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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
Date of Report (Date of earliest event reported) September 14, 1996
UNITED MAGAZINE COMPANY
(Exact name of registrant as specified in its charter)
Ohio 0-2675 31-0681050
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
5131 Post Road, Dublin, Ohio 43017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 792-0777
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Item 5. Other Events
On September 14, 1996 United Magazine Company ("UNIMAG") entered into
a Stock Transfer and Exchange agreement with George R. Klein News Co.,
Central News Co., and Newspaper Sales, Inc. (collectively "Klein"), and George
R. Klein, the sole shareholder of those companies pursuant to which all of the
stock of Klein is to be contributed to Unimag in exchange for common shares of
Unimag and Senior and subordinated debentures of Unimag.
The purchase price of Klein as of August 30, 1996, is estimated at
$36,500,000 with 51% of the value being exchanged for shares of Common Stock of
UNIMAG and 49% being exchanged for Senior Debentures and Subordinated
Debentures. The UNIMAG stock to be issued is estimated at 12,410,000 shares,
at $1.50 per share.
Klein is engaged in the wholesale distribution of magazines
and books primarily in Northern Ohio.
Item 7. Financial Statements and Exhibits.
The Stock Transfer and Exchange Agreement between UNIMAG and Klein
dated September 14, 1996 is attached herein.
Current audited financials for Klein and pro forma financial
information for the Registrant and Klein are not presently available, but will
be filed under cover of Form 8-KA on or before November 27, 1996.
SIGNATURES
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 hereunto duly authorized.
UNITED MAGAZINE COMPANY
(Registrant)
Date: September 26, 1996 By: /s/ Thomas L. Gerlacher
---------------------------
Thomas L. Gerlacher
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description of Exhibit Page No.
- ----------- ---------------------- --------
2 Stock Transfer and Exchange Agreement
among United Magazine Company, The
George R. Klein News Co., Central News Co.,
Newspaper Sales, Inc. and all of the
shareholders of The George R. Klein News Co.,
Central News Co., and Newspaper Sales, Inc.,
effective August 30, 1996* 3
- --------------
* The schedules and exhibits to the agreement, which are listed on the
following page of this Index, will be furnished to the Commission upon
request.
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The following is a listing of Schedules and Exhibits included on the Agreement
listed as Exhibit No. 2:
Schedule 1.1 Control Group
Schedule 2.1(b) Certain Generally Accepted Accounting Principles
Schedule 3.5 Litigation
Schedule 4.1 Qualification as Foreign Corporation
Schedule 4.2 Klein Shareholders
Schedule 4.3 Restrictions on Klein Shares
Schedule 4.5 Consents and Approvals
Schedule 4.7 Undisclosed Liabilities
Schedule 4.8 Absence of Certain Changes
Schedule 4.9 Taxes
Schedule 4.10 Compliance with Law
Schedule 4.11 Proprietary Rights
Schedule 4.12 Restrictive Documents and Laws
Schedule 4.13 Insurance
Schedule 4.14 Bank Accounts
Schedule 4.15 Properties
Schedule 4.17 Legal Proceedings
Schedule 4.18 Employee Benefit Plans (Schedules (a) through (j))
Schedule 4.19 Contracts
Schedule 4.20 Accounts Receivable
Schedule 4.21 Conflicts or Defaults
Schedule 4.23 Employees and Compensation
Schedule 4.24 Labor Relations
Schedule 4.25 Customers and Suppliers
Schedule 4.26 Special Terms to Customers
Schedule 5.2(a) Employment Arrangements
Exhibit A Debenture Agreement
Exhibit B Opinion of Baker & Hostetler
Exhibit C-1 Form of Employment Agreement
Exhibit C-2 Form of Employment Agreement
Exhibit C-3 Form of Employment Agreement
Exhibit D Opinion of Counsel to Klein
Exhibit E Document Escrow Agreement
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STOCK TRANSFER AND EXCHANGE AGREEMENT
AMONG
UNITED MAGAZINE COMPANY,
THE GEORGE R. KLEIN NEWS CO.
CENTRAL NEWS CO.
NEWSPAPER SALES, INC.
AND
ALL OF THE SHAREHOLDERS OF
THE GEORGE R. KLEIN NEWS CO.
CENTRAL NEWS CO.
NEWSPAPER SALES, INC.
EFFECTIVE DATE: AUGUST 30, 1996
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TABLE OF CONTENTS
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ARTICLE 1 EXCHANGE...................................................................................... 1
Section 1.1 Exchange...................................................................................... 1
Section 1.2 Escrow Closing; Closing....................................................................... 2
ARTICLE 2 EXCHANGE OF CAPITAL STOCK AND DEBENTURES...................................................... 2
Section 2.1 Exchange of Capital Stock..................................................................... 2
(a) Outstanding Klein Shares............................................................. 2
(b) Valuation Adjustment................................................................. 2
(c) Klein Treasury Shares................................................................ 4
Section 2.2 Exchange of Certificates; Issuance of Shares and Debentures................................... 4
(a) Delivery of Klein Share Certificates................................................. 4
(b) Issuance of Unimag Shares............................................................ 4
(c) Issuance of Unimag Debentures........................................................ 5
(d) Distributions with Respect to Unexchanged Shares..................................... 5
(e) Unimag Shares to be Restricted Securities............................................ 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF UNIMAG..................................................................................... 6
Section 3.1 Organization and Standing..................................................................... 6
Section 3.2 Corporate Power and Authority................................................................. 6
Section 3.3 Capitalization of Unimag...................................................................... 7
Section 3.4 Conflicts; Consents; and Approvals............................................................ 7
Section 3.5 Litigation.................................................................................... 8
Section 3.6 Brokerage and Finder's Fees................................................................... 8
Section 3.7 Unimag 10-K and 10-Q.......................................................................... 8
Section 3.8 Taxes......................................................................................... 8
Section 3.9 Undisclosed Liabilities....................................................................... 9
Section 3.10 Compliance With Law........................................................................... 9
Section 3.11 No Material Adverse Change.................................................................... 9
Section 3.12 Section 351 Exchange......................................................................... 9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF
THE GEORGE R. KLEIN NEWS CO. AND THE KLEIN
SHAREHOLDERS.................................................................................. 10
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Section 4.1 Organization and Standing..................................................................... 10
Section 4.2 Capitalization and Security Holders; Subsidiaries..............................................10
Section 4.3 Ownership of Shares and Authority............................................................. 11
Section 4.4 Corporate Power and Authority................................................................. 11
Section 4.5 Consents and Approvals........................................................................ 11
Section 4.6 Financial Statements.......................................................................... 11
Section 4.7 Undisclosed Liabilities....................................................................... 12
Section 4.8 Absence of Certain Changes.................................................................... 12
Section 4.9 Taxes......................................................................................... 14
Section 4.10 Compliance with Law........................................................................... 15
Section 4.11 Proprietary Rights............................................................................ 15
Section 4.12 Restrictive Documents or Laws................................................................. 17
Section 4.13 Insurance..................................................................................... 17
Section 4.14 Bank Accounts, Depositories; Powers of Attorney............................................... 17
Section 4.15 Title to and Condition of Properties.......................................................... 17
Section 4.16 Brokers and Finders........................................................................... 19
Section 4.17 Legal Proceedings............................................................................. 19
Section 4.18 ERISA......................................................................................... 20
Section 4.19 Contracts..................................................................................... 22
Section 4.20 Accounts Receivable........................................................................... 23
Section 4.21 No Conflict or Default........................................................................ 23
Section 4.22 Books of Account; Records..................................................................... 23
Section 4.23 Officers, Employees, and Compensation......................................................... 24
Section 4.24 Labor Relations............................................................................... 24
Section 4.25 Customers and Suppliers....................................................................... 24
Section 4.26 Special Terms; Product Warranties............................................................. 25
Section 4.27 Business of Klein............................................................................. 25
Section 4.28 Investment Representation..................................................................... 25
Section 4.29 Section 351 Exchange.......................................................................... 25
ARTICLE 5 COVENANTS OF THE PARTIES...................................................................... 27
Section 5.1 Mutual Covenants.............................................................................. 27
(a) General.............................................................................. 27
(b) HSR Filings.......................................................................... 27
(c) Other Governmental Matters........................................................... 27
(d) Tax-Free Treatment................................................................... 27
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Section 5.2 Covenants of Klein and the Klein Shareholders................................................. 27
(a) Conduct of Business.................................................................. 27
(b) Exclusive Rights..................................................................... 29
(c) Access to Records and Other Due Diligence............................................ 29
(d) Disclosures.......................................................................... 30
(e) Employee Retention................................................................... 30
(f) Dividends and Distributions.......................................................... 30
(g) Notices of Certain Events............................................................ 30
(h) Title Evidence....................................................................... 31
(i) Audited Financial Statements......................................................... 31
Section 5.3 Covenants of Unimag........................................................................... 31
(a) Conduct of Unimag's Business......................................................... 31
(b) Joint Operations of Unimag and Klein................................................. 32
(c) Consummation of Acquisitions......................................................... 32
(d) Confidential Information............................................................. 32
ARTICLE 6 CONDITIONS.................................................................................... 33
Section 6.1 Mutual Conditions to Escrow Closing........................................................... 33
(a) Completion of Schedules and Exhibit.................................................. 33
(b) No Adverse Proceeding................................................................ 33
(c) Certain Approvals.................................................................... 33
(d) Other Governmental Approvals......................................................... 33
(e) Escrow Closing of Certain Acquisitions............................................... 34
(f) Tax Commentary....................................................................... 34
(g) Employment Agreements................................................................ 34
Section 6.2 Conditions to Obligations of Klein and the
Klein Shareholders to Complete the Escrow Closing............................................. 34
(a) Representations and Warranties....................................................... 34
(b) Performance of Agreement............................................................. 34
(c) Certificate.......................................................................... 34
(d) Tax Commentary......................................................................35
(e) Opinion of Counsel................................................................... 35
(f) Adverse Change and Condition......................................................... 35
(g) Unimag Shareholder Letters........................................................... 35
(h) Due Diligence........................................................................ 35
(i) Other Documents...................................................................... 35
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Section 6.3 Conditions to Obligations of Unimag to Complete
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the Escrow Closing............................................................................ 36
(a) Representations and Warranties....................................................... 36
(b) Performance of Agreement............................................................. 36
(c) Certificate.......................................................................... 36
(d) Opinion of Counsel................................................................... 36
(e) Books and Records.................................................................... 36
(f) Third Party Consents................................................................. 36
(g) Adverse Change and Condition......................................................... 36
(h) Other Documents...................................................................... 36
(i) Due Diligence........................................................................ 37
Section 6.4 Document Escrow Agreement; Unimag Shareholder Approval........................................ 37
Section 6.5 Mutual Conditions to Consummate the Exchange.................................................. 37
(a) Escrow Closing of Acquisitions....................................................... 37
(b) Unimag Shareholder Approval.......................................................... 38
ARTICLE 7 TERMINATION AND AMENDMENT..................................................................... 38
Section 7.1 Termination................................................................................... 38
(a) Termination by Klein and the Klein Shareholders...................................... 38
(b) Termination by Unimag................................................................ 38
Section 7.2 Amendment..................................................................................... 39
Section 7.3 Extension; Waiver............................................................................. 39
ARTICLE 8 INDEMNIFICATION............................................................................... 39
Section 8.1 Survival of Representations, Warranties, Covenants,
and Agreements............................................................................... 39
Section 8.2 Indemnification by Klein Shareholders........................................................ 40
Section 8.3 Indemnification by Unimag.................................................................... 40
Section 8.4 Limitations on Indemnification............................................................... 41
Section 8.5 Procedure for Indemnification with Respect to
Third Party Claims........................................................................... 42
Section 8.6 Procedure For Indemnification with Respect to
Non-Third Party Claims....................................................................... 43
Section 8.7 Right of Setoff.............................................................................. 43
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ARTICLE 9 MISCELLANEOUS................................................................................. 44
Section 9.1 Notices....................................................................................... 44
Section 9.2 Non-Waiver.................................................................................... 45
Section 9.3 Genders and Numbers........................................................................... 45
Section 9.4 Headings...................................................................................... 45
Section 9.5 Counterparts.................................................................................. 45
Section 9.6 Entire Agreement.............................................................................. 45
Section 9.7 No Third Party Beneficiaries.................................................................. 45
Section 9.8 Governing Law................................................................................. 46
Section 9.9 Binding Effect; Assignment.................................................................... 46
Section 9.10 Expenses...................................................................................... 46
Section 9.11 Public Announcements.......................................................................... 46
Section 9.12 Severability.................................................................................. 46
INDEX OF SCHEDULES..................................................................................................... 48
INDEX OF EXHIBITS...................................................................................................... 50
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STOCK TRANSFER AND EXCHANGE AGREEMENT
This Stock Transfer and Exchange Agreement (this "Agreement") is made
and entered into September 14, 1996, to be effective as of August 30, 1996,
among United Magazine Company, an Ohio corporation ("Unimag"), The George R.
Klein News Co., Central News Co. and Newspapers Sales, Inc. all Ohio
corporations (hereinafter collectively referred to as "Klein"), and all of
Klein's shareholders which are listed on Schedule 4.2 (individually, a "Klein
Shareholder" and collectively, the "Klein Shareholders").
BACKGROUND INFORMATION
A. Unimag desires to acquire the magazine, book, newspaper and sundries
distribution, retail and related businesses of Klein (the "Wholesale Periodical
Business") through an exchange (the "Exchange"), pursuant to which Klein's Class
A common shares, voting, without par value, and Class B common shares,
nonvoting, without par value (each a "Klein Share" and collectively, the "Klein
Shares"), outstanding at the Escrow Closing (defined in Section 1.2, below)
shall be exchanged for (1) Unimag's common shares, without par value ("Unimag
Shares"), and (2) senior and subordinated debentures of Unimag, subject to and
upon the terms and conditions set forth in this Agreement.
B. The respective boards of directors of Unimag and Klein have (1)
determined that the Exchange and the other transactions contemplated in this
Agreement are desirable and in the best interests of their respective
shareholders, and (2) duly approved and adopted this Agreement.
C. Unimag and Klein intend that the Exchange qualify, along with other
exchanges between other companies and Unimag occurring both before and after the
closing of the transactions contemplated by this Agreement, as a tax-free
exchange under Section 351 of the Internal Revenue Code of 1986, as amended (the
"Code"), subject to the rules of Section 351 of the Code and the regulations
promulgated thereunder applicable to the receipt and taxability of "boot"
(within the meaning of such rules).
STATEMENT OF AGREEMENT
The parties to this Agreement (each a "Party," and collectively, the
"Parties") hereby acknowledge the accuracy of the above Background Information
and, in consideration of the representations, warranties, covenants, and
agreements set forth in this Agreement, the Parties agree as follows:
ARTICLE 1
EXCHANGE
Section 1.1 EXCHANGE. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the provisions of Section 351 of
the Code, the Klein
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Shareholders shall transfer all of the Klein Shares to Unimag in exchange for
Unimag's transfer to the Klein Shareholders of Unimag Shares and senior and
subordinated debentures of Unimag (both in the amounts and as described in
Section 2.1). Immediately after this exchange, the former Klein Shareholders
shall represent a part of the group of transferors, a list of whom is attached
as Schedule 1.1, who will be in control (as defined in Section 368(c) of the
Code) of Unimag.
Section 1.2 ESCROW CLOSING; CLOSING. The escrow closing of the Exchange
and the other transactions contemplated by this Agreement (the "Escrow Closing")
shall be held at the offices of Baker & Hostetler, 65 East State Street,
Columbus, Ohio 43215, commencing at 10:00 a.m. Columbus, Ohio time on such date
(the "Escrow Closing Date") as may be reasonably designated by Unimag; provided
that it is the intention of the Parties that the Escrow Closing shall be held
not later than September 28, 1996. As provided in Section 6.5, after the Escrow
Closing the only conditions to the release of this Agreement and the other
documents executed in connection with the transactions contemplated by this
Agreement (the "Additional Documents") from the Document Escrow Agreement
(defined in Section 6.4) shall be the approval of the Exchange by the
shareholders of Unimag and the escrow closing of certain other acquisitions.
Within ten days after such shareholder approval (the "Closing Date"), the
Parties will cause the Agreement and the Additional Documents to be delivered to
the appropriate Party in accordance with the terms and conditions of the
Document Escrow Agreement and the Parties will close the Exchange (the
"Closing"). In no event shall the Closing be held later than December 31, 1996.
ARTICLE 2
EXCHANGE OF CAPITAL STOCK AND DEBENTURES
Section 2.1 EXCHANGE OF CAPITAL STOCK. At the Closing:
(a) Outstanding Klein Shares. Each Klein Share which is issued
and outstanding immediately prior to the Escrow Closing shall, subject
to the provisions of Section 2.2, and subject to the adjustments
provided for in Sections 2.1(b) and 3.3, be exchanged for (i)
21,215 Unimag Shares (an aggregate of 12,410,775 Unimag Shares for all
Klein Shares exchanged), and (ii) 30,570.73 principal amount of Unimag
debentures (an aggregate of $17,883,882.50 principal amount of Unimag
debentures for all Klein Shares exchanged) (the "Unimag Debentures").
The Unimag Debentures shall be issued pursuant to the terms of the
Debenture Agreement attached hereto as Exhibit A. An aggregate of
$10,179,506 principal amount of the Unimag Debentures ($17,400.86 per
Klein Share converted) will be Senior Debentures (as defined in the
Debenture Agreement), and the balance of the Unimag Debentures will be
Subordinated Debentures (as defined in the Debenture Agreement).
(b) Valuation Adjustment. The amount of Unimag Shares and the
principal amount of Unimag Debentures to be received upon exchange of
the Klein Shares is based upon a total valuation of Klein of
$36,500,000, or $62,393.16 per Klein Share, with 51.00% of this value
being exchanged for Unimag Shares at an agreed upon price of
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$1.50 per Unimag Share, and 49.00% of this value being exchanged for
Unimag Debentures. The value of Klein was determined by adding the sum
of:
(i) An amount equal to 60% of the net annual
wholesale and retail sales of Klein, based upon the average
weekly sales during the five weeks of March, 1996, multiplied
by 52 weeks, which amount is currently estimated to be
$55,435,172 ("1996 Annualized Sales"), and of which 60% is
estimated to be $33,261,103; plus
(ii) The tangible net worth of Klein as of August 30,
1996, which is currently estimated to be $3,238,897 (the
"Tangible Net Worth").
Within 30 days after the Escrow Closing Date, the
Klein Shareholders shall cause to be prepared and delivered to Unimag
(A) the balance sheet of Klein as of August 30, 1996 (the "August 30th
Balance Sheet"), and (B) the 1995 Financial Statements (defined in
Section 5.2(i)). The August 30th Balance Sheet shall: (1) be prepared
from and in accordance with the books and records of Klein; (2) be
prepared in conformity with generally accepted accounting principles
applied on a consistent basis, including without limitation the
generally accepted accounting principles set forth on Schedule 2.1(b),
but subject to the exceptions to generally accepted accounting
principles also set forth on Schedule 2.1(b); and (3) fairly present in
all material respects the financial condition of Klein as of such date
in accordance with such practices. The Klein Shareholders shall also
deliver to Unimag copies of the work papers used in connection with the
preparation of the August 30th Balance Sheet and the 1995 Financial
Statements.
As soon as practical after Klein delivers to Unimag
the August 30th Balance Sheet, the 1995 Financial Statements, and the
related workpapers, Unimag shall cause Arthur Andersen LLP to conduct
an audit of the August 30th Balance Sheet to determine the actual
Tangible Net Worth of Klein as of such date, and, if necessary, to
conduct a review of the 1995 Financial Statements to confirm the
accuracy of the recorded amount of 1996 Annualized Sales. In connection
with the determination of 1996 Annualized Sales, Arthur Andersen shall
deduct the aggregate amount of purchase made by Klein's retail division
from any affiliates, during the five-week period, on an annualized
basis. The determination of the Tangible Net Worth shall be made
consistent with the generally accepted accounting principles (and
exceptions therefrom) set forth in Schedule 2.1(b). Arthur Andersen LLP
shall promptly deliver a report as to its determination of the actual
value of Klein to Unimag and the Klein Shareholders. Within thirty (30)
days after the delivery of this report to them, the Klein Shareholders
shall deliver to Unimag a written statement describing their objections
(if any) to Arthur Andersen LLP's determination of Tangible Net Worth,
1996 Annualized Sales, and the actual value of Klein. Unimag and the
Klein Shareholders shall use reasonable efforts to resolve any disputes
regarding these determinations, and if they are unable to resolve any
such disputes within thirty (30) days after the Klein Shareholders have
submitted their objections to Unimag, then Price Waterhouse LLP, an
independent accounting firm, shall
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resolve any such disputes. The parties shall use reasonable efforts to
cause Price Waterhouse LLP to decide all disputed items as soon as
practicable (but in any event within thirty (30) days). All fees and
expenses of Arthur Andersen LLP shall be borne by Unimag, but the fees
and expenses of Price Waterhouse LLP shall be borne equally between
Unimag, on the one hand, and the Klein Shareholders, on the other.
If the actual value of Klein, as so determined, is
more than $36,500,000, then Unimag shall issue additional Unimag
Shares, valued at $1.50 per share, equal to 51.00% of, and additional
Unimag Subordinated Debentures in a principal amount equal to 49.00%
of, the amount by which the actual value of Klein, as so determined,
exceeds $36,500,000. If the actual value of Klein, as so determined, is
less than $36,500,000, then the parties shall reduce the number of
Unimag Shares, valued at $1.50 per share, issued to the Klein
Shareholders by an amount equal to 51.00% of, and the Unimag
Subordinated Debentures issued to the Klein Shareholders by an amount
equal to 49.00% of, the amount by which the actual value of Klein, as
so determined, is less than $36,500,000. Notwithstanding the foregoing,
if any reduction in the amount of Unimag Shares to be issued would in
any way prevent the Exchange, along with other exchanges between other
companies and Unimag occurring both before and after the closing of the
transactions contemplated by this Agreement, from being treated as a
tax-free exchange under Section 351 of the Code, then the relative
percentage of Unimag Shares and Unimag Subordinated Debentures to be so
returned shall be adjusted in order to maintain the tax-free exchange
nature of these transactions. In the event that the Klein Shareholders
fail to return such Unimag Shares and Unimag Subordinated Debentures
within 30 days after a determination that the actual value of Klein is
less than $36,500,000, then, in addition to any other rights or
remedies Unimag may have under this Agreement or otherwise, Unimag
shall have the right to setoff the value of such Unimag Shares and
Unimag Subordinated Debentures against any amount owed to the Klein
Shareholders by Unimag, whether pursuant to this Agreement or the
Unimag Debentures.
(c) Klein Treasury Shares. Each Klein Share, if any, which is
held by Klein as a treasury share immediately prior to the Escrow
Closing shall, by virtue of the Exchange and without any required
action on the part of Klein, cease to exist and be canceled and
retired, and no cash or other property shall be issued in respect
thereof.
Section 2.2 EXCHANGE OF CERTIFICATES; ISSUANCE OF SHARES AND
DEBENTURES.
(a) Delivery of Klein Share Certificates. At the Closing, each
Klein Shareholder shall surrender to Unimag the certificates evidencing
all the Klein Shares (the "Klein Share Certificates") owned by such
Klein Shareholder immediately prior to the Escrow Closing.
(b) Issuance of Unimag Shares. At the Closing, upon delivery
of the Klein Share Certificates evidencing all of the Klein Shares
owned by each Klein Shareholder
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pursuant to Section 2.2(a), Unimag shall issue to each Klein
Shareholder that number of Unimag Shares which such Klein Shareholder
is entitled to receive as described in Section 2.1.
Unimag shall not be obligated to issue any fractional
Unimag Shares as a result of the Exchange described in Section 2.1 and
this subsection. To the extent that an outstanding Klein Share would
otherwise become a fractional Unimag Share as a result of such
Exchange, the holder of such Klein Share shall be entitled to receive a
cash payment for such fractional interest in an amount equal to such
fractional interest multiplied by $1.50 upon presentation of an
appropriate Klein Share Certificate representing such fractional
interest to Unimag pursuant to this Section 2.2. Such payment is merely
intended to provide a mechanical rounding off of, and is not a
separately bargained for, consideration. If more than one Klein Share
Certificate is exchanged by the same Klein Shareholder, the number of
Unimag Shares issuable to such Klein Shareholder pursuant to Section
2.1 and this subsection shall be computed on the basis of the aggregate
number of Klein Shares represented by such Klein Share Certificates.
(c) Issuance of Unimag Debentures. At the Closing, upon the
delivery of the Klein Share Certificates evidencing all of the Klein
Shares owned by each Klein Shareholder pursuant to Section 2.2(a),
Unimag shall issue to each Klein Shareholder the Unimag Debentures
which such Klein Shareholder is entitled to receive as described in
Section 2.1.
(d) Distributions with Respect to Unexchanged Shares. The
Klein Shareholders shall have no rights as shareholders of Unimag and
no rights as debenture holders of Unimag (except that the Debenture
Agreement shall provide that interest will begin accruing under both
the Unimag Senior and Subordinated Debentures effective as of
September 1, 1996) until they have exchanged their Klein Shares, and no
dividends or other distributions or payments with respect to Unimag
Shares or Unimag Debentures having a record date either before or after
the Closing shall be paid to the holder of any delivered Klein Share
Certificate until such holder delivers such certificate.
(e) Unimag Shares to be Restricted Securities. The Unimag
Shares to be received by the Klein Shareholders in the Exchange shall
be restricted securities within the meaning of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "ACT"). The Klein
Shareholders understand and agree that such shares may not be sold,
pledged, hypothecated or otherwise transferred unless such shares are
registered under the Act or pursuant to an opinion of counsel, which
opinion and counsel are reasonably acceptable to Unimag and its
counsel, that an exemption from such registration is available. The
Klein Shareholders agree that the following legend may be placed on the
certificates for the Unimag Shares to be received by them and that
appropriate stop-transfer instructions may be given to Unimag's
transfer agent and registrar:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED, UNLESS THEY ARE
AT THE TIME SO REGISTERED, OR THE SALE OR TRANSFER THEREOF IS
NOT REQUIRED TO BE SO REGISTERED, OR IS MADE PURSUANT TO THE
APPLICABLE EXEMPTION FROM REGISTRATION PROVIDED IN THE
SECURITIES ACT OF 1933, AS AMENDED, OR IN THE RULES OR
REGULATIONS THEREUNDER.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF UNIMAG
In order to induce Klein and the Klein Shareholders to enter
into this Agreement, Unimag hereby represents and warrants to Klein and the
Klein Shareholders that the statements set forth in this Article 3 are true,
correct and complete.
Section 3.1 ORGANIZATION AND STANDING. Unimag is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Ohio with full power and authority (corporate and otherwise), to own, lease,
use, and operate its properties and to conduct its business as and where now
owned, leased, used, operated, and conducted. Unimag is duly qualified to do
business and is in good standing in each state where the nature of the business
or other activities conducted by Unimag or the properties it owns, leases, or
operates requires it to qualify to do business as a foreign corporation, except
where the failure to be so qualified would not have a material adverse effect on
the business, operations, assets, properties, or condition (financial or
otherwise) of Unimag. Unimag is not in default or in violation of the
performance, observation or fulfillment of any material provision of its
articles of incorporation or code of regulations.
Section 3.2 CORPORATE POWER AND AUTHORITY. Unimag has all requisite
corporate power and authority to enter into and to perform its obligations under
this Agreement and to consummate the Exchange and other transactions
contemplated by this Agreement. This Agreement and the transactions contemplated
by this Agreement have been duly and validly authorized by all necessary
corporate action on the part of Unimag (except for final approval by the
shareholders of Unimag to be obtained after the date of this Agreement). This
Agreement has been duly executed and delivered by Unimag and constitutes a
legal, valid, and binding obligation of Unimag, enforceable against Unimag in
accordance with its terms, except as such enforceability may be limited by (a)
applicable bankruptcy, insolvency, or other similar laws from time to time
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in effect which may affect the enforcement of creditors' rights in general, and
(b) general principles of equity.
Section 3.3 CAPITALIZATION OF UNIMAG. As of the date of this Agreement,
Unimag's authorized capital stock consists solely of 53,250,000 Unimag Shares of
which (a) 26,760,334 shares are issued and outstanding and (b) 16,074,718 shares
are issued and held as treasury shares. Each outstanding Unimag Share is, and
all Unimag Shares to be issued in connection with the Exchange will be, duly
authorized, validly issued, fully paid, and nonassessable. Klein and the Klein
Shareholders acknowledge that prior to the Closing, Unimag may (i) authorize
additional capital stock, including additional Unimag Shares, or (ii) reduce the
number of outstanding Unimag Shares by means of a reverse stock split, or any
other method which would result in a reduction in the number of outstanding
Unimag Shares. Unimag will deliver written notice to Klein and the Klein
Shareholders if it authorizes any such action. In the event that Unimag
authorizes a reverse stock split or other reduction in the number of outstanding
Unimag Shares, then the $1.50 agreed upon price of a Unimag Share for purposes
of the exchange of Klein Shares for Unimag Shares pursuant to Section 2.1 shall
be proportionately adjusted with the objective that the Klein Shareholders, in
the aggregate, shall have the right to receive the same proportionate ownership
interest in Unimag as before the reduction in the number of outstanding Unimag
Shares. Klein and the Klein Shareholders also acknowledge that prior to the
Closing, Unimag will have issued Unimag Shares and Unimag Debentures to other
parties as identified in Section 5.3(c)) and that such issuances will have no
affect whatsoever on the amount of Unimag Shares and Unimag Debentures to be
issued to the Klein Shareholders in connection with the Exchange.
Section 3.4 CONFLICTS; CONSENTS; AND APPROVALS. Neither the execution
and delivery of this Agreement by Unimag nor compliance by Unimag with the terms
and provisions of this Agreement, including without limitation the consummation
of the transactions contemplated by this Agreement, shall:
(a) Violate, conflict with, result in a violation or breach of
any provision of, constitute a default (or an event which, with the
giving of notice, the passage of time, or otherwise, would constitute
a default) under, entitle any third party (with the giving of notice,
the passage of time, or otherwise) to terminate, accelerate, or
declare a default under, or result in the creation of any lien,
security interest, charge, or other encumbrance upon any of the
properties or assets of Unimag under any of the terms or conditions
of the articles of incorporation or code of regulations of Unimag, or
under any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease, or other instrument or
obligation to which Unimag is a party and which is material to Unimag
and its subsidiaries, taken as a whole;
(b) Violate any order, writ, injunction, decree, statute,
rule, or regulation, applicable to Unimag or its respective
properties or assets; or
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(c) Require any action, consent, or approval of, review by,
or registration with any third party, court, governmental body, or
other agency, instrumentality, or authority, other than (i) actions
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder (the
"HSR Act"), (ii) actions to be taken in respect of federal and state
securities laws as contemplated by this Agreement, and (iii) approval
by the shareholders of Unimag.
Section 3.5 LITIGATION. Except as disclosed in Schedule 3.5: (a) there
is no (and over the last three years there have been no) suits, claims, actions,
proceedings, or investigations (collectively, "Actions") pending or, to the best
knowledge of Unimag, threatened against Unimag or any of its subsidiaries in
which the amount in dispute exceeds (or exceeded) $25,000, or which has or could
result in liability or loss for Unimag or any of its subsidiaries of more than
$25,000, or which, individually or in the aggregate, is reasonably likely to
have a material adverse effect on Unimag and its subsidiaries, taken as a whole,
or a material adverse effect on the ability of Unimag to consummate the Exchange
and other transactions contemplated by this Agreement; and (b) to the best
knowledge of Unimag, there exist no disputes, conflicts or circumstances
providing the basis for a dispute or conflict which could reasonably be expected
to result in any such Action. Neither Unimag nor any subsidiary is subject to
any outstanding judgment, order, writ, injunction, or decree which, individually
or in the aggregate, has a reasonable probability of having a material adverse
effect on the business operations, assets, properties, condition (financial or
otherwise), or prospects of Unimag, or a material adverse effect on the ability
of Unimag to consummate the Exchange or other transactions contemplated by this
Agreement.
Section 3.6 BROKERAGE AND FINDER'S FEES. Neither Unimag nor any of its
shareholders, directors, officers, or employees has incurred any brokerage,
finder's, or similar fee in connection with the Exchange and other transactions
contemplated by this Agreement.
Section 3.7 UNIMAG 10-K AND 10-Q. Unimag has previously made available
to Klein and the Klein Shareholders true, correct, and complete copies of
Unimag's most recent 10-KSB for the fiscal year ending September 30, 1995 (the
"10-K"), and Unimag's most recent 10-QSB for the fiscal quarter ending March 31,
1996 ("10-Q"), both of which have been filed with the Securities and Exchange
Commission ("SEC"). The financial statements of Unimag included in the 10-K and
10-Q have been prepared from and in accordance with the books and records of
Unimag and in accordance with generally accepted accounting principles applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the 10-Q, as permitted by the SEC under the
Securities and Exchange Act of 1934, as amended) and fairly present (subject, in
the case of the 10-Q, to normal and recurring audit adjustments) the
consolidated financial position of Unimag and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended.
Section 3.8 TAXES. Unimag has duly paid, or caused to be paid, all
taxes, assessments, fees, and other governmental charges (hereinafter, "taxes")
payable by Unimag or its subsidiaries. Unimag has duly filed, or caused to be
filed, all federal, state, local and foreign tax returns and
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tax reports required to be filed by it or its subsidiaries and all such returns
and reports are true, correct, and complete. There is no pending or, to the best
knowledge of Unimag, threatened federal, state, local or foreign tax audit or
assessment relating to it or its subsidiaries and there is no agreement with any
federal, state, local, or foreign tax authority that may affect the subsequent
tax liabilities of Unimag and its subsidiaries.
Section 3.9 UNDISCLOSED LIABILITIES. Unimag has no liability or
obligation of any nature (whether liquidated, unliquidated, accrued, absolute,
contingent, or otherwise and whether due or to become due) except:
(a) Those set forth or reflected in the 10-Q or the financial
statements therein set forth, which have not been paid or discharged
since the date thereof;
(b) Current liabilities (determined in accordance with
generally accepted accounting principles) incurred since March 31,
1996, in transactions in the ordinary course of business consistent
with past practices which are properly reflected on its books and which
are not inconsistent with the other representations, warranties and
agreements of Unimag set forth in this Agreement; and
(c) Liabilities which, consistent with generally accepted
accounting principles, are not required to be reflected in its
financial statements.
Section 3.10 COMPLIANCE WITH LAW. To the best knowledge of Unimag,
Unimag has complied and is in compliance in all material respects with all laws,
statutes, ordinances, orders, rules and regulations promulgated, and all
judgments, decisions and orders entered, by any federal, state, local or foreign
court or governmental authority or instrumentality which are applicable or
relate to it or to its businesses or properties.
Section 3.11 NO MATERIAL ADVERSE CHANGE. Since the filing of the 10-Q
with the SEC, there has been no material adverse change in the properties,
assets, liabilities, business, results of operations, or condition (financial or
otherwise) of Unimag. Unimag is not subject to any obligation or requirement to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any entity.
Section 3.12 SECTION 351 EXCHANGE. It is the intention of Unimag to
treat the acquisition of Klein pursuant to this Agreement along with other
exchanges and acquisitions occurring before and after the closing of the
transactions contemplated by this Agreement, as an exchange under Section 351 of
the Code, subject to the rules of Section 351 of the Code and the regulations
promulgated thereunder applicable to the receipt and taxability of "boot"
(within the meaning of such rules). Unimag shall be solely responsible for
evaluating (and determining the appropriate methods required for reporting) all
federal, state, and local income and other tax consequences to Unimag which will
and may result from the transactions contemplated by this Agreement.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
KLEIN AND THE KLEIN SHAREHOLDERS
In order to induce Unimag to enter into this Agreement, Klein
and each of the Klein Shareholders hereby jointly and severally represent and
warrant to Unimag that the statements contained in this Article 4 are true,
correct, and complete.
Section 4.1 ORGANIZATION AND STANDING. Each of the George R. Klein News
Co., Central News Co. and Newspapers Sales, Inc. is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio with full power and authority (corporate and otherwise) to own, lease, use,
and operate its properties and to conduct its business as and where now owned,
leased, used, operated and conducted. Each is duly qualified to do business and
is in good standing in each state listed in Schedule 4.1, is not qualified to do
business in any other state and, except as set forth in Schedule 4.1, neither
the nature of the business or other activities conducted by Klein nor the
properties it owns, leases, or operates requires it to qualify to do business as
a foreign corporation in any other state, except where the failure to be so
qualified would not have a material adverse effect on the business, operations,
assets, properties, condition (financial or otherwise) or prospects of Klein.
None has received any written notice or assertion within the last three years
from any governmental official in any state to the effect that it is required to
be qualified or authorized to do business in a state in which it is not so
qualified or has not obtained such authorization. None is in default or in
violation of the performance, observation or fulfillment of any material
provision of its articles of incorporation or code of regulations.
Section 4.2 CAPITALIZATION AND SECURITY HOLDERS; SUBSIDIARIES. The
authorized capital stock of the George R. Klein News Co., Central News Co. and
Newspaper Sales, Inc., respectively, consists solely of five (5), eighty (80)
and five hundred ten (510) common shares, voting, without par value, (i) all of
which are issued and outstanding and (ii) none of which are held as treasury
shares. Schedule 4.2 contains a correct and complete list of the names and
addresses of all of the shareholders of Klein and indicates all Klein Shares
owned beneficially and of record by each such shareholder. Each outstanding
Klein Share has been duly authorized and validly issued and is fully paid and
nonassessable, and no Klein Share has been issued in violation of preemptive or
similar rights. Except as set forth and briefly described in Schedule 4.2, there
are no outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims, or other commitments or rights of any type relating to
the issuance, sale, or transfer by Klein or any Klein Shareholder of any
securities of Klein, nor are there outstanding any securities which are
convertible into or exchangeable for shares of capital stock of Klein; and Klein
has no obligations of any kind to issue any additional securities. The issuance
and sale of all securities of Klein has been in full compliance with all
applicable federal and state securities laws. Klein does not own, directly or
indirectly, any equity or other ownership interest in any corporation,
partnership, joint venture, or any other entity or enterprise. Klein is not
subject to any obligation
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or requirement to provide funds to or make any investment (in the form of a
loan, capital contribution, or otherwise) in any entity.
Section 4.3 OWNERSHIP OF SHARES AND AUTHORITY. Except as set forth and
briefly described in Schedule 4.3, all of the Klein Shares are owned free and
clear of all liens, security interests, encumbrances, pledges, charges, claims,
voting trusts, and restrictions of any nature whatsoever, except restrictions on
transfer imposed by or pursuant to federal or state securities laws. Each Klein
Shareholder owns beneficially and of record all of the Klein Shares disclosed as
being owned by him or her on Schedule 4.2, and each Klein Shareholder has the
full and unrestricted right, power and capacity to transfer and deliver the same
and to execute this Agreement and consummate the transactions contemplated by
this Agreement without the consent or approval of any other person. This
Agreement has been duly executed and delivered by each Klein Shareholder and
constitutes the legal, valid and binding obligation of each Klein Shareholder,
enforceable against such Klein Shareholder in accordance with its terms except
as such enforceability may be limited by (a) applicable bankruptcy, insolvency,
or other similar laws from time to time in effect which may affect the
enforcement of creditors' rights in general, and (b) general principles of
equity.
Section 4.4 CORPORATE POWER AND AUTHORITY. Each of the George R. Klein
News Co., Central News Co. and Newspaper Sales, Inc. has all requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and to consummate the Exchange and other transactions contemplated by
this Agreement. This Agreement and the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of each of the Klein corporations. This Agreement has been
duly executed and delivered by each of the Klein corporations and constitutes
the legal, valid, and binding obligation enforceable against each of the Klein
corporations in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, or other similar laws from
time to time in effect which may affect the enforcement of creditors' rights in
general, and (b) general principles of equity.
Section 4.5 CONSENTS AND APPROVALS. Except for the consents described
in Schedule 4.5, all of which shall be obtained prior to the Escrow Closing
(unless otherwise agreed by Unimag in writing), neither the execution and
delivery of this Agreement by Klein or the Klein Shareholders nor the
consummation of the transactions contemplated by this Agreement requires or will
require any action, consent, or approval of, review by, or registration with any
third party, court, governmental body, or other agency, instrumentality, or
authority, other than (i) actions required by the HSR Act, and (ii) actions to
be taken in respect of federal and state securities laws as contemplated by this
Agreement.
Section 4.6 FINANCIAL STATEMENTS. Klein has furnished to Unimag the
balance sheet of Klein as of August 30, 1996, and the related statements of
income, changes in shareholders' equity, and cash flows for the fiscal year then
ended, including, in each case, the related notes (collectively, the "Audited
Statements"), which are accompanied by the review report of Coopers & Lybrand.
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The Audited Statements have been prepared from and are in accordance with the
books and records of Klein, have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis (except as
disclosed in the Audited Statements), and fairly present in all material
respects the financial condition of Klein as of the date stated and the results
of operations of Klein for the period then ended in accordance with such
practices.
Section 4.7 UNDISCLOSED LIABILITIES. Except as disclosed in Schedule
4.7, Klein has no liability or obligation of any nature (whether liquidated,
unliquidated, accrued, absolute, contingent, or otherwise and whether due or to
become due) except:
(a) Those set forth or reflected in the Audited Statements
which have not been paid or discharged since the date thereof;
(b) Current liabilities (determined in accordance with
generally accepted accounting principles) incurred since June 30, 1996,
in transactions in the ordinary course of business consistent with past
practices which are properly reflected on its books and which are not
inconsistent with the other representations, warranties, and agreements
of Klein and the Klein Shareholders set forth in this Agreement; and
(c) Liabilities which, consistent with generally accepted
accounting principles, are not required to be reflected in the Audited
Statements.
Section 4.8 ABSENCE OF CERTAIN CHANGES. Except as expressly provided
for or permitted under Section 5.2(a) or Section 5.2(f) of this Agreement, or as
set forth in Schedule 4.8, since June 30, 1996, there has not been:
(a) Any material adverse change in the business, operations,
assets, properties, customer base, prospects, rights, or condition
(financial or otherwise) of Klein or any occurrence, circumstance, or
combination thereof which reasonably could be expected to result in any
such material adverse change;
(b) Any declaration, setting aside, or payment of any
dividend or any distribution (in cash or in kind) to any Klein
Shareholder, or any direct or indirect redemption, purchase, or other
acquisition by Klein of any of its capital stock, or any options,
warrants, rights, or agreements to purchase or acquire such stock;
(c) Any increase in amounts payable by Klein to or for the
benefit of, or committed to be paid by Klein to or for the benefit of,
any shareholder, director, officer, or other consultant, agent, or
employee of Klein whose total annual compensation exceeds $50,000 or
any relatives of such person, or any increase in any benefits granted
under any bonus, stock option, profit-sharing, pension, retirement,
severance, deferred compensation, group health, insurance, or other
direct or indirect benefit plan, payment or arrangement made to, with,
or for the benefit of any such person;
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(d) Any transaction entered into or carried out by Klein
other than in the ordinary and usual course of business consistent with
past practices;
(e) Any borrowing or agreement to borrow funds by Klein, any
incurring by Klein of any other obligation or liability (contingent or
otherwise), except liabilities incurred in the usual and ordinary
course of Klein's business (consistent with past practices), or any
endorsement, assumption or guarantee of payment or performance of any
loan or obligation of any other person or entity by Klein;
(f) Any material change in Klein's method of doing business
or any change in its accounting principles or practices or its method
of application of such principles or practices;
(g) Any mortgage, pledge, lien, security interest,
hypothecation, charge, or other encumbrance imposed or agreed to be
imposed on or with respect to the property or assets of Klein;
(h) Any sale, lease, or other disposition of, or any
agreement to sell, lease, or otherwise dispose of any of the operating
properties or assets of Klein, other than sales of inventory in the
usual and ordinary course of business for fair equivalent value to
persons other than directors, officers, shareholders, or other
affiliates of Klein;
(i) Any purchase of or any agreement to purchase assets
(other than inventory purchased in the ordinary course of business
consistent with past practices) for an amount in excess of $50,000 for
any one purchase or $100,000 for all such purchases made by Klein or
any lease or any agreement to lease, as lessee, any capital assets with
payments over the term thereof to be made by Klein exceeding an
aggregate of $100,000;
(j) Any loan or advance made by Klein to any person other
than loans made to Klein's customers in the ordinary course of business
consistent with past practices not exceeding $50,000, in the aggregate,
to any customer;
(k) Any modification, waiver, change, amendment, release,
rescission, or termination of, or accord and satisfaction with respect
to, any material term, condition, or provision of any contract,
agreement, license, or other instrument to which Klein is a party,
other than any satisfaction by performance in accordance with the terms
thereof in the usual and ordinary course of business; or
(l) Any labor dispute or disturbance adversely affecting the
business operations or condition (financial or otherwise) of Klein,
including without limitation the filing of any petition or charge of
unfair labor practice with any governmental or regulatory authority,
efforts to effect a union representation election, or actual or
threatened employee strike, work stoppage, or slow down.
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Section 4.9 TAXES.
(a) Except as set forth and briefly described in Schedule 4.9,
Klein has duly paid all taxes payable by Klein. Klein has duly filed
all federal, state, local, and foreign tax returns and tax reports
required to be filed by it and all such returns and reports are true,
correct, and complete. Except as disclosed and briefly described in
Schedule 4.9, since December 31, 1991, none of such returns and reports
have been amended, and except as set forth and briefly described in
Schedule 4.9, all taxes, arising under or reflected on such returns and
reports have been fully paid or were fully accrued as liabilities in
the Audited Statements and shall be paid before the Closing. During the
last five (5) years, no claim has been made by authorities in any
jurisdiction where Klein did not file tax returns that it is or may be
subject to taxation therein.
(b) Klein has delivered to Unimag copies of all federal,
state, local, and foreign income tax returns filed with respect to it
for taxable periods ended on or after December 31, 1991. Schedule 4.9
sets forth the dates and results of any and all audits conducted by
taxing authorities within the last five years or otherwise with respect
to any tax year for which assessment is not barred by any applicable
statute of limitations. No waivers of any applicable statute of
limitations for the filing of any tax returns or payment of any taxes
or assessments of any deficient or unpaid taxes are outstanding. Except
as set forth and briefly described in Schedule 4.9, all deficiencies
proposed as a result of any audits have been paid or settled or have
been fully accrued as liabilities in the Audited Statements and shall
be paid before the Closing. Except as set forth and briefly described
in Schedule 4.9, there is no pending or, to the best knowledge of Klein
and the Klein Shareholders, threatened federal, state, local, or
foreign tax audit or assessment relating to Klein, and there is no
agreement with any federal, state, local, or foreign taxing authority
that may affect the subsequent tax liabilities of Klein.
(c) Except as set forth and briefly described in Schedule 4.9,
all taxes attributable to the existence or operation of Klein as at or
through June 30, 1996 are, to the extent not already paid, accurately
reflected in the Audited Statements.
(d) Except as set forth and briefly described in Schedule 4.9,
there exists no tax-sharing agreement or arrangement pursuant to which
Klein is obligated to pay the tax liability of any other person or
entity or to indemnify any other person or entity with respect to any
tax.
(e) Schedule 4.9 includes a list of all states, territories
and jurisdictions to which any tax is properly payable by Klein.
(f) Central News Co. and Newspapers Sales, Inc. each became
an "S corporation," within the meaning of Section 1361(a)(1) of the
Code (an "S Corporation"), for federal income tax purposes effective
_________________ and _________________,
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respectively, pursuant to a valid election made by it, with the consent
of all of its shareholders, effective as of such date, and each of the
Klein corporations is and from such date always has been an S
corporation.
Section 4.10 COMPLIANCE WITH LAW. Except as disclosed and briefly
described in Schedule 4.10, to the best knowledge of Klein and the Klein
Shareholders, Klein has complied and is in compliance in all material respects
with all nonenvironmental (environmental matters being addressed in Section
4.15) laws, statutes, ordinances, orders, rules and regulations promulgated, and
all judgments, decisions, and orders entered, by any federal, state, local, or
foreign court or governmental authority or instrumentality which are applicable
or relate to it or to its business or properties including without limitation:
(a) all zoning, fire, safety, and building laws, ordinances, regulations, and
requirements; (b) Title VII of the Civil Rights Act of 1964, as amended; (c) the
Fair Labor Standards Act, as amended; (d) the Occupational Safety and Health Act
of 1970, as amended; (e) the Americans with Disabilities Act of 1990; (f) all
applicable federal, state and local laws, rules and regulations relating to
employment; (g) all applicable laws, rules and regulations governing payment of
minimum wages and overtime rates, and the withholding and payment of taxes from
compensation of employees; (h) federal and state antitrust and trade regulation
laws applicable to competition generally or to agreements restricting,
allocating, or otherwise affecting geographic or product markets; and (i) the
Controlled Substances Act (collectively, the "Applicable Laws"). To the best
knowledge of Klein and the Klein Shareholders, Klein has all franchises,
licenses, permits, covenants, authorizations, approvals, and certifications
necessary or appropriate for the operation of its business or the ownership of
its properties. Schedule 4.10 includes a list of all material franchises,
licenses, permits, consents, authorizations, approvals, and certificates owned
or held by Klein (collectively, the "Permits"), each of which is currently valid
and in full force and effect. To the best knowledge of Klein and the Klein
Shareholders, Klein is not in violation of any of the Permits, and there is no
pending nor, to the best knowledge of Klein and the Klein Shareholders, any
threatened proceeding which could result in the revocation, cancellation or
inability of Klein to renew any Permit. Except as disclosed and briefly
described in Schedule 4.10, Klein has not been charged with or given actual
notice of any violation of any of the Applicable Laws which violation has not
been remedied in full (without any remaining liability of Klein).
Section 4.11 PROPRIETARY RIGHTS. Schedule 4.11 sets forth:
(a) All material names, patents, inventions, trade secrets,
proprietary rights, computer software, trademarks, trade names, service
marks, logos, copyrights, and franchises and all applications therefor,
registrations thereof, and licenses, sublicenses, or agreements in
respect thereof which Klein owns, has the right to use, or to which
Klein is a party; and
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(b) All filings, registrations, or issuances of any of the
foregoing with or by any federal, state, local, or foreign regulatory,
administrative, or governmental office or offices (all items in (a) and
(b) of this Section 4.11, together with the customer lists described
below, being sometimes hereinafter referred to collectively as the
"Proprietary Rights").
Except as set forth in Schedule 4.11, Klein is, to
the best knowledge of Klein and the Klein Shareholders, the sole and
exclusive owner of all right, title, and interest in and to all
Proprietary Rights free and clear of all liens, claims, charges,
equities, rights of use, encumbrances, and restrictions whatsoever, and
there is not pending or, to the best knowledge of Klein and the Klein
Shareholders, threatened any investigation, proceeding, inquiry, or
other review by any federal, state, local, or foreign regulatory,
administrative, or governmental office or offices with respect to
Klein's right, title, or interest in any Proprietary Right.
Other than those Proprietary Rights listed in
Schedule 4.11, no name, patent, invention, trade secret, customer list,
proprietary right, computer software, trademark, trade name, service
mark, logo, copyright, franchise, license, sublicense, or other such
right is necessary for the operation of the business of Klein in
substantially the same manner as such business is presently conducted.
To the best knowledge of Klein and the Klein Shareholders, the business
of Klein has not been and is not being conducted in contravention of
any trademark, copyright, or other proprietary right of any person or
entity.
Except as set forth in Schedule 4.11, none of the
Proprietary Rights: (i) has been hypothecated, sold, assigned, or
licensed by Klein, or to the best knowledge of Klein and the Klein
Shareholders, any other person or entity; (ii) to the best knowledge of
Klein and the Klein Shareholders, infringes upon or violate the rights
of any person or entity; (iii) to the best knowledge of Klein and the
Klein Shareholders, is subject to challenge, claims of infringement,
unfair competition, or other claims; or (iv) to the best knowledge of
Klein and the Klein Shareholders, is being infringed upon or violated
by any person or entity. Except as set forth in Schedule 4.11, Klein
has not given any indemnification against patent, trademark, or
copyright infringement as to any equipment, materials, products,
services, or supplies which Klein uses, licenses, or sells. To the best
knowledge of Klein and the Klein Shareholders, no product, process,
method, or operation presently sold, engaged in, or employed by Klein
infringes upon any rights owned by any other person or entity. There is
not pending or, to the best knowledge of Klein and the Klein
Shareholders, threatened any claim or litigation against Klein
contesting the right of Klein to sell, engage in, or employ any such
product, process, method, or operation.
Except as set forth in Schedule 4.11, Klein has
exclusive rights to own and use the computer software used by it (the
"Software"). Schedule 4.11 lists and briefly describes, all material
licenses, agreements, documents, and other materials relating to the
Software and to Klein's rights therein. Except as set forth in Schedule
4.11, Klein has not licensed or otherwise authorized any other person
to use or make use of all or any part of
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the Software, nor granted, assigned, or otherwise conveyed any right in
or to the Software.
Section 4.12 RESTRICTIVE DOCUMENTS OR LAWS. With the exception of the
matters listed in Schedule 4.12, Klein is not a party to or bound under any
mortgage, lien, lease, agreement, contract, instrument, law, order, judgment or
decree, or any similar restriction not of general application which materially
and adversely affects, or reasonably could be expected to so affect (a) the
business, operations, assets, properties, prospects, rights, or condition
(financial or otherwise) of Klein; (b) the continued operation by Unimag of
Klein's business after the Closing Date on substantially the same basis as such
business is currently operated; or (c) the consummation of the transactions
contemplated by this Agreement.
Section 4.13 INSURANCE. Klein has been and is insured with respect to
its properties and the conduct of its business in such amounts and against such
risks as are sufficient for compliance with applicable law and as are adequate
to protect its property and business in accordance with normal industry
practice. Such insurance is and has been provided by insurers unaffiliated with
Klein, which insurers are, to the best knowledge of Klein and the Klein
Shareholders, financially sound and reputable. Set forth in Schedule 4.13 is a
true, correct, and complete list of all insurance policies and bonds in force in
which Klein is named as an insured party, or for which Klein has paid any
premiums, and such list correctly states the name of the insurer, the name of
each insured party, the type and amount of coverage, deductible amounts, if any,
the expiration date, and the premium amount of each such policy or bond. Except
as disclosed in Schedule 4.13, all such policies or bonds are currently in full
force and effect and no notice of cancellation or termination has been received
by Klein with respect to any such policy. Klein will continue all of such
insurance in full force and effect through the Closing Date. All premiums due
and payable on such policies have been paid. Except as disclosed in Schedule
4.13, Klein is not a co-insurer under any term of any insurance policy.
Section 4.14 BANK ACCOUNTS, DEPOSITORIES; POWERS OF ATTORNEY. Set forth
in Schedule 4.14 is a true, correct, and complete list of the names and
locations of all banks or other depositories in which Klein has accounts or safe
deposit boxes, and the names of the persons authorized to draw thereon, borrow
therefrom, or have access thereto. Except as set forth in Schedule 4.14, no
person has a power of attorney from Klein.
Section 4.15 TITLE TO AND CONDITION OF PROPERTIES. Except as set forth
in Schedule 4.15, Klein has good, valid, and indefeasible title to all of its
assets and properties of every kind, nature, and description, tangible or
intangible, wherever located, which constitute all of the property now used in
and necessary for the conduct of its business as presently conducted (including
without limitation all operating property and assets shown or reflected on the
Audited Statements, except inventory sold in the ordinary course of business).
Except as set forth in Schedule 4.15, to the best knowledge of Klein and the
Klein Shareholders, all such properties are owned free and clear of all
mortgages, pledges, liens, security interests, encumbrances, and restrictions of
any nature whatsoever, including without limitation: (a) rights or claims of
parties in possession; (b)
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easements or claims of easements; (c) encroachments, overlaps, boundary line or
water drainage disputes, or any other matters; (d) any lien or right to a lien
for services, labor, or material furnished; (e) special tax or other
assessments; (f) options to purchase, leases, tenancies, or land contracts; (g)
contracts, covenants, or reservations which restrict the use of such properties;
and (h) violations of any Applicable Laws applicable to such properties. To the
best knowledge of Klein and the Klein Shareholders, all such properties are
usable for their current uses without violating any Applicable Laws, or any
applicable private restriction, and such uses are legal conforming uses. Except
as set forth in Schedule 4.15, no financing statement under the Uniform
Commercial Code or similar law naming Klein or any of its predecessors is on
file in any jurisdiction in which Klein owns property or does business, and
Klein is not a party to or bound under any agreement or legal obligation
authorizing any party to file any such financing statement. Schedule 4.15
contains a complete and accurate list of the location of all real property which
is owned, leased, or operated by Klein and describes the nature of Klein's
interest in that real property. With respect to any real property leased by
Klein, Klein, except as set forth in Schedule 4.15, has an insurable leasehold
interest in that real property.
Except as set forth in Schedule 4.15, to the best knowledge of
Klein and the Klein Shareholders, all real property and structures, all
machinery and equipment, and all tangible personal property owned, leased or
used by Klein and material to the operation of its business are reasonably
suitable for the purpose or purposes for which they are being used (including
full compliance with all Applicable Laws) and are in good condition and repair,
ordinary wear and tear excepted. Except as set forth in Schedule 4.15, to the
best knowledge of Klein and the Klein Shareholders, there are no material
structural defects in the exterior walls or the interior bearing walls, the
foundation, or the roof of any building, garage or other such structure owned,
leased, or used by Klein, and, to the best knowledge of Klein and the Klein
Shareholders, the electrical, plumbing, heating systems, and air conditioning
systems, of any such structure are in good operating condition, ordinary wear
and tear excepted. The utilities servicing the real properties owned, leased, or
used by Klein are adequate to permit the continued operation of its business,
and there are no pending or, to the best knowledge of Klein and the Klein
Shareholders, threatened zoning, condemnation or eminent domain proceedings,
building, utility, or other moratoria, or injunctions or court orders which
would materially and adversely affect such continued operation. Schedule 4.15
lists, and Klein and the Klein Shareholders have furnished or made available to
Unimag, copies of all engineering, geologic, and environmental reports prepared
by or for Klein or with respect to the real property owned, leased or used by
Klein in their possession which Klein and the Klein Shareholders have been able
to reasonably locate after conducting a good-faith review.
Except as set forth in Schedule 4.15, no real or personal
property owned, leased, or used by Klein has been used to produce, process,
store, handle, or transport any hazardous or toxic substance or waste (as those
terms are defined or described in any of the applicable laws relating to the
protection, preservation, conservation, restoration, or quality of the
environment), except to the extent immaterial quantities of hazardous substances
are used as an incidental aspect of the operation of its business. Except as set
forth in Schedule 4.15, no hazardous or toxic
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substance or waste has been disposed of, released or discharged on, leaked from,
or has otherwise contaminated any real property owned, leased, or used by Klein.
Except as set forth in Schedule 4.15, no asbestos or substances containing
material quantities of asbestos have been installed in any such property. Except
as set forth in Schedule 4.15, there are no oil or gas wells capped or uncapped
or piping, structures, fixtures or other appliances relating thereto on or about
any such property and no such property has been used as a landfill.
Section 4.16 BROKERS AND FINDERS. No investment banker, broker, finder,
or other intermediary: (a) has been retained by or is authorized to act on
behalf of Klein or the Klein Shareholders; (b) has submitted the transactions
contemplated by this Agreement to Klein or the Klein Shareholders; or (c) is or
might be entitled to any fee, commission, or other payment from Klein or any
Klein Shareholder as a direct or indirect result of the transactions
contemplated by this Agreement.
Section 4.17 LEGAL PROCEEDINGS. Except as described in Schedule 4.17:
(a) there are no (and over the last three years there have been no) Actions
pending or, to the best knowledge of Klein and the Klein Shareholders,
threatened against or relating to Klein (or any of its officers, directors,
shareholders, agents, or representatives in connection with the business or
affairs of Klein), before any federal, state, local, or foreign court or
governmental body in which the amount in dispute exceeds (or exceeded) $25,000
or which has or could result in liability or loss for Klein or any Klein
Shareholder of more than $25,000; and (b) to the best knowledge of Klein and the
Klein Shareholders, there exist no disputes, conflicts, or circumstances
providing the basis for a dispute or conflict which could reasonably be expected
to result in any such Action. There are no Actions pending or, to the best
knowledge of Klein and the Klein Shareholders, threatened for the purpose of
enjoining or preventing this Agreement or any other transaction contemplated by
this Agreement or otherwise challenging the validity or propriety of the
transactions contemplated by this Agreement. Except as disclosed in Schedule
4.17, Klein is not subject to any judgment, order or decree, or any governmental
restriction, which has a reasonable probability of having a material adverse
effect on the business operations, assets, properties, condition (financial or
otherwise), or prospects of Klein.
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Section 4.18 ERISA.
(a) Schedule 4.18(a) identifies each "employee benefit plan,"
as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974 ("ERISA") which (i) is subject to any provision of ERISA,
and (ii) is or was at any time during the last 5 years maintained,
administered, or contributed to by Klein or any affiliate (as defined
below) and covers any employee or former employee of Klein or any
affiliate or under which Klein or any affiliate has any liability.
Copies of such plans (and, if applicable, related trust agreements) and
all amendments thereto have been furnished to Unimag together with the
three most recent annual reports (Form 5500 and all related schedules)
and actuarial valuation reports, if any, prepared in connection with
any such plan. Such plans are referred to collectively herein as the
"Employee Plans". For purposes of this section, "affiliate" of any
person or entity means (A) any other person or entity which, together
with such person or entity, would be treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended (the
"Code"), or (B) is an "affiliate," whether or not incorporated, as
defined in Section 407(d)(7) of ERISA, of such person or entity. The
only Employee Plans which individually or collectively would constitute
an "employee pension benefit plan" as defined in Section 3(2) of ERISA
(the "Pension Plans") are identified as such on Schedule 4.18(a).
(b) Except as set forth in Schedule 4.18(b), no Employee Plan
constitutes a "multiemployer plan," as defined in Section 3(37) of
ERISA, or a "defined benefit plan," as defined in Section 3(35) and
subject to Title IV of ERISA, nor does Klein have any obligation to
create, maintain, or contribute to any such "multiemployer plan" or
"defined benefit plan". No Employee Plan is maintained in connection
with any trust described in Section 501(c)(9) of the Code. No
"accumulated funding deficiency," as defined in Section 412 of the
Code, has been incurred with respect to any Employee Plan, whether or
not waived. Full payment has been made of all amounts which Klein is
required to have paid as contributions to or benefits under any
Employee Plan as of the end of the most recent fiscal year thereof, and
there are no unfunded obligations under any Employee Plan. Klein knows
of no "reportable event," within the meaning of Section 4043 of ERISA,
and no event described in Section 4041, 4042, 4062 or 4063 of ERISA has
occurred in connection with any Employee Plan. No condition exists and
no event has occurred which could constitute grounds for termination of
any Employee Plan, and neither Klein nor any of its affiliates has
incurred any material liability under Title IV of ERISA arising in
connection with the termination of, or complete or partial withdrawal
from, any plan covered or previously covered by Title IV of ERISA.
Nothing done or omitted to be done and no transaction or holding of any
asset under or in connection with any Employee Plan has or will make
Klein, or any officer or director of Klein, subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section 4975
of the Code. There is no pending or, to the best knowledge of Klein and
the Klein Shareholders, threatened litigation, arbitration, disputed
claim, adjudication, audit,
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examination, or other proceeding with respect to any Employee Plan or
any fiduciary or administrator thereof in their capacities as such.
(c) Except as set forth in Schedule 4.18(c), each Employee
Plan which is intended to be qualified under Section 401(a) of the Code
is, to the best knowledge of Klein and the Klein Shareholders, so
qualified and has been so qualified during the period from its adoption
to date, and each trust forming a part thereof is exempt from tax
pursuant to Section 501(a) of the Code. Klein has furnished to Unimag
copies of the most recent Internal Revenue Service determination
letters with respect to each such plan for which it is the plan
sponsor. Except as set forth in Schedule 4.18(c), to the best knowledge
of Klein and the Klein Shareholders, each Employee Plan has been
maintained in compliance with its terms and the requirements prescribed
by any and all statutes, orders, rules, and regulations, including but
not limited to ERISA and the Code, which are applicable to such plan.
(d) Except as set forth in Schedule 4.18(d), there is no
contract, agreement, plan, or arrangement covering any employee or
former employee of Klein or any affiliate that, individually or
collectively, could give rise to the payment of any amount that would
not be deductible pursuant to the terms of the Code.
(e) Schedule 4.18(e) identifies each employment, severance, or
other similar contract, arrangement, or policy and each plan or
arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, severance benefits, supplemental unemployment
benefits, vacation benefits, retirement benefits, or for deferred
compensation, profit-sharing, bonuses, stock options, stock
appreciation, or other forms of incentive compensation or
post-retirement insurance, compensation, or benefits which (i) is not
an Employee Plan, (ii) is entered into, maintained, or contributed to,
as the case may be, by Klein or any of its affiliates, and (iii) covers
any employee or former employee of Klein or any of its affiliates. Such
contracts, plans, and arrangements as are described above, copies or
descriptions of which have been furnished previously to Unimag, are
referred to collectively herein as the "Benefit Arrangements." Each
Benefit Arrangement has been maintained in substantial compliance with
its terms and with requirements prescribed by any and all statutes,
orders, rules, and regulations that are applicable to such Benefit
Arrangement.
(f) Except as set forth in Schedule 4.18(f), there is no
liability in respect of post-retirement health and medical benefits for
current or retired employees of Klein or any of its affiliates. Except
as set forth in Schedule 4.18(f), Klein has reserved its right to amend
or terminate any Employee Plan or Benefit Arrangement providing health
or medical benefits in respect of any active employee of Klein under
the terms of any such plan and descriptions thereof given to employees.
With respect to any of Klein's Employee Plans which are "group health
plans" under Section 4980B of the Code and Section 607(1) of ERISA,
there has been substantial compliance with all requirements imposed
thereunder .
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(g) Except as set forth in Schedule 4.18(g), there has been no
amendment to, written interpretation, or announcement (whether or not
written) by Klein or any of its affiliates relating to any Employee
Plan or Benefit Arrangement which would increase the expense of
maintaining such Employee Plan or Benefit Arrangement above the level
of the expense incurred in respect thereof for the fiscal year ended
immediately prior to the Closing Date.
(h) Except as set forth in Schedule 4.18(h), Klein is not a
party or subject to any union contract or any material employment
contract or arrangement providing for annual future compensation of
more than $25,000 to any officer, consultant, director or employee,
except for employment agreements to be entered into as provided in
Section 6.1(g).
(i) Except as set forth in Schedule 4.18(i), the execution,
delivery, and consummation of the transactions contemplated by this
Agreement do not constitute a triggering event under any Employee Plan,
whether or not legally enforceable, which (either alone or upon the
occurrence of any additional or subsequent event) will or may result in
any payment (of severance pay or any other type), acceleration,
increase in vesting, or increase in benefits to any current or former
participant, employee, or director of Klein.
(j) Any reference to ERISA or the Code or any section thereof
shall be construed to include all amendments thereto and applicable
regulations and administrative rulings issued thereunder.
Section 4.19 CONTRACTS. Schedule 4.19 lists and briefly describes all
contracts, agreements, leases, arrangements, and understandings (written or
oral) ("Contracts") to which Klein is a party and which fall within any of the
following categories: (a) Contracts with any of Klein's top 20 customers based
on Klein's revenues for the 12-month period ended August 30, 1996; (b) Contracts
not entered into in the ordinary course of Klein's business (including without
limitation Contracts with any present or former shareholder, director, or
officer of Klein, or any person related by blood or marriage to any such person,
or any person controlling, controlled by, or under common control with any such
person, or with any employee, agent, or consultant of Klein not terminable at
will); (c) Contracts which are service contracts (excluding contracts for
delivery services entered into in the ordinary course of business) or equipment
leases involving payments by Klein of more than $10,000 per year; (d) Contracts
containing covenants or restrictions purporting to limit the freedom of Klein to
compete in any line of business in any geographic area or to employ or otherwise
engage any person; (e) Contracts which extend beyond one year, unless cancelable
on 60 or fewer days' notice without any liability, penalty, or premium; (f)
Contracts which relate to any borrowings or guarantees in excess of $25,000; (g)
Contracts containing any obligation or commitment which limits the freedom of
Klein to sell, lease, or otherwise distribute any product or customer
information; or (h) Contracts which are not listed above but which are material
to the condition (financial or otherwise), operations, assets, prospects, or
business of Klein. All such Contracts are valid and binding and in full force
and
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effect, and, to the best knowledge of Klein and the Klein Shareholders,
enforceable in accordance with their respective terms in all material respects.
Except as set forth in Schedule 4.19, neither Klein nor, to the best knowledge
of Klein and the Klein Shareholders, any other party thereto, is in violation
of, in default in respect of, nor, to the best knowledge of Klein and the Klein
Shareholders, has there occurred an event or condition which, with the passage
of time or giving of notice (or both) would constitute a default under any such
Contract.
Section 4.20 ACCOUNTS RECEIVABLE. Except as set forth in Schedule 4.20,
all accounts and notes receivable (customer, vendor, and other) of Klein as of
August 30, 1996, are and will be collectible in full, after application of a
reserve for uncollectible accounts determined in accordance with generally
accepted accounting principles, and are and will be valid and subsisting (unless
previously paid) and represent and will represent sales actually made (net of
all applicable credits and rebates) in the ordinary and usual course of business
consistent with past practices.
From the date of this Agreement through the Closing Date, no
customer or vendor accounts receivable of Klein will be converted to notes
receivable or written off without the prior written consent of Unimag.
Section 4.21 NO CONFLICT OR DEFAULT. Except as set forth on Schedule
4.21, neither the execution and delivery of this Agreement by Klein or the Klein
Shareholders, nor compliance by Klein and the Klein Shareholders with the terms
and provisions of this Agreement, including without limitation the consummation
of the transactions contemplated by this Agreement, will: (a) violate any
Applicable Laws or Permits; (b) conflict with or result in the breach of any
term, condition, or provision of (i) the articles of incorporation, code of
regulations, or other organizational document of Klein or (ii) any material
agreement, deed, contract, undertaking, mortgage, indenture, writ, order,
decree, restriction, legal obligation, or instrument to which Klein or any Klein
Shareholder is a party or by which Klein or any Klein Shareholder or any of
their respective assets or properties are or may be bound or affected; (c)
constitute a default (or an event which, with the giving of notice, the passage
of time, or both, would constitute a default) thereunder; (d) result in the
creation or imposition of any lien, security interest, charge or encumbrance, or
restriction of any nature whatsoever with respect to any material properties or
assets of Klein or any Klein Shareholder; or (e) give to others any interest or
rights, including rights of termination, acceleration, or cancellation in or
with respect to any of the material properties, assets, contracts, or business
of Klein.
Section 4.22 BOOKS OF ACCOUNT; RECORDS. Klein's general ledgers, stock
record books, minute books and other material records relating to the assets,
properties, contracts, and outstanding legal obligations of Klein are, in all
material respects, complete and correct, and have been maintained in accordance
with good business practices and the matters contained therein are, to the
extent required by generally accepted accounting principles, accurately
reflected in the Audited Statements, except as may be set forth in Section 4.6.
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Section 4.23 EMPLOYEES AND COMPENSATION. Schedule 4.23 lists and
describes the current compensation of the five most highly compensated managers
of Klein and any other employee of Klein whose total current salary and bonus
exceeds $50,000. Except as disclosed in Schedule 4.23: (a) there are no other
forms of compensation paid to any such employee of Klein; (b) the amounts
accrued or to be accrued on the books and records of Klein for vacation pay,
sick pay, and all commissions and other fees payable to agents, salespersons and
representatives of Klein will be adequate to cover Klein's liabilities for all
such items; (c) Klein has not become obligated, directly or indirectly, to any
shareholder, director, or officer of Klein or any person related to any such
person by blood or marriage, except for current liability for such compensation;
and (d) to the best knowledge of Klein and the Klein Shareholders, no
shareholder, director, officer, agent, employee, or representative of Klein or
any person related to such person by blood or marriage holds any position or
office with or has any material financial interest, direct or indirect, in any
supplier, customer, or account of, or other outside business which has material
transactions with, Klein. Neither Klein nor any Klein Shareholder has any
agreement or understanding with any shareholder, director, officer, agent,
employee, or representative of Klein which would influence any such person not
to become associated with Unimag from and after the Closing or not to serve
Klein after the Closing in a capacity similar to the capacity presently held.
Section 4.24 LABOR RELATIONS. Except as set forth in Schedule 4.24,
there is no unfair labor practice complaint against Klein pending before the
National Labor Relations Board. Except as set forth in Schedule 4.24, Klein is
not a party to or bound by any collective bargaining agreement and there is no
labor strike, dispute, slowdown or stoppage, or any union organizing campaign,
actually pending or, to the best knowledge of Klein and the Klein Shareholders,
threatened against or involving Klein. Except as set forth in Schedule 4.24, no
labor grievance has been filed against Klein in the last three years, and no
arbitration proceeding has arisen out of or under a collective bargaining or
other labor agreement and is pending and no claim therefor has been asserted.
Except as set forth in Schedule 4.24, no collective bargaining or other labor
agreement is currently being negotiated by Klein and no union or collective
bargaining unit represents any of Klein's employees. Klein has not experienced
any work stoppage or other material labor difficulty during the past five years.
Section 4.25 CUSTOMERS AND SUPPLIERS. Except as set forth in Schedule
4.25, no supplier of Klein has indicated that it shall stop, or decrease the
rate of, or substantially increase its fees for, supplying products or services
to Klein either prior to, or following the consummation of, the Closing.
Schedule 4.25 sets forth a list of all customers which have terminated their
relationships with Klein since June 30, 1996, or have notified Klein or the
Klein Shareholders since June 30, 1996, that they intend to terminate their
relationships with Klein. Except as set forth in Schedule 4.25, Klein and the
Klein Shareholders do not know of any customers of Klein which alone or in the
aggregate comprise more than 1% of actual annualized sales as shown in the
Audited Statements, which have indicated that they are considering or planning
to (a) discontinue being customers of Klein, (b) discontinue being customers of
Unimag or Klein after the Escrow Closing or the Closing, or (c) substantially
decrease the amount of their purchasing
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<PAGE> 31
from Klein or Unimag or otherwise materially alter the terms of such purchasing
either before or after the Closing.
Section 4.26 SPECIAL TERMS; PRODUCT WARRANTIES. Schedule 4.26 sets
forth the terms and conditions of any credit, discount, or other terms given by
Klein to any customer outside the usual and ordinary course of business.
Section 4.27 BUSINESS OF KLEIN. Klein is and since 19__ has been
engaged in the Wholesale Periodical Business and is presently engaged in no
other business whatsoever except as may be incidental to the foregoing.
Section 4.28 INVESTMENT REPRESENTATION. Each of the Klein Shareholders:
(a) represents that such Klein Shareholder owns beneficially and of record the
number of Klein Shares set forth opposite such Klein Shareholder's name on
Schedule 4.2; and (b) acknowledges, represents, and warrants to Unimag that (i)
such Klein Shareholder is an "accredited investor," as that term is defined in
Regulation D, because he or she has a net worth at this time in excess of $1
million or had income in each of the two most recent years in excess of $200,000
and has a reasonable expectation of reaching the same income level in the
current year, or, in the case of a Klein Shareholder that is a trust, because
such trust has total assets in excess of $5,000,000, was not formed for the
purpose of the transactions contemplated by this Agreement, and the investment
decision respecting the Unimag Shares and Unimag Debentures will be directed by
a person who has such knowledge and experience in financial and business matters
that he or she is capable of evaluating the merits and risks of an investment in
the Unimag Shares and Unimag Debentures, (ii) such Klein Shareholder has been
provided the opportunity to ask questions and receive answers from Unimag
concerning the business operations and financial condition of Unimag and the
terms and conditions of the transactions described in this Agreement, and to
obtain any additional information necessary to verify the accuracy of
information provided to such Klein Shareholder by Unimag, and (iii) is acquiring
the Unimag Shares and Unimag Debentures to be issued pursuant to this Agreement
for such Klein Shareholder's own accounts for investment only and not with a
view to the distribution thereof.
Section 4.29 SECTION 351 EXCHANGE. It is the intention of Klein and the
Klein Shareholders to treat the acquisition of Klein pursuant to this Agreement,
along with other exchanges and acquisitions occurring before and after the
closing of the transactions contemplated by this Agreement, as an exchange under
Section 351 of the Code, subject to the rules of Section 351 of the Code and the
regulations promulgated thereunder applicable to the receipt and taxability of
"boot" (within the meaning of such rules). Klein and the Klein Shareholders
shall be solely responsible for evaluating (and determining the appropriate
methods required for reporting) all
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federal, state, and local income and other tax consequences to each of them
which will and may result from the transactions contemplated by this Agreement.
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ARTICLE 5
COVENANTS OF THE PARTIES
Section 5.1 MUTUAL COVENANTS.
(a) General. Each Party shall use all reasonable efforts to
take all actions and do all things necessary, proper, or advisable to
consummate the Exchange and the other transactions contemplated by this
Agreement, including without limitation using all reasonable efforts to
cause the conditions set forth in Article 6 of this Agreement for which
such Party is wholly or partially responsible to be satisfied as soon
as reasonably practicable and to prepare, execute, acknowledge or
verify, deliver, and file such additional documents, and take or cause
to be taken such additional actions, as any other Party may reasonably
request.
(b) HSR Filings. The Parties shall cooperate with each other
with respect to the preparation and filing of any Notification and
Report Forms and related materials that they may be required to file
with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the HSR Act with respect to
the Exchange and shall promptly make any further filings pursuant to
the HSR Act that may be necessary, proper, or advisable.
(c) Other Governmental Matters. Each Party shall use all
reasonable efforts to take any additional action that may be necessary,
proper, or advisable in connection with any other notices to, filings
with, and authorizations, consents and approvals of any court,
administrative agency or commission, or other governmental authority or
instrumentality that it may be required to give, make, or obtain.
(d) Tax-Free Treatment. Each of the Parties shall use all
reasonable efforts to cause the Exchange to constitute (along with
other exchanges and acquisitions occurring before and after the
Exchange) a tax-free exchange under Section 351 of the Code, subject to
the rules of Section 351 of the Code and the regulations promulgated
thereunder applicable to the receipt and taxability of "boot" (within
the meaning of such rules). Each of the Parties shall be solely
responsible for evaluating (and determining the appropriate methods
required for reporting) all federal, state, and local income and other
tax consequences to each such Party which will and may result from the
transactions contemplated by this Agreement.
Section 5.2 COVENANTS OF KLEIN AND THE KLEIN SHAREHOLDERS. Klein and
the Klein Shareholders, jointly and severally, covenant and agree that:
(a) Conduct of Business. Except as otherwise expressly
contemplated by this Agreement, from the date of this Agreement until
the Closing (the "Pre-Exchange
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<PAGE> 34
Period"): (i) neither Klein nor any Klein Shareholder shall take or
permit to be taken any action or do or permit to be done anything in
the conduct of the business of Klein, or otherwise, that would be
contrary to or in breach of any of the terms or provisions of this
Agreement or which would cause any of their representations and
warranties contained in this Agreement to be or become untrue in any
material respect; (ii) Klein shall conduct its business in the ordinary
course consistent with past practices; (iii) Klein and the Klein
Shareholders shall permit Unimag to manage and oversee the business
operations of Klein as provided in Section 5.3(b), and (iv) Klein and
the Klein Shareholders shall use all reasonable efforts to assist
Unimag in preserving the business organization intact, keeping
available to Klein and Unimag the present service of Klein's employees,
and preserving for Klein and Unimag the goodwill of Klein's suppliers,
customers, and others with whom business relationships exist. Without
limiting the generality of the foregoing, during the Pre-Exchange
Period, except as otherwise expressly contemplated by this Agreement or
with the prior written consent of Unimag, Klein shall not:
(A) Adopt or propose any change in its articles of
incorporation or code of regulations; adjust, split, combine,
or reclassify any of its capital stock; or make any other
changes in its authorized or issued capital stock;
(B) Redeem, purchase, or otherwise acquire any shares
of its capital stock; grant any person or entity any right to
acquire any shares of its capital stock; issue, deliver, sell,
or agree to issue, deliver, or sell, any additional shares of
its capital stock or any other securities; or enter into any
agreement or arrangement with respect to the sale or voting of
its shares of capital stock;
(C) Merge or consolidate with any other person or
entity or acquire a material amount of assets of any other
person or entity except for the acquisition of inventory in
the ordinary course of business consistent with past
practices;
(D) Sell, lease, license, pledge, encumber, or
otherwise dispose of any operating assets other than sales of
inventory in the ordinary course of business consistent with
past practices;
(E) Incur, create, assume, or otherwise become liable
for any indebtedness other than indebtedness incurred in the
ordinary course of business consistent with past practices;
(F) Except for those arrangements disclosed in
Schedule 5.2(a), enter into or modify any employment,
severance, termination, or similar agreement or arrangement
with, or grant any bonuses, salary increases, severance, or
termination pay to, any officer, director, consultant, or
employee;
(G) Adopt, amend, or terminate any employee benefit
plan or increase, amend, or terminate any benefits to
officers, directors, consultants, or employees;
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(H) Modify in any material way or terminate any of
the contracts listed or required to be listed in Schedule
4.19, except in the ordinary course of business consistent
with past practices;
(I) Except as disclosed in Schedule 4.17, settle any
claims, litigation, or actions, whether now pending or
hereafter made or brought, unless such settlement does not
involve a payment by Klein of more than $25,000;
(J) Engage in any transaction, or enter into any
agreement, contract, lease, or other arrangement or
understanding, with any affiliate of Klein, except for
transactions expressly permitted by this Agreement; or
(K) Agree or commit to do any of the foregoing;
provided, however, that nothing in this Section 5.2(a) shall prohibit
Klein from (1) transferring to the Klein Shareholders or their
affiliates real estate, affiliate accounts receivable, affiliate notes
receivable, airplanes and life insurance policies which are not
necessary for the conduct of ordinary business operations, or from (2)
entering into any financial or deferred compensation arrangements with
any employee of Klein, as long as such arrangements are disclosed on
the books and records of Klein. Any such transfers and compensation
arrangements shall be utilized in determining the actual Tangible Net
Worth of Klein in connection with the valuation adjustment provided for
in Section 2.1(b).
(b) Exclusive Rights. Neither Klein nor any Klein Shareholder
shall, directly or indirectly, solicit (including without limitation by
way of furnishing or making available any non-public information
concerning the business, properties, or assets of Klein) or engage in
negotiations or discussions with, disclose any of the terms of this
Agreement to, accept any offer from, furnish any information to, or
otherwise cooperate, assist, or participate with any person or
organization (other than Unimag and its representatives) regarding any
Acquisition Proposal (defined below), except that any person or entity
making an Acquisition Proposal may be informed of the restrictions
contained in this sentence. Klein and the Klein Shareholders shall
notify Unimag promptly by telephone, and thereafter promptly confirm in
writing, if any such information is requested from, or any Acquisition
Proposal is received by, Klein or any of the Klein Shareholders. For
purposes of this Agreement, "Acquisition Proposal" shall mean any offer
or proposal received by Klein or any Klein Shareholder prior to the
Closing regarding the acquisition by purchase, merger, lease, or
otherwise of any capital stock of Klein, the business of Klein, or any
material assets, customer relationships, or other operations of Klein.
(c) Access to Records and Other Due Diligence. During the
Pre-Exchange Period, Klein shall: (i) make or cause to be made
available to Unimag and its representatives, attorneys, accountants,
and agents, for examination, inspection, and review, the
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assets and property of Klein and all books, contracts, agreements,
commitments, records, and documents of every kind relating to Klein's
business, and shall permit Unimag and its representatives, attorneys,
accountants and agents to have access to the same at all reasonable
times, including without limitation access to all tax returns filed and
in preparation and all review and other accounting work papers of
Coopers & Lybrand and all reports to management and related responses;
and (ii) permit representatives of Unimag to interview suppliers,
customers, and personnel of Klein, provided, however, that a Klein
representative shall be entitled to be present at and participate in
each such interview.
(d) Disclosures. After the date of this Agreement, neither
Klein nor any Klein Shareholder shall: (i) disclose to any person,
association, firm, corporation or other entity (other than Unimag or
those designated in writing by Unimag) in any manner, directly or
indirectly, any proprietary information or data relevant to the
business of Klein, whether of a technical or commercial nature; or (ii)
use, or permit or assist, by acquiescence or otherwise, any person,
association, firm, corporation, or other entity (other than Unimag or
those designated in writing by Unimag) to use, in any manner, directly
or indirectly, any such information or data, excepting only use of such
data or information as is at the time generally known to the public and
which did not become generally known through any breach of any
provision of this section by Klein or any Klein Shareholder. Upon the
termination of this Agreement for any reason, Klein shall promptly
cause all copies of such information and data in its possession, or in
the possession of the Klein Shareholders, to be returned to Unimag.
(e) Employee Retention. Klein and the Klein Shareholders
understand that in Unimag's view it is essential to the successful
operation of the business of Klein that Klein assist Unimag in
retaining substantially unimpaired Klein's operating organization.
During the Pre-Exchange Period, neither Klein nor any Klein Shareholder
shall take any action which would induce any employee or representative
of Klein (other than himself or herself) or Unimag not to become or
continue as an employee or representative of Klein or Unimag.
(f) Dividends and Distributions. During the Pre-Exchange
Period, except as permitted in Section 5.2(a), Klein and the Klein
Shareholders shall not permit Klein to declare, set aside or pay any
dividend or any distribution (in cash or in kind) to its shareholders,
except cash dividends which shall be paid to the Klein Shareholders at
the Closing in an aggregate amount equal to 50% of the net taxable
income of Klein for that portion of the fiscal year 1996, which is
allocable to the Klein Shareholders as shareholders of an S
corporation.
(g) Notices of Certain Events. Klein and the Klein
Shareholders shall promptly notify Unimag of:
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(i) Any notice or other communication from any person
or entity alleging that the consent of such person or entity
is or may be required in connection with the transactions
contemplated by this Agreement;
(ii) Any notice or other communication from any
governmental or regulatory agency or authority in connection
with the transactions contemplated by this Agreement; and
(iii) Any actions, suits, claims, investigations, or
proceedings commenced or, to the knowledge of Klein or any
Klein Shareholder, threatened against, relating to, or
involving or otherwise affecting Klein or any Klein
Shareholder, or any of their property which, if in existence
on the date of this Agreement would have been required to have
been disclosed by Klein and the Klein Shareholders pursuant to
Section 4.17 or which relate to the consummation of the
transactions contemplated by this Agreement.
(h) Title Evidence. Klein shall deliver to Unimag as soon as
practicable after the date of this Agreement title opinions, title reports, or
other evidence of title, in form and substance reasonably satisfactory to
Unimag, showing in Klein indefeasible fee simple title in all of the facilities
and real property owned by Klein, subject only to such exceptions, encumbrances,
or other matters as are reasonably satisfactory to Unimag.
(i) Audited Financial Statements. The Klein Shareholders shall deliver
to Unimag audited financial statements for the fiscal year ended December 31,
1995 (the "1995 Financial Statements") within 30 days after the Escrow Closing
Date and for the eight-month period ended August 30, 1996 within 75 days after
the Escrow Closing Date. These audited financial statements shall be prepared
from and shall be in accordance with the books and records of Klein, prepared in
conformity with generally accepted accounting principles applied on a consistent
basis, including without limitation the generally accepted accounting principles
set forth on Schedule 2.1(b), but subject to the exceptions to generally
accepted accounting principles also set forth on Schedule 2.1(b), and fairly
present in all material respects the financial condition of Klein as of the
dates stated and the results of operations of Klein for the periods then ended
in accordance with such practices. Klein shall cause Coopers & Lybrand to
perform the December 31, 1995 audit and Klein shall pay all costs and expenses
incurred in connection with such audit. Unimag shall cause Arthur Andersen LLP
to perform the August 30, 1996 audit and Unimag shall pay all costs and expenses
incurred in connection with such audit.
Section 5.3 COVENANTS OF UNIMAG. Unimag covenants and agrees that:
(a) Conduct of Unimag's Business. Except as otherwise
expressly contemplated by this Agreement, during the Pre-Exchange
Period: (i) Unimag shall not take or permit to be taken any action or
do or permit to be done anything in the conduct of the business of
Unimag, or otherwise, that would be contrary to or in breach of any of
the
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terms or provisions of this Agreement or which would cause any of its
representations and warranties contained in this Agreement to be or
become untrue in any material respect; and (ii) Unimag shall conduct
its business in the ordinary course consistent with past practices.
(b) Joint Operations of Unimag and Klein. Notwithstanding
anything in this Agreement to the contrary, from and after the Escrow
Closing Date, Unimag shall manage and oversee the operation of the
business of Klein as if the Exchange had already occurred.
(c) Consummation of Acquisitions. Unimag shall use all
reasonable efforts to take all actions and do all things necessary,
proper, or advisable to consummate the: (i) acquisition of Michiana
News Services, Inc., a Michigan corporation ("Michiana"), pursuant to
and upon the terms and conditions of the Stock Transfer and Exchange
Agreement among Unimag, Michiana, and all of the shareholders of
Michiana (the "Michiana Acquisition"); (ii) acquisition of The Stoll
Companies, an Ohio corporation ("Stoll"), pursuant to and upon the
terms and conditions of the Stock Transfer and Exchange Agreement among
Unimag, Stoll and all of the shareholders of Stoll (the "Stoll
Acquisition"); and (iii) the acquisitions (the "Scherer Companies
Acquisitions") of certain assets and liabilities of Ohio Periodical
Distributors, Inc., an Ohio corporation, Northern News Company and its
wholly-owned subsidiary, MacGregor News Agency, Inc., both Michigan
corporations ("Northern"), and Wholesalers Leasing Corp., a Delaware
corporation, pursuant to and upon the terms and conditions of the
respective Asset Transfer and Exchange Agreements between Unimag and
each corporation, together with the acquisition of Read-mor Book
Stores, Inc., an Ohio corporation ("Read-Mor") and The Scherer
Companies, a Delaware corporation ("Scherer"), pursuant to and upon the
terms and conditions of the Stock Transfer and Exchange Agreements
among each corporation, its shareholders and Unimag (collectively, the
"Scherer Companies"). None of the acquisition agreements for the
Michiana Acquisition (the "Michiana Acquisition Agreement"), the
acquisition agreement for the Stoll Acquisition (the "Stoll Acquisition
Agreement") or the acquisition agreements for the Scherer Companies
Acquisitions (the "Scherer Companies Acquisition Agreements") shall be
modified or amended, in any material respect, without the prior written
consent of the Unimag Board of Directors, Klein, and each of Stoll,
Michiana and the Scherer Companies. In addition to the transferors
described in this Section 5.3(c), the remainder of the control group
(as defined in Section 368(c) of the Code) of Unimag is specified in
Schedule 1.1.
(d) Confidential Information. Upon the termination of this
Agreement for any reason, Unimag shall promptly cause all proprietary
information or data relevant to the business of Klein, whether of a
technical, financial or commercial nature and whether furnished by
Klein hereunder or otherwise received by Unimag, and all copies,
extracts
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and summaries thereof in its possession or in the possession of any of
its officers, shareholders or agents, to be promptly returned to Klein,
except for any such information relating to customers of Klein obtained
from Klein in connection with the joint business operations of Unimag
and Klein pursuant to the Joint Operating Agreement.
ARTICLE 6
CONDITIONS
Section 6.1 MUTUAL CONDITIONS TO ESCROW CLOSING. The obligations of
each of the Parties to complete the Escrow Closing and to consummate the other
transactions contemplated by this Agreement to be completed at the Escrow
Closing shall be subject to fulfillment of all of the following conditions:
(a) Completion of Schedules and Exhibits. Except for the
Debenture Agreement attached as Exhibit A and the Employment Agreements
attached as Exhibits C-1 through C-3, the Parties acknowledge that at
the time of the execution of this Agreement the schedules and exhibits
will not be attached. Unimag and Klein will proceed in good faith to
finalize the form and content of such schedules and exhibits in a
manner consistent with the terms and conditions of this Agreement and
otherwise mutually acceptable to both Parties. Upon finalizing the form
and content of such schedules and exhibits they will be attached to and
become a part of this Agreement as if they had been attached to this
Agreement at the time of execution.
(b) No Adverse Proceeding. No temporary restraining order,
preliminary or permanent injunction, or other order or decree which
prevents the consummation of the Exchange or the other transactions
contemplated by this Agreement shall have been issued and remain in
effect, and no statute, rule, or regulation shall have been enacted by
any state or federal government or governmental agency which would
prevent the consummation of the Exchange or the other transactions
contemplated by this Agreement.
(c) Certain Approvals. Unimag and Klein each shall have filed
any Notification and Report Forms and related materials that either
such Party may be required to file with the Federal Trade Commission
and the Antitrust Division of the United States Department of Justice
under the HSR Act with respect to the Exchange, and all waiting periods
applicable to the consummation of the Exchange under the HSR Act shall
have expired or been terminated.
(d) Other Governmental Approvals. Any governmental or other
approvals or reviews of this Agreement and the transactions
contemplated by this Agreement required under any applicable laws,
statutes, orders, rules, regulations, policies or guidelines
promulgated thereunder, or any governance document of Unimag or Klein
shall have been received, except for any filings which Unimag must make
with the Securities and Exchange Commission in connection with
obtaining approval from Unimag's Shareholders of the Exchange and other
transactions contemplated by this Agreement.
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(e) Escrow Closing of Certain Acquisitions. Klein shall have
received copies of the final form of the Stoll Acquisition Agreement,
the Michiana Acquisition Agreement and the Scherer Companies
Acquisition Agreements, all of which shall be of a form and content
substantially similar to this Agreement, with the exception that the
Scherer Companies Acquisition Agreements shall be for the purchase and
sale of assets. In addition, Unimag shall have consummated the escrow
closings of the Stoll Acquisition, the Michiana Acquisition and the
Scherer Companies Acquisition for Northern.
(f) Tax Commentary. Unimag shall have received a tax
commentary, dated the Escrow Closing Date, of Arthur Andersen LLP, in
form and substance satisfactory to Unimag, as to the qualification of
the Exchange for Unimag as a tax-free exchange under Section 351 of the
Code, and Unimag shall have delivered a copy of such commentary to
Klein.
(g) Employment Agreements. ______________, __________________,
and ________________ shall have entered into employment agreements with
Klein or Unimag in substantially the form attached to this Agreement as
Exhibits C-1, C-2 and C-3, and such employment agreements shall be in
full force and effect as of the Escrow Closing.
Section 6.2 CONDITIONS TO OBLIGATIONS OF KLEIN AND THE KLEIN
SHAREHOLDERS TO COMPLETE THE ESCROW CLOSING. The obligations of Klein and the
Klein Shareholders to complete the Escrow Closing and to consummate the other
transactions contemplated by this Agreement to be completed at the Escrow
Closing shall be subject to the fulfillment of all of the following conditions
unless waived by Klein and the Klein Shareholders in writing:
(a) Representations and Warranties. The representations and
warranties of Unimag set forth in Article 3 of this Agreement shall be
true and correct in all material respects as of the date of this
Agreement and as of the Escrow Closing as though made at and as of the
Escrow Closing.
(b) Performance of Agreement. Unimag shall have performed and
observed in all material respects all covenants, agreements,
obligations, and conditions to be performed or observed by them under
this Agreement at or prior to the Escrow Closing.
(c) Certificate. Unimag shall have furnished Klein and the
Klein Shareholders with a certificate dated the Escrow Closing Date
signed by its chairman, president, or any vice president to the effect
that the conditions set forth in Section 6.2(a) and Section 6.2(b) have
been satisfied.
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(d) Tax Commentary. Klein and the Klein Shareholders shall
have received the commentary dated the Escrow Closing Date, of Coopers
& Lybrand, in form and substance satisfactory to Klein and the Klein
Shareholders, as to the qualification of the Exchange for the Klein
Shareholders as a tax-free exchange under Section 351 of the Code.
(e) Opinion of Counsel. Klein and the Klein Shareholders shall
have received the legal opinion, dated the Escrow Closing Date, of
Baker & Hostetler, counsel to Unimag, in substantially the form
attached to this Agreement as Exhibit B.
(f) Adverse Change and Condition. There shall have been no
material adverse change in the properties, assets, liabilities,
business, results of operations, condition (financial or otherwise), or
prospects of Unimag since the date of the 10-Q or of Michiana, the
Stoll Companies or the Scherer Companies since August 30, 1996.
(g) Unimag Shareholder Letters. As of the date of this
Agreement, shareholders of Unimag who have the right to vote more than
50% of the outstanding Unimag Shares intend to submit letters to Unimag
indicating they intend to vote in favor of the Stoll Exchange, the
Klein Acquisition, and the Scherer Companies Acquisitions at the Unimag
shareholders meeting to be held for that purpose. Copies of these
letters will be provided to Klein by Unimag prior to the Escrow
Closing.
(h) Due Diligence. Klein's completion of its due diligence
review of Unimag and The Scherer Companies with results satisfactory to
Klein on or before September 25, 1996, and Klein's completion of a
review of the schedules attached to the acquisition agreements
described in Section 5.3(c), above.
(i) Other Documents. Unimag shall have delivered the following
items to Klein:
(i) Unimag's articles of incorporation, certified by
the Ohio Secretary of State as of a date not more than ten
days prior to the Escrow Closing Date;
(ii) A good standing certificate of Unimag, issued by
the Ohio Secretary of State as of a date not more than ten
days prior to the Escrow Closing Date;
(iii) The code of regulations of Unimag, certified by
the secretary of Unimag on the Escrow Closing Date; and
(iv) Resolutions of the directors of Unimag
approving, adopting, and authorizing this Agreement and the
transactions contemplated by this Agreement, certified by the
secretary of Unimag on the Escrow Closing Date.
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Section 6.3 CONDITIONS TO OBLIGATIONS OF UNIMAG TO COMPLETE THE ESCROW
CLOSING. The obligatiONS of Unimag to complete the Escrow Closing and to
consummate the other transactions contemplated by this Agreement to be completed
at the Escrow Closing shall be subject to the fulfillment of all of the
following conditions unless waived by Unimag in writing:
(a) Representations and Warranties. The representations and
warranties of Klein and the Klein Shareholders set forth in Article 4
of this Agreement shall be true and correct in all material respects as
of the date of this Agreement and as of the Escrow Closing as though
made at and as of the Escrow Closing.
(b) Performance of Agreement. Klein and the Klein Shareholders
shall have performed and observed in all material respects all
covenants, agreements, obligations, and conditions to be performed or
observed by them under this Agreement at or prior to the Escrow
Closing.
(c) Certificate. Klein shall have furnished Unimag with a
certificate dated the Escrow Closing Date signed on its behalf by its
chairman, president or any vice president to the effect that the
conditions set forth in Section 6.3(a) and Section 6.3(b) have been
satisfied.
(d) Opinion of Counsel. Unimag shall have received the legal
opinion, dated the Escrow Closing Date, of Cohen, Pollock, Merlin,
Axelrod & Tanenbaum, counsel to Klein and the Klein Shareholders,
substantially in the form attached to this Agreement as Exhibit D.
(e) Books and Records. Klein shall have delivered to Unimag
all corporate books and records and other materials of Klein, including
without limitation stock books and ledgers, minute books, bank account
lists, tax returns, and financial and operational records and
materials.
(f) Third Party Consents. Unimag shall have received all
necessary customer, vendor, and other third party consents and
approvals of this Agreement and the transactions contemplated by this
agreement
(g) Adverse Change and Condition. There shall have been no
material adverse change in the properties, assets, liabilities,
business, results of operations, condition (financial or otherwise) or
prospects of Klein from that reflected in the Audited Statements.
(h) Other Documents. Klein shall have delivered the following
items to Unimag:
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(i) Articles of incorporation, for each of the Klein
corporations, certified by the Ohio Secretary of State as of a
date not more than ten days prior to the Escrow Closing Date;
(ii) A good standing certificate for each of the
Klein corporations, issued by the Ohio Secretary of State as
of a date not more than ten days prior to the Escrow Closing
Date;
(iii) The code of regulations of each of the Klein
corporations, certified by the secretary of each of the Klein
corporations on the Escrow Closing Date; and
(iv) The resolutions of the shareholders and
directors of each of the Klein corporations approving,
adopting, and authorizing this Agreement and the transactions
contemplated by this Agreement, certified by the secretary of
each of the Klein corporations on the Escrow Closing Date.
(i) Due Diligence. Unimag's completion of its due diligence
review with results satisfactory to Unimag on or before September 25,
1996.
Section 6.4 DOCUMENT ESCROW AGREEMENT; UNIMAG SHAREHOLDER APPROVAL.
Upon the satisfaction or waiver of all of the conditions set forth in
Sections 6.1, 6.2, and 6.3, the Parties shall hold the Escrow Closing at
which the Parties and Baker & Hostetler shall execute and deliver the document
escrow agreement in the form attached to this Agreement as Exhibit E (the
"Document Escrow Agreement"). The Document Escrow Agreement shall provide, among
other things, that at the Escrow Closing this Agreement and all of the
Additional Documents shall be deposited with Baker & Hostetler to be held
pursuant to the terms of the Document Escrow Agreement and that upon the escrow
closing of certain acquisitions and the approval of the Exchange by Unimag's
shareholders, this Agreement and the Additional Documents shall be released and
delivered to the appropriate Party at the Closing and the Exchange and other
transactions contemplated by this Agreement shall be consummated.
Section 6.5 MUTUAL CONDITIONS TO CONSUMMATE THE EXCHANGE. Upon the
execution and delivery of THe Document Escrow Agreement, the obligation of each
of the Parties to consummate the Exchange and the other transactions
contemplated by this Agreement shall be subject to the fulfillment of both of
the following conditions:
(a) Escrow Closing of Remaining Stoll, Michiana and Scherer
Companies Acquisitions. Unimag shall have consummated the escrow
closings of Stoll, Michiana and all of the Scherer Companies
Acquisitions (except for the escrow closing for the acquisition of
Northern which was closed into escrow prior to the Escrow Closing under
this Agreement). Such escrow closings shall be completed no later than
September 28,
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1996, unless such date is extended by written agreement of the parties,
and shall be substantially similar to the Escrow Closing under this
Agreement.
(b) Unimag Shareholder Approval. The Exchange, the Klein
Acquisition, and the Scherer Companies Acquisitions shall have been
approved by the affirmative vote of the shareholders of Unimag to the
extent such approval is required by the provisions of Ohio Revised Code
Chapter 1701 and Unimag's articles of incorporation.
ARTICLE 7
TERMINATION AND AMENDMENT
SECTION 7.1 TERMINATION.
(a) Termination by Klein and the Klein Shareholders. This
Agreement may be terminated and canceled prior to the Closing by Klein
and the Klein Shareholders if: (i) (A) any of the representations or
warranties of Unimag contained in this Agreement shall prove to be
inaccurate in any material respect, or any covenant, agreement,
obligation, or condition to be performed or observed by Unimag under
this Agreement has not been performed or observed in any material
respect at or prior to the time specified in this Agreement, and (B)
such inaccuracy or failure shall not have been cured within 15 business
days after receipt by Unimag of written notice of such occurrence from
Klein and the Klein Shareholders; (ii) any permanent injunction or
other order of a court or other competent authority preventing
consummation of the Exchange or any other transaction contemplated by
this Agreement shall have become final and nonappealable; (iii) so long
as Klein and the Klein Shareholders are not in material breach of any
representation, warranty, covenant, or agreement, if the Escrow Closing
has not occurred on or before September 28, 1996; or (iv) so long as
Klein and the Klein Shareholders are not in material breach of any
representation, warranty, covenant, or agreement, if the Closing has
not occurred on or before December 31, 1996.
(b) Termination by Unimag. This Agreement may be terminated
and canceled at any time prior to the Closing by Unimag if: (i) (A) any
of the representations or warranties of Klein or any Klein Shareholder
contained in this Agreement shall prove to be inaccurate in any
material respect, or any covenant, agreement, obligation, or condition
to be performed or observed by Klein or any Klein Shareholder under
this Agreement has not been performed or observed in any material
respect at or prior to the time specified in this Agreement, and (B)
such inaccuracy or failure shall not have been cured within 15 business
days after receipt by Klein and the Klein Shareholders of written
notice of such occurrence from Unimag; (ii) any permanent injunction or
other order of a court or other competent authority preventing
consummation of the Exchange or any other transaction contemplated by
this Agreement shall have become final and nonappealable; (iii) so long
as Unimag is not in material breach of any representation, warranty,
covenant, or agreement, if the Escrow Closing has not occurred on or
before
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September 28, 1996; or (iv) so long as Unimag is not in material breach
of any representation, warranty, covenant, or agreement, if the Closing
has not occurred on or before December 31, 1996.
Section 7.2 AMENDMENT. This Agreement may be amended by the Parties, by
action taken or authorized by their respective boards of directors (to the
extent such action or authorization is required by law), at any time before or
after adoption of this Agreement by the Klein Shareholders and Unimag
Shareholders, but, after such adoption, no amendment shall be made which by law
requires further adoption by the Klein Shareholders or Unimag Shareholders
without such further adoption. Notwithstanding the foregoing, this Agreement may
not be amended except by an instrument in writing signed by each of the Parties.
Section 7.3 EXTENSION; WAIVER. At any time prior to the Escrow Closing
or Closing, as the case may be, Unimag (with respect to Klein and the Klein
Shareholders) and Klein (with respect to Unimag) may, to the extent legally
allowed: (a) extend the time for the performance of any of the obligations or
other acts of such Party; (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or in any document delivered pursuant
hereto; or (c) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a Party to any such
extension or waiver shall be valid only if set forth in a written instrument
signed by such Party.
ARTICLE 8
INDEMNIFICATION
Section 8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
AGREEMENTS.
(a) Notwithstanding any investigation conducted at any time
with regard thereto by or on behalf of any Party, all representations,
warranties, covenants and agreements of Klein, the Klein Shareholders
and Unimag in this Agreement and in the Document Escrow Agreement shall
survive the execution, delivery, and performance of this Agreement and
the Document Escrow Agreement. All representations and warranties of
the Parties set forth in this Agreement and in the Document Escrow
Agreement shall be deemed to have been made again by them at and as of
the Escrow Closing.
(b) As used in this Article 8, any reference to a
representation, warranty, covenant, or agreement contained in any
section of this Agreement shall include the Schedule relating to such
section.
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Section 8.2 INDEMNIFICATION BY KLEIN SHAREHOLDERS.
(a) Subject to the provisions of this Section 8.2 and of
Section 8.4, below, the Klein Shareholders, jointly and severally,
shall indemnify and hold harmless Unimag from and against any and all
losses, liabilities, damages, demands, claims, suits, actions,
judgments or causes of action, assessments, costs and expenses,
including without limitation interest, penalties, reasonable attorneys'
fees, any and all reasonable expenses incurred in investigating,
preparing, or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation (collectively, "Damages"),
asserted against, resulting to, imposed upon, or incurred or suffered
by Unimag, directly or indirectly, as a result of or arising from any
material inaccuracy in or breach of any of the representations,
warranties, covenants, or agreements made by the Klein Shareholders in
this Agreement or the Document Escrow Agreement (collectively,
"Indemnifiable Klein Claims").
(b) Unimag shall be deemed to have suffered Damages arising
out of or resulting from the matters referred to in Section 8.2(a),
above, if the same shall be suffered by any parent, subsidiary, or
affiliate of Unimag.
(c) The Klein Shareholders may satisfy any obligation of
indemnification under this Article 8 by delivery of Unimag Shares to
Unimag with a value equal to the amount of the payment being satisfied.
For purposes of this Section 8.2(c), Unimag Shares shall be valued at
the greater of (i) $1.50 per share, or (ii) their market value at the
time the indemnification obligation has been finally established.
(d) Notwithstanding anything contained in this Agreement to
the contrary, the collective indemnification obligations of the Klein
Shareholders as a group under this Agreement shall never exceed, in the
aggregate, the sum of $3,500,000 and no single Klein Shareholder shall
have any indemnification obligation in excess of the total
consideration received by such Klein Shareholder in exchange for his or
her Klein Shares.
Section 8.3 INDEMNIFICATION BY UNIMAG.
(a) Unimag shall indemnify and hold harmless each of the Klein
Shareholders from and against any Damages asserted against, resulting
to, imposed upon, or incurred or suffered by any of the Klein
Shareholders, directly or indirectly, as a result of or arising from
any (i) material inaccuracy in or breach or nonfulfillment of any of
the representations, warranties, covenants, or agreements made by
Unimag in this Agreement or the Document Escrow Agreement, (ii) subject
to the limitations set forth in Section 8.3(c), below, any and all
claims, liabilities or obligations arising out of the operation of the
business of Klein after the Escrow Closing Date, or (iii) any and all
claims, liabilities and
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obligations arising out of any failure by Unimag to pay, following the
Escrow Closing Date, any liability of Klein disclosed on the August
30th Balance Sheet or to pay any amount or perform any obligation under
any of the Contracts, (collectively, "Indemnifiable Unimag Claims" and,
together with Indemnifiable Klein Claims, the "Indemnifiable Claims").
(b) Unimag shall satisfy any obligation of indemnification
under this Article 8 in cash.
(c) Notwithstanding anything contained in this Agreement to
the contrary, the Klein Shareholders hereby acknowledge that Unimag
shall not be liable to the Klein Shareholders, under this Article 8 or
any other provision of this Agreement, for any claims, liabilities, or
obligations arising out of the operation of the business of Klein prior
to the Escrow Closing Date, if such claim, liability, or obligation is
caused by or results from any Indemnifiable Klein Claim.
Section 8.4 LIMITATIONS ON INDEMNIFICATION. Rights to indemnification
under this Article 8 are subject to the following limitations:
(a) For purposes of this Article 8, all Damages shall be
computed net of any insurance coverage which reduces the Damages that
would otherwise be sustained; provided that in all cases the timing of
the receipt or realization of insurance proceeds shall be taken into
account in determining the amount of reduction of Damages.
(b) Subject to the provisions of Section 8.4(c), below, Unimag
shall not be entitled To indemnification hereunder with respect to an
Indemnifiable Claim or Claims unless the aggregate amount of Damages
with respect to such Indemnifiable Claim or Claims exceeds $350,000.
Once Unimag's Damages exceeds $350,000 in the aggregate, Unimag shall
only be entitled to be indemnified to the extent of such Damages in
excess of such initial $350,000 of Damages.
(c) Notwithstanding and in lieu of the provisions of
Section 8.4(b), above, Unimag shall not be entitled to indemnification
with respect to an Indemnifiable Claim or Claims resulting from a
breach of the representations and warranties contained in the last
paragraph of Section 4.15 unless the aggregate amount of Damages with
respect to such Indemnifiable Claim or Claims exceeds $35,000. Once
Unimag's Damages for any such breach exceeds $35,000 in the aggregate,
Unimag shall only be entitled to be indemnified to the extent of such
Damages in excess of such initial $35,000 of Damages.
(d) The obligations of indemnity under this Article 8 with
respect to any indemnifiable claim shall terminate two years after the
Escrow Closing Date.
(e) If, prior to the termination of the obligation to
indemnify, written notice of an Indemnifiable Claim is given by Unimag
or any of the Klein Shareholders, as the case
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may be (an "Indemnified Party") to the other Party or Parties, as the
case may be (the "Indemnifying Party"), or a suit or action based upon
an alleged Indemnifiable Claim is commenced against the Indemnifying
Party, the Indemnified Party shall not be precluded from pursuing such
Indemnifiable Claim (whether through the courts or otherwise) by reason
of the termination of the obligation of indemnity as described in
Section 8.4(d) above.
Section 8.5 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO THIRD PARTY
CLAIMS.
(a) If an Indemnified Party determines to seek indemnification
under this Article 8 from an Indemnifying Party with respect to
Indemnifiable Claims resulting from the assertion of liability by third
parties, the Indemnified Party shall give written notice to the
Indemnifying Party, which notice shall set forth such material
information with respect to such Indemnifiable Claim as is then
reasonably available to the Indemnified Party. If any such liability is
asserted against the Indemnified Party and the Indemnified Party
notifies the Indemnifying Party of such liability, the Indemnifying
Party shall be entitled, if they so elect by written notice delivered
to the Indemnified Party within 10 days after receiving the Indemnified
Party's notice, to assume the defense of such asserted liability with
counsel reasonably satisfactory to the Indemnified Party.
Notwithstanding the foregoing: (i) the Indemnified Party shall have the
right to employ its own counsel in any such case, but the fees and
expenses of such counsel shall be payable by the Indemnified Party;
(ii) the Indemnified Party shall not have any obligation to give any
notice of any assertion of liability by a third party unless such
assertion is in writing; and (iii) the rights of the Indemnified Party
to be indemnified in respect of Indemnifiable Claims resulting from the
assertion of liability by third parties shall not be adversely affected
by its failure to give notice pursuant to the foregoing provisions
unless, and, if so, only to the extent that, the Indemnifying Party is
prejudiced by such failure. With respect to any assertion of liability
by a third party that results in an Indemnifiable Claim, the Parties
shall make available to each other all relevant information in their
possession which is material to any such assertion.
(b) In the event that the Indemnifying Party fails to assume
the defense of the Indemnified Party against any such Indemnifiable
Claim, within 15 days after receipt of the Indemnified Party's notice
of such Indemnifiable Claim, the Indemnified Party shall have the right
to defend, compromise, or settle such Indemnifiable Claim on behalf,
for the account, and at the risk of the Indemnifying Party.
(c) Notwithstanding anything in this Section 8.5 to the
contrary, (i) if there is a reasonable probability that an
Indemnifiable Claim may materially and adversely affect the Indemnified
Party, including without limitation any of its subsidiaries or
affiliates (other than as a result of money damages or other money
payments), then the Indemnified Party shall have the right, at the cost
and expense of the Indemnifying Party, to defend, compromise, or settle
such Indemnifiable Claim; and (ii) the Indemnifying Party shall not,
without the Indemnified Party's prior written consent, settle or
compromise any Indemnifiable Claim or consent to entry of any judgment
in respect of any Indemnifiable
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Claim unless such settlement, compromise, or consent includes as an
unconditional term the giving by the claimant or the plaintiff to the
Indemnified Party (and its subsidiaries and affiliates) a release from
all liability in respect of such Indemnifiable Claim.
Section 8.6 PROCEDURE FOR INDEMNIFICATION WITH RESPECT TO NON-THIRD
PARTY CLAIMS. In the event that the Indemnified Party asserts the existence of
an Indemnifiable Claim giving rise to Damages (but excluding Indemnifiable
Claims resulting from the assertion of liability by third parties), it shall
give written notice to the Indemnifying Party specifying the nature and amount
of the Indemnifiable Claim asserted. If the Indemnifying Party, within 15 days
after the mailing of such notice by the Indemnified Party, has not given written
notice to the Indemnified Party announcing its intent to contest such assertion
by the Indemnified Party, such assertion shall be deemed accepted and the amount
of Indemnifiable Claim shall be deemed a valid Indemnifiable Claim. In the
event, however, that the Indemnifying Party contests the assertion of an
Indemnifiable Claim by giving such written notice to the Indemnified Party
within such 15-day period, then if the Parties, acting in good faith, cannot
reach agreement with respect to such Indemnifiable Claim within 10 days after
such notice, the contested assertion of the claim shall be resolved by
arbitration. Such dispute shall be submitted to arbitration by a panel of three
disinterested arbitrators. The panel shall be composed of one arbitrator
appointed by the Indemnified Party, one appointed by the Indemnifying Party, and
the third, who shall be an attorney admitted to practice in the State of Ohio
who has experience in periodical distribution, shall be appointed by the mutual
agreement of the two arbitrators chosen by the Indemnified Party and the
Indemnifying Party. The panel shall sit in Columbus, Ohio, and its procedures
shall be governed by the Ohio Arbitration Act contained in Chapter 2711 of the
Ohio Revised Code. The rules of civil procedure with respect to depositions and
requests for production of documents applicable in Ohio common pleas courts
shall apply. A decision in any such arbitration shall apply both to the
particular question submitted and to all similar questions arising thereafter.
The determination made shall be final and binding and conclusive on the Parties
and the amount of the Indemnifiable Claim, if any, determined to exist shall be
a valid Indemnifiable Claim. Each Party shall pay its own legal, accounting, and
other fees in connection with such a contest; provided that if the contested
claim is referred to and ultimately determined by arbitration, the legal,
auditing, and other fees of the prevailing Party and the fees and expenses of
any arbitrator shall be borne by the nonprevailing Party.
Section 8.7 RIGHT OF SETOFF. If (a) after following the procedures set
forth in Section 8.5 or Section 8.6, as the case may be, a Party's right to be
indemnified for an Indemnifiable Claim has been duly established and (b) the
Damages associated with such Indemnifiable Claim have not been paid by the
Indemnifying Party to the Indemnified Party within 30 days thereafter, then, in
addition to its other rights under this Agreement, the Indemnified Party shall
have the right to setoff any amounts owing to the Indemnifying Party by the
Indemnified Party against any amounts owing to the Indemnified Party by the
Indemnifying Party, whether pursuant to this Agreement (including taking into
consideration the amount of such Indemnifiable Claim in determining the amount
of the valuation adjustment under Section 2.1(b)), the Unimag Debentures, or the
Additional Documents.
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ARTICLE 9
MISCELLANEOUS
Section 9.1 NOTICES. All notices and other communications under this
Agreement to any Party shall be in writing and shall be deemed given when
delivered personally, by facsimile (which is confirmed), mailed by registered or
certified mail (return receipt requested) to that Party at the address for that
Party (or at such other address for such Party as such Party shall have
specified in notice to the other Parties), or delivered to Federal Express,
United Parcel Service, or any other nationally recognized express delivery
service for delivery to that Party at that address:
(a) If to Unimag:
United Magazine Company
5131 Post Road
Dublin, Ohio 43017
Attention: Ronald E. Scherer, Chairman
Facsimile No.: (614) 792-2029
with a copy to:
Baker & Hostetler
65 East State Street, Suite 2100
Columbus, Ohio 43215
Attention: Robert M. Kincaid, Esq.
Facsimile No.: (614) 462-2616
(b) If to Klein:
The George R. Klein News Co.
1771 East 30th Street
Cleveland, Ohio 44114
(216) 623-0919
with a copy to:
Cohen Pollock Merlin Axelrod & Tanenbaum
2100 RiverEdge Parkway, Suite 300
Atlanta, Georgia
Attention: H. Stephen Merlin, Esq.
Facsimile No.: (770) 858-1277
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(c) If to the Klein Shareholders:
George R. Klein
1771 East 30th Street
Cleveland, Ohio 44114
Facsimile No. (216) 623-0919
Section 9.2 NON-WAIVER. No failure by any Party to insist upon
strict compliance with any term or provision of this Agreement, to
exercise any option, to enforce any right, or to seek any remedy upon
any default of any other Party shall affect, or constitute a waiver of,
any other Party's right to insist upon such strict compliance, exercise
that option, enforce that right, or seek that remedy with respect to
that default or any prior, contemporaneous, or subsequent default. No
custom or practice of the Parties at variance with any provisions of
this Agreement shall affect or constitute a waiver of, any Party's
right to demand strict compliance with all provisions of this
Agreement.
Section 9.3 GENDERS AND NUMBERS. Where permitted by the
context, each pronoun used in this Agreement includes the same pronoun
in other genders and numbers, and each noun used in this Agreement
includes the same noun in other numbers.
Section 9.4 HEADINGS. The headings of the various articles and
sections of this Agreement are not part of the context of this
Agreement, are merely labels to assist in locating such articles and
sections, and shall be ignored in construing this Agreement.
Section 9.5 COUNTERPARTS. This Agreement may be executed in
multiple counterparts, each of which shall be deemed to be an original,
but all of which taken together shall constitute one and the same
Agreement.
Section 9.6 ENTIRE AGREEMENT. This Agreement (including all
exhibits, schedules, and other documents referred to in this Agreement,
all of which are hereby incorporated herein by reference) constitutes
the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the Parties with respect
to the subject matter of this Agreement.
Section 9.7 NO THIRD PARTY BENEFICIARIES. Nothing contained in
this Agreement, expressed or implied, is intended or shall be construed
to confer upon or give to any person, firm, corporation, or other
entity, other than the Parties, any rights, remedies, or other benefits
under or by reason of this Agreement.
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Section 9.8 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Ohio without
regard to principles of conflicts of law.
Section 9.9 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon, inure to the benefit of and be enforceable by and against
the Parties and their respective heirs, personal representatives,
successors, and assigns. Neither this Agreement nor any of the rights,
interests, or obligations under this Agreement shall be transferred or
assigned by any of the Parties without the prior written consent of the
other Parties.
Section 9.10 EXPENSES. Except as otherwise specifically
provided in this Agreement: (a) Unimag shall pay its costs and expenses
associated with the transactions contemplated by this Agreement,
including without limitation the fees and expenses of its legal
counsel, independent public accountants, and other financial advisors;
(b) the Klein Shareholders shall pay their own costs and expenses
associated with this Agreement, including without limitation the fees
and expenses of their legal counsel, accountants, and financial
advisors; and (c) all such costs and expenses incurred by Klein in
connection with this Agreement and the transactions contemplated hereby
shall be accrued and expensed, or otherwise accounted for, so that such
costs and expenses (if not paid prior to August 30, 1996) will be taken
into consideration when determining the Tangible Net Worth of Klein
pursuant to Section 2.1(b).
Section 9.11 PUBLIC ANNOUNCEMENTS. Neither Klein nor any Klein
Shareholder shall, without the prior written consent of Unimag, make
any public announcement or statement with respect to the transactions
contemplated in the Agreement. The provisions of this section are
subject to each Party's obligation to comply with applicable
requirements of the federal or state securities laws or any
governmental order or regulation.
Section 9.12 SEVERABILITY. With respect to any
provision of this Agreement finally determined by a court of competent
jurisdiction to be unenforceable, such court shall have jurisdiction to
reform such provision so that it is enforceable to the maximum extent
permitted by applicable law, and the Parties shall abide by such
court's determination. In the event that any provision of this
Agreement cannot be reformed, such provision shall be deemed to be
severed from this Agreement, but every other provision of this
Agreement shall remain in full force and effect.
IN WITNESS WHERE, the Parties have executed this Stock Transfer
and Exchange Agreement as of the day and year first above written.
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UNITED MAGAZINE COMPANY
By /s/ Ronald E. Scherer
--------------------------------
Ronald E. Scherer, Chairman
THE GEORGE R. KLEIN NEWS CO.
By /s/ George R. Klein
--------------------------------
George R. Klein, Chairman
CENTRAL NEWS CO.
By /s/ George R. Klein
--------------------------------
George R. Klein, Chairman
NEWSPAPER SALES, INC.
/s/ George R. Klein
--------------------------------
George R. Klein, Chairman
THE KLEIN SHAREHOLDERS:
/s/ George R. Klein
--------------------------------
George R. Klein
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INDEX OF SCHEDULES
Schedule 1.1 Control Group
Schedule 2.1(b) Certain Generally Accepted Accounting Principles
Schedule 3.5 Litigation
Schedule 4.1 Qualification as Foreign Corporation
Schedule 4.2 Klein Shareholders
Schedule 4.3 Restrictions on Klein Shares
Schedule 4.5 Consents and Approvals
Schedule 4.7 Undisclosed Liabilities
Schedule 4.8 Absence of Certain Changes
Schedule 4.9 Taxes
Schedule 4.10 Compliance with Law
Schedule 4.11 Proprietary Rights
Schedule 4.12 Restrictive Documents and Laws
Schedule 4.13 Insurance
Schedule 4.14 Bank Accounts
Schedule 4.15 Properties
Schedule 4.17 Legal Proceedings
Schedule 4.18 Employee Benefit Plans (Schedules (a) through (j))
Schedule 4.19 Contracts
Schedule 4.20 Accounts Receivable
-48-
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Schedule 4.21 Conflicts or Defaults
Schedule 4.23 Employees and Compensation
Schedule 4.24 Labor Relations
Schedule 4.25 Customers and Suppliers
Schedule 4.26 Special Terms to Customers
Schedule 5.2(a) Employment Arrangements
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INDEX OF EXHIBITS
Exhibit A Debenture Agreement
Exhibit B Opinion of Baker & Hostetler
Exhibit C-1 Form of Employment Agreement with
Exhibit C-2 Form of Employment Agreement with
Exhibit C-3 Form of Employment Agreement with
Exhibit D Opinion of
Exhibit E Document Escrow Agreement
50
