Freedom Chain to Alter Bylaws : Papers and Harry Hoiles Agree on Compromise

In an unusual compromise with estranged shareholder Harry H. Hoiles, Freedom Newspapers Inc., the Santa Ana media chain, has altered proposed bylaw amendments to change the manner in which new shares can be issued and has revised several other apparent anti-takeover measures. In return, Hoiles, the son of founder R.C. Hoiles, has withdrawn a court challenge of the company’s actions.

Hoiles, whose suit to dissolve the corporation is scheduled for trial April 7, had claimed that proposals to allow a three-member executive committee to issue new preferred stock and additional non-voting common stock were aimed at lowering his family’s one-third interest in the corporation because there are no guarantees that Hoiles or members of his family would be given an opportunity to purchase any of the additional shares.

Hoiles’ family has no representatives on the executive committee and would not learn about its actions until the infrequent board meetings, said Richard Quan, attorney for Hoiles. Quan claimed that Hoiles generally has been kept in the dark about corporate actions since he left the executive committee in 1982. But with four members on the 12-member board of directors, the Hoiles family would at least have notice of any plan to issue new or additional stock and could go to court if necessary, Quan said.

“The compromise basically gave us what a court would probably give us,” he said.

Families Agreed to Moves

To placate Hoiles, the families of his late brother, Clarence, and his sister, Mary Jane Hoiles Hardie, agreed to put the decision on issuing new and additional shares in the hands of the board of directors. The two families, each of which owns about a third of the privately held business, also cut back drastically on proposals to require 60 days’ notice of--and detailed background information on--any nominee for the board and any shareholder proposal.

They also took away the executive committee’s power to grant its three members annual compensation or bonuses, which Hoiles complained totaled as much as $150,000 a year.

Freedom Newspapers owns the Orange County Register, 28 other dailies and four television stations. Purchases of a fifth station and the assets of a 30th daily newspaper are pending.