<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): April 18, 1997
Hollinger International Inc.
(Exact name of registrant as specified in charter)
Delaware 0-24004 95-3518892
State or other (Commission (IRS employer
jurisdiction of incorp.) file number) identification no.)
401 North Wabash Avenue,
Chicago, Illinois 60611
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including
area code: (312) 321-2299
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Item 2. Acquisition or Disposition of Assets.
On April 18, 1997, certain Canadian newspaper interests owned and
controlled by Hollinger Inc., the parent corporation of Hollinger International
Inc. (the "Company"), were purchased by Hollinger Canadian Publishing Holdings
Inc. ("Hollinger Canadian Publishing"), a Canadian company in the Company's
consolidated group, from Hollinger Inc. (the "Canadian Newspaper Transaction"),
effective as of January 1, 1997, for an aggregate consideration of approximately
Cdn.$523.0 million (U.S.$382.0 million) pursuant to (i) the UniMedia Class A
Stock Purchase Agreement dated as of April 18, 1997 among Hollinger Inc.,
UniMedia Holding Company, a subsidiary of Hollinger Inc. ("UniMedia Holding")
and the Company (the "UniMedia Class A Stock Purchase Agreement"), (ii) the
UniMedia Class B Stock Purchase Agreement dated as of April 18, 1997 among
Hollinger Inc., UniMedia Holding and the Company (the "UniMedia Class B Stock
Purchase Agreement"), and (iii) the Sterling Purchase Agreement dated as of
April 18, 1997 between Hollinger Inc. and Hollinger Canadian Publishing (the
"Sterling Purchase Agreement"). (The UniMedia Class A Stock Purchase Agreement,
the UniMedia Class B Stock Purchase Agreement and the Sterling Purchase
Agreement are collectively referred to as the "Purchase Agreements.") The
Canadian newspaper interests transferred to the Company consist of the Sterling
Newspaper Group and UniMedia Inc. (collectively, the "Canadian Newspapers").
Pursuant to the UniMedia Class A Stock Purchase Agreement, the Company paid
UniMedia Holding consideration consisting of Cdn.$19.373 million in cash and
149,658 shares of newly issued Series 2 Nonvoting Preferred Stock, par value
$.01 per share, of the Company ("Series 2 Preferred Stock") valued at
Cdn.$149.658 million. Pursuant to the UniMedia Class B Stock Purchase Agreement,
the Company paid UniMedia Holding consideration consisting of Cdn.$100,000 in
cash and 23,267 shares of newly issued Series 1 Nonvoting Preferred Stock, par
value $.01 per share, of the Company ("Series 1 Preferred Stock") valued at
Cdn.$23.267 million. Pursuant to the Sterling Purchase Agreement, Hollinger
Canadian Publishing paid Hollinger Inc. consideration consisting of Cdn.$330.602
million in cash.
As a condition to the closing of the Purchase Agreements, the Company,
Hollinger Inc. and UniMedia Holding entered into an Exchange Agreement dated as
of April 18, 1997 (the "Exchange Agreement") pursuant to which the Company
agreed to exchange all of the shares of Series 1 Preferred Stock and Series 2
Preferred Stock issued to UniMedia Holding as consideration under the UniMedia
Class A Stock Purchase Agreement and the UniMedia Class B Stock Purchase
Agreement for shares of Class A Common Stock and shares of Series C Convertible
Preferred Stock, par value $.01 per share of the Company ("Series C Preferred
Stock") (each in an amount to be determined pursuant to the terms of the
Exchange Agreement), subject to receiving the requisite approval of the
stockholders of
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the Company (the "First Exchange"). In addition, it is anticipated that the
Company, Hollinger Inc., UniMedia Holding, 1159670 Ontario Limited, a wholly
owned subsidiary of Hollinger Inc., and/or another direct or indirect wholly
owned subsidiary of Hollinger Inc. (as Hollinger Inc. may designate) will enter
into a proposed Second Exchange Agreement (the "Second Exchange Agreement")
pursuant to which the Company intends to issue shares of Class A Common Stock to
UniMedia Holding in exchange for the Series C Preferred Stock issued in the
First Exchange and intends to issue shares of Series C Preferred Stock to
1159670 Ontario Limited (or such other subsidiary) in exchange for shares of
outstanding Class A Common Stock owned by 1159670 Ontario Limited (the "Second
Exchange"). The proposed exchanges contemplated by the Second Exchange Agreement
would occur immediately following the First Exchange, subject to receiving the
requisite approval of the stockholders of the Company. In accordance with the
rules of the New York Stock Exchange (the "NYSE"), on which the Company's Class
A Common Stock and Preferred Redeemable Increased Dividend Equity Securities
("PRIDES") are listed, the Company is required to obtain stockholder approval
for the First Exchange and the Second Exchange. The Company expects that the
stockholder meeting to approve such issuances and exchanges will be held in June
1997.
Upon consummation of the Purchase Agreements, Hollinger Inc. continues to
own a majority of the equity interest and voting control of the Company, the
Company continues to own all of the outstanding capital stock of Hollinger
International Publishing Inc. ("Publishing"), Hollinger Inc. and Publishing
each hold interests in Hollinger Canadian Publishing such that (i) Publishing
and its subsidiaries own 100% of the non-voting equity shares and non-voting
preference shares and (ii) each of Publishing and Hollinger Inc. (through its
wholly-owned subsidiary) own 50% of the voting preference shares which have
only nominal equity value.
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TERMS OF THE PURCHASE AGREEMENTS
Pursuant to the Purchase Agreements, the Company purchased from Hollinger
Inc. the Canadian Newspapers, consisting of the Sterling Newspaper Group and
UniMedia Inc. The Purchase Agreements each contained customary representations
and warranties of the Company and Hollinger Inc., and UniMedia Holding with
respect to the UniMedia Class A Stock Purchase Agreement and the UniMedia Class
B Stock Purchase Agreement and Hollinger Canadian Publishing with respect to
the Sterling Purchase Agreement.
The UniMedia Class A Purchase Agreement provides for an adjustment to the
purchase price paid thereunder to be paid in Canadian dollars within 60 days of
closing, or June 17, 1997, as follows: (i) increased by an amount equal to the
excess of interest on the purchase price from and including January 1, 1997 to
and 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 UniMedia Newspapers Company and its subsidiaries on certain specified
outstanding indebtedness; and (ii) decreased (increased) by an amount equal to
the aggregate net cash receipts (disbursements) generated by the operations of
the Canadian Newspapers transferred pursuant to the UniMedia Class A Purchase
Agreement during the Interim Period which have been paid to Hollinger Inc. The
UniMedia Class A Purchase Agreement further provides for a net working capital
adjustment as of December 31, 1996 to be paid to UniMedia Holding. The UniMedia
Class B Purchase Agreement provides for an increase to the purchase price paid
thereunder to be paid in Canadian dollars within 60 days of closing, or June
17, 1997, in an amount equal to interest on the purchase price during the
Interim Period at an annual rate equal to 7.75%. The Sterling Purchase
Agreement provides for an adjustment to the purchase price paid thereunder to
be paid in Canadian dollars within 60 days of closing, or June 17, 1997, as
follows: (i) increased by an amount equal to the interest on the purchase price
during the Interim Period at an annual rate of 7.75%; (ii) decreased
(increased) by an amount equal to the aggregate pre-tax net cash receipts
(disbursements) generated by the operations of the Canadian Newspapers
transferred pursuant to the Sterling Purchase Agreement during the Interim
Period which have been paid to Hollinger Inc.; and (iii) increased by an amount
equal to the notional tax liability attributable to the Canadian Newspapers
transferred pursuant to the Sterling Purchase Agreement during the Interim
Period calculated using a tax rate of 44%. The Sterling Purchase Agreement
further provides for a net working capital adjustment, which was paid on the
closing date to Hollinger Inc. in the form of a cash dividend.
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The UniMedia Class A Purchase Agreement and the UniMedia Class B Purchase
Agreement each provide that Hollinger Inc. and UniMedia Holding shall jointly
and severally indemnify the Company for claims resulting from a breach of a
representation, warranty or covenant of Hollinger Inc. or UniMedia Holding
under such agreements (with certain limited exceptions); provided, however,
that any claims must be made by the Company no later than the date(s) on which
such representations, warranties or covenants expire. With respect to each
agreement, Hollinger Inc. and UniMedia Holding are obligated to indemnify the
Company only if indemnification claims, in the aggregate, exceed Cdn.$1.0
million, in which case Hollinger Inc. and UniMedia Holding are required to
indemnify the Company only to the extent such claims exceed Cdn.$500,000, to a
maximum aggregate amount equal to the purchase price under each such agreement.
The Sterling Purchase Agreement provides that Hollinger Inc. shall indemnify
Hollinger Canadian Publishing for claims resulting from a breach of a
representation, warranty or covenant of Hollinger Inc. under the Sterling
Purchase Agreement; provided, however, that any claims must be made by
Hollinger Canadian Publishing no later than the date(s) on which such
representations, warranties or covenants expire. Hollinger Inc. is obligated to
indemnify Hollinger Canadian Publishing only if indemnification claims, in the
aggregate, exceed Cdn.$1.0 million, in which case Hollinger Inc. is required to
indemnify Hollinger Canadian Publishing only to the extent such claims exceed
Cdn.$500,000, to a maximum aggregate amount equal to the purchase price under
the Sterling Purchase Agreement.
Pursuant to the Purchase Agreements, (i) the Company agreed to call a
special meeting of the holders of its Common Stock and Series B Preferred Stock
to approve the issuance to UniMedia Holding under the Exchange Agreement of
Class A Common Stock and Series C Preferred Stock in exchange for the Series 1
and 2 Preferred Stock, and (ii) Hollinger Inc., which holds directly or
indirectly approximately 77.75% of the total voting power of the Common Stock
and Series B Preferred Stock, agreed to vote in favor of the proposed issuance.
Hollinger Inc. further agreed pursuant to the Purchase Agreements, that it
and its subsidiaries would not, for a period of five years after the closing of
the Purchase Agreements, without the prior written consent of the Company,
either directly or indirectly, undertake or carry on or be engaged or have any
financial interest in any newspaper, shopper or similar publication carrying
advertising, for which the circulation or the distribution is primarily in the
communities where the Canadian Newspapers are currently being published or
within a radius of 10 miles of the center point of any such community;
provided, however, that these restrictions do not apply to the publication
or acquisition of
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certain national market publications, the ownership of less than 5% of any
class of securities of any publicly-traded company, or the interest that
Hollinger Inc. has in Hollinger Canadian Publishing, Southam, The Financial
Post Limited, Saturday Night Magazine Limited and their respective
subsidiaries.
The Company and Hollinger Inc. also entered into a waiver agreement which
waived the provisions of that certain Business Opportunities Agreement between
the Company and Hollinger Inc., to permit the Company to consummate the
purchase of the Canadian Newspapers from Hollinger Inc. and operate such
newspapers. Hollinger Inc., which owns 50% of the voting stock of Hollinger
Canadian Publishing, also agreed that it would not take certain actions
affecting ownership of the Canadian Newspapers which would cause a material
adverse impact on the Canadian Newspapers under Canadian tax law.
AMENDED BANK CREDIT FACILITY
The purchase price of the Canadian Newspapers was financed in part through
a Cdn.$244.5 million ($175 million) borrowing by Hollinger Canadian Publishing
under an amended long-term bank credit facility among Publishing, Hollinger
Canadian Publishing, Telegraph Group Limited ("The Telegraph") and certain
financial institutions (the "Amended Bank Credit Facility"). The remainder of
the cash portion of the purchase price, Cdn.$105.5 million ($75 million), was
funded by a loan from Publishing to Hollinger Canadian Publishing. The Amended
Bank Credit Facility, which was entered into on April 7, 1997, provides for up
to $900 million in total credit availability under four tranches with available
borrowings by The Telegraph limited to $150 million, available borrowings by
Hollinger Canadian Publishing limited to $250 million, and available borrowings
by Publishing limited to $900 million, less amounts outstanding under other
tranches, with maximum borrowings in each case limited by certain financial
statement covenants. The Amended Bank Credit Facility also provides a fourth
tranche which may be used for permitted acquisitions under terms and conditions
subject to the lenders' approval. The Amended Bank Credit Facility matures on
March 15, 2004 with required reductions in availability equal to 6.25% of the
commitment per calendar quarter commencing on June 30, 2000.
Loans under the Amended Bank Credit Facility bear interest, at the option
of the respective borrower, at a rate per annum tied to specified floating
rates or a reserve adjusted Eurocurrency rate,
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in each case plus a specified margin determined based on leverage ratios. The
obligations of each borrower under the Bank Credit Facility are guaranteed by
the Company and by each U.S. subsidiary (other than American Publishing (1991)
Inc. ("AP-91"), which provides a partial guaranty). The obligations of
Hollinger Canadian Publishing are guaranteed in whole or part by each of its
Canadian subsidiaries (other than Southam Inc.) and by The Telegraph and its
subsidiaries. The obligations of The Telegraph are guaranteed in whole or
part by each English subsidiary and by Hollinger Canadian Publishing and
each of its Canadian subsidiaries.
The obligations of all borrowers under the Bank Credit Facility are
secured by a pledge by the Company of all stock of Publishing, the pledge by
Publishing and its restricted subsidiaries of the stock of their United States
subsidiaries (other than AP-91 and its subsidiaries), certain intercompany
notes and security agreements, and portions of the stock of certain Canadian
and English subsidiaries. The obligations of Hollinger Canadian Publishing and
the Canadian and English subsidiaries which have guaranteed its debt are
secured by all or part of the pledge of the stock of the Canadian subsidiaries,
including approximately 42% of the stock of Southam Inc., and all or part of the
stock of The Telegraph and the English subsidiaries. The obligations of The
Telegraph and the Canadian and English subsidiaries which have guaranteed its
debt are secured by the pledge of all or part of the stock of the English
subsidiaries, and all or part of the stock of The Telegraph and the Canadian
subsidiaries.
TERMS OF THE SERIES 1 AND 2 PREFERRED STOCK
The Series 1 Preferred Stock consists of 23,267 shares with a stated issue
price of Cdn.$1,000 per share, which were issued pursuant to the UniMedia Class
B Stock Purchase Agreement. The Series 2 Preferred Stock consists of 149,658
shares with a stated issue price of Cdn.$1,000 per share, which were issued
pursuant to the UniMedia Class A Stock Purchase Agreement. The Series 2
Preferred Stock consists of two tranches: (i) the Canadian dollar equivalent of
$90.0 million of Series 2 Preferred Stock, which will be mandatorily exchanged
into shares of Series C Preferred Stock (the "First Tranche") pursuant to the
Exchange Agreement, and (ii) the balance of the Series 2 Preferred Stock will be
mandatorily exchanged into shares of Class A Common Stock (the "Second Tranche")
pursuant to the Exchange Agreement. See "Terms of the Exchange Agreement."
Dividends are payable on the Series 1 Preferred Stock when, as and if
declared by the Board of Directors of the Company, at a rate equal to the
dividends that would have been paid on Class A
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Common Stock as if Class A Common Stock had been issued on the closing date of
the Purchase Agreements. Dividends accrue on the First Tranche of the Series 2
Preferred Stock at a rate equal to 9.5% per annum. Dividends are payable on
the Second Tranche of the Series 2 Preferred Stock when, as and if declared by
the Board of Directors of the Company, at a rate equal to the dividends that
would have been paid on Class A Common Stock as if Class A Common Stock had
been issued on the closing date of the Purchase Agreements.
The Series 1 and 2 Preferred Stock is subject to mandatory exchange in
accordance with the terms of the Exchange Agreement. Subject to the receipt of
stockholder approval of the First Exchange, the Series 1 Preferred Stock is
mandatorily exchangeable into shares of Class A Common Stock, the First Tranche
of the Series 2 Preferred Stock is mandatorily exchangeable into shares of
Series C Preferred Stock and the Second Tranche of the Series 2 Preferred Stock
is mandatorily exchangeable into shares of Class A Common Stock. If the
Exchange Proposal is not approved, the Series 1 and 2 Preferred Stock may be
redeemed at the option of the holder in whole or in part at any time
after December 31, 1997, upon 60 days' prior written notice to the Company, for
an amount equal to 95% of the stated issue price, plus the amount of any unpaid
dividends accrued to the date of redemption.
The Series 1 and 2 Preferred Stock rank on a parity with the Common Stock
and junior to the Series A Preferred Stock and Series B Preferred Stock. The
Series 1 and 2 Preferred Stock do not have any voting rights, except as
otherwise provided by law, and are nontransferable, except to affiliates or
subsidiaries of the original holder or otherwise with the prior written
approval of the Company, but may be pledged by the original holder as
collateral security for indebtedness. If the requisite stockholder approval of
the Exchange Proposal is not obtained, all (but not less than all) of the
Series 1 and 2 Preferred Stock may be sold or transferred to a third party,
subject to compliance with all applicable laws, agreement by the pledgee or
transferee to be bound by the terms of the Exchange Agreement and receipt of a
legal opinion.
TERMS OF THE EXCHANGE AGREEMENT
The Company, Hollinger Inc. and UniMedia Holding entered into the Exchange
Agreement as a condition to the closing of the Purchase Agreements. The
Exchange Agreement provides that within five business days of obtaining the
required affirmative stockholder vote with respect to the exchange, the Company
will issue to UniMedia Holding the following securities in exchange for all
issued and outstanding shares of Series 1 and 2 Preferred Stock: (i) newly
issued shares of Class A Common Stock in exchange for all 23,267 shares of
Series 1 Preferred Stock; (ii) newly
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issued shares of Series C Preferred Stock in exchange for all shares of the
First Tranche of the Series 2 Preferred Stock; and (iii) newly issued shares of
Class A Common Stock for all shares of the Second Tranche of the Series 2
Preferred Stock. Upon completion of the First Exchange contemplated by the
Exchange Agreement, all outstanding shares of Series 1 and 2 Preferred Stock
will be cancelled.
The Company also has agreed, that at the request of Hollinger Inc., it
will 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 (and the shares of Class A Common Stock issuable upon
the conversion of the Series C Preferred Stock) issued in the exchange, and to
list such shares on the NYSE as soon as practicable.
In the event stockholder approval of the First Exchange is not obtained,
the shares of Series 1 and 2 Preferred Stock will remain outstanding in
accordance with their terms. If the requisite stockholder approval of the First
Exchange is not obtained, all (but not less than all) of the Series 1 and 2
Preferred Stock may be sold or transferred to a third party, subject to
compliance with all applicable laws, agreement by the pledgee or transferee to
be bound by the terms of the Exchange Agreement and receipt of a legal opinion.
Item 7. Financial Statements and Exhibits.
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(a) Financial statements of businesses acquired.
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
Report of Independent Auditors
Combined Balance Sheet
Combined Statement of Earnings
Combined Statement of Shareholder's Interest
Combined Statement of Changes in Financial Position
Notes to Combined Financial Statements
(b) Pro forma financial information.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
HOLLINGER INTERNATIONAL INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1996
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1995
Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1994
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements
(c) Exhibits.
2.01 UniMedia Class A Stock Purchase Agreement dated as of April
18, 1997 among Hollinger Inc., UniMedia Holding Company and
Hollinger International Inc.
2.02 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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2.03 Sterling Purchase Agreement dated as of April 18, 1997 between
Hollinger Inc. and Hollinger Canadian Publishing Holdings Inc.
3.01 Certificate of Designations for Series 1 Preferred Stock.
3.02 Certificate of Designations for Series 2 Preferred Stock.
4.03 Second Amended Bank Credit Facility dated April 7, 1997 among
Hollinger International Publishing Inc., Telegraph Group
Limited, Hollinger Canadian Publishing Holdings Inc., various
financial institutions, The Toronto-Dominion Bank, as Issuing
Bank, The Bank of Nova Scotia, as Syndication Agent, Canadian
Imperial Bank of Commerce, as Documentation Agent, and Toronto
Dominion (Texas), Inc., as Administrative Agent. Pursuant to
S-K 601(b)(4)(iii), the Registrant has not filed a copy of this
exhibit but will furnish a copy upon the Commission's request.
10.01 Exchange Agreement dated as of April 18, 1997 among Hollinger
International Inc., Hollinger Inc. and UniMedia Holding
Company.
99.01 Press Release dated April 18, 1997.
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INDEX TO FINANCIAL STATEMENTS
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
<TABLE>
<S> <C>
Report of Independent Auditors.................................................. 13
Combined Balance Sheet.......................................................... 14
Combined Statement of Earnings.................................................. 15
Combined Statement of Shareholder's Interest.................................... 16
Combined Statement of Changes in Financial Position............................. 17
Notes to Combined Financial Statements.......................................... 18
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF HOLLINGER
INTERNATIONAL INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet........................ 28
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1996........................................................ 29
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1995........................................................ 30
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1994........................................................ 31
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements........ 32
</TABLE>
12
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REPORT OF INDEPENDENT AUDITORS
We have audited the combined balance sheet of the Hollinger Inc. Canadian
Newspaper Group (the "Group") as at December 31, 1996 and the combined
statements of earnings, shareholder's interest and changes in financial position
for the Group for the year ended December 31, 1996. These combined financial
statements are the responsibility of Hollinger Inc. Our responsibility is to
express an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these combined financial statements present fairly, in all
material respects, the financial position of the Group as at December 31, 1996
and the results of its operations and the changes in its financial position for
the year then ended in accordance with the accounting principles described in
note 1 to the combined financial statements.
Accounting principles generally accepted in Canada vary in certain
significant respects from accounting principles generally accepted in the United
States. A description of certain significant differences, as applicable to the
Group is included in note 14 to the combined financial statements.
Chartered Accountants
Toronto, Canada
March 15, 1997
13
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HOLLINGER INC. CANADIAN NEWSPAPER GROUP
COMBINED BALANCE SHEET
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1995 1996
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Due from Hollinger.................................................... $ -- $ 17,416
Accounts receivable................................................... 32,600 44,241
Inventories........................................................... 5,704 5,471
Prepaid expenses...................................................... 993 1,205
-------- --------
39,297 68,333
Fixed assets (note 4)................................................... 72,469 77,891
Circulation, net of accumulated amortization of $14,835 (1995-$9,875)... 117,037 186,164
Goodwill and other assets (note 5)...................................... 24,261 29,583
-------- --------
$253,064 $361,971
======== ========
LIABILITIES AND SHAREHOLDER'S INTEREST
Current liabilities:
Bank indebtedness (note 6(b))......................................... $ 11,287 $ 8,480
Accounts payable and accrued expenses................................. 19,992 21,124
Deferred subscription revenue......................................... 10,534 13,857
Due to Hollinger Inc. (note 10)....................................... 492 --
Current portion of long-term debt..................................... 3,203 3,279
-------- --------
45,508 46,740
Long-term debt (note 6)................................................. 13,808 10,697
Due to Hollinger, Inc. (note 10)........................................ 16,161 16,161
Other liabilities (note 7).............................................. 13,862 6,732
SHAREHOLDER'S INTEREST (note 8)......................................... 163,725 281,641
Commitments (note 12)
-------- --------
$253,064 $361,971
======== ========
</TABLE>
See accompanying notes to combined financial statements.
14
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HOLLINGER INC. CANADIAN NEWSPAPER GROUP
COMBINED STATEMENT OF EARNINGS
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Revenue....................................................... $139,641 $162,714 $296,582
Expenses:
Cost of sales and expenses before the undernoted items...... 124,249 144,692 247,613
Interest on long-term debt.................................. 575 1,194
Other interest, net......................................... 817 1,767 1,699
Depreciation of fixed assets................................ 4,048 5,078 7,776
Amortization of circulation................................. 1,625 1,625 5,048
Amortization of goodwill, and other assets.................. 415 794 775
Management fees to Hollinger Inc............................ 3,264 4,601 5,579
-------- -------- --------
134,418 159,132 269,684
-------- -------- --------
Earnings before the undernoted................................ 5,223 3,582 26,898
Write-down of building and related costs (note 4)............. 5,611
Write-down of investment and deferred costs................... 1,126 1,322
Other unusual items........................................... 563
-------- -------- --------
Earnings before income taxes.................................. 4,097 2,260 20,724
Income taxes (recovery) (note 11):............................ 115 402 284
-------- -------- --------
Net earnings.................................................. $ 3,982 $ 1,858 $ 20,440
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
15
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HOLLINGER INC. CANADIAN NEWSPAPER GROUP
COMBINED STATEMENT OF SHAREHOLDER'S INTEREST
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Shareholder's interest, beginning of year..................... $ 66,127 $ 70,109 $163,725
Net earnings.................................................. 3,982 1,858 20,440
Acquisition of Armadale newspapers (note 3)................... 94,200
Acquisition of Thomson newspapers (note 3).................... 91,758
Additional capital contribution to Sterling Newspapers
Limited..................................................... 3,276
-------- -------- --------
Shareholder's interest, end of year........................... $ 70,109 $163,725 $281,641
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
16
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HOLLINGER INC. CANADIAN NEWSPAPER GROUP
COMBINED STATEMENT OF CHANGES IN FINANCIAL POSITION
(IN THOUSANDS OF CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Cash provided by (used in):
Operations:
Net earnings................................................ $ 3,982 $ 1,858 $ 20,440
Non-cash items:
Depreciation and amortization............................ 6,088 7,497 13,599
Loss on disposal or writedown of fixed assets or
investments............................................ 48 1,755 4,957
Deferred taxes........................................... (32) 145 1
Changes in non-cash working capital items................... (9,723) (7,611) (1,694)
Deferred pension costs...................................... 1,346 (1,437) (395)
Deferred lease inducement................................... 1,315 (105) (92)
Deferred subscription revenue............................... 129 (282) (126)
Severance and provision for rationalization costs........... -- (3,669) (8,612)
-------- -------- --------
3,153 (1,849) 28,078
-------- -------- --------
Financing:
Net increase (decrease) in long-term debt, including capital
lease obligations........................................ 4,175 6,916 (3,035)
-------- -------- --------
Investments:
Additions to fixed assets and assets under capital leases... (26,129) (7,855) (6,528)
Net proceeds on disposal of fixed assets and investments.... 624 848 3,426
Addition to circulation and other intangibles............... (1,436) (1,963) (1,226)
Advances from (to) Hollinger................................ 16,490 (595) (17,908)
Addition to investment...................................... (1,211) -- --
Acquisition of businesses (note 3).......................... (2,399) (91,758) (94,200)
Acquisitions financed by Hollinger.......................... 91,758 94,200
Capital contributions to Sterling Newspapers Limited........ -- -- 3,276
Contribution by Hollinger................................... -- -- (3,276)
-------- -------- --------
(14,061) (9,565) (22,236)
-------- -------- --------
Decrease (increase) in bank indebtedness...................... (6,733) (4,498) 2,807
Bank indebtedness, beginning of year.......................... 56 6,789 11,287
-------- -------- --------
Bank indebtedness, end of year................................ $ 6,789 $ 11,287 $ 8,480
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
17
<PAGE> 18
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
1. BASIS OF PRESENTATION:
The Canadian Newspaper Group ("Group") of Hollinger Inc. ("Hollinger"), a
Canadian public company, consists of the following wholly-owned entities:
UniMedia Inc. (acquired June 1987)
Sterling Newspapers Limited (acquired October 1986)
Thomson Division (acquired October 1995)
Armadale Division (acquired January 1996)
The combined financial statements reflect each of the businesses in the
Group at their historical cost to Hollinger to reflect the combination of
businesses under common control using "as-if pooling of interests"
accounting. Accordingly, the combined financial statements reflect all
purchase accounting adjustments made by Hollinger in respect of its
acquisition of businesses in the Group.
These combined financial statements do not reflect the borrowings and
related interest charges made by Hollinger in acquiring its investment in
the businesses of the Group. In addition, no income taxes have been
provided against the earnings of the Thomson and Armadale divisions as
Hollinger had sufficient unrecognized tax losses carried forward to fully
offset the taxable earnings of these divisions.
Hollinger transferred substantially all of the assets and liabilities of
the Thomson and Armadale divisions to Sterling Newspapers Limited in 1997.
Shareholder's interest represents the historical cost of Hollinger's
investments in the businesses of the Group and the accumulated
undistributed earnings of these businesses since the date they were
acquired by Hollinger.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) Inventories:
Raw materials are valued at the lower of cost and replacement cost.
Finished goods are valued at the lower of cost and net realizable
value. Cost is determined using the first-in, first-out method.
(b) Fixed assets:
Fixed assets are stated at cost. Cost represents the cost of
acquisition or construction, including the direct costs of financing
the acquisition or construction until the asset is ready for use.
Leases which transfer substantially all of the benefits and risks of
ownership to the Group are recorded as assets together with the
obligations, based on the present value of future rental payments.
Fixed assets, including assets under capital leases, are depreciated
using the straight-line method over their estimated useful lives as
follows:
<TABLE>
<CAPTION>
ASSETS RATE
------ ----
<S> <C>
Buildings........................................................ 2.5%
Machinery and equipment.......................................... 5% to 20%
Leasehold improvements........................................... Over the term
of the lease
</TABLE>
18
<PAGE> 19
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) Circulation:
Circulation represents the long-term readership of paid newspapers. The
Group allocates a portion of the purchase price discrepancy in each
business acquired to the cost of circulation and capitalizes costs
incurred to increase the long-term readership thereafter. Circulation
is being amortized on a straight-line basis over 40 years. The net book
value of circulation would be written down when declines in value are
considered to be other than temporary based on expected cash flows of
the respective operation.
(d) Copyrights:
Copyrights are amortized over the estimated publishing period of each
publication.
(e) Goodwill:
Goodwill represents the excess of the purchase consideration over the
fair value of net assets acquired at the time of acquisition and is
amortized on a straight-line basis over 40 years. The net book value of
goodwill would be written down to fair value if the value is
permanently impaired. The Group determines whether there has been a
permanent decline in value based on the expected cash flows of the
respective operation.
(f) Deferred start-up costs:
Direct costs incurred, net of any revenues, during the development
period of a new newspaper or other publication, are deferred and
amortized on a straight-line basis over three years. If a subsequent
decision is made to discontinue the newspaper or publication before the
end of the amortization period, the remaining balance is written off.
(g) Deferred subscription revenue:
The portion of customer subscription revenue not yet earned is deferred
and recognized in income over the term of the subscription.
(h) Deferred government grants and investment tax credits:
Deferred government grants and investment tax credits are amortized
over the estimated useful lives of the related capital assets and the
annual amount is recorded as a reduction of depreciation expense.
(i) Pension expense and obligations:
Pension costs related to current service are charged to earnings for
the period during which the services are rendered. These costs reflect
management's best estimates of the pension plans' expected investment
yields, salary escalations, mortality of members and retirement ages.
Adjustments arising from plan amendments, changes in assumptions and
experience gains and losses are amortized on a straight-line basis over
the expected remaining service life of the plan participants. However,
the gains or losses on plan settlements, partial settlement, or
curtailments are recognized into income the year in which they occur.
The difference between pension expense and the funding contributions,
as well as the unamortized portion of the unfunded pension liability at
the date of acquisition, are included in other assets.
19
<PAGE> 20
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
3. ACQUISITIONS AND DISPOSITIONS:
On January 1, 1996, Hollinger acquired for cash consideration two daily
newspapers and twelve non-daily newspapers representing all of the assets
and operations of the Armadale division.
On October 4, 1995, Hollinger acquired for cash consideration 12 daily
newspapers and seven non-daily newspapers representing all of the assets
and operations of the Thomson division.
The details of the acquisitions are as follows:
<TABLE>
<CAPTION>
1995 1996
----------- ------------
(UNAUDITED)
<S> <C> <C>
Assets acquired, at fair value:
Current assets............................................... $ 11,731 $ 15,037
Fixed assets................................................. 22,375 13,702
Circulation.................................................. 58,601 72,862
Goodwill and other assets.................................... 9,476 10,457
--------- --------
102,183 112,058
Liabilities assumed:
Current liabilities.......................................... 4,225 17,858
Other long-term liabilities.................................. 6,200 --
--------- --------
10,425 17,858
--------- --------
Net cost of the investment..................................... $ 91,758 $ 94,200
========= ========
</TABLE>
These acquisitions have been accounted for using the purchase method of
accounting whereby the results of operations of the acquired business are
included from the date of acquisition. Certain amounts ascribed to assets
are subject to revision once final appraisals are complete.
During 1996, the Group sold a non-daily newspaper for cash consideration of
$3,400,000, which resulted in no gain or loss on the sale.
4. FIXED ASSETS:
<TABLE>
<CAPTION>
1995 1996
-------- -------------------------------------
NET BOOK ACCUMULATED NET BOOK
VALUE COST DEPRECIATION VALUE
-------- -------- ------------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land..................................... $ 8,441 $ 10,498 $ -- $10,498
Buildings and leasehold interests........ 24,283 30,160 4,495 25,665
Machinery and equipment owned............ 37,602 67,127 27,130 39,997
Machinery and equipment under
capital lease.......................... 2,143 2,678 947 1,731
------- -------- ------- -------
$72,469 $110,463 $32,572 $77,891
======= ======== ======= =======
</TABLE>
(a) During the year, the net book value of a building was written down. The
write down and related costs totalled $5,611,000. Management believes
that the carrying charges related to this building will be recovered
through future cash inflows.
(b) Capitalized financing costs totalled $280,000 for the year ended
December 31, 1995 (1994-615,600).
20
<PAGE> 21
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
5. GOODWILL AND OTHER ASSETS:
<TABLE>
<CAPTION>
1995 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Goodwill, net of amortization of $2,895 (1995 - $2,255)............. $18,492 $23,053
Copyrights, net of amortization of $533 (1995 - $409)............... 673 1,065
Deferred income taxes............................................... 2,296 2,297
Deferred pension costs.............................................. 2,375 2,770
Investment, at cost................................................. 385 358
Other............................................................... 40 40
------- -------
$24,261 $29,583
======= =======
</TABLE>
6. LONG-TERM DEBT:
<TABLE>
<CAPTION>
1995 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Unimedia Inc.:
Bank loans........................................................ $14,800 $12,400
Obligations under capital leases.................................. 1,513 780
Non-interest bearing loan maturing in 2000 and 2001............... 470 470
Other 228 326
------- -------
17,011 13,976
Less current portion included in current liabilities................... 3,203 3,279
------- -------
$13,808 $10,697
======= =======
</TABLE>
(a) Unimedia Inc.'s bank loans are as follows:
(i) A revolving facility of $9,000,000, reducing over a five-year period
by $600,000 per quarter, available through variable rate loans at
prime plus 3/8% or bankers' acceptances at market rates at its
option. At December 31, 1996, borrowings under this facility
totalled $9,000,000.
(ii) A revolving facility of $12,000,000, renewable annually, available
through variable rate loans at prime plus 5/8% or bankers'
acceptances at market rates at its option. If not renewed, this
facility will be converted into a five-year term loan. At December
31, 1996, borrowings under this facility totalled $3,400,000.
(b) Unimedia Inc.'s bank indebtedness and bank loans are secured by a
general assignment of its book debts, a charge on its inventory under
Section 427 of the Bank Act (Canada), and a deed of hypothec covering
the universality of its assets, present and future, moveable and
immoveable.
(c) Maximum principal amounts payable on long-term debt, excluding
obligations under capital leases, for each of the five years subsequent
to December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997............................................................. $2,616
1998............................................................. 2,444
1999............................................................. 2,443
2000............................................................. 2,035
2001............................................................. 235
</TABLE>
21
<PAGE> 22
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
6. LONG-TERM DEBT (CONTINUED)
(d) Minimum lease commitments together with the present value of
obligations under capital leases are as follows:
<TABLE>
<S> <C>
1997............................................................. $ 714
1998............................................................. 119
------
Total future minimum lease payments.............................. 833
Less imputed interest calculated at a rate of 10.7%.............. 53
------
780
Less current portion included in current liabilities............. 663
------
Present value of minimum lease payments.......................... $ 117
======
</TABLE>
7. OTHER LIABILITIES:
<TABLE>
<CAPTION>
1995 1996
------ ------
(UNAUDITED)
<S> <C> <C>
Severance....................................................... $11,233 $ 4,364
Deferred lease inducement....................................... 1,257 1,165
Deferred subscription revenue................................... 801 675
Other........................................................... 571 528
------- -------
$13,862 $ 6,732
======= =======
</TABLE>
Principal amounts payable on severance for Unimedia Inc. are as follows:
<TABLE>
<S> <C>
1997..................................................................... $ 1,823
1998..................................................................... 1,370
1999..................................................................... 1,033
2000..................................................................... 872
2001..................................................................... 720
Thereafter............................................................... 1,335
-------
Total payments........................................................... 7,153
Less interest calculated at a rate of 8%................................. 1,331
-------
5,822
Less current portion included in accounts payable........................ 1,458
-------
Present value............................................................ $ 4,364
=======
</TABLE>
8. SHAREHOLDER'S INTEREST:
Shareholder's interest represents Hollinger's combined equity investment in
its wholly-owned subsidiaries, Sterling Newspapers Limited, UniMedia Inc.,
and its Armadale and Thomson divisions and is comprised of the following:
<TABLE>
<CAPTION>
1995 1996
-------- -------
(UNAUDITED)
<S> <C> <C>
Historical cost of Hollinger's original investments........... $166,759 $264,235
Post acquisition retained earnings (losses)................... (3,034) 17,406
-------- --------
$163,725 $281,641
======== ========
</TABLE>
22
<PAGE> 23
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
9. PENSION PLANS:
Substantially all of the employees of Unimedia Inc. and certain employees
of Sterling Newspapers Limited and the Thomson division of Hollinger Inc.
are covered by defined benefit pension plans. Under these plans, benefits
are paid based on participants' length of service and earnings.
Based on actuarial extrapolations, the valuation of the plans is as
follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Net pension plan assets, at market value........................ $70,994 $78,520
Actuarial value of accrued pension benefits..................... 66,263 67,555
======= =======
</TABLE>
10. RELATED PARTY TRANSACTIONS:
Related party transactions not presented elsewhere in the combined
financial statements are summarized below:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Interest income from the parent company........................ $403 $ -- $ --
==== ==== ====
Interest expense paid to parent company........................ $818 $394 $186
==== ==== ====
</TABLE>
Amounts due to Hollinger Inc are non-interest bearing and have no fixed
terms for repayment.
11. INCOME TAXES:
No income taxes have been provided against the aggregate 1996 earnings of
$20,002 of the Thomson and Armadale divisions of Hollinger Inc., (1995 -
1,716; 1994 - Nil) as Hollinger had sufficient unrecognized tax losses
carried forward to fully offset the taxable earnings of these divisions.
As at December 31, 1996, the Group has tax losses carried forward for which
tax benefit has not been reflected in the accounts. These losses expire as
follows:
<TABLE>
<CAPTION>
STERLING UNIMEDIA TOTAL
-------- -------- -------
<S> <C> <C> <C>
1997................................................. $ -- $ 1,892 $ 1,892
1998................................................. 452 6,762 7,214
1999................................................. -- 6,112 6,112
2000................................................. 85 2,801 2,886
2001................................................. 156 -- 156
---- ------- -------
$693 $17,567 $18,260
==== ======= =======
</TABLE>
23
<PAGE> 24
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
12. COMMITMENTS:
Future minimum lease payments subsequent to December 31, 1996 under
operating leases are as follows:
<TABLE>
<S> <C>
1997..................................................................... $ 2,099
1998..................................................................... 1,656
1999..................................................................... 1,557
2000..................................................................... 1,280
2001..................................................................... 1,248
Thereafter............................................................... 3,619
-------
$11,459
=======
</TABLE>
Each of UniMedia Inc. and Sterling Newspapers Limited have guaranteed loans
to a maximum of $115,000,000 taken out by 1159670 Ontario Limited, a
subsidiary of Hollinger.
Hollinger has pledged all of the assets of the Group as security against
its bank indebtedness.
13. FINANCIAL INSTRUMENTS:
The book value of accounts receivable, bank indebtedness and accounts
payable approximates their fair value due to the near maturity of these
instruments. The book value of long-term debt is representative of its fair
value, as the interest rate on a substantial portion of the long-term debt
fluctuates with the prime rate. The book value of severance pay does not
differ significantly from its fair value since the discount rate initially
used at the time the severance pay was recorded is representative of
interest rates available to the businesses. The fair value of the amounts
due to Hollinger Inc. is not determinable due to the lack of repayment
terms.
14. U.S. GAAP:
The following represents additional information to the combined financial
statements of the Group that were prepared in accordance with Canadian
GAAP. Set out below are the material adjustments (net of deferred income
taxes, where applicable) to the combined net earnings of the Group for the
three years
24
<PAGE> 25
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
14. U.S. GAAP (CONTINUED)
ended December 31, 1996 and shareholder's interest at December 31, 1995 and
1996 in order to conform to accounting principles generally accepted in the
United States.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1994 1995 1996
------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Net Earnings:
Net earnings for the year based on Canadian GAAP..... $ 3,982 $ 1,858 $ 20,440
Capitalization of betterments, net of related
amortization (a)................................... (730) (693) (570)
Start-up costs, net of amortization (c).............. (20) (7) (107)
Adjustment to tax provision (d)...................... (2,000) (700) (750)
------- -------- --------
Net earnings for the year based on U.S. GAAP......... $ 1,232 $ 458 $ 19,013
======= ======== ========
Shareholder's Interest:
Shareholder's interest based on Canadian GAAP........ $163,725 $281,641
Capitalization of betterments, net of related
amortization (a)................................... (3,357) (3,927)
Amortization of intangible assets (b)................ (2,355) (2,355)
Start-up costs, net of amortization (c).............. (317) (424)
Income taxes (d)..................................... (2,700) (3,450)
-------- --------
Shareholder's interest based on U.S. GAAP............ $154,996 $271,485
======== ========
</TABLE>
Summary of accounting policy differences:
The areas of material difference between Canadian and U.S. GAAP and their
impact on the combined financial statements of the Group are set out below:
(a) Capitalization of betterments:
Effective January 1, 1990, the Group capitalizes as circulation the
costs incurred to increase the long-term readership of its publications
("betterments"). U.S. GAAP does not permit capitalization of these
costs.
(b) Amortization of intangible assets:
U.S. GAAP requires the amortization of all intangible assets acquired
on a straight-line basis over a period not exceeding 40 years. Under
Canadian GAAP, prior to December 31, 1990, there was no requirement to
amortize intangible assets such as circulation that are considered to
have an indefinite life. Effective January 1, 1991, Canadian GAAP
requires that all intangible assets be amortized. As a result,
commencing January 1, 1990 under Canadian GAAP, the Group is amortizing
the cost of circulation on a straight-line basis over a 40 year period.
(c) Start-up costs:
Operating losses incurred during the development period (no longer than
one year) of a newspaper or other publication are deferred and
amortized on a straight-line basis over three years. U.S. GAAP does not
permit capitalization of these losses.
(d) Income taxes:
Under U.S. GAAP the asset and liability method is used to account for
income taxes. Under Canadian GAAP the deferral method of providing for
income taxes is used.
25
<PAGE> 26
HOLLINGER INC. CANADIAN NEWSPAPER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS OF CANADIAN DOLLARS)
14. U.S. GAAP (CONTINUED)
(e) Statement of changes in financial position:
(i) U.S. GAAP requires that the amount of interest and taxes paid
during each fiscal period be disclosed. There is no requirement to
disclose this information under Canadian GAAP. Interest paid for
each of the years ended December 31, 1994, 1995 and 1996 amounted
to $798, $2,303 and $1,961 respectively. Taxes paid for each of the
years ended December 31, 1994, 1995 and 1996 amounted to $319, $335
and $368 respectively.
(ii) Canadian GAAP permits bank indebtedness to be reported as cash flow
from operations. U.S. GAAP requires that operating bank loans and
bank advances be reported as financing cash flows. As a result,
under U.S. GAAP, the funds provided by financing activities for the
year ended December 31, 1995 would be increased by $4,498 and the
funds provided by operating activities would be decreased by the
same amount. The fund's provided by financing activities for the
year ended December 31, 1996 would be decreased by $2,807 and the
funds provided by operating activities would be increased by the
same amount.
26
<PAGE> 27
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet
presents the pro forma financial position of Hollinger International (the
"Company") as of December 31, 1996, assuming that the acquisition by the Company
of the Canadian Newspaper Group of Hollinger Inc. under the terms of the
Reorganization, have been consummated as of December 31, 1996.
The following unaudited pro forma condensed consolidated statements of
operations for the years ended December 31, 1996, 1995 and 1994 present the pro
forma results of operations of the Company as if the Reorganization had been
consummated as of January 1, 1994. These unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
respective historical financial statements and notes thereto of the Company and
the Hollinger Inc. Canadian Newspaper Group, included elsewhere in this
document.
The unaudited pro forma condensed consolidated financial statements were
prepared utilizing the accounting policies of the Company and the Hollinger Inc.
Canadian Newspaper Group included elsewhere in this document. The unaudited pro
forma condensed consolidated balance sheet and unaudited pro forma condensed
consolidated statements of operations do not necessarily reflect actual results
which may have occurred if the Reorganization had taken place as of January 1,
1994 nor are they indicative of the results of future combined operations.
The Canadian Newspaper Group consists of Sterling Newspapers Limited and
UniMedia Inc., each wholly-owned subsidiaries of Hollinger Inc., and the Thomson
and Armadale Divisions of Hollinger Inc. Substantially all of the assets and
liabilities of the Canadian Newspaper Group were transferred to the Company. The
financial information for Canadian Newspaper Group included in these unaudited
pro forma condensed consolidated financial statements has been derived from
Canadian Newspaper Group's combined financial statements prepared in accordance
with Canadian GAAP and stated in Canadian dollars. These consolidated financial
statements have been adjusted to reflect Hollinger Inc.'s historical
consolidation adjustments with respect to the Canadian Newspaper Group to
reflect the combination of entities under common control using "as-if pooling of
interests" accounting and have been adjusted to comply with U.S. GAAP. The
assets and liabilities included in the unaudited pro forma condensed
consolidated balance sheet as at December 31, 1996 have been translated to U.S.
dollars at the rate of $1.371 per Canadian dollar and shareholders' interest has
been translated to U.S. dollars at historical rates. Revenues and expenses have
been translated to U.S. dollars at the rate of $1.364 per Canadian dollar for
purposes of the unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 1996 $1.373 for the year 1995 and
$1.366 for the year 1994. Such translations should not be construed as
representation that the amounts represent, or have been, or could be converted
into U.S. dollars at that or any other rate.
27
<PAGE> 28
HOLLINGER INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CANADIAN REDUNDANT PRO FORMA ADJUSTMENTS
NEWSPAPER ASSETS AND ---------------------
INTERNATIONAL GROUP OPERATIONS DR. CR. PRO FORMA
------------- --------- ---------- -------- -------- ----------
(a) (b)
<S> <C> <C> <C> <C> <C> <C>
Current assets............. $ 487,560 $ 49,856 $ 1,296 775(g) $ 451,845
75,000(c)
8,500(h)
Investment in affiliates,
at equity................ 198,461 261 198,722
Other investments, at
cost..................... 487,597 487,597
Fixed assets............... 505,902 56,830 2,253 560,479
Intangible assets and other
assets, net of
accumulated
amortization............. 1,509,568 149,739 3,911 8,500(h) 1,663,896
---------- -------- -------- ----------
$3,189,088 256,686 7,460 3,362,539
========== ======== ======== ==========
Current liabilities........ 919,971 34,101 344 7,945(e) 21,973(g) 967,756
Long-term debt............. 675,263 7,804 7,640(e) 175,000(c) 850,427
Due to Hollinger Inc....... 11,791 612 11,179(g) --
Deferred income taxes...... 70,705 48,154(f) 22,551
Other liabilities.......... 53,788 4,912 58,700
---------- -------- -------- ----------
1,719,727 58,608 956 1,899,434
Minority interest.......... 109,943 109,943
Redeemable Preferred
Stock.................... 605,579 605,579
Shareholders' interest..... 194,762 13,765 11,569(g) --
185,013(d) 15,585(e)
Stockholders' equity
Convertible preferred
stock................. 195,104 195,104
Common stock............. 846 30 876
Paid-in capital.......... 408,147 65,017(d) 48,154(f) 391,284
Cumulative foreign
currency translation
adjustment............ 24,257 (1,130) 132 22,995
Retained earnings........ 125,485 4,446 (7,393) 137,324
---------- -------- -------- ----------
1,469,361 198,078 6,504 1,463,105
---------- -------- -------- ----------
$3,189,088 $256,686 $ 7,460 $3,362,539
========== ======== ======== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
28
<PAGE> 29
HOLLINGER INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CANADIAN REDUNDANT PRO FORMA ADJUSTMENTS
NEWSPAPER ASSETS AND ---------------------
INTERNATIONAL GROUP OPERATIONS DR. CR. PRO FORMA
------------- --------- ---------- -------- -------- ----------
(a) (i)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues......... $ 1,862,714 $217,499 $ 6,114 $2,074,099
Operating costs and
expenses................. 1,600,461 186,811 5,941 1,781,331
Reorganization expenses and
other.................... 41,567 41,567
Amortization and
depreciation............. 92,853 9,758 177 102,434
---------- -------- -------- ----------
Operating income........... 127,833 20,930 (4) 148,767
Other income (expense):
Interest expense......... (98,875) (2,122) 10,700(j) 2,048(k) (110,849)
1,200(h)
Equity earnings in
affiliates............ 12,037 13 12,050
Unusual items............ (4,528) (3,807) (721)
Other.................... 70,839 70,839
---------- -------- -------- ----------
Total other income
(expense)................ (15,999) (6,637) (3,807) (28,681)
---------- -------- -------- ----------
Earnings before income
taxes,
minority interest, and
extraordinary item....... 111,834 14,293 (3,811) 120,086
Income taxes............... 44,883 350 (1,117) 5,574(m) 3,639(l) 48,285
Minority interest.......... 33,138 33,138
---------- -------- -------- ----------
Net earnings before
extraordinary items...... 33,813 13,943 (2,694) 38,663
Extraordinary loss on debt
extinguishments.......... (2,150) (2,150)
---------- -------- -------- ----------
Net earnings............... $ 31,663 $ 13,943 $ (2,694) $ 36,513
========== ======== ======== ==========
Average common shares
outstanding.............. 82,799 92,852
========== ==========
Net earnings per common
share.................... $0.37 $0.38
========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
29
<PAGE> 30
HOLLINGER INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CANADIAN REDUNDANT PRO FORMA ADJUSTMENTS
NEWSPAPER ASSETS AND ---------------------
INTERNATIONAL GROUP OPERATIONS DR. CR. PRO FORMA
------------- --------- ---------- -------- -------- ----------
(a) (i)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues......... $ 964,251 $ 118,545 $ 4,194 $1,078,602
Operating costs and
expenses................. 844,738 109,732 4,069 950,401
Reorganization expenses and
other.................... 8,000 8,000
Amortization and
depreciation............. 52,388 5,389 313 57,464
--------- -------- -------- ----------
Operating income........... 59,125 3,424 (188) 62,737
Other income (expense):
Interest expense......... (43,189) (1,707) 10,700(j) 1,590(k) (55,206)
1,200(h)
Equity earnings in
affiliates............ 14,410 (54) 14,356
Unusual items............ (963) (963)
Other.................... 18,199 18,199
-------- -------- -------- ----------
Total other income
(expense)................ (10,580) (2,724) -- (23,614)
-------- -------- -------- ----------
Earnings before income
taxes and minority
interest................. 48,545 700 (188) 39,123
Income taxes............... 19,706 366 (20) 475(m) 3,900(l) 16,667
Minority interest.......... 22,637 22,637
-------- -------- -------- ----------
Net earnings............... $ 6,202 $ 334 $ (168) $ (181)
======== ======== ======== ==========
Average common shares
outstanding.............. 56,956 66,739
======== ==========
Net earnings per common
share.................... $0.11 $(0.01)
======== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
30
<PAGE> 31
HOLLINGER INTERNATIONAL INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
CANADIAN REDUNDANT ADJUSTMENTS
NEWSPAPER ASSETS AND --------------------
INTERNATIONAL GROUP OPERATIONS DR. CR. PRO FORMA
------------- --------- ---------- -------- -------- ----------
(a) (i)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues........... $ 808,310 $ 102,234 $ 4,341 295(k) $ 905,908
Operating costs and
expenses................... 690,118 94,761 3,953 780,926
Amortization and
depreciation............... 45,200 4,083 299 48,984
--------- -------- -------- ----------
Operating income............. 72,992 3,390 89 75,998
Other income (expense):
Interest expense........... (32,593) (599) 10,700(j) 553(k) (44,539)
1,200(h)
Equity earnings in
affiliates.............. 35,896 35,896
Unusual items.............. (824) (824)
Other...................... 91,886 91,886
--------- -------- -------- ----------
Total other income
(expense).................. 95,189 (1,423) -- 82,419
--------- -------- -------- ----------
Earnings before income taxes
and minority interest...... 168,181 1,967 89 158,417
Income taxes................. 44,000 1,065 15 4,406(l) 40,644
Minority interest............ 21,409 21,409
--------- -------- -------- ----------
Net earnings................. $ 102,772 $ 902 $ 74 $ 96,364
========= ======== ======== ==========
Average common shares
outstanding................ 53,980 63,763
========= ==========
Net earnings per common
share...................... $1.90 $1.51
========= ==========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
31
<PAGE> 32
HOLLINGER INTERNATIONAL INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
a) The amounts in this column represent the combined financial statements of
the Canadian Newspaper Group at their historical cost to Hollinger Inc. to
reflect the combination of entities under common control using "as-if
pooling of interests" accounting, adjusted to comply with U.S. GAAP (see
Note 14 to the Hollinger Inc. Canadian Newspaper Group financial
statements) and have been translated to U.S. dollars. The amounts in this
column represent all of the businesses of the Canadian Newspaper Group,
including certain operations and redundant assets not being transferred, as
described in (b) below.
b) Represents certain of the operations and redundant assets of the Canadian
Newspaper Group which will be retained by Hollinger Inc. and will not be
transferred to the Company.
c) Represents the $175 million borrowed against credit facilities, which
together with $75 million of cash on hand was used to fund the acquisition
of the Canadian Newspaper Group.
d) Represents the $.01 par value of the 3,005,541 shares of Class A Common
Stock of the Company (assuming a price of $10.75 for the Class A Common
Stock translated to Canadian dollars at a rate of $0.7166 per U.S. dollar)
which may ultimately be issued in exchange for Hollinger Inc.'s investment
in the Canadian Newspaper Group. The adjustment to paid-in capital of $65
million represents the excess of the $250 million of cash consideration
paid and the par value of the common stock over Hollinger Inc.'s historical
carrying value of its investment in the Canadian Newspaper Group, being
$185 million. Other than par value, no value was assigned for accounting
purposes to the common and preferred stock which will ultimately be issued
to Hollinger. The exact number of shares of Class A Common Stock to be
issued will be determined in accordance with a formula in the purchase
agreements for the Canadian Newspapers.
e) Represents the repayment by Hollinger Inc. of certain indebtedness of the
Canadian Newspaper Group, prior to the transfer to the Company, in the
amount of $15.6 million.
f) Represents the tax benefit of the step up in the tax basis of the
underlying assets being transferred to the Company which arises as a direct
result of the transfer.
g) Represents the forgiveness of amounts owing to Hollinger Inc. by the
Canadian Newspaper Group and working capital adjustment.
h) Represents a $8.5 million financing fee, paid out of working capital, in
connection with the borrowings to finance the acquisition of the Canadian
Newspaper Group and the related amortization over the term of the facility.
i) Represents the revenues and expenses associated with the operations and
redundant assets of the Canadian Newspaper Group which will be retained by
Hollinger Inc. and will not be transferred to the Company, at their
historical cost to Hollinger Inc., adjusted to comply with U.S. GAAP.
j) Represents interest at 6.13% on the $175 million borrowed to fund the
acquisition of the Canadian Newspaper Group.
k) Represents the interest expense and interest income associated with certain
indebtedness or assets of the Canadian Newspaper Group which will not be
transferred to the Company.
l) Represents the tax effect of the pro forma adjustments.
m) Represents a tax charge in respect to the aggregate earnings of the Thomson
and Armadale Divisions of Hollinger Inc., which as divisions were not
subject to tax.
n) The estimated costs and expenses allocable to the Company associated with
the acquisition of the Canadian Newspaper Group have not been reflected in
the pro forma financial statements.
32
<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOLLINGER INTERNATIONAL INC.
By: /s/ KENNETH L. SEROTA
-------------------------
Kenneth L. Serota
Title: Vice President --
Law and Finance
Date: May 2, 1997
- 33 -
<PAGE> 34
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Sequential
No. Document Page No.
-------- -------- -----------
<S> <C> <C>
2.01 UniMedia Class A Stock Purchase Agreement dated as of April 18, 1997
among Hollinger Inc., UniMedia Holding Company and Hollinger
International Inc.
2.02 UniMedia Class B Stock Purchase Agreement dated as of April 18, 1997
among Hollinger Inc., UniMedia Holding Company and Hollinger
International Inc.
2.03 Sterling Purchase Agreement dated as of April 18, 1997 between
Hollinger Inc. and Hollinger Canadian Publishing Holdings Inc.
3.01 Certificate of Designations for Series 1 Preferred Stock.
3.02 Certificate of Designations for Series 2 Preferred Stock.
4.01 Second Amended Bank Credit Facility dated April 7, 1997 among
Hollinger International Publishing Inc., Telegraph Group
Limited, Hollinger Canadian Publishing Holdings Inc.,
various financial institutions, The Toronto-Dominion Bank,
as Issuing Bank, The Bank of Nova Scotia, as Syndication
Agent, Canadian Imperial Bank of Commerce, as
Documentation Agent, and Toronto Dominion (Texas), Inc.,
as Administrative Agent. Pursuant to S-K 601(b)(4)(iii),
the Registrant has not filed a copy of this exhibit but
will furnish a copy upon the Commission's request.
10.01 Exchange Agreement dated as of April 18, 1997 among Hollinger
International Inc., Hollinger Inc. and UniMedia Holding Company.
</TABLE>
- 34 -
<PAGE> 35
<TABLE>
<S> <C>
99.01 Press Release Dated April 18, 1997
</TABLE>
- 35 -
<PAGE> 1
EXHIBIT 2.01
UNIMEDIA CLASS A STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 18, 1997
AMONG
HOLLINGER INC.,
UNIMEDIA HOLDING COMPANY
AND
HOLLINGER INTERNATIONAL INC.
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1.
SALE AND PURCHASE OF SHARES.
<TABLE>
<S> <C> <C>
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.................................................................................. 8
3.10. Brokers and Finders....................................................................................... 8
3.11. Securities Act Compliance................................................................................. 9
3.12. Taxes..................................................................................................... 9
3.13. Employment Matters........................................................................................10
3.14. Certain Forecasts.........................................................................................10
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF INTERNATIONAL.
4.1. Due Incorporation of International; Authority Concerning this Agreement...................................11
4.2. Capitalization............................................................................................11
4.3. Governmental Filings......................................................................................12
4.4. No Violations.............................................................................................12
4.5. Brokers and Finders.......................................................................................13
4.6. Private Offering..........................................................................................13
</TABLE>
<PAGE> 3
- ii -
<TABLE>
ARTICLE 5.
COVENANTS OF THE PARTIES.
<S> <C> <C>
5.1. Standstill................................................................................................13
5.2. International Stockholders' Approval......................................................................14
5.3. Filings; Other Actions....................................................................................15
5.4. Registration of Certain Securities........................................................................16
5.5. Assumptions of Obligations under SOGIC Agreement..........................................................16
5.6. Non-Competition...........................................................................................16
5.7. Ownership Changes.........................................................................................17
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............................................................................................18
6.4. No Suits or Proceedings Challenging Transaction...........................................................18
6.5. Certain Consents..........................................................................................19
6.6. Income Tax Act............................................................................................19
6.7. RBC Dominion Fairness Opinion.............................................................................19
6.8. Exchange Agreement........................................................................................19
6.9. Other Transaction Documents...............................................................................19
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF HOLLINGER AND THE VENDOR
7.1. Representations and Warranties True.......................................................................20
7.2. Performance by International..............................................................................20
7.3. Legal Opinions............................................................................................21
7.4. No Suits or Proceedings Challenging Transaction...........................................................21
7.5. Certain Consents..........................................................................................21
7.6. Income Tax Act............................................................................................21
7.7. Exchange Agreement........................................................................................21
7.8. RBC Dominion Fairness Opinion.............................................................................21
7.9. Other Transaction Documents...............................................................................22
ARTICLE 8.
TERMINATION.
8.1. Termination by Mutual Consent.............................................................................22
8.2. Termination by either Hollinger or International..........................................................22
8.3. Termination by Hollinger..................................................................................22
</TABLE>
<PAGE> 4
- iii -
<TABLE>
<S> <C> <C>
8.4. Termination by International..............................................................................23
8.5. Special Committee.........................................................................................23
8.6. Effect of Termination and Abandonment.....................................................................23
ARTICLE 9.
INDEMNIFICATION.
9.1. Indemnity.................................................................................................23
9.2. Limitations...............................................................................................23
ARTICLE 10.
MISCELLANEOUS.
10.1. Survival..................................................................................................24
10.2. Certain Expenses..........................................................................................24
10.3. Dollar Amounts............................................................................................24
10.4. Further Assurances........................................................................................24
10.5. Press Releases, Announcements and Communications..........................................................25
10.6. Amendment and Modification................................................................................25
10.7. Waiver of Compliance; Consents............................................................................25
10.8. Notices...................................................................................................25
10.9. Assignment................................................................................................27
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..........................................................................................28
</TABLE>
<PAGE> 5
- iv -
LIST OF SCHEDULES
<TABLE>
<S> <C>
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
</TABLE>
THE SCHEDULES TO THIS AGREEMENT HAVE NOT BEEN FILED WITH THIS EXHIBIT BUT WILL
BE FILED SUPPLEMENTALLY UPON REQUEST.
<PAGE> 6
- v -
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERMS SECTION IN WHICH DEFINED
- ------------- ------------------------
<S> <C>
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
</TABLE>
<PAGE> 7
- vi -
<TABLE>
<CAPTION>
DEFINED TERMS SECTION IN WHICH DEFINED
- ------------- ------------------------
<S> <C>
Series C Convertible Preferred Stock Section 1.1.3.2
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
</TABLE>
<PAGE> 8
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:
<PAGE> 9
- 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 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
<PAGE> 10
- 3 -
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 accordance with the allocations contained in or
determined pursuant to this section 1.3 in any and all applicable tax returns or
similar filings.
<PAGE> 11
- 4 -
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 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
<PAGE> 12
- 5 -
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 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");
<PAGE> 13
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(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 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).
<PAGE> 14
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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 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
<PAGE> 15
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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.
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
<PAGE> 16
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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.
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
<PAGE> 17
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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.
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.
<PAGE> 18
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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.
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
<PAGE> 19
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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 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
<PAGE> 20
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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.
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
<PAGE> 21
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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 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
<PAGE> 22
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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 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
<PAGE> 23
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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 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
<PAGE> 24
- 17 -
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.
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
<PAGE> 25
- 18 -
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.
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.
<PAGE> 26
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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 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;
<PAGE> 27
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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.
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.
<PAGE> 28
- 21 -
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.
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.
<PAGE> 29
- 22 -
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.
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
<PAGE> 30
- 23 -
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.
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
<PAGE> 31
- 24 -
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.
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
<PAGE> 32
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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.
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):
<PAGE> 33
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(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
(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
<PAGE> 34
- 27 -
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
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.
<PAGE> 35
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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
(both written and oral) between the parties with respect to the transfer of the
Shares to International hereunder.
<PAGE> 36
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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
<PAGE> 1
EXHIBIT 2.02
UNIMEDIA CLASS B STOCK PURCHASE AGREEMENT
DATED AS OF APRIL 18, 1997
AMONG
HOLLINGER INC.,
UNIMEDIA HOLDING COMPANY
AND
HOLLINGER INTERNATIONAL INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
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..................................................11
4.6. Private Offering.....................................................12
ARTICLE 5.
COVENANTS OF THE PARTIES.
5.1. Standstill...........................................................12
5.2. International Stockholders' Approval.................................13
</TABLE>
<PAGE> 3
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<TABLE>
<S> <C> <C>
5.3. Filings; Other Actions...............................................13
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..................................16
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.......................................................17
6.7. RBC Dominion Fairness Opinion........................................17
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......................19
7.5. Certain Consents.....................................................19
7.6. Income Tax Act.......................................................19
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........................................20
8.2. Termination by either Hollinger or International.....................20
8.3. Termination by Hollinger.............................................21
8.4. Termination by International.........................................21
8.5. Special Committee....................................................21
8.6. Effect of Termination and Abandonment................................21
</TABLE>
<PAGE> 4
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<TABLE>
<S> <C>
ARTICLE 9.
INDEMNIFICATION.
9.1. Indemnity............................................................21
9.2. Limitations..........................................................22
ARTICLE 10.
MISCELLANEOUS.
10.1. Survival.............................................................22
10.2. Certain Expenses.....................................................22
10.3. Dollar Amounts.......................................................23
10.4. Further Assurances...................................................23
10.5. Press Releases, Announcements and Communications.....................23
10.6. Amendment and Modification...........................................23
10.7. Waiver of Compliance; Consents.......................................23
10.8. Notices..............................................................24
10.9. Assignment...........................................................26
10.10. Governing Law and Jurisdiction.......................................26
10.11. Counterparts.........................................................26
10.12. No Third Party Beneficiaries.........................................26
10.13. Interpretation.......................................................26
10.14. Entire Agreement.....................................................27
</TABLE>
<PAGE> 5
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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 its 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
THE SCHEDULES TO THIS AGREEMENT HAVE NOT BEEN FILED WITH THIS
EXHIBIT BUT WILL BE FILED SUPPLEMENTALLY UPON REQUEST.
<PAGE> 6
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INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
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
</TABLE>
<PAGE> 7
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<TABLE>
<S> <C>
DEFINED TERMS SECTION IN WHICH DEFINED
- ------------- ------------------------
Total Purchase Price Section 1.1.1
UniMedia Group Recitals
Vendor Recitals
</TABLE>
<PAGE> 8
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:
<PAGE> 9
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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, as the Vendor may
direct. The Vendor shall deliver the Shares to International free and clear of
<PAGE> 10
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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 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
<PAGE> 11
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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 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
<PAGE> 12
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(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 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.
<PAGE> 13
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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
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.
<PAGE> 14
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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.
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
<PAGE> 15
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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.
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
<PAGE> 16
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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 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
<PAGE> 17
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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 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
<PAGE> 18
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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, 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,
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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 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
<PAGE> 20
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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.
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
<PAGE> 21
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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 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.
<PAGE> 22
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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 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
<PAGE> 23
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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).
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.
<PAGE> 24
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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.
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.
<PAGE> 25
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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 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:
<PAGE> 26
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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.
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.
<PAGE> 27
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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;
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
<PAGE> 28
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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.
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
<PAGE> 29
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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.
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.
<PAGE> 30
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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.
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
<PAGE> 31
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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
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
<PAGE> 32
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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
<PAGE> 33
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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
<PAGE> 34
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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.
<PAGE> 35
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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
<PAGE> 1
EXHIBIT 2.03
STERLING PURCHASE AGREEMENT
DATED AS OF APRIL 18, 1997
BETWEEN
HOLLINGER INC.
AND
HOLLINGER CANADIAN PUBLISHING HOLDINGS INC.
<PAGE> 2
STERLING PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1.
SALE AND PURCHASE OF SHARES.
1.1. Purchase Price............................................................................................ 1
1.2. Net Working Capital Adjustment............................................................................ 2
1.3. Purchase Price Allocations................................................................................ 3
ARTICLE 2.
CLOSING; DELIVERY OF SHARES AND NOTES.
2.1. Date and Place............................................................................................ 4
2.2. Delivery of Shares and Notes.............................................................................. 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.................................................................................. 8
3.10. Brokers and Finders....................................................................................... 9
3.11. Due Incorporation; Authority Concerning the Notes......................................................... 9
3.12. Taxes..................................................................................................... 9
3.13. Employment Matters........................................................................................10
3.14. Certain Forecasts.........................................................................................10
3.15. Principal Amount of the Notes.............................................................................10
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF HCPH.
4.1. Due Incorporation; Authority Concerning this Agreement....................................................10
4.2. Governmental Filings......................................................................................10
4.3. No Violations.............................................................................................11
4.4. Brokers and Finders.......................................................................................11
</TABLE>
<PAGE> 3
- ii -
<TABLE>
<S> <C> <C>
ARTICLE 5.
COVENANTS OF THE PARTIES.
5.1. Standstill................................................................................................12
5.2. Assignment of Rights......................................................................................13
5.3. Non-Competition...........................................................................................13
5.4. Ownership Changes.........................................................................................14
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS OF HCPH.
6.1. Representations and Warranties True.......................................................................14
6.2. Performance by Hollinger..................................................................................15
6.3. Legal Opinions............................................................................................15
6.4. No Suits or Proceedings Challenging Transaction...........................................................15
6.5. Certain Consents..........................................................................................15
6.6. Income Tax Act............................................................................................15
6.7. RBC Dominion Fairness Opinion.............................................................................15
6.8. Other Transaction Documents...............................................................................16
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF HOLLINGER
7.1. Representations and Warranties True.......................................................................16
7.2. Performance by HCPH.......................................................................................17
7.3. No Suits or Proceedings Challenging Transaction...........................................................17
7.4. Certain Consents..........................................................................................17
7.5. Income Tax Act............................................................................................17
7.6. RBC Dominion Fairness Opinion.............................................................................17
7.7. Other Transaction Documents...............................................................................18
ARTICLE 8.
TERMINATION.
8.1. Termination by Mutual Consent.............................................................................18
8.2. Termination by either Hollinger or HCPH...................................................................18
8.3. Termination by Hollinger..................................................................................18
8.4. Termination by HCPH.......................................................................................19
8.5. Effect of Termination and Abandonment.....................................................................19
</TABLE>
<PAGE> 4
- iii -
ARTICLE 9.
INDEMNIFICATION.
<TABLE>
<S> <C> <C>
9.1. Indemnity.................................................................................................19
9.2. Limitations...............................................................................................19
ARTICLE 10.
MISCELLANEOUS.
10.1. Survival..................................................................................................20
10.2. Certain Expenses..........................................................................................20
10.3. Dollar Amounts............................................................................................20
10.4. Further Assurances........................................................................................20
10.5. Press Releases, Announcements and Communications..........................................................21
10.6. Amendment and Modification................................................................................21
10.7. Waiver of Compliance; Consents............................................................................21
10.8. Notices...................................................................................................21
10.9. Assignment................................................................................................24
10.10. Governing Law and Jurisdiction............................................................................24
10.11. Counterparts..............................................................................................24
10.12. No Third Party Beneficiaries..............................................................................24
10.13. Interpretation............................................................................................24
10.14. Entire Agreement..........................................................................................24
</TABLE>
<PAGE> 5
- iv -
LIST OF SCHEDULES
<TABLE>
<S> <C>
Schedule A List of Newspapers and Related Publications
Schedule 3.2.1 Bank Indebtedness of Hollinger and Encumbrances Affecting the Shares
Schedule 3.2.2(A) Credit Facilities of Hollinger and Sterling 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 Sterling and its Subsidiaries
Schedule 3.4 Undisclosed Liabilities
Schedule 3.13 Employment Matters
Schedule 5.2 Acquisition Agreements
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
</TABLE>
THE SCHEDULES TO THIS AGREEMENT HAVE NOT BEEN FILED WITH THIS EXHIBIT BUT WILL
BE FILED SUPPLEMENTALLY UPON REQUEST.
<PAGE> 6
- v -
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERMS SECTION IN WHICH DEFINED
- ------------- ------------------------
<S> <C>
Arbitrator Section 1.3.1
Canadian Newspaper Group Section 3.3
Class A Stock Recitals
Class B Stock Recitals
Closing Section 2.1
Closing Date Section 2.1
Encumbrances Section 2.2
Governmental Entity Section 3.5
HCPH Recitals
HCPH Shares Section 5.4
Hollinger Recitals
Interim Period Section 1.1.2.1
International Section 3.14
Newspaper Financial Statements Section 3.3
Newspaper Assets Recitals
Newspapers Recitals
Notes Section 1.1.1
Permitted Encumbrances Section 3.2.2
Proceedings Section 3.7
RBC Dominion Securities Section 4.4
Shares Section 1.1.1
Special Committee Section 3.14
Sterling Recitals
Sterling Promissory Notes Encumbrances Section 3.2.1
Sterling Promissory Notes Recitals
Total Purchase Price Section 1.1.1
Transferred Newspapers Section 1.2.1
UniMedia Promissory Note Recitals
</TABLE>
<PAGE> 7
STERLING PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT, made as of this 18th day of April, 1997,
between HOLLINGER INC., a corporation continued under the laws of Canada
("HOLLINGER"), and HOLLINGER CANADIAN PUBLISHING HOLDINGS INC., a corporation
formed under the laws of the Province of New Brunswick ("HCPH").
WITNESSETH:
WHEREAS, Hollinger has agreed to transfer to HCPH its indirect
interests in the daily newspapers and related publications listed on Schedule A
attached hereto and certain other assets, tangible and intangible, related
thereto (collectively, the "NEWSPAPERS");
WHEREAS, prior to the consummation of the sale transaction contemplated
hereby, Hollinger intends to reorganize its interests in the Newspapers with the
result that Hollinger will own (i) all of the outstanding shares in the capital
of Sterling Newspapers Company, a Nova Scotia unlimited liability company
("STERLING") which together will own directly and indirectly through
subsidiaries, the tangible and intangible assets of the Newspapers
(collectively, the "NEWSPAPER ASSETS") and (ii) secured promissory notes
receivable in the aggregate principal amount of Cdn. $293,264,998 from Sterling
(the "STERLING PROMISSORY NOTES");
WHEREAS, as part of the reorganization of Hollinger's interest in the
assets of UniMedia Newspapers Company and its subsidiaries, Hollinger will also
own on the Closing Date a promissory note receivable from UniMedia Group Inc. in
the principal amount of Cdn. $25,188,258 (the "UNIMEDIA PROMISSORY NOTE");
WHEREAS, Hollinger is proposing to sell all of the outstanding shares
of Sterling, the Sterling Promissory Notes and the UniMedia Promissory Note to
HCPH in exchange for cash;
NOW THEREFORE, in consideration of the premises and the respective
covenants herein contained, the parties, intending to be legally bound, hereby
agree as follows:
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, Hollinger shall sell, transfer and deliver to HCPH at Closing
(as hereinafter defined) all of the issued and outstanding shares of
Sterling (the "SHARES"), the Sterling Promissory Notes and the UniMedia
Promissory Note (collectively, the "Notes") for a purchase price of
Cdn. $330,602,000 (the "TOTAL PURCHASE
<PAGE> 8
- 2 -
PRICE") subject to adjustment pursuant to Section 1.1.2. The Total
Purchase Price shall be payable in cash in immediately available
Canadian dollars at the Closing.
1.1.2. The Total Purchase Price shall be:
1.1.2.1. increased by an amount equal to interest thereon
calculated from and including January 1, 1997 to but excluding the
Closing Date (the "INTERIM PERIOD") at an annual rate equal to
7.75%;
1.1.2.2. decreased (increased) by an amount equal to the aggregate
pre-tax net cash receipts (disbursements) generated by the
Newspapers on a stand-alone basis without bank debt 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 Sterling and its respective subsidiaries)
including, without limitation, through the operation of
Hollinger's concentration account, payment of dividends, return of
capital or management fees (other than as contemplated by section
1.2); and
1.1.2.3. increased by an amount equal to the notional tax
liability attributable to the operating income of the Transferred
Newspapers (as defined below) during the Interim Period calculated
using a tax rate of 44% and assuming that the Transferred
Newspapers were the only assets of Hollinger for such period.
The net increase (decrease) to the Total Purchase Price resulting from
the adjustments set out above shall be paid in Canadian dollars by HCPH
to Hollinger or vice versa, as applicable, within 60 days of the
Closing Date. If the parties cannot agree (for these purposes, HCPH
shall not have agreed to any adjustments unless agreed to by all of its
shareholders and the independent financial advisor to International) 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.
1.2. 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 Hollinger to be
settled as follows.
1.2.1. In connection with the reorganization of Hollinger's
interests in the Newspapers describe in the second recital of this
Agreement, Hollinger will transfer to Sterling all of the operating
assets (other than cash) of those Newspapers operated directly by it
(the "TRANSFERRED NEWSPAPERS"). On this transfer, Hollinger will
retain the net cash receipts (disbursements) of the
<PAGE> 9
- 3 -
Transferred Newspapers generated prior to the date of such transfer. As
of December 31, 1996 the Transferred Newspapers had aggregate positive
working capital estimated to be Cdn. $15,084,712 (subject to final
review and revision in connection with the post-closing adjustments)
which amount will be for the credit of Hollinger. Any net cash receipts
(disbursements) of the Transferred Newspapers in respect of their
operations after December 31, 1996 shall be for the account of HCPH as
contemplated in section 1.1.2.2.
1.2.2. As of December 31, 1996 the predecessor companies of
Sterling had aggregate positive working capital estimated to be Cdn.
$2,839,105 (subject to final review and revision in connection with the
post-closing adjustments) which amount will be paid as a dividend by
Sterling to Hollinger prior to the Closing Date.
1.2.3. As soon as practicable after the Closing Date, Hollinger
shall deliver to HCPH an unaudited statement of the working capital of
the Newspapers as at December 31, 1996 (with pro-forma adjustments
required to reflect the expenditure of amounts to eliminate
Encumbrances on the assets of the Newspapers relating to long-term or
short-term debt) 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 ALLOCATIONS
1.3.1. The parties agree that the Total Purchase Price will be
allocated among the Newspaper Assets owned by Sterling on the basis of
the fair market value of such assets. If the parties have not agreed to
a final allocation 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 HCPH and Hollinger having no material
relationship with HCPH 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 HCPH and Hollinger.
1.3.2. The purchase price allocated to the Shares,
Sterling Promissory Notes and to the UniMedia Promissory
Notes shall be allocated as follows:
1.3.2.1. Shares - Cdn. $12,148,744;
1.3.2.2. Sterling Promissory Notes - Cdn. $293,264,998; and
<PAGE> 10
- 4 -
1.3.2.3. UniMedia Promissory Note - Cdn. $25,188,258.
ARTICLE 2.
CLOSING; DELIVERY OF SHARES AND NOTES.
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
satisfaction 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 AND NOTES
At the Closing, Hollinger shall deliver (i) stock certificates
representing all of the Shares, accompanied by stock transfer forms duly
executed in blank in respect of the Shares and (ii) an assignment of the Notes
in each case with a consent to such assignment of the issuer thereof, against
delivery by HCPH of the Total Purchase Price. Hollinger shall deliver the Shares
and the Notes to HCPH 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 hereby represents and warrants to HCPH as follows:
3.1. DUE INCORPORATION; AUTHORITY CONCERNING THIS AGREEMENT.
3.1.1. Hollinger is a corporation subsisting under the laws of
Canada. Sterling is an unlimited liability company existing under the
laws of Nova Scotia. Each of Hollinger and Sterling 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 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 of its obligations hereunder, and the
consummation by Hollinger of the transactions contemplated hereby have
been duly and validly authorized by all necessary
<PAGE> 11
- 5 -
corporate action on the part of Hollinger. This Agreement has been duly
and validly executed and delivered by Hollinger and (assuming due and
valid authorization, execution and delivery by HCPH) constitutes the
legal, valid and binding agreement of Hollinger, enforceable in
accordance with its terms.
3.1.2. There has been no order or resolution for the winding up of
Sterling, 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 Sterling consists solely of
Common Shares, of which 1,000 Common Shares are issued and outstanding
and held by Hollinger. The Shares constitute the only voting securities
of Sterling and the Shares are validly issued, fully paid and
non-assessable. Except as set forth in Schedule 3.2.1 attached hereto,
Hollinger has good and marketable title to the Shares, the Sterling
Promissory Notes and the UniMedia Promissory Note, free and clear of
any Encumbrances, and has full right and authority to transfer and
deliver the Shares and Notes to HCPH as contemplated hereby. Upon
consummation of the transactions contemplated hereby, Hollinger will
have transferred to HCPH good and marketable title to the Shares, the
Sterling Promissory Notes and the UniMedia Promissory Note, free and
clear of all Encumbrances, except specific Encumbrances relating to the
Sterling Promissory Notes in favour of Hollinger, such Encumbrances to
be assigned to HCPH (the "STERLING PROMISSORY NOTES 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 pre-emptive or contractual) pursuant to which either Sterling
is or may become obligated to issue, sell or transfer any shares of its
capital or any debt or other security of Sterling which is convertible
or exchangeable into, or evidences the right to subscribe for, any
share capital of Sterling. 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. Sterling 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 Hollinger, directly or indirectly through its
subsidiaries, except for (A) Encumbrances arising under the credit
facilities of Hollinger and Sterling described in Schedule 3.2.2(A),
all of
<PAGE> 12
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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 Hollinger as soon as practicable but in
no event later than 28 days after the Closing Date; and (D)
Encumbrances relating to leased assets and properties described in
Schedule 3.2.2(D).
3.2.3. Except as set forth on Schedule 3.2.3 attached hereto,
Sterling 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
Sterling 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 pre-emptive 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 has delivered to HCPH an unaudited balance sheet of the
Newspapers and certain other Canadian newspapers and publications of Hollinger
and its subsidiaries other than Sterling (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 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, Sterling, and the other subsidiaries of Hollinger 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
<PAGE> 13
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combined basis as of the dates and for the respective periods indicated, and
(iii) have been prepared in conformity with Canadian generally accepted
accounting principles as described in note 1 to the Newspaper Financial
Statements. The Canadian Newspaper Group is comprised of the Newspapers, the
Newspaper Intangible Assets (as defined in the UniMedia Class A Stock Purchase
Agreement (the "UniMedia A Agreement") dated the date hereof made between
Hollinger, UniMedia Holding Company ("UHC") and International) and the Newspaper
Tangible Assets (as defined in the UniMedia Class B Stock Purchase Agreement
(the "UniMedia B Agreement") dated the date hereof made between Hollinger, UHC
and International).
3.4. INDEBTEDNESS; ABSENCE OF UNDISCLOSED LIABILITIES.
Sterling does not have any 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 Sterling or of any other person that is guaranteed,
directly or indirectly, by Sterling) other than those matters disclosed in the
Newspaper Financial Statements or the notes thereto or as set forth on Schedule
3.4 hereto. Since December 31, 1996, neither Sterling 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 Sterling or the
Newspapers, taken as a whole.
3.5. GOVERNMENTAL FILINGS.
No notice, report or other filing is required to be made by Hollinger
or Sterling 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 or the
consummation by it of the transactions contemplated hereby.
3.6. NO VIOLATIONS.
The execution and delivery of this Agreement by Hollinger 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 Articles or By-laws or
the Articles (or other comparable governing documents) or By-laws of Sterling or
(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 or
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Sterling 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 or Sterling is subject or by which Hollinger or Sterling or
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 Sterling and (B) certain provisions
of the existing loan agreements of Hollinger described in Schedule 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 or Sterling 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
Hollinger and Sterling or the Newspapers; and there is no judgment, decree,
injunction, rule, award or order of any Governmental Entity outstanding against
Hollinger or Sterling with respect to any of the Newspapers.
3.8. COMPLIANCE WITH LAWS.
To Hollinger's best knowledge, Sterling 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 Sterling and its
consolidated subsidiaries, taken as a whole. Neither Hollinger nor Sterling 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 Hollinger'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 Sterling and its consolidated subsidiaries, taken
as a whole.
3.9. MATERIAL FACTS DISCLOSED.
Hollinger and its management have disclosed to HCPH 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.
<PAGE> 15
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3.10. BROKERS AND FINDERS.
Neither Hollinger 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. DUE INCORPORATION; AUTHORITY CONCERNING THE NOTES
The issuance, execution and delivery of the Notes by Sterling and
UniMedia Company and the performance of their obligations thereunder have been
duly and validly authorized by all necessary corporate action on the part of
Sterling and UniMedia Company. The Notes have been duly and validly executed and
delivered by Sterling and UniMedia Company, as the case may be, and constitute
the legal, valid and binding agreement of Sterling and UniMedia Company, as the
case may be, enforceable in accordance with their terms.
3.12. TAXES
3.12.1. Hollinger and Sterling (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 nor Sterling (nor 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 Sterling (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 Sterling (or any predecessor thereof) in
respect of any of the Newspapers. None of Hollinger or Sterling (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 A Agreement, the UniMedia B Agreement
and the Exchange Agreement (as defined in the UniMedia A Agreement),
the Canadian Newspaper Group will continue to so qualify.
<PAGE> 16
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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, Sterling 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 (the "SPECIAL COMMITTEE") made up
of the independent directors of the Board of Directors of Hollinger
International Inc. ("INTERNATIONAL") (i) were developed by management of
Hollinger and its subsidiaries based on information that management of Hollinger
and Sterling prepared in good faith, (ii) utilize assumptions which management
of Hollinger and Sterling 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.
3.15. PRINCIPAL AMOUNT OF THE NOTES
Each of the Notes evidence the indebtedness of Sterling and UniMedia
Company, as the case may be, in the full principal amount as set out in the
Note.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF HCPH.
HCPH hereby represents and warrants to Hollinger as follows:
4.1. DUE INCORPORATION; AUTHORITY CONCERNING THIS AGREEMENT.
HCPH is a corporation incorporated and existing and in good standing
under the laws of the Province of New Brunswick. HCPH 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. HCPH 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 by HCPH, the performance by HCPH of its obligations hereunder and the
consummation by HCPH of the transactions
<PAGE> 17
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contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of HCPH. This Agreement has been duly and validly
executed and delivered by HCPH and (assuming due and valid authorization,
execution and delivery by Hollinger) constitutes the legal, valid and binding
agreement of HCPH and is enforceable in accordance with its terms.
4.2. GOVERNMENTAL FILINGS.
No notice, report or other filing is required to be made by HCPH with,
nor is any material consent, registration, approval, permit or authorization
required to be obtained by HCPH from any Governmental Entity in connection with
the execution and delivery of this Agreement, payment of the Total Purchase
Price or the consummation by HCPH of the transactions contemplated hereby.
4.3. NO VIOLATIONS.
The execution and delivery of this Agreement by HCPH does not, and the
consummation by HCPH 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 Articles (or other
comparable constating documents) or By-laws of HCPH, (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 HCPH, or any law, statute, rule, ordinance or
regulation or judgment, decree, order, award, injunction or governmental or
non-governmental permit or license to which HCPH is subject to or by which HCPH
or any property of HCPH 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 HCPH.
4.4. BROKERS AND FINDERS.
None of HCPH nor any of its 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 the Special Committee has
retained RBC Dominion Securities Inc. ("RBC DOMINION SECURITIES") as its
financial advisor.
<PAGE> 18
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ARTICLE 5.
COVENANTS OF THE PARTIES.
5.1. STANDSTILL.
Hollinger agrees 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 HCPH or as specifically required,
permitted or contemplated by this Agreement, it 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
Sterling 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 Sterling 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
Sterling would incur any indebtedness for borrowed money or create any
Encumbrances affecting any of their assets, other than (A)
indebtedness incurred pursuant to the credit facilities described in
Schedule 3.2.2(A) and (B) Encumbrances arising in the ordinary course
of business which constitute Permitted Encumbrances; or
5.1.4. not approve, consent to or take any action in furtherance
of any plan, scheme, transaction or series of transactions whereby
Sterling 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.
<PAGE> 19
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5.2. ASSIGNMENT OF RIGHTS
At the request of HCPH, Hollinger shall use commercially reasonable
efforts to enforce its contractual rights regarding the representations and
warranties and other covenants it may have under the terms of the acquisition
agreements, listed on Schedule 5.2 attached hereto, by which Hollinger or any of
its subsidiaries acquired any of the Newspapers or their respective assets. At
the request of HCPH, Hollinger shall assign such contractual rights to HCPH. To
the extent that any such acquisition agreements are not assignable, or any
required consent of another party is not obtained, this Agreement shall not
constitute an assignment thereof, an attempted assignment thereof or an
agreement to effect such an assignment, if such assignment or attempted
assignment would constitute a breach or violation or a default under any such
acquisition agreement. If any such consent cannot be obtained, Hollinger shall
cooperate with HCPH in any reasonable arrangement designed to provide to HCPH
the benefits intended to be assigned with respect to the relevant acquisition
agreements, including enforcement at the cost and for the account of HCPH of any
and all rights of Hollinger against the other party thereto arising out of the
breach or violation thereof by such other party or otherwise.
5.3. NON-COMPETITION
5.3.1. 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 HCPH, 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.
5.3.2. Hollinger acknowledges that in the event of any violation
of the covenants contained in this section 5.3.1 hereof, HCPH's damages
will be difficult to ascertain and HCPH's remedy at law will be
inadequate. Accordingly, Hollinger agrees that, in addition to such
remedies as HCPH may have at law, HCPH shall be entitled to specific
performance of such covenants hereunder and to an injunction to prevent
any continuing violation thereof.
<PAGE> 20
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5.3.3. 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 5.3.1 in any other
jurisdiction.
5.4. 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 HCPH.
The obligations of HCPH 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 HCPH:
6.1. REPRESENTATIONS AND WARRANTIES TRUE.
At the Closing Date, the representations and warranties of Hollinger
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 as of the Closing Date, Hollinger shall have
delivered to HCPH certificates to such effect signed by an officer of Hollinger
acceptable to HCPH.
<PAGE> 21
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6.2. PERFORMANCE BY HOLLINGER.
From the date of this Agreement, each of the obligations of Hollinger
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 shall have delivered to
HCPH certificates to such effect signed by an officer of Hollinger acceptable to
HCPH.
6.3. LEGAL OPINIONS.
HCPH 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, Sterling and HCPH 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 HCPH 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 UniMedia B 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
<PAGE> 22
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and Series B Convertible Preferred Stock other than Hollinger.
6.8. OTHER TRANSACTION DOCUMENTS.
HCPH shall have received on or prior to the Closing Date:
6.8.1. certificates evidencing the incumbency of the officers of
Hollinger executing this Agreement on its behalf and of their authority
to do so;
6.8.2. certified copies of the Articles and By-laws (or similar
governing documents) of Sterling;
6.8.3. certificates of status (or the equivalent under the laws of
their respective jurisdictions of incorporation) of recent date for
Hollinger and Sterling;
6.8.4. certified copies of the resolutions of the Board of
Directors of Hollinger authorizing the transactions contemplated
hereunder to take place on the Closing Date;
6.8.5. stock certificates representing all of the Shares
registered in the name of Hollinger together with customary searches of
public records in Nova Scotia reasonably satisfactory to counsel to
HCPH and to its lenders confirming that such interests are free and
clear of any Encumbrances; and
6.8.6. customary documentation reasonably satisfactory to counsel
to HCPH and to its lenders confirming (A) an undertaking from
Hollinger's lenders to release of all obligations of Sterling, its
subsidiaries and the Newspapers with respect to indebtedness of
Hollinger 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 Sterling, the Newspaper Assets, the Sterling Promissory Notes
and the UniMedia Promissory Note are free and clear of any Encumbrances
other than Permitted Encumbrances and the Sterling Promissory Notes
Encumbrances.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF HOLLINGER
The obligations of Hollinger 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 HCPH
contained in this Agreement shall be true and correct in all material respects
at and as of such date and time as
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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 HCPH shall have delivered to Hollinger a certificate to such
effect signed by officers of HCPH acceptable to Hollinger.
7.2. PERFORMANCE BY HCPH.
From the date of this Agreement, each of the obligations of HCPH 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 HCPH shall have delivered to Hollinger a certificate to such
effect signed on behalf of HCPH by officers of HCPH acceptable to Hollinger.
7.3. 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.
7.4. CERTAIN CONSENTS.
Hollinger, Sterling and HCPH shall have obtained all consents from
unrelated parties and Governmental Entities required to consummate the
transactions contemplated by this Agreement.
7.5. 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 HCPH 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.
7.6. 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 UniMedia B 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 Convertible Preferred Stock other than
Hollinger.
<PAGE> 24
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7.7. OTHER TRANSACTION DOCUMENTS.
Hollinger shall have received on or prior to the Closing Date:
7.7.1. certificate evidencing the incumbency of the officers of
HCPH executing this Agreement on its behalf and their authority to do
so;
7.7.2. certified copy of the charter documents and by-laws of HCPH;
7.7.3. certificate of good standing of recent date for HCPH; and
7.7.4. certified copies of the resolutions of the Board of
Directors of HCPH authorizing 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 and HCPH by action of their respective Boards of Directors.
8.2. TERMINATION BY EITHER HOLLINGER OR HCPH.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of the Board of Directors of either Hollinger
or HCPH 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 if there has been a material breach or failure
to perform by HCPH 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 HCPH as the case may be.
<PAGE> 25
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8.4. TERMINATION BY HCPH.
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 HCPH if there has been a material breach or failure to perform by
Hollinger 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 to Hollinger.
8.5. EFFECT OF TERMINATION AND ABANDONMENT.
In the event of the termination and abandonment of this Agreement,
Hollinger, Sterling and HCPH shall have no obligation or liability to the
others.
ARTICLE 9.
INDEMNIFICATION.
9.1. INDEMNITY
Hollinger shall indemnify and save HCPH harmless for and from any loss,
damages or deficiencies suffered by HCPH or by Sterling or any subsidiary
thereof as a result of any breach of representation, warranty or covenant on the
part of Hollinger 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 to indemnify HCPH 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 HCPH (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> 26
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ARTICLE 10.
MISCELLANEOUS.
10.1. SURVIVAL.
Only the agreements and covenants of the parties contained in Articles
5 and 10, and Section 8.5 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
contained in Sections 3.1, 3.2, 3.11 and 3.15 hereof and the representations and
warranties of HCPH contained in Section 4.1 hereof shall survive the Closing
Date without time limit and the representations and warranties of Hollinger
contained in Sections 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.12.2, 3.13 and
3.14 and the representations and warranties of HCPH contained in Sections 4.2,
4.3 and 4.4 shall survive until the second anniversary of the Closing Date and
the representations and warranties by Hollinger 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.
Each of the parties 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 HCPH or their successors or assigns, Hollinger 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 HCPH, or to confirm of record or otherwise to HCPH, title
to and possession of all of the Shares. From time to time as and when requested
by Hollinger or its successors and assigns, HCPH shall execute and deliver such
further deeds and
<PAGE> 27
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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.
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 by one party without the prior approval of the other party, such approval
not to be unreasonably withheld or delayed, except for any public disclosure
that any party 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 HCPH only
if in writing approved by all of the shareholders of HCPH.
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. HCPH shall not waive,
nor shall HCPH be deemed to waive, any obligations of Hollinger hereunder or any
other benefits to HCPH arising hereunder or any other benefits to HCPH arising
under this Agreement unless approved by all of the shareholders of HCPH.
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):
<PAGE> 28
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(a) If to Hollinger:
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
Harper Grey Easton
3100 Vancouver Centre
P.O. Box 11504
650 West Georgia Street
Vancouver, B.C.
Canada V6B 4P7
Attention: Isidor M. Wolfe
Facsimile No.: (604) 669-9385
<PAGE> 29
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(b) If to HCPH:
Hollinger Canadian Publishing Holdings Inc.
10 Toronto Street
Toronto, Ontario
Canada M5C 2B7
Attention: Kenneth L. Serota,
Vice President
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
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> 30
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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.
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 and the Notes to HCPH. 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 and the Notes to HCPH hereunder.
<PAGE> 31
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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
HOLLINGER CANADIAN PUBLISHING
HOLDINGS INC.
By: /s/ KENNETH L. SEROTA
----------------------------------
Kenneth L. Serota
Vice President-Law and Finance and
Secretary
<PAGE> 1
EXHIBIT 3.01
HOLLINGER INTERNATIONAL INC.
CERTIFICATE OF DESIGNATIONS
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
---------
SERIES 1 NONVOTING PREFERRED STOCK
---------
HOLLINGER INTERNATIONAL INC., a Delaware corporation (the "Corporation"),
certifies that, pursuant to the authority contained in Article 4 of its
Restated Certificate of Incorporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors has adopted the following resolution creating
a series of its Preferred Stock, par value U.S. $.01 per share, designated as
Series 1 Nonvoting Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock, par
value U.S. $.01 per share, of the Corporation is hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof, are as follows:
SECTION 1. Designation and Amount. The shares of such series shall be
designated as "Series 1 Nonvoting Preferred Stock", and the number of whole
shares constituting such series shall be 23,267.
SECTION 2. Dividends.
(a) The holder of shares of Series 1 Nonvoting Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors of the
Corporation, cash dividends, out of funds legally available for the purpose, in
the respective amounts determined in accordance with the provisions of this
Section 2 (each such day set by the Board of Directors of the Corporation for
the payment of cash dividends to the holders of shares of Series 1 Nonvoting
Preferred Stock being herein called a "Dividend Payment Date"), accruing from
the date on which shares of Series 1 Nonvoting Preferred Stock are first issued
(the "Issue Date").
<PAGE> 2
(b) The dividend payable upon the shares of Series 1 Nonvoting Preferred
Stock on a particular Dividend Payment Date shall be an amount per share of
Series 1 Nonvoting Preferred Stock equal to (i) the aggregate amount (if any)
of the Class A Common Stock Dividends that would have been paid by the
Corporation during the Payment Period (as herein defined) immediately preceding
such Dividend Payment Date divided by (ii) 23,267 (being the number of
authorized and initially issued shares of Series 1 Nonvoting Preferred Stock).
(c) Dividends upon shares of Series 1 Nonvoting Preferred Stock shall be
payable to the holders of record as they appear on the stock register of the
Corporation on a record date fixed with respect to each Dividend Payment Date
by the Board of Directors of the Corporation, which shall in each case be a
date not more than 60 days preceding such Dividend Payment Date.
(d) Such dividends upon shares of Series 1 Nonvoting Preferred Stock shall
be cumulative and will accrue, whether or not there are funds legally available
for the payment of such dividends and whether or not such dividends are
declared, from the previous Dividend Payment Date or the Issue Date if prior to
the first Dividend Payment Date. Accumulated unpaid dividends shall not bear
interest. Dividends will cease to accrue in respect of shares of Series 1
Nonvoting Preferred Stock on the earlier of the date fixed for redemption or
mandatory exchange ("Mandatory Exchange") pursuant to the Exchange Agreement
(as herein defined).
(e) The shares of Series 1 Nonvoting Preferred Stock will rank junior,
both as to payment of dividends and distribution of assets upon liquidation, to
the outstanding shares of Series A Preferred Stock, Series B Convertible
Preferred Stock (as each is herein defined) and any future series of preferred
stock ranking senior to the Series 1 Nonvoting Preferred Stock as to the
payment of dividends or the distribution of assets upon liquidation ("Senior
Stock"), and will rank on a parity, both as to payment of dividends and
distribution of assets upon liquidation, with the Common Stock, the Series 2
Nonvoting Preferred Stock (as each is herein defined) and with any future
preferred stock issued by the Corporation that by its terms ranks on a parity
with the Series 1 Nonvoting Preferred Stock ("Parity Stock").
(f) As long as any shares of Series 1 Nonvoting Preferred Stock are
outstanding, no dividends for any dividend period (other than dividends payable
in shares of, or warrants, rights or options exercisable for or convertible
into shares of, any capital stock of the Corporation ranking junior to the
Series 1 Nonvoting Preferred Stock and the Parity Stock as to the payment of
dividends and the distribution of assets upon liquidation ("Junior Stock") and
cash in lieu of fractional shares of such Junior Stock in connection with any
such dividend) will be paid in cash or otherwise, nor will any other
distribution be made (other than a distribution payable in Junior Stock and
cash in lieu of fractional shares of such Junior Stock in connection with any
such distribution), on any Junior Stock unless (i) full dividends on the Series
1 Nonvoting Preferred Stock and any Parity Stock have been paid, or declared
and set aside for payment, for all dividend periods terminating on or prior to
the date of such Junior Stock dividend or distribution payment to the extent
such dividends are cumulative; (ii) dividends in full, in the case of a
dividend payment with respect to Junior Stock, for any Series 1 Nonvoting
Preferred Stock and Parity
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<PAGE> 3
Stock dividend periods commencing on or prior to the date of such Junior Stock
dividend payment or, in the case of any other distribution with respect to
Junior Stock, for the current Series 1 Nonvoting Preferred Stock and Parity
Stock dividend periods, have been paid, or declared and set aside for payment,
on all Series 1 Nonvoting Preferred Stock and Parity Stock to the extent such
dividends are cumulative; (iii) the Corporation has paid or set aside all
amounts, if any, then or theretofore required to be paid or set aside for all
purchase, retirement, and sinking funds, if any, for the Series 1 Nonvoting
Preferred Stock and any Parity Stock; and (iv) the Corporation is not in
default on any of its obligations to redeem the Series 1 Nonvoting Preferred
Stock or any Parity Stock.
In addition, as long as any shares of Series 1 Nonvoting Preferred Stock
are outstanding, no shares of Junior Stock may be purchased, redeemed, or
otherwise acquired by the Corporation or any of its subsidiaries (except in
connection with the reclassification or exchange of any Junior Stock through
the issuance of other Junior Stock (and cash in lieu of fractional shares of
such Junior Stock in connection therewith) or the purchase, redemption, or
other acquisition of any Junior Stock with any Junior Stock (and cash in lieu
of fractional shares of such Junior Stock in connection therewith) nor may any
funds be set aside or made available for any sinking fund for the purchase or
redemption of any Junior Stock unless: (i) full dividends on the Series 1
Nonvoting Preferred Stock and any Parity Stock have been paid, or declared and
set aside for payment, for all dividend periods terminating on or prior to the
date of such purchase, redemption or acquisition to the extent such dividends
are cumulative; (ii) the Corporation has paid or set aside all amounts, if any,
then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for the Series 1 Nonvoting Preferred
Stock and any Parity Stock; and (iii) the Corporation is not in default on any
of its obligations to redeem the Series 1 Nonvoting Preferred Stock or any
Parity Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Junior Stock) as may be determined
by the Board of Directors may be declared and paid on the shares of any Junior
Stock from time to time and Junior Stock may be purchased, redeemed or
otherwise acquired by the Corporation or any of its subsidiaries from time to
time. In the event of the declaration and payment of any such dividends or
other distributions, the holders of such Junior Stock will be entitled, to the
exclusion of holders of the Series 1 Nonvoting Preferred Stock and any Parity
Stock, to share therein according to their respective interests.
(g) As long as any shares of Series 1 Nonvoting Preferred Stock are
outstanding, dividends for any dividend period or other distributions may not
be paid on any Parity Stock (other than dividends or other distributions
payable in Junior Stock and cash in lieu of fractional shares of such Junior
Stock in connection therewith), unless either: (i)(A) full dividends on the
Series 1 Nonvoting Preferred Stock and any Parity Stock have been paid, or
declared and set aside for payment, for all dividend periods terminating on or
prior to the date of such Parity Stock dividend or distribution payment to the
extent such dividends are cumulative; (B) full dividends, in the case of a
dividend payment with respect to Parity Stock, for any Series 1 Nonvoting
Preferred Stock and any Parity Stock dividend periods commencing on or prior to
the
-3-
<PAGE> 4
date of such Parity Stock dividend payment or, in the case of any other
distribution with respect to Parity Stock, for the current Series 1 Nonvoting
Preferred Stock and Parity Stock dividend periods, have been paid, or declared
and set aside for payment, on all Series 1 Nonvoting Preferred Stock and any
Parity Stock to the extent such dividends are cumulative; (C) the Corporation
has paid or set aside all amounts, if any, then or theretofore required to be
paid or set aside for all purchase, retirement, and sinking funds, if any, for
the Series 1 Nonvoting Preferred Stock and any Parity Stock; and (D) the
Corporation is not in default on any of its obligations to redeem the Series 1
Nonvoting Preferred Stock and any Parity Stock; or (ii) any such dividends are
declared and paid pro rata so that the amounts of any dividends declared and
paid per share of Series 1 Nonvoting Preferred Stock and each share of such
Parity Stock will in all cases bear to each other the same ratio that accrued
and unpaid dividends (including any accumulation with respect to unpaid
dividends for prior dividend periods, if such dividends are cumulative) per
share of Series 1 Nonvoting Preferred Stock and such shares of Parity Stock
bear to each other.
In addition, as long as any shares of Series 1 Nonvoting Preferred Stock
are outstanding, the Corporation may not purchase, redeem or otherwise acquire
any Parity Stock other than pursuant to the terms of the Exchange Agreement
(except with any Junior Stock and cash in lieu of fractional shares of such
Junior Stock in connection therewith) unless: (i) full dividends on the Series
1 Nonvoting Preferred Stock and any Parity Stock have been paid, or declared
and set aside for payment, for all dividend periods terminating on or prior to
the date of such Parity Stock purchase, redemption or other acquisition payment
to the extent such dividends are cumulative; (ii) the Corporation has paid or
set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for the Series 1
Nonvoting Preferred Stock and any Parity Stock; and (iii) the Corporation is
not in default on any of its obligations to redeem any Series 1 Nonvoting
Preferred Stock or Parity Stock.
SECTION 3. Redemption at the Option of a Holder.
(a) The holders of shares of Series 1 Nonvoting Preferred Stock shall have
the right, at the sole option and election of all such holders, at any time
after December 31, 1997, to require the Corporation to redeem all (but not less
than all) of the outstanding shares of Series 1 Nonvoting Preferred Stock owned
of record by all holders, to the extent that such redemption shall be permitted
under applicable law.
(b) In order to exercise such right, the holders of shares of Series 1
Nonvoting Preferred Stock, acting together, must provide notice of such
exercise by first-class mail, postage prepaid, mailed to the Corporation at its
principal place of business not less than 60 days prior to the date for
redemption. Such notice shall state (i) the redemption date, (ii) the number of
shares of Series 1 Nonvoting Preferred Stock held of record by all holders to
be redeemed pursuant to this Section 3, and (iii) the number of the certificate
or certificates representing such shares.
(c) Upon the surrender in accordance with such notice of the certificates
for the shares of this Series so to be redeemed (properly endorsed or assigned
for transfer, if the
-4-
<PAGE> 5
Board of Directors of the Corporation shall so require), such shares shall be
redeemed by the Corporation and the Corporation shall pay to the holder thereof
in cash a redemption price (the "Redemption Price") equal to (i) Cdn. $950 per
share plus (ii) an amount equal to all dividends accrued and unpaid thereon to
the date fixed for redemption (whether or not such dividends shall have been
declared or earned and whether or not the Corporation shall have at such
redemption date, or shall have had, assets legally available for the payment of
such dividends), whereupon all rights of the holder of the shares, as such,
shall cease and terminate and such shares shall not thereafter be deemed to be
outstanding. No interest or sum of money in lieu of interest shall be payable
in respect of such Redemption Price.
SECTION 4. Liquidation Rights.
(a) In the event of the liquidation, dissolution, or winding up of the
business of the Corporation, whether voluntary or involuntary, the holders of
shares of Series 1 Nonvoting Preferred Stock then outstanding, after payment or
provision for payment of the debts and other liabilities of the Corporation and
the payment or provision for payment of any distribution on any shares of the
Corporation having a preference and a priority over the shares of Series 1
Nonvoting Preferred Stock on liquidation, and before any distribution to the
holders of Junior Stock, shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount per share
of Series 1 Nonvoting Preferred Stock in cash equal to the sum of (i) Cdn.
$1,000 (the "Stated Liquidation Amount") plus (ii) all accrued and unpaid
dividends thereon. In the event the assets of the Corporation available for
distribution to the holders of the shares of Series 1 Nonvoting Preferred Stock
upon any dissolution, liquidation or winding up of the Corporation shall be
insufficient to permit payment of the full preferential amounts payable to the
holders of outstanding shares of Series 1 Nonvoting Preferred Stock and of
Parity Stock, the holders of shares of Series 1 Nonvoting Preferred Stock and
of Parity Stock shall share ratably in such distribution of assets in
proportion to the amount which would be payable on such distribution if the
amounts to which the holders of outstanding shares of Series 1 Nonvoting
Preferred Stock and the holders of outstanding shares of such Parity Stock were
paid in full. Except as provided in this Section 4, the holders of Series 1
Nonvoting Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation.
(b) For the purposes of this Section 4, none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation:
(i) the sale, lease, transfer or exchange of all or substantially all of
the assets of the Corporation; or
(ii) the consolidation or merger of the Corporation with one or more other
corporations (whether or not the Corporation is the corporation surviving
such consolidation or merger).
-5-
<PAGE> 6
SECTION 5. No Preemptive Rights. The holders of shares of Series 1
Nonvoting Preferred Stock shall have no preemptive rights, including preemptive
rights with respect to any shares of capital stock or other securities of the
Corporation convertible into or carrying rights or options to purchase any such
shares.
SECTION 6. Voting Rights.
(a) The holders of shares of Series 1 Nonvoting Preferred Stock shall have
no voting rights except as otherwise set forth herein or as otherwise provided
by law or elsewhere in the Restated Certificate of Incorporation of the
Corporation, as amended.
(b) For as long as any shares of Series 1 Nonvoting Preferred Stock
(collectively with the Series 2 Nonvoting Preferred Stock, the "Nonvoting
Preferred Stock") remain outstanding, the affirmative vote or consent of the
holders of at least 66 2/3% of the shares thereof actually voting (voting
separately as a class together with the holders of the Series 2 Nonvoting
Preferred Stock) in person or by proxy at any annual meeting or special meeting
of the shareholders called for such purpose, or by written consent, shall be
necessary to (i) amend, alter or repeal any of the provisions of the Restated
Certificate of Incorporation of the Corporation, as amended, which would
adversely affect the powers, preferences or rights of the holders of the shares
of Nonvoting Preferred Stock then outstanding or reduce the minimum time
required for any notice to which holders of shares of Nonvoting Preferred Stock
then outstanding may be entitled; provided, however, that any such amendment,
alteration or repeal that would authorize, create or increase the authorized
amount of any additional shares of Junior Stock or of Parity Stock (whether or
not already authorized) shall not be deemed to affect adversely such powers,
preferences or rights and shall not be subject to approval by the holders of
shares of Nonvoting Preferred Stock; and provided further that clause (i) shall
not be applicable to the amendment, alteration or repeal of any provisions of
the Restated Certificate of Incorporation of the Corporation, as amended, prior
to the issuance of any shares of Nonvoting Preferred Stock; (ii) authorize or
create, or increase the authorized amount of, any Senior Stock, or any security
convertible into Senior Stock; or (iii) merge or consolidate with or into any
other corporation, unless each holder of the shares of Nonvoting Preferred
Stock immediately preceding such merger or consolidation shall have the right
either to (A) receive or continue to hold in the resulting corporation the same
number of shares, with substantially the same rights and preferences, as
corresponds to such holder's shares of Nonvoting Preferred Stock so held or (B)
exchange into shares of Class A Common Stock and Series C Convertible Preferred
Stock (as herein defined) pursuant to the terms of the Exchange Agreement.
There is no limitation on the issuance by the Corporation of Junior Stock
or Parity Stock.
Notwithstanding the provisions set forth in the first paragraph of this
Section 6 (b), however, no such approval described therein of the holders of
the shares of Series 1 Nonvoting Preferred Stock shall be required if, at or
prior to the time when such amendment, alteration, or repeal is to take effect
or when such consolidation or merger is to take effect, as the case may be,
-6-
<PAGE> 7
provision is made for the redemption of all shares of Series 1 Nonvoting
Preferred Stock at the time outstanding.
SECTION 7. Definitions. As used in this Certificate of Designations:
(a) The term "Adjusted Market Price" means the greater of (i) the amount
per share determined by multiplying 1.05 by the Market Price (as herein
defined) and (ii) U.S. $9.00 per share.
(b) The term "business day" means any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close or are closed because of a
banking moratorium or otherwise.
(c) The term "Class A Common Stock" means the Class A Common Stock, par
value U.S. $.01 per share, of the Corporation.
(d) The term "Class A Common Stock Dividends" means the amount of dividend
or other distribution that would have been paid on or with respect to the Class
A Common Stock Shares had such shares been issued on the Issue Date during a
Payment Period and on or prior to the earlier of (i) the redemption date for
the redemption of all (but not less than all) of the shares of Series 1
Nonvoting Preferred Stock or (ii) the date of the Mandatory Exchange.
(e) The term "Class A Common Stock Shares" means that number of shares of
Class A Common Stock determined by dividing (x) the U.S. Dollar Equivalent (as
herein defined) of Cdn. $23,267,000 on the Determination Date by (y) the
Adjusted Market Price of Class A Common Stock on the Determination Date (as
herein defined).
(f) The term "Class B Common Stock" means the Class B Common Stock, par
value U.S. $.01 per share, of the Corporation.
(g) The term "Common Stock" means the Class A Common Stock and the Class B
Common Stock, neither of which has any preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and neither of which is subject to
redemption by the Corporation.
(h) The term "Determination Date" means the date that is five (5) business
days prior to the mailing by the Corporation of the definitive version of the
proxy solicitation materials to all stockholders of record of the Corporation
with respect to the stockholders meeting as provided for in and pursuant to the
Exchange Agreement.
(i) The term "Exchange Agreement" means the Exchange Agreement dated as of
April 18, 1997 among Hollinger Inc., a corporation continued under the laws of
Canada, UniMedia Holding Company, a company formed under the laws of Nova
Scotia, and the Corporation.
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<PAGE> 8
(j) The term "Market Price" means the weighted average market price per
share of Class A Common Stock on the New York Stock Exchange (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 New York Stock Exchange)
for the ten (10) trading day period ending on the Determination Date as
reported by Bloomberg or other authority satisfactory to the Corporation as
determined pursuant to and in accordance with the Exchange Agreement.
(k) The term "Payment Period" means the period beginning on a Dividend
Payment Date and ending on the last day immediately preceding the next
succeeding Dividend Payment Date. The initial Payment Period will begin with
the Issue Date and end on the last day immediately preceding the initial
Dividend Payment Date.
(l) The term "Series 2 Nonvoting Preferred Stock" means the Series 2
Nonvoting Preferred Stock, par value U.S. $.01 per share, of the Corporation.
(m) The term "Series A Preferred Stock" means the Series A Redeemable
Convertible Preferred Stock, par value U.S. $.01 per share, of the Corporation.
(n) The term "Series B Convertible Preferred Stock" means the Series B
Convertible Preferred Stock, par value U.S. $.01 per share, of the Corporation,
represented by PRIDES originally issued by the Corporation on August 7, 1996.
(o) The term "Series C Convertible Preferred Stock" means the Series C
Convertible Preferred Stock, par value U.S. $.01 per share, of the Corporation.
(p) The term "U.S. Dollar Equivalent" means the inverse of the noon buying
rate ("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.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Hollinger International Inc. has caused this
Certificate of Designations of Series 1 Nonvoting Preferred Stock to be signed
and attested this 18th day of April 1997.
ATTEST: HOLLINGER INTERNATIONAL INC.
By: /s/ LINDA LOYE By: /s/ KENNETH L. SEROTA
------------------------- -------------------------------
Linda Loye, Kenneth L. Serota,
Assistant Secretary Vice President - Law & Finance
and Secretary
<PAGE> 1
EXHIBIT 3.02
HOLLINGER INTERNATIONAL INC.
---------
CERTIFICATE OF DESIGNATIONS
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
---------
SERIES 2 NONVOTING PREFERRED STOCK
---------
HOLLINGER INTERNATIONAL INC., a Delaware corporation (the "Corporation"),
certifies that, pursuant to the authority contained in Article 4 of its
Restated Certificate of Incorporation, as amended, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors has adopted the following resolution creating
a series of its Preferred Stock, par value U.S. $.01 per share, designated as
Series 2 Nonvoting Preferred Stock:
RESOLVED, that a series of the class of authorized Preferred Stock, par
value U.S. $.01 per share, of the Corporation is hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof, are as follows:
SECTION 1. Designation and Amount. The shares of such series shall be
designated as "Series 2 Nonvoting Preferred Stock", and the number of whole
shares constituting such series shall be 149,658.
SECTION 2. Dividends.
(a) The holders of shares of Series 2 Nonvoting Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors of the
Corporation, cash dividends, out of funds legally available for the purpose, in
the respective amounts determined in accordance with the provisions of this
Section 2 (each such day set by the Board of Directors for the payment of cash
dividends to the holders of shares of Series 2 Nonvoting Preferred Stock being
herein called a "Dividend Payment Date"), accruing from the date on which
shares of Series 2 Nonvoting Preferred Stock are first issued ("Issue Date").
<PAGE> 2
(b) The dividend payable upon the shares of Series 2 Nonvoting Preferred
Stock on a particular Dividend Payment Date shall be an amount per share of
Series 2 Nonvoting Preferred Stock equal to (i) the aggregate amount (if any)
of (A) the First Tranche Dividends (as herein defined) and (B) the Second
Tranche Dividends (as herein defined) divided by (ii) 149,658 (being the
number of authorized and initially issued shares of Series 2 Nonvoting
Preferred Stock).
(c) Dividends upon shares of Series 2 Nonvoting Preferred Stock shall be
payable to the holders of record as they appear on the stock register of the
Corporation on a record date fixed with respect to each Dividend Payment Date
by the Board of Directors of the Corporation, which shall in each case be a
date not more than 60 days preceding such Dividend Payment Date.
(d) Such dividends upon the shares of Series 2 Nonvoting Preferred Stock
shall be cumulative and will accrue, whether or not there are funds legally
available for the payment of such dividends and whether or not such dividends
are declared, from the previous Dividend Payment Date or the Issue Date if
prior to the first Dividend Payment Date. Accumulated unpaid dividends shall
not bear interest. Dividends will cease to accrue in respect of shares of
Series 2 Nonvoting Preferred Stock on the earlier of the date fixed for
redemption or mandatory exchange ("Mandatory Exchange") pursuant to the
Exchange Agreement (as herein defined).
(e) The shares of Series 2 Nonvoting Preferred Stock will rank junior,
both as to payment of dividends and distribution of assets upon liquidation, to
the outstanding shares of Series A Preferred Stock, Series B Convertible
Preferred Stock (as each is herein defined) and any future series of preferred
stock ranking senior to the Series 2 Nonvoting Preferred Stock as to the
payment of dividends or the distribution of assets upon liquidation ("Senior
Stock"), and will rank on a parity, both as to payment of dividends and
distribution of assets upon liquidation, with the Common Stock and the Series 1
Nonvoting Preferred Stock (as each is herein defined) and with any future
preferred stock issued by the Corporation that by its terms ranks on a parity
with the Series 2 Nonvoting Preferred Stock ("Parity Stock").
(f) As long as any shares of Series 2 Nonvoting Preferred Stock are
outstanding, no dividends for any dividend period (other than dividends payable
in shares of, or warrants, rights or options exercisable for or convertible
into shares of, or any other capital stock of the Corporation ranking junior to
the Series 2 Nonvoting Preferred Stock and the Parity Stock as to the payment
of dividends and the distribution of assets upon liquidation ("Junior Stock")
and cash in lieu of fractional shares of such Junior Stock in connection with
any such dividend) will be paid in cash or otherwise, nor will any other
distribution be made (other than a distribution payable in Junior Stock and
cash in lieu of fractional shares of such Junior Stock in connection with any
such distribution), on any Junior Stock unless (i) full dividends on the Series
2 Nonvoting Preferred Stock and any Parity Stock have been paid, or declared
and set aside for payment, for all dividend periods terminating on or prior to
the date of such Junior Stock dividend or distribution payment to the extent
such dividends are cumulative; (ii) dividends in full, in the case of a
dividend
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<PAGE> 3
payment with respect to Junior Stock, for any Series 2 Nonvoting Preferred
Stock and Parity Stock dividend periods commencing on or prior to the date of
such Junior Stock dividend payment or, in the case of any other distribution
with respect to Junior Stock, for the current Series 2 Nonvoting Preferred
Stock and Parity Stock dividend periods, have been paid, or declared and set
aside for payment, on all Series 2 Nonvoting Preferred Stock and Parity Stock
to the extent such dividends are cumulative; (iii) the Corporation has paid or
set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for the Series 2
Nonvoting Preferred Stock and any Parity Stock; and (iv) the Corporation is not
in default on any of its obligations to redeem the Series 2 Nonvoting Preferred
Stock or any Parity Stock.
In addition, as long as any shares of Series 2 Nonvoting Preferred Stock
are outstanding, no shares of Junior Stock may be purchased, redeemed, or
otherwise acquired by the Corporation or any of its subsidiaries (except in
connection with the reclassification or exchange of any Junior Stock through
the issuance of other Junior Stock (and cash in lieu of fractional shares of
such Junior Stock in connection therewith) or the purchase, redemption, or
other acquisition of any Junior Stock with any Junior Stock (and cash in lieu
of fractional shares of such Junior Stock in connection therewith) nor may any
funds be set aside or made available for any sinking fund for the purchase or
redemption of any Junior Stock unless: (i) full dividends on the Series 2
Nonvoting Preferred Stock and any Parity Stock have been paid, or declared and
set aside for payment, for all dividend periods terminating on or prior to the
date of such purchase, redemption or acquisition to the extent such dividends
are cumulative; (ii) the Corporation has paid or set aside all amounts, if any,
then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for the Series 2 Nonvoting Preferred
Stock and any Parity Stock; and (iii) the Corporation is not in default on any
of its obligations to redeem the Series 2 Nonvoting Preferred Stock or any
Parity Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property or Junior Stock) as may be determined
by the Board of Directors may be declared and paid on the shares of any Junior
Stock from time to time and Junior Stock may be purchased, redeemed or
otherwise acquired by the Corporation or any of its subsidiaries from time to
time. In the event of the declaration and payment of any such dividends or
other distributions, the holders of such Junior Stock will be entitled, to the
exclusion of holders of the Series 2 Nonvoting Preferred Stock and any Parity
Stock, to share therein according to their respective interests.
(g) As long as any shares of Series 2 Nonvoting Preferred Stock are
outstanding, dividends for any dividend period or other distributions may not
be paid on any Parity Stock (other than dividends or other distributions
payable in Junior Stock and cash in lieu of fractional shares of such Junior
Stock in connection therewith), unless either: (i)(A) full dividends on the
Series 2 Nonvoting Preferred Stock and any Parity Stock have been paid, or
declared and set aside for payment, for all dividend periods terminating on or
prior to the date of such Parity Stock
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<PAGE> 4
dividend or distribution payment to the extent such dividends are cumulative;
(B) full dividends, in the case of a dividend payment with respect to Parity
Stock, for any Series 2 Nonvoting Preferred Stock and any Parity Stock dividend
periods commencing on or prior to the date of such Parity Stock dividend
payment or, in the case of any other distribution with respect to Parity Stock,
for the current Series 2 Nonvoting Preferred Stock and Parity Stock dividend
periods, have been paid, or declared and set aside for payment, on all Series 2
Nonvoting Preferred Stock and any Parity Stock to the extent such dividends are
cumulative; (C) the Corporation has paid or set aside all amounts, if any, then
or theretofore required to be paid or set aside for all purchase, retirement,
and sinking funds, if any, for the Series 2 Nonvoting Preferred Stock and any
Parity Stock; and (D) the Corporation is not in default on any of its
obligations to redeem the Series 2 Nonvoting Preferred Stock and any Parity
Stock; or (ii) any such dividends are declared and paid pro rata so that the
amounts of any dividends declared and paid per share of Series 2 Nonvoting
Preferred Stock and each share of such Parity Stock will in all cases bear to
each other the same ratio that accrued and unpaid dividends (including any
accumulation with respect to unpaid dividends for prior dividend periods, if
such dividends are cumulative) per share of Series 2 Nonvoting Preferred Stock
and such shares of Parity Stock bear to each other.
In addition, as long as any shares of Series 2 Nonvoting Preferred Stock
are outstanding, the Corporation may not purchase, redeem or otherwise acquire
any Parity Stock other than pursuant to the terms of the Exchange Agreement
(except with any Junior Stock and cash in lieu of fractional shares of such
Junior Stock in connection therewith) unless: (i) full dividends on the Series
2 Nonvoting Preferred Stock and any Parity Stock have been paid, or declared
and set aside for payment, for all dividend periods terminating on or prior to
the date of such Parity Stock purchase, redemption or other acquisition payment
to the extent such dividends are cumulative; (ii) the Corporation has paid or
set aside all amounts, if any, then or theretofore required to be paid or set
aside for all purchase, retirement, and sinking funds, if any, for the Series 2
Nonvoting Preferred Stock and any Parity Stock; and (iii) the Corporation is
not in default on any of its obligations to redeem any Series 2 Nonvoting
Preferred Stock or Parity Stock.
SECTION 3. Redemption at the Option of a Holder.
(a) The holders of shares of Series 2 Nonvoting Preferred Stock shall have
the right, at the sole option and election of all such holders, at any time
after December 31, 1997, to require the Corporation to redeem all (but not less
than all) of the outstanding shares of Series 2 Nonvoting Preferred Stock owned
of record by all holders, to the extent that such redemption shall be permitted
under applicable law.
(b) In order to exercise such right, the holders of shares of Series 2
Nonvoting Preferred Stock, acting together, must provide notice of such
exercise by first-class mail, postage prepaid, mailed to the Corporation at its
principal place of business not less than 60 days prior to the date for
redemption. Such notice shall state (i) the redemption date, (ii) the number of
shares
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<PAGE> 5
of Series 2 Nonvoting Preferred Stock held of record by all holders to be
redeemed pursuant to this Section 3, and (iii) the number of the certificate or
certificates representing such shares.
(c) Upon the surrender in accordance with such notice of the certificates
for the shares of this Series so to be redeemed (properly endorsed or assigned
for transfer, if the Board of Directors of the Corporation shall so require),
such shares shall be redeemed by the Corporation and the Corporation shall pay
to the holders thereof in cash a redemption price (the "Redemption Price")
equal to (i) Cdn. $950 per share plus (ii) an amount equal to all dividends
accrued and unpaid thereon to the date fixed for redemption (whether or not
such dividends shall have been declared or earned and whether or not the
Corporation shall have at such redemption date, or shall have had, assets
legally available for the payment of such dividends), whereupon all rights of
the holder of the shares, as such, shall cease and terminate and such shares
shall not thereafter be deemed to be outstanding. No interest or sum of money
in lieu of interest shall be payable in respect of such Redemption Price.
SECTION 4. Liquidation Rights.
(a) In the event of the liquidation, dissolution, or winding up of the
business of the Corporation, whether voluntary or involuntary, the holders of
shares of Series 2 Nonvoting Preferred Stock then outstanding, after payment or
provision for payment of the debts and other liabilities of the Corporation and
the payment or provision for payment of any distribution on any shares of the
Corporation having a preference and a priority over the shares of Series 2
Nonvoting Preferred Stock on liquidation, and before any distribution to the
holders of Junior Stock, shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders an amount per share
of Series 2 Nonvoting Preferred Stock in cash equal to the sum of (i) Cdn.
$1,000 (the "Stated Liquidation Amount") plus (ii) all accrued and unpaid
dividends thereon. In the event the assets of the Corporation available for
distribution to the holders of the shares of Series 2 Nonvoting Preferred Stock
upon any dissolution, liquidation or winding up of the Corporation shall be
insufficient to permit payment of the full preferential amounts payable to the
holders of outstanding shares of Series 2 Nonvoting Preferred Stock and of
Parity Stock, the holders of shares of Series 2 Nonvoting Preferred Stock and
of Parity Stock shall share ratably in such distribution of assets in
proportion to the amount which would be payable on such distribution if the
amounts to which the holders of outstanding shares of Series 2 Nonvoting
Preferred Stock and the holders of outstanding shares of such Parity Stock were
paid in full. Except as provided in this Section 4, the holders of Series 2
Nonvoting Preferred Stock shall not be entitled to any distribution in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation.
(b) For the purposes of this Section 4, none of the following shall be
deemed to be a voluntary or involuntary liquidation, dissolution or winding up
of the Corporation:
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<PAGE> 6
(i) the sale, lease, transfer or exchange of all or substantially
all of the assets of the Corporation; or
(ii) the consolidation or merger of the Corporation with one or
more other corporations (whether or not the Corporation is the
corporation surviving such consolidation or merger).
SECTION 5. No Preemptive Rights. The holders of shares of Series 2
Nonvoting Preferred Stock shall have no preemptive rights, including preemptive
rights with respect to any shares of capital stock or other securities of the
Corporation convertible into or carrying rights or options to purchase any such
shares.
SECTION 6. Voting Rights.
(a) The holders of shares of Series 2 Nonvoting Preferred Stock shall have
no voting rights except as otherwise set forth herein or as otherwise provided
by law or elsewhere in the Restated Certificate of Incorporation of the
Corporation, as amended.
(b) For as long as any shares of Series 2 Nonvoting Preferred Stock
(collectively with the Series 1 Nonvoting Preferred Stock, the "Nonvoting
Preferred Stock") remain outstanding, the affirmative vote or consent of the
holders of at least 66 2/3% of the shares thereof actually voting (voting
separately as a class together with the holders of the Series 1 Nonvoting
Preferred Stock) in person or by proxy at any annual meeting or special meeting
of the shareholders called for such purpose, or by written consent, shall be
necessary to (i) amend, alter or repeal any of the provisions of the Restated
Certificate of Incorporation of the Corporation, as amended, which would
adversely affect the powers, preferences or rights of the holders of the shares
of Nonvoting Preferred Stock then outstanding or reduce the minimum time
required for any notice to which holders of shares of Nonvoting Preferred Stock
then outstanding may be entitled; provided, however, that any such amendment,
alteration or repeal that would authorize, create or increase the authorized
amount of any additional shares of Junior Stock or of Parity Stock (whether or
not already authorized) shall not be deemed to affect adversely such powers,
preferences or rights and shall not be subject to approval by the holders of
shares of Nonvoting Preferred Stock; and provided further that clause (i) shall
not be applicable to the amendment, alteration or repeal of any provisions of
the Restated Certificate of Incorporation of the Corporation, as amended, prior
to the issuance of any shares of Nonvoting Preferred Stock; (ii) authorize or
create, or increase the authorized amount of, any Senior Stock, or any security
convertible into Senior Stock; or (iii) merge or consolidate with or into any
other corporation, unless each holder of the shares of Nonvoting Preferred
Stock immediately preceding such merger or consolidation shall have the right
either (A) to receive or continue to hold in the resulting corporation the same
number of shares, with substantially the same rights and preferences, as
corresponds to such holder's shares of Nonvoting Preferred Stock so held or (B)
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<PAGE> 7
exchange into shares of Class A Common Stock and Series C Convertible Preferred
Stock (as herein defined) pursuant to the terms of the Exchange Agreement.
There is no limitation on the issuance by the Corporation of Junior Stock
or Parity Stock.
Notwithstanding the provisions set forth in the first paragraph of this
Section 6 (b), however, no such approval described therein of the holders of
the shares of Series 2 Nonvoting Preferred Stock shall be required if, at or
prior to the time when such amendment, alteration, or repeal is to take effect
or when such consolidation or merger is to take effect, as the case may be,
provision is made for the redemption of all shares of Series 2 Nonvoting
Preferred Stock at the time outstanding.
SECTION 7. Definitions. As used in this Certificate of Designations:
(a) The term "Adjusted Market Price" means the greater of (i) the amount
per share determined by multiplying 1.05 by the Market Price (as herein
defined) and (ii) U.S. $9.00 per share.
(b) The term "business day" means any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close or are closed because of a
banking moratorium or otherwise.
(c) The term "Canadian Dollar Balance" means an amount equal to Cdn.
$149,658,000.
(d) The term "Class A Common Stock" means the Class A Common Stock, par
value U.S. $.01 per share, of the Corporation.
(e) The term "Class B Common Stock" means the Class B Common Stock, par
value U.S. $.01 per share, of the Corporation.
(f) The term "Common Stock" means the Class A Common Stock and the Class B
Common Stock, neither of which has any preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation and neither of which is subject to
redemption by the Corporation.
(g) The term "Determination Date" means the date that is five (5) business
days prior to the mailing by the Corporation of the definitive version of the
proxy solicitation materials to all stockholders of record of the Corporation
with respect to the stockholders meeting as provided for in and pursuant to the
Exchange Agreement.
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<PAGE> 8
(h) The term "Exchange Agreement" means the Exchange Agreement dated as of
April 18, 1997 among Hollinger Inc., a corporation continued under the laws of
Canada, UniMedia Holding Company, a company formed under the laws of Nova
Scotia, and the Corporation.
(i) The term "First Tranche Amount" means the Canadian dollar equivalent
of U.S. $90,000,000 using the Noon Buying Rate (as herein defined).
(j) The term "First Tranche Dividends" means the amount of dividends
accrued during a Payment Period at the rate of 9.50% per annum of the Stated
Liquidation Amount multiplied by the number of First Tranche Shares (as herein
defined). Dividends (or amounts equal to accrued and unpaid dividends) payable
on First Tranche Shares will be computed on the basis of a 360-day year of
twelve 30-day months and the actual number of days elapsed in any Payment
Period.
(k) The term "First Tranche Shares" means the number of shares of Series 2
Nonvoting Preferred Stock determined by (A) dividing the First Tranche Amount
by the Canadian Dollar Balance and then by (B) multiplying the resulting
fractional amount (rounded to the fourth decimal place) by 149,658.
(l) The term "Market Price" means the weighted average market price per
share of Class A Common Stock on the New York Stock Exchange (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 New York Stock Exchange)
for the ten (10) trading days period ending on the Determination Date as
reported by Bloomberg or other authority satisfactory to the Corporation, as
determined pursuant to and in accordance with the Exchange Agreement; provided,
however, that the Market Price shall not be an amount less than U.S. $9.00 per
share.
(m) The term "Payment Period" means the period beginning on a Dividend
Payment Date and ending with the last day immediately preceding the next
succeeding Dividend Payment Date. The initial Payment Period will begin on the
Issue Date and end with the last day immediately preceding the initial Dividend
Payment Date.
(n) The term "Second Tranche Amount" means the amount determined by
subtracting the First Tranche Amount from the Canadian Dollar Balance.
(o) The term "Second Tranche Dividends" means the amount of dividend or
other distribution that would have been paid on or with respect to that number
of shares of Class A Common Stock (had such shares been issued on the Issue
Date) determined by dividing (x) the U.S. Dollar Equivalent (as herein defined)
of the Second Tranche Amount (if any) by (y) the Adjusted Market Price of Class
A Common Stock on the Determination Date during a Payment Period and on or
prior to the earlier of (i) the redemption date for the redemption of all (but
not
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<PAGE> 9
less than all) of the shares of Series 2 Nonvoting Preferred Stock or (ii) the
date of the Mandatory Exchange.
(p) The term "Second Tranche Shares" means the number of shares (if any)
of Series 2 Nonvoting Preferred Stock determined by subtracting the number of
First Tranche Shares from 149,658.
(q) The term "Series A Preferred Stock" means the Series A Redeemable
Convertible Preferred Stock, par value U.S. $.01 per share, of the Corporation.
(r) The term "Series B Convertible Preferred Stock" means the Series B
Convertible Preferred Stock, par value U.S. $.01 per share, of the Corporation,
represented by PRIDES originally issued by the Corporation on August 7, 1996.
(s) The term "Series C Convertible Preferred Stock" means the Series C
Convertible Preferred Stock, par value U.S. $.01 per share, of the Corporation.
(t) The term "Series 1 Nonvoting Preferred Stock" means the Series 1
Nonvoting Preferred Stock, par value U.S. $.01 per share, of the Corporation.
(u) The term "U.S. Dollar Equivalent" means the inverse of the noon buying
rate ("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.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Hollinger International Inc. has caused this
Certificate of Designations of Series 2 Nonvoting Preferred Stock to be signed
and attested this 18th day of April 1997.
ATTEST: HOLLINGER INTERNATIONAL INC.
By: /s/ LINDA LOYE By: /s/ KENNETH L. SEROTA
------------------------ -----------------------------
Linda Loye, Kenneth L. Serota,
Assistant Secretary Vice President - Law & Finance
and Secretary
<PAGE> 1
EXHIBIT 10.01
HOLLINGER INTERNATIONAL INC.
401 NORTH WABASH AVENUE
CHICAGO, ILLINOIS 60611
APRIL 18, 1997
Hollinger Inc.
UniMedia Holding Company
10 Toronto Street
Toronto, Ontario
Canada M5C 2B7
Attention: Mr. John A. Boultbee, Vice-President,
Finance and Treasury
Re: Exchange Agreement
------------------
Dear Mr. Boultbee:
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 formed under the laws of Nova Scotia
("Vendor"), 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"); and (ii) the UniMedia Class B Stock Purchase Agreement
dated as of April 18, 1997 ("UniMedia B Agreement") among Hollinger, the
Vendor, and International relating to the purchase of all of the outstanding
Class B Common Shares of UniMedia (the UniMedia A
<PAGE> 2
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 2
Agreement and the UniMedia B Agreement being referred to collectively as the
"Purchase Agreements").
In consideration of the purchase of the outstanding Class B
Common Shares of UniMedia, International is issuing to the Vendor 23,267 newly
issued shares of Series 1 Nonvoting Preferred Stock (having the relative rights
and preferences set forth in the form of Certificate of Designations attached
hereto as Annex 1) 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, International is issuing to the Vendor 149,658 shares of Series 2
Nonvoting Preferred Stock (having the relative rights and preferences set forth
in the form of Certificate of Designations attached hereto as Annex 2) at a
stated issue price of Cdn. $1,000 per share ("Series 2 Nonvoting Preferred
Stock"), and cash in the amount of Cdn. $19,373,000.
The shares of Series 1 Nonvoting Preferred Stock and Series 2
Nonvoting Preferred Stock (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 the Vendor 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
<PAGE> 3
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 3
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) the Vendor, Hollinger or any
Subsidiary or Affiliate of Hollinger 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, and (b) the Vendor 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 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
<PAGE> 4
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 4
provisions of this 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 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
69,565,754 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, and 149,658 shares of Series 2 Nonvoting Preferred
Stock are issued and outstanding. In order to comply with 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 Series B 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
<PAGE> 5
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 5
New York Stock Exchange. 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 A Common Stock upon exchange by the
Vendor of all shares of Series 1 Nonvoting Preferred Stock and the "Second
Tranche Shares" of the Series 2 Nonvoting Preferred Stock (as hereinafter
defined) in accordance with this Exchange Agreement; (ii) to permit the
issuance by International of authorized but unissued shares of Series C
Convertible Preferred Stock (having the relative rights and preferences set
forth in the form of Certificate of Designations attached hereto as Annex 3) of
International ("Series C Convertible Preferred Stock") upon exchange by the
Vendor of all of the "First Tranche Shares" of the Series 2 Nonvoting Preferred
Stock (as hereinafter defined) in accordance with this 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 Convertible Preferred
Stock as provided therein; and (iv) to increase the authorized capital of
International from 20 million shares to 120 million shares of Preferred Stock
(collectively, the "International Proposals"). The holders of outstanding
shares of Class A Common Stock, Class B Common Stock and Series B Preferred
Stock will be entitled to vote as a single class on items (i) through (iv),
above. Hollinger, as the sole holder of the outstanding shares of Series A
Preferred Stock, hereby consents to approve an amendment to the terms of the
Series A Preferred Stock to clarify its voting rights (as provided by law) to
eliminate any right to vote as a separate class with respect to any proposed
increase in the number of shares of Preferred Stock or to authorize the
<PAGE> 6
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 6
issuance of parity or junior stock, such amendment to be effective as soon as
practicable after the date hereof and, in any event, prior to the Stockholders
Meeting. Hollinger Inc., 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 favour of the
International Proposals.
On the Determination Date (as hereafter defined), an amount
equal to Cdn. $149,658,000 (the "Canadian Dollar Balance") will be converted
into U.S. dollars using the "U.S. Dollar Equivalent" (as hereinafter defined)
as of that date and allocated, for computational purposes, as set forth below.
The Canadian dollar equivalent of U.S. $90,000,000 using the "Noon Buying
Rate," as hereinafter defined on the Determination Date (the "First Tranche
Amount"), will first be allocated to a portion of the Series 2 Nonvoting
Preferred Stock (the "First Tranche Shares") to determine the portion of the
Series 2 Nonvoting Preferred Stock to be mandatorily exchanged into Series C
Convertible Preferred Stock. Such portion (rounded to the nearest share) will
be determined by (A) dividing the First Tranche Amount by the Canadian Dollar
Balance, and then (B) multiplying the resulting fractional amount (rounded to
the fourth decimal place) by 149,658. Then, any remaining amount of the Canadian
Dollar Balance (the "Second Tranche Amount"), expressed in Canadian dollars,
will be allocated to the remaining shares of Series 2 Nonvoting Preferred Stock
(the "Second Tranche Shares"), determined by subtracting the number of First
Tranche Shares from 149,658. On the Determination Date,
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Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 7
International will deliver two new stock certificates to the Vendor in respect
of the Series 2 Nonvoting Preferred Stock in replacement of the original
certificate issued on the date hereof, with one new certificate representing
the First Tranche Shares and the other representing the Second Tranche Shares.
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 (iv) of the International Proposals ("Stockholder Approval"),
International shall issue to Hollinger or the Vendor 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, that number of newly issued shares of Class
A Common Stock as is determined by dividing (x) the "U.S. Dollar
Equivalent" of Cdn. $23,267,000 on the Determination Date by (y) the
"Adjusted Market Price" of Class A Common Stock on the "Determination
Date" (as such terms are hereinafter defined);
(ii) in exchange for all the First Tranche Shares,
that number of newly issued shares of Series C Convertible Preferred
Stock as is determined by dividing (x) the "U.S. Dollar Equivalent" of
the First Tranche Amount by (y) the "Adjusted Market Price"
<PAGE> 8
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 8
of Class A Common Stock on the "Determination Date" (as such terms are
defined below);
(iii) in exchange for all of the Second Tranche
Shares, that number of newly issued shares of Class A Common Stock as
is determined by dividing (x) the "U.S. Dollar Equivalent" of the
"Second Tranche Amount" (if any) by (y) the "Adjusted Market Price" of
Class A Common Stock on the "Determination Date" (as such terms are
defined below).
If the "U.S. Dollar Equivalent" of the Canadian Dollar Balance is less
than U.S. $90,000,000, then the number of shares of Series C
Convertible Preferred Stock will be proportionally reduced. If the
Second Tranche Amount is zero, there will be no exchange in respect
thereof.
For purposes hereof: (A) the "U.S. Dollar Equivalent" means the inverse of the
"Noon Buying Rate"; (B) 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; (C) the "Adjusted
Market Price" means 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 the weighted average market price per share of Class A
Common Stock on the New York Stock Exchange (taking into account the actual
sale prices and the respective
<PAGE> 9
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 9
number of shares of Class A Common Stock so sold in each sale transaction on
the New York Stock Exchange) for the ten (10) trading day period ending on the
"Determination Date" as reported by Bloomberg or other authority satisfactory
to International; and (E) the "Determination Date" means the date that is five
(5) business days prior to the mailing by International of the definitive
version of the proxy solicitation materials (the "Proxy Statement") to all
stockholders of record of International with respect to the Stockholders
Meeting.
As soon as practicable after the Determination Date, but in
any event no later than the date (the "Mailing Date") on which International
first mails the definitive Proxy Statement to its stockholders with respect to
the Stockholders Meeting, International will furnish to Hollinger and the
Vendor a certificate (the "Officers' Certificate"), executed by a duly
authorized officer of International and substantially in the form of Annex 4
attached hereto with all blanks completed.
<PAGE> 10
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 10
Absent manifest error, all such information as set forth in the definitive
Officers' Certificate delivered to Hollinger and the Vendor hereunder shall be
binding and conclusive on all of the parties hereto.
As soon as practicable, but in any event no later than five(5)
business days after the Determination Date, International, Hollinger, Vendor,
1159670 Ontario Limited, Hollinger's indirect wholly owned subsidiary
("1159670"), and/or any other direct or indirect wholly owned subsidiary of
Hollinger (as Hollinger may designate) will enter into the Second Exchange
Agreement, substantially in the form of Annex 5 attached hereto with all blanks
completed (the "Second Exchange Agreement"). Hollinger will cause Vendor,
1159670 and/or any other direct or indirect wholly owned subsidiary of
Hollinger (as Hollinger may designate) to execute and deliver the Second
Exchange Agreement and perform their respective obligations thereunder.
During the preparation of the definitive Proxy Statement, the
parties hereto shall consult and cooperate with each other in order to complete
any and all matters relating to the definitive Certificate of Designations to
be filed with the Delaware Secretary of State to create the Series C
Convertible Preferred Stock, including without limitation the expected date of
the Exchange, the expected Dividend Payment Dates, the Mandatory Conversion
Date and the Initial Redemption Date, the calculation of the Call Price, and
all other pertinent matters, taking into
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Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 11
account the parties' mutual intention that the Series C Convertible Preferred
Stock (as reflected in the definitive Certificate of Designations creating such
Preferred Stock, and when issued upon the Exchange) be similar in all material
respects to the Series B Preferred Stock (except for the agreed dividend rate
of 9.5% per annum and the other financial terms referred to above).
The Special Committee of independent members of the Board of
Directors of International (the "Special Committee"), acting on behalf of
International pursuant to authority duly delegated to it by the Board of
Directors of International, shall approve (a) the definitive Officers'
Certificate prior to its delivery to Hollinger and the Vendor and (b) the other
provisions requiring completion with respect to the definitive Certificate of
Designations for the Series C Convertible Preferred Stock.
The Exchange shall be mandatory and shall not require any
request or other action by, or notice to, Hollinger, the Vendor or
International. Immediately upon the Exchange dividends will cease to accrue in
respect of shares of Nonvoting Preferred Stock. Hollinger and the Vendor 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 Convertible
Preferred Stock issued upon the Exchange will not be
<PAGE> 12
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 12
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 Convertible Preferred Stock issued to the Vendor upon the
Exchange (and the shares of Class A Common Stock issuable upon conversion of
the Series C Convertible Preferred Stock) and to list such newly issued shares
of Class A Common Stock and Series C Convertible Preferred Stock on the New
York Stock Exchange, 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 Exchange Agreement.
This Agreement may be amended or modified, but only by a
written agreement that identifies this 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 on behalf of International. In addition, International shall not
waive any obligations of Hollinger or the Vendor hereunder or any other
benefits to International arising under this Exchange Agreement unless approved
by the Board of Directors of International following receipt of a favourable
recommendation thereof by the Special Committee.
<PAGE> 13
Hollinger Inc.
UniMedia Holding Company
April 18, 1997
Page 13
This 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 18th day of April, 1997:
HOLLINGER INC.
By: /s/ J. A. BOULTBEE
----------------------
Name: J. A. Boultbee
Title: Vice President, Finance
and Treasury
UNIMEDIA HOLDING COMPANY
By: /s/ J. A. BOULTBEE
----------------------
Name: J. A. Boultbee
Title: Vice President, Finance
and Treasury
<PAGE> 1
EXHIBIT 99.01
HOLLINGER INC. (Canada)
HOLLINGER INTERNATIONAL INC. (U.S.)
PRESS RELEASE
REORGANIZATION OF CANADIAN PUBLISHING INTERESTS COMPLETED
TORONTO, CANADA, April 18, 1997 - HOLLINGER INC. ("HOLLINGER") (TSE,
MSE, VSE: HLG; NASDAQ: HLGRF) and its subsidiary, HOLLINGER INTERNATIONAL INC.
("HOLLINGER INTERNATIONAL") (NYSE:HLR), announce that they have completed the
transaction previously announced on January 7, 1997 whereby Hollinger has
transferred (effective as of January 1, 1997) its Canadian publishing interests
to a Canadian company in the Hollinger International consolidated group.
Hollinger is a Canadian-based international newspaper company that,
directly and through its subsidiaries and associated companies, is engaged
primarily in the publishing, printing and distribution of newspapers and
magazines in the United Kingdom, the United States, Canada and Israel.
Hollinger holds 51.2% of the equity shares and 77.7% of the voting power in
Hollinger International.
Hollinger International, through subsidiaries and affiliated companies,
is a leading publisher of English-language newspapers in the United States, the
United Kingdom, Canada and Israel. Included among the 142 paid daily newspapers
that the company owns or has an interest in are the Chicago Sun-Times and The
Daily Telegraph. These 142 newspapers have a world-wide daily combined
circulation of 4,021,000. In addition, the company owns or has an interest in
358 non-daily newspapers as well as magazines and other publications.
FOR INFORMATION PLEASE CALL:
<TABLE>
<S> <C> <C>
J. A. Boultbee Paul B. Healy F. David Radler
Vice-President Finance and Vice President, Corporate President and Chief Operating
Treasury Development and Investor Officer
Hollinger Inc. and Relations Hollinger Inc. and
Vice-President and Chief Hollinger International Inc. Hollinger International Inc.
Financial Officer (212) 586-5666 (604) 732-4443
Hollinger International Inc.
(416) 363-8721
</TABLE>
