SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 27, 1998
Date of report
(Date of earliest event reported)
THE SOURCE INFORMATION MANAGEMENT COMPANY
(Exact name of Registrant as specified in its charter)
Missouri 0-26238 43-1710906
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
11644 Lilburn Park Road, St. Louis, Missouri 63146
(Address of principal executive offices) (Zip Code)
(314) 995-9040
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets
As of July 27, 1998, The Source Information Management Company
(the "Company"), through a wholly-owned subsidiary, acquired all the
assets of Periodical Concepts, a Texas general partnership doing
business as PC2 ("PC") of Dallas, Texas in exchange for $2,500,000 in
cash (the "Acquisition"). The acquired assets included all of the
right, title and interest in and to certain real, personal, tangible
and intangible property (the "Assets"). The Acquisition was effected
pursuant to an Asset Purchase Agreement dated as of July 10, 1998, as
amended by a First Amendment to Asset Purchase Agreement, dated as of
July 24, 1998 (the "Purchase Agreement"). The total purchase price for
PC was determined by arm's length negotiation and was based upon,
among other factors, (i) the current and historical financial results
of PC, and (ii) PC's customer base. Of the $2,500,000 purchase price,
$150,000 was deposited into an escrow account to secure certain
indemnification obligations of PC to the Company pursuant to the
Purchase Agreement.
Other than in connection with the Acquisition, PC has not had
any material relationship with the Company or any of its affiliates,
any director or officer of the Company or any associate of any such
director or officer.
Prior to the Acquisition, PC used the Assets in providing
information and marketing services to retail stores selling magazines
and other periodicals. The Company intends to devote the Assets to
such business and does not intend to substantially change the nature
of PC's operation.
The Company financed the Acquisition with internally generated
funds and proceeds from the Company's recent public offering.
Item 7. Financial Statements and Exhibits
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits - See Exhibit Index.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Date: August 10, 1998
THE SOURCE INFORMATION MANAGEMENT COMPANY
By: /s/ W. Brian Rodgers
--------------------------------------
W. Brian Rodgers
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
10.26 Asset Purchase Agreement dated as of July 10, 1998, between the
Company and Periodical Concepts.
10.27 First Amendment to Asset Purchase Agreement dated as of July 24,
1998 between the Company and Periodical Concepts.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of the
10th day of July, 1998, by and among THE SOURCE INFORMATION MANAGEMENT COMPANY,
INC., a Missouri corporation ("The Source"), PC-SUB, INC., a Missouri
corporation ("PC- Sub") and wholly-owned subsidiary of The Source, and
PERIODICAL CONCEPTS ("Seller"), a Texas general partnership doing business as
PC2.
WHEREAS, Seller is engaged in the collection of retail display
allowances ("RDA") for retail store chains (the "Business");
WHEREAS, the Board of Directors of The Source has approved this
Agreement and determined that it is in the best interests of The Source to
acquire, through PC-Sub, all of the Assets in exchange for the Purchase Price,
upon the terms and subject to the conditions of this Agreement; and
WHEREAS, Seller has determined that it is in the best interests of
Seller to sell and transfer the Assets to PC-Sub in exchange for the Purchase
Price;
THEREFORE, it is agreed as follows:
I. DEFINITIONS.
For purposes of this Agreement, the following words and phrases have
the following meanings:
"Accounting Firm" means BDO Seidman, LLP.
"Accounts Receivable" is defined in Section 4.16(b).
"Accounts Receivable Schedule" is defined in Section 4.16(b).
"Advance Pay" is defined in Section 6.09.
"Assets" means all of the right, title and interest in and to the
property, real, personal and mixed, tangible or intangible, of every kind or
character and wherever located, of Seller and comprising the Business in its
entirety, excluding cash, and including (but not limited to) the following:
(a) All merchandise, inventory, goods, supplies and other
products owned by Seller, committed to be purchased by Seller, or
otherwise under the control of Seller as of the Closing Date, but not
including any commitment of Seller to purchase any item not set forth
in the Assigned Contracts;
(b) The Closing Accounts Receivable;
(c) The furniture and equipment listed in Schedule 1.01;
(d) All trade secrets, know-how and other intellectual
property and intangible property rights used by Seller in the Business,
including the name PC2;
(e) All contract rights, privileges, claims of Seller under
the Assigned Contracts; and
(f) All records, files, books of account, customer and
supplier lists and other books and records of Seller relating to the
Business and the Assets.
"Assigned Contracts" means the contracts set forth in Schedule 4.17 to
which Seller is a party, a true copy of each of which has been delivered to The
Source by Seller, which Assigned Contracts will be assigned by Seller to The
Source at the Closing, and the performance of which shall be assumed by The
Source at the Closing.
"Assignment and Assumption Agreement" is defined in Section 2.04(b).
"Assumed Leases" is defined in Section 4.15.
"Audit" is defined in Section 8.07.
"Bill of Sale and Assignment" is defined in Section 2.04(a).
"Business" is defined in the second paragraph of this Agreement.
"Closing" means the consummation of the transactions contemplated by
this Agreement.
"Closing Accounts Receivable" is defined in Section 4.16(b).
"Closing Balance Sheet" means the consolidated balance sheet of the
Seller as of the close of business on the day preceding the Closing Date.
"Closing Balance Sheet Date" means the date of the Closing Balance
Sheet.
"Closing Customer List" is defined in Section 4.16(a).
"Closing Date" means 10:00 a.m. on July 30, 1998, or such other date
and time as are mutually agreed upon in writing by The Source and Seller.
"Code" means the Internal Revenue Code of 1986, as amended.
"Customer List" is defined in Section 4.16(a).
"Customer Revenues" is defined in Section 4.04(b).
"December 31 Balance Sheet" is defined in Section 4.04(a).
"Encumbrances" is defined in section 2.04(a).
"Escrow" is defined in Section 2.02(b).
"Escrow Agent" is defined in Section 2.02(b).
"Escrow Agreement" is defined in Section 2.02(b).
"Financial Statements" are defined in Section 4.04(a).
"Hold-Back" means $150,000 out of the Purchase Price, which shall be
paid and delivered to the Escrow Agent at Closing, plus any interest or other
income earned thereon.
"Interim Financial Statements" is defined in Section 4.04(a).
"Liabilities" means the liabilities and obligations of Seller.
"Name" is defined in Section 4.14.
"Partners" is defined in the first paragraph of this Agreement.
"Purchase Price" means the sum of $2,500,000.
"RDA" is defined in the second paragraph of this Agreement.
"Roberts" is defined in Section 6.04.
"Seller" is defined in the first paragraph of this Agreement.
"Seller Executives" is defined in Section 6.09.
"Subsequent Financial Statements" is defined in Section 4.04(a).
"Transaction" means the transactions contemplated to be completed
pursuant to this Agreement.
II. TRANSFER AND SALE OF ASSETS.
2.01. Transfer of Assets. At the Closing, subject to the terms and
conditions of this Agreement, and in reliance on the representations, warranties
and covenants of The Source and PC-Sub contained herein, Seller shall transfer,
convey and assign to PC-Sub the Assets in exchange for the Purchase Price.
2.02. Payment of Purchase Price; Escrow.
(a) At the Closing, subject to the terms and conditions of
this Agreement, and in reliance on the representations, warranties and covenants
of Seller contained herein, PC-Sub shall acquire the Assets and pay the Purchase
Price to Seller.
(b) At the Closing, Seller and PC-Sub shall enter into an
Escrow Agreement mutually acceptable to Seller and PC-Sub (the "Escrow
Agreement"); and PC-Sub shall pay $150,000 out of the Purchase Price (together
with any interest or other income earned thereon, the "Escrow") to the Escrow
Agent (as agreed to and defined in the Escrow Agreement), to be held and
disbursed after a 90 day period following the Closing Date, subject to claims
existing thereon, in accordance with the terms and conditions of the Escrow
Agreement.
2.03. No Assumption of Liabilities. In no event shall The Source or
PC-Sub assume or incur any liability or obligation of Seller under any provision
of this Agreement, except for the obligations of Seller under the Assigned
Contracts, as expressly provided herein. For such purposes, it is expressly
understood and agreed (but not by way of limitation of the generality of the
previous sentence) that neither The Source or PC-Sub shall have no liability or
obligation in respect of any of the following:
(a) any liabilities or obligations arising out of or in
connection with the possession or use of any real property by Seller,
including any liability arising out of a violation of any environmental
laws;
(b) liabilities or obligations arising out of any breach by
Seller of any provision of any agreement, contract, commitment or lease
(including the Assigned Contracts), including liabilities or
obligations arising out of the failure to perform any agreement,
contract, commitment or lease (including the Assigned Contracts) in
accordance with its terms prior to the Closing;
(c) any liability or claim for damages or injury, regardless
of when made or asserted, which arises out of or is based upon any
express or implied representation, warranty, agreement or guarantee
made by Seller, or alleged to have been made by Seller, or which is
imposed or asserted to be imposed by operation of law, in connection
with any service performed or product sold or leased by or on behalf of
Seller on or prior to the Closing, including without limitation any
claim for consequential damage, lost revenue or income;
(d) any federal, state or local income or other tax: (i)
payable with respect to the Business, the Assets or the operations of
Seller for any period prior to the Closing; or (ii) incident to or
arising as a consequence of the negotiation or consummation by Seller
of the transactions contemplated hereby; or
(e) any liability or obligation arising prior to or as a
result of the Closing to any employee, agent or independent contractor
of Seller, whether or not employed by The Source after the Closing, or
under any benefit arrangement with respect thereto.
2.04. Transactions at Closing. At the Closing:
(a) Seller will deliver to PC-Sub full possession of the
Assets and such bill(s) of sale, endorsements, assignments and other
good and sufficient instruments of sale, conveyance, transfer and
assignment, all containing covenants of general warranty, in form and
substance satisfactory to PC-Sub (including, without limitation, a
"Bill of Sale and Assignment" in the form of Schedule 2.04(a)), as will
be required or as may be desirable in the opinion of PC-Sub's counsel
in order to effectively vest in PC-Sub full, indefeasible,
merchantable, legal, equitable and beneficial title to the Assets, with
full substitution and subrogation to all rights and actions of
warranty, free and clear of all debts, claims, security interests,
liens, encumbrances and other title retention agreements, pledges,
assessments, covenants, restrictions and charges of every nature
"Encumbrances");
(b) Pursuant to the form of Assignment and Assumption
Agreement set forth in Schedule 2.04(b), and Seller shall transfer and
assign to PC-Sub, and PC-Sub shall accept and agree to perform from and
after the Closing, the Assigned Contracts; and
(c) the parties shall perform all of the other obligations
required to be performed by them under this Agreement on or before the
Closing.
III. ADJUSTMENT; HOLD BACK.
3.01. Hold Back. To secure the rights of The Source and PC-Sub under
Section 10.01, at the Closing, the Escrow will be deposited with the Escrow
Agent, to be held by the Escrow Agent under the terms of the Escrow Agreement.
3.02. Adjustment. If and to the extent the Customer Revenues of Seller
were less than $450,000 (the "Revenue Deficiency"), which shall be finally
confirmed in conjunction with the Audit, the Purchase Price shall be reduced by
5.56 times the amount of such Revenue Deficiency (the "Purchase Price
Adjustment"). If the Revenue Deficiency is determined prior to the Closing, the
amount of such adjustment shall be made by reducing the portion of the Purchase
Price payable by PC-Sub to Seller at Closing. If the Revenue Deficiency is
determined subsequent to the Closing, the amount of such adjustment shall be
made by reducing the Purchase Price and Seller shall refund the amount of the
Purchase Price Adjustment to PC-Sub. As security therefor, PC-Sub shall have the
option, but shall not be obligated, to recover the amount of the Purchase Price
Adjustment from the Escrow.
IV. WARRANTIES AND REPRESENTATIONS OF SELLER.
Seller hereby represents and warrants to, and covenants and agrees
with, The Source and PC-Sub as follows:
4.01. Organization and Standing of Seller. Seller is a general
partnership duly organized, validly existing and in good standing under the laws
of the State of Missouri and has all necessary power and authority to own its
assets as now owned and to carry on its business as now being conducted.
4.02. Authority. Seller has full power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, which have
been duly authorized by all proper and necessary action on the part of Seller,
and, except for the approval of NationsBank (to which the Assets are pledged by
Seller), no further authorization, consent or approval of Seller or its
partners, or of any regulatory body or third party, is required as a condition
to the validity of this Agreement or to give effect to the transactions
contemplated hereby. This Agreement constitutes a valid and binding agreement of
Seller and is enforceable against Seller in accordance with its terms.
4.03. Good Title and Condition of Assets. Seller has good and
marketable title to and interest in all of the Assets to be transferred by it
under this Agreement, free and clear of restrictions on or conditions to
transfer or assignment, and free and clear of all mortgages, conditional sales
agreements, liens, pledges, charges, encumbrances, claims, security interests,
easements, covenants, conditions or restrictions. At Closing, Seller will convey
to PC-Sub good and marketable title to, and all rights and interests in, the
Assets, free and clear of all restrictions on or conditions to transfer or
assignment, mortgages, conditional sales agreements, liens, pledges, charges,
claims, encumbrances, security interests, easements, covenants, conditions and
restrictions. All of the tangible personal property included in the Assets is in
good operating condition and repair, ordinary wear and tear excepted, and
conforms to all applicable laws, ordinances and regulations.
4.04. Books and Records; Financial Statements; Customer Revenues.
(a) The books of account of Seller fully and fairly reflect
the transactions, assets and liabilities of Seller. Seller has provided
The Source with the Balance Sheet of Seller at December 31, 1997 (the
"December 31 Balance Sheet") and the Statements of Operations of Seller
for the year then ended (the "Financial Statements"). Seller has
provided The Source with comparable financial statements for each of
the six months ended June 30, 1998 (the "Interim Financial Statements")
and will provide The Source and PC-Sub with comparable financial
statements for each succeeding month, if any, preceding the Closing
Date (the "Subsequent Financial Statements") as promptly as practicable
following the end of each such month. The Financial Statements and the
Interim Financial Statements have been, and the Subsequent Financial
Statements will be, accurate and complete, and fairly represent, and
will fairly represent, the financial condition of Seller and the
income, expenses and results of operation of Seller, for the time
periods covered thereby, and do not, and will not, omit to state or
reflect any material fact concerning Seller, the Assets or the Business
required to be stated or reflected therein or necessary to make the
statements therein not misleading.
(b) For the 12 months ended June 30, 1998, the revenues of
Seller from fees from the customers of the Business for RDA and RDP
claims (the "Customer Revenues") were not less than $450,000.
4.05. Absence of Changes.
(a) Except as set forth in Schedule 4.05, since December
31, 1997, there has not been any:
(i) transaction by Seller related to the Business,
except in the ordinary course of business as previously
conducted;
(ii) adverse change in the financial condition,
Assets, Business or prospects of Seller;
(iii) amendment or termination of any contract,
agreement or license to which Seller is a party, except
for the termination of contracts and agreements in the
ordinary course of the Business in accordance with the
past practice of Seller, none of which are material,
individually or in the aggregate, to the continued conduct
of the Business as previously conducted;
(iv) mortgage, pledge or other encumbrance of, or the
granting of any security interest or lien with respect to,
any of the Assets; or
(v) any other event or condition of any character
that has had or in the future may have a material adverse
effect on the financial condition, Business, Assets or
prospects of the Business as heretofore conducted.
(b) Since December 31, 1997, Seller has not had any
customer account which was included in the Customer Revenues cease
doing business with Seller or advise Seller that it intends to cease
doing business with Seller or intends to reduce the amount of business
it does or proposes to do with Seller.
(c) Except as set forth on Schedule 4.05(c), there are no
proposals currently outstanding to provide new, modified or additional
services or products to any customer or proposed customer of Seller.
4.06. Payment of All Debts and Liabilities. On or prior to the Closing
Date, Seller shall have paid or provided for the payment of all accounts, debts,
bills and liabilities of Seller which are, or subsequent to the Closing could
become, a lien or encumbrance on or result in a security interest in the Assets
or otherwise affect the free and unencumbered use of the Assets subsequent to
the Closing.
4.07. No Conflicting Agreements or Orders. Except for the security
interest of NationsBank in the Assets and the Assigned Contracts, there is no:
(a) provision of the partnership agreement of Seller, or of any mortgage,
indenture, lease, contract, security agreement, document, instrument, license or
agreement binding on Seller or affecting the Assets, or of any federal, state or
local law, rule or regulation, or (b) order, writ, injunction, decree, judgment,
award, determination, direction or demand of any court, arbitrator, or federal,
state, municipal or other governmental department, bureau, agency or
instrumentality to which Seller is subject, which conflicts with or in any way
prevents or will be violated by the execution, delivery or carrying out of the
terms of this Agreement or the consummation of the Transaction, nor will such
execution, delivery or consummation constitute a default, or an event which,
with the giving of notice or the passage of time, or both, would constitute a
default, under any of the foregoing, nor be the grounds for the suspension,
revocation, impairment, forfeiture, nonrenewal or termination of any license,
permit, franchise, certificate, consent or authorization.
4.08. Compliance.
(a) Seller is not required to obtain any license, permit
or consent from any federal, state, county or municipal authority with
respect to the ownership or use of the Assets or the operation of the
Business or otherwise.
(b) Seller has conducted the Business and maintained the
Assets, including all real property covered by any lease or otherwise
used by Seller, in compliance with, and is not in violation of,
applicable laws, rules, regulations or orders of federal, state or
local governments or regulatory bodies. Seller has not received any
claim or notice that Seller has not complied in all respects with such
laws, rules and regulations.
4.09. Litigation. No suit, action, decree, arbitration or legal,
administrative or other proceeding, controversy or investigation is pending or
threatened against Seller which might affect the Business or any of the Assets,
the possession and use of the Assets, the right of Seller to transfer the
Assets, or the operation of the Business by The Source and PC-Sub subsequent to
the Closing, as heretofore conducted by Seller, and to the knowledge of Seller,
and without notice to the contrary, there is no basis for any such litigation,
proceeding, controversy or investigation. Seller is not in default with respect
to any order, writ, injunction or decree of any federal, state, local or foreign
court, department, agency or instrumentality, nor has the time period of
compliance by Seller with respect to any of the same been extended or stayed.
Seller is not a party to any legal action to recover moneys due to Seller or
damages sustained by Seller relating to the Business or the Assets.
4.10. Condition of Seller. Since December 31, 1997, Seller has kept the
Business and its organization intact; has maintained the good will of its
customers; and has conducted the Business in the same manner as it had been
conducted prior to that date.
4.11. Employment. Seller has provided The Source with the terms and
conditions of employment of Roberts, including benefits provided, for the year
ended December 31, 1997 and as in effect as of the date of this Agreement.
4.12. Labor Relations. Seller has complied with all applicable laws,
rules and regulations relating to the employment of labor, including those
relating to wages (including overtime), benefits (including vacation), hours,
employee safety or other conditions of employment, collective bargaining and the
withholding and payment of taxes. Seller has withheld all amounts required by
law or agreement to be withheld from the wages or salaries of such employees,
and is not liable for any arrears of wages or any tax or penalties for failure
to comply with the foregoing. Seller has paid over, and will pay over, to the
appropriate governmental agencies or depositories, at the time or times required
by law (without any extensions or stays), all "employment taxes" and
"withholding taxes." Seller is not a party to any collective bargaining
agreement with any labor union or other representative of employees. No labor
dispute, controversy, grievance, strike, lockout, work slowdown or stoppage,
boycott, or other employment or labor trouble or other occurrence, event or
condition of a similar character has occurred or been threatened within the past
three years relating to Seller, nor has Seller or any officer or managerial
employee of Seller been the subject of any proceeding before any court,
governmental agency or arbitrator relating to such matters, including unfair
labor practice claims. No discharge has occurred which forms the basis for any
claim of discrimination against Seller.
4.13. Taxes. Seller has filed all federal, state and local tax returns
and estimates required to be filed by it within the times and in the manner
prescribed by law, which returns and estimates were correct and complete in all
material respects.
4.14. Name PC2. Seller has a valid right to use the name PC2 (the
"Name"). Seller's use of the Name or any other intellectual property has not
conflicted and does not conflict with the rights of others, and there are no
pending claims or demands by any third party to the contrary.
4.15. Personal Property, Leases. No personal property used by Seller in
the operation of the Business is held under any lease or rental arrangement,
except for the leases set forth in Schedule 4.15 and included in the Assigned
Contracts (the "Assumed Leases"). The Assumed Leases are currently in full force
and effect. Neither Seller nor the lessor is in default under any of the Assumed
Leases, nor has any event occurred, nor does any condition exist, which with the
giving of notice or the passage of time, or both, would constitute a default
under the Assumed Leases. The use of such leased property in the Business as
heretofore used does not violate or encroach upon the rights of any other party.
4.16. Customers; Accounts Receivable.
(a) Seller has provided The Source and PC-Sub with a list
of the customers of Seller (the "Customer List"). Seller will update
and deliver to The Source and PC- Sub at Closing a current list of such
customers and the amounts each customer has been billed as of the
Closing Balance Sheet Date (the "Closing Customer List").
(b) Seller has delivered to The Source and PC-Sub a
current aged list (the "Accounts Receivable Schedule") of unpaid
accounts receivable owing to Seller, excluding amounts owed by partners
or employees of Seller ("Accounts Receivable"), and will deliver to The
Source and PC-Sub, as of the close of business on the Closing Balance
Sheet Date (the "Closing Accounts Receivable") and as of the Closing
Date, current updates of the Accounts Receivable Schedule and other
information pertaining to the accounts receivable of Seller (excluding
amounts owed by partners or employees of Seller), certified as correct
by Seller. The Accounts Receivable Schedule and any such updates
thereto or other related information provided to The Source or PC-Sub
sets forth or will set forth a true and correct list of all Accounts
Receivable as of the respective dates thereof. The Accounts Receivable
are, and the Closing Accounts Receivable will be, legal, valid and
binding claims, and are and will be fully collectible in the ordinary
course of business in accordance with their terms, without litigation
or other collection expenses, within 120 days of the Closing Date at
the full face value thereof, and are not subject to any counterclaim or
right of set off.
4.17. Other Contracts. The Assigned Contracts listed on Schedule 4.17
represent all of the commitments, agreements, indentures, mortgages, deeds of
trust, leases or other agreements between Seller and any third party which are
material to the operation of the Business by Buyer subsequent to the Closing.
There is no default of Seller or event that with notice or lapse of time, or
both, would constitute a default, nor, to the knowledge of Seller and without
notice to the contrary, any default or threatened default by any other party
thereto, existing with respect to any of the Assigned Contracts. Seller has not
received notice that any party to any of the Assigned Contracts intends to
cancel or terminate any of the Assigned Contracts or to exercise or not exercise
any options under any of the Assigned Contracts. Seller is not a party to, nor
are the Assets bound by, any other commitment, agreement, indenture, mortgage,
deed of trust, lease or other agreement that is material to the unencumbered
ownership of the Assets or operation of the Business by The Source or PC-Sub
subsequent to the Closing.
4.18. No Misrepresentation. No representation or warranty made by
Seller in this Agreement or any Schedule hereto contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein and therein not
misleading.
V. REPRESENTATIONS AND WARRANTIES OF THE SOURCE AND PC-SUB.
The Source and PC-Sub hereby represent and warrant to, and covenant and
agree with, Seller as follows:
5.01. Organization and Standing of The Source and PC-Sub. The Source is
a Missouri corporation, validly existing and in good standing under the laws of
the State of Missouri. PC- Sub is a Missouri corporation, validly existing and
in good standing under the laws of the State of Missouri. The Source owns all of
the issued and outstanding shares of capital stock of PC- Sub.
5.02. Binding Agreement. This Agreement constitutes, and each other
instrument to be executed and delivered by The Source and PC-Sub in accordance
herewith will constitute, when executed and delivered pursuant hereto, the valid
and legally binding obligations of The Source or PC-Sub, as applicable.
5.03. Agreement Within Authority. The execution and delivery of this
Agreement, consummation of the Transaction and performance of this Agreement and
the agreements and instruments to be executed and delivered in connection with
this Agreement by The Source and PC-Sub will not: (a) violate the Articles of
Incorporation or Bylaws of The Source or PC-Sub, or (b) violate any judgment,
order, writ, injunction, decree or demand against The Source or PC-Sub of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality.
5.04. No Conflicting Agreements or Orders. No approval or consent of
any foreign, federal, state, county, local or other governmental or regulatory
body is required as a condition to the validity of this Agreement or to give
effect to the transactions contemplated hereby, as applicable to The Source or
PC-Sub.
5.05. Corporate Action. The Source and PC-Sub have full corporate power
and authority to enter into and deliver this Agreement and to perform the acts
contemplated to be performed by The Source and PC-Sub hereunder, and no further
authorization, consent or approval of its board of directors or shareholders, or
of any regulatory body or third party, is required as a condition to the
validity of this Agreement or to give effect to the Transaction by PC-Sub.
5.06. No Conflict. The execution and delivery of this Agreement and
each other instrument to be executed by The Source and PC-Sub in accordance
herewith and the consummation of the transactions contemplated herein by The
Source and PC-Sub will not conflict or be inconsistent with or result in the
termination of or constitute a breach of or default under the terms of any
indenture, mortgage, deed of trust, covenant, agreement or other instrument to
which The Source or PC-Sub is a party or to which its property is subject.
5.07. No Misrepresentation. No representation or warranty made by The
Source or PC- Sub in this Agreement or any Schedule hereto contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein and therein not
misleading.
VI. COVENANTS OF SELLER AND SELLER EXECUTIVES.
A. Pending Closing, Seller covenants and agrees as follows:
6.01. Access to Information. The Source and PC-Sub and their counsel,
accountants and other representatives shall have full access during normal
business hours to all properties, books, accounts, records, files, agreements
and documents of or relating to the Business and the Assets, including
electronic files. Seller shall furnish or cause to be furnished to The Source
and PC-Sub and their counsel, accountants and representatives all data and
information concerning the Business, the Assets and the Assigned Contracts
requested by The Source.
6.02. Maintain Properties. Seller shall maintain the Assets in good
repair, order and condition.
6.03. Regular Course of Business. Seller shall not, without the prior
written consent of The Source or PC-Sub, purchase, sell or otherwise dispose of
any of the Assets, or incur any liability, obligation or commitment, or engage
in any activity or transaction related to the Business, except in the regular
and customary course of the Business in accordance with its past practices.
6.04. Employee. Without the prior written consent of The Source or
PC-Sub, Seller will not, nor will it agree to, enter into or amend any
representation, employment or compensation agreement or grant any increase or
change in the salary or other compensation or benefits payable or to become
payable by Seller to Terry Roberts ("Roberts") for a period of six months
following the Closing Date. Seller consents to The Source hiring Roberts as of
the Closing Date.
6.05. Business Changes. Seller will not do or agree to do any of the
following without the prior written consent of The Source:
(a) Enter into any contract, commitment or transaction not
in the usual and ordinary course of the Business as heretofore
conducted;
(b) Agree to, modify, amend, cancel or terminate any of
its existing contracts or agreements related to the operation of the
Business.
6.06. Consents. As soon as reasonably practical after the execution and
delivery of this Agreement, and in any event on or before the Closing Date,
Seller will obtain the written consent of all persons whose consent to the
execution of this Agreement and Closing of the
Transaction is required, in form and substance acceptable to The Source and
PC-Sub; and Seller will furnish The Source and PC-Sub original executed copies
of any such consents as they are obtained.
6.07. Filing of Claims; Collection of Accounts Receivable.
(a) Seller will not file any claims with publishers for
the quarter ended March 31, 1998 or thereafter.
(b) Seller will not take any action other than in the
ordinary course of business, consistent with past practices, to collect
the accounts receivable of Seller.
6.08. Availability of Facilities. Seller will make available to Roberts
and such other employees of The Source and PC-Sub as are located in Dallas the
use of such space, equipment and facilities as have been heretofore occupied and
by Seller in the operation of the Business until the expiration of Seller's
current lease.
B. Subsequent to Closing:
6.09 Post Closing Assistance by Seller. For the six month period
following the Closing Date, David Parry and Ben Martin ("Seller Executives")
will continue to support the Business, as conducted by The Source and PC-Sub
subsequent to the Closing. In addition, the Seller Executives will assist The
Source and PC-Sub and actively participate with The Source and PC- Sub in
meetings with customers of Seller as of the Closing Date for the purpose of
causing such customers to convert to The Source's Advance Pay RDA collection
program ("Advance Pay"). If any such customers are converted to Advance Pay with
Seller's active assistance, The Source and PC-Sub agree to pay Seller 10% of any
increase in RDA fee collections from such accounts, based on the percentage
levels obtained on such Advance Pay business over the percentage previously
obtained from the account on RDA collections, after deducting a 2% factor for
the cost of funds and 2% non-collection factor, as and when RDA payments are
received by The Source and PC-Sub on such accounts during the three year period
following the conversion of each such customer to Advance Pay. In addition, if
the Seller Executives assist The Source and PC-Sub in obtaining new RDA
customers (whether or not on the Advance Pay program), the solicitation of which
is approved in writing in advance by The Source or PC-Sub, The Source and PC-Sub
will pay Seller, for the three year period following the date the new customer
commences doing business with The Source, 10% of any RDA collection fees
actually received by The Source on such new accounts (in the case of Advance Pay
accounts, after deducting a 2% factor for the cost of funds and 2%
non-collection factor). Notwithstanding the foregoing, the Seller Executives
shall not be required to exceed a reasonable time commitment in complying with
the provisions of this Section 6.09, consistent with the other business
responsibilities of the Seller Executives; and The Source and PC-Sub shall
reimburse Seller Executives for their reasonable out-of-pocket expenses incurred
in complying with such provisions.
6.10 Change of Name by Seller. As soon as practicable after closing,
Seller shall file with the Secretary of State of the State of Texas to terminate
its registration of the Name.
VII. COVENANTS OF THE SOURCE AND PC-SUB.
7.01. Performance of the Assigned Contracts. Subject to the
representations and warranties of Seller with respect thereto being true and
correct as of the Closing, effective on and after the Closing Date, PC-Sub will
perform and discharge the Assigned Contracts in accordance with the terms and
conditions thereof.
7.02. Employment Agreement. At the Closing, The Source will offer to
enter into an employment agreement with Roberts for a term of not less than six
months which provides for a salary and related compensation on terms comparable
to those by which Roberts was compensated for the year prior to the date of this
Agreement and contains provisions under which Roberts agrees not to compete with
the business of The Source during the term of his employment by The Source and
for one year thereafter.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SOURCE AND PC-SUB.
The obligations of The Source and PC-Sub hereunder are subject to
fulfillment (or waiver by The Source and PC-Sub), prior to or on the Closing
Date, of the following conditions:
8.01. No Adverse Change. There shall have been no adverse change in or
loss or damage to the Assets or the Business.
8.02. Representations, Warranties and Agreements of Seller. The
representations, warranties, covenants and agreements of Seller herein shall be
true and not breached as of the Closing Date, with the same effect as though
such representations, warranties, covenants and agreements had been repeated by
the Seller as of the Closing Date, and all of the obligations of Seller
hereunder shall have been duly performed.
8.03. Absence of Litigation. No action, suit or proceeding before any
court or any governmental body or authority pertaining to the Transaction or to
the consummation of the Closing, or to the Assets or the Business, shall have
been instituted or threatened on or before the Closing Date.
8.04. General Partner's Certificate. The Source shall have received a
certificate, dated the Closing Date, signed and verified by a general partner of
Seller certifying that the conditions specified in this Article VIII relating to
Seller have been fulfilled.
8.05. Approval of Documents. The form and substance of all
certificates, instruments, opinions and other documents delivered to The Source
and PC-Sub under this Agreement shall be satisfactory to The Source and PC-Sub
and their counsel.
8.06. Casualty Loss. The Business shall not have been curtailed or
interrupted by, and the Assets shall not have been affected by, any loss,
destruction or damage due to fire or other casualty unless, if any such
destruction or damage shall have occurred, The Source and PC-Sub have
determined, in their sole judgment and discretion, that such loss, destruction
or damage is not of such nature as to curtail or interrupt the Business or
determined that available insurance proceeds are sufficient to repair or replace
any damaged or lost Assets and Seller shall have assigned the proceeds of any
such insurance to The Source and PC-Sub, which Seller agrees to do upon the
request of The Source and PC-Sub.
8.07. Satisfactory Review of the Business and the Assets; Audit. The
Source and PC- Sub shall have been given access to and been permitted to review
the Assets, the Business and the Assigned Contracts and such other information
as shall have been requested by The Source; and The Source and PC-Sub shall be
satisfied, in their sole discretion, with the physical, operating and financial
condition of the Assets and the Business. The Accounting Firm shall have
completed a review of the December 31 Financial Statements and the results of
operation for the two fiscal years then ended and a review of the Interim
Financial Statements and shall be satisfied with the results of such review,
consistent with the terms and conditions of this Agreement (the "Audit").
8.08. Roberts Employment Agreement. The Source and Roberts shall have
entered into an employment agreement on the terms on conditions provided in
Section 7.02 and otherwise on such terms and subject to such conditions as are
acceptable to The Source.
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller hereunder are conditioned upon the
fulfillment (or waiver by Seller, prior to or at the Closing Date) of the
following:
9.01. Representations, Warranties and Agreements of The Source and
PC-Sub. The representations, warranties, covenants and agreements of The Source
and PC-Sub contained herein shall be true and not breached at and as of the
Closing Date, with the same effect as though such representations, warranties,
covenants and agreements had been repeated by The Source and PC-Sub at and as of
such time, and all of the obligations of The Source and PC-Sub hereunder shall
have been duly performed.
9.02. Performance of the Assigned Contracts. Subsequent to the Closing
and subject to the truth and accuracy at Closing of Seller's representations and
warranties with respect thereto, PC-Sub will perform and satisfy the Assigned
Agreements, in accordance with the terms and conditions thereof.
9.03. Consents. All necessary agreements and consents of any parties to
the consummation of the Transaction by PC-Sub or otherwise pertaining to the
matters contemplated by this Agreement shall have been obtained by PC-Sub and/or
The Source, as appropriate.
9.04. Approval of Documents. The form and substance of all
certificates, instruments, opinions and other documents delivered to Seller
under this Agreement shall be satisfactory to Seller and its counsel.
9.05. The Source's Certificate. Seller shall have received a
certificate, dated the Closing Date, signed and verified by the chief executive
officer and chief financial officer of The Source certifying that the conditions
specified in this Article IX have been fulfilled.
9.06. Bank Approval. Seller shall have obtained the approval of
NationsBank to the Transaction.
X. INDEMNIFICATION
This Article sets forth the manner in which The Source and PC-Sub shall
be indemnified by Seller in the event of any misrepresentation or breach of
warranty or agreement on the part of Seller hereunder, and the respects in which
Seller shall be indemnified by The Source and PC-Sub, jointly and severally, in
the event Seller shall become obligated for, or shall discharge, any liabilities
of PC-Sub or The Source subsequent to the Closing, and/or in the event of any
misrepresentation or breach of warranty or agreement on the part of The Source
or PC-Sub hereunder.
10.01. Indemnification of The Source and PC-Sub by Seller.
(a) Representations, Warranties, Covenants and Agreements.
Seller agrees to indemnify The Source and PC-Sub against and hold The
Source and PC-Sub harmless from any and all loss, liability, damage,
claim, cost and expense of any nature whatsoever, including, without
limitation, attorneys' fees, arising from or in connection with any
representation or warranty made by Seller not being complete, accurate
and true at the date of this Agreement and on the Closing Date, or the
failure by Seller to fulfill and fully perform each covenant or
agreement of Seller under this Agreement or under any other instrument
or document executed and delivered by Seller in connection with the
Transaction or as otherwise contemplated hereby.
(b) Remedies Not Exclusive. The rights and remedies of The
Source and PC- Sub provided for in this Article or otherwise in this
Agreement shall be deemed to be cumulative and in addition to and not
in limitation or exclusion of all other rights and remedies, whether by
the provisions of this Agreement or at law or in equity or otherwise,
which may exist on the part of The Source or PC-Sub by reason of any
misrepresentation or breach of warranty, covenant or agreement on the
part of Seller hereunder; provided, however, that the rights and
remedies of The Source and PC-Sub to obtain recovery for the breach of
the representations and warranties of Seller regarding Customer
Revenues under Section 4.04(b), except for a recovery based upon fraud,
shall be limited to the amount of the Escrow. Such rights and remedies
shall be cumulative and may be exercised at any time or from time to
time, and any failure or delay of The Source or PC-Sub in exercising
any right or remedy at any time shall not constitute a waiver thereof
or restrict its subsequent enforcement or the enforcement of any other
right or remedy of The Source or PC-Sub. In addition to any other
rights and remedies of The Source and PC-Sub hereunder or otherwise,
any amounts due and payable to The Source or PC-Sub by reason of the
obligations of Seller to indemnify The Source and PC-Sub and hold The
Source and PC-Sub harmless hereunder shall be subject to a right of,
and shall first be applied in, but in no event shall exceed, the setoff
and reduction thereof on the part of The Source and PC-Sub against the
Hold-Back under the Escrow Agreement.
10.02. Indemnification of Seller by The Source and PC-Sub.
(a) Representations, Warranties, Covenants and Agreements.
The Source and PC-Sub agree, jointly and severally, to indemnify Seller
against and hold Seller harmless from any and all loss, liability,
damage, claim, cost and expense of any nature whatsoever, including,
without limitation, attorneys' fees, arising from or in connection with
any representation or warranty made by The Source or PC-Sub not being
complete, accurate and true at the date of this Agreement and on the
Closing Date or the failure by The Source or PC-Sub to fulfill and
fully perform each covenant or agreement of The Source or PC-Sub under
this Agreement or under any other instrument or document executed and
delivered by The Source or PC-Sub in connection with the Transaction or
otherwise as contemplated hereby.
(b) Remedies Not Exclusive. The rights and remedies of Seller
provided for in this Article or otherwise in this Agreement shall be
cumulative and in addition to and not in limitation or exclusion of all
other rights and remedies, whether by the provisions of this Agreement
or at law or in equity or otherwise, which may exist on the part of
Seller by reason of any misrepresentation or breach of warranty,
covenant or agreement on the part of The Source or PC-Sub hereunder.
Such rights and remedies shall be cumulative and may be exercised at
any time or from time to time, and any failure or delay of Seller in
exercising any right or remedy at any time shall not constitute a
waiver thereof or restrict its subsequent enforcement or the
enforcement of any other right or remedy of Seller.
10.03. Notice to Indemnifying Party. In the event that any party may be
entitled to, or intends to assert a claim for, indemnification hereunder, not
later than thirty (30) days after actual notice of any claim or the filing of
any action giving rise to such claim for indemnification, the indemnified party
will, if a claim in respect thereof is to be made against another party or
parties hereto, notify the indemnifying party or parties thereof. In case any
action is threatened or brought against any indemnified party, and it notifies
the indemnifying party or parties thereof, the indemnifying party or parties
will be entitled to participate in or assume the defense thereof with counsel
reasonably satisfactory to such indemnified party and, after notice of its
election to assume the defense thereof, the indemnifying party or parties will
no longer be liable for any legal or other expense subsequently incurred by the
indemnified party in connection with the defense thereof; provided, however,
that the indemnified party shall be entitled at all times to participate in the
defense of any such action at its own cost.
XI. CLOSING AND RISK OF LOSS.
11.01. Place and Time. The Closing shall take place on the Closing Date
at the offices of The Source, St. Louis, Missouri, or at such other place as may
be agreed upon by The Source, PC-Sub and Seller.
11.02. Simultaneous Performance. None of the transactions described in
Article II will occur unless all such transactions occur.
XII. MISCELLANEOUS.
12.01. Non-competition. In consideration of the Closing, but without
the separate allocation of any specific portion of the Purchase Price, Seller
agrees, and by his or her signature hereto, as set forth below, which is given
in consideration of The Source and PC-Sub entering into this Agreement and
solely for the purposes of this Section 12.01, each of the partners of Seller
agrees, effective on and after the Closing Date and for the five year period
following the Closing Date, not to engage, directly or indirectly, either
personally, or as an owner, employee, partner, associate, officer, manager,
agent, advisor, consultant or otherwise in the periodical rebate or pocket
payment business in the United States or Canada; provided, however, that the
foregoing shall not prevent any of such persons from being employed by a
competitor of The Source or PC-Sub so long as the person is not engaged,
directly or indirectly, in any activities in the periodical rebate or pocket
payment business in the United States or Canada or which is violative of the
confidentiality agreement of Seller under this Agreement. Seller acknowledges
and agrees that the restrictions contained in this section are reasonable in
light of the unique circumstances of this Agreement, and that any violation of
this section would cause immediate serious and irreparable harm to The Source
and PC-Sub, incapable of being measured in money damages. Accordingly, Seller
agrees that in the event of any breach or threatened breach of this section, The
Source and/or PC-Sub shall be entitled to an injunction or restraining order and
to reasonable attorneys' fees and expenses incurred in connection therewith and
otherwise in the enforcement hereof.
12.02. Information. Except as required by law, each of the parties
hereto agrees to maintain non-public proprietary or otherwise confidential
documents and information of the other in confidence and not to disclose or use
the same other than for the purpose of consummating the Transaction. In the
event the Transaction is not consummated for any reason, all copies of
non-public proprietary or otherwise confidential documents and information: (a)
provided to The Source or PC-Sub and their officers, directors, employees,
agents, accountants, counsel, investment bankers and other financing sources
(its "Representatives"), by or on behalf of Seller or otherwise hereunder for
the purpose of consummating the Transaction shall be returned to Seller by The
Source and PC-Sub, and The Source and PC-Sub and their Representatives shall
maintain the same in confidence and shall not disclose or utilize the same, or
(b) provided to Seller or its Representatives by or on behalf of The Source or
PC-Sub or otherwise hereunder for the purpose of consummating the Transaction
shall be returned to The Source by Seller, and Seller shall maintain the same in
confidence and shall not disclose or utilize the same.
12.03. Incorporation of Schedules. The Schedules hereto shall be deemed
to be incorporated in and form part of this Agreement.
12.04. Further Assurances. Each of the parties agrees to do, execute,
acknowledge and deliver, and cause to be done, executed, acknowledged and
delivered, all such further acts, assignments, transfers, instruments,
documents, deeds and assurances as shall be required in order to carry out this
Agreement and give effect hereto.
12.05. Transfer Taxes. Any sales, transfer, excise and other taxes, if
any, payable by reason of the consummation of the Transaction and transfer of
the Assets contemplated hereby shall be paid by Seller.
12.06. Notices. Any notice, consent, request, claim or other
communication hereunder shall be in writing and shall be deemed to have been
duly given when mailed by First Class Certified, Registered or Express mail, or
when sent by next business day courier (for example, Federal Express) or
confirmed telefax, addressed as follows:
If to The Source or PC-Sub:
S. Leslie Flegel,
The Source Information Management
Company, Inc.
11644 Lilburn Park Rd.
St. Louis, Missouri 63146
Fax: 314-995-9022
If to Seller:
Mr. David Parry
Periodical Concepts
11325 Gemini Lane
Dallas, Texas 75229
Fax: 972-243-6741
or to such other address as any party may designate by written notice hereunder.
12.07. No Commission. All negotiations on behalf of Seller and The
Source and PC- Sub, respectively, relative to this Agreement and the
transactions contemplated hereby have been carried on by or on behalf of Seller
and The Source and PC-Sub directly between Seller and The Source and PC-Sub,
without the intervention of any third party, either as the result of any action
of Seller or The Source and PC-Sub, or otherwise, to the knowledge of Seller or
The Source and PC-Sub, in such a manner as to give rise to any valid claim
against Seller or The Source or PC- Sub for a finders' fee, brokerage commission
or other like payment.
12.08. Survival of Representations and Warranties. The representations
and warranties of The Source and PC-Sub and of Seller, respectively, contained
herein shall survive the Closing, regardless of any investigations made by or on
behalf of or any disclosure to The Source, PC-Sub or Seller, for two (2) years
following the Closing Date, except that the representations and warranties of
Seller contained in Sections 4.02, 4.03 and 4.13, and of The Source contained in
Section 5.03, shall survive the Closing for the period of the statute of
limitations applicable thereto.
12.09. Entire Agreement. This Agreement embodies the entire Agreement
between the parties, and no representations, inducements, promises or other
agreements, oral or otherwise, not embodied herein, shall be of any force or
effect. This Agreement may not be modified or terminated except in writing
signed by the parties hereto.
12.10. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns.
12.11. Third Parties. Nothing in this Agreement or in any instrument or
document executed by any party hereto in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of, any person, firm, corporation or other entity or
body that is not a party hereto.
12.12. Expenses of the Parties. All expenses involved in the
preparation, authorization and consummation of this Agreement, including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants in connection therewith, shall be borne solely by the party who
shall have incurred the same, and no other party shall have any liability in
respect thereof.
12.13. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
12.14. Missouri Law to Govern. This Agreement shall be governed by and
construed under the internal laws of the State of Missouri, without regard to
its conflicts of law provisions or interpretations.
12.15. Mail and Communications. After the Closing, each party will
promptly deliver to the other party the original of any mail or other
communication received by that party but pertaining to the business of the other
party.
12.16. Review of Closing Balance Sheet and Customer Revenues. Not later
than 30 days following the Closing Balance Sheet Date, Seller, in cooperation
with The Source and PC- Sub, shall prepare the Closing Balance Sheet and the
related statements of income for the period from June 30, 1998 to the Closing
Balance Sheet Date in accordance with generally accepted accounting principles,
consistently applied. In preparing the Closing Balance Sheet and related
financial statements, Seller shall consult with The Source and PC-Sub and shall
permit The Source and PC-Sub to participate in and review the preparation
thereof, including all work papers, schedules and calculations related thereto,
prior to the issuance thereof. The Source and PC-Sub shall commence its review
of said work papers, schedules and calculations as soon as practicable. Any
dispute which arises between Seller on the one hand and The Source and PC- Sub
on the other hand as to such financial statements shall be resolved in the
following manner:
(a) The Source and PC-Sub, if it disputes the financial
statements, shall notify Seller in writing within ten days after its
receipt of such financial statements that The Source and PC-Sub
disputes the financial statements, specifying in reasonable detail the
nature of the dispute;
(b) During the five day period following the date of such
notice, Seller and The Source and PC-Sub shall attempt to resolve such
dispute and determine the appropriateness of the Closing Balance Sheet
and related financial statements; and
(c) If at the end of such five day period, the parties have
failed to reach an agreement with respect to the dispute, the matter
shall be referred to an independent accounting firm selected by the
Accounting Firm (the "Arbitrator"). The Arbitrator shall issue its
report as to the Closing Balance Sheet and related financial statements
within ten days after such dispute is referred to the Arbitrator. Each
of the parties shall bear all costs and expenses incurred by it in
connection with such arbitration except for the fees and expenses of
the Arbitrator which shall be borne equally by Seller, on the one hand,
and The Source and PC-Sub, on the other hand. This provision for
arbitration shall be specifically enforceable by the parties and the
decision of the Arbitrator in accordance with the provisions hereof
shall be final and binding and there shall be no right of appeal
therefrom.
12.17. Allocation of Purchase Price. The parties agree to allocate the
Purchase Price for tax purposes by allocating that a portion of the Purchase
Price which is equal to the book value of the tangible assets, as carried on the
books of the Seller, to such tangible assets, and that the remainder of the
Purchase Price shall be allocated to goodwill.
12.18. Schedules. Any schedule provided by a party to this agreement
after the execution of the Agreement and at or before Closing shall be subject
to the approval of the party to whom it has been provided.
IN WITNESS WHEREOF, the parties hereto executed this Agreement as of
the date first set forth above.
<PAGE>
THE SOURCE INFORMATION PERIODICAL CONCEPTS
MANAGEMENT COMPANY, INC.
By:
W. Brian Rodgers Ben Martin
Chief Financial Officer General Partner
PC-SUB, INC.
By:
W. Brian Rodgers
Chief Financial Officer
Partners of Seller (who are executing this Agreement solely for the purposes of
Section 12.01 and, with respect to Seller Executives, Section 6.09).
- ------------------------------- ------------------------------------
Ben Martin David Parry
- ------------------------------- ------------------------------------
Casey N. Martin Ellajean Martin Snyder
FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement is made as of the 24th
day of July, 1998, by and between THE SOURCE INFORMATION MANAGEMENT COMPANY, a
Missouri corporation ("The Source"), and PERIODICAL CONCEPTS, a Texas general
partnership doing business as PC2 ("Seller").
WHEREAS, The Source, under the name of "The Source Information
Management Company, Inc.," and Seller entered into an Asset Purchase Agreement
on July 10, 1998 (the "Agreement");
WHEREAS, the correct name of The Source is "The Source Information
Management Company";
WHEREAS, The Source will assign its interest in the Agreement to
PC-Sub, Inc., a Missouri corporation and wholly-owned subsidiary of The Source
but will remain liable for all of its obligations under the Agreement as hereby
amended; and
WHEREAS, the parties believe that amending the Agreement is in the best
interests of both parties hereto and necessary to clarify the terms of the
Agreement;
THEREFORE, it is agreed as follows:
1. Every reference in the Agreement to "The Source Information
Management Company, Inc." shall be replaced with and mean "The Source
Information Management Company."
2. The Source may assign its interest in the Agreement, as amended, to
PC-Sub, Inc., and The Source will remain liable for all of its obligations under
the Agreement, as amended.
3. The definition of Assets as contained in Section I of the Agreement
is hereby amended as follows:
"Assets" means all of the right, title and interest in and to
the property, real, personal and mixed, tangible or intangible, of
every kind or character and wherever located, of Seller and comprising
the Business in its entirety, including (but not limited to) the
following:
(a) All merchandise, inventory, goods, supplies and
other products owned by Seller, committed to be purchased by
Seller, or otherwise under the control of Seller as of the
Closing Date, but not including any commitment of Seller to
purchase any item not set forth in the Assigned Contracts;
(b) The Closing Accounts Receivable;
(c) The furniture and equipment listed in Schedule
1.01;
(d) All trade secrets, know-how and other
intellectual property and intangible property rights used by
Seller in the Business, including the name PC2;
(e) All contract rights, privileges, claims of Seller
under the Assigned Contracts; and
(f) All records, files, books of account, customer
and supplier lists and other books and records of Seller
relating to the Business and the Assets.
Notwithstanding any other provision of this Agreement, the
defined term "Assets" does not include cash, cash equivalents,
furniture and fixtures not listed on Schedule 1.01, and the contract
between Seller and AAFES as renewed as of October 30, 1997 (the "AAFES
Contract").
4. Section 2.01 of the Agreement is hereby amended to provide as
follows:
2.01. Transfer of Assets. At the Closing, subject to the terms
and conditions of this Agreement, and in reliance on the
representations, warranties and covenants of The Source contained
herein and in exchange for the Purchase Price, Seller shall (i)
transfer, convey and assign the Assets to The Source and (ii) enter
into a subcontract agreement with The Source or its assigns whereby
Seller grants the exclusive right to such subcontractor to provide all
services under the AAFES Contract and to collect and retain all
compensation due and owing as a result of the provision of such
services.
5. Section 2.02(a) of the Agreement is hereby amended to provide as
follows:
(a) At the Closing, subject to the terms and conditions of
this Agreement, and in reliance on the representations, warranties and
covenants of Seller contained herein, The Source shall acquire the
Assets and pay the Purchase Price to Seller by wire transferring all
such funds pursuant to the following wire transfer instructions for
application to the indebtedness of Martin News Agency, Inc., to
NationsBank, N.A.:
Routing No. 111000025
Account No. 187253271
For the account of Martin News Agency, Inc.
Attn: Mark Henze
6. Section 4.04 of the Agreement is hereby amended to provide as
follows:
4.04. Books and Records; Financial Statements; Customer
Revenues.
(a) The books of account of Seller fully and fairly
reflect the transactions, assets and liabilities of Seller.
Seller has provided The Source with the Balance Sheet of
Seller at December 31, 1997 (the "December 31 Balance Sheet")
and the Statements of Operations of Seller for the year then
ended (the "Financial Statements"). Seller has provided The
Source with comparable financial statements for each of the
six months from January 1998 through June 1998 (the "Interim
Financial Statements") and will provide The Source with
comparable financial statements for each succeeding month, if
any, preceding the Closing Date (the "Subsequent Financial
Statements") as promptly as practicable following the end of
each such month. The Financial Statements and the Interim
Financial Statements have been, and the Subsequent Financial
Statements will be, accurate and complete, and fairly
represent, and will fairly represent, the financial condition
of Seller and the income, expenses and results of operation of
Seller, for the time periods covered thereby, and do not, and
will not, omit to state or reflect any material fact
concerning Seller, the Assets or the Business required to be
stated or reflected therein or necessary to make the
statements therein not misleading. The Financial Statements
and the Interim Financial Statements are attached hereto as
Schedule 4.04(a).
(b) For the 12 months ended June 30, 1998, the
revenues of Seller from fees from the customers of the
Business for RDA and RDP claims (the "Customer Revenues") were
not less than $450,000.
7. Section 4.07 of the Agreement is hereby amended to provide as
follows:
4.07. No Conflicting Agreements or Orders . Except for the
security interest of NationsBank, N.A., in the Assets, there is no: (a)
provision of the partnership agreement of Seller, or of any mortgage,
indenture, lease, contract, security agreement, document, instrument,
license or agreement binding on Seller or affecting the Assets, or of
any federal, state or local law, rule or regulation, or (b) order,
writ, injunction, decree, judgment, award, determination, direction or
demand of any court, arbitrator, or federal, state, municipal or other
governmental department, bureau, agency or instrumentality to which
Seller is subject, which conflicts with or in any way prevents or will
be violated by the execution, delivery or carrying out of the terms of
this Agreement or the consummation of the Transaction, nor will such
execution, delivery or consummation constitute a default, or an event
which, with the giving of notice or the passage of time, or both, would
constitute a default, under any of the foregoing, nor be the grounds
for the suspension, revocation, impairment, forfeiture, nonrenewal or
termination of any license, permit, franchise, certificate, consent or
authorization.
8. Section 4.15 of the Agreement is hereby amended to provide as
follows:
4.15. Personal Property, Leases . No personal property used by
Seller in the operation of the Business is held under any lease or
rental arrangement, except for the leases set forth in Schedule 4.15.
The Source is not assuming any lease liability of the Seller under this
Agreement.
9. Section 4.16(a) of the Agreement is hereby amended to provide as
follows:
(a) Seller has provided The Source with a list of the
customers of Seller (the "Customer List"). Attached hereto as Schedule
4.16(a) is an updated Customer List as of July 24, 1998, showing all
billed but unpaid claims made on behalf of such customers by Seller and
Seller's claim against such customers for Seller's fees attributable to
such claims.
10. Section 4.17 of the Agreement is hereby amended to provide as
follows:
4.17. Other Contracts . Except for the Assigned Contracts
listed on Schedule 4.17, the AAFES Contract, and Seller's lease of its
Sharp SF2035 copier, Seller is not a party to, nor are the Assets bound
by, any commitment, agreement, indenture, mortgage, deed of trust,
lease or any other agreement between Seller and any third party related
to the operation of the Business. There is no default of Seller or
event that with notice or lapse of time, or both, would constitute a
default, nor, to the knowledge of Seller and without notice to the
contrary, any default or threatened default by any other party thereto,
existing with respect to any of the Assigned Contracts. Seller has not
received notice that any party to any of the Assigned Contracts intends
to cancel or terminate any of the Assigned Contracts or to exercise or
not exercise any options under any of the Assigned Contracts. Seller is
not a party to, nor are the Assets bound by, any agreement that is
materially adverse to the Assets or the Business.
11. Section 8.09 of the Agreement is hereby amended to: (i) renumber
the section as 6.09 and to restate the reference therein from "Section 8.09" to
"Section 6.09" and (ii) replace the reference therein to "1% non-collection
factor" with "a 1% to 2% non-collection factor based on the collection history
of each account at issue."
12. Article VI of the Agreement is hereby amended to add the following
section:
6.10 Change of Name by Seller. As soon as practicable after the earlier
to occur of Closing or October 30, 1998, the partners of Seller shall
cause the filing of documents with the office of Dallas County Clerk
abandoning their use of the assumed names "Periodical Concepts" and
"PC2," and, if such assumed names were filed of record, they shall
cause such documents to be filed with the Secretary of State of Texas.
13. Section 12.17 of the Agreement is hereby amended to read as
follows:
12.17. Allocation of Purchase Price. The parties agree to
allocate the Purchase Price for tax purposes by allocating that portion
of the Purchase Price which is equal to the book value of the tangible
assets included within the Assets, as carried on the books of the
Seller, to such tangible assets, and the remainder to goodwill.
14. Except as modified herein, all terms of the Agreement shall remain
in full force and effect.
THE SOURCE INFORMATION PERIODICAL CONCEPTS
MANAGEMENT COMPANY
By:___________________________ By:________________________________
W. Brian Rodgers Ben Martin
Chief Financial Officer General Partner
Partners of Seller (who are executing this Agreement solely for the
purposes of Section 12.01 and, with respect to Seller Executives, Section 6.09).
- ------------------------------- -----------------------------------
Ben Martin David Parry
- ------------------------------- ------------------------------------
Casey N. Martin Ellajean Martin Snyder
