Page 1 of 114 Pages
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 5)
Hollinger International Inc.
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(Name of Issuer)
Class A Common Stock, par value $.01 per share
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(Title of Class of Securities)
435569 10 8
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(CUSIP Number)
Charles G. Cowan, Q.C.
Vice-President and Secretary
Hollinger Inc.
10 Toronto Street
Toronto, Ontario
Canada M5C 2B7
(416) 363-8721
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
July 31, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act.
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CUSIP No. 435569 10 8 Page 2 of 114 Pages
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Schedule 13D/A
1. NAME OF REPORTING PERSON Hollinger Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
---------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3. SEC USE ONLY
4. SOURCE OF FUNDS OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
6. CITIZENSHIP OR PLACE OF ORGANIZATION Canada
NUMBER OF 7. SOLE VOTING POWER 64,470,419
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 0
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER 64,470,419
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON 64,470,419
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES /X/
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 64.8%
14. TYPE OF REPORTING PERSON HC
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CUSIP No. 435569 10 8 Page 3 of 114 Pages
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Schedule 13D/A
1. NAME OF REPORTING PERSON The Ravelston Corporation Limited
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
-----------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3. SEC USE ONLY
4. SOURCE OF FUNDS OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
6. CITIZENSHIP OR PLACE OF ORGANIZATION Canada
NUMBER OF 7. SOLE VOTING POWER 64,470,419
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 0
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER 64,470,419
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON 64,470,419
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES /X/
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 64.8%
14. TYPE OF REPORTING PERSON HC
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Schedule 13D/A
1. NAME OF REPORTING PERSON Conrad M. Black
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) / /
3. SEC USE ONLY
4. SOURCE OF FUNDS OO
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) / /
6. CITIZENSHIP OR PLACE OF ORGANIZATION Canada
NUMBER OF 7. SOLE VOTING POWER 64,625,019
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 0
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER 64,625,019
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON 64,625,019
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES / /
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 64.9%
14. TYPE OF REPORTING PERSON IN
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CUSIP No. 435569 10 8 Page 5 of 114 Pages
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This Schedule 13D/A, Amendment No. 5 (the "Amendment"), relates to the
Class A Common Stock, par value $.01 per share (CUSIP Number: 435569 10 8)
("Class A Common Stock"), of Hollinger International Inc., a Delaware
corporation (the "Issuer").
On April 18, 1997 the Issuer completed the purchase of all of the issued
and outstanding Class A Common Shares and Class B Common Shares of UniMedia
Newspapers Company, a Nova Scotia unlimited liability company ("UniMedia
Newspapers Company") from UniMedia Holding Company, a company amalgamated under
the laws of Nova Scotia ("UniMedia"). UniMedia is a wholly owned subsidiary of
Hollinger Inc., a corporation continued under the laws of Canada ("Hollinger").
In partial consideration of the purchase of the Class A Common Shares of
UniMedia Newspapers Company, the Issuer issued to UniMedia 149,658 shares of
Series 2 Nonvoting Preferred Stock, par value $.01 per share ("Series 2
Preferred Stock"). In partial consideration of the purchase of the Class B
Common Shares of UniMedia Newspapers Company, the Issuer issued to UniMedia
23,267 shares of Series 1 Nonvoting Preferred Stock, par value $.01 per share
("Series 1 Preferred Stock").
Pursuant to exchange agreements entered into in connection with the
purchase of the outstanding shares of UniMedia Newspapers Company, the Issuer
issued shares of its Class A Common Stock, newly issued shares of its Series C
Convertible Preferred Stock, par value $.01 per share ("Series C Preferred
Stock") and newly issued shares of its Series D Convertible Redeemable Preferred
Stock, par value $.01 per share ("Series D Preferred Stock") to Hollinger and
UniMedia in exchange for the outstanding shares of Series 1 Preferred Stock and
Series 2 Preferred Stock. As a result, there are 71,811,399 shares of Class A
Common Stock outstanding. This Amendment restates in their entirety Items 3, 4,
5, 6 and 7 of the Schedule 13D of the filing persons dated October 20, 1995, as
amended by Amendment No. 1 thereto dated February 7, 1996, Amendment No. 2
thereto dated March 7, 1996, Amendment No. 3 thereto dated June 17, 1996 and
Amendment No. 4 thereto dated August 28, 1996 (collectively, the "Amended
Schedule 13D"). No other Items of the Amended Schedule 13D are being amended at
this time. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Amended Schedule 13D.
Item 3. Source and Amount of Funds or Other Consideration.
Pursuant to a Share Exchange Agreement dated as of July 19, 1995 between
the Issuer and Hollinger (the "Share Exchange Agreement"), which is incorporated
herein by reference as Exhibit
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CUSIP No. 435569 10 8 Page 6 of 114 Pages
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2, Hollinger acquired 33,610,754 shares of the Issuer's Class A Common Stock and
739,500 shares of non-voting Series A Redeemable Covertible Preferred Stock, par
value $.01 per share (the "Series A Preferred Stock"), on October 13, 1995 in
connection with a corporate reorganization of the international newspaper
interests of Hollinger and the Issuer (the "Reorganization"). The Class A Common
Stock and the Series A Preferred Stock were issued to Hollinger in exchange for
all of the outstanding ordinary share capital of DT Holdings Limited ("DTH").
Hollinger beneficially owns 14,990,000 shares of the Issuer's Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"). The Class B
Common Stock was issued to Hollinger in May 1994 in connection with a
recapitalization effected by the Issuer concurrently with the initial public
offering of its Class A Common Stock. The shares of Class B Common Stock were
issued to Hollinger in consideration for (i) the conversion of $44,500,000 in
intercompany indebtedness owed by the Issuer to Hollinger, (ii) the conversion
of the common stock of the Issuer then held by Hollinger (which represented 100%
of the Issuer's common stock at that time) and (iii) the transfer of Hollinger's
99.3% interest in Jerusalem Post Publications Limited. On February 29, 1996
Hollinger transferred 15,950,000 shares of Class A Common Stock and the Class B
Common Stock to Ontario Limited. In July 1997, the 15,950,000 shares of Class A
Common Stock were transferred to WMT Holdings LLC, a Delaware limited liability
company ("WMT"), and the Class B Common Stock was transferred to UniMedia.
In May 1994, Conrad Black Capital Corporation acquired 9,600 shares of
Class A Common Stock for cash. Mr. Black is the sole shareholder and Chairman of
Conrad Black Capital Corporation. In addition, Mr. Black has been granted
options to purchase 145,000 shares of the Issuer's Class A Common Stock
pursuant to the Issuer's 1994 Stock Option Plan.
On April 18, 1997, certain Canadian newspaper interests owned and
controlled by Hollinger were sold to a member of the Issuer's consolidated
group, effective as of January 1, 1997, pursuant to the (i) UniMedia Class A
Stock Purchase Agreement dated as of April 18, 1997 among Hollinger, UniMedia
and the Issuer (the "UniMedia Class A Stock Purchase Agreement"), which is
attached hereto as Exhibit 14, (ii) the UniMedia Class B Stock Purchase
Agreement dated as of April 18, 1997, among Hollinger, UniMedia and the Issuer
(the "UniMedia Class B Stock Purchase Agreement"), which is attached hereto as
Exhibit 15 and (iii) the Sterling Stock Purchase Agreement dated as of April 18,
1997 between Hollinger and Hollinger Canadian Publishing Holdings Inc.
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CUSIP No. 435569 10 8 Page 7 of 114 Pages
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(the "Sterling Purchase Agreement", and, together with the UniMedia Class A
Stock Purchase Agreement and the UniMedia Class B Stock Purchase Agreement, the
"Purchase Agreements")(the transactions effected by the Purchase Agreements are
collectively referred to as the "Canadian Newspaper Transaction"). Pursuant to
the UniMedia Class A Stock Purchase Agreement, UniMedia sold all of the issued
and outstanding Class A Common Shares of UniMedia Newspapers Company to the
Issuer for consideration consisting of Cdn. $19.373 million in cash and 149,658
shares of newly issued Series 2 Preferred Stock of the Issuer. Pursuant to the
UniMedia Class B Stock Purchase Agreement, UniMedia sold all of the issued and
outstanding Class B Common Shares of UniMedia Newspapers Company to the Issuer
for consideration consisting of Cdn.$100,000 in cash and 23,267 shares of newly
issued Series 1 Preferred Stock of the Issuer. Pursuant to the Sterling Purchase
Agreement, Hollinger sold the Sterling Newspaper Group to Hollinger Canadian
Publishing Holdings Inc. ("Hollinger Canadian Publishing") for consideration
consisting of Cdn. $330.602 million in cash.
As a condition to the closing of the Purchase Agreements, Hollinger, the
Issuer and UniMedia entered into the Exchange Agreement, which was subsequently
amended and restated by the Amended and Restated First Exchange Agreement dated
as of July 21, 1997 (the "Amended and Restated First Exchange Agreement"), which
is attached hereto as Exhibit 16. The Amended and Restated First Exchange
Agreement provided that, upon receiving the required approval of the
stockholders of the Issuer, the Issuer would issue to UniMedia (i) 1,547,474
newly issued shares of Class A Common Stock in exchange for all 23,267 shares of
Series 1 Preferred Stock, (ii) 829,409 newly issued shares of Series C Preferred
Stock in exchange for 124,704 shares of the Series 2 Preferred Stock and (iii)
1,659,571 newly issued shares of Class A Common Stock in exchange for the
remaining 24,954 shares of the Series 2 Preferred Stock (the transactions
contemplated by the Amended and Restated First Exchange Agreement, the "First
Exchange"). On July 31, 1997, the approval of the stockholders of the Issuer was
obtained at a special meeting held for such purpose. The Amended and Restated
First Exchange Agreement provided that the First Exchange must be completed
within five business days of the stockholder approval; accordingly, the First
Exchange was completed on Wednesday, August 6, 1997.
Hollinger and the Issuer, contemporaneously with the execution of the
Amended and Restated First Exchange Agreement, entered into the Second Amended
and Restated Second Exchange Agreement (the "Second Amended and Restated Second
Exchange Agreement"), which is attached hereto as Exhibit 17. Pursuant to
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the Second Amended and Restated Second Exchange Agreement, within five business
days of receiving the approval of the Issuer's stockholders and immediately
following the First Exchange, the Issuer issued (i) 669,261 newly issued shares
of Series C Preferred Stock to Hollinger in exchange for the 739,500 outstanding
shares of the Issuer's Series A Preferred Stock owned by Hollinger and (ii)
739,500 newly issued shares of Series D Preferred Stock to UniMedia in exchange
for 669,261 shares of Series C Preferred Stock issued in the First Exchange(the
transactions effected pursuant to the Second Amended and Restated Second
Exchange Agreement are referred to as the "Second Exchange"). At the special
meeting of the stockholders of the Issuer held on July 31, 1997, the requisite
stockholder approval was obtained. The Second Exchange was consummated on
Wednesday, August 6, 1997.
Item 4. Purpose of Transaction.
Hollinger beneficially owns shares of both classes of the Issuer's Common
Stock representing approximately 84.2% of the combined voting power of such
classes. As a result, Hollinger is in a position to control the outcome of
substantially all actions of the Issuer requiring stockholder approval,
including the election of the entire Board of Directors of the Issuer. Subject
to the fiduciary responsibilities of the directors of the Issuer to all
stockholders and the terms of certain agreements defining the ongoing
relationships between Hollinger and the Issuer, Hollinger, through its ability
to control the outcome of any election of directors, is able to direct the
management policy, strategic direction and financial decisions of the Issuer.
The Ravelston Corporation Limited, a corporation organized under the laws
of Ontario, Canada ("Ravelston"), effectively controls Hollinger through its
direct or indirect control or direction over 53.2% of the outstanding common
shares of Hollinger. This percentage includes Hollinger common shares held by
the Ravelston Trust and the following direct and indirect subsidiaries of
Ravelston: Argus Corporation Limited, 176264 Canada Limited, 2753430 Canada
Limited, 176268 Canada Limited and 176295 Canada Limited. The Ravelston Trust
was formed pursuant to a Trust Agreement dated as of October 31, 1991 among
Ravelston, the Canadian Imperial Bank of Commerce ("CIBC") and Mr. Black, John
A. Boultbee and R. Geoffrey Browne, as trustees. On August 29, 1996, R. Geoffrey
Brown resigned as a trustee and was replaced by Kenneth Kilgour (Messrs. Black,
Boultbee and Kilgour, collectively, the "Trustees"). The Trustees have
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granted Ravelston an irrevocable proxy to vote all of the Hollinger common
shares held by the Ravelston Trust as long as the Ravelston Trust holds such
common shares. As the holder of 100 units of the Ravelston Trust, Ravelston has
the right to direct the disposition of 100 of the Hollinger common shares held
by the Ravelston Trust. As the holder of the remaining 5,531,915 units of the
Ravelston Trust, CIBC has the right to direct the disposition of 5,531,915 of
the Hollinger common shares held by the Ravelston Trust. Conrad Black Capital
Corporation holds 65.3% of the common shares of Ravelston. Mr. Black is the sole
shareholder and Chairman of Conrad Black Capital Corporation.
As a result of the performance of their duties as directors and officers of
the Issuer, certain directors and officers of Hollinger and Ravelston, including
Mr. Black, expect to have continually under consideration various plans or
proposals which may relate to or might result in one or more of the matters
described in paragraphs (a) through (j), inclusive, of Item 4 of Schedule 13D.
Any such plans or proposals would, however, be subject to consideration and
approval by the Board of Directors of the Issuer.
The First Exchange was undertaken to increase Hollinger's flexibility and
as part of its general tax, financing and corporate planning in connection with
its holding of the Issuer's securities. The Second Exchange was undertaken for
two principal reasons. First, at the request of the Issuer, the Canadian
Newspaper Transaction was structured to ensure that the operations subsidiaries
of Hollinger being acquired by the Issuer obtained a stepped-up tax basis in the
underlying assets being acquired, thereby maximizing the depreciable and
amortizable basis of the assets of the acquired businesses. As a result, the
Issuer has higher depreciation and amortization expense available to offset
Canadian taxable income earned in the future by the acquired businesses.
Second, the recent offer to purchase common shares of Southam Inc.
("Southam") made by Hollinger Canadian Publishing has resulted in the
acceleration of the redemption rights of the holders of Hollinger's outstanding
Southam-linked convertible debentures. The Board of Directors of the Issuer
determined that the offer to purchase the common shares of Southam was in the
best interest of the Company. In connection with its review of the offer to
purchase, Hollinger advised the Issuer that it expected to exercise its right to
require the Issuer to purchase all or a portion of the Series A Preferred Stock
to generate proceeds to satisfy any exercise of such accelerated redemption
rights by holders of Southam-linked convertible debentures. The
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Second Exchange was undertaken to reduce the tax cost to Hollinger associated
with the redemption of the Series A Preferred Stock by substituting in exchange
therefor the higher basis Series D Preferred Stock.
As stockholders, the filing persons intend to periodically review and
evaluate the market for the Issuer's Common Stock, the Issuer's business,
prospects and financial condition, general economic conditions and other
opportunities available to the filing persons. On the basis of such periodic
reviews and evaluations, the filing persons may, subject to restrictions imposed
by the agreements described in Item 6 hereof, determine to increase or decrease
their investment in the Common Stock through purchases, sales, gifts, or other
means of acquisition or disposition. The filing persons do not currently
anticipate that any dispositions, if made, would reduce their beneficial
ownership to less than 50% of the combined voting power of the Issuer's Class A
and Class B Common Stock.
Item 5. Interest in Securities of the Issuer.
Hollinger Inc. and Ravelston
(a) Amount Beneficially Owned: 64,470,419 shares of Class A Common Stock;
64.82% (calculated pursuant to Rule 13d-3). Comprised of the following:
(i)10,121,726 shares of Class A Common Stock held directly by Hollinger;
(ii)7,539,028 shares of Class A Common Stock held by 3007017 Nova Scotia
Company ("Nova Scotia Company"), a wholly owned subsidiary of Hollinger;
(iii) 15,950,000 shares of Class A Common Stock held by WMT Holdings LLC,
an indirect wholly owned subsidiary of Hollinger; (iv) 14,990,000 shares
of Class A Common Stock that may be acquired at any time by the conversion
of 14,990,000 shares of Class B Common Stock held by UniMedia; (v)
3,207,045 shares of Class A Common Stock held by UniMedia; (vi)7,052,465
shares of Class A Common Stock that may be acquired at any time by the
conversion of 829,409 shares of Series C Preferred Stock held by Hollinger
and UniMedia; and (vii) at an initial conversion price of the Canadian
dollar equivalent of $14.00 per share, 5,604,155 shares of Class A Common
Stock that may be acquired at any time by the conversion of 739,500 shares
of Series D Preferred Stock held by UniMedia (taking each share of Series
D Preferred Stock at Cdn. $146.625 and assuming an exchange rate of $1.00
per Cdn. $1.3820, as in effect on July 31, 1997, the date on which such
shares were acquired). The number of shares of Class A Common Stock into
which the Series D Preferred Stock may be converted will fluctuate
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from time to time based on changes in the conversion rate and/or exchange
rate. Through its relationship with Hollinger described in Item 4 hereof,
Ravelston may be deemed to beneficially own all of the securities of the
Issuer that are held by Hollinger and its subsidiaries.
(b) Voting Power; Dispositive Power: Hollinger has the sole power to vote
or to direct the vote of and to dispose of or direct the disposition of
64,470,419 shares of Class A Common Stock. Through its relationship with
Hollinger described in Item 4 hereof, Ravelston may also be deemed to have
the sole power to vote or to direct the vote of these shares.
(c) Not applicable.
(d) Right to Receive Dividends or Proceeds: UniMedia, WMT and Nova Scotia
Company have the right to receive the dividends from or the proceeds from
the sale of the securities which they hold. The shares of Class A Common
Stock owned by Nova Scotia Company constitute 10.5% of the outstanding
shares of Class A Common Stock. The shares of Class A Common Stock owned
by WMT constitute 22.2% of the outstanding shares of Class A Common Stock.
The shares of Class B Common, Series C Preferred Stock and Series D
Preferred Stock held by UniMedia represent 100%, 19.3% and 100% of the
outstanding shares of Class B Common Stock, Series C Preferred Stock and
Series D Preferred Stock, respectively.
(e) Not applicable.
The amount and percentage of Class A Common Stock beneficially owned by
Hollinger and Ravelston exclude 154,600 shares of Class A Common Stock
beneficially owned by Mr. Black. Pursuant to Rule 13d-4, Hollinger and Ravelston
hereby expressly disclaim beneficial ownership of such shares.
Directors and Executive Officers of Hollinger Inc. and Ravelston (Other
Than Mr. Black):
Except as set forth below, the directors and executive officers of
Hollinger and Ravelston (other than Mr. Black) do not beneficially own any
shares of Class A Common Stock. Barbara Amiel Black, Mr. Black's wife, disclaims
beneficial ownership of any shares of Class A Common Stock beneficially owned by
Mr. Black.
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Name Number of Shares of Class A Common
Stock Beneficially Owned*
J. A. Boultbee 6,000
Dixon S. Chant 17,500
Charles G. Cowan 6,000
F. David Radler 29,600
* Includes shares subject to presently exercisable options or options
exercisable within 60 days of July 31, 1997 under the Issuer's 1994 Stock Option
Plan as follows: Mr. Boultbee, 6,000 shares; Mr. Chant, 10,000 shares; Mr.
Cowan, 6,000 shares; and Mr. Radler, 20,000 shares.
Mr. Black
(a) Amount Beneficially Owned: 64,625,019 shares of Class A Common Stock;
64.88% of class (calculated pursuant to Rule 13d-3). Comprised of the
following: (i)64,470,419 shares of Class A Common Stock beneficially owned
by Hollinger and Ravelston; (ii) 9,600 shares of Class A Common Stock held
by Conrad Black Capital Corporation; and (iii) 145,000 shares of Class A
Common Stock that may be acquired by Mr. Black upon the exercise of all
outstanding options held by him, whether or not presently exercisable or
exercisable within 60 days of July 31, 1997.
(b) Voting Power; Dispositive Power: Through his relationships with
Hollinger, Ravelston and Conrad Black Capital Corporation describe in Item
4 hereof, Mr. Black may be deemed to have the sole power to vote or to
direct the vote of and to dispose of or direct the disposition of
64,625,019 shares of Class A Common Stock.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
The Issuer's Restated Certificate of Incorporation, as amended, provides
that holders of Class B Common Stock are entitled to ten votes per share and
holders of Class A Common Stock are entitled to one vote per share. The holders
of Class A Common Stock and Class B Common Stock vote together as a single
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class on all matters on which stockholders may vote, except when class voting is
required by applicable law or on a vote to issue or increase the authorized
number of shares of Class B Common Stock. Dividends must be paid on both the
Class A Common Stock and the Class B Common Stock at any time dividends are paid
on either.
Each share of Class B Common Stock is convertible at any time at the option
of the holder into one share of Class A Common Stock and is transferable by
Hollinger to a subsidiary or an affiliate. In addition, each share of Class B
Common Stock is automatically convertible into a share of Class A Common Stock
at the time it is sold, transferred or otherwise disposed of by Hollinger or a
subsequent permitted transferee to any third party (other than a subsidiary or
an affiliate of Hollinger or such subsequent permitted transferee) unless such
purchaser or transferee offers to purchase all shares of Class A Common Stock
from the holders thereof for an amount per share equal to the amount per share
received by the holder of the Class B Common Stock (a "Permitted Transaction").
Notwithstanding the foregoing paragraph, any holder of class B Common Stock
may pledge his or its shares of Class B Common Stock to a pledgee pursuant to a
bona fide pledge of such shares as collateral security for indebtedness due to
the pledgee, provided that such shares shall not be transferred to or registered
in the name of the pledgee and shall remain subject to the transfer restrictions
described in the foregoing paragraph. In the event that shares of Class B Common
Stock are so pledged, the pledged shares shall not be converted automatically
into Class A Common Stock. However, if any such pledged shares become subject to
any foreclosure, realization or other similar action of the pledgee, they shall
be converted automatically into shares of Class A Common Stock unless they are
sold in a Permitted Transaction.
Pursuant to the Issuer's Restated Certificate of Incorporation, as amended,
the Series C Preferred Stock ranks senior in right and priority of payment to
the Class A and Class B Common Stock and on a parity with the Issuer's
outstanding Series B Preferred Stock as to dividends and upon liquidation. The
Series C Preferred Stock is mandatorily convertible into shares of Class A
Common Stock on June 1, 2001, and the Issuer has the option to redeem the shares
of Series C Preferred Stock, in whole or in part, at any time on or after June
1, 2000 and prior to June 1, 2001. At any time prior to June 1, 2001, unless
previously redeemed, each share of Series C Preferred Stock is convertible at
the option of the holder thereof into 8.503 shares
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of Class A Common Stock. The holders of Series C Preferred Stock have the right
to vote together as a single class with the holders of Class A and Class B
Common Stock and Series B Preferred Stock in the election of Directors and upon
each other matter coming before the stockholders of the Issuer on the basis of
ten votes per share of Series C Preferred Stock, except as otherwise provided by
law or the Issuer's Restated Certificate of Incorporation. In addition, (i)
whenever dividends on the Series C Preferred Stock or any other series of
preferred stock with like voting rights are in arrears and unpaid for six
quarterly dividend periods, and in certain other circumstances, the holders of
all Series C Preferred Stock (voting separately as a class) will be entitled to
vote, on the basis of ten votes for each share of Series C Preferred Stock, for
the election of two directors of the Issuer, such directors to be in addition to
the number of directors constituting the Board of Directors immediately prior to
the accrual of such right, and (ii) the holders of Series C Preferred Stock may
have voting rights with respect to certain alterations of the Restated
Certificate of Incorporation and certain other matters, voting on the same basis
or separately as a class.
The Issuer's Series D Preferred Stock is entitled to receive cumulative
cash dividends, payable quarterly. The amount of each dividend per share is
equal to the aggregate amount (if any) of ordinary course cash dividends paid
during the preceding calendar quarter on 7,395,000 Southam Common Shares owned
beneficially, directly or indirectly, by the Issuer, divided by 739,500. The
Series D Preferred Stock is redeemable in whole or in part, at any time and from
time to time, subject to restrictions in the Issuer's existing credit
facilities, by the Issuer or by a holder of such shares. Hollinger has agreed
pursuant to the Share Exchange Agreement to limit the exercise of its redemption
rights to a number of Southam Common Shares that at the time of such exercise
have been delivered to the Issuer free and clear of encumbrances other than
certain encumbrances.
The holder or holders of shares of the Series D Preferred Stock may convert
such shares at any time into shares of Class A Common Stock of the Issuer. Any
holder of Series D Preferred Stock may pledge such shares to a pledgee pursuant
to a bona fide pledge of such shares as collateral security for indebtedness or
other obligations due to the pledgee, provided that such shares shall remain
subject to, and upon foreclosure, realization or other similar action by the
pledgee, shall be transferred only in accordance with, the transfer restrictions
set forth in the Restated Certificate of Incorporation.
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Pursuant to the Amended and Restated First Exchange Agreement, the Issuer
has agreed to take commercially reasonable efforts to cause the registration
under the Securities Act of 1933, as amended, of the shares of Class A Common
Stock and Series C Preferred Stock issued to UniMedia in the First Exchange, and
to list such shares on the New York Stock Exchange as soon as practicable.
Pursuant to the Second Amended and Restated Second Exchange Agreement, the
Issuer has agreed to use commercially reasonable efforts to cause the
registration under the Securities Act of the shares of Series C Preferred Stock
issued to Hollinger, UniMedia and/or the Hollinger designee upon the Second
Exchange and to list such newly issued shares of Series C Preferred Stock on the
New York Stock Exchange, in each case as soon as practicable after the issuance
thereof.
Pursuant to the terms of the Hypothecation of Specific Securities dated
October 13, 1995 by Hollinger in favor of CIBC, which is incorporated herein by
reference as Exhibit 3, Hollinger has pledged 33,610,754 Class A Common Shares,
14,990,000 Class B Common Shares and 669,261 shares of Series C Preferred Stock
to CIBC as collateral security for the obligations of Hollinger and certain
affiliated companies under an amended and restated Cdn.$80,000,000 demand
operating facility (the "CIBC Facility"). The CIBC Facility requires compliance
by Hollinger with certain financial and other covenants and is subject to
standard default and other provisions.
<PAGE>
CUSIP No. 435569 10 8 Page 16 of 114 Pages
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Certain registration rights agreements, which are incorporated herein by
reference as Exhibits 4, 8 and 11, were entered into in connection with the
above-described pledges. These agreements provide for registration (either
within a certain time period of execution of the registration rights agreement
or upon foreclosure) under the Securities Act of 1933, as amended, of the
pledged shares of Class A Common Stock and the shares of Class A Common Stock
into which other pledged securities are convertible.
Under the Share Exchange Agreement, Hollinger and the Issuer have agreed
that if the Issuer proposes to effect a public offering of its equity or
equity-linked securities for cash, or to issue equity-linked securities in any
acquisition by the Issuer of the stock or assets of an unrelated corporation or
entity, at any time during the 24 months following the closing date, the
Issuer's efforts to raise capital through such offering shall have priority over
any proposal by Hollinger to effect a public offering or sale of the Issuer's
equity securities by Hollinger, unless a majority of the disinterested members
of an Independent Committee of the Issuer's Board of Directors shall otherwise
agree. For these purposes, an "Independent Committee" means a committee of the
Issuer's Board the majority of the members of which are not employees or
directors of Hollinger or employees of the Issuer, or another committee of the
Issuer's Board whose membership satisfies any more restrictive requirements of
independence of any securities exchange or market in which the Issuer's equity
securities are traded or listed.
The Share Exchange Agreement also provides that, until the second
anniversary of the closing date, Hollinger shall not, without the prior approval
of the Independent Committee, purchase outstanding shares of Class A Common
Stock in the market from
<PAGE>
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time to time except in conformity with applicable rules and regulations of the
Securities and Exchange Commission or propose or undertake (or enter into an
agreement or commitment to propose or undertake) any transaction or series of
transactions that would constitute a Rule 13e-3 transaction (as such term is
defined in Rule 13-e(a)(3) promulgated under the Securities Exchange Act of
1934, as amended) with respect to the Issuer (a "Going Private Transaction")
unless Hollinger, as a condition to the consummation of such Going Private
Transaction, provides that a majority of the disinterested members of the
Independent Committee shall have (i) approved the terms and conditions of the
Going Private transaction and shall have recommended that the Issuer's
stockholders vote in favor or accept the terms thereof and (ii) received from
its financial advisor a written fairness opinion for inclusion in the proxy or
information statement (or other similar disclosure documents) to be delivered to
stockholders of the Issuer in connection with the Going Private Transaction.
Item 7. Materials to Be Filed as Exhibits:
Exhibit No. Description
1 Joint Filing Agreement dated October 20, 1995, among Hollinger
Inc., The Ravleston Corporation Limited and The Hon. Conrad M.
Black, P.C., O.C. (individually and on behalf of Conrad Black
Capital Corporation).
2 Share Exchange Agreement dated as of July 19, 1995 between
American Publishing Company and Hollinger Inc. (incorporated
by reference to the definitive proxy statement of the Issuer
dated September 28, 1995).
3 Hypothecation of Specific Securities dated October 13, 1995 by
Hollinger Inc. in favor the Canadian Imperial Bank of Commerce.
4 Letter agreement dated October 13, 1995 between Hollinger Inc.
and the Canadian Imperial Bank of Commerce.
5 Letter agreements dated August 1, 1996 between Hollinger Inc.
and certain underwriters.
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6 Letter agreements dated August 1, 1996 between The Hon. Conrad
M. Black, P.C., O.C. and certain underwriters.
7 Securities Pledge Agreement dated February 29, 1996 by 1159670
Ontario Limited in favor of the Canadian Imperial Bank of
Commerce, as agent for certain lenders.
8 Registration Rights Agreement dated February 29, 1996 among
Hollinger Inc., 1159670 Ontario Limited and certain lenders.
9 Securities Pledge Agreement dated May 24, 1996 by 1159670
Ontario Limited in favor of the Candian Imperial Bank of
Commerce.
10 Securities Pledge Agreement dated May 24, 1996 by 3184081 Canada
Limited in favor of the Canadian Imperial Bank of Commerce.
11 Letter agreement dated May 24, 1996 among Hollinger Inc.,
Hollinger International Inc., 1159670 Ontario Limited, 3184081
Canada Limited and the Canadian Imperial Bank of Commerce
(omitting Schedules A and B).
12 Securities Pledge Agreement dated July 17, 1996 by 1159670
Ontario Limited in favor of the Canadian Imperial Bank of
Commerce as agent for certain lenders.
13 Securities Pledge Agreement dated July 17, 1996 by 3184081
Canada Limited in favor of the Canadian Imperial Bank of
Commerce as agent for certain lenders.
14 UniMedia Class A Stock Purchase Agreement dated as of April 18,
1997 among Hollinger Inc., UniMedia Holding Company and
Hollinger International Inc. (omitting schedules).
15 UniMedia Class B Stock Purchase Agreement dated as of April 18,
1997 among Hollinger Inc., UniMedia Holding Company and
Hollinger International Inc. (omitting schedules).
16 Amended and Restated First Exchange Agreement dated as of July
21, 1997 among Hollinger, UniMedia and Hollinger International
Inc.
<PAGE>
CUSIP No. 435569 10 8 Page 19 of 114 Pages
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17 Second Amended and Restated Second Exchange Agreement dated as
of July 21, 1997 among Hollinger, UniMedia and Hollinger
International Inc.
<PAGE>
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Statement is true, complete and
correct.
Dated: August 11, 1997
HOLLINGER INC.
By: /s/ C. G. Cowan
-----------------------------
Charles G. Cowan, Q.C.
Vice President and Secretary
THE RAVELSTON CORPORATION LIMITED
By: /s/ C. G. Cowan
-----------------------------
Charles G. Cowan, Q.C.
Vice President and Secretary
By: /s/ Conrad M. Black
-----------------------------
The Hon. Conrad M. Black, P.C.,
O.C., individually and on behalf
of Conrad Black Capital Corporation
Title: Chairman of Conrad Black
Capital Corporation
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CUSIP No. 435569 10 8 Page 21 of 114 Pages
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EXHIBIT INDEX
Exhibit No. Description
1 Joint Filing Agreement dated October 20, 1995, among Hollinger
Inc., The Ravleston Corporation Limited and The Hon. Conrad M.
Black, P.C., O.C. (individually and on behalf of Conrad Black
Capital Corporation). (previously filed)
2 Share Exchange Agreement dated as of July 19, 1995 between
American Publishing Company and Hollinger Inc. (incorporated
by reference to the definitive proxy statement of the Issuer
dated September 28, 1995). (previously filed)
3 Hypothecation of Specific Securities dated October 13, 1995 by
Hollinger Inc. in favor the Canadian Imperial Bank of Commerce.
(previously filed)
4 Letter agreement dated October 13, 1995 between Hollinger Inc.
and the Canadian Imperial Bank of Commerce. (previously filed)
5 Letter agreements dated August 1, 1996 between Hollinger Inc.
and certain underwriters. (previously filed)
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CUSIP No. 435569 10 8 Page 22 of 114 Pages
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6 Letter agreements dated August 1, 1996 between The Hon. Conrad
M. Black, P.C., O.C. and certain underwriters. (previously
filed)
7 Securities Pledge Agreement dated February 29, 1996 by 1159670
Ontario Limited in favor of the Canadian Imperial Bank of
Commerce, as agent for certain lenders. (previously filed)
8 Registration Rights Agreement dated February 29, 1996 among
Hollinger Inc., 1159670 Ontario Limited and certain lenders.
(previously filed)
9 Securities Pledge Agreement dated May 24, 1996 by 1159670
Ontario Limited in favor of the Candian Imperial Bank of
Commerce. (previously filed)
10 Securities Pledge Agreement dated May 24, 1996 by 3184081 Canada
Limited in favor of the Canadian Imperial Bank of Commerce.
(previously filed)
11 Letter agreement dated May 24, 1996 among Hollinger Inc.,
Hollinger International Inc., 1159670 Ontario Limited, 3184081
Canada Limited and the Canadian Imperial Bank of Commerce
(omitting Schedules A and B). (previously filed)
12 Securities Pledge Agreement dated July 17, 1996 by 1159670
Ontario Limited in favor of the Canadian Imperial Bank of
Commerce as agent for certain lenders. (previously filed)
13 Securities Pledge Agreement dated July 17, 1996 by 3184081
Canada Limited in favor of the Canadian Imperial Bank of
Commerce as agent for certain lenders. (previously filed)
14 UniMedia Class A Stock Purchase Agreement dated as of April 18,
1997 among Hollinger Inc., UniMedia Holding Company and
Hollinger International Inc. (filed herewith)
15 UniMedia Class B Stock Purchase Agreement dated as of April 18,
1997 among Hollinger Inc., UniMedia Holding Company and
Hollinger International Inc. (filed herewith)
16 Amended and Restated First Exchange Agreement dated as of July
21, 1997 among Hollinger, UniMedia and Hollinger International
Inc. (filed herewith)
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17 Second Amended and Restated Second Exchange Agreement dated as
of July 21, 1997 among Hollinger, UniMedia and Hollinger
International Inc. (filed herewith)
<PAGE>
CUSIP No. 435569 10 8 Page 24 of 114 Pages
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UNIMEDIA CLASS A STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 18, 1997
AMONG
HOLLINGER INC.,
UNIMEDIA HOLDING COMPANY
AND
HOLLINGER INTERNATIONAL INC.
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CUSIP No. 435569 10 8 Page 25 of 114 Pages
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TABLE OF CONTENTS
ARTICLE 1.
SALE AND PURCHASE OF SHARES.
1.1. Purchase Price.......................................................... 2
1.2. Net Working Capital Adjustment.......................................... 3
1.3. Purchase Price Allocation............................................... 3
ARTICLE 2.
CLOSING; DELIVERY OF SHARES.
2.1. Date and Place.......................................................... 4
2.2. Delivery of Shares...................................................... 4
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF HOLLINGER AND THE VENDOR.
3.1. Due Incorporation; Authority Concerning this Agreement.................. 4
3.2. Capitalization; Title to Shares and Assets; Subsidiaries................ 5
3.3. Newspaper Financial Statements.......................................... 6
3.4. Indebtedness; Absence of Undisclosed Liabilities........................ 7
3.5. Governmental Filings.................................................... 7
3.6. No Violations........................................................... 7
3.7. Litigation and Other Proceedings........................................ 8
3.8. Compliance with Laws.................................................... 8
3.9. Material Facts Disclosed................................................ 9
3.10. Brokers and Finders..................................................... 9
3.11. Securities Act Compliance............................................... 9
3.12. Taxes...................................................................10
3.13. Employment Matters......................................................10
3.14. Certain Forecasts.......................................................11
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL.
4.1. Due Incorporation of International; Authority Concerning this
Agreement...............................................................11
4.2. Capitalization..........................................................12
4.3. Governmental Filings....................................................12
4.4. No Violations...........................................................13
4.5. Brokers and Finders.....................................................13
4.6. Private Offering........................................................13
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ii
ARTICLE 5.
COVENANTS OF THE PARTIES.
5.1. Standstill..............................................................14
5.2. International Stockholders' Approval....................................15
5.3. Filings; Other Actions..................................................15
5.4. Registration of Certain Securities......................................16
5.5. Assumptions of Obligations under SOGIC Agreement........................17
5.6. Non-Competition.........................................................17
5.7. Ownership Changes.......................................................18
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS OF INTERNATIONAL.
6.1. Representations and Warranties True.....................................18
6.2. Performance by Hollinger and the Vendor.................................18
6.3. Legal Opinions..........................................................19
6.4. No Suits or Proceedings Challenging Transaction.........................19
6.5. Certain Consents........................................................19
6.6. Income Tax Act..........................................................19
6.7. RBC Dominion Fairness Opinion...........................................19
6.8. Exchange Agreement......................................................20
6.9. Other Transaction Documents.............................................20
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF HOLLINGER AND THE VENDOR.
7.1. Representations and Warranties True.....................................21
7.2. Performance by International............................................21
7.3. Legal Opinions..........................................................21
7.4. No Suits or Proceedings Challenging Transaction.........................21
7.5. Certain Consents........................................................21
7.6. Income Tax Act..........................................................22
7.7. Exchange Agreement......................................................22
7.8. RBC Dominion Fairness Opinion...........................................22
7.9. Other Transaction Documents.............................................22
ARTICLE 8.
TERMINATION.
8.1. Termination by Mutual Consent...........................................23
8.2. Termination by either Hollinger or International........................23
8.3. Termination by Hollinger................................................23
8.4. Termination by International............................................23
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iii
8.5. Special Committee.......................................................23
8.6. Effect of Termination and Abandonment...................................24
ARTICLE 9.
INDEMNIFICATION.
9.1. Indemnity...............................................................24
9.2. Limitations.............................................................24
ARTICLE 10.
MISCELLANEOUS.
10.1. Survival................................................................24
10.2. Certain Expenses........................................................25
10.3. Dollar Amounts..........................................................25
10.4. Further Assurances......................................................25
10.5. Press Releases, Announcements and Communications........................26
10.6. Amendment and Modification..............................................26
10.7. Waiver of Compliance; Consents..........................................26
10.8. Notices.................................................................26
10.9. Assignment..............................................................28
10.10 Governing Law and Jurisdiction..........................................28
10.11 Counterparts............................................................28
10.12 No Third Party Beneficiaries............................................28
10.13 Interpretation..........................................................28
10.14 Entire Agreement........................................................29
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iv
LIST OF SCHEDULES*
Schedule A List of Newspapers and Related Publications
Schedule 1.1.3.1 Form of Certificate of Designations of Series 2 Preferred
Stock
Schedule 1.1.3.2 Form of Certificate of Designations of Series C
Convertible Preferred Stock
Schedule 3.2.1 Bank Indebtedness of Hollinger and Encumbrances Affecting
the Shares
Schedule 3.2.2(A) Credit Facilities of the Company and its Subsidiaries
Schedule 3.2.2(B) Permitted Encumbrances
Schedule 3.2.2(C) Registrations to be Discharged
Schedule 3.2.2(D) Encumbrances Relating to Leased Assets and Properties
Schedule 3.2.3 Shares Owned by the Company and its Subsidiaries
Schedule 3.4 Undisclosed Liabilities
Schedule 3.5 Governmental Filings or Consents
Schedule 3.11.3 Form of Stock Certificate Legends
Schedule 3.13 Employment Matters
Schedule 6.3(a) Form of Opinion of Tory Tory DesLauriers & Binnington
Schedule 6.3(b) Form of Opinion of Lapointe Rosenstein
Schedule 6.3(c) Form of Opinion of Stewart McKelvey Stirling Scales
Schedule 6.8 Form of Exchange Agreement
Schedule 7.3 Form of Opinion of Kirkpatrick & Lockhart LLP
* Hollinger Inc. agrees to furnish supplementally a copy of any omitted schedule
to the Commission upon request.
<PAGE>
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v
INDEX OF DEFINED TERMS
DEFINED TERMS SECTION IN WHICH DEFINED
- ------------- ------------------------
Arbitrator Section 1.3
Canadian Newspaper Group Section 3.3
Class A Stock Recitals
Class B Stock Recitals
Cash Purchase Price Section 1.1.1
Class A Common Stock Section 4.2
Class B Common Stock Section 4.2
Closing Section 2.1
Closing Date Section 2.1
Company Recitals
Encumbrances Section 2.2
Exchange Act Section 4.3
Governmental Entity Section 3.5
HCPH Section 1.2.1
HCPH Shares Section 5.7
Hollinger Recitals
Interim Period Section 1.1.2.1
International Recitals
International Common Stock Section 4.2
International 1994 Stock Option Plan Section 4.2
International Preferred Stock Section 4.2
International Proposals Section 5.2
Newspaper Financial Statements Section 3.3
Newspaper Intangible Assets Recitals
Newspapers Recitals
Permitted Encumbrances Section 3.2.2
PRIDES Section 4.2
Preliminary Proxy Statement Section 5.3.1
Proceedings Section 3.7
Proxy Statement Section 5.3.1
RBC Dominion Securities Section 4.5
Registration Statements Section 5.4
SEC Section 3.11.2
Securities Act Section 3.11.1
Series 2 Preferred Stock Section 1.1.3.1
Series A Preferred Stock Section 4.2
Series B Preferred Stock Section 4.2
Series C Convertible Preferred Stock Section 1.1.3.2
<PAGE>
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vi
DEFINED TERMS SECTION IN WHICH DEFINED
- ------------- ------------------------
Shares Section 1.1.1
SOGIC Agreement Section 5.5
Special Committee Section 3.14
Total Purchase Price Section 1.1.1
UniMedia Group Recitals
Vendor Recitals
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CUSIP No. 435569 10 8 Page 31 of 114 Pages
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UNIMEDIA CLASS A STOCK PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, made as of this 18th day of April, 1997,
among HOLLINGER INC., a corporation continued under the laws of Canada
("HOLLINGER"), and UNIMEDIA HOLDING COMPANY, a company formed under the laws of
Nova Scotia (the "VENDOR"), and HOLLINGER INTERNATIONAL INC., a Delaware
corporation ("INTERNATIONAL").
WITNESSETH:
WHEREAS, Hollinger has agreed to transfer to International its
indirect interests in the daily newspapers and related publications listed on
Schedule A attached hereto and certain other assets related thereto
(collectively, the "NEWSPAPERS");
WHEREAS, the Vendor is a wholly-owned subsidiary of Hollinger;
WHEREAS, prior to the consummation of the sale transaction
contemplated hereby, Hollinger intends to reorganize its interests in the
Newspapers with the result that the Vendor will own all of the outstanding
shares in the capital of UniMedia Newspapers Company, a Nova Scotia unlimited
liability company (the "COMPANY"), which will own directly the intangible assets
of the Newspapers (collectively, the "NEWSPAPER INTANGIBLE ASSETS") and all of
the outstanding capital stock of UniMedia Inc., a corporation incorporated under
the laws of Canada which in turn owns all of the outstanding capital stock of
UniMedia Group Inc. ("UNIMEDIA GROUP"), a Quebec company which owns the
remaining assets of the Newspapers;
WHEREAS, the outstanding shares of the Company consists of two
classes of stock, 6600 shares of Class A Stock, without par value (the "CLASS A
STOCK") which entitles the holder thereof to receive dividends payable out of
funds or other property, legally available for the purpose, and attributable to
assets or property of the Company other than UniMedia Inc. shares and to receive
upon liquidation of the Company the remaining property of the Company other than
UniMedia Inc. shares; and 1100 shares of Class B Stock, without par value (the
"CLASS B STOCK");
WHEREAS, Hollinger is proposing that the Vendor sell all of the
outstanding shares of the Class A Stock of the Company to International in
exchange for cash and shares of Series 2 Preferred Stock of International;
NOW THEREFORE, in consideration of the premises and the respective
covenants herein contained, the parties, intending to be legally bound, hereby
agree as follows:
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2
ARTICLE 1.
SALE AND PURCHASE OF SHARES.
1.1. PURCHASE PRICE
1.1.1. Upon the terms and subject to the conditions set forth
herein, the Vendor shall sell, transfer and deliver to International
at Closing (as hereinafter defined) all of the issued and
outstanding shares of the Class A Stock of the Company
(collectively, the "SHARES") for a purchase price of Cdn.
$169,031,000 (the "TOTAL PURCHASE PRICE"), subject to adjustment
pursuant to section 1.1.2, payable as follows: (x) as to Cdn.
$19,373,000, in cash in immediately available funds in Canadian
dollars (the "CASH PURCHASE PRICE"); and (y) as to Cdn.
$149,658,000, in 149,658 newly issued shares of Series 2 Preferred
Stock.
1.1.2. The Total Purchase Price shall be:
1.1.2.1. increased by an amount equal to the excess of
interest on the Total Purchase Price calculated from and
including January 1, 1997 to but excluding the Closing Date
(the "Interim Period") at an annual rate equal to 7.75% over
the amount of any interest expense incurred during the Interim
Period by the Company and its subsidiaries on the indebtedness
outstanding pursuant to the credit facilities described in
Schedule 3.2.2(A);
1.1.2.2. decreased (increased) by an amount equal to the
aggregate net cash receipts (disbursements) generated by the
Newspapers during the Interim Period in respect of their
operations during the Interim Period which has been
appropriated by Hollinger or any of its subsidiaries (other
than the Company and its subsidiaries) including, without
limitation, through the operation of Hollinger's concentration
account, payment of dividends, return of capital or management
fees.
The net increase (decrease) to the Total Purchase Price resulting
from the adjustments set out above shall be paid in Canadian dollars
by International to the Vendor or vice versa, as applicable, within
60 days of the Closing Date. If the parties cannot agree (for these
purposes, International shall not have agreed to any adjustments
unless agreed to by the Special Committee (as defined in section
4.1) and its financial advisor) on the net amount of such
adjustments within such period the disputed issues shall be resolved
by an Arbitrator in the manner set out in section 1.3.
1.1.3. As used herein:
1.1.3.1. "Series 2 Preferred Stock" means Series 2 Nonvoting
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CUSIP No. 435569 10 8 Page 33 of 114 Pages
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3
Preferred Stock, $.01 par value of International having the relative
rights and preferences set forth in Schedule 1.1.3.1 attached hereto
and which is exchangeable into shares of Series C Convertible
Preferred Stock and Class A Common Stock pursuant to and in
accordance with the Exchange Agreement (as defined in Section 4.3);
1.1.3.2. "Series C Convertible Preferred Stock" means Series C
Convertible Preferred Stock, $.01 par value of International
having the relative rights and preferences set forth in
Schedule 1.1.3.2 attached hereto.
1.2. NET WORKING CAPITAL ADJUSTMENT
The parties agree that any working capital surplus or deficit of the
Newspapers as at December 31, 1996 shall be for the account of the Vendor to be
settled as follows.
1.2.1. As at December 31, 1996 the Vendor had a working capital
deficiency estimated to be Cdn.$3,827,864 (subject to final review
and revision in connection with the post-closing adjustments) and
owed bank debt of Cdn.$21,360,394. Hollinger will loan
Cdn.$25,188,258 to the Company which will provide sufficient funds
to enable the Company to repay its bank debt outstanding on the
Closing Date. This loan will be sold by Hollinger to Hollinger
Canadian Publishing Holdings Inc. ("HCPH") on the Closing Date for
the principal amount thereof.
1.2.2. As soon as practicable after the Closing Date the Vendor
shall deliver to International an unaudited statement of the working
capital of the Newspapers as at December 31, 1996 together with any
information in respect of the operations of the Newspapers during
the Interim Period required to calculate the adjustment to the Total
Purchase Price contemplated by section 1.1.2.2.
1.3. PURCHASE PRICE ALLOCATION
The parties agree that the Total Purchase Price will be allocated
among the Newspaper Intangible Assets on the basis of the fair market value of
such assets. If the parties have not agreed to a final allocation of the Total
Purchase Price on or prior to December 31, 1997, any disputed aspects of the
allocation shall be resolved not more than sixty (60) calendar days after such
date by a nationally recognized accounting firm mutually agreed upon by
International and Hollinger having no material relationship with either
International or Hollinger or their respective affiliates (the "ARBITRATOR").
The resolution of such disputed aspects by the Arbitrator shall in all respects
be final, binding and conclusive on the parties hereto, and the allocation shall
incorporate such resolution. The costs, expenses and fees of the Arbitrator
shall be borne equally by International and the Vendor. International and the
Vendor agree to act in
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CUSIP No. 435569 10 8 Page 34 of 114 Pages
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4
accordance with the allocations contained in or determined pursuant to this
section 1.3 in any and all applicable tax returns or similar filings.
ARTICLE 2.
CLOSING; DELIVERY OF SHARES.
2.1. DATE AND PLACE
Subject to the fulfilment or waiver of the respective covenants and
conditions set forth herein, the closing of the transactions contemplated hereby
(the "CLOSING") will take place at the offices of Tory Tory DesLauriers &
Binnington, Suite 3000, Aetna Tower, Toronto-Dominion Centre, Toronto, Ontario
M5K 1N2, at 10:00 a.m., local time, on the first business day subsequent to the
fulfilment or waiver of all conditions set forth in Articles 6 and 7 hereof, or
at such other time and place as the parties hereto may determine (the date on
which the Closing occurs being hereinafter referred to as the "CLOSING DATE").
2.2. DELIVERY OF SHARES
At the Closing, the Vendor shall deliver stock certificates
representing all of the Shares, accompanied by stock transfer forms duly
executed in blank in respect of the Shares against delivery by International of
the Cash Purchase Price and the Series 2 Preferred Stock to be issued in
accordance with section hereof registered in the name of the Vendor or its
nominee, as the Vendor may direct. The Vendor shall deliver the Shares to
International free and clear of any mortgage, pledge, lien, encumbrance, charge,
security interest, pledge, right of first refusal, option, adverse claim of
ownership or use, or any other encumbrance of any kind or nature whatsoever
(collectively, "ENCUMBRANCES").
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF HOLLINGER AND THE VENDOR.
Hollinger and the Vendor hereby jointly and severally represent and
warrant to International as follows:
3.1. DUE INCORPORATION; AUTHORITY CONCERNING THIS AGREEMENT.
3.1.1. Each of Hollinger, UniMedia Inc. and UniMedia Group is a
corporation subsisting under the laws of its jurisdiction of
incorporation. Each of the Vendor and the Company is an unlimited
liability company existing under the laws of Nova Scotia. Each of
Hollinger, the Vendor, the Company, UniMedia Inc. and UniMedia Group
has the requisite corporate power and authority to carry on its
business and operations as presently conducted by it and to own,
lease and operate its properties and assets. Hollinger and the
Vendor each has the requisite corporate power and authority to
execute and deliver this Agreement, to perform
<PAGE>
CUSIP No. 435569 10 8 Page 35 of 114 Pages
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5
its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement,
the performance by Hollinger and the Vendor of their respective
obligations hereunder, and the consummation by Hollinger and the
Vendor of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of
Hollinger and the Vendor. This Agreement has been duly and validly
executed and delivered by Hollinger and the Vendor and (assuming due
and valid authorization, execution and delivery by International)
constitutes the legal, valid and binding agreement of Hollinger and
the Vendor, enforceable in accordance with its terms.
3.1.2. There has been no order or resolution for the winding
up of any of the Company, UniMedia Inc. or UniMedia Group, and no
appointment of a receiver, administrative receiver or
administrator with respect thereto.
3.2. CAPITALIZATION; TITLE TO SHARES AND ASSETS; SUBSIDIARIES.
3.2.1. The authorized share capital of the Company consists solely
of Class A Shares and Class B Shares, of which 6600 Class A Shares
and 1100 Class B Shares are issued and outstanding and held by the
Vendor. The Shares and the Class B Stock constitute the only voting
securities of the Company, and the Shares are validly issued, fully
paid and non-assessable. Except as set forth in Schedule 3.2.1
attached hereto, the Vendor has good and marketable title to the
Shares, free and clear of any Encumbrances, and has full right and
authority to transfer and deliver the Shares to International as
contemplated hereby. Upon consummation of the transactions
contemplated hereby, the Vendor will have transferred to
International good and marketable title to the Shares, free and
clear of all Encumbrances. There are no outstanding or authorized
subscriptions, agreements (other than this Agreement), options,
warrants, calls or other commitments, rights (including conversion
rights) or privileges (whether preemptive or contractual) pursuant
to which the Company is or may become obligated to issue, sell or
transfer any shares of its capital or any debt or other security of
the Company which is convertible or exchangeable into, or evidences
the right to subscribe for, any share capital of the Company. There
are no shareholder agreements, voting trust agreements, rights of
first refusal, options to purchase, or restrictions upon transfer or
alienability of or with respect to the Shares, or any other similar
agreement or understanding otherwise affecting the Shares.
3.2.2. The Company owns, or as of Closing will own, directly or
through wholly-owned subsidiaries, good and marketable title, free
and clear of any Encumbrances, to all of the tangible and intangible
assets of every kind and nature (including intellectual property),
used in or held for use in the business and operations of the
Newspapers as historically conducted by UniMedia Inc. and its
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subsidiaries, except for (A) Encumbrances arising under the credit
facilities of UniMedia Inc. and its subsidiaries described on
Schedule 3.2.2(A), all of which will be released and terminated as
of the Closing Date; (B) Encumbrances and leasehold interests in
real properties described on Schedule 3.2.2(B) which will remain in
effect as of the Closing (collectively, the "PERMITTED
ENCUMBRANCES"); (C) Encumbrances in effect as of the Closing Date
described on Schedule 3.2.2(C) which will be discharged at the
expense of the Vendor as soon as practicable, but in any event not
less than 28 days, after the Closing Date; and (D) Encumbrances
relating to leased assets and properties described on Schedule
3.2.2(D).
3.2.3. Except as set forth on Schedule 3.2.3 attached hereto, the
Company does not own directly or indirectly through subsidiaries
securities representing or convertible into more than 5% of the
outstanding capital stock of any corporation or more than 5% of the
equity interest in any partnership or other entity. The authorized
and issued share capital and any other outstanding securities of
each such corporation, partnership or other entity are set forth on
Schedule 3.2.3. Except as set forth on Schedule 3.2.3, in the case
of each such corporation, partnership or other entity, the
securities owned by the Company constitute all of the issued and
outstanding share capital of such corporation, partnership or other
entity, and all the securities are validly issued, fully paid and
non-assessable with no personal liability attached to the ownership
thereof. Except as set forth on Schedule 3.2.3, the Company has good
and marketable title to the securities of the corporations,
partnerships and other entities reflected on Schedule 3.2.3, free
and clear of all Encumbrances. Except as set forth on Schedule
3.2.3, there are no outstanding or authorized subscriptions,
agreements (other than this Agreement), options, warrants, calls or
other commitments, rights (including conversion rights) or
privileges (whether preemptive or contractual) pursuant to which any
such corporation, partnership or other entity is or may become
obligated to issue, sell or transfer any shares of its capital or
any debt or other security convertible into or evidencing the right
to subscribe for any share capital of any such corporation,
partnership or other entity.
3.3. NEWSPAPER FINANCIAL STATEMENTS.
Hollinger and the Vendor have delivered to International an
unaudited balance sheet of the Newspapers and certain other Canadian newspapers
and publications of Hollinger and its subsidiaries other than the Company
(collectively, the "CANADIAN NEWSPAPER GROUP") on a combined basis as at
December 31, 1995 and 1996 and unaudited combined statements of earnings,
shareholders' interest and changes in financial position for the respective
periods ended December 31, 1994, 1995 and 1996 (collectively, the "NEWSPAPER
FINANCIAL STATEMENTS"). The Newspaper Financial Statements (i) have been
prepared in accordance with the books and records of Hollinger, the Company,
their respective subsidiaries and the Newspapers, (ii) present fairly in all
material respects the financial position of the Canadian Newspaper Group as at
the
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dates indicated and the results of operations and cash flows of the Canadian
Newspaper Group on a combined basis as of the dates and for the respective
periods indicated, (iii) have been prepared in conformity with generally
accepted accounting principles applicable to Canadian companies and (iv) will be
used as the basis for the financial statements prepared in accordance with
generally accepted accounting principles applicable to U.S. companies to be
included in the Proxy Statement (as defined in section 5.1).
The Canadian Newspaper Group is comprised of the Newspaper
Intangible Assets, the Newspapers (as defined in the Sterling Purchase Agreement
dated the date hereof made between Hollinger and HCPH (the "Sterling Purchase
Agreement")) and the Newspaper Tangible Assets (as defined in the UniMedia Class
B Stock Purchase Agreement dated the date hereof made between the parties hereto
(the "UniMedia B Agreement")).
3.4. INDEBTEDNESS; ABSENCE OF UNDISCLOSED LIABILITIES.
The Company has no outstanding indebtedness for borrowed money,
capitalized leases or any other indebtedness not incurred in the ordinary course
of business (including without limitation any indebtedness of any affiliate or
associated corporation of the Company or of any other person that is guaranteed,
directly or indirectly, by the Company) other than those matters disclosed in
the Newspaper Financial Statements or the notes thereto or as set forth on
Schedule 3.4 attached hereto. Since December 31, 1996, neither the Company nor
any of the Newspapers has incurred any liabilities or obligations of any nature,
whether accrued, contingent or otherwise, which reasonably could be expected to
have, individually or in the aggregate, a material adverse effect on the
business, assets, financial condition or results of operations of the Company or
the Newspapers, taken as a whole.
3.5. GOVERNMENTAL FILINGS.
Except as set forth on Schedule 3.5, no notice, report or other
filing is required to be made by Hollinger, the Vendor, the Company, UniMedia
Inc., UniMedia Group or any of the Newspapers with, nor is any material consent,
registration, approval, permit or authorization required to be obtained by them
from, any governmental or regulatory authority, agency, court, commission or
other similar entity, domestic or foreign ("GOVERNMENTAL ENTITY") in connection
with the execution and delivery of this Agreement by Hollinger and the Vendor or
the consummation by them of the transactions contemplated hereby.
3.6. NO VIOLATIONS.
The execution and delivery of this Agreement by Hollinger and the
Vendor does not, and the consummation by it of the transactions contemplated
hereby will not, require the consent or approval of any unrelated party or
constitute or result in (i) a breach or violation of, or a default (or an event
which with notice or lapse of time or both would become a default) under,
Hollinger's and the Vendor's Articles or By-laws or the Articles (or other
comparable governing
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documents) or By-laws of the Company, UniMedia Inc. or UniMedia Group (ii) a
breach or violation of, a default (or an event which with notice or lapse of
time or both would become a default) under, a right to terminate, amend, cancel,
or accelerate, or the creation of a lien, pledge, security interest or other
encumbrance on assets (with or without the giving of notice or the lapse of
time) pursuant to, any provision of any material agreement, lease, contract,
note, mortgage, indenture, arrangement or other obligation of Hollinger, the
Vendor, the Company, UniMedia Inc. or UniMedia Group or any law, statute, rule,
ordinance or regulation or judgment, decree, order, award, injunction or
governmental or non-governmental permit or license to which Hollinger, the
Vendor, the Company, UniMedia Inc. or UniMedia Group is subject or by which any
of them or their respective properties is bound or affected, except, in the case
of clause (ii) above, (A) such breaches, violations, defaults, terminations,
amendments, cancellations, accelerations, encumbrances or changes that,
individually or in the aggregate, have not had and are not reasonably likely to
have a material adverse effect on the Company and (B) certain provisions of the
existing loan agreements of Hollinger and UniMedia Group described in Schedules
3.2.1 and 3.2.2(A) attached hereto.
3.7. LITIGATION AND OTHER PROCEEDINGS.
There is no court, administrative, regulatory or similar proceeding,
arbitration or other dispute settlement procedure, investigation or inquiry by
or before any Governmental Entity or any similar matter or proceeding
(collectively "PROCEEDINGS") against or involving Hollinger, the Vendor, the
Company, UniMedia Inc. or UniMedia Group with respect to any of the Newspapers
(whether in progress or threatened), which if determined adversely would be
likely to have a material adverse effect on the Company or the Newspapers; and
there is no judgment, decree, injunction, rule, award or order of any
Governmental Entity outstanding against the Hollinger, the Vendor, the Company,
UniMedia Inc. or UniMedia Group with respect to any of the Newspapers.
3.8. COMPLIANCE WITH LAWS.
To Hollinger's and the Vendor's best knowledge, the Company is
conducting the business and operations of the Newspapers directly and indirectly
through subsidiaries in compliance with all statutes, laws, rules, regulations,
ordinances, decrees and orders applicable to them and the Newspapers and the
ownership of their assets, which are in effect as of the date hereof (including,
without limitation, those relating to environmental and health and safety
matters), except for violations which would not be likely to have a material
adverse effect on the Company and its consolidated subsidiaries, taken as a
whole. Neither the Vendor, the Company, UniMedia Inc. nor UniMedia Group has
received any written complaint or written notice from any Governmental Entity
alleging that they or any of the Newspapers has violated any law, ordinance,
regulation or order and, to the Vendor's best knowledge, no such complaint or
notice is threatened, except those violations which would not be likely to have
a material adverse effect on the Company and its consolidated subsidiaries,
taken as a whole.
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3.9. MATERIAL FACTS DISCLOSED.
Hollinger, its management and the Vendor have disclosed to
International all facts known to them relating to the Newspapers and the cash
flow generated therefrom which could reasonably be expected to be material to an
intending purchaser of the Shares.
3.10. BROKERS AND FINDERS.
Neither Hollinger, the Vendor nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby, except
that Hollinger has retained Dirks Van Essen & Associates as its financial
advisor.
3.11. SECURITIES ACT COMPLIANCE.
3.11.1. The shares of Series 2 Preferred Stock issuable to the
Vendor hereunder and the Series C Convertible Preferred Stock and
the Class A Common Stock issuable upon exchange thereof following
the approval of the International Proposals by the stockholders of
International are being acquired by the Vendor for its own account,
not as a nominee or agent, and not with a view to sale or
distribution within the meaning of the U.S. Securities Act of 1933,
as amended (the "SECURITIES ACT") and the rules and regulations
thereunder, and the Vendor will not distribute such shares in
violation of the Securities Act.
3.11.2. The Vendor (A) acknowledges that as of the Closing Date the
shares of Series 2 Preferred Stock issuable hereunder and the Series
C Convertible Preferred Stock and the Class A Common Stock issuable
upon exchange thereof will not have been registered under the
Securities Act and must be held indefinitely by the Vendor unless
they are subsequently registered under the Securities Act pursuant
to section 5.4 hereof or otherwise or an exemption from registration
is available, (B) is aware that any routine sale of shares of Class
A Common Stock under Rule 144 promulgated by the U.S. Securities and
Exchange Commission ("SEC") under the Securities Act may be made
only in limited amounts and in accordance with the terms and
conditions of the Rule and that in such cases where that Rule is not
applicable, compliance with some other registration exemption will
be required, and (C) is aware that Rule 144 is not presently
available for use by the Vendor for resale of any such shares.
3.11.3. The Vendor acknowledges that the certificates evidencing the
shares of Series 2 Preferred Stock, the Class A Common Stock and
Series C Convertible Preferred Stock issuable to it hereunder will
bear the legends set forth in Schedule 3.11.3
attached hereto.
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3.11.4. As the controlling stockholder of International, Hollinger
confirms that it has had access to all information about the
business and financial condition of International that it requires
in order to effect the transactions contemplated by this Agreement.
3.12. TAXES
3.12.1. Hollinger and the Company (or a predecessor thereof) have
paid or accrued on the Newspaper Financial Statements all foreign,
federal, provincial and local taxes in respect of the Newspapers and
filed or caused to be filed all tax returns on or prior to the
Closing Date required to be filed in respect of the Newspapers and
accurately reported in all material respects all information
required to be included on such returns in respect of the
Newspapers. Neither Hollinger in respect of the Newspapers nor the
Company (or any predecessor thereof) has received written notice of
or otherwise has actual knowledge of an audit or examination
currently in progress of any tax return of the Newspapers. There are
no proposed assessments of taxes asserted in writing against
Hollinger or the Company (or any predecessor thereof) in respect of
any of the Newspapers or proposed adjustments asserted in writing to
any tax returns filed by Hollinger or the Company (or any
predecessor thereof) in respect of any of the Newspapers. Neither
Hollinger nor the Company (or any predecessor thereof) is a party to
any material action or proceeding by any governmental authority for
assessment or collection of taxes or penalties or interest in
respect of the Newspapers, nor has any material claim for such
assessment or collection been asserted in writing against any of
them.
3.12.2. The Canadian Newspaper Group qualifies as "Canadian
newspapers or periodicals" as defined in section 19 of the Income
Tax Act (Canada) and, after giving effect to the transactions
contemplated by this Agreement, the UniMedia B Agreement, the
Sterling Purchase Agreement and the Exchange Agreement (as defined
in Section 6.8), the Canadian Newspaper Group will continue to so
qualify.
3.13. EMPLOYMENT MATTERS
Schedule 3.13 sets forth the collective bargaining agreements that
expire within seven (7) years of the date hereof with respect to the Newspapers.
Except as referred to in Schedule 3.13, there is no material work stoppage or
other concerted action or material grievance, strike or dispute existing or
threatened against any of the Newspapers. Except as set out in Schedule 3.13,
Hollinger, the Company and the Newspapers are in material compliance with all
applicable laws and regulations relating to employees of the Newspapers,
including those related to terms and conditions of employment, collective
bargaining and discrimination.
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3.14. CERTAIN FORECASTS
The financial forecasts of the Canadian Newspaper Group that were
provided by Hollinger to the special committee of independent directors of the
Board of Directors of International (the "SPECIAL COMMITTEE") (i) were developed
by management of Hollinger and its subsidiaries based on information that
management of Hollinger and the Company prepared in good faith, (ii) utilize
assumptions which management of Hollinger and the Company believe to be
reasonable under the circumstances, (iii) represent the good faith estimate and
judgment of management of Hollinger, as of the date of such forecasts, of the
Canadian Newspaper Group's expected future financial performance and (iv) do not
reflect the expected results of any newspaper or publication that is not
included in the Canadian Newspaper Group or omit the expected results of any
newspapers or publication that is included in the Canadian Newspaper Group.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL.
International hereby represents and warrants to Hollinger and the
Vendor as follows:
4.1. DUE INCORPORATION OF INTERNATIONAL; AUTHORITY CONCERNING THIS
AGREEMENT.
International is a corporation incorporated and existing and in good
standing under the laws of the State of Delaware, and has the requisite
corporate power and authority to carry on its business and operations as
presently conducted by it and to own, lease and operate its properties and
assets. International has the requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The Special Committee, pursuant
to authority duly delegated to it by the Board of Directors of International,
has approved this Agreement and the Exchange Agreement. The Board of Directors
of International has ratified this Agreement and the Exchange Agreement and
recommended approval by International stockholders of the issuance of Class A
Common Stock and Series C Convertible Preferred Stock in exchange for Series 2
Preferred Stock to be issued pursuant to this Agreement and the Exchange
Agreement, as contemplated by the International Proposals (as defined in section
5.2 hereof). The execution and delivery of this Agreement and the Exchange
Agreement by International, the performance by International of its obligations
hereunder and thereunder and the consummation by International of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of International,
subject to approval of the International Proposals by the stockholders of
International. This Agreement has been duly and validly executed and delivered
by International and (assuming due and valid authorization, execution and
delivery by Hollinger and the Vendor,) constitutes the legal, valid and binding
agreement of International and is enforceable in accordance with its terms.
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4.2. CAPITALIZATION.
The authorized capital stock of International consists of
250,000,000 shares of Class A Common Stock ("CLASS A COMMON STOCK"), 50,000,000
shares of Class B Common Stock, $.01 par value ("CLASS B COMMON STOCK"), and
20,000,000 shares of preferred stock, $.01 par value ("INTERNATIONAL PREFERRED
STOCK"), of which 69,565,754 shares of Class A Common Stock, 14,990,000 shares
of Class B Common Stock, and 739,500 shares of Series A Preferred Stock, par
value $.01 per share ("SERIES A PREFERRED STOCK"), and 10,350,000 shares of
Series B Convertible Preferred Stock, par value $.01 per share ("Series B
Preferred Stock") are issued and outstanding. International has also issued
20,700,000 depository shares ("PRIDES") each representing a one-half share of
International's Series B Preferred Stock. The Class A Common Stock and Class B
Common Stock (collectively, the "INTERNATIONAL COMMON STOCK") and Series B
Preferred Stock constitute the only outstanding voting securities of
International. Upon receipt of stockholder approval of the International
Proposals (as defined below), the authorized capital stock will be increased to
420,000,000, of which 120,000,000 shares of Preferred Stock will be authorized.
Options to purchase an aggregate of 1,281,500 shares of Class A Common Stock
have been granted under the International 1994 Stock Option Plan, as amended
(the "INTERNATIONAL 1994 STOCK OPTION PLAN"), an additional 189,640 shares of
Class A Common Stock have been reserved for issuance under the International
1994 Stock Option Plan, and 5,156,915 shares of Class A Common Stock have been
reserved for issuance under the International 1997 Stock Incentive Plan.
International has also reserved for issuance the requisite shares of Class A
Common Stock issuable upon conversion of shares of Class B Common Stock, Series
A Preferred Stock, Series B Preferred Stock and Series C Convertible Preferred
Stock. Except for (i) options granted under the International 1994 Stock Option
Plan and options that may be granted under the International 1997 Stock
Incentive Plan, (ii) outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Class B Common Stock, all of which are convertible into
shares of Class A Common Stock, and (iii) shares of Series 1 Preferred Stock and
Series 2 Preferred Stock to be issued to Hollinger or the Vendor hereunder,
shares of Series C Convertible Preferred Stock issuable to Hollinger or the
Vendor on exchange of the Series 2 Preferred Stock, and shares of Class A Common
Stock issuable to Hollinger or the Vendor on exchange or conversion of the
Series 1 Preferred Stock, Series 2 Preferred Stock and Series C Convertible
Preferred Stock, all pursuant to this Agreement and the UniMedia Class B Stock
Agreement and the Exchange Agreement, each dated the date hereof among
Hollinger, the Vendor and International, there are no outstanding or authorized
subscriptions, agreements, options, warrants, calls or other commitments, rights
(including exchange or conversion rights) or privileges (whether preemptive or
contractual) pursuant to which International is or may become obligated to
issue, sell or transfer any shares of its capital stock or any debt or other
security of International which is convertible or exchangeable into, or
evidences the right to subscribe for, any shares of capital stock of
International.
4.3. GOVERNMENTAL FILINGS.
Except for filings under the Securities Act, the U.S. Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the Securities Act
(Ontario), applicable state securities
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laws, the General Corporation Law of Delaware with respect to the Class A Common
Stock, the Series 2 Preferred Stock and the Series C Convertible Preferred Stock
to be issued to the Vendor hereunder, and the New York Stock Exchange, no
notice, report or other filing is required to be made by International with, nor
is any material consent, registration, approval, permit or authorization
required to be obtained by International from, any Governmental Entity in
connection with the execution and delivery of this Agreement, the issuance and
delivery of the shares of Series 2 Preferred Stock to the Vendor hereunder, or
the consummation by it of the transactions contemplated hereby.
4.4. NO VIOLATIONS.
Except for the approval of International's stockholders to permit
the issuance of Class A Common Stock and Series C Convertible Preferred Stock
upon exchange of the Series 1 and 2 Preferred Stock pursuant to the Exchange
Agreement (as defined below) and the issuance of Class A Common Stock upon
conversion of the Series C Convertible Preferred Stock, the execution and
delivery of this Agreement by International does not, and the consummation by it
of any of the transactions contemplated hereby will not, require the consent or
approval of any unrelated party or constitute or result in (i) a breach or
violation of, or a default (or an event which with notice or lapse of time or
both would become a default) under the Restated Certificate of Incorporation or
By-laws of International, (ii) a breach or violation of, a default (or an event
which with notice or lapse of time or both would become a default) under, a
right to terminate, amend, cancel or accelerate, or the creation of a lien,
pledge, security interest or other encumbrance on assets (with or without the
giving of notice or the lapse of time) pursuant to, any provision of any
material agreement, lease, contract, note, mortgage, indenture, arrangement or
other obligation of International, or any law, statute, rule, ordinance or
regulation or judgment, decree, order, award, injunction or governmental or
non-governmental permit or license to which International is subject to or by
which International or any property of International is bound or affected,
except, in the case of clause (ii) above, such breaches, violations, defaults,
terminations, amendments, cancellations, accelerations, encumbrances or changes
that, individually or in the aggregate, have not had and are not reasonably
likely to have a material adverse effect on International.
4.5. BROKERS AND FINDERS.
Neither International nor any of its officers, directors or
employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby, except that the Special
Committee has retained RBC Dominion Securities Inc. ("RBC DOMINION Securities")
as its financial advisor.
4.6. PRIVATE OFFERING.
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Assuming the accuracy of the representations of Hollinger and the
Vendor contained in section 3.11 hereof, the offer, issuance and delivery to the
Vendor of the shares of Series 2 Preferred Stock pursuant to this Agreement will
be exempt from registration under the Securities Act.
ARTICLE 5.
COVENANTS OF THE PARTIES.
5.1. STANDSTILL.
Hollinger and the Vendor jointly and severally agree that from the
date hereof to the Closing Date or the earlier termination of this Agreement in
accordance with Article 8 hereof, and except as otherwise consented to in
writing by the Chairman of the Special Committee or as specifically required,
permitted or contemplated by this Agreement, they will:
5.1.1. not sell, lease, assign, transfer or otherwise dispose of any
of the Shares or any interests therein, or create or permit any
Encumbrances affecting the Shares (other than those Encumbrances
referred to on Schedules 3.2.1 and 3.2.2(A) attached hereto, all of
which will be terminated on or prior to Closing);
5.1.2. not approve, consent to or take any action in furtherance of
any plan, scheme, transaction or series of transactions whereby the
Company would undertake a merger, consolidation, amalgamation, or
sale, lease, transfer, assignment or other disposition of all or any
significant portion of its properties or assets, or otherwise
resulting in a change in control of the Company or any of the
Newspapers;
5.1.3. not approve, consent to or take any action in furtherance of
any plan, scheme, transaction or series of transactions whereby the
Company would incur any indebtedness for borrowed money or create
any Encumbrances affecting any of its assets, other than (A)
indebtedness incurred pursuant to the credit facilities described in
Schedule 3.2.2(A), (B) Encumbrances arising in the ordinary course
of business which constitute Permitted Encumbrances, (C)
intercompany transactions among Hollinger, the Vendor, the Company,
UniMedia Inc. and UniMedia Group consistent with past practices, and
(D) indebtedness incurred by the Company from Hollinger in an amount
necessary to pay in full indebtedness outstanding pursuant to the
credit facilities described in Schedule 3.2.2(A), which indebtedness
will be sold by Hollinger to HCPH on the Closing Date for the
principal amount thereof; or
5.1.4. not approve, consent to or take any action in furtherance of
any plan, scheme, transaction or series of transactions whereby the
Company would (A) alter, amend or repeal any provision of its
Articles or By-laws (or similar
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governing documents), (B) declare, set aside, make or pay any
dividends (in cash or otherwise) or other distributions on or with
respect to its share capital other than as contemplated herein or
(C) increase or reclassify the number of shares authorized or issued
and outstanding of its share capital or grant any option, warrant,
call, commitment, right or agreement of any character relating to
its share capital or any securities convertible or exchangeable into
its share capital.
5.2. INTERNATIONAL STOCKHOLDERS' APPROVAL.
International shall take, in accordance with the requirements of
applicable law, the New York Stock Exchange and International's Restated
Certificate of Incorporation and By-Laws, all action necessary to convene a
meeting of holders of International Common Stock, Series B Preferred Stock
represented by PRIDES, at which Hollinger is entitled to vote, as promptly as
practicable after the Closing Date. At such meeting, International stockholders
will be asked to consider and vote upon the following proposals: (i) to permit
the issuance by International of shares of Class A Common Stock and Series C
Convertible Preferred Stock upon exchange by the Vendor of the Series 2
Preferred Stock in accordance with the Exchange Agreement, (ii) to permit the
issuance by International of shares of Class A Common Stock upon conversion of
the Series C Convertible Preferred Stock, and (iii) to increase the authorized
capital of International from 20 million shares to 120 million shares of
Preferred Stock (collectively, the "INTERNATIONAL PROPOSALS"), among other
matters at such meeting. At such meeting Hollinger agrees to vote or cause to be
voted all shares of Class A Common Stock and Class B Common Stock of
International, held by it or its subsidiaries in favour of the International
Proposals. International shall take all lawful action to solicit such approval
and all lawful action necessary or helpful to secure the affirmative vote of
holders of International Common Stock and Series B Preferred Stock represented
by PRIDES required to approve the foregoing matters.
5.3. FILINGS; OTHER ACTIONS.
5.3.1. As soon as practicable after the Closing, International and
Hollinger shall cooperate to prepare and file promptly with the SEC
preliminary proxy solicitation materials (the "PRELIMINARY PROXY
STATEMENT") for the International stockholders meeting, including
obtaining all such information (financial or other) as may be
required under applicable law and rules and regulations of the SEC
with respect to the International stockholders meeting and the
International Proposals. After review by the SEC, International
shall mail a definitive version of such proxy solicitation materials
(the "PROXY STATEMENT") to all stockholders of record of
International. The Proxy Statement shall contain the recommendation
of the Board of Directors of International and the Special Committee
that holders of International Common Stock and of Series B Preferred
Stock represented by PRIDES vote in favour of approval of the
International Proposals. Prior to submitting the Preliminary Proxy
Statement and the Proxy
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Statement and any such amendment, supplement or revision to the SEC
or to International's stockholders, such Preliminary Proxy
Statement, Proxy Statement and amendment, supplement or revision
will be submitted to Hollinger for its review and comment.
5.3.2. Each party hereto shall cooperate with the other party hereto
and use all reasonable efforts to prepare and file promptly all
necessary documentation, to effect all necessary applications,
notices, petitions, filings and other documents, and to obtain as
promptly as practicable all necessary permits, consents, orders,
approvals and authorizations of, or any exemption from, all third
parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement. Each
party agrees, to the extent either deems necessary or appropriate,
to request "cold comfort letters" or similar assurances from KPMG
Peat Marwick or other accounting firms with audit responsibility for
financial statements included in the Proxy Statement regarding the
pro forma financial statements and unaudited financial statements to
be included in the Proxy Statement and such other matters (including
without limitation other securities laws matters affecting Hollinger
or International, as the case may be) as may be identified. Each
party shall have the right to review in advance, and to the extent
practicable each will consult with the other on, all the information
relating to the other party and any of their respective subsidiaries
and associated companies which are to appear in any filing to be
made with, or written materials to be submitted to, any third party
or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the
other party hereto with respect to the obtaining of all permits,
consents, orders, approvals and authorizations of all third parties
and any Governmental Entity necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep
the other party hereto apprised of the status of matters relating to
the transactions contemplated hereby and thereby.
5.3.3. Each party shall promptly furnish each other party with
copies of written communications received by such party, or any of
its subsidiaries, affiliates or associates from, or delivered by any
of the foregoing to, any unrelated party or Governmental Entity in
respect of the transactions contemplated, in each case subject to
applicable laws relating to the exchange of information as advised
by independent counsel in writing.
5.4. REGISTRATION OF CERTAIN SECURITIES.
Upon request by Hollinger following the Closing, International will
use commercially reasonable efforts to cause the registration under the
Securities Act of the shares of Series C Convertible Preferred Stock and Class A
Common Stock issuable to Hollinger or the
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Vendor on exchange of the Series 2 Preferred Stock, such registration to be
effected by means of filing one or more Registration Statements with the SEC
(the "REGISTRATION STATEMENTS"). All costs and expenses of such registration
incurred on or after the date hereof, including any additional SEC filing fees,
will be borne by International. Such Registration Statements may, if so
requested by Hollinger, reflect one or more pledges of shares of Series C
Convertible Preferred Stock and Class A Common Stock issuable in exchange for
the Series 2 Preferred Stock in favour of lenders to Hollinger or the Vendor,
subject to receipt by International of customary assurances to permit sales or
distributions of such securities in accordance with applicable law.
5.5. ASSUMPTIONS OF OBLIGATIONS UNDER SOGIC AGREEMENT.
International is an entity which is directly or indirectly
controlled by Hollinger and undertakes to assume all of the obligations of
Hollinger under the agreement executed among Hollinger, UniMedia Group and la
Societe Generale des Industries Culturelles on August 8, 1988 (the "SOGIC
AGREEMENT") as if it were a party to the SOGIC Agreement.
5.6. NON-COMPETITION
5.6.1. Hollinger agrees that neither it nor any of its subsidiaries
will, for a period of five (5) years after the Closing Date, without
the prior written consent of International, either directly or
indirectly, undertake or carry on or be engaged or have any
financial interest in any newspaper, shopper or other similar
publication carrying advertising, for which the circulation or
distribution is primarily in the communities where the Newspapers
are currently published or within a radius of ten (10) miles of the
centre point of any such community (such geographic area being
hereinafter referred to as the "Restricted Area"); provided,
however, that the foregoing provisions shall not apply to (A) the
publication or the future acquisition of any publication that is
circulated to a national market so long as such newspaper does not
publish or distribute any regional, community, zoned or similar
edition in the Restricted Area; (B) the ownership, directly or
indirectly, of less than five percent (5%) of any class of
securities of any publicly-traded company; or (C) for greater
certainty, prohibit the interest that Hollinger has in HCPH, Southam
Inc., The Financial Post Company, Saturday Night Magazine Limited,
and their respective subsidiaries and operations.
5.6.2. Hollinger acknowledges that in the event of any violation of
the covenants contained in this section 5.6.1 hereof,
International's damages will be difficult to ascertain and
International's remedy at law will be inadequate. Accordingly,
Hollinger agrees that, in addition to such remedies as International
may have at law, International shall be entitled to specific
performance of such covenants hereunder and to an injunction to
prevent any continuing violation thereof.
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5.6.3. If any of the provisions of or covenants contained in this
section hereof is hereafter construed to be invalid or unenforceable
in any jurisdiction, the same shall not affect the remainder of the
provisions or the enforceability thereof in any other jurisdiction,
which shall be given full effect, without regard to the invalidity
or unenforceability in such other jurisdiction. If any of the
provisions of or covenants contained herein is held to be
unenforceable in any jurisdiction because of the duration or
geographical scope thereof, the parties agree that the court making
such determination shall have the power to reduce the duration or
geographical scope of such provision or covenant and, in its reduced
form, said provision or covenant shall be enforceable; provided,
however, that the determination of such court shall not affect the
enforceability of section 5.6.1 in any other jurisdiction.
5.7. OWNERSHIP CHANGES
Hollinger owns, through wholly-owned subsidiaries, 50 Series A
Preferred Shares in the capital of HCPH (the "HCPH SHARES"), representing 50% of
the outstanding voting stock of HCPH. Hollinger will not, either directly or
indirectly through its subsidiaries or affiliates, issue, sell, exchange,
assign, transfer, dispose, mortgage, charge, pledge, encumber, grant a security
interest in or otherwise deal with any security of Hollinger or any of its
subsidiaries or affiliates, in any manner which is materially prejudicial to the
direct or indirect interests of International in the Canadian Newspaper Group by
reason of changes in ownership that would cause a material adverse impact on the
profitability, ownership or operation of the Canadian Newspaper Group by reason
of section 19 of the Income Tax Act (Canada).
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS OF INTERNATIONAL.
The obligations of International to consummate the transactions
contemplated hereby are subject to the fulfilment of the following conditions,
any one or more of which may be waived by International:
6.1. REPRESENTATIONS AND WARRANTIES TRUE.
At the Closing Date, the representations and warranties of Hollinger
and the Vendor contained in this Agreement shall be true and correct in all
material respects and at and as of such date and time as if made on and as of
such date and time, other than any such representations and warranties which are
made as of a specified earlier date, which shall be true and correct in all
material respects at and as of such date; and at and as of the Closing Date
Hollinger and the Vendor shall have delivered to International certificates to
such effect signed by an officer of the relevant company acceptable to
International.
6.2. PERFORMANCE BY HOLLINGER AND THE VENDOR.
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From the date of this Agreement, each of the obligations of
Hollinger and the Vendor to be performed by it on or before the Closing Date
pursuant to the terms of this Agreement shall have been duly performed in all
material respects at the Closing Date; and at and as of the Closing Date,
Hollinger and the Vendor shall have delivered to International certificates to
such effect signed by an officer of the relevant company acceptable to
International.
6.3. LEGAL OPINIONS.
International shall have been furnished with opinions of Tory Tory
DesLauriers & Binnington, Lapointe Rosenstein and Stewart McKelvey Stirling
Scales, each dated as of the Closing Date and substantially in the forms
attached hereto as Schedules 6.3(a), 6.3(b) and 6.3(c), respectively,
to this Agreement.
6.4. NO SUITS OR PROCEEDINGS CHALLENGING TRANSACTION.
There shall be no pending or threatened suits, actions, proceedings,
governmental inquiries or investigations of any kind which seek to enjoin,
prevent or otherwise interfere with the transactions contemplated hereby or
otherwise question the validity or legality of such transactions.
6.5. CERTAIN CONSENTS.
Hollinger, the Vendor, the Company and International shall have
obtained all consents from unrelated parties and Governmental Entities required
to consummate the transactions contemplated by this Agreement.
6.6. INCOME TAX ACT.
Prior to the Closing Date there shall have been no amendment to the
Income Tax Act (Canada) including Section 19 thereof that would have a material
adverse impact on the profitability, ownership or operation by the Company of
the Newspapers after giving effect to the transactions contemplated hereby and
there shall have been no bill read in Parliament that would have such material
adverse impact if enacted into law.
6.7. RBC DOMINION FAIRNESS OPINION.
International shall have obtained from RBC Dominion Securities an
opinion in form satisfactory to the Special Committee to the effect that the
aggregate consideration to be paid for the Canadian Newspaper Group by
International (either directly, or indirectly through HCPH) pursuant to (i) this
Agreement, (ii) the UniMedia B Agreement, (iii) the Sterling Purchase Agreement
and (iv) the Exchange Agreement (including the term sheets attached
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20
thereto) is fair, from a financial point of view, to International and the
holders of International's common stock and Series B Preferred Stock other than
Hollinger.
6.8. EXCHANGE AGREEMENT.
Hollinger, the Vendor and International shall have entered into an
Exchange Agreement (the "Exchange Agreement") as of the Closing Date in
substantially the form attached hereto as Schedule 6.8.
6.9. OTHER TRANSACTION DOCUMENTS.
International shall have received on or prior to the Closing Date:
6.9.1. certificates evidencing the incumbency of the
officers of Hollinger and the Vendor executing this Agreement on
its behalf and of their authority to do so;
6.9.2. certified copies of the Articles and By-laws (or
similar governing documents) of the Company;
6.9.3. certificates of status (or the equivalent under the
laws of their respective jurisdictions of incorporation) of
recent date for Hollinger, the Vendor and the Company;
6.9.4. certified copies of the resolutions of the Board of
Directors of the Vendor authorizing the transactions contemplated
hereunder to take place on the Closing Date;
6.9.5. stock certificates representing all of the Shares registered
in the name of the Vendor together with customary searches of public
records in Nova Scotia reasonably satisfactory to counsel to
International and to its lenders confirming that such interests are
free and clear of any Encumbrances; and
6.9.6. customary documentation reasonably satisfactory to counsel to
International and to its lenders confirming (A) an undertaking from
Hollinger's lenders to release all obligations of the Company and
its subsidiaries with respect to indebtedness of Hollinger, the
Vendor or of any other person and the Encumbrances arising under the
credit facilities described in Schedule 3.2.2(A) and (B) that the
shares of the Company and the Newspaper Intangible Assets are free
and clear of any other Encumbrances other than Permitted
Encumbrances.
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ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF HOLLINGER AND THE VENDOR
The obligations of Hollinger and the Vendor to consummate the
transactions contemplated hereby are subject to the fulfilment of the following
conditions, any one or more of which may be waived by Hollinger:
7.1. REPRESENTATIONS AND WARRANTIES TRUE.
As of the Closing Date, the representations and warranties of
International contained in this Agreement shall be true and correct in all
material respects at and as of such date and time as if made on and as of such
date and time, other than any such representations and warranties which are made
as of a specified earlier date, which shall be true and correct in all material
respects at and as of such specified date; and at and as of the Closing Date
International shall have delivered to Hollinger and the Vendor a certificate to
such effect signed by an officer of International acceptable to Hollinger and
the Vendor.
7.2. PERFORMANCE BY INTERNATIONAL.
From the date of this Agreement, each of the obligations of
International to be performed on or before the Closing Date pursuant to the
terms of this Agreement shall have been duly performed in all material respects
at the Closing Date and at and as of the Closing Date International shall have
delivered to Hollinger and the Vendor a certificate to such effect signed on
behalf of International by an officer of International acceptable to Hollinger
and the Vendor.
7.3. LEGAL OPINIONS.
Hollinger and the Vendor shall have been furnished with the opinion
of Kirkpatrick & Lockhart LLP dated as of the Closing Date and substantially in
the form attached hereto as Schedule 7.3 to this Agreement.
7.4. NO SUITS OR PROCEEDINGS CHALLENGING TRANSACTION.
There shall be no pending or threatened suits, actions, proceedings,
governmental inquiries or investigations of any kind which seek to enjoin,
prevent or otherwise interfere with the transactions contemplated hereby or
otherwise question the validity or legality of such transactions.
7.5. CERTAIN CONSENTS.
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Hollinger, the Vendor, the Company and International shall have
obtained all consents from unrelated parties and Governmental Entities required
to consummate the transactions contemplated by this Agreement.
7.6. INCOME TAX ACT.
Prior to the Closing Date there shall have been no amendment to the
Income Tax Act (Canada), including Section 19 thereof that would have a material
adverse impact on the profitability, ownership or operation by the Company of
the Newspapers after giving effect to the transactions contemplated hereby and
there shall have been no bill read in Parliament that would have such material
adverse impact if enacted into law.
7.7. EXCHANGE AGREEMENT.
Hollinger, the Vendor and International shall have entered into the
Exchange Agreement as of the Closing Date.
7.8. RBC DOMINION FAIRNESS OPINION.
International shall have obtained from RBC Dominion Securities an
opinion in form satisfactory to the Special Committee to the effect that the
aggregate consideration to be paid for the Canadian Newspaper Group by
International (either directly, or indirectly through HCPH) pursuant to (i) this
Agreement, (ii) the UniMedia B Agreement, (iii) the Sterling Purchase Agreement
and (iv) the Exchange Agreement (including the term sheets attached thereto) is
fair, from a financial point of view, to International and the holders of
International's common stock and Series B Preferred Stock other than Hollinger.
7.9. OTHER TRANSACTION DOCUMENTS.
Hollinger and the Vendor shall have received on or prior to the
Closing Date:
7.9.1. certificate evidencing the incumbency of the officers
of International executing this Agreement on its behalf and their
authority to do so;
7.9.2. certified copy of the Restated Certificate of
Incorporation or similar charter documents and By-laws of
International including without limitation the Certificates of
Designations creating the Series 2 Preferred Stock;
7.9.3. certificate of good standing of recent date for
International; and
7.9.4. certified copies of the resolutions of the Board of
Directors of International and of the Special Committee
authorizing or recommending the transactions contemplated
hereunder to take place on the Closing Date.
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ARTICLE 8.
TERMINATION.
8.1. TERMINATION BY MUTUAL CONSENT.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date by the mutual
consent of Hollinger (on behalf of itself and the Vendor) and International by
action of their respective Boards of Directors.
8.2. TERMINATION BY EITHER HOLLINGER OR INTERNATIONAL.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of the Board of Directors of either Hollinger
(acting on behalf of itself and the Vendor) or International if: (i) the Closing
shall not have occurred on or before December 31, 1997; or (ii) a Governmental
Entity of competent jurisdiction shall have issued an order, or taken any other
action, permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby, and such order or other
action shall have become final and not appealable; provided, however, that in
the case of a termination pursuant to clause (i) above, the terminating party
shall not have breached or failed to perform in any material respect its
obligations under this Agreement.
8.3. TERMINATION BY HOLLINGER.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date by action of the
Board of Directors of Hollinger (acting on behalf of itself and the Vendor) if
there has been a material breach or failure to perform by International of any
covenant or agreement contained in this Agreement which is not curable or, if
curable, is not cured within five (5) days after written notice of such breach
is given by Hollinger to International.
8.4. TERMINATION BY INTERNATIONAL.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned prior to the Closing Date by action of the Board of
Directors of International if there has been a material breach or failure to
perform by Hollinger or the Vendor of any covenant or agreement contained in
this Agreement which is not curable or, if curable, is not cured within five (5)
days after written notice of such breach is given by International to Hollinger
or the Vendor as the case may be.
8.5. SPECIAL COMMITTEE.
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In any event in which International intends to consent to or seek
termination of this Agreement pursuant to this Article 8, such action must be
taken by the Board of Directors of International following receipt of a
favourable recommendation thereof by the Special Committee.
8.6. EFFECT OF TERMINATION AND ABANDONMENT.
In the event of the termination and abandonment of this Agreement,
Hollinger, the Vendor and International shall have no obligation or liability to
the others.
ARTICLE 9.
INDEMNIFICATION.
9.1. INDEMNITY
Hollinger and the Vendor shall, jointly and severally, indemnify and
save International harmless for and from any loss, damages or deficiencies
suffered by International or by the Company or any subsidiary thereof as a
result of any breach of representation, warranty or covenant on the part of
Hollinger or the Vendor contained in this Agreement and all claims, demands,
costs and expenses, including legal fees, in respect of the foregoing.
9.2. LIMITATIONS
The obligations of Hollinger and the Vendor to indemnify
International in accordance with the foregoing shall be subject to the
following:
9.2.1. any claim arising as a result of a breach of (i) a
representation or warranty contained in Article 3 or (ii) a covenant
contained in Article 5 shall be made not later than the date on
which pursuant to section 10.1 such representation, warranty or
covenant terminated;
9.2.2. their obligation to indemnify International (except in
respect of any obligations to indemnify arising from section 3.10)
shall only apply if indemnification claims, in the aggregate, exceed
Cdn.$1,000,000 in which case they shall be liable therefor only to
the extent that such claims exceed Cdn. $500,000 to a maximum
aggregate amount equal to the Total Purchase Price.
ARTICLE 10.
MISCELLANEOUS.
10.1. SURVIVAL.
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Only the agreements and covenants of the parties contained in
Articles 5 and 10, and Section 8.6 hereof shall survive the Closing Date without
time limit, except as otherwise specified therein. All representations,
warranties and other agreements and covenants shall be deemed to be conditions
of the transactions contemplated hereby and shall not survive the Closing Date;
provided, however, that the representations and warranties of Hollinger and the
Vendor contained in Sections 3.1 and 3.2 hereof and International's
representations and warranties contained in Sections 4.1 and 4.2 hereof shall
survive the Closing Date without time limit; and the representations and
warranties of Hollinger and the Vendor contained in Sections 3.3, 3.4, 3.5, 3.6,
3.7, 3.8, 3.9, 3.10, 3.11, 3.12.2, 3.13 and 3.14, International's
representations and warranties contained in Sections 4.3, 4.4, 4.5 and 4.6 shall
survive until the second anniversary of the Closing Date and the representations
and warranties by Hollinger and the Vendor made in Section 3.12.1 shall survive
for the applicable statute of limitations.. If the transactions contemplated
hereby shall be abandoned and this Agreement terminated, only the agreements and
covenants of the parties contained in Sections 10.1, 10.2, 10.5, 10.10, 10.12
and 10.14 hereof shall survive such abandonment and termination.
10.2. CERTAIN EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the party incurring such costs
and expenses.
10.3. DOLLAR AMOUNTS.
Except as expressly indicated, all dollar amounts in this Agreement
are stated in and shall be interpreted to be in United States dollars.
10.4. FURTHER ASSURANCES.
International, Hollinger and the Vendor shall use its reasonable
commercial efforts to perform and fulfil all conditions and obligations on its
part to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be fully carried out. From
time to time as and when requested by International or its successors or
assigns, the Vendor shall execute and deliver such deeds and other instruments
of transfer and shall take or cause to be taken such further or other actions as
shall be necessary or advisable in order to carry out the purpose and intention
of this Agreement or to vest or perfect in International, or to confirm of
record or otherwise to International, title to and possession of all of the
Shares. From time to time as and when requested by Hollinger, the Vendor or
their successors and assigns, International shall execute and deliver such
further deeds and other instruments and shall take or cause to be taken such
further or other actions as shall be necessary or advisable in order to carry
out the purpose and intention of this Agreement.
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10.5. PRESS RELEASES, ANNOUNCEMENTS AND COMMUNICATIONS.
No press release or other public announcements related to this
Agreement or the transactions contemplated hereby will be issued after the date
hereof without the prior approval of Hollinger and International, such approval
not to be unreasonably withheld or delayed, except for any public disclosure
that Hollinger or International in good faith believes is required by law or by
obligations relating to any securities exchange or market. The parties agree to
use reasonable efforts to consult with each other before taking any action that
would require the issuance of any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby.
10.6. AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented at any time
prior to or after the Closing Date, but only by written agreement that
identifies this Agreement and is signed by all of the parties hereto. Any
amendment, modification or supplement hereto shall be effective as to
International only if in writing signed by the Chairman of the Special Committee
on behalf of International.
10.7. WAIVER OF COMPLIANCE; CONSENTS.
Except as otherwise provided in this Agreement, any failure of any
of the parties to comply with any obligation, representation, warranty,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, representation, warranty, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing.
International shall not waive, nor shall International be deemed to have waived,
any obligations of Hollinger or the Vendor hereunder or any other benefits to
International arising under this Agreement unless approved by the Board of
Directors of International following receipt of a favourable recommendation
thereof by the Special Committee.
10.8. NOTICES.
All notices, demands and other communications hereunder shall be in
writing and shall be deemed to have been given when received if delivered by
hand, courier or by facsimile transmission to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to Hollinger or the Vendor:
Hollinger Inc.
10 Toronto Street
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Toronto, Ontario
Canada M5C 2B7
Attention: Peter Y. Atkinson
Vice-President and General Counsel
Facsimile No.: (416) 364-2088
Copies to:
Tory Tory DesLauriers & Binnington
Suite 3000, Aetna Tower
P.O. Box 270
Toronto-Dominion Centre
Toronto, Ontario
Canada M5K 1N2
Attention: Beth DeMerchant
Facsimile No.: (416) 865-7380
Lapointe Rosenstein
1250 Rene Levesque Blvd. West
Suite 1400
Montreal, P.Q.
Canada H3B 5E9
Attention: Mark Rosenstein
Facsimile No.: (514) 925-9001
(b) If to International:
Hollinger International Inc.
401 N. Wabash Avenue
Chicago, Illinois 60611
U.S.A.
Attention: Kenneth L. Serota,
Vice President - Law and Finance and Secretary
Facsimile No.: (312) 321-0629
Copies to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
U.S.A.
Attention: Jerry H. Owens
Facsimile No.: (412) 355-6501
(c) If to the Special Committee:
Hollinger International Inc.
Special Committee
c/o Richard N. Perle, Chairman
5 Grafton Street
Chevy Chase, Maryland 20815
U.S.A.
Facsimile No.: (301) 652-1120
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Copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
U.S.A.
Attention: Dennis J. Block
Facsimile No.: (212) 310-8007
10.9. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned by any party hereto without
the prior written consent of the other parties hereto. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and assigns; provided,
however, that International may assign its rights and interests (but not its
obligations) hereunder to HCPH or another subsidiary of International.
10.10. GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in accordance with
the laws of Ontario. Each party hereto submits to the non-exclusive jurisdiction
of the courts of competent jurisdiction of Ontario in connection with any
dispute arising out of or related to this Agreement.
10.11. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
an original, and all of which together shall constitute one and the same
instrument.
10.12. NO THIRD PARTY BENEFICIARIES.
No person who is not a party to this Agreement shall be deemed to be
a beneficiary of any provision of this Agreement, and no such person shall have
any claim, cause of action, right or remedy pursuant to this Agreement.
10.13. INTERPRETATION.
The descriptive headings contained in this Agreement are for
convenience of reference only and shall have no effect on the interpretation or
meaning hereof. The word "Agreement" refers to the body of this Agreement and
all Schedules attached hereto or referred to herein. "Herein," "hereof" and the
like refer to this Agreement as a whole. As used in this
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Agreement, the singular shall include the plural, the plural shall include the
singular and each gender shall include all genders.
10.14. ENTIRE AGREEMENT.
This Agreement, including the Schedules attached hereto (and any
other instruments executed and delivered at the Closing), embodies the entire
agreement and understanding of the parties hereto with respect to the transfer
of the Shares to International. The Schedules hereto are an integral part of
this Agreement and are incorporated by reference herein. This Agreement
supersedes all prior discussions, negotiations, agreements and understandings
(both written and oral) between the parties with respect to the transfer of the
Shares to International hereunder.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
HOLLINGER INC.
By: /s/ Peter Y. Atkinson
-------------------------------
Peter Y. Atkinson
Vice-President and General Counsel
UNIMEDIA HOLDING COMPANY
By: /s/ Peter Y. Atkinson
-------------------------------
Peter Y. Atkinson
Vice-President and General Counsel
HOLLINGER INTERNATIONAL INC.
By: /s/ Kenneth L. Serota
-------------------------------
Kenneth L. Serota
Vice President-Law and Finance and
Secretary
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UNIMEDIA CLASS B STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 18, 1997
AMONG
HOLLINGER INC.,
UNIMEDIA HOLDING COMPANY
AND
HOLLINGER INTERNATIONAL INC.
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TABLE OF CONTENTS
ARTICLE 1.
SALE AND PURCHASE OF SHARES.
1.1. Purchase Price.......................................................... 2
ARTICLE 2.
CLOSING; DELIVERY OF SHARES.
2.1. Date and Place.......................................................... 2
2.2. Delivery of Shares...................................................... 2
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF HOLLINGER AND THE VENDOR.
3.1. Due Incorporation; Authority Concerning this Agreement.................. 3
3.2. Capitalization; Title to Shares and Assets; Subsidiaries................ 3
3.3. Newspaper Financial Statements.......................................... 5
3.4. Indebtedness; Absence of Undisclosed Liabilities........................ 5
3.5. Governmental Filings.................................................... 6
3.6. No Violations........................................................... 6
3.7. Litigation and Other Proceedings........................................ 6
3.8. Compliance with Laws.................................................... 7
3.9. Material Facts Disclosed................................................ 7
3.10. Brokers and Finders..................................................... 7
3.11. Securities Act Compliance............................................... 7
3.12. Taxes................................................................... 8
3.13. Employment Matters...................................................... 9
3.14. Certain Forecasts....................................................... 9
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL.
4.1. Due Incorporation of International; Authority Concerning this Agreement.
9
4.2. Capitalization..........................................................10
4.3. Governmental Filings....................................................11
4.4. No Violations...........................................................11
4.5. Brokers and Finders.....................................................12
4.6. Private Offering........................................................12
ARTICLE 5.
COVENANTS OF THE PARTIES.
5.1. Standstill..............................................................12
5.2. International Stockholders' Approval....................................13
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5.3. Filings; Other Actions..................................................14
5.4. Registration of Certain Securities......................................15
5.5. Assumptions of Obligations under SOGIC Agreement........................15
5.6. Non-Competition.........................................................15
5.7. Ownership Changes.......................................................16
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS OF INTERNATIONAL.
6.1. Representations and Warranties True.....................................17
6.2. Performance by Hollinger and the Vendor.................................17
6.3. Legal Opinions..........................................................17
6.4. No Suits or Proceedings Challenging Transaction.........................17
6.5. Certain Consents........................................................17
6.6. Income Tax Act..........................................................18
6.7. RBC Dominion Fairness Opinion...........................................18
6.8. Exchange Agreement......................................................18
6.9. Other Transaction Documents.............................................18
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF HOLLINGER AND THE VENDOR.
7.1. Representations and Warranties True.....................................19
7.2. Performance by International............................................19
7.3. Legal Opinions..........................................................19
7.4. No Suits or Proceedings Challenging Transaction.........................20
7.5. Certain Consents........................................................20
7.6. Income Tax Act..........................................................20
7.7. Exchange Agreement......................................................20
7.8. RBC Dominion Fairness Opinion...........................................20
7.9. Other Transaction Documents.............................................20
ARTICLE 8.
TERMINATION.
8.1. Termination by Mutual Consent...........................................21
8.2. Termination by either Hollinger or International........................21
8.3. Termination by Hollinger................................................21
8.4. Termination by International............................................21
8.5. Special Committee.......................................................22
8.6. Effect of Termination and Abandonment...................................22
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ARTICLE 9.
INDEMNIFICATION.
9.1. Indemnity...............................................................22
9.2. Limitations.............................................................22
ARTICLE 10.
MISCELLANEOUS.
10.1. Survival................................................................23
10.2. Certain Expenses........................................................23
10.3. Dollar Amounts..........................................................23
10.4. Further Assurances......................................................23
10.5. Press Releases, Announcements and Communications........................24
10.6. Amendment and Modification..............................................24
10.7. Waiver of Compliance; Consents..........................................24
10.8. Notices.................................................................24
10.9. Assignment..............................................................27
10.10 Governing Law and Jurisdiction..........................................27
10.11 Counterparts............................................................27
10.12 No Third Party Beneficiaries............................................27
10.13 Interpretation..........................................................27
10.14 Entire Agreement .......................................................27
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LIST OF SCHEDULES*
Schedule A List of Newspapers and Related Publications
Schedule 1.1.3 Form of Certificate of Designations of Series 1 Preferred
Stock
Schedule 3.2.1 Bank Indebtedness of Hollinger and Encumbrances Affecting
the Shares
Schedule 3.2.2(A) Credit Facilities of the Company and its Subsidiaries
Schedule 3.2.2(B) Permitted Encumbrances
Schedule 3.2.2(C) Registrations to be Discharged
Schedule 3.2.2(D) Encumbrances Relating to Leased Assets and Properties
Schedule 3.2.3 Shares Owned by the Company and it Subsidiaries and
Encumbrances and Agreements Relating Thereto
Schedule 3.4 Undisclosed Liabilities
Schedule 3.5 Governmental Filings or Consents
Schedule 3.11.3 Form of Stock Certificate Legends
Schedule 3.13 Employment Matters
Schedule 6.3(a) Form of Opinion of Tory Tory DesLauriers & Binnington
Schedule 6.3(b) Form of Opinion of Lapointe Rosenstein
Schedule 6.3(c) Form of Opinion of Stewart McKelvey Stirling Scales
Schedule 6.8 Form of Exchange Agreement
Schedule 7.3 Form of Opinion of Kirkpatrick & Lockhart LLP
* Hollinger Inc. agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request.
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INDEX OF DEFINED TERMS
DEFINED TERMS SECTION IN WHICH DEFINED
- ------------- ------------------------
Class A Stock Recitals
Class B Stock Recitals
Cash Purchase Price Section 1.1.1
Class A Common Stock Section 4.2
Class B Common Stock Section 4.2
Closing Section 2.1
Closing Date Section 2.1
Company Recitals
Encumbrances Section 2.2
Exchange Act Section 4.3
Governmental Entity Section 3.5
HCPH Section 5.1.3
HCPH Shares Section 5.7
Hollinger Recitals
International Recitals
International Common Stock Section 4.2
International 1994 Stock Option Plan Section 4.2
International Preferred Stock Section 4.2
International Proposals Section 5.2
Newspaper Financial Statements Section 3.3
Newspaper Tangible Assets Recitals
Newspapers Recitals
Permitted Encumbrances Section 3.2.2
PRIDES Section 4.2
Preliminary Proxy Statement Section 5.3.1
Proceedings Section 3.7
Proxy Statement Section 5.3.1
RBC Dominion Securities Section 4.5
Registration Statements Section 5.4
SEC Section 3.11.2
Securities Act Section 3.11.1
Series 1 Preferred Stock Section 1.1.3
Series A Preferred Stock Section 4.2
Series B Preferred Stock Section 4.2
Shares Section 1.1.1
SOGIC Agreement Section 5.5
Special Committee Section 3.14
Total Purchase Price Section 1.1.1
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DEFINED TERMS SECTION IN WHICH DEFINED
- ------------- ------------------------
UniMedia Group Recitals
Vendor Recitals
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UNIMEDIA CLASS B STOCK PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, made as of this 18th day of April, 1997,
among HOLLINGER INC., a corporation continued under the laws of Canada
("HOLLINGER"), and UNIMEDIA HOLDING COMPANY, a company formed under the laws of
Nova Scotia (the "VENDOR"), and HOLLINGER INTERNATIONAL INC., a Delaware
corporation ("INTERNATIONAL")
WITNESSETH:
WHEREAS, Hollinger has agreed to transfer to International its
indirect interests in the daily newspapers and related publications listed on
Schedule A attached hereto and certain other assets related thereto
(collectively, the "NEWSPAPERS");
WHEREAS, the Vendor is a wholly-owned subsidiary of Hollinger;
WHEREAS, prior to the consummation of the sale transaction
contemplated hereby, Hollinger intends to reorganize its interests in the
Newspapers with the result that the Vendor will own all of the outstanding
shares in the capital of UniMedia Newspapers Company, a Nova Scotia unlimited
liability company (the "COMPANY"), which will own directly the intangible assets
of the Newspapers and all of the outstanding capital stock of UniMedia Inc., a
corporation incorporated under the laws of Canada which in turn owns all of the
outstanding capital stock of UniMedia Group Inc. ("UNIMEDIA Group"), a Quebec
company which owns the tangible assets of the Newspapers (collectively, the
"NEWSPAPER TANGIBLE ASSETS");
WHEREAS, the outstanding shares of the Company consists of two
classes of stock, 6600 shares of Class A Stock, without par value (the "CLASS A
STOCK"); and 1100 shares of Class B Stock, without par value (the "CLASS B
STOCK") which entitles the holder thereof to receive dividends payable out of
funds or other property, legally available for the purpose, and attributable to
the UniMedia Inc. shares and to receive upon liquidation of the Company the
UniMedia Inc. shares;
WHEREAS, Hollinger is proposing that the Vendor sell all of the
outstanding shares of the Class B Stock of the Company to International in
exchange for cash and shares of Series 1 Preferred Stock of International;
NOW THEREFORE, in consideration of the premises and the respective
covenants herein contained, the parties, intending to be legally bound, hereby
agree as follows:
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ARTICLE 1.
SALE AND PURCHASE OF SHARES.
1.1. PURCHASE PRICE.
1.1.1. Upon the terms and subject to the conditions set forth
herein, the Vendor shall sell, transfer and deliver to International
at Closing (as hereinafter defined) all of the issued and
outstanding shares of the Class B Stock of the Company
(collectively, the "SHARES") for a purchase price of Cdn.
$23,367,000 (the "TOTAL PURCHASE PRICE"), subject to adjustment
pursuant to section 1.1.2, payable as follows: (x) as to
Cdn.$100,000, in cash in immediately available funds in Canadian
dollars (the "CASH PURCHASE PRICE") and (y) as to Cdn.$23,267,000,
in 23,267 newly issued shares of Series 1 Preferred Stock.
1.1.2. The Total Purchase Price shall be increased by an amount
equal to interest on the Total Purchase Price calculated from and
including January 1, 1997 to but excluding the Closing Date at an
annual rate equal to 7.75%. The increase to the Total Purchase Price
resulting from the adjustment set out herein shall be paid in
Canadian dollars by International to the Vendor within 60 days of
the Closing Date.
1.1.3. As used herein, "SERIES 1 PREFERRED STOCK" means
Series 1 Nonvoting Preferred Stock, $.01 par value of International
having the relative rights and preferences set forth in Schedule
1.1.3 attached hereto.
ARTICLE 2.
CLOSING; DELIVERY OF SHARES.
2.1. DATE AND PLACE.
Subject to the fulfilment or waiver of the respective covenants and
conditions set forth herein, the closing of the transactions contemplated hereby
(the "CLOSING") will take place at the offices of Tory Tory DesLauriers &
Binnington, Suite 3000, Aetna Tower, Toronto-Dominion Centre, Toronto, Ontario
M5K 1N2, at 10:00 a.m., local time, on the first business day subsequent to the
fulfilment or waiver of all conditions set forth in Articles 6 and 7 hereof, or
at such other time and place as the parties hereto may determine (the date on
which the Closing occurs being hereinafter referred to as the "CLOSING DATE").
2.2. DELIVERY OF SHARES.
At the Closing, The Vendor shall deliver stock certificates
representing all of the Shares, accompanied by stock transfer forms duly
executed in blank in respect of the Shares against delivery by International of
the Cash Purchase Price and Series 1 Preferred Stock to be issued in accordance
with section 1.1 hereof registered in the name of the Vendor or its nominee,
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as the Vendor may direct. The Vendor shall deliver the Shares to International
free and clear of any mortgage, pledge, lien, encumbrance, charge, security
interest, pledge, right of first refusal, option, adverse claim of ownership or
use, or any other encumbrance of any kind or nature whatsoever (collectively,
"ENCUMBRANCES").
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF HOLLINGER AND THE VENDOR.
Hollinger and the Vendor hereby jointly and severally represent and
warrant to International as follows:
3.1. DUE INCORPORATION; AUTHORITY CONCERNING THIS AGREEMENT.
3.1.1. Each of Hollinger, UniMedia Inc. and UniMedia Group is a
corporation subsisting under the laws of its jurisdiction of
incorporation. Each of the Vendor and the Company is an unlimited
liability company existing under the laws of Nova Scotia. Each of
Hollinger, the Vendor, the Company, UniMedia Inc. and UniMedia Group
has the requisite corporate power and authority to carry on its
business and operations as presently conducted by it and to own,
lease and operate its properties and assets. Hollinger and the
Vendor each has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder, and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, the performance by
Hollinger and the Vendor of their respective obligations hereunder,
and the consummation by Hollinger and the Vendor of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Hollinger and the Vendor.
This Agreement has been duly and validly executed and delivered by
Hollinger and the Vendor and (assuming due and valid authorization,
execution and delivery by International) constitutes the legal,
valid and binding agreement of Hollinger and the Vendor, enforceable
in accordance with its terms.
3.1.2. There has been no order or resolution for the winding
up of any of the Company, UniMedia Inc. or UniMedia Group, and no
appointment of a receiver, administrative receiver or
administrator with respect thereto.
3.2. CAPITALIZATION; TITLE TO SHARES AND ASSETS; SUBSIDIARIES.
3.2.1. The authorized share capital of the Company consists solely
of Class A Shares and Class B Shares, of which 6600 Class A Shares
and 1100 Class B Shares are issued and outstanding and held by the
Vendor. The Shares and the Class A Stock constitute the only voting
securities of the Company, and the Shares are validly issued, fully
paid and non-assessable. Except as set forth in Schedule 3.2.1
attached hereto, the Vendor has good and marketable title to the
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Shares, free and clear of any Encumbrances, and has full right and
authority to transfer and deliver the Shares to International as
contemplated hereby. Upon consummation of the transactions
contemplated hereby, the Vendor will have transferred to
International good and marketable title to the Shares, free and
clear of all Encumbrances. There are no outstanding or authorized
subscriptions, agreements (other than this Agreement), options,
warrants, calls or other commitments, rights (including conversion
rights) or privileges (whether preemptive or contractual) pursuant
to which the Company is or may become obligated to issue, sell or
transfer any shares of its capital or any debt or other security of
the Company which is convertible or exchangeable into, or evidences
the right to subscribe for, any share capital of the Company. There
are no shareholder agreements, voting trust agreements, rights of
first refusal, options to purchase, or restrictions upon transfer or
alienability of or with respect to the Shares, or any other similar
agreement or understanding otherwise affecting the Shares.
3.2.2. The Company owns, or as of Closing will own, directly or
through wholly-owned subsidiaries, good and marketable title, free
and clear of any Encumbrances, to all of the tangible and intangible
assets of every kind and nature (including intellectual property),
used in or held for use in the business and operations of the
Newspapers as historically conducted by UniMedia Inc. and its
subsidiaries, except for (A) Encumbrances arising under the credit
facilities of UniMedia Inc. and its subsidiaries described on
Schedule 3.2.2(A), all of which will be released and terminated as
of the Closing Date; (B) Encumbrances and leasehold interests in
real properties described on Schedule 3.2.2(B) which will remain in
effect as of the Closing (collectively, the "PERMITTED
ENCUMBRANCES"); (C) Encumbrances in effect as of the Closing Date
described on Schedule 3.2.2(C) which will be discharged at the
expense of the Vendor as soon as practicable, but in any event not
less than 28 days after the Closing Date; and (D) Encumbrances
relating to leased assets and properties described on Schedule
3.2.2(D).
3.2.3. Except as set forth on Schedule 3.2.3 attached hereto, the
Company does not own directly or indirectly through subsidiaries
securities representing or convertible into more than 5% of the
outstanding capital stock of any corporation or more than 5% of the
equity interest in any partnership or other entity. The authorized
and issued share capital and any other outstanding securities of
each such corporation, partnership or other entity are set forth on
Schedule 3.2.3. Except as set forth on Schedule 3.2.3, in the case
of each such corporation, partnership or other entity, the
securities owned by the Company constitute all of the issued and
outstanding share capital of such corporation, partnership or other
entity, and all the securities are validly issued, fully paid and
non-assessable with no personal liability attached to the ownership
thereof. Except as set forth on
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Schedule 3.2.3, the Company has good and marketable title to the
securities of the corporations, partnerships and other entities
reflected on Schedule 3.2.3, free and clear of all Encumbrances.
Except as set forth on Schedule 3.2.3, there are no outstanding or
authorized subscriptions, agreements (other than this Agreement),
options, warrants, calls or other commitments, rights (including
conversion rights) or privileges (whether preemptive or contractual)
pursuant to which any such corporation, partnership or other entity
is or may become obligated to issue, sell or transfer any shares of
its capital or any debt or other security convertible into or
evidencing the right to subscribe for any share capital of any such
corporation, partnership or other entity.
3.3. NEWSPAPER FINANCIAL STATEMENTS.
Hollinger and the Vendor have delivered to International an
unaudited balance sheet of the Newspapers and certain other Canadian newspapers
and publications of Hollinger and its subsidiaries other than the Company
(collectively, the "Canadian Newspaper Group") on a combined basis as at
December 31, 1995 and 1996 and unaudited combined statements of earnings,
shareholders' interests and changes in financial position for the periods ended
December 31, 1994, 1995 and 1996 (collectively, the "NEWSPAPER FINANCIAL
STATEMENTS"). The Newspaper Financial Statements (i) have been prepared in
accordance with the books and records of Hollinger, the Company, their
respective subsidiaries and the Newspapers, (ii) present fairly in all material
respects the financial position of the Canadian Newspaper Group as at the dates
indicated and the results of operations and cash flows of the Canadian Newspaper
Group on a combined basis as of the dates and for the respective periods
indicated, (iii) have been prepared in conformity with generally accepted
accounting principles applicable to Canadian companies, and (iv) will be used as
the basis for the financial statements prepared in accordance with generally
accepted accounting principles applicable to U.S. companies to be included in
the Proxy Statement (as defined in Section 5.1).
The Canadian Newspaper Group is comprised of the Newspaper Tangible
Assets, the Newspapers (as defined in the Sterling Purchase Agreement dated the
date hereof made between Hollinger and HCPH (the "Sterling Purchase Agreement"))
and the Newspaper Intangible Assets (as defined in the UniMedia Class A Stock
Purchase Agreement dated the date hereof made between the parties hereto (the
"UniMedia A Agreement")).
3.4. INDEBTEDNESS; ABSENCE OF UNDISCLOSED LIABILITIES.
The Company has no outstanding indebtedness for borrowed money,
capitalized leases or any other indebtedness not incurred in the ordinary course
of business (including without limitation any indebtedness of any affiliate or
associated corporation of the Company or of any other person that is guaranteed,
directly or indirectly, by the Company) other than those matters disclosed in
the Newspaper Financial Statements or the notes thereto or as set forth in
Schedule 3.4 attached hereto. Since December 31, 1996, neither the Company nor
any of the Newspapers has incurred any liabilities or obligations of any nature,
whether accrued, contingent
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or otherwise, which reasonably could be expected to have, individually or in the
aggregate, a material adverse effect on the business, assets, financial
condition or results of operations of the Company or the Newspapers, taken as a
whole.
3.5. GOVERNMENTAL FILINGS.
Except as set forth in Schedule 3.5, no notice, report or other
filing is required to be made by Hollinger, the Vendor, the Company, UniMedia
Inc. or UniMedia Group or any of the Newspapers with, nor is any material
consent, registration, approval, permit or authorization required to be obtained
by them or any of the Newspapers from, any governmental or regulatory authority,
agency, court, commission or other similar entity, domestic or foreign
("GOVERNMENTAL ENTITY") in connection with the execution and delivery of this
Agreement by Hollinger and the Vendor or the consummation by them of the
transactions contemplated hereby.
3.6. NO VIOLATIONS.
The execution and delivery of this Agreement by Hollinger and the
Vendor does not, and the consummation by it of the transactions contemplated
hereby will not, require the consent or approval of any unrelated party or
constitute or result in (i) a breach or violation of, or a default (or an event
which with notice or lapse of time or both would become a default) under,
Hollinger's and the Vendor's Articles or By-laws or the Articles (or other
comparable governing documents) or By-laws of the Company, UniMedia Inc. or
UniMedia Group (ii) a breach or violation of, a default (or an event which with
notice or lapse of time or both would become a default) under, a right to
terminate, amend, cancel, or accelerate, or the creation of a lien, pledge,
security interest or other encumbrance on assets (with or without the giving of
notice or the lapse of time) pursuant to, any provision of any material
agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation of Hollinger, the Vendor, the Company, UniMedia Inc. or UniMedia
Group or any law, statute, rule, ordinance or regulation or judgment, decree,
order, award, injunction or governmental or non-governmental permit or license
to which Hollinger, the Vendor, the Company, UniMedia Inc. or UniMedia Group is
subject or by which any of them or their respective properties is bound or
affected, except, in the case of clause (ii) above, (A) such breaches,
violations, defaults, terminations, amendments, cancellations, accelerations,
encumbrances or changes that, individually or in the aggregate, have not had and
are not reasonably likely to have a material adverse effect on the Company and
(B) certain provisions of the existing loan agreements of Hollinger and UniMedia
Group described in Schedules 3.2.1 and 3.2.2(A) attached hereto.
3.7. LITIGATION AND OTHER PROCEEDINGS.
There is no court, administrative, regulatory or similar proceeding,
arbitration or other dispute settlement procedure, investigation or inquiry by
or before any Governmental Entity or any similar matter or proceeding
(collectively "PROCEEDINGS") against or involving Hollinger, the Vendor, the
Company, UniMedia Inc. or UniMedia Group with respect to any of the Newspapers
(whether in progress or threatened), which if determined adversely would be
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likely to have a material adverse effect on the Company or the Newspapers; and
there is no judgment, decree, injunction, rule, award or order of any
Governmental Entity outstanding against the Company, UniMedia Inc. or UniMedia
Group with respect to any of the Newspapers.
3.8. COMPLIANCE WITH LAWS.
To Hollinger's and the Vendor's best knowledge, the Company is
conducting the business and operations of the Newspapers directly and indirectly
through subsidiaries in compliance with all statutes, laws, rules, regulations,
ordinances, decrees and orders applicable to them and the Newspapers and the
ownership of their assets, which are in effect as of the date hereof (including,
without limitation, those relating to environmental and health and safety
matters), except for violations which would not be likely to have a material
adverse effect on the Company and its consolidated subsidiaries, taken as a
whole. Neither the Vendor, the Company, UniMedia Inc. nor UniMedia Group has
received any written complaint or written notice from any Governmental Entity
alleging that they or any of the Newspapers has violated any law, ordinance,
regulation or order and, to the Vendor's best knowledge, no such complaint or
notice is threatened, except those violations which would not be likely to have
a material adverse effect on the Company and its consolidated subsidiaries,
taken as a whole.
3.9. MATERIAL FACTS DISCLOSED.
Hollinger, its management and the Vendor have disclosed to
International all facts known to them relating to the Newspapers and the cash
flow generated therefrom which could reasonably be expected to be material to an
intending purchaser of the Shares.
3.10. BROKERS AND FINDERS.
Neither Hollinger, the Vendor nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby, except
that Hollinger has retained Dirks Van Essen & Associates as its financial
advisor.
3.11. SECURITIES ACT COMPLIANCE.
3.11.1. The shares of Series 1 Preferred Stock issuable to the
Vendor hereunder and the Class A Common Stock issuable upon exchange
thereof following the approval of the International Proposals by the
stockholders of International are being acquired by the Vendor for
its own account, not as a nominee or agent, and not with a view to
sale or distribution within the meaning of the U.S. Securities Act
of 1933, as amended (the "SECURITIES ACT") and the rules and
regulations thereunder, and the Vendor will not distribute such
shares in violation of the Securities Act.
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3.11.2. The Vendor (A) acknowledges that as of the Closing Date the
shares of Series 1 Preferred Stock issuable hereunder and the Class
A Common Stock issuable upon exchange thereof will not have been
registered under the Securities Act and must be held indefinitely by
the Vendor unless they are subsequently registered under the
Securities Act pursuant to section 5.4 hereof or otherwise or an
exemption from registration is available, (B) is aware that any
routine sale of shares of Class A Common Stock under Rule 144
promulgated by the U.S. Securities and Exchange Commission ("SEC")
under the Securities Act may be made only in limited amounts and in
accordance with the terms and conditions of the Rule and that in
such cases where that Rule is not applicable, compliance with some
other registration exemption will be required, and (C) is aware that
Rule 144 is not presently available for use by the Vendor for resale
of any such shares.
3.11.3. The Vendor acknowledges that the certificates evidencing the
shares of Series 1 Preferred Stock issuable to it hereunder will
bear the legend set forth in Schedule 3.11.3 attached hereto.
3.11.4. As the controlling stockholder of International, Hollinger
confirms that it has had access to all information about the
business and financial condition of International that it requires
in order to effect the transactions contemplated by this Agreement.
3.12. TAXES
3.12.1. Hollinger and the Company (or a predecessor thereof) have
paid, or accrued on the Newspaper Financial Statements, all foreign,
federal, provincial and local taxes in respect of the Newspapers and
filed or caused to be filed all tax returns on or prior to the
Closing Date required to be filed in respect of the Newspapers and
accurately reported in all material respects all information
required to be included on such returns in respect of the
Newspapers. Neither Hollinger in respect of the Newspapers nor the
Company (or any predecessor thereof) has received written notice of
or otherwise has actual knowledge of an audit or examination
currently in progress of any tax return of the Newspapers. There are
no proposed assessments of taxes asserted in writing against
Hollinger or the Company (or any predecessor thereof) in respect of
any of the Newspapers or proposed adjustments asserted in writing to
any tax returns filed by Hollinger or the Company (or any
predecessor thereof) in respect of any of the Newspapers. None of
Hollinger or the Company (or any predecessor thereof) is a party to
any material action or proceeding by any governmental authority for
assessment or collection of taxes or penalties or interest in
respect of the Newspapers, nor has any material claim for such
assessment or collection been asserted in writing against any of
them.
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3.12.2. The Canadian Newspaper Group qualifies as "Canadian
Newspapers or periodicals" as defined in section 19 of the Income
Tax Act (Canada) and, after giving effect to the transactions
contemplated by this Agreement, the UniMedia A Agreement, the
Sterling Purchase Agreement and the Exchange Agreement (as defined
in Section 6.8), the Canadian Newspaper Group will continue to so
qualify.
3.13. EMPLOYMENT MATTERS
Schedule 3.13 sets forth the collective bargaining agreements that
expire within seven (7) years of the date hereof with respect to the Newspapers.
Except as referred to in Schedule 3.13, there is no material work stoppage or
other concerted action or material grievance, strike or dispute existing or
threatened against any of the Newspapers. Except as set out in Schedule 3.13,
Hollinger, the Company and the Newspapers are in material compliance with all
applicable laws and regulations relating to employees of the Newspapers,
including those related to terms and conditions of employment, collective
bargaining and discrimination.
3.14. CERTAIN FORECASTS
The financial forecasts of the Canadian Newspaper Group that were
provided by Hollinger to the special committee of independent directors of the
Board of Directors of International (the "SPECIAL COMMITTEE") (i) were developed
by management of Hollinger and its subsidiaries based on information that
management of Hollinger and the Company prepared in good faith, (ii) utilize
assumptions which management of Hollinger and the Company believe to be
reasonable under the circumstances, (iii) represent the good faith estimate and
judgment of management of Hollinger, as of the date of such forecasts, of the
Canadian Newspaper Group's expected future financial performance and (iv) do not
reflect the expected results of any newspaper or publication that is not
included in the Canadian Newspaper Group or omit the expected results of any
newspapers or publication that is included in the Canadian Newspaper Group.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL.
International hereby represents and warrants to Hollinger and the
Vendor as follows:
4.1. DUE INCORPORATION OF INTERNATIONAL; AUTHORITY CONCERNING THIS
AGREEMENT.
International is a corporation incorporated and existing and in good
standing under the laws of the State of Delaware, and has the requisite
corporate power and authority to carry on its business and operations as
presently conducted by it and to own, lease and operate its properties and
assets. International has the requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder, and to
consummate the
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transactions contemplated hereby. The Special Committee, pursuant to authority
duly delegated to it by the Board of Directors of International has approved
this Agreement and the Exchange Agreement. The Board of Directors of
International has ratified this Agreement and the Exchange Agreement and
recommended approval by International stockholders of the issuance of Class A
Common Stock in exchange for Series 1 Preferred Stock to be issued pursuant to
this Agreement and the Exchange Agreement, as contemplated by the International
Proposals (as defined in section 5.2 hereof). The execution and delivery of this
Agreement and the Exchange Agreement by International, the performance by
International of its obligations hereunder and thereunder and the consummation
by International of the transactions contemplated hereby and thereby have been
duly and validly authorized by all necessary corporate action on the part of
International, subject to approval of the International Proposals by the
stockholders of International. This Agreement has been duly and validly executed
and delivered by International and (assuming due and valid authorization,
execution and delivery by Hollinger and the Vendor) constitutes the legal, valid
and binding agreement of International and is enforceable in accordance with its
terms.
4.2. CAPITALIZATION.
The authorized capital stock of International consists of
250,000,000 shares of Class A Common Stock ("CLASS A COMMON STOCK"), 50,000,000
shares of Class B Common Stock, $.01 par value ("CLASS B COMMON STOCK"), and
20,000,000 shares of preferred stock, $.01 par value ("INTERNATIONAL PREFERRED
STOCK"), of which 69,565,754 shares of Class A Common Stock, 14,990,000 shares
of Class B Common Stock, and 739,500 shares of Series A Preferred Stock, par
value $.01 per share ("SERIES A PREFERRED STOCK"), and 10,350,000 shares of
Series B Convertible Preferred Stock, par value $.01 per share ("Series B
Preferred Stock") are issued and outstanding. International has also issued
20,700,000 depository shares ("PRIDES") each representing a one-half share of
International's Series B Preferred Stock. The Class A Common Stock and Class B
Common Stock (collectively, the "INTERNATIONAL COMMON STOCK") and Series B
Preferred Stock constitute the only outstanding voting securities of
International. Upon receipt of stockholder approval of the International
Proposals (as defined below), the authorized capital stock will be increased to
420,000,000, of which 120,000,000 shares of Preferred Stock will be authorized.
Options to purchase an aggregate of 1,281,500 shares of Class A Common Stock
have been granted under the International 1994 Stock Option Plan, as amended
(the "INTERNATIONAL 1994 STOCK OPTION PLAN"), an additional 189,640 shares of
Class A Common Stock have been reserved for issuance under the International
1994 Stock Option Plan, and 5,156,915 shares of Class A Common Stock have been
reserved for issuance under the International 1997 Stock Incentive Plan.
International has also reserved for issuance the requisite shares of Class A
Common Stock issuable upon conversion of shares of Class B Common Stock, Series
A Preferred Stock and Series B Preferred Stock. Except for (i) options granted
under the International 1994 Stock Option Plan and options that may be granted
under the International 1997 Stock Incentive Plan, (ii) outstanding shares of
Series A Preferred Stock, Series B Preferred Stock and Class B Common Stock, all
of which are convertible into shares of Class A Common Stock, and (iii) shares
of Series 1 Preferred Stock and Series 2 Preferred Stock
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to be issued to Hollinger or the Vendor hereunder, shares of Series C
Convertible Preferred Stock issuable to Hollinger or the Vendor in exchange for
the Series 2 Preferred Stock, and shares of Class A Common Stock issuable to
Hollinger or the Vendor on exchange or conversion of the Series 1 Preferred
Stock, Series 2 Preferred Stock and Series C Convertible Preferred Stock, all
pursuant to this Agreement and the UniMedia Class A Stock Agreement and the
Exchange Agreement, each dated the date hereof among Hollinger, the Vendor and
International, there are no outstanding or authorized subscriptions, agreements,
options, warrants, calls or other commitments, rights (including conversion
rights) or privileges (whether preemptive or contractual) pursuant to which
International is or may become obligated to issue, sell or transfer any shares
of its capital stock or any debt or other security of International which is
convertible or exchangeable into, or evidences the right to subscribe for, any
shares of capital stock of International.
4.3. GOVERNMENTAL FILINGS.
Except for filings under the Securities Act, the U.S. Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), the Securities Act
(Ontario), applicable state securities laws, the General Corporation Law of
Delaware with respect to the Class A Common Stock and the Series 1 Preferred
Stock to be issued to the Vendor hereunder, and the New York Stock Exchange, no
notice, report or other filing is required to be made by International with, nor
is any material consent, registration, approval, permit or authorization
required to be obtained by International from, any Governmental Entity in
connection with the execution and delivery of this Agreement, the issuance and
delivery of the shares of Series 1 Preferred Stock to the Vendor hereunder, or
the consummation by it of the transactions contemplated hereby.
4.4. NO VIOLATIONS.
Except for the approval of International's stockholders to permit
the issuance of Class A Common Stock and Series C Convertible Preferred Stock
upon exchange of the Series 1 and 2 Preferred Stock pursuant to the Exchange
Agreement (as defined below) and the issuance of Class A Common Stock upon
conversion of the Series C Convertible Preferred Stock, the execution and
delivery of this Agreement by International does not, and the consummation by it
of any of the transactions contemplated hereby will not, require the consent or
approval of any unrelated party or constitute or result in (i) a breach or
violation of, or a default (or an event which with notice or lapse of time or
both would become a default) under the Restated Certificate of Incorporation or
By-laws of International, (ii) a breach or violation of, a default (or an event
which with notice or lapse of time or both would become a default) under, a
right to terminate, amend, cancel or accelerate, or the creation of a lien,
pledge, security interest or other encumbrance on assets (with or without the
giving of notice or the lapse of time) pursuant to, any provision of any
material agreement, lease, contract, note, mortgage, indenture, arrangement or
other obligation of International, or any law, statute, rule, ordinance or
regulation or judgment, decree, order, award, injunction or governmental or
non-governmental permit or license to which International is subject to or by
which International or any property of International is bound or affected,
except, in the case of clause (ii) above, such breaches, violations, defaults,
terminations,
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amendments, cancellations, accelerations, encumbrances or changes that,
individually or in the aggregate, have not had and are not reasonably likely to
have a material adverse effect on International.
4.5. BROKERS AND FINDERS.
Neither International nor any of its officers, directors or
employees has employed any broker or finder or incurred any liability for any
financial advisory fees, brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby, except that the Special
Committee has retained RBC Dominion Securities Inc. ("RBC DOMINION Securities")
as its financial advisor.
4.6. PRIVATE OFFERING.
Assuming the accuracy of the representations of Hollinger and the
Vendor contained in section 3.11 hereof, the offer, issuance and delivery to the
Vendor of the shares of Series 1 Preferred Stock pursuant to this Agreement will
be exempt from registration under the Securities Act.
ARTICLE 5.
COVENANTS OF THE PARTIES.
5.1. STANDSTILL.
Hollinger and the Vendor jointly and severally agree that from the
date hereof to the Closing Date or the earlier termination of this Agreement in
accordance with Article 8 hereof, and except as otherwise consented to in
writing by the Chairman of the Special Committee or as specifically required,
permitted or contemplated by this Agreement, they will:
5.1.1. not sell, lease, assign, transfer or otherwise dispose of any
of the Shares or any interests therein, or create or permit any
Encumbrances affecting the Shares (other than those Encumbrances
referred to on Schedules 3.2.1 and 3.2.2(A) attached hereto, all of
which will be terminated on or prior to Closing);
5.1.2. not approve, consent to or take any action in furtherance of
any plan, scheme, transaction or series of transactions whereby the
Company would undertake a merger, consolidation, amalgamation, or
sale, lease, transfer, assignment or other disposition of all or any
significant portion of its properties or assets, or otherwise
resulting in a change in control of the Company or any of the
Newspapers;
5.1.3. not approve, consent to or take any action in furtherance of
any plan, scheme, transaction or series of transactions whereby the
Company would incur any indebtedness for borrowed money or create
any Encumbrances affecting
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any of its assets, other than (A) indebtedness incurred pursuant to
the credit facilities described in Schedule 3.2.2(A), (B)
Encumbrances arising in the ordinary course of business which
constitute Permitted Encumbrances, (C) intercompany transactions
among Hollinger, the Vendor, the Company, UniMedia Inc. and UniMedia
Group consistent with past practices, and (D) indebtedness incurred
by the Company from Hollinger in an amount necessary to pay in full
indebtedness outstanding pursuant to the credit facilities described
in Schedule 3.2.2(A), which indebtedness will be sold by Hollinger
to Hollinger Canadian Publishing Holdings Inc. ("HCPH") on the
Closing Date for the principal amount thereof; or
5.1.4. not approve, consent to or take any action in furtherance of
any plan, scheme, transaction or series of transactions whereby the
Company would (A) alter, amend or repeal any provision of its
Articles or By-laws (or similar governing documents), (B) declare,
set aside, make or pay any dividends (in cash or otherwise) or other
distributions on or with respect to its share capital other than as
contemplated herein or (C) increase or reclassify the number of
shares authorized or issued and outstanding of its share capital or
grant any option, warrant, call, commitment, right or agreement of
any character relating to its share capital or any securities
convertible or exchangeable into its share capital.
5.2. INTERNATIONAL STOCKHOLDERS' APPROVAL.
International shall take, in accordance with the requirements of
applicable law, the New York Stock Exchange and International's Restated
Certificate of Incorporation and By-Laws, all action necessary to convene a
meeting of holders of International Common Stock, and Series B Preferred Stock
represented by PRIDES, at which Hollinger is entitled to vote, as promptly as
practicable after the Closing Date. At such meeting, International stockholders
will be asked to consider and vote upon the following proposals: (i) to permit
the issuance by International of shares of Class A Common Stock upon exchange by
the Vendor of the Series 1 Preferred Stock in accordance with the Exchange
Agreement, (ii) to permit the issuance by International of shares of Class A
Common Stock and Series C Convertible Preferred Stock upon exchange of the
Series 2 Preferred Stock, (iii) to permit the issuance by International of
shares of Class A Common Stock upon conversion of the Series C Convertible
Preferred Stock, and (iv) to increase the authorized capital of International to
permit the issuance of an additional 50 million shares of Preferred Stock
(collectively, the "INTERNATIONAL PROPOSALS"), among other matters at such
meeting. At such meeting Hollinger agrees to vote or cause to be voted all
shares of Class A Common Stock and Class B Common Stock of International held by
it or its subsidiaries in favour of the International Proposals. International
shall take all lawful action to solicit such approval and all lawful action
necessary or helpful to secure the affirmative vote of holders of International
Common Stock and Series B Preferred Stock represented by PRIDES required to
approve the foregoing matters.
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5.3. FILINGS; OTHER ACTIONS.
5.3.1. As soon as practicable after the Closing, International and
Hollinger shall cooperate to prepare and file promptly with the SEC
preliminary proxy solicitation materials (the "PRELIMINARY PROXY
STATEMENT") for the International stockholders meeting, including
obtaining all such information (financial or other) as may be
required under applicable law and rules and regulations of the SEC
with respect to the International stockholders meeting and the
International Proposals. After review by the SEC, International
shall mail a definitive version of such proxy solicitation materials
(the "PROXY STATEMENT") to all stockholders of record of
International. The Proxy Statement shall contain the recommendation
of the Board of Directors of International and the Special Committee
that holders of International Common Stock and of Series B Preferred
Stock represented by PRIDES vote in favour of approval of the
International Proposals. Prior to submitting the Preliminary Proxy
Statement and the Proxy Statement and any such amendment, supplement
or revision to the SEC or to International's stockholders, such
Preliminary Proxy Statement, Proxy Statement and amendment,
supplement or revision will be submitted to Hollinger for its review
and comment.
5.3.2. Each party hereto shall cooperate with the other party hereto
and use all reasonable efforts to prepare and file promptly all
necessary documentation, to effect all necessary applications,
notices, petitions, filings and other documents, and to obtain as
promptly as practicable all necessary permits, consents, orders,
approvals and authorizations of, or any exemption from, all third
parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement. Each
party agrees, to the extent either deems necessary or appropriate,
to request "cold comfort letters" or similar assurances from KPMG
Peat Marwick or other accounting firms with audit responsibility for
financial statements included in the Proxy Statement regarding the
pro forma financial statements and unaudited financial statements to
be included in the Proxy Statement and such other matters (including
without limitation other securities law matters affecting Hollinger
or International, as the case may be) as may be identified. Each
party shall have the right to review in advance, and to the extent
practicable each will consult with the other on, all the information
relating to the other party and any of their respective subsidiaries
and associated companies which are to appear in any filing to be
made with, or written materials to be submitted to, any third party
or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto shall act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the
other party hereto with respect to the obtaining of all permits,
consents, orders, approvals and authorizations of all third parties
and any Governmental Entity necessary or
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advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other party hereto apprised
of the status of matters relating to the transactions contemplated
hereby and thereby.
5.3.3. Each party shall promptly furnish each other party with
copies of written communications received by such party, or any of
its subsidiaries, affiliates or associates from, or delivered by any
of the foregoing to, any unrelated party or Governmental Entity in
respect of the transactions contemplated, in each case subject to
applicable laws relating to the exchange of information as advised
by independent counsel in writing.
5.4. REGISTRATION OF CERTAIN SECURITIES.
Upon request by Hollinger following the Closing, International will
use commercially reasonable efforts to cause the registration under the
Securities Act of the shares of Class A Common Stock issuable to Hollinger or
the Vendor on exchange of the Series 1 Preferred Stock issued hereunder, such
registration to be effected by means of filing one or more Registration
Statements with the SEC (the "REGISTRATION STATEMENTS"). All costs and expenses
of such registration incurred on or after the date hereof, including any
additional SEC filing fees, will be borne by International. Such Registration
Statements may, if so requested by Hollinger, reflect one or more pledges of
shares of Class A Common Stock issuable on exchange of the Series 1 Preferred
Stock in favour of lenders to Hollinger or the Vendor, subject to receipt by
International of customary assurances to permit sales or distributions of such
securities in accordance with applicable law.
5.5. ASSUMPTIONS OF OBLIGATIONS UNDER SOGIC AGREEMENT.
International, as an entity which is directly or indirectly
controlled by Hollinger, undertakes to assume all of the obligations of
Hollinger under the agreement executed among Hollinger, UniMedia Group and la
Societe Generale des Industries Culturelles on August 8, 1988 (the "SOGIC
AGREEMENT") as if it were a party to the SOGIC Agreement.
5.6. NON-COMPETITION
5.6.1. Hollinger agrees that neither it nor any of its subsidiaries
will, for a period of five (5) years after the Closing Date, without
the prior written consent of International, either directly or
indirectly, undertake or carry on or be engaged or have any
financial interest in any newspaper, shopper or other similar
publication carrying advertising, for which the circulation or
distribution is primarily in the communities where the Newspapers
are currently published or within a radius of ten (10) miles of the
centre point of any such community (such geographic area being
hereinafter referred to as the "Restricted Area"); provided,
however, that the foregoing provisions shall not apply to (A) the
publication or the future acquisition of any publication that is
circulated to a national market so long as
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such newspaper does not publish or distribute any regional,
community, zoned or similar edition in the Restricted Area; (B) the
ownership, directly or indirectly, of less than five percent (5%) of
any class of securities of any publicly-traded company; or (C) for
greater certainty, prohibit the interest that Hollinger has in HCPH,
Southam Inc., The Financial Post Company, Saturday Night Magazine
Limited, and their respective subsidiaries and operations.
5.6.2. Hollinger acknowledges that in the event of any violation of
the covenants contained in this section 5.6.1 hereof,
International's damages will be difficult to ascertain and
International's remedy at law will be inadequate. Accordingly,
Hollinger agrees that, in addition to such remedies as International
may have at law, International shall be entitled to specific
performance of such covenants hereunder and to an injunction to
prevent any continuing violation thereof.
5.6.3. If any of the provisions of or covenants contained in this
section hereof is hereafter construed to be invalid or unenforceable
in any jurisdiction, the same shall not affect the remainder of the
provisions or the enforceability thereof in any other jurisdiction,
which shall be given full effect, without regard to the invalidity
or unenforceability in such other jurisdiction. If any of the
provisions of or covenants contained herein is held to be
unenforceable in any jurisdiction because of the duration or
geographical scope thereof, the parties agree that the court making
such determination shall have the power to reduce the duration or
geographical scope of such provision or covenant and, in its reduced
form, said provision or covenant shall be enforceable; provided,
however, that the determination of such court shall not affect the
enforceability of section 5.6.1 in any other jurisdiction.
5.7. OWNERSHIP CHANGES
Hollinger owns, through wholly-owned subsidiaries, 50 Series A
Preferred Shares in the capital of HCPH (the "HCPH SHARES"), representing 50% of
the outstanding voting stock of HCPH. Hollinger will not, either directly or
indirectly through its subsidiaries or affiliates, issue, sell, exchange,
assign, transfer, dispose, mortgage, charge, pledge, encumber, grant a security
interest in or otherwise deal with any security of Hollinger or any of its
subsidiaries or affiliates, in any manner which is materially prejudicial to the
direct or indirect interests of International in the Canadian Newspaper Group by
reason of changes in ownership that would cause a material adverse impact on the
profitability, ownership or operation of the Canadian Newspaper Group by reason
of section 19 of the Income Tax Act (Canada).
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ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS OF INTERNATIONAL.
The obligations of International to consummate the transactions
contemplated hereby are subject to the fulfilment of the following conditions,
any one or more of which may be waived by International:
6.1. REPRESENTATIONS AND WARRANTIES TRUE.
At the Closing Date, the representations and warranties of Hollinger
and the Vendor contained in this Agreement shall be true and correct in all
material respects at and as of such date and time as if made on and as of such
date and time, other than any such representations and warranties which are made
as of a specified earlier date, which shall be true and correct in all material
respects at and as of such date; and at and as of the Closing Date Hollinger and
the Vendor shall have delivered to International certificates to such effect
signed by an officer of the relevant company acceptable to International.
6.2. PERFORMANCE BY HOLLINGER AND THE VENDOR.
From the date of this Agreement, each of the obligations of
Hollinger and the Vendor to be performed by it on or before the Closing Date
pursuant to the terms of this Agreement shall have been duly performed in all
material respects at and as of the Closing Date; and at the Closing Date,
Hollinger and the Vendor shall have delivered to International certificates to
such effect signed by an officer of the relevant company acceptable to
International.
6.3. LEGAL OPINIONS.
International shall have been furnished with opinions of Tory Tory
DesLauriers & Binnington, Lapointe Rosenstein, and Stewart McKelvey Stirling
Scales, each dated as of the Closing Date and substantially in the forms
attached hereto as Schedules 6.3(a), 6.3(b) and 6.3(c) respectively, to
this Agreement.
6.4. NO SUITS OR PROCEEDINGS CHALLENGING TRANSACTION.
There shall be no pending or threatened suits, actions, proceedings,
governmental inquiries or investigations of any kind which seek to enjoin,
prevent or otherwise interfere with the transactions contemplated hereby or
otherwise question the validity or legality of such transactions.
6.5. CERTAIN CONSENTS.
Hollinger, the Vendor, the Company and International shall have
obtained all consents from unrelated parties and Governmental Entities required
to consummate the transactions contemplated by this Agreement.
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6.6. INCOME TAX ACT.
Prior to the Closing Date there shall have been no amendment to the
Income Tax Act (Canada) including Section 19 thereof that would have a material
adverse impact on the profitability, ownership or operation by the Company of
the Newspapers after giving effect to the transactions contemplated hereby and
there shall have been no bill read in Parliament that would have such material
adverse impact if enacted into law.
6.7. RBC DOMINION FAIRNESS OPINION.
International shall have obtained from RBC Dominion Securities an
opinion in form satisfactory to the Special Committee to the effect that the
aggregate consideration to be paid for the Canadian Newspaper Group by
International (either directly, or indirectly through HCPH) pursuant to (i) this
Agreement, (ii) the UniMedia A Agreement, (iii) the Sterling Purchase Agreement
and (iv) the Exchange Agreement (including the term sheets attached thereto) is
fair, from a financial point of view, to International and the holders of
International's common stock and Series B Preferred Stock other than Hollinger.
6.8. EXCHANGE AGREEMENT.
Hollinger, the Vendor and International shall have entered into an
Exchange Agreement (the "Exchange Agreement") as of the Closing Date
substantially in the form attached hereto as Schedule 6.8.
6.9. OTHER TRANSACTION DOCUMENTS.
International shall have received on or prior to the Closing Date:
6.9.1. certificates evidencing the incumbency of the
officers of Hollinger and the Vendor executing this Agreement on
its behalf and of their authority to do so;
6.9.2. certified copies of the Articles and By-laws (or
similar governing documents) of the Company;
6.9.3. certificates of status (or the equivalent under the
laws of their respective jurisdictions of incorporation) of
recent date for Hollinger, the Vendor and the Company;
6.9.4. certified copies of the resolutions of the Board of
Directors of the Vendor authorizing the transactions contemplated
hereunder to take place on the Closing Date;
6.9.5. stock certificates representing all of the Shares
registered in the name of the Vendor together with customary
searches of public records in Nova
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Scotia reasonably satisfactory to counsel to International and to
its lenders confirming that such interests are free and clear of any
Encumbrances; and
6.9.6. customary documentation reasonably satisfactory to
counsel to International and to its lenders confirming (A) an
undertaking from Hollinger's lenders upon receipt of the Cash
Purchase Price to release of all obligations of the Company and its
subsidiaries with respect to indebtedness of Hollinger, the Vendor
or of any other person and the Encumbrances arising under the credit
facilities described on Schedule 3.2.2(A) and (B) that the shares of
the Company and the assets of UniMedia Inc. and its subsidiaries are
free and clear of any other Encumbrances other than Permitted
Encumbrances.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF HOLLINGER AND THE VENDOR.
The obligations of Hollinger and the Vendor to consummate the
transactions contemplated hereby are subject to the fulfilment of the following
conditions, any one or more of which may be waived by Hollinger:
7.1. REPRESENTATIONS AND WARRANTIES TRUE.
As of the Closing Date, the representations and warranties of
International contained in this Agreement shall be true and correct in all
material respects at and as of such date and time as if made on and as of such
date and time, other than any such representations and warranties which are made
as of a specified earlier date, which shall be true and correct in all material
respects at and as of such specified date; and at the Closing Date International
shall have delivered to Hollinger and the Vendor a certificate to such effect
signed by an officer of International acceptable to Hollinger and the Vendor.
7.2. PERFORMANCE BY INTERNATIONAL.
From the date of this Agreement, each of the obligations of
International to be performed on or before the Closing Date pursuant to the
terms of this Agreement shall have been duly performed in all material respects
at the Closing Date and at the Closing Date International shall have delivered
to Hollinger and the Vendor a certificate to such effect signed on behalf of
International by an officer of International acceptable to Hollinger and the
Vendor.
7.3. LEGAL OPINIONS.
Hollinger and the Vendor shall have been furnished with the opinion
of Kirkpatrick & Lockhart LLP dated as of the Closing Date and substantially in
the form attached hereto as Schedule 7.3 to this Agreement.
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7.4. NO SUITS OR PROCEEDINGS CHALLENGING TRANSACTION.
There shall be no pending or threatened suits, actions, proceedings,
governmental inquiries or investigations of any kind which seek to enjoin,
prevent or otherwise interfere with the transactions contemplated hereby or
otherwise question the validity or legality of such transactions.
7.5. CERTAIN CONSENTS.
Hollinger, the Vendor, the Company and International shall have
obtained all consents from unrelated parties and Governmental Entities required
to consummate the transactions contemplated by this Agreement.
7.6. INCOME TAX ACT.
Prior to the Closing Date there shall have been no amendment to the
Income Tax Act (Canada), including Section 19 thereof that would have a material
adverse impact on the profitability, ownership or operation by the Company of
the Newspapers after giving effect to the transactions contemplated hereby and
there shall have been no bill read in Parliament that would have such material
adverse impact if enacted into law.
7.7. EXCHANGE AGREEMENT.
Hollinger, the Vendor and International shall have entered into the
Exchange Agreement as of the Closing Date.
7.8. RBC DOMINION FAIRNESS OPINION.
International shall have obtained from RBC Dominion Securities an
opinion in form satisfactory to the Special Committee to the effect that the
aggregate consideration to be paid for the Canadian Newspaper Group by
International (either directly, or indirectly through HCPH) pursuant to (i) this
Agreement, (ii) the UniMedia A Agreement, (iii) the Sterling Purchase Agreement
and (iv) the Exchange Agreement (including the term sheets attached thereto) is
fair, from a financial point of view, to International and the holders of
International's common stock and Series B Preferred Stock other than Hollinger.
7.9. OTHER TRANSACTION DOCUMENTS.
Hollinger and the Vendor shall have received on or prior to the
Closing Date:
7.9.1. certificate evidencing the incumbency of the officers
of International executing this Agreement on its behalf and their
authority to do so;
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7.9.2. certified copy of the Restated Certificate of
Incorporation or similar charter documents and By-laws of
International including without limitation the Certificate of
Designations creating the Series 1 Preferred Stock;
7.9.3. certificate of good standing of recent date for
International; and
7.9.4. certified copies of the resolutions of the Board of
Directors of International and of the Special Committee
authorizing or recommending the transactions contemplated
hereunder to take place on the Closing Date.
ARTICLE 8.
TERMINATION.
8.1. TERMINATION BY MUTUAL CONSENT.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date by the mutual
consent of Hollinger (on behalf of itself and the Vendor) and International by
action of their respective Boards of Directors.
8.2. TERMINATION BY EITHER HOLLINGER OR INTERNATIONAL.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of the Board of Directors of either Hollinger
(acting on behalf of itself and the Vendor) or International if: (i) the Closing
shall not have occurred on or before December 31, 1997; or (ii) a Governmental
Entity of competent jurisdiction shall have issued an order, or taken any other
action, permanently restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby, and such order or other
action shall have become final and not appealable; provided, however, that in
the case of a termination pursuant to clause (i) above, the terminating party
shall not have breached or failed to perform in any material respect its
obligations under this Agreement.
8.3. TERMINATION BY HOLLINGER.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing Date by action of the
Board of Directors of Hollinger (acting on behalf of itself and the Vendor) if
there has been a material breach or failure to perform by International of any
covenant or agreement contained in this Agreement which is not curable or, if
curable, is not cured within five (5) days after written notice of such breach
is given by Hollinger to International.
8.4. TERMINATION BY INTERNATIONAL.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned prior to the Closing Date by action of the Board of
Directors of International if there has been a material breach or failure to
perform by Hollinger or the Vendor of any covenant
<PAGE>
CUSIP No. 435569 10 8 Page 89 of 114 Pages
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22
or agreement contained in this Agreement which is not curable or, if curable, is
not cured within five (5) days after written notice of such breach is given by
International to Hollinger or the Vendor as the case may be.
8.5. SPECIAL COMMITTEE.
In any event in which International intends to consent to or seek
termination of this Agreement pursuant to this Article 8, such action must be
taken by the Board of Directors of International following receipt of a
favourable recommendation thereof by the Special Committee.
8.6. EFFECT OF TERMINATION AND ABANDONMENT.
In the event of the termination and abandonment of this Agreement,
Hollinger, the Vendor and International shall have no obligation or liability to
the others.
ARTICLE 9.
INDEMNIFICATION.
9.1. INDEMNITY.
Hollinger and the Vendor shall, jointly and severally, indemnify and
save International harmless for and from any loss, damages or deficiencies
suffered by International or by the Company or any subsidiary thereof as a
result of any breach of representation, warranty or covenant on the part of
Hollinger or the Vendor contained in this Agreement and all claims, demands,
costs and expenses, including legal fees, in respect of the foregoing.
9.2. LIMITATIONS.
The obligations of Hollinger and the Vendor to indemnify
International in accordance with the foregoing shall be subject to the
following:
9.2.1. any claim arising as a result of a breach of (i) a
representation or warranty contained in Article 3 or (ii) a covenant
contained in Article 5 shall be made not later than the date on
which pursuant to section 10.1 such representation, warranty or
covenant terminated;
9.2.2. their obligation to indemnify International (except
in respect of any obligations to indemnify arising from
section 3.10) shall only apply if indemnification claims, in the
aggregate, exceed Cdn. $1,000,000 in which case they shall be
liable therefor only to the extent that such claims exceed Cdn.
$500,000 to a maximum aggregate amount equal to the Total
Purchase Price.
<PAGE>
CUSIP No. 435569 10 8 Page 90 of 114 Pages
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23
ARTICLE 10.
MISCELLANEOUS.
10.1. SURVIVAL.
Only the agreements and covenants of the parties contained in
Articles 5 and 10, and Section 8.6 hereof shall survive the Closing Date without
time limit, except as otherwise specified therein. All representations,
warranties and other agreements and covenants shall be deemed to be conditions
of the transactions contemplated hereby and shall not survive the Closing Date;
provided, however, that the representations and warranties of Hollinger and the
Vendor contained in Sections 3.1 and 3.2 hereof and International's
representations and warranties contained in Sections 4.1 and 4.2 hereof shall
survive the Closing Date without time limit; and the representations and
warranties of Hollinger and the Vendor contained in Sections 3.3, 3.4, 3.5, 3.6,
3.7, 3.8, 3.9, 3.10, 3.11, 3.12.2, 3.13 and 3.14 and International's
representations and warranties contained in Sections 4.3, 4.4, 4.5 and 4.6 shall
survive until the second anniversary of the Closing Date and the representations
and warranties by Hollinger and the Vendor made in Section 3.12.1 shall survive
for the applicable statute of limitations. If the transactions contemplated
hereby shall be abandoned and this Agreement terminated, only the agreements and
covenants of the parties contained in Sections 10.1, 10.2, 10.5, 10.10, 10.12
and 10.14 hereof shall survive such abandonment and termination.
10.2. CERTAIN EXPENSES.
Whether or not the transactions contemplated hereby are consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the party incurring such costs
and expenses.
10.3. DOLLAR AMOUNTS.
Except as expressly indicated, all dollar amounts in this Agreement
are stated in and shall be interpreted to be in United States dollars.
10.4. FURTHER ASSURANCES.
International, Hollinger and the Vendor shall use its reasonable
commercial efforts to perform and fulfil all conditions and obligations on its
part to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be fully carried out. From
time to time as and when requested by International or its successors or
assigns, the Vendor shall execute and deliver such deeds and other instruments
of transfer and shall take or cause to be taken such further or other actions as
shall be necessary or advisable in order to carry out the purpose and intention
of this Agreement or to vest or perfect in International, or to confirm of
record or otherwise to International, title to and possession of all of the
Shares. From time to time as and when requested by Hollinger, the Vendor or
their successors and assigns, International shall execute and deliver such
further deeds and other
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CUSIP No. 435569 10 8 Page 91 of 114 Pages
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24
instruments and shall take or cause to be taken such further or other actions as
shall be necessary or advisable in order to carry out the purpose and intention
of this Agreement.
10.5. PRESS RELEASES, ANNOUNCEMENTS AND COMMUNICATIONS.
No press release or other public announcements related to this
Agreement or the transactions contemplated hereby will be issued after the date
hereof without the prior approval of Hollinger and International, such approval
not to be unreasonably withheld or delayed, except for any public disclosure
that Hollinger or International in good faith believes is required by law or by
obligations relating to any securities exchange or market. The parties agree to
use reasonable efforts to consult with each other before taking any action that
would require the issuance of any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby.
10.6. AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented at any time
prior to or after the Closing Date, but only by written agreement that
identifies this Agreement and is signed by all of the parties hereto. Any
amendment, modification or supplement hereto shall be effective as to
International only if in writing signed by the Chairman of the Special Committee
on behalf of International.
10.7. WAIVER OF COMPLIANCE; CONSENTS.
Except as otherwise provided in this Agreement, any failure of any
of the parties to comply with any obligation, representation, warranty,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, representation, warranty, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing.
International shall not waive, nor shall International be deemed to have waived,
any obligations of Hollinger or the Vendor hereunder or any other benefits to
International arising under this Agreement unless approved by the Board of
Directors of International following receipt of a favourable recommendation
thereof by the Special Committee.
10.8. NOTICES.
All notices, demands and other communications hereunder shall be in
writing and shall be deemed to have been given when received if delivered by
hand, courier or by facsimile transmission to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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CUSIP No. 435569 10 8 Page 92 of 114 Pages
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25
(a) If to Hollinger or the Vendor:
Hollinger Inc.
10 Toronto Street
Toronto, Ontario
Canada M5C 2B7
Attention: Peter Y. Atkinson
Vice-President and General Counsel
Facsimile No.: (416) 364-2088
Copies to:
Tory Tory DesLauriers & Binnington
Suite 3000, Aetna Tower
P.O. Box 270
Toronto-Dominion Centre
Toronto, Ontario
Canada M5K 1N2
Attention: Beth DeMerchant
Facsimile No.: (416) 865-7380
Lapointe Rosenstein
1250 Rene Levesque Blvd. West
Suite 1400
Montreal, P.Q.
Canada H3B 5E9
Attention: Mark Rosenstein
Facsimile No.: (514) 925-9001
<PAGE>
CUSIP No. 435569 10 8 Page 93 of 114 Pages
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26
(b) If to International:
Hollinger International Inc.
401 N. Wabash Avenue
Chicago, Illinois 60611
U.S.A.
Attention: Kenneth L. Serota,
Vice President - Law and Finance and Secretary
Facsimile No.: (312) 321-0629
Copies to:
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
U.S.A.
Attention: Jerry H. Owens
Facsimile No.: (412) 355-6501
(c) If to the Special Committee:
Hollinger International Inc.
Special Committee
c/o Richard N. Perle, Chairman
5 Grafton Street
Chevy Chase, Maryland 20815
U.S.A.
Facsimile No.: (301) 652-1120
Copies to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
U.S.A.
Attention: Dennis J. Block
Facsimile No.: (212) 310-8007
<PAGE>
CUSIP No. 435569 10 8 Page 94 of 114 Pages
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27
10.9. ASSIGNMENT.
Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned by any party hereto without
the prior written consent of the other parties hereto. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and assigns; provided,
however, that International may assign its rights and interests (but not its
obligations) hereunder to HCPH or another subsidiary of International.
10.10. GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in accordance with
the laws of Ontario. Each party hereto submits to the non-exclusive jurisdiction
of the courts of competent jurisdiction of Ontario in connection with any
dispute arising out of or related to this Agreement.
10.11. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, none of
which need contain the signatures of all parties, each of which shall be deemed
an original, and all of which together shall constitute one and the same
instrument.
10.12. NO THIRD PARTY BENEFICIARIES.
No person who is not a party to this Agreement shall be deemed to be
a beneficiary of any provision of this Agreement, and no such person shall have
any claim, cause of action, right or remedy pursuant to this Agreement.
10.13. INTERPRETATION.
The descriptive headings contained in this Agreement are for
convenience of reference only and shall have no effect on the interpretation or
meaning hereof. The word "Agreement" refers to the body of this Agreement and
all Schedules attached hereto or referred to herein. "Herein," "hereof" and the
like refer to this Agreement as a whole. As used in this Agreement, the singular
shall include the plural, the plural shall include the singular and each gender
shall include all genders.
10.14. ENTIRE AGREEMENT.
This Agreement, including the Schedules attached hereto (and any
other instruments executed and delivered at the Closing), embodies the entire
agreement and understanding of the parties hereto with respect to the transfer
of the Shares to International. The Schedules hereto are an integral part of
this Agreement and are incorporated by reference herein. This Agreement
supersedes all prior discussions, negotiations, agreements and understandings
<PAGE>
CUSIP No. 435569 10 8 Page 95 of 114 Pages
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28
(both written and oral) between the parties with respect to the transfer of the
Shares to International hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
HOLLINGER INC.
By: /s/ Peter Y. Atkinson
-------------------------------
Peter Y. Atkinson
Vice-President and General Counsel
UNIMEDIA HOLDING COMPANY
By: /s/ Peter Y. Atkinson
-------------------------------
Peter Y. Atkinson
Vice-President and General Counsel
HOLLINGER INTERNATIONAL INC.
By: /s/ Kenneth L. Serota
-------------------------------
Kenneth L. Serota
Vice President-Law and Finance and
Secretary
<PAGE>
CUSIP No. 435569 10 8 Page 96 of 114 Pages
- --------------------------------------------------------------------------------
HOLLINGER INTERNATIONAL INC.
401 NORTH WABASH AVENUE
CHICAGO, ILLINOIS 60611
JULY 21, 1997
Hollinger Inc.
UniMedia Holding Company
10 Toronto Street
Toronto, Ontario
Canada M5C 2B7
Attention: Mr. John A. Boultbee, Executive
Vice-President and Chief Financial
Officer
Re: AMENDED AND RESTATED FIRST EXCHANGE AGREEMENT
---------------------------------------------
Dear Mr. Boultbee:
This letter ("Amended and Restated First Exchange Agreement") amends
and restates in its entirety that certain Exchange Agreement dated as of April
18, 1997 (the "First Exchange Agreement").
Reference is hereby made to (i) the UniMedia Class A Stock Purchase
Agreement dated as of April 18, 1997 ("UniMedia A Agreement") among Hollinger
Inc., a corporation continued under the laws of Canada ("Hollinger"), UniMedia
Holding Company, a company amalgamated under the laws of Nova Scotia
("UniMedia"), and Hollinger International Inc., a Delaware corporation
("International"), relating to the purchase of all of the outstanding Class A
Common Shares of UniMedia Newspapers Company, a Nova Scotia unlimited liability
company ("UniMedia Newspapers Company"); (ii) the UniMedia Class B Stock
Purchase Agreement
<PAGE>
CUSIP No. 435569 10 8 Page 97 of 114 Pages
- --------------------------------------------------------------------------------
Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 2
dated as of April 18, 1997 ("UniMedia B Agreement") among Hollinger, UniMedia,
and International relating to the purchase of all of the outstanding Class B
Common Shares of UniMedia Newspapers Company (the UniMedia A Agreement and the
UniMedia B Agreement being referred to collectively as the "Purchase
Agreements"); (iii) the Exchange Agreement dated as of April 18, 1997 among
Hollinger, UniMedia and International (the "First Exchange Agreement"); and (iv)
that certain Officer's Certificate dated May 20, 1997, delivered by
International and acknowledged by Hollinger and UniMedia (the "Officer's
Certificate") setting forth, among other things, the number of shares of Class A
Common Stock, par value $.01 per share ("Class A Common Stock") and Series C
Convertible Preferred Stock, par value $.01 per share ("Series C Preferred
Stock") of International to be issued pursuant to the First Exchange Agreement.
All capitalized terms not otherwise defined herein shall have the meanings
ascribed to them in the First Exchange Agreement.
In consideration of the purchase of the outstanding Class B Common
Shares of UniMedia Newspapers Company, International issued to UniMedia 23,267
newly issued shares of Series 1 Nonvoting Preferred Stock at a stated issue
price of Cdn. $1,000 per share ("Series 1 Nonvoting Preferred Stock") and cash
in the amount of Cdn. $100,000. In consideration of the purchase of the
outstanding Class A Common Shares of UniMedia Newspapers Company, International
issued to UniMedia 149,658 shares of Series 2 Nonvoting Preferred Stock at a
stated issue price of Cdn. $1,000 per share ("Series 2 Nonvoting Preferred
Stock"), and cash in
<PAGE>
CUSIP No. 435569 10 8 Page 98 of 114 Pages
- --------------------------------------------------------------------------------
Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 3
the amount of Cdn. $19,373,000. The parties' respective obligations to close the
transactions contemplated by the Purchase Agreements were expressly conditioned
upon the execution and delivery of the First Exchange Agreement, in order to
facilitate the closing of such transactions while ensuring that International
would not be obligated to issue shares of its voting securities to Hollinger
Inc. or its subsidiaries (as originally contemplated by the parties) prior to
having obtained stockholder approval of such issuance.
The shares of Series 1 Nonvoting Preferred Stock and Series 2
Nonvoting Preferred Stock issued pursuant to the Purchase Agreements
(collectively, "Nonvoting Preferred Stock") will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and will not be
transferable by UniMedia without the prior written consent of International,
except as provided below. No sale, transfer, or other disposition of any share
or shares of Nonvoting Preferred Stock shall be valid or effectual for any
purpose whatsoever, and International shall not be obligated to recognize or
give any effect to any purported such sale, transfer or other disposition, other
than a sale, transfer or disposition to a Subsidiary or Affiliate (as such terms
are defined in International's Restated Certificate of Incorporation, as
amended) of Hollinger unless and until International, by resolution duly adopted
by its Board of Directors, shall first have consented to the proposed sale,
transfer or other disposition and approved the proposed transferee; PROVIDED,
HOWEVER, that, subject to the next sentence hereof, (a) UniMedia, Hollinger or
any Subsidiary or Affiliate of Hollinger may pledge such shares to a pledgee
<PAGE>
CUSIP No. 435569 10 8 Page 99 of 114 Pages
- --------------------------------------------------------------------------------
Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 4
pursuant to a bona fide pledge of such shares as collateral security for
indebtedness or other obligations due to the pledgee, and (b) UniMedia may sell,
transfer or otherwise dispose of all (but not less than all) such shares to a
third party at any time after the Stockholders Meeting (as hereinafter defined)
but only if the requisite Stockholder Approval (as hereinafter defined) has not
been obtained at the Stockholders Meeting or any postponement or adjournment(s)
thereof. Notwithstanding the provisions of clauses (a) and (b) above, no such
pledge, sale, transfer or other disposition shall be effectual unless, as a
condition prior thereto: (A) such pledge, sale, transfer or other disposition
shall be completed in accordance with all applicable laws, including without
limitation the Securities Act and the rules and regulations of the Securities
and Exchange Commission thereunder and Canadian securities laws and regulations
thereunder; (B) the shares so pledged, sold, transferred or disposed shall
remain subject to the provisions of this Amended and Restated First Exchange
Agreement, and any transferee thereof (whether by or following foreclosure,
realization or other similar action by the pledgee in the case of pledged
shares, or by or following the purchase by or transfer to a third party in the
case of any other sale, transfer or other disposition) shall have consented, in
a writing addressed to International, to be bound by the provisions of this
Amended and Restated First Exchange Agreement, including but not limited to the
restrictions on transfer set forth in this paragraph which, for greater
certainty, will continue in effect with respect to any proposed sale, transfer
or other disposition of shares by such third party; and (C) International shall
have received a written opinion, from counsel
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CUSIP No. 435569 10 8 Page 100 of 114 Pages
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Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 5
reasonably acceptable to International, confirming the matters referred to in
clauses (A) and (B), above.
The authorized capital stock of International currently consists of
250,000,000 shares of Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), 50,000,000 shares of Class B Common Stock, par value $.01 per
share ("Class B Common Stock"), and 20,000,000 shares of preferred stock, par
value $.01 per share ("Preferred Stock"), of which 68,604,354 shares of Class A
Common Stock, 14,990,000 shares of Class B Common Stock, 739,500 shares of
Series A Redeemable Convertible Preferred Stock ("Series A Preferred Stock"),
10,350,000 shares of Series B Convertible Preferred Stock ("Series B Preferred
Stock"), 23,267 shares of Series 1 Nonvoting Preferred Stock, and149,658 shares
of Series 2 Nonvoting Preferred Stock are issued and outstanding as of July 11,
1997. In order to comply with New York Stock Exchange ("NYSE") rules relating to
issuance of shares to certain related parties, International has agreed to call
a special meeting of the holders of International's Class A Common Stock, Class
B Common Stock and Preferred Stock (the "Stockholders Meeting") as soon as
practicable after the date hereof in accordance with the Securities Exchange Act
of 1934, as amended, the applicable rules and regulations of the Securities and
Exchange Commission thereunder, and the applicable rules of the NYSE. At the
Stockholders Meeting, the stockholders of International will be requested, among
other matters, to consider and vote upon the following proposals: (i) to permit
the issuance by International of authorized but unissued shares of Class
<PAGE>
CUSIP No. 435569 10 8 Page 101 of 114 Pages
- --------------------------------------------------------------------------------
Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 6
A Common Stock upon exchange by UniMedia of all shares of Series 1 Nonvoting
Preferred Stock and the Second Tranche Shares (as hereinafter defined) of the
Series 2 Nonvoting Preferred Stock in accordance with this Amended and Restated
First Exchange Agreement; (ii) to permit the issuance by International of
authorized but unissued shares of Series C Preferred Stock (having the relative
rights and preferences set forth in the form of Certificate of Designations
attached hereto as Annex 1) upon exchange by UniMedia of all of the First
Tranche Shares (as hereinafter defined) of the Series 2 Nonvoting Preferred
Stock in accordance with this Amended and Restated First Exchange Agreement;
(iii) to permit the issuance by International of authorized but unissued shares
of Class A Common Stock upon conversion of the Series C Preferred Stock as
provided therein; (iv) to permit the issuance by International of authorized but
unissued shares of Series C Preferred Stock and Series D Redeemable Convertible
Preferred Stock, par value $.01 of International ("Series D Preferred Stock")
upon the exchange by Hollinger (or another subsidiary thereof) or UniMedia of
shares of Series A Preferred Stock and Series C Preferred Stock pursuant to the
Second Amended and Restated Second Exchange Agreement (as hereinafter defined);
and (v) to increase the authorized capital of International from 20 million
shares to 120 million shares of Preferred Stock. Hollinger Inc. has agreed to
vote or cause to be voted all shares of Class A Common Stock, Class B Common
Stock and Preferred Stock of International held by it or its subsidiaries in
favor of all such proposals and any other proposals relating thereto.
<PAGE>
CUSIP No. 435569 10 8 Page 102 of 114 Pages
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Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 7
Within five (5) business days after obtaining the affirmative vote
of the holders of a majority of the total votes cast with regard to items (i)
through (iii) of the proposals described above ("Stockholder Approval"),
International shall issue to Hollinger or UniMedia the following securities in
exchange for all (but not less than all) issued and outstanding shares of
Nonvoting Preferred Stock of all series (the "Exchange"):
(i) in exchange for all 23,267 shares of Series 1 Nonvoting
Preferred Stock, 1,547,474 shares of Class A Common Stock (such number of
Class A Common Stock having been determined by dividing (x) U.S.
$16,791,794 (which the parties have agreed is the approximate U.S. dollar
equivalent of Cdn. $23,267,000 using the inverse of the Noon Buying Rate
on the Determination Date) by (y) the Adjusted Market Price of Class A
Common Stock on the Determination Date (as all such terms are defined
below);
(ii) in exchange for the First Tranche Shares, 829,409 shares
of Series C Preferred Stock (such number of shares of Series C Preferred
Stock having been determined by (A) dividing (I) U.S. $90,000,000 (which
the parties have agreed is the approximate U.S. dollar equivalent of the
First Tranche Amount using the inverse of the Noon Buying Rate on the
Determination Date) by (II) the Adjusted Market Price of Class A Common
Stock on the Determination Date (as all such terms are defined below) and
then (B) dividing the resulting amount by 10); and
<PAGE>
USIP No. 435569 10 8 Page 103 of 114 Pages
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Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 8
(iii) in exchange for the Second Tranche Shares, 1,659,571
shares of Class A Common Stock (such number of shares of Class A Common
Stock having been determined by dividing (x) U.S. $18,008,178 (which the
parties have agreed is the approximate U.S. dollar equivalent of the
Second Tranche Amount using the inverse of the Noon Buying Rate on the
Determination Date) by (y) the Adjusted Market Price of Class A Common
Stock on the Determination Date (as all such terms are defined below).
For purposes hereof: (A) the "Noon Buying Rate" means the noon buying rate in
The City of New York for cable transfers in United States dollars as certified
for customs purposes by the Federal Reserve Bank of New York; (B) the Noon
Buying Rate on the Determination Date means 1.3856; (C) the "Adjusted Market
Price" means $10.8511, which is the greater of (I) the amount per share
determined by multiplying 1.05 by the Market Price and (II) U.S. $9.00 per
share; (D) the "Market Price" means $10.3344, which is the weighted average
market price per share of Class A Common Stock on the NYSE (taking into account
the actual sale prices and the respective number of shares of Class A Common
Stock so sold in each sale transaction on the NYSE) for the ten (10) trading day
period ending on the Determination Date as reported by Bloomberg; (E) the
"Determination Date" means May 14, 1997, which was the date that was five (5)
business days prior to the mailing by International of the definitive version of
the original proxy solicitation materials (the "Proxy Statement") to
stockholders of record of International with respect to the Stockholders
Meeting; (F) the "First Tranche Amount" means Cdn.
<PAGE>
CUSIP No. 435569 10 8 Page 104 of 114 Pages
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Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 9
$124,704,000, which is the Canadian dollar equivalent of U.S. $90,000,000 using
the Noon Buying Rate on the Determination Date; (G) the "First Tranche Shares"
means 124,704 shares of Series 2 Nonvoting Preferred Stock, determined by (I)
dividing the First Tranche Amount by the Canadian Dollar Balance, and then (II)
multiplying the resulting fractional amount (rounded to the fifth decimal place)
by 149,658; (H) the "Second Tranche Amount" means Cdn. $24,954,000, which is the
remaining amount of the Canadian Dollar Balance after subtracting the First
Tranche Amount; (I) the "Canadian Dollar Balance" means $149,658,000; and (J)
the "Second Tranche Shares" means 24,954 shares of the Series 2 Nonvoting
Preferred Stock, determined by subtracting from the Series 2 Nonvoting Preferred
Stock issued to UniMedia the First Tranche Shares.
All of the foregoing terms and amounts were previously determined by
the parties in accordance with the Purchase Agreements, the First Exchange
Agreement and the Officer's Certificate, other than the number of shares of
Series C Preferred Stock to be issued as specified in clause (ii) above, which
number of shares, and certain terms of such Preferred Stock, are being modified
by the parties as reflected in this Amended and Restated First Exchange
Agreement and Annex 1 hereto.
International, Hollinger, UniMedia, and/or any other direct or
indirect wholly owned subsidiary of Hollinger (as Hollinger may designate) will
enter into contemporaneously with this Amended and Restated First Exchange
Agreement the Second Amended and Restated
<PAGE>
CUSIP No. 435569 10 8 Page 105 of 114 Pages
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Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 10
Second Exchange Agreement, substantially in the form of Annex 2 attached hereto
("Second Amended and Restated Second Exchange Agreement"). Hollinger will cause
UniMedia and/or any other direct or indirect wholly owned subsidiary of
Hollinger (as Hollinger may designate) to execute and deliver the Second Amended
and Restated Second Exchange Agreement, as such agreement may be amended, and
perform their respective obligations thereunder.
The Exchange shall be mandatory upon receipt of the Stockholder
Approval and shall not require any request or other action by, or notice to,
Hollinger, UniMedia or International. Immediately upon the Exchange dividends
will cease to accrue in respect of shares of Nonvoting Preferred Stock.
Hollinger and UniMedia will promptly tender all stock certificates evidencing
shares of Nonvoting Preferred Stock in order to permit International to complete
the Exchange.
Upon the completion of the Exchange after Stockholder Approval is
obtained, the outstanding shares of Nonvoting Preferred Stock will be cancelled.
The shares of Class A Common Stock and Series C Preferred Stock issued upon the
Exchange will not be registered under the Securities Act at the time of
issuance. At the request of Hollinger, International agrees to take commercially
reasonable efforts to cause the registration under the Securities Act of the
shares of Class A Common Stock and Series C Preferred Stock issued to UniMedia
upon the Exchange (and the shares of Class A Common Stock issuable upon
conversion of the Series C
<PAGE>
CUSIP No. 435569 10 8 Page 106 of 114 Pages
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Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 11
Preferred Stock) and to list such newly issued shares of Class A Common Stock
and Series C Preferred Stock on the NYSE, in each case as soon as practicable
after the issuance thereof.
In the event Stockholder Approval is not obtained at the
Stockholders Meeting or any adjournment or postponement thereof, the shares of
Nonvoting Preferred Stock will remain outstanding, subject to redemption at the
option of the holder in accordance with their terms or transfer in accordance
with the provisions of this Amended and Restated First Exchange Agreement.
This Agreement may be amended or modified, but only by a written
agreement that identifies this Amended and Restated First Exchange Agreement and
is signed by all of the parties hereto. Any such amendment or modification shall
be effective as to International only if in writing signed by the Chairman of
the Special Committee of independent members of the Board of Directors of
International (the "Special Committee") on behalf of International. In addition,
International shall not waive any obligations of Hollinger or UniMedia hereunder
or any other benefits to International arising under this Amended and Restated
First Exchange Agreement unless approved by the Board of Directors of
International following receipt of a favorable recommendation thereof by the
Special Committee. Execution of this Amended and Restated Exchange Agreement by
or on behalf of the parties hereto shall be deemed to cure all defects, if any,
in the execution of the First Exchange Agreement.
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CUSIP No. 435569 10 8 Page 107 of 114 Pages
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Hollinger Inc.
UniMedia Holding Company
July 21, 1997
Page 12
This Amended and Restated First Exchange Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware.
Very truly yours,
HOLLINGER INTERNATIONAL INC.
By: /s/ Kenneth L. Serota
-----------------------------------
Name: Kenneth L. Serota
Title: Vice President-Law & Finance
and Secretary
Agreed and Accepted this 21st day of July, 1997:
HOLLINGER INC.
By: /s/ J.A. Boultbee
---------------------------
Name: J.A. Boultbee
Title: Vice President
and Chief Financial
Officer
UNIMEDIA HOLDING COMPANY
By: /s/ J.A. Boultbee
---------------------------
Name: J.A. Boultbee
Title: President
<PAGE>
CUSIP No. 435569 10 8 Page 108 of 114 Pages
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HOLLINGER INTERNATIONAL INC.
401 NORTH WABASH AVENUE
CHICAGO, ILLINOIS 60611
July 21, 1997
Hollinger Inc.
UniMedia Holding Company
10 Toronto Street
Toronto, Ontario Canada M5C2B7
Attention: Mr. John A. Boultbee, Executive Vice-President
and Chief Financial Officer
Re: SECOND AMENDED AND RESTATED SECOND EXCHANGE AGREEMENT
-----------------------------------------------------
Dear Mr. Boultbee:
This letter ("Second Amended and Restated Second Exchange
Agreement") amends and restates in its entirety that certain Amended and
Restated Second Exchange Agreement dated as of July 3, 1997.
Reference is hereby made to the Amended and Restated First Exchange
Agreement dated as of July 21, 1997 ("Amended and Restated First Exchange
Agreement") among Hollinger Inc., a corporation continued under the laws of
Canada ("Hollinger"), UniMedia Holding Company, a company amalgamated under the
laws of Nova Scotia ("UniMedia"), and Hollinger International Inc., a Delaware
corporation ("International"), relating to the issuance to UniMedia of shares of
Series 1 Nonvoting Preferred Stock and of Series 2 Nonvoting Preferred Stock of
International and the exchange by UniMedia and International ("First Exchange")
of the shares of Series 1 Nonvoting Preferred Stock and Series 2 Nonvoting
<PAGE>
CUSIP No. 435569 10 8 Page 109 of 114 Pages
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UniMedia Holding Company
July 21, 1997
Page 2
Preferred Stock for shares of Class A Common Stock and Series C Preferred Stock
of International in accordance with the terms, and subject to the conditions,
set forth in the Amended and Restated First Exchange Agreement. All capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Amended and Restated First Exchange Agreement.
As soon as practicable, but in any event no later than five (5)
business days, after completion of the First Exchange, International shall issue
(the "Second Exchange"): (x) to Hollinger or any other direct or indirect
subsidiaries of Hollinger as Hollinger may designate (any such subsidiary a
"Designated Subsidiary"), 721,165 shares of Series C Preferred Stock (subject to
adjustment as set forth below) in exchange for 739,500 shares of Series A
Redeemable Convertible Preferred Stock, par value $.01 per share, of
International ("Series A Preferred Shares") and (y) to UniMedia or a Designated
Subsidiary, 739,500 shares of Series D Redeemable Convertible Preferred Stock of
International having the relative rights and preferences set forth in the form
of Certificate of Designations attached hereto as Annex 1 ("Series D Preferred
Stock") in exchange for 721,165 shares of Series C Preferred Stock (subject to
adjustment as set forth below) ("UniMedia Series C Preferred Shares") issued to
UniMedia pursuant to the First Exchange (which shall be immediately cancelled).
The number of shares of Series C Preferred Stock to be issued by
International pursuant to clause (x), above, and the number of shares of Series
C Preferred Stock to be acquired by International pursuant to clause (y), above,
is subject to reduction if the Board of
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CUSIP No. 435569 10 8 Page 110 of 114 Pages
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UniMedia Holding Company
July 21, 1997
Page 3
Directors of International (or a duly authorized committee thereof) determines,
based on the advice of a nationally recognized investment banking firm
experienced in the valuation of securities, that the aggregate value of the
shares of Series C Preferred Stock to be issued in the Second Exchange,
calculated as of the close of business on the trading day immediately preceding
the date of consummation of such exchange, is greater than the Aggregate
Redemption Price (as defined below) of the Series A Preferred Shares to be
acquired in the Second Exchange. The "Aggregate Redemption Price" is defined as
the product of (i) 739,500 (the number of Series A Preferred Shares to be
exchanged for such shares of Series C Preferred Stock) and (ii) the redemption
price for the Series A Preferred Shares of Cdn. $146.625 per share. In the event
that the Board of Directors of International (or a duly authorized committee
thereof) makes such a determination, the number of shares of Series C Preferred
Stock to be issued in the Second Exchange (and the number of UniMedia Series C
Preferred Shares to be acquired by International in exchange for Series D
Preferred Stock) shall be reduced to the greatest whole number of shares of
Series C Preferred Stock the value of which, determined by the Board of
Directors (or a duly authorized committee thereof) as set forth above, does not
exceed the Aggregate Redemption Price of the Series A Preferred Shares.
Hollinger, as soon as practicable but in any event no later than the
date of the Stockholders Meeting, will furnish to International a certificate
("Officer's Certificate"), executed by a duly authorized officer of Hollinger,
identifying each of the Designated Subsidiaries (if any) that will be party to
each exchange described above.
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CUSIP No. 435569 10 8 Page 111 of 114 Pages
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UniMedia Holding Company
July 21, 1997
Page 4
The Second Exchange shall be mandatory and shall not require any
request or other action by, or notice to, Hollinger, UniMedia, the Designated
Subsidiaries or International. The obligations of the parties to this Second
Amended and Restated Second Exchange Agreement to perform the Second Exchange
are conditioned upon and the Second Exchange will occur only after: (i) receipt
by International of the approval by its stockholders of the proposed stock
issuances contemplated by both the First Exchange and the Second Exchange and
(ii) completion of the First Exchange.
Immediately upon the Second Exchange dividends will cease to accrue
in respect of the Series A Preferred Shares and the UniMedia Series C Preferred
Shares. Hollinger and UniMedia and/or each Designated Subsidiary will promptly
tender all stock certificates evidencing the Series A Preferred Shares and the
UniMedia Series C Preferred Shares in order to permit International to complete
the Second Exchange.
Upon completion of the First Exchange and until the earlier of (i)
thirty (30) days thereafter and (ii) completion of the Second Exchange,
Hollinger and UniMedia shall not exercise the registration rights granted under
the First Exchange Agreement. The shares of Series C Preferred Stock and Series
D Preferred Stock issued upon the Second Exchange will not be registered under
the Securities Act at the time of issuance, and the certificates evidencing such
shares will bear the legends set forth in Annex 2 attached hereto. At the
request of Hollinger, UniMedia and/or the Designated Subsidiaries, International
agrees to take commercially reasonable efforts to cause the registration under
the Securities Act of the shares of Series C
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CUSIP No. 435569 10 8 Page 112 of 114 Pages
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UniMedia Holding Company
July 21, 1997
Page 5
Preferred Stock issued to Hollinger, UniMedia and/or the Designated Subsidiaries
upon the Second Exchange and to list such newly issued shares of Series C
Preferred Stock on the New York Stock Exchange, in each case as soon as
practicable after the issuance thereof.
International, Hollinger, UniMedia and the Designated Subsidiaries
shall each use its reasonable commercial efforts to perform and fulfill all
conditions and obligations on its part to be performed and fulfilled under this
Second Amended and Restated Second Exchange Agreement, to the end that the
transactions contemplated by this Second Amended and Restated Second Exchange
Agreement shall be fully carried out. At the Stockholders Meeting, Hollinger, as
the holder, directly or indirectly through its subsidiaries, of all of the
outstanding Class B Common Stock and 33,610,754 shares of Class A Common Stock,
has agreed to vote or cause to be voted all such shares of International held by
it or its subsidiaries in favor of the second exchange proposal and all other
proposals relating thereto.
This Second Amended and Restated Second Exchange Agreement may be
amended or modified, but only by a written agreement that identifies this Second
Amended and Restated Second Exchange Agreement and is signed by all of the
parties hereto. Any such amendment or modification shall be effective as to
International only if in a writing signed by the Chairman of the Special
Committee on behalf of International. In addition, International shall not waive
any obligations of Hollinger, UniMedia or the Designated Subsidiaries hereunder
or any other benefits to International arising under this Second Amended and
Restated Second Exchange Agreement unless approved by the Board of Directors of
International following
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CUSIP No. 435569 10 8 Page 113 of 114 Pages
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UniMedia Holding Company
July 21, 1997
Page 6
receipt of a favorable recommendation thereof by the Special Committee.
Execution of this Second Amended and Restated Second Exchange Agreement by or on
behalf of the parties hereto shall be deemed to cure all defects, if any, in the
execution of the Amended and Restated Second Exchange Agreement and the Second
Exchange Agreement amended thereby.
This Second Amended and Restated Second Exchange Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware.
Very truly yours,
HOLLINGER INTERNATIONAL INC.
By: /s/ Kenneth L. Sertota
----------------------------------
Name: Kenneth L. Serota
Title: Vice President-Law & Finance
and Secretary
Agreed and Accepted this 21st day of July, 1997:
HOLLINGER INC.
By: /s/ J. A. Boultbee
---------------------------
Name: J.A. Boultbee
Title: Vice President and
Chief Financial Officer
UNIMEDIA HOLDING COMPANY
By: /s/ J. A. Boultbee
--------------------------
Name: J.A. Boultbee
Title: President
<PAGE>
CUSIP No. 435569 10 8 Page 114 of 114 Pages
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ANNEX 2
FORM OF STOCK CERTIFICATE LEGENDS
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE SECURITIES ACT"), OR ANY APPLICABLE
STATE SECURITIES LAW, AND MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR A
WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED."
"THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, A
STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS."
