EXHIBIT 99.2
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RELEASE AND SETTLEMENT AGREEMENT
THIS RELEASE AND SETTLEMENT AGREEMENT (this "Agreement") is entered
into this 16th day of March 2007 between North American Newspapers Ltd. f/k/a
XX Xxxxxx Ltd. ("NANL") and Sun-Times Media Group, Inc., a Delaware corporation
f/k/a Xxxxxxxxx International Inc. ("STMG"), (together, the "Parties").
WHEREAS by resolutions dated June 19, 2003, and January 20, 2004, the
STMG Board of Directors formed and authorized a Special Committee (the "SC") to
investigate and file suit regarding, among other things, various related-party
transactions and payments and to take any actions necessary to recover assets
and damages for STMG; and
WHEREAS on August 30, 2004, STMG filed the SC's report of
investigation (the "SC Report") with the U.S. District Court for the Northern
District of Illinois in the action titled SEC X. XXXXXXXXX INTERNATIONAL INC.,
Case No. 04-C-0366, and with the U.S. Securities & Exchange Commission on SEC
Form 8-K; and
WHEREAS on January 28, 2004, the SC filed a complaint on STMG's behalf
in the U.S. District Court for the Northern District of Illinois against F.
Xxxxx Xxxxxx ("Xxxxxx"), sole shareholder of NANL, and others alleging breaches
of fiduciary duties and conversion of company assets in an action captioned
XXXXXXXXX INTERNATIONAL INC. X. XXXXXXXXX INC., ET AL., Case No. 04-C-0698, and
subsequent amendments on May 7 and October 29, 2004 (the "Illinois Action");
and
WHEREAS STMG is simultaneously entering into a release and settlement
agreement with Xxxxxx (the "Xxxxxx Settlement Agreement"); and
WHEREAS the SC has approved the settlement reflected in this Agreement
as fair, reasonable, adequate, and in the best interests of STMG and its
shareholders;
NOW THEREFORE IN CONSIDERATION OF THE COVENANTS SET FORTH BELOW AND
OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS
ACKNOWLEDGED, STMG and NANL agree as follows:
1. NANL SETTLEMENT AMOUNT. Simultaneously upon execution of this
Agreement by both Parties, NANL will pay to STMG the sum of U.S. $23.3 million
(the "NANL Settlement Amount").
2. APPORTIONMENT OF NANL SETTLEMENT AMOUNT. The amount in
paragraph 1 above includes the following allocation to portions of STMG's
asserted damages on the following items:
a. MANAGEMENT SERVICE FEES (PAID TO BOTH RAVELSTON AND
MOFFAT MANAGEMENT): U.S.$15.71 million;(1)
b. CANWEST NON-COMPETITION PAYMENT TO RAVELSTON: U.S.$1.99
million;
c. CANWEST-RAVELSTON MANAGEMENT SERVICES AGREEMENT:
U.S.$2.93 million;
d. "BROKER FEE" PAYMENT TO MOFFAT MANAGEMENT: U.S.$70,000;
e. DIGITAL INCENTIVE PLAN PAYMENTS: U.S.$800,000;
f. HORIZON TRANSACTIONS: U.S.$1.3 million; and
x. XXXXXXXX TRANSACTION: U.S.$500,000.
3. MUTUAL RELEASE AND SETTLEMENT. Upon payment in full of (i) the
NANL Settlement Amount; and (ii) the remainder of the Xxxxxx/Horizon Settlement
Amount as that term is defined in the Xxxxxx Settlement Agreement, STMG and its
affiliates (except Xxxxxxxxx Inc. and its subsidiaries that are not
subsidiaries of STMG), subsidiaries, and divisions, and their predecessors,
successors, and assigns (collectively, the "STMG Releasors") do hereby fully,
finally, and forever release NANL and its officers, directors, shareholders,
employees, subsidiaries, divisions, attorneys, and advisors and their
predecessors, successors, and assigns (collectively, the "NANL Releasees") from
any and all rights, interests, obligations, debts, dues, sums of money,
accounts, reckonings, damages, claims, actions, allegations, causes of action,
counterclaims, or demands whatsoever, whether known or unknown, in law or in
equity, that have been or that could be asserted by the STMG Releasors from the
beginning of time through the date hereof against the NANL Releasees (the
"Settled Claims"). NANL and any and all of its officers, directors, employees,
subsidiaries, divisions, and advisors, and their predecessors, successors, and
assigns (collectively, the "NANL Releasors") do hereby fully, finally, and
forever release STMG and its current and former agents, advisors (except KPMG
LLP, and any of its predecessor or successor partnerships, which are addressed
below in paragraph 5), representatives, affiliates, subsidiaries, divisions,
officers, directors, employees, and attorneys (except Torys LLP and any of its
predecessor partnerships, which are addressed below in paragraph 6) and their
predecessors, successors, and assigns (collectively, the "STMG Releasees")(2)
from any and all rights, interests, obligations, debts, dues, sums of money,
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(1) The Parties acknowledge that $4,928,175 of the monies allocated to
management fees were paid initially to Moffat Management, Inc. ("Moffat") and
forwarded to NANL. This amount includes the repayment of those fees.
(2) To the extent that the NANL Releasors' release extends to Xxxxxx X. Xxxxx,
Xxxxxxx Xxxxx Black, Xxxx X. Xxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxx X. Xxxxxx, The
Ravelston Corporation Ltd., or Xxxx X. Xxxx, it is limited to claims based on
their conduct in their capacity as STMG officers, directors, employees, or
agents. In addition, to the extent that the NANL Releasors have defenses or
affirmative defenses against Xxxxxx X. Xxxxx, Xxxxxxx Xxxxx Black, Xxxx X.
Xxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxx X. Xxxxxx, The Ravelston Corporation Ltd., or
Xxxx X. Xxxx that are based on their conduct in their capacity as STMG
officers, directors, employees, or agents, the NANL Releasors' release does not
preclude the NANL Releasors from pursuing those defenses or affirmative
defenses (but not claims, including affirmative claims, counterclaims, or
cross-claims) in any pending or future litigation. Further, to the extent that
the NANL Releasors have claims, defenses, or affirmative defenses against
Xxxxxxxxx Inc. that may be pursued in response to Xxxxxxxxx Inc.'s proposed
counterclaims in the Illinois Action, Xxxxxxxxx Inc.'s litigation in Canada, or
any other current or future claims brought by or on Xxxxxxxxx Inc.'s behalf
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accounts, reckonings, damages, claims, actions, allegations, causes of action,
counterclaims, or demands whatsoever, whether known or unknown, in law or in
equity, that NANL has or will have or that have been or could be asserted by
the NANL Releasors from the beginning of time through the date hereof against
the STMG Releasees. The releases provided under this paragraph do not release
NANL or STMG from their respective obligations under this Agreement.
4. MUTUAL WAIVER OF RIGHTS UNDER SECTION 1542 OF THE CALIFORNIA
CIVIL CODE. The STMG Releasors and the NANL Releasors are hereby deemed to have
waived any and all rights, to the extent permitted by law, under Section 1542
of the California Civil Code or any other similar state or federal law,
provincial or territorial law, or principle of common law that may have the
effect of limiting the releases set forth herein. Section 1542 of the
California Civil Code provides: "A general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have materially affected
his settlement with the debtor."
5. LIMITED RELEASE OF KPMG LLP. The NANL Releasors agree that
they will not seek contribution, indemnification, reimbursement, or any other
form of claims over from KPMG LLP, including its Canadian and United States
limited liability partnerships, and any of their predecessor or successor
partnerships (all together, the "KPMG Entities"), for any portion of the
Xxxxxx/Horizon Settlement Amount as that term is defined in the Xxxxxx
Settlement Agreement. The NANL Releasors further agree that they will not
assert claims against any of the KPMG Entities for any tax compliance services,
tax consulting services, or economic consulting services, as those terms are
used in the letters in which STMG or its subsidiaries engaged the KPMG
Entities, that any of the KPMG Entities provided to STMG or its subsidiaries.
For reference purposes only, samples of letters in which STMG engaged the KPMG
Entities are attached as Exhibits A-C hereto. Subject to the previous two
sentences, this Agreement does not in any way limit the NANL Releasors' ability
to pursue claims against any of the KPMG Entities for (i) any audit services,
as that term is used in the letters in which STMG or its subsidiaries engaged
the KPMG entities, that any of the KPMG Entities provided to STMG or its
subsidiaries; or (ii) contribution, indemnification, or reimbursement for any
amounts other than the Xxxxxx/Horizon Settlement Amount as that term is defined
in the Xxxxxx Settlement Agreement.
6. LIMITED RELEASE OF TORYS LLP. The NANL Releasors agree that
they will not seek contribution, indemnification, reimbursement, or any other
form of claims over from Torys LLP, or any of its predecessor or successor
partnerships, for any portion of the Xxxxxx/Horizon Settlement Amount as that
term is defined in the Xxxxxx Settlement Agreement. This Agreement does not in
any way limit the NANL Releasors' ability to pursue claims against Torys LLP,
or any of its predecessor or successor partnerships, for contribution,
indemnification, or reimbursement for any amounts other than the Xxxxxx/Horizon
Settlement Amount as that term is defined in the Xxxxxx Settlement Agreement.
7. STMG REPRESENTATION AND WARRANTY REGARDING AGREEMENT. STMG
represents and warrants as follows: (i) it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware;
(ii) it has all requisite power and authority to execute and deliver this
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against any of the NANL Releasors, the NANL Releasors' release does not
preclude the NANL Releasors from pursuing those claims, defenses, or
affirmative defenses in any pending or future litigation.
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Agreement; (iii) the execution and delivery by STMG of this Agreement will not
conflict with or result in any violation or breach of or default under any
provision of the certificate of incorporation and by-laws of STMG or any
contract to which STMG is a party; (iv) no consent or approval of any person is
required in connection with the execution and delivery of this Agreement; and
(v) this Agreement is legal, valid, binding, and enforceable against STMG in
accordance with its terms.
8. POTENTIAL JUDGMENT REDUCTION. In accordance with 10 Del. C.
Section 6304(b), and if and to the extent applicable any other statute or law
discharging and barring contribution or similar claims against a released or
settled party, including but not limited to 740 Ill. Comp. Stat. Xxx. 100/2(d),
in the event that judgment reduction is determined to be necessary and
appropriate under applicable law, this Agreement reduces, to the extent, if at
all appropriate, by NANL's PRO RATA share, if any, of the liability and damages
recoverable by STMG in any action or claim involving the Settled Claims that
STMG has filed, will file, or could file, or that could have been filed on its
behalf derivatively against a person other than NANL. NANL acknowledges and
agrees that the court or tribunal before which any such STMG action or claim is
brought will have the necessary authority and jurisdiction to make findings as
to the joint tort-feasor status, if at all, and proportionate liability, if
any, or lack thereof, of NANL for STMG's damages, regardless of whether NANL is
a party to such action or claim. NANL further agrees to cooperate with all
reasonable requests for documents or other evidentiary materials, whether from
STMG or any other party, in connection with any action or claim involving the
Settled Claims in which findings may be required as to the joint tort-feasor
status and/or proportionate liability, or lack thereof, of NANL. NANL also
agrees not to move to stay or dismiss a claim or action involving the Settled
Claims brought by STMG against someone other than NANL, provided, however, that
this shall not affect NANL's right to seek dismissal or any other relief with
respect to any claims asserted in such actions against the NANL Releasees.
9. GOVERNING LAW; CHOICE OF FORUM; JURY WAIVER. This Agreement
and any claim related directly or indirectly to this Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware,
without regard to the conflicts of law principles thereof. All disputes arising
out of or relating to this Agreement or its breach may be resolved in the U.S.
District Court for the Northern District of Illinois, and NANL and STMG hereby
submit and attorn to the jurisdiction and venue of that court. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE ARISING OUT OF THIS AGREEMENT.
10. COUNTERPARTS AND DELIVERY. This Agreement may be signed in any
number of counterparts, all of which together shall constitute one and the same
instrument. This Agreement may be executed and delivered by fax transmission or
by transmission in PDF or similar electronic document format.
11. SEVERABILITY. If any provision of this Agreement is found to
be unenforceable in whole or in part, it shall be construed or limited in such
a way as to make it enforceable, consistent with the intentions of the Parties
as set out in this Agreement. If such construction or limitation is not
possible, the unenforceable provision will be stricken, and the remaining
provisions of this Agreement will remain valid and enforceable.
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12. ADMISSIBILITY. This Agreement may be filed and used in any
action or proceeding as may be necessary to enforce or seek relief with respect
to the Agreement.
13. NO ADMISSION. This Agreement does not in any manner constitute
NANL's or STMG's admission of liability, wrongdoing, or responsibility, or lack
thereof. Nor is it an admission by the Parties of any matter.
14. SUCCESSORS. This Agreement shall apply to NANL, as well as any
and all of its officers, directors, shareholders, employees, divisions,
attorneys, and advisors and its predecessors, successors, assigns, and
subsidiaries, or any subsidiaries that NANL may designate. Except as otherwise
expressly provided in this Agreement, this Agreement also shall apply and inure
to the benefit of STMG and its subsidiaries, and any successors of STMG or its
subsidiaries that STMG may designate.
15. NO WAIVER. Any failure by any party to insist upon the strict
performance by the other party of any of the provisions of this Agreement shall
not be deemed a waiver of any of the provisions hereof, and such party,
notwithstanding such failure, shall have the right thereafter to insist upon
strict performance of any and all of the provisions of this Agreement to be
performed by such other party.
16. NOTICE. Any notices required to be given under this Agreement
shall be in writing and shall be made by fax or e-mail transmission to the fax
numbers and e-mail addresses set out below:
To: North American Newspapers, Ltd.
0000 Xxxxxxx Xxxx X.X.
Xxxxxxxx Xxx, Xxxxxxx X0X0X0
Attn: F. Xxxxx Xxxxxx
With a copy to: Jenner & Block LLP
000 X. Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
E-mail: xxxxxxxx@xxxxxx.xxx
To: Sun-Times Media Group, Inc.
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 00 Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. XxXxxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
E-mail: xxxxxxxxxx@xxxxxxxxxxxxx.xxx
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With a copy to: O'Melveny & Xxxxx LLP
Times Square Tower
0 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
E-mail: xxxxxxxxxx@xxx.xxx
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between NANL and STMG and supersedes and replaces any and all prior
negotiations, understandings, promises, representations, inducements, and
discussions, whether written or oral. This Agreement may not be changed or
modified except in writing signed by both NANL and STMG.
18. KNOWLEDGE AND UNDERSTANDING. NANL acknowledges that this
Agreement has been read in consultation with competent counsel and by an
individual with authority to bind NANL who understands and acknowledges the
significance and consequence of it and executes it voluntarily with full
understanding of its consequences.
Agreed to this 16th day of March 2007 by:
SUN-TIMES MEDIA GROUP, INC. NORTH AMERICAN NEWSPAPERS LTD.
By: /s/ Xxxxxx Xxxxx By: /s/ F. Xxxxx Xxxxxx
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Name: Xxxxxx Xxxxx Name: F. Xxxxx Xxxxxx
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Title: Chairman, STMG Special Committee Title: Secretary and Director
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