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Exhibit 2(j)
March 1, 1996
Xx. Xxxxx Xxxxxxx (Xxxxxxx)
0000 Xxxx Xxxx
Xxxxxx, Xxxx 00000
Re: Option to Acquire Assets or Capital Stock Of
Ohio Periodicals Distributors, Inc. and
Northern News Company
Dear Xxxxx:
This Option Agreement is made and entered into this _____ day of March,
1996, by and between UNITED MAGAZINE COMPANY (hereinafter referred to as
"Buyer") and Xxxxx Xxxxxxx (Xxxxxxx), an individual residing in Dublin, Ohio
(hereinafter referred to as "Seller"), representing the owners of all the
authorized, issued and outstanding shares, voting and non-voting, of the capital
stock of Ohio Periodicals Distributors, Inc., an Ohio corporation, and Northern
News Company and its wholly-owned subsidiary, MacGregor News Agency, Inc., both
Michigan corporations (hereinafter collectively referred to as the "Company"),
for the acquisition of the assets and liabilities (or at Seller's option, all of
the authorized, issued and outstanding capital stock) of the Company, which
operated wholesale newspaper, magazine and periodicals distribution businesses
having offices in Columbus and Cincinnati, Ohio and Petoskey and Mount Pleasant
Michigan under the following terms and conditions:
1. For and in consideration of the sum of one hundred and no/100 dollars
($100.00), and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Sellers hereby grant to Buyer the
option, during the term set forth in Paragraph 4 hereof (the "Term"), to acquire
all of the above referenced assets or, at Seller's option, to cause the Company
to merge with a to-be-formed wholly-owned subsidiary of Buyer ("Sub"). Buyer may
exercise its option upon written notice to the Company at any time during the
Term.
2. The consideration for the assets or capital stock shall be calculated
as follows:
a. an amount equal to sixty percent (60%) of the net annual
wholesale sales of the Companies to be calculated as of December 31,
1995; plus or minus
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b. the actual net worth of the Company (exclusive of any
intangibles) which is estimated to be a deficit of four million three
hundred eighty-five thousand three hundred twenty-two and no/100
dollars ($-4,385,322.00), such amount to be increased or decreased as
of date of closing pursuant to a certified financial statement to be
completed by the parties in accordance with generally accepted
accounting principles, as later defined in the Acquisition Agreement.
3. Buyer and Seller acknowledge and agree that the estimated net total
of Paragraph 2(a) and 2(b), above, as of the date of execution of this Option
Agreement, amounts to approximately $34,648, 442.00, based upon the Company's
PRO FORMA financial statement attached hereto as Exhibit A. Such figure, as
adjusted at closing, shall be the total Consideration to be payable as
follows:
i) fifty-one percent (51%) of the Consideration shall be payable in
voting common shares of the capital stock of Buyer, to be valued for the
purposes of this transaction at $1.50 per share. Seller understands and agrees
that the shares of Buyer's capital stock may be restricted pursuant to
applicable federal securities regulations; and
ii) forty-nine percent (49%) of the Consideration shall be payable in
immediately available funds at Closing, as hereinafter defined.
4. The term of this Option Agreement shall commence upon the written
acceptance by the Seller/Company of this proposal and shall continue thereafter
until the earlier of (i) the termination or expiration of either of Buyer's
options to acquire Michiana News Service, Inc., ("Michiana") and The Xxxxx
Companies ("Xxxxx") on the terms and conditions set forth on Exhibits B and C,
respectively, hereto; (ii) the exercise of the Seller/Company's election to
terminate this option pursuant to this Paragraph 4; or (iii) August 31, 1996. In
the event Buyer does not close on the merger of Michiana and Xxxxx on the terms
and conditions set forth in Exhibits B and C hereto simultaneous with the
Closing of the acquisition of the Company, then the Seller/Company may, in its
sole discretion, either proceed to close with Buyer on this transaction or
refuse to do so. Notwithstanding anything contained herein to the contrary, the
Seller/Company shall have the right to terminate this Option Agreement and
Buyer's rights hereunder on written notice to Buyer in the event Buyer has not,
on or before May 31, 1996, obtained a financing commitment, satisfactory to
Buyer, to enable Buyer to complete the acquisition of the Company and the
acquisition of Michiana and Xxxxx, or if there has been, since the date hereof,
a material adverse change in the financial condition or prospects of Buyer or
any of its subsidiaries, Michiana or Xxxxx.
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5. During the term of this Option, Seller shall retain the exclusive
right to continue operating the Company. Seller shall strive to maintain, to the
extent possible, the current balance sheet and profitability of the Company as
reported to Buyer at the execution of this Agreement. At closing, Seller shall
warrant to Buyer the accuracy of its balance sheet. During Seller's continuing
operations, the parties acknowledge that the Company may be in competitive bid
situations with Buyer, and the parties agree that the submission of such
proposals by either party shall have no effect on the continued viability of
this Option Agreement. Further, Seller/Company agree that from and after the
execution of this Option Agreement, Seller will cause the business of the
Company to be conducted in the usual and ordinary course, and will, consistent
with such operation, use all reasonable efforts to preserve the present business
organization substantially intact and to continue the present business
relationships with publishers and customers. In the event Seller acquires
another wholesale agency prior to Closing, the value of the annualized sales of
the acquired agency shall be included in the calculation of purchase price
under this Option at an amount equal to the lesser of a) Seller's cost pursuant
to its purchase contract for such agency; or b) the formula set forth in
Paragraph 2, above.
6. Notwithstanding anything contained herein to the contrary, the
Seller/Company reserves the right to sell non-operating assets and to make
distributions to its shareholders to the extend such transactions will not
inhibit the Company from achieving, as of Closing, the targets set forth on its
PRO FORMA balance sheet attached hereto as Exhibit A.
7. During the term of this Option, Seller shall cooperate with Buyer to
complete Buyer's due diligence process on the Company, and further Seller shall
cooperate with Buyer and assist in its negotiations with lending institutions
and investment bankers as may reasonably be required by Buyer. The parties agree
that they will both participate in any presentations that may be made to either
investment banks or lending institutions. Buyer and Seller further covenant and
agree that they will work together to bring the transaction contemplated
hereunder to a successful conclusion. Seller shall make freely available to
Buyer, for its due diligence, all of the Company's records, including tax and
accounting records, and any other information on the Company as may be required
by Buyer. Seller acknowledge that Buyer's decision to exercise this Option is
dependent upon its ability to complete a thorough due diligence review of the
Company.
8. During the Term of this Option, Buyer will cause its business and,
the business of its wholly-owned subsidiaries to be conducted in the usual and
ordinary course and will not amend, modify or otherwise supplement its option
agreements with Michiana, attached hereto as Exhibit B, and with Xxxxx,
attached hereto as Exhibit C, without the Seller's prior written consent.
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9. In the event Buyer elects not to exercise the Option granted
hereunder, Buyer and Seller hereby agree, for themselves, their successors and
assigns, to release and forever discharge the other party, its successors and
assigns, from any and all debts, claims, demands, damages. actions and causes of
action whatsoever, past, present or future, which can or may ever be asserted as
a result of, or in any way arising out of, this Option Agreement and/or the
effects or consequences thereof.
10. The parties recognize that the nature of information being made
available to Buyer and its agents and employees pursuant to its due diligence
review of the Company is of such a confidential nature that the parties agree
that this information shall be kept confidential, and in the event Buyer does
not exercise its Option to purchase the Companies, all records and information
shall be immediately returned to Seller.
11. Notwithstanding anything contained herein to the contrary, the
Company shall not be required to close any transaction with Buyer unless and
until (i) the contemplated survivor of Sub and the Company, or Buyer itself if
the transaction is structured as an asset purchase, shall have executed
employment agreements with three key executives of the Company, who shall be
designated by the Company prior to closing, for their continued employment with
the survivor of the Sub or the Company, or Buyer;, and (ii) arrangements
satisfactory to the Company have been made to assure the Company's shareholders
of representation on Buyer's Board of Directors.
12. The parties understand and agree that the terms and conditions of
this Option Agreement are subject to Buyer's receipt of a "fairness opinion"
from the appropriate regulatory body and the approval of the Board of
Directors of Buyer.
13. The parties agree that, immediately upon Buyer's exercise of the
Option provided hereunder, they shall enter into good faith negotiations of a
Acquisition Agreement acceptable to Buyer and Seller, which sets forth usual and
customary provisions, representations, warranties, covenants and indemnities
(and limitations thereof) of Buyer and Seller, including but not limited to
those relating to the ownership of assets, compliance with laws, accuracy of
financial statements, existence of contracts and such other items as may be
reasonably required by Buyer or Seller, with all said representations,
warranties, covenants and indemnities to survive the Closing, such agreement to
be fully executed within thirty (30) days after Buyer provides to Seller written
notices of its exercise of this Option. The transaction shall close no later
than thirty (30) days after the execution of the definitive Acquisition
Agreement.
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14. The parties agree that upon the execution of this Option Agreement,
they will enter into a joint operating agreement, in the form attached hereto
as Exhibit D, for the express purpose of preserving and maintaining the value of
the optioned companies during the term of this Option.
Please acknowledge your agreement with the terms and conditions of the
Option outlined above by signing and returning to me the enclosed copy of this
Option Agreement.
Very truly yours,
AGREED TO AND ACCEPTED UNITED MAGAZINE COMPANY,
this ____ day of March, 1996 an Ohio Corporation
/s/ Xxxxx Xxxxxxx Xxxxxxx /s/ Xxxxxx X. Xxxxxxx
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Xxxxx Xxxxxxx (Xxxxxxx), individually By: Xxxxxx X. Xxxxxxx
and on behalf of Seller Its: Chairman
