
corresponding "settlement payment" to the Shareholders for the difference.
Such settlement payment shall be made no later than July 31, 2001.
(f) In the event the Company has not collected the
accounts receivable reflected on the Closing Date Balance Sheet within one (1)
year from the Closing Date, Purchaser shall be entitled to offset any or all
Subsequent Payments by an amount equal to such uncollected accounts
receivable.
(g) In the event that the Shareholder Agent disagrees with
the amount of the First Subsequent Payment, the Second Subsequent Payment or
Third Subsequent Payment, the Shareholder Agent shall notify Purchaser in
writing of such disagreement within fifteen (15) days after the Shareholders'
receipt of the First Subsequent Payment, Second Subsequent Payment or Third
Subsequent Payment, as the case may be, and such notice shall set forth the
basis for such disagreement in reasonable detail. If Purchaser and the
Shareholder Agent fail to resolve any such disagreement within thirty (30)
days after written notice from the Shareholder Agent, then all such items as
to which there is a disagreement shall be determined within sixty (60) days
thereafter by a nationally recognized independent accounting firm (the
"Earnout Accounting Firm") (whose determination shall be final and binding
upon the parties) selected by mutual agreement of Purchaser and the
Shareholder Agent (the costs of the Earnout Accounting Firm shall be borne
equally by Purchaser and the Shareholders), and the First Year Subsequent
Payment, Second Subsequent Payment or Third Subsequent Payment, as the case
may be, shall be calculated in accordance therewith.
(h) Notwithstanding anything to the contrary, it shall
hereby be agreed that "Base Revenue" shall equal $7,150,000; "First Year
Target Revenue" shall equal $9,831,250 (a number that represents Base Revenue
multiplied by 1.375); "Second Year Target Revenue" shall equal $13,517,968.75
(a number that represents First Year Target Revenue multiplied by 1.375); and
"Third Year Target Revenue" shall equal $18,587,207.03 (a number that
represents Second Year Target Revenue multiplied by 1.375).
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2. Miscellaneous.
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2.1 Successors and Assigns. Except as otherwise provided
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herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
2.2 Governing Law. This Agreement shall be governed by and
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construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
2.3 Counterparts. This Agreement may be executed in two or
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more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2.4 Amendments and Waivers. Any term of this Agreement may be
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amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of each of the parties hereto.
Except as explicitly stated in this Agreement, all terms, conditions and
provisions of the Agreement remain unchanged by this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
XXXX, XXXXXX & ASSOCIATES, INC.
By:
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Xxxx X. Xxxxxxxx
President
Address: China Basin Landing
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
SIGNATURE PAGE TO AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
PURCHASER:
XXXX, XXXXXX & ASSOCIATES, INC.
By:
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Xxxx X. Xxxxxxxx
President
THE COMPANY:
GROUP-IPEX INC.
By:
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Xxxxx X. Xxxxxx
President
SHAREHOLDERS:
LALIT AND XXXXXXXX XXXXXX,
AS COMMUNITY PROPERTY
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Lalit Kapoor
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Xxxxxxxx Xxxxxx
SIGNATURE PAGE TO AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
EXHIBIT A
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Base Rev. = 7,000,000
Year -1 Target Revenue = 7,000,000 x 1.375 = 9,625,000
Year-2 Target Revenue = 9,625,000 x 1.375 = 13,234,375
Year-3 Target Revenue = 13,234,375 x 1.375 = 18,197,265.63
Year-1 Factor = 9,500,000 - 7,000,000 = 0.952380952
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9,625,000 - 7,000,000
Year-1 Payment = 0.952380952 x 1,125,000 = 1,071,428.57
Shortfall = 53,571.43
Year-2 Factor = 13,000,000 - 9,625,000 = 3,375,000 = .935064
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13,234,375 - 9,625,000 3,609,375
Year-2 Payment = 1,102,040.82 = .935064 x (1,125,000 = 53,571.43)
Shortfall = 76,530.61 = 1,178,571.43 - 1,102,040.82
Year-3 Factor = 18,500,000.00 - 13,234,375 = 5,265,625.00 = 1.060999605
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18,197,265.63 - 13,234,375 4,962,890.63
Year-3 Payment = 1,201,530.61 = (1,125,000 = 76,530.61) x 1.00
TOTAL PAYMENT = 3,375,000
