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EXHIBIT 10.24
THE INTERLINK COMPANIES, INC.
000 XXXXXXXXX XXXXX, XXXXX 000
XXXXXXXXX, XXX XXXX 00000
March 5, 2001
Xx. Xxxxxx Xxxxxx, Chairman
The Source Information Management Company
0 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xx. Xxxxx, Xxxxxxxx 00000
Dear Xxxxxx:
When executed by both parties, this shall serve as a binding letter of intent
(subject only to the provisions of Section 9, below) between your company, The
Source Information Management Company ("Source"), and ours, The InterLink
Companies, Inc. (formerly Deyco Acquisition Corp.) ("InterLink") with respect to
Source's acquisition of 100% of the stock of InterLink, on the following terms
and conditions:
1. Source and InterLink have completed the transaction whereby InterLink
purchased International Periodical Distributors ("IPD") (the "First
Closing"). Following the First Closing, Source owns approximately 33% of
InterLink common stock on a fully-diluted basis.
2. As soon as practicable, but not later than 60 days after the date hereof
unless Source determines that the Source common shares to be issued in the
transaction require prior registration with the Securities and Exchange
Commission, Source will purchase 100% of the issued and outstanding
preferred stock of InterLink (the "Interlink Preferred Stock"), and all of
the issued and outstanding common stock of Interlink ("Interlink Common
Stock") and options (the "Options") to purchase common stock of InterLink
not already owned by Source, such that following these transactions, Source
will be the sole owner of InterLink, and, indirectly, of its two operating
subsidiaries, Xxxxx X. Xxxxx, Inc. and IPD.
3. The purchase price for the Interlink Preferred Stock will be $1,200,000,
paid in cash at the time of closing to the current shareholders thereof.
The purchase price for the Interlink Common Stock and the Options will be
1,220,000 shares of Source common stock in the aggregate (the "Source
Shares"). At the closing (the "Overall Closing"), the $1,200,000 in cash
and 854,000 of the Source Shares will be transferred to the existing
holders InterLink Preferred Stock and the existing holders of Interlink
Common Stock and the Options, respectively, and 366,000 of the Source
Shares (the "Escrow Shares") will be delivered to an escrow agent
acceptable to Source and Interlink (the "Escrow Agent"), to be held by the
Escrow Agent for a period of six (6) months from the date of the Overall
Closing (the "Escrow Period"). At the end of the Escrow Period, all of the
Escrow Shares shall be delivered to the holders of Interlink Common Stock
and the Options existing as of the date hereof (the "Indemnifying
Holders"), unless the conditions described in Section 5 hereof shall have
occurred.
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4. At the Overall Closing, all recipients of the Source Shares will execute
documents with Source to the following effects:
(i) That Source or its designee will have a "call" on the
Source Shares, at $7.75 per share in cash, for a period of six (6) months from
the date of the Overall Closing;
(ii) That in consideration therefor, Source will undertake to
register such Source Shares pursuant to the Securities Act of 1933 within such
six (6) month period;
(iii) That following such registration, and if the call expires
unexercised, any such recipient will not, for a period of an additional six (6)
months, sell Source Shares in the open market unless it is sold at a price
higher than the previous days' close, and at the then prevailing ask price, and
with the volume limitation expressed in Rule 144 promulgated by the Securities
and Exchange Commission (even if such sale is not subject to Rule 144).
(iv) That the Source Shares, until they are registered, will be
subject to normal restrictions on transfer under federal and state securities
laws.
5. If Source has not exercised its "call" at the end of the Escrow Period, and
each of Xxxxxx Xxxxxx (on behalf of Source), Xxxxxx X. Xxxxxx, and Xxxxx
Xxxxxxxx agree that Source shall invest additional capital in Interlink or
in IPD (the "Additional Capital"), such parties shall use their best
efforts to structure the investment of such Additional Capital so that it
shall not be deemed to be permanent capital to Interlink or IPD. However,
in the event such investment of Additional Capital is deemed by a
nationally recognized investment bank acceptable to both Source and
Interlink to be permanent capital to Interlink or IPD, then such number of
Escrow Shares shall be returned to Source as is determined by dividing two
thirds of such Additional Capital by 5; provided, however, that in no event
shall RDA superadvances be considered permanent capital. The remaining
Escrow Shares shall be converted into an investment of additional capital
in Interlink by Source at the rate of $5.00 per share, and shall be
delivered by Source to the Indemnifying Holders at the end of the Escrow
Period.
6. At the Overall Closing, Source will or will cause InterLink to enter into
mutually satisfactory employment agreements with Xxxxx Xxxxxxxx and Xxxxxx
Xxxxx.
7. In the event that either party can benefit from a change in the structure
of the transactions contemplated to be consummated at the Overall Closing,
without detriment to the other party and without change to the substance of
such transactions, then such structure shall be changed accordingly. In the
event that fewer than 100% of the holders of common stock and preferred
stock and Options of InterLink execute a definitive agreement with respect
to the transactions contemplated by this letter of intent, the parties
agree to cooperate in restructuring the transactions contemplated by this
letter of intent in order that Source will obtain 100% of the outstanding
preferred and common shares and Options of InterLink. Such restructuring
may be:
(a) A statutory merger between a subsidiary of Source and
InterLink in a transaction in which InterLink shareholders and Option holders
will receive the same consideration they would have received if the transaction
were structured as a stock purchase.
(b) A purchase of InterLink preferred and common shares from
those InterLink shareholders who execute the definitive agreement (the "Initial
Purchase") followed by a merger in which InterLink preferred shareholders
receive the same cash consideration they would have received had they
participated in the Initial Purchase, and InterLink common shareholders and
Option holders who do not sell their shares in the Initial Purchase receive
either the same number of Source shares they would have received had they
participated in the Initial Purchase or cash of a value equivalent to the value
of Source common shares they would have received in the Initial Purchase.
8. Subject to approval by Source's Board of Directors to be made prior to the
Overall Closing, upon the Overall Closing, Xxxxxx X. Xxxxxx will be elected
to the Board of Directors of Source.
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9. The transactions contemplated by this letter of intent are subject to:
(a) Negotiation and execution of a definitive agreement containing
representations, warranties, covenants and other terms customary in agreements
of this type. The parties agree in good faith to negotiate, finalize and execute
the definitive agreement as soon as practicable.
(b) Satisfactory completion of due diligence.
(c) Written confirmation of oral consent to the transactions
contemplated by this letter of intent by Source's lender.
(d) Written confirmation of oral consent to the transactions
contemplated by this letter of intent by Congress Financial.
10. The undersigned holders of preferred and common shares of InterLink who
hold of record and beneficially the number of InterLink common and
preferred shares set forth opposite their respective names (collectively
more than fifty percent (50%) of the outstanding preferred shares and the
outstanding common shares of InterLink), as an inducement to Source to
proceed with the transactions contemplated by this letter of intent, agree
that they will sell their shares to Source in the Initial Purchase on the
terms outlined in this letter of intent.
11. InterLink will cause to be prepared audited consolidated financial
statements of IPD and its affiliates and of InterLink and its affiliates
which will be required to be filed by Source with the Securities and
Exchange Commission.
12. This letter and the agreements contemplated herein shall be governed by the
laws of the State of Delaware.
If the foregoing correctly set forth our understanding, please sign the enclosed
copy of this letter of intent and return it to my attention.
Very truly yours,
Accepted and Agreed:
THE INTERLINK COMPANIES, INC. THE SOURCE INFORMATION MANAGEMENT
COMPANY
By: By:
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Xxxxxx Xxxxx
Executive Vice President
Shares Owned SHAREHOLDERS:
Common Preferred [type or print names under signatures]
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