EXHIBIT 2.2
FIRST AMENDMENT
TO
PARTNERSHIP INTEREST PURCHASE AGREEMENT
This First Amendment to Partnership Interest Purchase Agreement (this
"First Amendment"), dated and effective as of October ___, 1996, constitutes the
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first amendment to that certain Partnership Interest Purchase Agreement (the
"Agreement"), dated as of May 3, 1996, by and among Avery Communications, Inc.,
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a Delaware corporation ("ACI"), Avery Acquisition Sub, Inc., a Texas corporation
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("Merger Sub"), HOLD Billing Services, Ltd. a Texas limited partnership
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("Billing" or the "Partnership"), HOLD Billing & Collection, L.C., a Texas
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limited liability company and the General Partner (the "General Partner") of
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Billing, Joseph W. Webb ("Webb"), James A. Young ("Young"), Edward L. Dunn ("E.
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Dunn"), Philip S. Dunn ("P. Dunn," and, collectively with Webb, Young and E.
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Dunn, the "Selling Partners," or individually, a "Selling Partner"), Harold D.
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Box ("Box"), David W. Mechler, Jr. ("Mechler," and collectively with the General
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Partner, Webb, Young, E. Dunn, P. Dunn and Box, the "Partners," or individually,
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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 1.2. Section 1.2 of the Agreement is
hereby amended and restated to read in its entirety as follows:
SECTION 1.2 PURCHASE PRICE. In consideration for the sale,
assignment, transfer and conveyance by the Selling Partners of the
Selling Partners' Partnership Interests to Merger Sub as herein
provided, Merger Sub shall deliver, or cause to be delivered, to the
Selling 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 $700,000.00;
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(ii) promissory notes (collectively, the "Notes"), in
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the form attached hereto as Annex I, in the aggregate
principal amount of $635,000.00, 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) 250,000 shares (collectively, the "ACI Shares")
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of the Common Stock, par value $0.01 per share (the "ACI
Common Stock"), of ACI.
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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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200,000 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 Selling Partners, pro rata in accordance with their
respective Partnership Interests, on April 30, 1998, 1999, and 2000 (each a
"Release Date"), in accordance with the provisions hereinafter set forth. For
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the purpose of determining the number of Escrow Shares to be released on any
Release Date, the following definitions shall apply: the term "AFTER-TAX
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EARNINGS" shall be deemed to mean the product obtained by multiplying (i) the
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result obtained by subtracting (A) the lesser of (1) the sum of clause (B)(2)
plus clause (B)(3), or (2) $250,000, from (B) the sum of (1) the Partnership's
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audited pre-tax earnings (as determined by ACI's Auditors, whose determination
shall be final and binding on the parties) for any applicable year, plus (2) any
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amortization of goodwill included in such earnings, plus (3) any allocation of
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ACI's 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
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 100,000 Escrow Shares shall be eligible for release
from Escrow. If on either the 1998 or 1999 Release Date less than 100,000 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
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100,000 Escrow 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 200,000
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 100,000 Escrow Shares, or the number of Escrow
Shares determined by multiplying (i) .54 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
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 I 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 Selling 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 Selling Partners on or before the consummation of
any such transaction. Any Escrow Shares not released to the Selling Partners
pursuant hereto shall be released from Escrow and delivered to ACI on or before
the 2000 Release Date.
SECTION 2.2 AMENDMENT OF SECTION 1.3. Clause (i) of Section 1.3 of the
Agreement is hereby amended to change the reference therein to "August 1" to
"November 15."
SECTION 2.3 AMENDMENT OF SECTION 4.2.5. Section 4.2.5 of the Agreement
is hereby amended by (i) deleting paragraphs (b) and (c) therefrom in their
entirety; (ii) redesignating paragraph (d) thereof as paragraph (b), and
deleting the period at the end of such paragraph and replacing such period with
"; and"; and (iii) adding the following paragraphs thereto:
(c) an amendment to the Option Agreement, in form, scope and
substance satisfactory to ACI in its sole and absolute discretion,
pursuant to which ACI may exercise the option provided therein
contemporaneously with the Closing of the transactions contemplated by
the Agreement; and
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(d) either a new agreement or agreements between the
Partnership and HOLD, or amendments to the Partnership's existing
agreement or agreements with HOLD, in each case, are substantially in
the same form and containing substantially similar terms as the present
agreement, but in form, scope and substance satisfactory to ACI in its
sole and absolute discretion, providing that, for a period of no less
than four calendar years following the Closing Date, the Partnership
will be the exclusive billing agent for HOLD's long distance services
(except for those local exchange carriers with which the Partnership
does not presently have an agreement to provide such services);
provided, however, if, after two years, HOLD shall be disposed of as a
going concern, either through the transfer of its outstanding
securities or through the sale of all or substantially all its assets,
to a single acquiror, then, in such event, the exclusivity provisions
of such contract shall automatically terminate.
SECTION 2.4 AMENDMENT OF SECTION 4.2.8. Section 4.2.8 of the Agreement
is hereby amended and restated to read in its entirety as follows:
SECTION 4.2.8 OPTION CLOSING. The conditions to the
obligations of ACI and Merger Sub under the Option Agreement to
consummate the transactions contemplated by the Option Agreement shall
have been fulfilled (or waived by ACI and Merger Sub) and, concurrently
with the Closing, the transactions contemplated by the Option Agreement
shall have been consummated.
SECTION 2.5 AMENDMENT OF SECTION 4.3. Section 4.3 of the Agreement is
hereby amended to delete Section 4.3.3 therefrom in its entirety, and to
renumber Section 4.3.4 as Section 4.3.3.
SECTION 2.6 AMENDMENT OF SECTION 5.1. Section 5.1 of the Agreement is
hereby amended to change all references therein to "September 30, 1996" to
"November 15, 1996."
SECTION 2.7 AMENDMENT OF SECTION 6.7. Section 6.7 of the Agreement is
hereby amended to change the reference therein to "Section 8.3(a)" to "Section
6.1," and the reference therein to "Section 8.3(b)" to "Section 6.2."
SECTION 2.8 AMENDMENT TO ADD ANNEXES. The Agreement is hereby amended
to add the form of the Notes thereto as Annex I, and to add the form of the
Escrow Agreement thereto as Annex II.
SECTION 2.9 AMENDMENT OF SECTION 7.1. Section 7.1 of the Agreement is
hereby amended to add the following terms, in each case in its appropriate
alphabetical order, to those terms defined therein:
ACI COMMON STOCK: as defined in Section 1.2.
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ACI SHARES: as defined in Section 1.2.
AFTER-TAX EARNINGS: as defined in Section 1.2.
BASE VALUE: as defined in Section 1.2.
ESCROW: as defined in Section 1.2.
ESCROW AGENT: as defined in Section 1.2.
ESCROW AGREEMENT: as defined in Section 1.2.
ESCROW SHARES: as defined in Section 1.2.
MULTIPLE OF EARNINGS VALUE: as defined in Section 1.2.
NOTES: as defined in Section 1.2.
OPTION AGREEMENT: that certain Partnership Interest Option Agreement
made as of May 3, 1996, by and among ACI, Merger Sub, Box and Mechler.
RELEASE DATE: as defined in Section 1.2.
TARGET VALUE: as defined in Section 1.2.
The definition of the term TERMINATION DATE in Section 7.1 of the
Agreement is hereby amended to change the cross-reference therein from "SECTION
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7.1" to "SECTION 5.1."
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Section 7.1 of the Agreement is hereby amended to delete the definition
of the term PURCHASE PRICE therefrom in its entirety.
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 of default or breach of any representation,
warranty or covenant by any other party, and the 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.
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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 OPTION AGREEMENT. This First Amendment shall
not become effective until such time as the Option Agreement shall have been
amended in form, scope and substance satisfactory to ACI in its sole and
absolute discretion.
SECTION 3.7 TEXSTAR NOTE. For so long as there is no default under the
Agreement or the Texstar Note, Webb, E. Dunn and Young shall remain as
guarantors of the Texstar Note, and any renewals or extensions thereof, up to a
maximum of $600,000. ACI, Mechler and Box shall cause Webb, E. Dunn and Young to
be released from such guaranty on or before 12 months following the Closing
Date.
[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 PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed this First Amendment
as of the date first above written.
AVERY COMMUNICATIONS, INC.
By:________________________________
Patrick J. Haynes, III
Chairman of the Board
AVERY ACQUISITION SUB, INC.
By:________________________________
Patrick J. Haynes, III
Chairman of the Board
HOLD BILLING SERVICES, LTD.
By: HOLD BILLING & COLLECTION, L.C.
By:___________________________
Harold D. Box
Managing Member
By:___________________________
David W. Mechler, Jr.
Managing Member
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SIGNATURE PAGE
TO
FIRST AMENDMENT
TO
PARTNERSHIP INTEREST PURCHASE AGREEMENT
HOLD BILLING & COLLECTION, L.C.
By:________________________________
Harold D. Box
Managing Member
By:________________________________
David W. Mechler, Jr.
Managing Member
SELLING PARTNERS
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Joseph W. Webb
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James A. Young
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Edward L. Dunn
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Philip S. Dunn
PARTNERS
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Harold D. Box
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David W. Mechler, Jr.
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