Daily Court Transcripts

May 02, 2000

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                                                                         201
                                             


         1                                           VOLUME 2

         2                                           PAGES 201  - 382 


         3                     UNITED STATES DISTRICT COURT

         4                    NORTHERN DISTRICT OF CALIFORNIA

         5    BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE

         6    CLINTON REILLY,             )
                                          )
         7               PLAINTIFF,       )
                                          )
         8      VS.                       )         NO. C 00-0119 VRW
                                          )
         9    THE HEARST CORPORATION,     )
              ET AL.,                     )
        10                                )  

                         DEFENDANTS.      )
        11   
____________________________)                            
                                         SAN FRANCISCO, CALIFORNIA
        12                               TUESDAY, MAY 2, 2000
              
        13                       TRANSCRIPT OF PROCEEDINGS
              APPEARANCES:
        14    FOR PLAINTIFF:          JOSEPH M. ALIOTO LAW FIRM
                                      ONE EMBARCADERO CENTER, SUITE 4000
        15                            SAN FRANCISCO, CALIFORNIA  94111
                                 BY:  JOSEPH M. ALIOTO 
        16                            ANGELINA ALIOTO-GRACE
       
                                      ATTORNEYS AT LAW 
        17      
                                      SHULMAN, WALCOTT & SHULMAN, P.A.
                  
        18                            121 WEST FRANKLIN AVENUE
                                      MINNEAPOLIS, MINNESOTA  55404
        19                       BY:  DANIEL R. SHULMAN
                                      JAMES HILBERT
        20                            ATTORNEYS AT LAW  
              
        21              (APPEARANCES CONTINUED ON FOLLOWING PAGE)  
              
        22    REPORTED BY:            JO ANN BRYCE, CSR, RMR, CRR, FCRR
                                      JUDITH N. THOMSEN, CSR, RMR, FCRR
        23                            OFFICIAL REPORTERS, USDC
              
        24                 COMPUTERIZED TRANSCRIPTION BY ECLIPSE

        25   



                                                                          202
                                             


         1    APPEARANCES:  (CONTINUED)

         2    FOR DEFENDANT           SHEPPARD, MULLIN, RICHTER & HAMPTON
              HEARST CORPORATION:     FOUR EMBARCADERO CENTER, 17TH FLOOR
         3                            SAN FRANCISCO, CALIFORNIA  94111
                                 BY:  GARY L. HALLING
         4                            THOMAS D. NEVINS
                                      ATTORNEYS AT LAW
         5    
                                      BAKER & HOSTETLER LLP
       
         6                            1050 CONNECTICUT AVE., N.W.
                                         SUITE 1100
         7                            WASHINGTON, D.C.  20036           
                                 BY:  GERALD A. CONNELL
         8                            ATTORNEY AT LAW                        
                                      
         9    FOR DEFENDANT           LATHAM & WATKINS

              CHRONICLE PUBLISHING    505 MONTGOMERY STREET
        10    COMPANY:                  SUITE 1900
                                      SAN FRANCISCO, CALIFORNIA  94111
        11                       BY:  PETER K. HUSTON
                                      J. THOMAS ROSCH
        12                            GREGORY P. LINDSTROM
                                      ATTORNEYS AT LAW
        13    
              FOR INTERVENOR-         MC CUTCHEN, DOYLE, BROWN & ENERSEN
                    
        14    DEFENDANT EXIN, LLC:    THREE EMBARCADERO CENTER, SUITE 1800
                                      SAN FRANCISCO, CALIFORNIA  94111 
        15                       BY:  DAVID M. BALABANIAN
                                      CHRISTOPHER B. HOCKETT     
        16                            ATTORNEYS AT LAW                 

        17           

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                                                                          203
                                             


         1                               I N D E X

         2     
              
         3                                                              
              PLAINTIFF'S WITNESSES                       PAGE    VOL.
         4    
                
         5    SIAS, JOHN
              DIRECT EXAMINATION BY MR. ALIOTO                210      2
         6    CROSS-EXAMINATION BY MR. ROSCH                  354      2
              CROSS-EXAMINATION BY MR. HALLING                360      2
         7    REDIRECT EXAMINATION BY MR. ALIOTO              365      2
              
         8   

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                                                                          204
                                             


         1                               I N D E X

         2                                   
                                      E X H I B I T S
         3    
              PLAINTIFF'S EXHIBITS 
 W/DRAWN       IDEN    EVID    VOL.  
         4    1                                               209      2
              3 THROUGH 6                                     209      2
         5    8 THROUGH 11                                    209      2
              15 THROUGH 16                                   209      2
         6    18                                              209      2
              20 THROUGH 31                                   209      2
         7    33 THROUGH 36                                   209      2
              45 THROUGH 46                                   209      2
         8    48                                              209      2
              50 THROUGH 52                                   209      2
         9    55 THROUGH 58                                   209      2
              62                                              209      2
        10    64                                              209      2
              66 THROUGH 75        
                          209      2
        11    79 THROUGH 81                                   209      2
              84 THROUGH 88                                   209      2
        12    91 THROUGH 95                                   209      2
              99 THROUGH 106                                  209      2
        13    110 THROUGH 114                                 209      2
              115                                             249      2
        14    116                                             249      2
              117                                             254      2
        15    120 AND 131                                     305      2
              125                                             209      2
        16    127 THROUGH 128                                 209      2
              132 THROUGH 133                                 209      2
        17    
              DEFENDANTS' EXHIBITS   W/DRAWN       IDEN    EVID    VOL.    
        18    C-300 THROUGH C-336                             209      2
              C-338 THROUGH C-347                             209      2
        19    H-1017 THROUGH H-1019                           209      2
              H-1021                                          209      2
        20    H-1024                                          209      2
              H-1027                                          209      2
        21    H-1031                                          209      2
              H-1033                                          209      2
        22    H-1036 THROUGH H-1038                           209      2
              H-1044                                          209      2
        23    H-900 THROUGH H-918                             209      2
              H-920 THROUGH H-937                             209      2
        24    H-941 THROUGH H-947                             209      2
              H-949 THROUGH H-953                             209      2
        25    H-955 THROUGH H-967                             209      2
              H-974 THROUGH H-982                             209      2



                                                                          205
                                              


         1    
         1    TUESDAY, MAY 2, 2000                          8:35 A.M.

         2               THE CLERK:  CALLING CIVIL 2000-119, CLINTON RILEY

         3    VS. THE HEARST CORPORATION AND THE CHRONICLE PUBLISHING

         4    COMPANY, ET AL.

         5               MR. HALLING:  YOUR HONOR, WE LEFT OFF WITH

         6    MR. ALIOTO COMPLETING HIS EXAMINATION OF MR. WHITE.

         7               WE MAY CALL THE HIM IN OUR CASE, BUT WE HAVE NO

         8    QUESTIONS OF MR. WHITE AT THIS TIME.  AND I UNDERSTAND THAT

         9    MR. BALABANIAN AND MR. ROSCH DON'T HAVE QUESTIONS, EITHER.

        10               MR. HOCKETT:  THAT IS CORRECT, YOUR HONOR.

        11               THE COURT:  VERY WELL.  THEN, MR. ALIOTO, YOU MAY

        12    CALL YOUR NEXT WITNESS.

        13               MR. ALIOTO:  THANK YOU, YOUR HONOR.

        14               WE DO HAVE SOME ADDITIONAL EXHIBITS THAT WE WOULD

        15    LIKE TO PUT IN FIRST, IF WE MIGHT, YOUR HONOR.

        16               THE COURT:  VERY WELL.  MR. SHULMAN?

        17               MR. SHULMAN:  YOUR HONOR, WHAT WE WOULD LIKE TO DO

        18    IS JUST READ INTO THE RECORD, AS TEDIOUS AS IT MAY BE, THE

        19    NUMBERS OF THE EXHIBITS THAT THE PARTIES HAVE AGREED TO, JUST

        20    SO IT IS IN THE RECORD.

        21               MR. NEVINS:  THIS IS TOM NEVINS, AND I AM READING

        22    INTO THE RECORD ALL OF THE EXHIBITS THAT ARE ADMITTED OR MAY BE

        23    ADMITTED BY STIPULATION OF THE PARTIES:  PLAINTIFF'S EXHIBIT 1,

        24    3, 4, 5, 6, 8, 9, 10, 11, 15, 16, 18, 20, 21, 22, 23, 24, 25,

        25    26, 27, 28, 29, 30, 31, 33, 34, 35, 36, 45, 46, 48, 50, 51, 52,



                                                                          206
                                             


         1    55, 56, 57, 58, 62, 64, 66, 67, 68, 69, 70, 71, 72, 73, 74, 75,

         2    79, 80, 81, 84, 85, 86, 87, 88, 91, 92, 93, 94, 95, 99, 100. 

         3    PLAINTIFF'S 101, 102, 103 --

         4               THE COURT:  YOU SAID "101."

         5               MR. NEVINS:  OKAY.  104 AND 1 -- I'M SORRY, YOUR

         6    HONOR?

         7               THE COURT:  YOU ARE ADMITTING BY STIPULATION 101?

         8               MR. NEVINS:  WELL, THESE, AS I UNDERSTAND IT FROM

         9    EXIN'S COUNSEL, MODIFY REDACTED VERSIONS OF THE FOLLOWING

        10    EXHIBITS THAT ARE TO BE ADMITTED BY STIPULATION.

        11               MR. SHULMAN:  YES.  WE AGREED LAST NIGHT ON THE

        12    REDACTIONS THAT THEY ASKED FOR IN THOSE EXHIBITS, TAKING OUT

        13    CERTAIN NUMBERS, SO THAT THOSE EXHIBITS WHICH ARE 101 THROUGH

        14    106 MAY BE RECEIVED AS REDACTED.

        15               MR. HIXSON:  YOUR HONOR, WE HAVE GIVEN THE REDACTED

        16    COPIES --

        17               THE COURT:  LET'S SEE.  WE BEGAN YESTERDAY BY

        18    RESERVING 101 THROUGH 105 AND THEN 107 THROUGH 109.  NOW DO I

        19    UNDERSTAND THAT YOU HAVE REDACTED THOSE AND ARE NOW OFFERING

        20    REDACTED VERSIONS OF THESE EXHIBITS?

        21               MR. SHULMAN:  101 THROUGH 106, YOUR HONOR, THOSE

        22    EXHIBITS.

        23               THE COURT:  101 THROUGH 106 ARE ALL ADMITTED?

        24               MR. SHULMAN:  RIGHT.

        25               THE COURT:  AS REDACTED?



                                                                          207
                                             


         1               MR. SHULMAN:  RIGHT.

         2               MR. NEVINS:  OKAY.

         3               MR. HIXSON:  WE HAVE REDACTED COPIES TO PROVIDE TO

         4    THE COURT AND TO THE CLERK.  WE HAVE GIVEN THEM TO THE OTHER

         5    PARTIES.

         6               THE COURT:  ALL RIGHT.  THAT'S THROUGH AND INCLUDING

         7    106, CORRECT?

         8               MR. SHULMAN:  RIGHT.

         9               THE COURT:  ALL RIGHT.

        10               MR. NEVINS:  OKAY.  THEN 110 THROUGH 114, INCLUSIVE,

        11    125, 127, 128, 132 AND 133.

        12               THEN EXHIBITS H-900.

        13               THE COURT:  H-900?

        14               MR. NEVINS:  -900 THROUGH H-930.

        15               MR. SHULMAN:  NO.  I'M SORRY.  THAT'S THROUGH 918.

        16               MR. NEVINS:  OKAY.  I -- LET ME JUST READ THEM INTO

        17    THE RECORD.  THAT'S TEDIOUS BUT WE GET IT RIGHT.

        18               THE COURT:  IT CERTAINLY IS.

        19               MR. NEVINS:  OKAY.

        20               H-900, 901, 902, 903, 904, 905, 906, 907, 908, 909,

        21    910 --

        22               THE COURT:  LET'S SEE.  907, 908?

        23               MR. NEVINS:  909.

        24               THE COURT:  RIGHT.

        25               MR. NEVINS:  910, 911, 912, 913, 914, 915, 916, 917,



                                                                          208
                                             


         1    918.  920 THROUGH 924, 925 THROUGH 933.

         2               THE COURT:  WHY NOT JUST . . .

         3               MR. NEVINS:  934, 935.

         4               THE COURT:  LET'S SEE.  925 THROUGH 933.

         5               MR. NEVINS:  934, 935, 936, 937, 941 THROUGH 944,

         6    945, 946, 947, 949 THROUGH 953, 955 THROUGH 962, 963 THROUGH

         7    967, 974 THROUGH 979, 980, 981, 982, 1017, 1018, 1019, 1021,

         8    1024, 1027, 1031, 1033, 1036, 1037, 1038, 1044.

         9               CHRONICLE EXHIBITS C-300 THROUGH 336 AND C-338

        10    THROUGH 347.

        11               AND THAT'S IT.

        12               MR. SHULMAN:  YOUR HONOR, WE ALSO HAVE STIPULATED TO

        13    THE ADMISSIBILITY OF THE -- ALL EXIN EXHIBITS ON THEIR LIST

        14    EXCEPT FOR EXHIBITS 84, 111 --

        15               THE COURT:  JUST A MINUTE.  SO IT WOULD BE X-84?

        16               MR. SHULMAN:  YES.  ACTUALLY, THAT WOULD BE EXIN

        17    EXHIBITS 1 THROUGH 83.

        18               MR. NEVINS:  BEFORE WE MOVE ON TO THESE, YOUR HONOR,

        19    I HAVEN'T HAD A CHANCE TO LOOK AT THE EXIN EXHIBITS.  COULD I

        20    MOVE ALL OF THE STIPULATED EXHIBITS INTO EVIDENCE AT THIS

        21    POINT, YOUR HONOR, THAT I HAVE READ ON THAT LIST?

        22               THE COURT:  VERY WISE.  

        23               I GATHER THERE IS NO OBJECTION.

        24               MR. SHULMAN:  RIGHT, RIGHT.  WELL, THAT MEANS WE

        25    SHOULD WAIT ON EXIN UNTIL YOU HAVE HAD A CHANCE TO LOOK?



                                                                          209
                                              


         1               MR. NEVINS:  YES.

         2               MR. HALLING:  THE STIPULATED EXHIBITS ARE ALL

         3    RECEIVED, YOUR HONOR?

         4               THE COURT:  YES.  I WON'T REPEAT THEM.

         5                        (PLAINTIFF'S EXHIBITS 1, 3, 4, 5, 6, 8, 9,

         6                        10, 11, 15, 16, 18, 20, 21, 22, 23, 24, 25,

         7                        26, 27, 28, 29, 30, 31, 33, 34, 35, 36, 45,

         8                   
    46, 48, 50, 51, 52, 55, 56, 57, 58, 62, 64,

         9                        66, 67, 68, 69, 70, 71, 72, 73, 74, 75, 79,

        10                        80, 81, 84, 85, 86, 87, 88, 91, 92, 93, 94,

        11                        95, 99, 100, 101 - 106, 110 - 114, 125,

        12                        127, 128, 132 AND 133) 

        13                        RECEIVED IN EVIDENCE)  

        14                        (DEFENDANT'S EXHIBITS H-900 - H-918, H-920

        15                       
- H-924, H-925 - H-933, 934, 935, 936, 937,

        16                        941 THROUGH 944, 945, 946, 947, 949 THROUGH

        17                        953, 955 THROUGH 962, 963 THROUGH 967, 974

        18                        THROUGH 979, 980, 981, 982, 1017, 1018,

        19                        1019, 1021, 1024, 1027, 1031, 1033, 1036,

        20                        1037, 1038, 1044

        21                        RECEIVED IN EVIDENCE)  

        22                        (DEFENDANT'S EXHIBITS C-300 THROUGH 336 AND

        23                        C-338 THROUGH 347 

        24                        RECEIVED IN EVIDENCE)  

        25               



                                                                          210
                                             


         1               THE COURT:  ALL RIGHT.  NOW ARE WE READY FOR A

         2    WITNESS?

         3               MR. ALIOTO?

         4               MR. ALIOTO:  THANK YOU, YOUR HONOR.

         5               MAY IT PLEASE YOUR HONOR, THE PLAINTIFFS WOULD CALL

         6    TO THE STAND MR. JOHN B. SIAS.

         7               THE CLERK:  THANK YOU.  PLEASE RAISE YOUR RIGHT HAND

         8    TO BE SWORN.

         9                            JOHN B. SIAS, 

        10    CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN DULY SWORN,

        11    TESTIFIED AS FOLLOWS:

        12               THE CLERK:  THANK YOU.  PLEASE BE SEATED.

        13               PLEASE STATE YOUR FULL NAME AND SPELL YOUR LAST FOR

        14    THE RECORD.

        15               THE WITNESS:  JOHN B., AS IN BOY, SIAS, S-I-A-S.

        16                          DIRECT EXAMINATION

        17    BY MR. ALIOTO:


        18    Q.   MR. SIAS, YOU ARE PRESENTLY THE CHAIRMAN OF THE BOARD, THE

        19    CHIEF EXECUTIVE OFFICER AND THE PRESIDENT OF THE CHRONICLE

        20    PUBLISHING COMPANY; IS THAT RIGHT?

        21    A.   YES, SIR.

        22    Q.   AND YOU BECAME -- AND YOU BEGAN TO WORK FOR THE CHRONICLE

        23    PUBLISHING COMPANY IN 1993; IS THAT CORRECT?

        24    A.   APRIL 1993.

        25    Q.   AND YOU BECAME THE CHAIRMAN OF THE BOARD OF THE CHRONICLE



                                                                          211
                                  SIAS - DIRECT / ALIOTO


         1    PUBLISHING COMPANY IN 1995; IS THAT CORRECT?

         2    A.   YES, SIR.

         3    Q.   AND THE CHAIRMAN OF THE BOARD OR CHAIRWOMAN OF THE BOARD

         4    BEFORE YOU WAS MS. NAN MCEVOY; IS THAT RIGHT?

         5    A.   NAN T. MCEVOY.

         6    Q.   AND MS. MCEVOY IS THE GRANDDAUGHTER OF THE FOUNDER OF THE

         7    CHRONICLE PUBLISHING COMPANY; IS THAT RIGHT?

         8    A.   YES, SIR.

         9    Q.   ONE OF THEM?

        10    A.   YES, SIR.

        11    Q.   WHEN YOU BECAME -- WHEN YOU CAME TO THE CHRONICLE

        12    PUBLISHING COMPANY, YOU FAMILIARIZED YOURSELF, DID YOU NOT,

        13    WITH THE JOA?

        14    A.   NO, I DID NOT.

        15    Q.   DID YOU EVER READ THE --

        16    A.   I HAD A CURSORY INSPECTION OF IT AND RELIED ON MR. RON

        17    INGRAM FOR INTERPRETATIONS AS WE PROGRESSED.  RON INGRAM IS THE

        18    CHIEF LEGAL COUNSEL FOR THE CHRONICLE PUBLISHING COMPANY.

        19    Q.   WELL, HAVE YOU EVER READ IT?

        20    A.   ABSOLUTELY NOT.  I HAVE READ PORTIONS OF IT AS HE WOULD

        21    HIGHLIGHT IT.

        22    Q.   OKAY.  SO FROM THE TIME THAT YOU BECAME THE CHIEF

        23    EXECUTIVE OFFICER AND THE PRESIDENT IN 1993 AND THEN AS THE

        24    CHAIRMAN IN 1995, YOU NEVER READ THE JOA ALL THE WAY THROUGH;

        25    IS THAT CORRECT?



                                                                          212
                                  SIAS - DIRECT / ALIOTO


         1    A.   THAT IS CORRECT.

         2    Q.   DID YOU FILE AN AFFIDAVIT IN THIS CASE?

         3    A.   IN WHAT CASE, SIR?

         4    Q.   THIS CASE.

         5    A.   YES, I BELIEVE I DID.

         6    Q.   ALL RIGHT.  LET ME HAND YOU -- I WANT TO SHOW YOU YOUR

         7    AFFIDAVIT AND ASK YOU WHETHER OR NOT -- IT IS EXHIBIT 50.  


         8               EXHIBIT 50, FOR THE RECORD, IS THE DECLARATION OF

         9    JOHN B. SIAS IN SUPPORT OF OPPOSITION OF DEFENDANT THE

        10    CHRONICLE PUBLISHING COMPANY TO THE PLAINTIFF'S MOTION FOR

        11    PRELIMINARY INJUNCTION.

        12               IS THIS YOUR SIGNATURE ON THE THIRD PAGE?

        13    A.   YES, IT IS.

        14    Q.   OKAY.  AND THIS IS IN FACT THE DECLARATION THAT YOU FILED

        15    IN THIS CASE?

        16    A.   YES.

        17    Q.   NOW, FROM TIME TO TIME IN YOUR AFFIDAVIT YOU MADE

        18    REFERENCE TO THE JOA, DID YOU NOT?

        19    A.   I SEE ONE REFERENCE, TWO -- YES, I SEE TWO THAT I CAN FIND

        20    HERE.  MAYBE THERE ARE THREE.

        21    Q.   ALL RIGHT.  AND THE ANSWER, I GUESS, TO THE QUESTION IS,

        22    YES, YOU DID REFER TO THE JOA IN YOUR AFFIDAVIT, DID YOU NOT?

        23    A.   I DID.  BUT YOU REFERRED TO IT FROM TIME TO TIME, AND I

        24    WANTED TO BE SPECIFIC.

        25    Q.   OKAY.  AND WHEN YOU REFERRED TO CERTAIN PROVISIONS OF THE



                                                                          213
                                  SIAS - DIRECT / ALIOTO


         1    JOA, DID YOU READ THOSE PROVISIONS?

         2    A.   I HAD THIS DECLARATION PREPARED FOR ME AND I DID NOT READ

         3    EACH OF THOSE PROVISIONS, ALTHOUGH I WAS FAMILIAR WITH THEM

         4    FROM CONVERSATIONS OVER THE YEARS WITH OUR CHIEF COUNSEL.

         5    Q.   WELL, IF YOU GO TO PAGE 2 -- FIRST OF ALL, WHEN YOU FILED

         6    THIS AFFIDAVIT, YOU KNEW THAT YOU WERE FILING IT UNDER OATH,

         7    DID YOU NOT?

         8    A.   YES.

         9    Q.   AND YOU ALSO STATED IN THIS AFFIDAVIT ON PAGE 1 -- ON THE

        10    SECOND SENTENCE OF PAGE 1, YOU STATED, QUOTE:

        11                   "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE

        12               FACTS SET FORTH IN THIS DECLARATION UNLESS

        13               OTHERWISE INDICATED."

        14               YOU STATED THAT, DID YOU NOT?

        15    A.   YES, I DID.

        16    Q.   IF YOU WILL GO TO PAGE 2 UNDER PARAGRAPH 3, PARAGRAPH 3 IN

        17    THE FIRST SENTENCE STATES, QUOTE:

        18                   "ONLY HEARST HAS THE ABILITY TO BUY THE 

        19               CHRONICLE WITHOUT ASSUMING THE CHRONICLE'S

        20               OBLIGATIONS UNDER THE JOA TO SUBSIDIZE THE

        21               EXAMINER."

        22               DO YOU SEE THAT?

        23    A.   I DO.

        24    Q.   IS THERE A STATEMENT OR ANY REFERENCE WHATSOEVER IN THE

        25    JOA THAT THE CHRONICLE HAS AN OBLIGATION TO SUBSIDIZE THE



                                                                          214
                                  SIAS - DIRECT / ALIOTO


         1    EXAMINER?

         2    A.   NOT TO MY KNOWLEDGE.

         3    Q.   SO WHEN YOU STATED THIS WITH REGARD -- WHEN YOU STATED

         4    THIS IN YOUR AFFIDAVIT, IT WASN'T TRUE, WAS IT?

         5    A.   MR. ALIOTO--

         6    Q.   SIR, IT WASN'T TRUE, WAS IT?

         7    A.   I WOULD SAY THAT --

         8    Q.   IT WASN'T TRUE, WAS IT, SIR?

         9    A.   I AM NOT GOING TO ANSWER THAT UNTIL I CAN .
. .

        10               THE COURT:  MR. SIAS, THE QUESTION IS PENDING. 

        11    PLEASE ANSWER.


        12               THE WITNESS:  THE WORD "SUBSIDIZE" IS --

        13               MR. ALIOTO:  I MOVE TO STRIKE, YOUR HONOR, AND I

        14    REQUEST A MOTION TO --

        15               THE COURT:  LET'S HEAR THE ANSWER.

        16               THE WITNESS:  THE WORD "SUBSIDIZED" IS NOT IN THE

        17    JOA, THE TERMS OF THE -- TO MY KNOWLEDGE.

        18               THE COURT:  I THINK THE QUESTION, MR. SIAS, IS

        19    WHETHER OR NOT THE STATEMENT IN THE FIRST SENTENCE OF

        20    PARAGRAPH 3 IS TRUE OR NOT TRUE.

        21               THE WITNESS:  I GUESS IT'S NOT TRUE.

        22    BY MR. ALIOTO:


        23    Q.   NOW, WITH REGARD TO THE JOA ITSELF AND YOUR UNDERSTANDING,

        24    IN 1999 STATE FOR US WHAT THE REVENUES WERE COMING INTO THE SAN

        25    FRANCISCO NEWSPAPER AGENCY FROM BOTH THE CHRONICLE AND THE



                                                                          215
                                  SIAS - DIRECT / ALIOTO


         1    EXAMINER.

         2    A.   WOULD YOU PLEASE REPEAT THE QUESTION?

         3    Q.   WHAT WERE THE -- ALL RIGHT.  LET ME START IT OVER.

         4               YOU UNDERSTAND UNDER THE JOA THAT THE INCOME COMING

         5    FROM THE CHRONICLE AND THE EXAMINER GOES INTO THE SAN FRANCISCO

         6    NEWSPAPER AGENCY?

         7    A.   YES.

         8    Q.   AND THAT REVENUE COMES FROM ADVERTISING AND IT COMES FROM

         9    CIRCULATION; IS THAT RIGHT?

        10    A.   THAT IS CORRECT.

        11    Q.   AND IN 1999, APPROXIMATELY HOW MUCH WAS THAT?

        12    A.   THE COMBINED CIRCULATION AND ADVERTISING REVENUE --

        13    Q.   OF BOTH PAPERS COMING INTO THE SAN FRANCISCO NEWSPAPER

        14    AGENCY, HOW MUCH WAS THAT?

        15    A.   IT WAS APPROXIMATELY $444 MILLION.

        16               MR. ALIOTO:  OKAY.  MAY I USE THE EASEL, YOUR HONOR?

        17               THE COURT:  VERY WELL.

        18    BY MR. ALIOTO:


        19    Q.   OKAY.  SO APPROXIMATELY THIS WOULD -- WE ARE JUST GOING TO

        20    USE THIS.  THIS WAS IN 19 --

        21    A.   '99.

        22    Q.   1999.  SO I AM GOING TO PUT ON THE LEFT-HAND SIDE OF THE

        23    EASEL -- NEXT TO WHERE WE HAVE "SAN FRANCISCO NEWSPAPER

        24    AGENCY," I WILL PUT '99 AND THEN IT WAS APPROXIMATELY 400 AND

        25    HOW MUCH?



                                                                          216
                                  SIAS - DIRECT / ALIOTO


         1    A.   400 --

         2    Q.   APPROXIMATELY.

         3    A.   $44 MILLION.

         4    Q.   444.  I WON'T PUT THE "MILLION." 444.

         5               OKAY.  NOW, OF THE 444, HOW MUCH OF THAT MONEY WAS

         6    ATTRIBUTABLE TO REVENUE COMING IN FROM THE SAN FRANCISCO

         7    EXAMINER?

         8    A.   I DO NOT KNOW.

         9    Q.   HOW MUCH OF THIS MONEY THAT CAME IN OF THE 444 -- HOW MUCH

        10    OF IT WAS REVENUE THAT CAME IN FROM ADVERTISING AND CIRCULATION

        11    FROM THE SAN FRANCISCO CHRONICLE?

        12    A.   I DO NOT KNOW.

        13    Q.   WHAT WAS THE APPROXIMATE COST THAT WAS DEDUCTED BY THE SAN

        14    FRANCISCO NEWSPAPER AGENCY PRIOR TO GETTING THE NET EXCESS

        15    FIGURE, DO YOU KNOW, APPROXIMATELY?

        16    A.   YES, I DO.  IT WAS APPROXIMATELY $300 MILLION.

        17    Q.   OKAY.  LET'S PUT THAT.  MINUS $300 MILLION.


        18               HOW MUCH OF THE $300 MILLION IN EXPENSES OF THE SAN

        19    FRANCISCO NEWSPAPER AGENCY WAS ATTRIBUTABLE TO THE SAN

        20    FRANCISCO CHRONICLE?

        21    A.   I CANNOT SAY.  THAT CALCULATION WAS NOT DONE.

        22    Q.   HOW MUCH OF THE 300 MILLION IN EXPENSES WAS ATTRIBUTABLE

        23    TO THE SAN FRANCISCO EXAMINER?

        24    A.   THOSE CALCULATIONS HAVE NOT BEEN PERFORMED.  I DO NOT

        25    KNOW.



                                                                          217
                                  SIAS - DIRECT / ALIOTO


         1    Q.   HAVE YOU EVER KNOWN THEM?

         2    A.   THEY'RE NOT IN THE FORM OF THE QUESTION YOU ARE ASKING.

         3    Q.   ALL RIGHT.  NOW, IF WE DEDUCT THIS, THIS LEAVES

         4    $144 MILLION.

         5               NOW, THEN, THIS $144 MILLION WOULD BE CHARACTERIZED

         6    AS NET EXCESSIVE, IS THAT -- NET EXCESS.  IS THAT RIGHT?

         7    A.   YOU ARE CORRECT.  I AM -- THE EXPENSES -- THE NET EXCESS

         8    WAS 57 MILLION.  I WAS LOW IN THE EXPENSES.  THE NET EXCESS

         9    LAST YEAR WAS APPROXIMATELY $115 MILLION.

        10    Q.   115.

        11    A.   YES.

        12    Q.   OKAY.  SO --

        13    A.   SO I AM LOW -- THE REVENUE FIGURE IS CORRECT.  I WAS LOW

        14    IN THE EXPENSES.

        15    Q.   SO THE EXPENSES MAY HAVE BEEN APPROXIMATELY
$330 MILLION?

        16    A.   YES, SIR.  YES, SIR.

        17    Q.   SO THAT LEFT A NET EXCESS OF $114 MILLION?

        18    A.   ABOUT THAT, BETWEEN 114 AND 115.

        19    Q.   OKAY.  AND THEN THAT WAS DIVIDED 50/50 BETWEEN THE

        20    CHRONICLE AND THE EXAMINER?

        21    A.   YES.

        22    Q.   SO THAT THE CHRONICLE WOULD GET 57 AND THE EXAMINER WOULD

        23    GET 57, CORRECT?

        24    A.   YES.

        25    Q.   OKAY.  NOW, SINCE YOU -- IN THIS INSTANCE.



                                                                          218
                                  SIAS - DIRECT / ALIOTO


         1               AND THEN AFTER YOU GOT THE 57, EACH OF YOU GOT THE

         2    57, THEN YOU WOULD TAKE OUT YOUR EDITORIAL EXPENSES, CORRECT?

         3    A.   EDITORIAL AND -- EDITORIAL AND PROMOTION EXPENSES.

         4    Q.   OKAY.  AND THEN THAT WOULD LEAVE YOU WITH A PROFIT OR AT

         5    LEAST A CASH FLOW FIGURE?

         6    A.   YES, SIR.

         7    Q.   AND WHAT WAS IT IN 1999?

         8    A.   THE CASH FLOW WAS APPROXIMATELY $18 MILLION.

         9    Q.   OKAY.  ALL RIGHT.  SO YOUR EXPENSES WERE ABOUT 40 -- ABOUT

        10    $40 MILLION IN EDITORIAL?

        11    A.   EDITORIAL, A LITTLE LESS THAN THAT, 38 -- EDITORIAL AND

        12    PROMOTION EXPENSES.

        13    Q.   AND PROMOTION, ABOUT 38, SAY?

        14    A.   OR 38 AND A HALF.

        15    Q.   ALL RIGHT.  SOMETHING LIKE THAT.  OKAY.

        16               THE COURT:  IS THE $18 MILLION BEFORE DEPRECIATION,

        17    TAXES, INTEREST?

        18               THE WITNESS:  YES, SIR, IT IS, AND I CAN GIVE YOU

        19    THE FREE CASH FLOW AND THE OPERATING EARNINGS IF MR. ALIOTO

        20    WANTS IT.

        21               THE COURT:  OKAY.

        22    BY MR. ALIOTO:


        23    Q.   OKAY NOW --

        24               THE COURT:  SO THE 18 MILLION WOULD BE THE EBITDA

        25    FIGURE?



                                                                          219
                                  SIAS - DIRECT / ALIOTO


         1               THE WITNESS:  YES, SIR.

         2    BY MR. ALIOTO:


         3    Q.   DO YOU KNOW WHAT THE EDITORIAL COSTS OF THE EXAMINER ARE?

         4    A.   SINCE I HAVE JUST BEEN EXPOSED AS A PERJURER, I AM GOING

         5    TO BE VERY TECHNICAL ON MY ANSWER.  AND BECAUSE I WAS IN THE

         6    COURTROOM YESTERDAY, I HEARD WHAT THEY WERE.  OTHER THAN THAT,

         7    I WOULD NOT HAVE ANY REASON TO KNOW WITH ANY PRECISION WHAT THE

         8    EXAMINER'S EDITORIAL COSTS ARE.

         9               THE COURT:  I DON'T THINK YOU MEANT THAT ANSWER

        10    LITERALLY, DID YOU?

        11               THE WITNESS:  WELL . . .

        12               THE COURT:  THE CHARACTERIZATION.

        13               THE WITNESS:  THANK YOU, SIR.

        14               THE COURT:  ALL RIGHT.

        15    BY MR. ALIOTO:


        16    Q.   ALL RIGHT.  NOW, SINCE YOU DO NOT KNOW HOW MUCH OF THE

        17    $444 MILLION IN THE REVENUE THAT GOES INTO THE SAN FRANCISCO

        18    NEWSPAPER AGENCY IS ATTRIBUTABLE TO THE SAN FRANCISCO EXAMINER

        19    AND SINCE YOU DO NOT KNOW HOW MUCH OF THE $330 MILLION IN

        20    EXPENSES ARE ATTRIBUTABLE TO THE EXAMINER, THEN YOU DON'T KNOW

        21    WHETHER THE EXAMINER WAS MAKING MONEY OR NOT, DO YOU, ON ITS

        22    OWN?

        23    A.   THAT IS CORRECT.

        24    Q.   NONETHELESS, IN YOUR AFFIDAVIT YOU REPRESENTED TO THIS

        25    COURT, DID YOU NOT, THAT IF IN FACT THE COURT WERE TO GRANT THE



                                                                          220
                                  SIAS - DIRECT / ALIOTO


         1    INJUNCTION YOU STATE AT PAGE 1, BEGINNING ON PARAGRAPH 2 -- THE

         2    LAST SENTENCE OF THAT PARAGRAPH, AND IT BEGINS AND IT STATES,

         3    QUOTE, "THE EFFECT OF AN INJUNCTION" -- DO YOU SEE THAT?

         4    A.   YES, SIR.

         5    Q.   QUOTE:  


         6                   "THE EFFECT OF AN INJUNCTION WOULD BE TO

         7               REQUIRE CPC TO CONTINUE TO SUBSIDIZE THE NEWS

         8               AND EDITORIAL OUTPUT OF THE EXAMINER FOR THE

         9               TERM OF THE INJUNCTION."

        10               DO YOU SEE THAT?

        11    A.   YES, SIR.

        12    Q.   AND WHEN YOU SAID "SUBSIDIZE THE NEWS AND EDITORIAL

        13    OUTPUT," YOU MEANT THAT YOU HAD TO TAKE -- THAT YOU WERE

        14    SUPPORTING THEM; IS THAT RIGHT?  THAT'S WHAT YOU MEANT, ISN'T

        15    IT?

        16    A.   I MEANT WHAT THIS SAYS.

        17    Q.   ISN'T THAT WHAT YOU MEANT, THAT YOU WERE -- THAT YOU WERE

        18    SUPPORTING THE EXAMINER?

        19    A.   IT'S VERY CLEAR WHAT IT SAYS.  WE BELIEVE THAT THE

        20    CHRONICLE, BY VIRTUE OF ITS SIZE, IS SUBSIDIZING THE EXAMINER.

        21    Q.   YOU DIDN'T SAY THAT IN YOUR AFFIDAVIT, DID YOU?

        22               AS A MATTER OF FACT, YOU SAID IN YOUR AFFIDAVIT,

        23    QUOTE:

        24                   "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE

        25               FACTS SET FORTH IN THIS DECLARATION UNLESS



                                                                          221
                                  SIAS - DIRECT / ALIOTO


         1               OTHERWISE INDICATED."

         2               AND IT ISN'T OTHERWISE INDICATED IN THAT SENTENCE

         3    THAT I JUST READ, IS IT?

         4               MR. ROSCH:  I OBJECT, YOUR HONOR.  IT SUGGESTS THAT

         5    IT'S INCONSISTENT, AND THERE IS NOTHING INCONSISTENT AT ALL

         6    WITH THE ANSWER.

         7               MR. ALIOTO:  I THINK THAT'S FOR THE TRIER OF FACT,

         8    YOUR HONOR.

         9               THE COURT:  THIS IS CROSS-EXAMINATION.  OBJECTION

        10    OVERRULED.

        11    BY MR. ALIOTO:


        12    Q.   YOU DIDN'T SAY OTHERWISE IN THAT SENTENCE, DID YOU, THAT

        13    THIS WAS YOUR BELIEF OR THIS IS WHAT YOU THINK ONLY BECAUSE

        14    THERE IS A LARGER CIRCULATION OF THE CHRONICLE.  YOU DIDN'T SAY

        15    THAT, DID YOU?


        16    A.   NO.  WE MADE THE DECLARATIVE STATEMENT.

        17    Q.   OKAY.  SO THAT YOU WANTED TO INDICATE TO THE COURT, DID

        18    YOU NOT, THAT IF THE COURT GRANTED THE INJUNCTION, THE

        19    TEMPORARY OR THE PRELIMINARY INJUNCTION, THAT DURING THAT TIME

        20    PERIOD YOU WOULD BE SUPPORTING THE EXAMINER.  THAT'S WHAT YOU

        21    WANTED THE COURT TO BELIEVE; ISN'T THAT TRUE?

        22    A.   YES.

        23    Q.   BUT, IN FACT, YOU KNEW THAT THAT WASN'T TRUE BECAUSE YOU

        24    KNEW THAT YOU DIDN'T KNOW WHETHER OR NOT YOU WERE SUBSIDIZING

        25    THEM OR NOT; ISN'T THAT TRUE?



                                                                          222
                                  SIAS - DIRECT / ALIOTO


         1    A.   WE . . .

         2    Q.   ISN'T THAT TRUE?

         3               MR. ROSCH:  YOUR HONOR, I THINK THE WITNESS IS

         4    ENTITLED TO EXPLAIN AN ANSWER.  HE DOESN'T HAVE TO JUST SAY

         5    "YES" OR "NO."

         6               MR. ALIOTO:  HE HAS TO GIVE AN ANSWER, YOUR HONOR. 

         7    I HAVE NO OBJECTION TO AN EXPLANATION AFTER.

         8               THE COURT:  YOU HAVE TO GIVE AN ANSWER, MR. ROSCH.

         9               MAY WE HAVE THE QUESTION REREAD, PLEASE, YOUR HONOR?

        10               THE WITNESS:  ANY RATIONAL --

        11               MR. ALIOTO:  EXCUSE ME, SIR.

        12               THE WITNESS:  I ONLY HAVE TO GIVE AN ANSWER "YES" OR

        13    "NO"?

        14               MR. ALIOTO:  WE ARE GOING TO READ THE QUESTION TO

        15    YOU.  I WOULD LIKE YOU TO ANSWER THE QUESTION TO YOU AFTER.

        16               MR. ROSCH:  YOUR HONOR, DO YOU WANT THE WITNESS TO

        17    SIMPLY ANSWER "YES" OR "NO" WITHOUT EXPLAINING?

        18               THE COURT:  LET'S HAVE THE QUESTION PUT TO THE

        19    WITNESS.

        20               LET ME ALSO HAVE A MOMENT WITH THE REPORTER.

        21               (RECORD READ AS FOLLOWS:  "BUT, IN FACT, YOU

        22               KNEW THAT THAT WASN'T TRUE BECAUSE YOU KNEW THAT

        23               YOU DIDN'T KNOW WHETHER OR NOT YOU WERE

        24               SUBSIDIZING THEM OR NOT; ISN'T THAT TRUE?")

        25               THE WITNESS:  THE TERM "NO" --



                                                                          223
                                  SIAS - DIRECT / ALIOTO


         1    BY MR. ALIOTO:


         2    Q.   CAN YOU ANSWER THE QUESTION?

         3               THE COURT:  WELL, LET HIM ANSWER THE QUESTION,

         4    MR. ALIOTO.

         5               THE WITNESS:  COMMON SENSE LOGIC ON THESE TWO

         6    NEWSPAPERS AND THEIR RELATIVE SIZE WHEN THE ADVERTISING CAME

         7    IN -- AND CIRCULATION REVENUE CAUSES US TO SAY -- INFER THAT

         8    THE EXAMINER IS BEING SUBSIDIZED BY THE CHRONICLE.  BUT I GUESS

         9    YOU CAN SAY I DON'T KNOW THAT FROM A COST ACCOUNTING STUDY OF

        10    BREAKDOWN OF THE REVENUE SOURCES.

        11               THE COURT:  YOUR ANSWER IS THAT YOU KNOW THIS BY

        12    VIRTUE OF YOUR COMMON SENSE AND YOUR EXPERIENCE IN THE

        13    NEWSPAPER BUSINESS AND YOUR FAMILIARITY WITH THE MARKET EVEN

        14    THOUGH YOU DID NOT HAVE THE FIGURES DIRECTLY BEFORE YOU?

        15               THE WITNESS:  YES, SIR.

        16               THE COURT:  IS THAT FAIR?

        17               THE WITNESS:  YES, SIR.

        18               THE COURT:  ALL RIGHT.

        19    BY MR. ALIOTO:


        20    Q.   SO, IN OTHER WORDS, YOU ARE SAYING THAT THIS WAS AN

        21    ASSUMPTION THAT YOU WERE MAKING; IS THAT IT?

        22               MR. ROSCH:  OBJECTION, YOUR HONOR.  THAT MISSTATES

        23    HIS JUST PRIOR TESTIMONY.

        24               THE COURT:  COUNSEL IS ENTITLED TO FOLLOW UP. 

        25    OBJECTION OVERRULED.  



                                                                          224
                                  SIAS - DIRECT / ALIOTO


         1               THE WITNESS:  I AM EXPLAINING MY REASON FOR

         2    HESITATING TO ANSWER "YES" OR "NO."  I AM GIVING SOME

         3    BACKGROUND ON IT.  

         4               AND, AGAIN, WITH THE LOGIC AND EXPERIENCE AND

         5    INFERENCE BASED UPON THE SIZE OF THE TWO NEWSPAPERS AND THE

         6    RATE STRUCTURE, ONE CAN MAKE A VERY LOGICAL INFERENCE THAT THE

         7    EXAMINER IS BEING SUBSIDIZED.

         8               DO I KNOW THAT AS A RESULT OF A COST ACCOUNTING

         9    BREAKDOWN OF THE TWO NEWSPAPERS' COST IN REVENUE?  AND THE

        10    ANSWER IS, NO, WE HAVE NOT HAD SUCH A BREAKDOWN OR ANALYSIS.

        11    Q.   NOW, THE SECOND SENTENCE OF PARAGRAPH 1 STATED, QUOTE --

        12    YOU STATED UNDER OATH, QUOTE:

        13                   "I HAVE FIRSTHAND PERSONAL KNOWLEDGE OF THE

        14               FACTS SET FORTH IN THIS DECLARATION UNLESS

        15               OTHERWISE INDICATED." 

        16               YOU DID NOT IN THIS AFFIDAVIT OTHERWISE INDICATE,

        17    DID YOU, THAT YOUR STATEMENTS ABOUT SUBSIDIZING THE EXAMINER

        18    WERE A MATTER OF YOUR LOGICAL INFERENCES FROM OTHER FACTS OTHER

        19    THAN YOUR PERSONAL KNOWLEDGE, DID YOU?  YOU DIDN'T SAY THAT,

        20    DID YOU?

        21    A.   NO, I DID NOT.

        22    Q.   NOW, AS A MATTER OF FACT, YOU KNOW AND ARE AWARE, AREN'T

        23    YOU, THAT A STUDY WAS DONE ON YOUR BEHALF WHICH SHOWED -- WHICH

        24    SHOWED THAT THE HEARST CORPORATION WITH AN INDEPENDENT

        25    NEWSPAPER WITH LESS THAN ONE QUARTER OF THE REVENUES OF THE SAN



                                                                          225
                                  SIAS - DIRECT / ALIOTO


         1    FRANCISCO CHRONICLE COULD MAKE A PROFIT.  CORRECT?


         2    A.   WELL, WILL YOU PLEASE LET ME SEE THE STUDY?  WE HAVE HAD A

         3    LOT OF STUDIES DONE, SOME OF WHICH WERE DONE INTERNALLY, SOME

         4    OF WHICH WERE DONE EXTERNALLY.  AND THEY ALL WERE NOT AGREED TO

         5    OR THEY WERE ALL JUST THAT, STUDIES.  SO IF I MAY SEE THE

         6    EXHIBIT, I CAN GIVE YOU A PRECISE ANSWER AS TO WHETHER I KNOW

         7    IT.

         8    Q.   DO YOU KNOW MR. JAFFE?  HAVE YOU EVER HEARD OF MR. JAFFE?

         9    A.   YES, I HAVE.  MR. MARTIN JAFFE IS CURRENTLY THE CHIEF

        10    FINANCIAL OFFICER.  HE WAS OF THE CHRONICLE CORPORATION AND HE

        11    WAS HEAD OF ACCOUNTING AND LONG-TERM PLANNING ANALYSIS.  AND HE

        12    DID A NUMBER OF MODELS FOR US OVER THE YEARS ON OUR BUSINESSES.

        13               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)

        14   

        15   

        16   

        17   

        18   

        19   

        20   

        21   

        22   

        23   

        24   

        25   



                                                                          226
                                  SIAS - DIRECT / ALIOTO


         1    Q.   AND ONE OF THE CALCULATIONS THAT MR. JAFFE MADE WAS THAT

         2    HEARST COULD ACHIEVE A HIGH SUCCESS IN THE YEAR 2006 AFTER THE

         3    JOA AND INDEPENDENT WITH LESS THAN ONE QUARTER THE REVENUES OF

         4    THE SAN FRANCISCO CHRONICLE; CORRECT?

         5    A.   I'M NOT -- NO, I DON'T THINK HE SAID A HIGH DEGREE.  THERE

         6    WAS SOME -- HE HAD A MODEL WITH DIFFERENT LEVELS OF SUCCESS OR

         7    NONSUCCESS BY HEARST.  HE HAD A NUMBER AT THE TIME.  BUT THE

         8    MODEL TO WHICH YOU REFER IS BASED UPON ASSUMPTIONS WHICH ARE SO

         9    AT ODDS WITH THE SITUATION THAT -- IN THE REAL WORLD THAT WE

        10    DID NOT GIVE IT ANY GREAT CREDENCE.

        11    Q.   MR. JAFFE AGAIN IS THE CHIEF FINANCIAL OFFICER OF --

        12    A.   HE IS NOW.

        13    Q.   AND HE DID CERTAIN CALCULATIONS FOR YOU; DIDN'T HE?

        14    A.   HE DID A LOT OF THEM.

        15    Q.   ONE OF THE CALCULATIONS HE DID WAS WHETHER OR NOT THE

        16    HEARST WOULD BE PROFITABLE, THE HEARST CORPORATION PAPER, THE

        17    EXAMINER, WOULD BE PROFITABLE AFTER THE JOA?  HE MADE THAT

        18    STUDY; DIDN'T HE?


        19    A.   HE MADE A NUMBER OF STUDIES INCLUDING THAT ONE,

        20    MR. ALIOTO.  HE ALSO MADE A NUMBER IN WHICH IT SHOWED THE

        21    HEARST CORPORATION WOULD NOT BE SUCCESSFUL.

        22    Q.   AND IN --

        23    A.   BUT WE DO SCENARIOS FOR PLANNING PURPOSES ON THE EXTREMES.

        24    Q.   AND IN ONE OF THOSE STUDIES HE CALCULATED, DID HE NOT,

        25    THAT THE EXAMINER COULD, IN FACT, BE QUITE PROFITABLE EVEN WITH



                                                                          227
                                  SIAS - DIRECT / ALIOTO


         1    ONLY ONE FOURTH -- ONE QUARTER OF THE REVENUE OF THE CHRONICLE;

         2    CORRECT?  HE DID THAT; DIDN'T HE?

         3    A.   HE DID IT.  THE ASSUMPTIONS UNDER WHICH HE DID IT WERE

         4    NOT -- AGAIN, THEY WERE UNREALISTIC BASED UPON EXISTING

         5    INFORMATION AND PROBABLE OUTCOME.  THEY WERE VERY, VERY

         6    UNREALISTIC AND WE DID NOT GIVE GREAT CREDENCE TO THEM.

         7    Q.   AND ONE COULD CONFER -- ONE COULD INFER -- ISN'T IT

         8    CORRECT THAT ONE COULD INFER FROM THAT CALCULATION THAT, IN

         9    FACT, THE EXAMINER COULD BE PROFITABLE EVEN THOUGH IT ONLY HAD

        10    ONE QUARTER OF THE REVENUE OF THE CHRONICLE; CORRECT?

        11    A.   I DON'T KNOW WHO "ONE" IS.  THIS "ONE" (INDICATING) DIDN'T

        12    INFER THAT NOR DID MY ASSOCIATES AT THE CHRONICLE.

        13    Q.   YOU DID NOT INFER THAT FROM THE CALCULATION THAT WAS MADE?

        14    A.   ABSOLUTELY NOT.  AS I TOLD YOU, WE DO A NUMBER OF ANALYSES

        15    AND INCLUDING ONES ON THE EXTREMES; AND JUST WHAT WOULD BE THE

        16    CASE -- AND, FRANKLY, WHEN MARTIN DID THAT, MY AND SOME OTHER

        17    REACTIONS WAS THAT THIS WAS TOTALLY UNREALISTIC BASED ON THE

        18    ASSUMPTIONS HE USED.

        19    Q.   MAYBE YOU THINK IT MAY HAVE BEEN UNREALISTIC OR NOT, BUT

        20    THE QUESTION WAS, FROM HIS CALCULATION, DIDN'T YOU IN FACT

        21    INFER FROM HIS CALCULATION THAT, IN FACT, THE EXAMINER COULD BE

        22    A SUCCESS WITH ONE QUARTER OF THE REVENUE OF THE CHRONICLE?

        23    A.   I DID NOT.

        24    Q.   I'D LIKE TO -- YOUR DEPOSITION WAS TAKEN BY THE UNITED

        25    STATES GOVERNMENT IN THIS MATTER; WAS IT NOT?



                                                                          228
                                  SIAS - DIRECT / ALIOTO


         1    A.   IT WAS.

         2    Q.   AND THAT DEPOSITION WAS TAKEN ON DECEMBER 10, 1999?

         3    A.   YES, SIR.

         4    Q.   YOU WERE UNDER OATH AT THE TIME; WERE YOU NOT?

         5    A.   I WAS.

         6    Q.   I WOULD LIKE TO DIRECT YOUR ATTENTION, AND I WILL DIRECT

         7    YOUR ATTENTION AND THE ATTENTION OF YOUR COUNSEL BEGINNING ON

         8    PAGE 288.

         9               THE COURT:  DO YOU HAVE A COPY FOR THE COURT?

        10               MR. ALIOTO:  YOUR HONOR, I ONLY HAVE ONE COPY OF THE

        11    EXHIBIT.  I WILL PASS IT TO THE COURT.

        12               MR. SHULMAN:  GAYLE HAS IT.

        13               MR. ALIOTO:  DO YOU HAVE ANOTHER ONE OF THE

        14    GOVERNMENT'S?  NO, THIS IS THE GOVERNMENT.  

        15               PAGE 288, AND I WILL GO TO PAGE 289, LINE 5, AND I

        16    WILL READ ANYTHING ELSE THAT COUNSEL WOULD WANT ME TO READ.  

        17               MAY I APPROACH --

        18               MR. ROSCH:  WOULD YOU PLEASE READ THROUGH LINE 11,

        19    PLEASE?

        20               MR. ALIOTO:  I WILL.

        21               MAY I APPROACH THE WITNESS?

        22               THE COURT:  VERY WELL.  YOU'RE READING FROM THE TOP

        23    OF 288?

        24               MR. ALIOTO:  288 BEGINNING LINE 20, YOUR HONOR.

        25               THE COURT:  THANK YOU.



                                                                          229
                                  SIAS - DIRECT / ALIOTO


         1    BY MR. ALIOTO:


         2    Q.   THIS IS PAGE 288, LINE 20.  AT THE TIME YOU GAVE THIS

         3    DEPOSITION, YOU WERE UNDER OATH; WERE YOU NOT, SIR?  WERE YOU

         4    UNDER OATH AT THE TIME, SIR?

         5    A.   YES, I WAS.

         6    Q.                     "Q.  OKAY.  THEREFORE MR. JAFFE 

         7               CALCULATED THAT HEARST COULD ACHIEVE HIGH

         8               SUCCESS IN THE YEAR 2006 WITH LESS THAN ONE

         9               QUARTER THE REVENUES OF THE SAN FRANCISCO

        10               CHRONICLE; IS THAT RIGHT?

        11                   "A.  HE CALCULATED WITH," QUOTE, "'HIGH

        12               SUCCESS' THAT THEY WOULD GENERATE 12 MILLION

        13               EBITDA.

        14                   "Q.  AND THEY WOULD NEED LESS THAN ONE

        15               QUARTER OF THE REVENUE OF THE SAN FRANCISCO

        16               CHRONICLE TO ACHIEVE THAT HIGH SUCCESS; ISN'T

        17               THAT RIGHT?

        18                   "A.  THAT'S WHAT ONE COULD INFER FROM THIS

        19               CALCULATION.

        20                   "Q.  DID YOU QUESTION THOSE CALCULATIONS

        21               THAT HE CAME UP WITH?

        22                   "A.  I DID NOT SPEND A GREAT DEAL OF TIME

        23               DISCUSSING THESE FIGURES BECAUSE OF OUR BELIEF

        24               THAT IT WAS SO IMPROBABLE THAT HEARST WOULD END

        25               UP PUBLISHING IN 2006 A MORNING EXAMINER."



                                                                          230
                                  SIAS - DIRECT / ALIOTO


         1               NOW, WHEN YOU MADE THE STATEMENT AT LINE 4, QUOTE,

         2    "THAT'S WHAT ONE COULD INFER FROM THIS CALCULATION," DID YOU

         3    MEAN SOMEONE OTHER THAN YOURSELF?

         4    A.   I'M NOT SURE WHO I MEANT.

         5    Q.   IT COULD HAVE BEEN YOU; RIGHT?

         6    A.   IT COULD HAVE BEEN ME.

         7    Q.   SO YOU WERE ONE PERSON WHO COULD, IN FACT, INFER FROM THIS

         8    THAT THE EXAMINER COULD FUNCTION AT ONE -- PROFITABLY AT ONE

         9    QUARTER OF THE REVENUE OF THE CHRONICLE; CORRECT?

        10    A.   I SAID COULD, ONE COULD, NOT ONE DID INFER THAT.

        11    Q.   NOW, WHAT YOU JUST TOLD THE COURT IN EXPLANATION OF YOUR

        12    AFFIDAVIT WAS THAT IT WAS A LOGICAL INFERENCE THAT BECAUSE THE

        13    CHRONICLE HAD FOUR TIMES THE AMOUNT OF THE REVENUE, THAT THAT

        14    MEANT THAT THE EXAMINER HAD TO BE SUBSIDIZED; ISN'T THAT RIGHT? 

        15    ISN'T THAT WHAT YOU JUST SAID?

        16    A.   I THINK SO.

        17    Q.   OKAY.  AND THAT WAS CONTRARY TO WHAT YOU KNEW THAT

        18    MR. JAFFE HAD DONE AND THAT YOU INFERRED WOULD BE CORRECT;

        19    ISN'T THAT RIGHT?

        20    A.   I'M NOT SURE I CAN -- DO YOU WANT TO GO THROUGH THAT

        21    AGAIN?  I'M SORRY, BUT YOU --

        22               THE COURT:  ALL RIGHT.

        23    BY MR. ALIOTO:


        24    Q.   NEVER MIND.  I'LL JUST ASK YOU ONE MORE QUESTION AND THEN

        25    I'LL GET OFF YOUR AFFIDAVIT.



                                                                          231
                                  SIAS - DIRECT / ALIOTO


         1               THIS STATEMENT, THIS STATEMENT THAT, QUOTE, "THE

         2    EFFECT OF AN INJUNCTION WOULD BE TO REQUIRE CPC TO CONTINUE TO

         3    SUBSIDIZE THE NEWS AND EDITORIAL OUTPUT OF THE EXAMINER FOR THE

         4    TERM OF THE INJUNCTION," THAT STATEMENT IS SIMPLY NOT A TRUE

         5    STATEMENT; ISN'T THAT CORRECT?  THAT'S A FALSE STATEMENT; ISN'T

         6    IT?

         7    A.   I DON'T BELIEVE IT IS.  THE SUBSIDIZE -- THE TERM

         8    "SUBSIDY" IS AN ADJECTIVE AND -- WELL, NO, IT'S A NOUN.

         9    Q.   IT'S A VERB ACTUALLY; ISN'T IT?

        10    A.   OKAY, THANK YOU.

        11                              (LAUGHTER)

        12    A.   "SUBSIDIZE" IS A VERB.  "SUBSIDY" I THINK WOULD BE A NOUN,


        13    BUT THAT'S WHAT --

        14    Q.   ALL I'M SAYING, SIR, IS, THE POINT IS THAT YOU WERE TRYING

        15    TO INDICATE TO THE COURT IN YOUR SWORN AFFIDAVIT, LISTING

        16    YOURSELF AS THE CHIEF EXECUTIVE OFFICER AND AS THE PRESIDENT OF

        17    THE CHRONICLE CORPORATION, YOU WERE TRYING TO INDICATE THAT THE

        18    EXAMINER WAS LOSING MONEY AND YOU WERE SUPPORTING THE EXAMINER

        19    AND YOU DIDN'T WANT TO DO IT ANY MORE AND THIS INJUNCTION WOULD

        20    MAKE YOU CONTINUE TO DO IT?  THAT'S WHAT YOU WERE TRYING TO

        21    TELL THE COURT; RIGHT?

        22    A.   I BELIEVE THAT'S CORRECT.

        23    Q.   AND YOU KNOW THAT THAT'S NOT TRUE BECAUSE YOU HAVEN'T GOT

        24    THE SLIGHTEST IDEA WHETHER THAT'S TRUE OR NOT; CORRECT?

        25    A.   NO, SIR.  I DO NOT KNOW THAT THAT IS NOT TRUE, BUT NEITHER



                                                                          232
                                  SIAS - DIRECT / ALIOTO


         1    CAN I GIVE YOU A COST ACCOUNTING BREAKDOWN OF THE AGENCY'S

         2    OPERATION BETWEEN THE CHRONICLE AND THE EXAMINER THAT WOULD

         3    CAUSE ME TO BE ABLE TO SAY WITH ASSURETY THAT THAT IS, INDEED,

         4    CORRECT OR BASED UPON A CAREFUL COST ACCOUNTING ANALYSIS.

         5               MR. ALIOTO:  EXCUSE ME, YOUR HONOR.

         6                    
   (PAUSE IN PROCEEDINGS.)

         7               MR. ALIOTO:  MAY I HAVE MR. SIAS' DEPOSITION,

         8    PLEASE.

         9    Q.   YOUR DEPOSITION WAS TAKEN IN THIS CASE; WAS IT NOT?

        10    A.   YES, SIR.

        11    Q.   LET ME HAND YOU -- AND YOUR DEPOSITION WAS TAKEN ON

        12    APRIL 21, 2000; IS THAT RIGHT?

        13    A.   IT WAS TAKEN IN YOUR OFFICES AND IF THAT'S THE DATE THAT I

        14    WAS THERE, THEN IT'S CORRECT.  I'D HAVE TO GO BACK AND LOOK AT

        15    A CALENDAR.

        16    Q.   OKAY.

        17               MR. ALIOTO:  WE WOULD HAND THE ORIGINAL CONFIDENTIAL

        18    DEPOSITION TO THE COURT IN SEAL AND ASK THAT IT BE UNSEALED.

        19               AND IF I MAY HAND THE DEPOSITION TO THE WITNESS.

        20               THE COURT:  YOU MAY.

        21                        (PAUSE IN PROCEEDINGS.)

        22    BY MR. ALIOTO:


        23    Q.   NOW, IT IS CORRECT, IS IT NOT, SIR, THAT YOU CANNOT SAY

        24    WHETHER THE EXAMINER IS A FAILING NEWSPAPER OR NOT?

        25               MR. HALLING:  YOUR HONOR, I OBJECT TO THE QUESTION



                                                                          233
                                  SIAS - DIRECT / ALIOTO


         1    TO THE EXTENT IT'S TRYING TO ELICIT A LEGAL OPINION.

         2               THE COURT:  IS THAT YOUR OBJECTION, MR. ROSCH?

         3               MR. ROSCH:  I'LL JOIN IN IT TO THAT EXTENT, YOUR

         4    HONOR.

         5               THE COURT:  PERHAPS YOU CAN CLARIFY THE QUESTION,

         6    MR. ALIOTO.

         7    BY MR. ALIOTO:


         8    Q.   ISN'T IT CORRECT THAT YOU TESTIFIED THAT YOU CAN'T SAY

         9    WHETHER IT'S A FAILING NEWSPAPER OR NOT, THE EXAMINER?

        10               THE COURT:  THAT'S NOT MUCH OF A CLARIFICATION.

        11               MR. ALIOTO:  I'M TRYING TO USE THE EXACT WORDS OF

        12    HIS TESTIMONY, YOUR HONOR.

        13               MR. ROSCH:  THAT'S THE PROBLEM, YOUR HONOR.

        14               MR. ALIOTO:  THAT'S HIS OPINION, YOUR HONOR.  HE'S

        15    THE CHIEF EXECUTIVE OFFICER.  I THINK THE STATEMENT --

        16               MR. ROSCH:  HE'S ALSO NOT A LAWYER.

        17               THE COURT:  WHAT PAGE ARE YOU REFERRING TO?

        18               MR. ALIOTO:  PAGE 57, LINE 6, YOUR HONOR.

        19               MR. ROSCH:  WELL, YOUR HONOR, ACTUALLY THERE IS AN

        20    OBJECTION AS OF -- IN THE RECORD IN THAT RESPECT RIGHT THEN ON

        21    THE SAME GROUND.

        22               THE COURT:  THE OBJECTION WILL BE OVERRULED.  YOU

        23    MAY ANSWER.

        24    BY MR. ALIOTO:


        25    Q.   YOU TESTIFIED, DIDN'T YOU, THAT YOU COULDN'T SAY WHETHER



                                                                          234
                                  SIAS - DIRECT / ALIOTO


         1    THE EXAMINER IS A FAILING NEWSPAPER OR NOT; ISN'T THAT TRUE?

         2    A.   THAT'S CORRECT.  IN THIS TESTIMONY I SAID BECAUSE I DON'T

         3    KEEP THE HEARST BOOKS.

         4    Q.   YOU JUST DON'T KNOW; CORRECT?

         5    A.   I DO NOT KNOW.

         6    Q.   AND IT WOULD BE WRONG FOR YOU TO SUGGEST TO ANYBODY THAT

         7    YOU DID KNOW; WOULDN'T IT?

         8    A.   NO, THAT'S NOT -- I DON'T KNOW WHETHER IT'S WRONG.

         9    Q.   IT WOULD BE WRONG FOR YOU TO SWEAR UNDER OATH THAT YOU

        10    KNEW WHEN YOU DIDN'T; WOULDN'T IT?

        11    A.   WHAT IS IT I'M SWEARING UNDER OATH THAT I KNOW?

        12    Q.   I WANT TO DIRECT YOUR ATTENTION TO 1996.  AT THAT TIME YOU

        13    HAD DISCUSSIONS WITH MR. BENNACK; DID YOU NOT?

        14    A.   YES.

        15    Q.   AND AT THAT TIME YOU WERE HAVING DISCUSSIONS WITH

        16    MR. BENNACK, WHAT YOU WERE DISCUSSING WITH HIM IS UNDER WHAT

        17    CONDITIONS THE HEARST CORPORATION WANTED IN ORDER TO CLOSE DOWN

        18    THE EXAMINER; IS THAT RIGHT?

        19    A.   THAT WOULD BE CORRECT.

        20    Q.   AND YOU WENT AND VISITED WITH MR. BENNACK IN NEW YORK TO

        21    FIND OUT WHAT THE CONDITIONS WOULD BE FOR THEM TO CLOSE DOWN

        22    THE EXAMINER; IS THAT TRUE?

        23    A.   YES.

        24    Q.   AND ONE OF THE THINGS THAT YOU WANTED TO NEGOTIATE WITH

        25    THE EXAMINER
-- WITH THE HEARST CORPORATION IS THAT IF THE



                                                                          235
                                  SIAS - DIRECT / ALIOTO


         1    EXAMINER SIMPLY CLOSED DOWN, YOU WOULD NONETHELESS PAY THE

         2    HEARST CORPORATION, CONTINUE TO PAY THE HEARST CORPORATION

         3    THEIR 50-50 SHARE; IS THAT RIGHT?

         4    A.   I'M NOT SURE THAT'S RIGHT BECAUSE THERE WERE NEGOTIATIONS

         5    AND DISCUSSIONS REGARDING THE EXAMINER AND THE CHRONICLE THAT

         6    WENT ON OVER A PERIOD OF YEARS BEFORE I GOT THERE AND AFTER I

         7    GOT THERE.  SO I'M -- YOU'RE -- YOU'RE ASKING ME TO SAY IS IT

         8    RIGHT IN THAT PARTICULAR NEGOTIATION.

         9    Q.   ALL RIGHT.  FORGET THAT PARTICULAR NEGOTIATION.

        10    A.   BUT LET ME ADD ONE THING.

        11    Q.   ALL RIGHT.

        12    A.   IN THE TALK -- YOU MENTIONED CLOSING DOWN THE EXAMINER. 

        13    IN ANY OF THE TALKS THAT WERE EVER HELD WITH THE HEARST

        14    CORPORATION IN DISCUSSIONS OF RESOLUTION OF THE JOA WHICH WOULD

        15    ENTAIL THE EXAMINER EITHER CLOSING OR FIRST BEING OFFERED FOR

        16    SALE, THAT WAS ALWAYS A PREMISE THAT WAS PRESENT.

        17    Q.   WHAT WAS A PREMISE?

        18    A.   THAT THE EXAMINER WOULD BE OFFERED FOR SALE BEFORE IT

        19    WOULD BE CONSIDERED FOR CLOSING DOWN.

        20    Q.   DID YOU HAVE DISCUSSIONS WITH MR. BENNACK THAT IF HE

        21    CLOSED DOWN THE EXAMINER, YOU WOULD ENTER INTO A DEAL WITH HIM

        22    THAT WOULD GIVE A CERTAIN PERCENTAGE OF THE REVENUE TO MR. --

        23    TO THE HEARST CORPORATION, A CERTAIN PERCENTAGE UP TO THE -- UP

        24    TO THE DATE OF THE END OF THE JOA AND A DIFFERENT PERCENTAGE

        25    FROM THAT DATE IN PERPETUITY?



                                                                          236
                                  SIAS - DIRECT / ALIOTO


         1    A.   WE HAD DISCUSSIONS WITH A NUMBER OF SCENARIOS, AND THE ONE

         2    THAT YOU'RE REFERRING TO I'M NOT SURE WHETHER IT WAS IN '96 OR

         3    '97; BUT THERE WAS A RESPONSE FROM THE HEARST CORPORATION TO A

         4    PROPOSAL THE CHRONICLE HAD MADE, AND I BELIEVE IT WAS IN 1997,

         5    THAT THE EXAMINER BE CLOSED OR SOLD AND ALL TERMS OF THE JOA

         6    WOULD STAY IN FORCE THROUGH THE END OF THE CURRENT TERM,

         7    SEPTEMBER 12, 2005.

         8               AT THAT TIME THE CHRONICLE WOULD NEGOTIATE WITH

         9    HEARST ON THE VALUE OF HEARST'S REMAINING ASSETS IN THE

        10    NEWSPAPER AGENCY, AND THERE WAS NO PROPOSAL FROM THE CHRONICLE

        11    THAT HEARST GET AN ONGOING INTEREST IN THE CHRONICLE BEYOND

        12    2005.

        13               HEARST AT OUR REQUEST RESPONDED.  I BELIEVE

        14    MR. BENNACK SENT A LETTER IN APRIL OF 1998 WITH HIS TERMS AND

        15    CONDITIONS UNDER WHICH THEY WOULD CONSIDER DOING SUCH A THING;

        16    AND THAT INCLUDED A 27 AND A HALF PERCENT INTEREST IN THE

        17    CHRONICLE FROM SEPTEMBER 12TH, 2005, GOING FORWARD, AND I

        18    FORGET -- 50 YEARS OR INFINITY, WHICHEVER -- IF YOU PUT A

        19    TIMETABLE ON THE 50 YEARS, I GUESS IT WOULD MAKE A LOT OF

        20    LAWYERS WORK FIGURING OUT HOW YOU WERE GOING TO GET TO RANGE. 

        21    SO I FORGET WHETHER IT WAS 50 OR INFINITY, BUT IT WAS A

        22    LONG-TERM EXTENSION IN WHICH THE HEARST CORPORATION WOULD HAVE

        23    OBTAINED A CARRIED INTEREST IN THE CHRONICLE.

        24               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR?

        25               THE COURT:  BUT UNDER THAT SCENARIO, THE EXAMINER



                                                                          237
                                  SIAS - DIRECT / ALIOTO


         1    WOULD EITHER BE SOLD OR CLOSED; IS THAT CORRECT?

         2               THE WITNESS:  YES, SIR.  IT WOULD -- THAT IS

         3    CORRECT, FROM THE TIME THAT SUCH AN AGREEMENT MIGHT HAVE BEEN

         4    REACHED, AND THIS WAS -- I WONDER, YOUR HONOR, IF I MIGHT MAKE

         5    A COMMENT THAT MIGHT SHED A LITTLE -- WELL, MAYBE I'LL --

         6               THE COURT:  I THINK YOU HAVE A VERY ABLE LAWYER. 

         7    HE'LL BRING OUT ANY OF THE FACTS THAT HE THINKS ARE RELEVANT.

         8               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR?

         9               THE COURT:  YES, YOU MAY.

        10    BY MR. ALIOTO:


        11    Q.   LET ME SHOW YOU A DOCUMENT WHICH IS IN EVIDENCE AS

        12    EXHIBIT 115.  IT'S A DOCUMENT DATED APRIL 5, 1996.  IT IS FROM

        13    YOU TO MS. PATRICIA TOBIN.  THERE ARE COPIES TO MR. RON INGRAM

        14    AND ALAN NICHOLS.  ATTACHED TO IT IS A CONFIDENTIAL MEMORANDUM

        15    TO PATRICIA TOBIN ALSO FROM YOU, THREE PAGES.

        16               DID YOU, SIR, PREPARE THIS DOCUMENT AND CAUSE IT TO

        17    BE SENT ON OR ABOUT THE DATE INDICATED TO MS. TOBIN?

        18    A.   (WITNESS EXAMINES DOCUMENT.)  YES, I DID.

        19               THE COURT:  WHAT EXHIBIT NUMBER IS THIS, MR. ALIOTO?

        20               MR. ALIOTO:  PARDON ME?

        21               THE COURT:  I'M SORRY.  WHAT EXHIBIT NUMBER IS THIS?

        22               MR. ALIOTO:  115, YOUR HONOR.

        23               THE COURT:  THANK YOU.

        24    BY MR. ALIOTO:


        25    Q.   IDENTIFY FOR THE RECORD, PLEASE, WHO MS. PATRICIA TOBIN



                                                                          238
                                  SIAS - DIRECT / ALIOTO


         1    IS.

         2    A.   MS. PATRICIA TOBIN CURRENTLY IS A SHAREHOLDER OF THE

         3    CHRONICLE CORPORATION AND A DIRECTOR OF THE CHRONICLE

         4    CORPORATION AND WAS A DIRECTOR AT THE TIME OF THIS MEMORANDUM.

         5    Q.   OKAY.  YOU STATE --

         6    A.   SHE WAS ALSO A MEMBER OF A NEGOTIATING COMMITTEE THAT WE

         7    HAD OF DIRECTORS TO REVIEW OUR DISCUSSIONS WITH THE HEARST

         8    CORPORATION.

         9    Q.   YOU STATE, QUOTE:  

        10                   "ATTACHED IS A SUMMATION OF THE PRESENT

        11               CONDITION OF DISCUSSIONS WITH THE HEARST

        12               CORPORATION."

        13               THE NEXT PARAGRAPH YOU STATE:

        14                   "VIC GANZI SPOKE WITH RON INGRAM ON APRIL 2

        15               AND IS PRESUMABLY DRAFTING SOME DEFINITIVE

        16               HEARST POSITIONS ON THIS SUBJECT."

        17               NEXT PARAGRAPH:

        18                   "PER OUR PHONE DISCUSSION, KEEPING THIS OUT

        19               OF THE MEDIA AT THIS POINT IN TIME IS IN THE

        20               BEST INTEREST OF ALL PARTIES."

        21               FIRST OF ALL, MR. VIC GANZI, MR. VIC GANZI IS THE

        22    EXECUTIVE VICE PRESIDENT OR WAS AT THE TIME THE EXECUTIVE VICE

        23    PRESIDENT OF THE HEARST CORPORATION; IS THAT CORRECT?

        24    A.   YES, SIR.

        25    Q.   AND MR. RON INGRAM, MR. RON INGRAM WAS THE GENERAL COUNSEL



                                                                          239
                                  SIAS - DIRECT / ALIOTO


         1    OF THE CHRONICLE PUBLISHING COMPANY; IS THAT CORRECT?

         2    A.   YES, SIR.

         3    Q.   AND THIS WAS SUPPOSED TO REFLECT SOME OF THE DRAFTING BY

         4    THESE TWO GENTLEMEN; IS THAT CORRECT?

         5    A.   YES, SIR.

         6    Q.   AND WHEN YOU HAD REFERENCE TO KEEPING THIS OUT OF THE

         7    MEDIA AT THIS POINT, DID YOU MEAN KEEPING IT OUT OF THE

         8    CHRONICLE AND THE EXAMINER?

         9    A.   I HAD --

        10    Q.   DID YOU MEAN KEEPING IT OUT OF THE CHRONICLE AND THE

        11    EXAMINER?

        12    A.   I MEANT KEEPING IT OUT OF ALL THE MEDIA.

        13    Q.   INCLUDING THE CHRONICLE AND THE EXAMINER?

        14    A.   IT WOULD INCLUDE THE CHRONICLE AND THE EXAMINER.  YOU MAY

        15    RECALL THAT THE SAN JOSE MERCURY NEWS WAS RUNNING AT THIS TIME

        16    STORIES SAYING THAT A DEAL WAS IMMINENT AND IT WAS VERY

        17    DISRUPTIVE TO EMPLOYEES, AND WHAT HAVE YOU, AND A DEAL WASN'T

        18    IMMINENT.

        19               THE COURT:  YOU MEAN YOU CAN'T ALWAYS BELIEVE WHAT

        20    YOU READ IN THE NEWSPAPERS?

        21                              (LAUGHTER)

        22               THE WITNESS:  WELL....

        23                              (LAUGHTER)

        24               THE COURT:  ALL RIGHT.

        25   



                                                                          240
                                  SIAS - DIRECT / ALIOTO


         1    BY MR. ALIOTO:


         2    Q.   ALL RIGHT.  IF YOU WILL GO TO THE NEXT PAGE.

         3    A.   I BEG YOUR PARDON?

         4    Q.   IF YOU WILL GO TO THE NEXT PAGE.

         5    A.   YES.

         6    Q.   THE NEXT PAGE IS THE FIRST PAGE OF THE MEMORANDUM AND IT

         7    IS ALSO DATED APRIL 5, 1996, AND THIS DOCUMENT -- DID YOU

         8    PREPARE THIS DOCUMENT?

         9    A.   (WITNESS EXAMINES DOCUMENT.)  I BELIEVE I DID.  IT WOULD

        10    HAVE BEEN SOME INPUT FROM PROBABLY NICHOLS OR RON INGRAM IN IT.

        11    Q.   OKAY.  YOU BEGIN BY SAYING, QUOTE:  

        12                   "WE ARE LISTING HERE WITH SOME OF THE MAJOR

        13               NEGOTIATING POSITIONS CURRENTLY BEING DISCUSSED

        14               WITH HEARST IN CONNECTION WITH ONGOING ATTEMPTS

        15               TO RESOLVE THE JOA."  

        16               THE NEXT PARAGRAPH, QUOTE:  

        17                   "A TERM OF THE AGREEMENT WOULD BE IN

        18               PERPETUITY."  

        19               YOU GO ON, QUOTE:  

        20                   "THIS IS LARGELY A RESULT OF THERE NOT BEING

        21               MUCH DIFFERENCE IN SHARING PERCENTAGES BETWEEN

        22               50 YEARS AND PERPETUITY."

        23               DO YOU SEE THAT?

        24    A.   YES.

        25    Q.   SO WAS THIS PARTICULAR PART AT LEAST AGREED BY BOTH



                                                                          241
                                  SIAS - DIRECT / ALIOTO


         1    PARTIES THAT WHATEVER, IF THERE WERE AN AGREEMENT, IT WOULD BE

         2    IN PERPETUITY?


         3    A.   NO, SIR, NOTHING IN THIS MEMORANDUM WAS AGREED TO BY

         4    EITHER PARTY.  WE WERE TALKING AND DISCUSSING THE POSITIONS

         5    WHICH APPEARED LIKELY TO BE WITHIN THE RANGE OF REASONABILITY

         6    IN WHICH PERHAPS AN AGREEMENT COULD BE REACHED, BUT THERE WAS

         7    ABSOLUTELY NO FINALITY IN ANY OF THIS.

         8    Q.   GOING TO THE SENTENCE AFTER THE NEXT, BEGINNING "SHARING

         9    PERCENTAGES," DO YOU SEE THAT?

        10    A.   YES, SIR.

        11    Q.   OKAY.  


        12                   "SHARING PERCENTAGES ARE NOT FINALIZED BUT

        13               IT WOULD SEEM THAT SUBJECT TO AGREEMENT ON OTHER

        14               POINTS, A 66 PERCENT CHRONICLE, 34 PERCENT

        15               HEARST SHARING WOULD BE APPROVED BY HEARST."

        16               DO YOU SEE THAT?

        17    A.   UH-HUH.

        18    Q.   HOW DID YOU KNOW THAT A 66 CHRONICLE, 34 PERCENT HEARST

        19    SHARING WOULD BE APPROVED BY HEARST?

        20    A.   I DIDN'T KNOW IT.  I WAS, AGAIN, USING SOME EXPERIENCE, OR

        21    WHAT HAVE YOU, BASED UPON COMMENTS THAT WERE MADE BY THE HEARST

        22    CORPORATION IN THESE MEETINGS THAT APPEARED TO BE WITHIN THE

        23    RANGE OF WHICH THEY WOULD GO.  WE HAD STARTED OUT PROPOSING 80

        24    CHRONICLE, 20 HEARST, AND MR. BENNACK WAS QUITE -- QUITE

        25    COLORFUL IN DISREGARDING THAT.  



                                                                          242
                                  SIAS - DIRECT / ALIOTO


         1               BUT THERE I WANT TO EMPHASIZE --

         2    Q.   DID HE THEN COME TO 66 PERCENT?

         3    A.   NO.  AS A MATTER OF FACT, I BELIEVE CHRONICLE HAD

         4    TRANSFERRED, USING AGAIN SOME OF THESE MANY PROJECTIONS, THAT A

         5    50 PERCENT FOR THE BALANCE OF THE JOA, 50-50 SHARING, AND THEN

         6    GOING TO 25.8 IN THE FUTURE WOULD BE VERY CLOSE TO 66-34

         7    STARTING AT THE TIME THESE DISCUSSIONS WERE TAKING PLACE.

         8    Q.   OKAY.

         9               MR. ALIOTO:  MAY I USE THE EASEL, YOUR HONOR?

        10               THE COURT:  YES.

        11    BY MR. ALIOTO:


        12    Q.   LET'S SEE IF WE CAN GET THESE STRAIGHT.  

        13               OKAY.  WE HAD PREVIOUSLY DRAWN YESTERDAY -- WERE YOU

        14    IN COURT YESTERDAY?

        15    A.   YES, SIR.

        16    Q.   WE HAD PREVIOUSLY DRAWN YESTERDAY THAT THE JOA COMMENCES

        17    ON JANUARY -- COMMENCED ON JANUARY -- EFFECTIVE DATE JANUARY,

        18    '65.

        19    A.   YES.

        20    Q.   IT WENT FOR THE 30 YEARS TO JANUARY, '95.

        21    A.   YES.

        22    Q.   AND THEN IT WAS EXTENDED BY HEARST TO 2005.  YOU HEARD

        23    THAT; RIGHT?

        24    A.   I DID.

        25    Q.   AND YOU UNDERSTAND THAT TO BE THE FACT; RIGHT?



                                                                          243
                                  SIAS - DIRECT / ALIOTO


         1    A.   I DO.

         2    Q.   AND THAT AFTER 2005, IF IT'S GOING TO BE EXTENDED TO 2015,

         3    THAT WOULD BE ONLY UP TO THE CHRONICLE; CORRECT?

         4    A.   WE WOULD HAVE TO MAKE THAT DETERMINATION, I BELIEVE, THREE

         5    YEARS PRIOR TO THE END OF THIS PRESENT TERM.

         6    Q.   SO YOU WOULD HAVE TO MAKE THAT DETERMINATION IN THE NEXT

         7    YEAR, NEXT YEAR OR SO?

         8    A.   I THINK THE NEXT --

         9    Q.   TWO YEARS.

        10    A.   -- TWO YEARS OR SO.

        11    Q.   OKAY.  NOW, THE ARRANGEMENT THAT YOU WERE TALKING ABOUT

        12    WITH MR. BENNACK WOULD BE THAT -- AND THIS IS IN 19 -- THIS IS

        13    IN 1996.

        14    A.   YES.

        15    Q.   OKAY.  SO I'M GOING TO PUT THIS DOWN HERE.  I'LL PUT

        16    DOWN -- I'M NOT GOING TO PUT IT DOWN WITH THAT.  I'LL PUT DOWN

        17    1996.

        18               OKAY.  NOW, THE DEAL GOING FORWARD -- AND I'LL PUT A

        19    LINE HERE FOR 2005.  

        20               NOW, THE IDEA WAS THAT WHEN YOU SAY THAT -- WHEN YOU

        21    SAY THAT:  

        22                   "SHARING PERCENTAGES ARE NOT FINALIZED BUT

        23               IT WOULD SEEM THAT SUBJECT TO AGREEMENT ON OTHER

        24               POINTS A 66 PERCENT CHRONICLE, 34 PERCENT HEARST

        25               SHARING WOULD BE APPROVED.  HEARST'S PREVIOUS



                                                                          244
                                  SIAS - DIRECT / ALIOTO


         1               PROPOSAL WAS FOR 50 PERCENT SHARING THROUGH THE

         2               END OF THE CURRENT AGREEMENT WITH HEARST,

         3               PERCENTAGE DROPPING TO 25 PERCENT FOR THE

         4               FUTURE.  CHRONICLE PROPOSED THE 66-34 WHICH

         5               MATHEMATICALLY IS CLOSE TO AN AVERAGE OF THEIR

         6               50/25.8 POST 2005 SHARING RATIO," DO YOU SEE

         7               THAT?

         8    A.   YES.

         9    Q.   OKAY.  SO THAT THE IDEA OF THE 66-34, THAT WOULD GO UP TO

        10    2005?

        11    A.   NO.  IT WAS 66-34 --

        12    Q.   SORRY.

        13    A.   -- WOULD START AT WHATEVER TIME AN AGREEMENT MIGHT HAVE

        14    BEEN REACHED AND WOULD GO ON FOR THE TERM OF THIS REVISED

        15    AGREEMENT, WHICH WOULD BE TO BE DETERMINED.  AT THIS POINT

        16    THERE WAS PERPETUITY.  IT MIGHT BE 50 YEARS, WHATEVER IT WAS.

        17    Q.   ALL RIGHT.  SO LET'S PUT THAT DOWN.  THE CHRONICLE, THIS

        18    IS WHAT YOU WERE SAYING, THE CHRONICLE 60-60 -- 66-34 AND THE

        19    66 WOULD BE TO THE CHRONICLE, 34 TO HEARST; CORRECT?

        20    A.   YES, SIR.

        21    Q.   AND THAT DEAL WOULD GO IN PERPETUITY OR 50 YEARS; CORRECT?

        22    A.   YES.

        23    Q.   AND WHAT HEARST WAS SAYING WAS THAT THEY WANTED A 50-50

        24    DEAL UNTIL THE END, 2005; IS THAT RIGHT?

        25    A.   YES.  THEY WANTED TO CONTINUE THE PRESENT -- THE PRESENT



                                                                          245
                                  SIAS - DIRECT / ALIOTO


         1    ARRANGEMENT AS CALLED FOR IN THE PRESENT JOINT OPERATING

         2    AGREEMENT UNTIL THE CONCLUSION, WHICH IS SEPTEMBER 12TH, 2005.

         3    Q.   OKAY.  SO THEY WANTED 50-50, SAME DEAL, 50-50, UNTIL 2005.

         4    A.   THAT'S RIGHT.

         5    Q.   AND THEN FROM 2005 THEY WOULD GO APPROXIMATELY 75-25?

         6    A.   YES, SIR.

         7    Q.   75-25.  AND AGAIN THAT WOULD BE IN PERPETUITY; CORRECT? 

         8    THAT WAS THE IDEA?

         9    A.   PERPETUITY OR 50 YEARS.  LONG-TERM.

        10    Q.   PERPETUITY OR 50 YEARS, OKAY.

        11               THE COURT:  AND WHAT WOULD BE THE SITUATION WITH THE

        12    EXAMINER UNDER BOTH OF THOSE SCENARIOS?

        13               THE WITNESS:  THE EXAMINER WOULD HAVE BEEN

        14    PRESUMABLY PUT UP FOR SALE.  MR. BENNACK WAS ALWAYS VERY

        15    EMPHATIC THAT THEY WOULD PUT THE EXAMINER UP FOR SALE ON THIS

        16    KIND OF A MATTER; AND IF THEY WERE UNABLE TO FIND A BUYER, THEN

        17    THEY WOULD CLOSE IT.

        18               THE COURT:  IT WOULD BE CLOSED PRIOR TO SEPTEMBER,

        19    2005, AND --

        20               THE WITNESS:  YES.

        21               THE COURT:  -- YET HEARST WOULD CONTINUE TO RECEIVE

        22    50 PERCENT OF THE NET EXCESS OF THE --

        23               THE WITNESS:  YES.

        24               THE COURT:  -- OF THE AGENCY AGREEMENT?

        25               THE WITNESS:  ALL TERMS OF THE JOA WILL CONTINUE IN



                                                                          246
                                  SIAS - DIRECT / ALIOTO


         1    PLACE.

         2               THE COURT:  OKAY.

         3               MR. ALIOTO:  THANK YOU, YOUR HONOR.

         4               THE WITNESS:  THERE WERE OTHER ELEMENTS --

         5    BY MR. ALIOTO:


         6    Q.   NOW, IF YOU GO TO THE LAST PAGE --

         7    A.   IF I MIGHT, THIS IS -- THERE ARE A NUMBER OF OTHER

         8    ELEMENTS THAT ARE PART OF THE JOA, NOT THE LEAST OF WHICH WAS

         9    THE SUNDAY NEWSPAPER IS LARGELY PRODUCED BY THE HEARST

        10    CORPORATION AS A RESULT OF THEIR TAKING THE EVENING SLOT.  AND

        11    SO THE SUNDAY NEWSPAPER, THE COST OF IT, THE EDITORIAL COSTS OF

        12    IT ARE BORNE BY HEARST.  THE ONLY SECTIONS OF IT ARE THE

        13    DATEBOOK AND THE TELEVISION BOOK AND A SMALL CHRONICLE SECTION

        14    THAT ARE IN THAT PAPER.  BUT ALL THE LIVE NEWS SECTIONS ARE

        15    PRODUCED BY HEARST WITH ATTENDANT EDITORIAL EXPENSES.  


        16               AND THE ISSUE OF WHETHER HEARST WOULD BE  -- SINCE

        17    THEY WOULD BE RELIEVED OF THAT RESPONSIBILITY, WHETHER THEY

        18    WOULD BE PREPARED TO GIVE CHRONICLE SOME MONEY TO PAY FOR THOSE

        19    EXTRA EDITORIAL EXPENSES.

        20               THE COURT:  THAT WAS, I GATHER, A POINT OF

        21    NEGOTIATION?

        22               THE WITNESS:  ABSOLUTELY.

        23               THE COURT:  OKAY.  

        24               THE WITNESS:  ALONG WITH MANY OTHERS THAT WE WILL

        25    NOT BURDEN YOU WITH.



                                                                          247
                                  SIAS - DIRECT / ALIOTO


         1               THE COURT:  ALL RIGHT.

         2    BY MR. ALIOTO:


         3    Q.   BUT IN ADDITION TO THOSE COSTS, THE FACT OF THE MATTER IS

         4    THAT THE SUNDAY PAPER WAS RESPONSIBLE FOR 30 TO 40 PERCENT OF

         5    THE TOTAL ADVERTISING VOLUME PER WEEK; ISN'T THAT RIGHT?

         6    A.   YES, SIR.

         7    Q.   NOW, IF YOU'LL GO TO THE THIRD PAGE --

         8    A.   AND ABOUT 80 PERCENT OF ITS CIRCULATION IS CHRONICLE.

         9    Q.   IF YOU GO TO THE THIRD PAGE AND IF YOU LOOK AT THE

        10    SECOND-TO-THE-LAST PARAGRAPH, IT STATES, QUOTE:  

        11                   "THESE ARE PRESENT ELEMENTS ON THE STATUS OF

        12               DISCUSSIONS.  THEY ARE SUBJECT TO CHANGES.  IN

        13               THE ONGOING DISCUSSIONS WE ARE TRYING TO GET A

        14               SENSE OF THE FINAL CONDITIONS UNDER WHICH HEARST

        15               WOULD AGREE TO CLOSE THE EXAMINER," END OF

        16               QUOTE.

        17               DO YOU SEE THAT?

        18    A.   JUST GIVE ME A MOMENT, PLEASE.

        19    Q.   IT'S THE SECOND-TO-LAST PARAGRAPH ON THE LAST PAGE.  

        20               THE COURT:  ON THE LAST PAGE?

        21               MR. ALIOTO:  THE VERY LAST PAGE, YES, SIR.

        22               THE WITNESS:  (WITNESS EXAMINES DOCUMENT.)

        23    BY MR. ALIOTO:


        24    Q.   IT BEGINS, "THESE ARE PRESENT ELEMENTS."

        25    A.   OKAY.  I'M NOT ON THE RIGHT ONE.



                                                                          248
                                  SIAS - DIRECT / ALIOTO


         1               (WITNESS EXAMINES DOCUMENT.)  YES.  ALL RIGHT, I'M

         2    THERE.

         3    Q.   OKAY.  IT SAYS, QUOTE:  

         4                   "THESE ARE PRESENT ELEMENTS ON THE STATUS OF

         5               DISCUSSIONS.  THEY ARE SUBJECT TO CHANGES.  IN

         6               THE ONGOING DISCUSSIONS WE ARE TRYING TO GET A

         7               SENSE OF THE FINAL CONDITIONS UNDER WHICH HEARST

         8               WOULD AGREE TO CLOSE THE EXAMINER."

         9               DO YOU SEE THAT?

        10    A.   YES.

        11    Q.   NOW, LET ME SHOW YOU --

        12               MR. ALIOTO:  IF I MAY APPROACH THE WITNESS, YOUR

        13    HONOR.

        14               MR. ROSCH:  EXCUSE ME, YOUR HONOR, THAT IS NOT AN

        15    EXHIBIT THAT'S BEEN ADMITTED INTO EVIDENCE AND I'D LIKE OFFER

        16    THAT IT BE ADMITTED.

        17               MR. ALIOTO:  WE WOULD OFFER INTO EVIDENCE WHAT IS

        18    MARKED FOR IDENTIFICATION AS EXHIBIT 115.  I DID THINK IT WAS

        19    IN EVIDENCE.

        20               THE COURT:  NO OBJECTION, I GATHER.

        21               MR. ROSCH:  NO.  I'M THE ONE THAT'S MOVING IT, YOUR

        22    HONOR.

        23               MR. ALIOTO:  OKAY.  THEN I DON'T HAVE AN OBJECTION

        24    TO HIM PUTTING IT IN.

        25               THE COURT:  ALL RIGHT.  I THOUGHT MR. ALIOTO WAS



                                                                          249
                                  SIAS - DIRECT / ALIOTO


         1    OFFERING IT, BUT 115 WILL BE ADMITTED.

         2                             (PLAINTIFF'S EXHIBIT 115 

         3                              RECEIVED IN EVIDENCE)  

         4    BY MR. ALIOTO:


         5    Q.   NOW, LET ME SHOW YOU AN EXHIBIT WHICH IS MARKED AS

         6    EXHIBIT 116 IN EVIDENCE, I BELIEVE.

         7               THE COURT:  116?

         8               MR. ALIOTO:  YES.

         9    Q.   116 IS A DOCUMENT DATED MAY 7, 1996.  IT IS FROM

        10    MR. RONALD INGRAM, GENERAL COUNSEL.  IT IS TO VICTOR GANZI.

        11               MR. SHULMAN:  IT'S NOT IN.

        12               MR. ROSCH:  IT'S NOT IN, YOUR HONOR, BUT WE'LL -- WE

        13    HAVE NO OBJECTION TO ITS BEING MADE --

        14               THE COURT:  VERY WELL.  116 WILL BE ADMITTED.

        15                             (PLAINTIFF'S EXHIBIT 116 

        16                              RECEIVED IN EVIDENCE)

        17    BY MR. ALIOTO:


        18    Q.   LET ME SHOW YOU THIS DOCUMENT AND ASK YOU WHETHER OR NOT

        19    YOU RECEIVED A COPY OF IT SOMETIME IN OR ABOUT MAY 7, 1996.

        20    A.   (WITNESS EXAMINES DOCUMENT.)  THE REASON I'M TAKING SOME

        21    TIME IS THAT THERE IS NOT A MARKED COPY TO ME, AND MY MEMORY --

        22    I WANT TO BE VERY CAREFUL BEFORE I --

        23    Q.   ALL RIGHT.  THEN LET ME JUST ASK YOU --

        24    A.   I THINK THAT -- I THINK THAT I PROBABLY WOULD HAVE SEEN

        25    EITHER A DRAFT OF THIS OR SOME PORTION THEREOF, BUT I CANNOT --



                                                                          250
                                  SIAS - DIRECT / ALIOTO


         1               THE COURT:  YOU CAN'T PIN IT DOWN IN YOUR MIND; IS

         2    THAT IT?

         3               THE WITNESS:  NO, SIR.

         4    BY MR. ALIOTO:


         5    Q.   OKAY.  WELL, DOES IT ACCORD WITH YOUR RECOLLECTION THAT

         6    SOMETIME AT OR ABOUT MAY OF 19 --

         7    A.   I SAW SOME VARIATION OF THIS, BUT THIS ITERATION IS

         8    UNCLEAR TO ME.


         9    Q.   ALL RIGHT.  WAS THERE AN EFFORT TO PUT -- WELL, FIRST OF

        10    ALL, THERE WAS SUPPOSED TO HAVE BEEN A PARTNERSHIP AND THE

        11    PARTNERSHIP WAS SUPPOSED TO HAVE PERPETUAL -- WELL, LET ME READ

        12    FROM IT AND ASK YOU IF IT ACCORDS WITH YOUR RECOLLECTION.  


        13               UNDER THE JOA PROPOSAL -- AND, AGAIN, THIS IS THE

        14    DOCUMENT FROM MR. RONALD INGRAM, THE GENERAL COUNSEL OF THE

        15    CHRONICLE PUBLISHING COMPANY, DIRECTED TO MR. VICTOR GANZI,

        16    EXECUTIVE VICE PRESIDENT OF THE HEARST CORPORATION.  AND UNDER

        17    "ORGANIZATION" IT STATES, QUOTE:  

        18                   "CHRONICLE AND HEARST WILL FORM A CALIFORNIA

        19               GENERAL PARTNERSHIP.  THE PARTNERSHIP WILL HAVE

        20               A PERPETUAL LIFE.  PROFITS, LOSSES AND

        21               DISTRIBUTIONS WILL BE ALLOCATED 66 PERCENT TO

        22               CHRONICLE, 34 PERCENT TO HEARST."

        23               NOW, THAT ACCORDS WITH YOUR RECOLLECTION OF ONE OF

        24    THE --

        25    A.   YES, SIR.



                                                                          251
                                  SIAS - DIRECT / ALIOTO


         1    Q.   ALL RIGHT.  AND THEN ALSO DOES IT ACCORD WITH YOUR

         2    RECOLLECTION THAT THERE WAS TO BE INSERTED IN THIS AGREEMENT A

         3    60-MILE CONCEPT; IN OTHER WORDS, THAT ON A FIRST RIGHT OF

         4    REFUSAL THERE COULD BE -- NO PARTNER COULD COMPETE WITH THE

         5    PARTNERSHIP WITHIN A 60-MILE RADIUS?

         6    A.   (WITNESS EXAMINES DOCUMENT.)  I BELIEVE THAT THERE IS SUCH

         7    A PROHIBITION IN THE CURRENT JOA.

         8    Q.   IN THE JOA.

         9    A.   AND THERE WOULD BE -- AND I DO RECALL THAT THERE WOULD BE

        10    A CONTINUING OF THAT IN THIS.

        11    Q.   AND THE IDEA OF THAT IS, IS THAT NO OWNER
-- IN THIS

        12    INSTANCE THE PARTNER, BUT IN THE JOA NEITHER THE CHRONICLE NOR

        13    THE EXAMINER, NOR IF THEY SOLD TO SOMEONE ELSE COULD THEY BE IN

        14    COMPETITION WITH THE JOA WITHIN 60 MILES; IS THAT RIGHT?

        15    A.   I THINK IT'S CONFINED TO THE DAILY NEWSPAPER.

        16    Q.   TO DAILY NEWSPAPERS WITHIN 60 MILES; CORRECT?

        17    A.   I THINK THAT IS CORRECT.

        18    Q.   AND THE EFFECT OF THAT WOULD BE, WOULD IT NOT, TO EXCLUDE

        19    KNIGHT RIDDER AS BEING A POTENTIAL MEMBER OF THE JOA?  


        20    A.   I SUPPOSE THAT IS CORRECT IF -- AS LONG AS KNIGHT RIDDER

        21    OWNS NEWSPAPERS WITHIN A 60-MILE RADIUS.

        22               MR. ROSCH:  YOUR HONOR, INSOFAR AS IT'S ASKING FOR A

        23    LEGAL CONCLUSION, I WOULD ASK -- I WILL OBJECT AND ASK THAT THE

        24    ANSWER BE STRICKEN.

        25               THE COURT:  I'LL UNDERSTAND THE ANSWER TO BE



                                                                          252
                                  SIAS - DIRECT / ALIOTO


         1    OTHERWISE.  

         2               YOU MAY PROCEED, MR. ALIOTO.

         3    BY MR. ALIOTO:


         4    Q.   AND IT WOULD ALSO EXCLUDE THE SINGLETON GROUP OR ANY OF

         5    THEM FROM BEING A MEMBER OF THE JOA OR -- YES, BEING A MEMBER

         6    OF THE JOA, PURCHASING ONE OF THE PAPERS; CORRECT?

         7    A.   I'M NOT SURE OF THAT.

         8    Q.   DO YOU KNOW WHO SINGLETON IS?

         9    A.   OF COURSE.

        10    Q.   DOES HE HAVE --

        11    A.   YES, I DO.  HE'S THE PRESIDENT OF THE MEDIA GENERAL GROUP.

        12    Q.   AND THAT IS A GROUP OF NEWSPAPERS; IS THAT CORRECT?

        13    A.   YES, SIR.

        14    Q.   SOME OF THEM ARE WITHIN 60 MILES OF SAN FRANCISCO?

        15    A.   IT'S THE ALAMEDA NEWSPAPER GROUP, THE OAKLAND TRIBUNE.

        16    Q.   THEREFORE, SINGLETON COULD NOT PURCHASE EITHER THE

        17    EXAMINER OR THE CHRONICLE, COULD IT, AND MAINTAIN ITS PAPERS IN

        18    ALAMEDA ACCORDING TO THE JOA; IS THAT RIGHT?

        19    A.   I WILL --

        20               THE COURT:  THIS CALLS FOR THE UNDERSTANDING OF THE

        21    WITNESS.

        22               MR. ALIOTO:  YES.

        23    Q.   YOU UNDERSTOOD AS THE CHAIRMAN OF THE BOARD AND THE CHIEF

        24    EXECUTIVE OFFICER AND THE PRESIDENT OF THE CHRONICLE PUBLISHING

        25    COMPANY THAT NEITHER KNIGHT RIDDER NOR SINGLETON COULD PURCHASE



                                                                          253
                                  SIAS - DIRECT / ALIOTO


         1    EITHER THE CHRONICLE OR THE EXAMINER AS A MEMBER OF THE JO --

         2    AND BECOME -- AND HAVING ANYTHING TO DO WITH THE JOA; CORRECT?

         3    A.   MY UNDERSTANDING WOULD HAVE BEEN -- THAT IS CORRECT,

         4    BUT --

         5    Q.   THANK YOU.

         6               THE COURT:  WHEN YOU'RE READY TO MOVE ON TO A NEW

         7    TOPIC, WHY, JUST LET ME KNOW.

         8               MR. ALIOTO:  PARDON ME, YOUR HONOR?

         9               THE COURT:  WHEN YOU'RE READY TO MOVE ON TO A NEW

        10    TOPIC, LET ME KNOW.

        11               MR. ALIOTO:  VERY GOOD, YOUR HONOR.  AT THE COURT'S

        12    CONVENIENCE.

        13               THE COURT:  IT'S YOURS.

        14               MR. ALIOTO:  VERY GOOD.

        15               THE COURT:  WHY DON'T WE TAKE, LADIES AND GENTLEMEN,

        16    UNTIL FIVE MINUTES AFTER THE HOUR, AND WE'LL RESUME WITH

        17    FURTHER ACTION OF THIS WITNESS.  

        18                      (RECESS TAKEN AT 9:50 A.M.)

        19                  (PROCEEDINGS RESUMED AT 10:10 A.M.)

        20               THE COURT:  VERY WELL, MR. ALIOTO, YOU MAY RESUME

        21    YOUR EXAMINATION OF THIS WITNESS.

        22               MR. ALIOTO:  THANK YOU, YOUR HONOR.

        23               MAY I APPROACH THE WITNESS, YOUR HONOR?

        24               THE COURT:  YES, YOU MAY.

        25   



                                                                          254
                                  SIAS - DIRECT / ALIOTO


         1    BY MR. ALIOTO:


         2    Q.   LET ME SHOW YOU EXHIBIT 117 IN EVIDENCE.  EXHIBIT 117 IN

         3    EVIDENCE IS DATED JUNE 5, 1997.  IT'S DIRECTED TO THE DIRECTORS

         4    CHRONICLE PUBLISHING COMPANY, RE THE JOA, AND FROM YOU.  AND

         5    THEN ENCLOSED
-- WITH CARBONS TO MR. INGRAM AND MR. NICHOLS. 


         6    AND ENCLOSED IS THE JOA PROPOSAL SIMILAR TO THE ONE IN 116.  

         7               SO IF YOU TAKE A LOOK AT 117, IS THAT, IN FACT, THE

         8    DOCUMENT -- IS THAT, IN FACT, YOUR COVER OF THE SAME JOA

         9    PROPOSAL THAT YOU SENT TO THE DIRECTORS OF THE CHRONICLE

        10    PUBLISHING COMPANY?

        11    A.   (WITNESS EXAMINES DOCUMENT.)  YES.

        12    Q.   AND YOU SENT THAT ON OR ABOUT THE DATE INDICATED, JUNE 5,

        13    1997?

        14    A.   YES.

        15               MR. ALIOTO:  WE WOULD OFFER INTO EVIDENCE WHAT IS

        16    MARKED FOR IDENTIFICATION ONLY APPARENTLY AS EXHIBIT 117, YOUR

        17    HONOR.

        18               MR. ROSCH:  NO OBJECTION, YOUR HONOR.

        19               THE COURT:  VERY WELL.  ADMITTED BY STIPULATION,

        20    117.

        21                             (PLAINTIFF'S EXHIBIT 117 

        22                              RECEIVED IN EVIDENCE)

        23    BY MR. ALIOTO:


        24    Q.   NOW, IN THE FIRST PARAGRAPH, DIRECTING YOUR ATTENTION TO

        25    THE FIRST PARAGRAPH, AND THIS GOING TO THE DIRECTORS, YOU



                                                                          255
                                  SIAS - DIRECT / ALIOTO


         1    STATE, QUOTE:  

         2                   "YOU WILL FIND ENCLOSED A DRAFT OF THE MAY,

         3               1996, JOA PROPOSAL BY CHRONICLE TO HEARST."

         4               THEN IN THE NEXT SENTENCE YOU SAY, QUOTE:  

         5                   "SHORTLY THEREAFTER, HEARST WAS ADVISED THE

         6               CHRONICLE SHAREHOLDERS WERE NOT INTERESTED IN

         7               FURTHER DISCUSSIONS."

         8               DO YOU SEE THAT?

         9    A.   YES, SIR.

        10    Q.   SO YOU'RE SENDING THEM THE PROPOSAL THAT WAS BEING WORKED

        11    ON BY MR. INGRAM AND BY MR. -- BY BOTH HEARST AND CHRONICLE BUT

        12    APPARENTLY CHRONICLE SHAREHOLDERS SAID THEY WEREN'T INTERESTED

        13    PERIOD; IS THAT IT?

        14    A.   YES.  I WOULD POINT OUT THAT 116 WAS IN MAY OF 1996.

        15    Q.   YES.

        16    A.   AND THIS MEMORANDUM IS IN MAY OF -- JUNE OF 1997.

        17    Q.   YES.

        18    A.   AT THE CHRONICLE SHAREHOLDERS MEETING IN APRIL OF 1997,

        19    THE STATUS OR THE PRESENT SITUATION AS IT REGARDS DISCUSSIONS

        20    WITH HEARST AND JOA WAS A MATTER OF INTEREST.  AND I REVIEWED

        21    WITH THE SHAREHOLDERS A NUMBER OF THE ELEMENTS THAT ARE

        22    CONTAINED IN HERE.  IT WAS APPARENT THAT THE CHRONICLE

        23    SHAREHOLDERS TO A PERSON WERE NOT IN FAVOR OF DOING ANYTHING AT

        24    THAT TIME FOR VARIOUS REASONS, BUT THEY WERE NOT.  WE DID NOT

        25    TAKE A FORMAL VOTE, BUT WE -- BUT I -- IT WAS VERY CLEAR THAT



                                                                          256
                                  SIAS - DIRECT / ALIOTO


         1    THEY DID NOT WANT MANAGEMENT TO PURSUE ANY FURTHER DISCUSSIONS

         2    AT THAT TIME.

         3    Q.   NOW, YOU ALSO STATE HERE THAT -- IN PARAGRAPH THREE, ALSO

         4    TO THE DIRECTORS, YOU STATE, QUOTE, AND THIS IS AFTER YOU'VE

         5    GONE THROUGH WHAT THE DIFFERENT ARRANGEMENTS WERE, THE

         6    SPLITTING ARRANGEMENTS WITH HEARST, YOU STATE, QUOTE:

         7                   "THE BOOZ ALLEN WORK HAS SUGGESTED THAT THE

         8               CHRONICLE SHAREHOLDERS WOULD BE INTERESTED IN

         9               AGAIN PURSUING A JOA RESOLUTION."

        10                   DO YOU SEE THAT?

        11    A.   YES, SIR.

        12    Q.   AND ONE OF THE INTERESTS OF THE BOOZ ALLEN THAT SUGGESTED

        13    THAT THE CHRONICLE SHAREHOLDERS WOULD BE INTERESTED IN AGAIN

        14    PURSUING A JOA RESOLUTION WAS BECAUSE BOOZ ALLEN MADE A REPORT

        15    THAT WOULD TEND TO SHOW WHAT THE HEARST CORPORATION WOULD BE

        16    ABLE TO DO IF IT COMPETED HEAD TO HEAD AGAINST THE CHRONICLE

        17    AFTER THE JOA; CORRECT?

        18    A.   THAT IS WITHIN VERY NARROW LIMITATIONS.  MAY I GIVE A

        19    LITTLE MORE DESCRIPTION OF THE BOOZ ALLEN WORK?

        20    Q.   YES, YOU MAY.  YOU CAN GIVE ANY EXPLANATION YOU WANT AT

        21    ANY TIME, MR. SIAS, BUT JUST ANSWER MY QUESTION FIRST AND THEN

        22    IF YOU WANT TO EXPLAIN IT, FEEL FREE TO DO SO.

        23    A.   ALL RIGHT.  RESTATE THE QUESTION WHAT YOU SAY THE BOOZ

        24    ALLEN REPORT
--

        25    Q.   OKAY.  ONE OF THE STATEMENTS IN BOOZ ALLEN THAT THE



                                                                          257
                                  SIAS - DIRECT / ALIOTO


         1    CHRONICLE SHAREHOLDERS -- THAT WAS SHOWN TO THE CHRONICLE

         2    SHAREHOLDERS WAS THAT THEY MADE AN ANALYSIS OF WHAT THE HEARST

         3    CORPORATION MIGHT BE ABLE TO DO, THE EXAMINER, IN HEAD-TO-HEAD

         4    COMPETITION WITH THE CHRONICLE AFTER THE -- AFTER 2005?

         5    A.   YES.  ONE OF THEM WAS.

         6    Q.   AND ONE OF THOSE -- AND THAT WAS THAT SHOWED
-- OR THE

         7    ANALYSIS --

         8    A.   ONE OF THEM WAS.

         9    Q.   OKAY.  AND THAT ONE THAT SHOWED THAT IF HEARST, THE

        10    EXAMINER, COMPETED HEAD TO HEAD WITH THE CHRONICLE AFTER 2005,

        11    IT SHOWED THAT THE CHRONICLE WOULD OBVIOUSLY RECEIVE LESS

        12    PROFITS THAN IT OTHERWISE WOULD IF THE EXAMINER WERE SHUT DOWN;

        13    CORRECT?

        14    A.   THAT WAS A LONG QUESTION AND I DON'T WANT TO --

        15    Q.   THE ONE THAT SHOWED -- THE ONE THAT SHOWED THAT WHAT MIGHT

        16    HAPPEN IF THE EXAMINER WAS HEAD-TO-HEAD --

        17    A.   YES.

        18    Q.   -- COMPETITION WITH THE CHRONICLE AFTER 2005, THAT THE

        19    PROFITS OF THE CHRONICLE WOULD BE LESS THAN IF THERE WERE NO

        20    EXAMINER.

        21    A.   THAT IS ONE OF THEIR SCENARIOS.

        22               MAY I PLEASE GIVE THE COURT A DESCRIPTION OF THE

        23    BOOZ ALLEN ASSIGNMENT?  BECAUSE THE INFERENCE HERE IS SOMEHOW

        24    THAT BOOZ ALLEN WAS BROUGHT IN SIMPLY TO EVALUATE THE

        25    CHRONICLE, AND I --



                                                                          258
                                  SIAS - DIRECT / ALIOTO


         1    Q.   YOU WANTED TO MAKE AN EXPLANATION ABOUT BOOZ ALLEN, IS

         2    THAT WHAT YOU WANT?

         3    A.   YES.

         4    Q.   OKAY.  IF YOU START TO TALK ABOUT HEARSAY, I'M GOING TO

         5    INTERRUPT YOU, OTHERWISE GO AHEAD AND SAY WHATEVER YOU WANT.

         6               THE COURT:  WELL, LET'S HEAR WHAT THE ANSWER IS.  GO

         7    AHEAD, MR. SIAS.

         8               THE WITNESS:  THE BOOZ ALLEN FIRM WAS RETAINED BY

         9    CHRONICLE SHAREHOLDERS AT A TIME TO EVALUATE THE COMPANY'S

        10    PROSPECTS AND WHAT POTENTIAL EVALUATIONS THEY MIGHT HAVE AND

        11    WHAT COURSES OF ACTIONS THEY MIGHT PURSUE TO GET THEM INTO THE

        12    21ST CENTURY.

        13               IT'S A PRIVATELY-HELD MEDIA COMPANY S CORP., AND A

        14    NUMBER OF THE SHAREHOLDERS WERE CONCERNED THAT MOST OF THEIR

        15    WEALTH IS TIED UP IN SHARES OF CHRONICLE CORPORATION COMPRISED

        16    OF EIGHT DIFFERENT BUSINESSES AND THEY WANTED A LOOK-SEE AT

        17    WHAT POTENTIAL ALTERNATIVES THEY MIGHT HAVE.

        18               SO INCLUDED IN THAT OVERALL ASSIGNMENT WAS A LOOK AT

        19    INDIVIDUAL COMPONENTS, INCLUDING THE CHRONICLE, AND IT WAS IN

        20    THAT CONTEXT THAT THE STUDY TO WHICH YOU REFER WAS INCLUDED.

        21    Q.   OKAY.  AND WHAT THEY SHOWED, ONE OF THE THINGS THAT IT

        22    SHOWED IS THAT IF THE EXAMINER COMPETED HEAD TO HEAD WITH THE

        23    CHRONICLE AFTER THE JOA, THAT THAT WOULD REDUCE THE PROFIT OF

        24    THE CHRONICLE?


        25    A.   THAT WAS ONE OF THEIR SCENARIOS.  WE DID NOT AGREE WITH



                                                                          259
                                  SIAS - DIRECT / ALIOTO


         1    IT.

         2    Q.   THAT WAS ONE OF THE THINGS THAT WAS GIVEN TO THE CHRONICLE

         3    SHAREHOLDERS; IS THAT CORRECT?

         4    A.   IT WAS GIVEN TO THE CHRONICLE SHAREHOLDERS, BUT I WANT TO

         5    MAKE IT CLEAR THAT IT WAS NOT AGREED TO.  THERE WERE A LOT OF

         6    THINGS GIVEN TO THEM.

         7    Q.   WELL, YOU GAVE IT TO THEM FOR THEIR INFORMATION SO THEY

         8    COULD MAKE CERTAIN JUDGMENTS WITH REGARD TO WHETHER CONTINUING

         9    THE JOA OR NOT; CORRECT?

        10    A.   AN ENTIRE REPORT INCLUDED IN WHICH WAS THIS PARTICULAR

        11    REFERENCE TO THE CHRONICLE.

        12    Q.   ONE OF THE THINGS YOU WANTED THEM TO KNOW IS THAT IF THERE

        13    WERE HEAD-TO-HEAD COMPETITION WITH THE EXAMINER, IF THERE WERE

        14    A NEWSPAPER WAR, THAT THAT MIGHT RESULT IN LESS PROFITS FOR

        15    THEM AND THEY SHOULD THINK ABOUT THAT; RIGHT?

        16    A.   I DON'T KNOW THAT THAT'S RIGHT.

        17               THE COURT:  YOU SAID THAT IS RIGHT?

        18               THE WITNESS:  I SAID I DO NOT KNOW THAT THAT IS

        19    CORRECT.

        20               THE COURT:  I SEE.

        21    BY MR. ALIOTO:


        22    Q.   YOU'RE NOT SURE WHETHER IT IS OR IT ISN'T?

        23    A.   YES.  BECAUSE WANTED THEM TO KNOW -- YOU'RE FRAMING

        24    THINGS -- THIS
-- AGAIN, THE BOOZ ALLEN STUDY WAS MUCH MORE

        25    COMPREHENSIVE.  IT WAS -- WE DID NOT AGREE.  THIS DID NOT GET A



                                                                          260
                                  SIAS - DIRECT / ALIOTO


         1    RINGING MANAGEMENT ENDORSEMENT THAT YOU SHOULD DO THIS AND

         2    THAT.  SO TO SAY THAT WHAT YOU HAVE JUST FRAMED AS A QUESTION,

         3    I DON'T KNOW THAT IT'S CORRECT.  I DON'T KNOW THAT IT'S

         4    INCORRECT, BUT I CERTAINLY AM NOT PREPARED TO SAY, "YES, THAT'S

         5    RIGHT, AND THAT'S WHAT WE WANTED TO DO."

         6    Q.   YOU ALSO SAY IN THE VERY LAST PARAGRAPH OF THIS DOCUMENT,

         7    YOU STATE THAT:  

         8                   "THE WRITER, RON INGRAM AND ALAN NICHOLS,

         9               WILL BE PLEASED TO ANSWER YOUR QUESTIONS.  IT IS

        10               VERY IMPORTANT THAT YOU TREAT THIS INFORMATION

        11               AS CONFIDENTIAL TO BE DISCUSSED ONLY WITH

        12               CHRONICLE SHAREHOLDERS OR THEIR

        13               REPRESENTATIVES."  

        14               DO YOU SEE THAT?

        15    A.   YES, SIR.

        16    Q.   AND YOU HAVE UNDERLINED "CONFIDENTIAL."  DO YOU SEE THAT?

        17    A.   YES, SIR.

        18    Q.   OKAY.  NOW, YOU WANT TO MAINTAIN IT AS CONFIDENTIAL EVEN

        19    THOUGH THE CHRONICLE SHAREHOLDERS TURNED DOWN THE OFFER;

        20    CORRECT?

        21    A.   YES.

        22    Q.   SO IT WAS A MATTER IN THE PAST; WAS IT NOT?  IT WASN'T

        23    SOMETHING BEING DISCUSSED AS A POTENTIAL HAPPENING; CORRECT?

        24    A.   I'M NOT --

        25    Q.   THE VERY LAST SENTENCE, SIR.



                                                                          261
                                  SIAS - DIRECT / ALIOTO


         1    A.   I'M TRYING TO DETERMINE WHETHER THIS IS REFERRING TO THE

         2    WHOLE BOOZ ALLEN STUDY OR ONLY WITH CHRONICLE SHAREHOLDERS AND

         3    THEIR REPRESENTATIVES.  

         4               WE DID WANT TO KEEP RUMORS, AND WHAT HAVE YOU, DOWN

         5    TO BOTH COMPANIES ARE PRIVATELY HELD.  AND THE RUMORS FUELED BY

         6    PRESS AND OTHER MEDIA REPORTS ABOUT POSSIBLE DEALS WERE QUITE

         7    DISRUPTIVE OF THE STAFF WHO WERE UNDERSTANDABLY NERVOUS ABOUT

         8    WHAT WOULD HAPPEN, ET CETERA, TO THEM AND TO THEIR JOB, HOW

         9    WOULD THEY BE CHANGED, AND I CAN GO ON AND ON.

        10               SO SINCE THERE HAD BEEN NO FIRM DEAL, THERE WAS

        11    CERTAINLY NO LEGAL REQUIREMENT THAT WE DO SO, AND WE HAD IN THE

        12    PAST SOME CHRONICLE SHAREHOLDERS WHO CHOSE TO TALK AND THERE

        13    WAS NOTHING WE COULD DO TO STOP THEM, BUT IT WASN'T IN THEIR

        14    BEST INTEREST TO HAVE THIS KIND OF CONFIDENTIAL DISCUSSIONS

        15    AIRED, IF YOU WILL, IN THE MEDIA.

        16    Q.   INCLUDING THE CHRONICLE AND THE EXAMINER?

        17    A.   YES, INCLUDING THE CHRONICLE AND THE EXAMINER.

        18    Q.   NOW, THESE ARE NOT CONFIDENTIAL, ONGOING DISCUSSIONS,

        19    HOWEVER, WITH HEARST.  THE CHRONICLE SHAREHOLDERS ALREADY CAME

        20    TO A DECISION THAT THEY'RE SIMPLY NOT INTERESTED IN FURTHER

        21    DISCUSSIONS; CORRECT?

        22    A.   THEY DID, BUT THE TIMEFRAME WHICH THEY DID IT, THE BOOZ

        23    ALLEN STUDY, WHICH WAS BEING COMPLETED, ENTAILED AN INTERVIEW

        24    WITH ALL CHRONICLE SHAREHOLDERS -- OR ALL BUT TWO OR THREE, AND

        25    IN THE PROCESS OF THIS AND THEN THEY REGISTERED THEIR REPORT, A



                                                                          262
                                  SIAS - DIRECT / ALIOTO


         1    MAJORITY OF CHRONICLE SHAREHOLDERS INDICATED A WILLINGNESS TO

         2    CONSIDER SEVERAL THINGS, ONE OF WHICH WAS PERHAPS TO OPEN

         3    RENEGOTIATIONS BUT THE MOST FUNDAMENTAL WAS TO KEEP THE COMPANY

         4    GOING AS IT WAS AT THAT TIME.

         5    Q.   WELL, THE MODEL THAT WAS BEING USED, WAS IT NOT, IN THOSE

         6    DISCUSSIONS WAS BASED UPON HEARST'S EXPERIENCE IN SAN ANTONIO

         7    WHERE THE HEARST CORPORATION CLOSED THE HEARST-OWNED NEWSPAPER,

         8    THE LIGHT, AFTER BUYING THE SAN ANTONIO EXPRESS NEWS?  ISN'T

         9    THAT CORRECT?  DON'T LOOK AT THAT.

        10    A.   WELL, OKAY.

        11               ONE OF THE ORIGINAL MODELS -- THERE WERE MODELS

        12    FLYING ALL OVER.  NOT MODEL PLANES, BUT MODEL -- FINANCIAL

        13    MODELS OF VARIOUS SCENARIOS; AND THE FIRST -- WHEN I FIRST

        14    ARRIVED ON THE SCENE, THE MODEL WAS BASED UPON A HEARST

        15    EXPERIENCE IN SAN ANTONIO WHERE TWO SEPARATE NEWSPAPERS

        16    OPERATED, AND
--

        17    Q.   AND THAT'S A SITUATION IN WHICH HEARST --

        18               THE COURT:  LET THE WITNESS FINISH HIS ANSWER.

        19               THE WITNESS:  THE SAN ANTONIO LIGHT WAS OWNED BY

        20    HEARST AND THE EXPRESS NEWS BY RUPERT MURDOCH.  THE HEARST

        21    CORPORATION BOUGHT THE EXPRESS NEWS.  THEY OFFERED, I BELIEVE,

        22    THE LIGHT FOR SALE AND THEY CLOSED IT AND THEN THEY COMBINED

        23    THE CIRCULATION.  

        24               BUT THERE WERE TWO SEPARATE NEWSPAPERS.  THERE WAS

        25    NOT A JOA.  AND THE EXPERIENCE THERE WAS THAT, AS I RECALL, THE



                                                                          263
                                  SIAS - DIRECT / ALIOTO


         1    COMBINED NEWSPAPERS' REVENUES THEY GOT 91 PERCENT OF THE

         2    REVENUES THAT THE COMBINED NEWSPAPERS HAD PRIOR TO THE PURCHASE

         3    OF THE EXPRESS NEWS AND 82 OR 83 PERCENT OF THE EXPENSES.  AND

         4    A MODEL THEN WAS BASED IN SAN FRANCISCO IF THAT WERE TO HAPPEN,

         5    AND ONE OF THE NEWSPAPERS WERE CLOSED, I.E., THE EXAMINER, OR

         6    SOLD, HOW MUCH REVENUE AND HOW MUCH EXPENSE WOULD BE ENTAILED. 

         7    AND THAT WAS THE BASE FROM WHICH THE MODEL THEN WAS BUILT TO

         8    GOING FORWARD.


         9    BY MR. ALIOTO:


        10    Q.   AND EVEN THOUGH THE DISCUSSIONS HAD CONCLUDED
--

        11               THE COURT:  LET ME SEE, LET ME SEE, THIS IS I ASSUME

        12    A HEARST MODEL, A MODEL THAT THEY DEVELOPED FOR THEIR OWN

        13    PLANNING PURPOSES?

        14               THE WITNESS:  I BELIEVE THAT IS CORRECT, YOUR HONOR. 

        15    I'M -- IT WAS THERE AND IT WAS -- WE GRAFTED ON AND STARTED

        16    DOING THINGS, BUT I BELIEVE IT WAS THEIR MODEL.  THEY HAD THE

        17    INFORMATION.  WE WOULD NOT HAVE HAD THAT INFORMATION.

        18               THE COURT:  I UNDERSTAND.  THEY HAD THAT

        19    INFORMATION.  THEY EVIDENTLY RELATED THAT INFORMATION TO YOU OR

        20    YOUR CONSULTANTS AND THEN YOU FOR YOUR OWN PLANNING PURPOSES

        21    USED THAT TO
--

        22               THE WITNESS:  SHARED IT.

        23    BY MR. ALIOTO:


        24    Q.   OKAY.  BUT THE SCENARIO WAS ONE IN WHICH HEARST -- IN

        25    WHICH HEARST CLOSED ITS OWN NEWSPAPER AND THEN BOUGHT THE



                                                                          264
                                  SIAS - DIRECT / ALIOTO


         1    COMPETING NEWSPAPER IN SAN ANTONIO; CORRECT?

         2    A.   THAT IS CORRECT.  I BELIEVE THAT THEY OFFERED THE LIGHT

         3    FOR SALE.

         4    Q.   AND ONE OF THE REASONS THAT YOU DIDN'T WANT THIS TO BE

         5    MADE PUBLIC, EVEN THOUGH THE CHRONICLE SHAREHOLDERS ALREADY

         6    TOLD YOU THAT THEY HAD NO FURTHER INTEREST IN DISCUSSING THIS

         7    WITH HEARST, WAS BECAUSE YOU FELT THAT NEWSPAPER REPORTERS IN

         8    THE CHRONICLE, EXAMINER OR OTHERWISE, MAY SEE THE ANALOGY WITH

         9    SAN ANTONIO IN WHICH HEARST SHUT DOWN ITS PAPER AND BOUGHT THE

        10    OTHER PAPER; RIGHT?

        11    A.   NO, I DON'T THINK THAT WAS ONE OF THE REASONS, ALTHOUGH AS

        12    A MATTER OF EXPERIENCE, BEFORE -- JUST BEFORE I GOT TO THE

        13    CHRONICLE, THIS SAN ANTONIO EXPERIENCE HAD TAKEN PLACE AND THE

        14    NEWSROOMS OF BOTH NEWSPAPERS WERE FILLED WITH RUMORS BACK AND

        15    FORTH OF WHAT WAS GOING ON.  THAT WAS BEFORE I GOT THERE.  

        16               BUT IT IS A FACT THAT THERE WAS A GREAT DEAL OF

        17    RUMORING GOING ON AS TO -- WHAT THE HECK, YOU HAVE INTELLIGENT

        18    ENERGETIC PEOPLE AND THEY'RE IN THE NEWS BUSINESS, SO THEY ARE

        19    SPECULATING, AND WHAT HAVE YOU.  AND THERE WAS GREAT INTEREST

        20    AT THAT TIME IN WHAT MIGHT HAPPEN IN SAN FRANCISCO SINCE THE

        21    HEARST CORPORATION WAS OPERATING IN BOTH MARKETS.

        22    Q.   AND WHEN YOU SAY THERE WERE RUMORS AT THAT TIME, YOU FELT

        23    THAT IF THIS INFORMATION GOT OUT, THOSE RUMORS WOULD HAVE BEEN

        24    VERIFIED; IS THAT RIGHT?

        25    A.   I DON'T KNOW.  NO, I DON'T KNOW THAT THE RUMORS VERIFIED



                                                                          265
                                  SIAS - DIRECT / ALIOTO


         1    AT THE TIME THIS LETTER, THAT BOOZ ALLEN STUDY, AND SO FORTH. 

         2    THAT WAS FOUR YEARS LATER, THREE AND A HALF YEARS LATER.  


         3               I EXPLAINED MY INTEREST IN HAVING THE MEDIA

         4    ATTENTION NOT FUELED BY OUR SHAREHOLDERS TALKING WITH THE MEDIA

         5    BECAUSE IT WAS VERY DISRUPTIVE OF THE PROCESS.  

         6               AND THE SAN JOSE MERCURY NEWS RAN A STORY IN APRIL,

         7    EITHER LATE APRIL OR MAY OF I BELIEVE IT WAS '97, IN WHICH THEY

         8    SAID THAT A DEAL TO CLOSE THE EXAMINER AND THE CHRONICLE WAS

         9    DUE WITHIN 10 DAYS OR LESS.  AND THAT IS VERY DISRUPTIVE; AND,

        10    IN FACT, IT WAS INCORRECT.  AND LATER THE SAN JOSE MERCURY NEWS

        11    PRINTED AN APOLOGY.  I THINK IT WAS ABOUT THREE YEARS LATER.

        12                              (LAUGHTER)

        13    Q.   AT THE TIME OF THE RUMORS, DID YOU DENY THAT THERE WERE

        14    ANY DISCUSSIONS GOING ON IN THE NEWSPAPER?

        15    A.   I DON'T COMMENT TO THE MEDIA ON MATTERS OF THIS NATURE.

        16                              (LAUGHTER)

        17    Q.   LET ME SHOW YOU A DOCUMENT WHICH IS IN EVIDENCE I BELIEVE

        18    AS 85.  EXHIBIT 85 IS A DOCUMENT DIRECTED TO MR. FRANK BENNACK

        19    DATED OCTOBER 24, 1997, FROM YOU.

        20               DID YOU, SIR, WRITE THAT DOCUMENT OR CAUSE THAT

        21    DOCUMENT TO BE PREPARED AND SENT TO MR. BENNACK ON OR ABOUT

        22    THAT DATE?

        23    A.   YES, SIR.

        24               MR. ALIOTO:  IT'S IN EVIDENCE; ISN'T IT?

        25               MR. SHULMAN:  (NODS HEAD.)



                                                                          266
                                  SIAS - DIRECT / ALIOTO


         1    BY MR. ALIOTO:


         2    Q.   OKAY.  THE DOCUMENT IS IN EVIDENCE.  I WANT TO DIRECT YOUR

         3    ATTENTION TO THE SECOND PARAGRAPH AND YOU STATE, QUOTE:  


         4                   "CHRONICLE'S SHAREHOLDERS HAVE DECIDED TO

         5               KEEP THE COMPANY INTACT AND UNDER THEIR

         6               EXCLUSIVE OWNERSHIP FOR THE LONG TERM AND

         7               COORDINATED ESTATE-PLANNING ACTIONS ARE BEING

         8               UNDERTAKEN BY THEM TO ASSURE THIS RESULT.  THEY

         9               HAVE DECIDED AGAINST TRANSFERRING PARTIAL

        10               OWNERSHIP IN ANY OF ITS PROPERTIES TO ANYONE

        11               ELSE.  THEY HAVE ALSO DECIDED NOT TO EXTEND OUR

        12               JOINT NEWSPAPER OPERATIONS BEYOND SEPTEMBER 12,

        13               2005, EXPIRATION DATE OF OUR JOINT OPERATING

        14               AGREEMENT."

        15               THESE ARE THE STATEMENTS THAT YOU WROTE TO

        16    MR. BENNACK ON OR ABOUT THIS DATE; CORRECT?

        17    A.   YES, SIR.

        18    Q.   SO THAT AS OF THIS DATE, OCTOBER 24, 1997, THE CHRONICLE

        19    SHAREHOLDERS DID NOT WANT TO CONTINUE ANY FURTHER NEGOTIATION

        20    WITH HEARST; CORRECT?

        21    A.   THAT IS CORRECT.

        22    Q.   AND NOT ONLY THAT, BUT THEY INTENDED NOT TO EXTEND THE

        23    JOA; CORRECT?

        24    A.   YES.

        25    Q.   ALL RIGHT.  NOW, THEN YOU STATE IN -- IF YOU GO DOWN TWO



                                                                          267
                                  SIAS - DIRECT / ALIOTO


         1    PARAGRAPHS, IT BEGINS, "IF HEARST," YOU STATE TO MR. BENNACK,

         2    QUOTE:  

         3                   "IF HEARST CONSIDERED CLOSING THE EXAMINER,

         4               CHRONICLE WOULD GIVE ITS APPROVAL TO SUCH ACTION

         5               AND WOULD TAKE ON THE RESPONSIBILITY OF PUTTING

         6               OUT THE ENTIRE SUNDAY PAPER, SPLITTING EQUALLY

         7               WITH HEARST ITS INCREMENTAL EDITORIAL COSTS OF

         8               DOING SO."

         9               DO YOU SEE THAT?

        10    A.   YES, SIR.

        11    Q.   NOW, IF HEARST IN FACT CLOSED THE EXAMINER AND THE

        12    CHRONICLE TOOK OVER THE SUNDAY PAPER, WAS IT GOING TO SPLIT ANY

        13    REVENUE WITH HEARST?

        14    A.   LATER ON THIS LETTER COVERS THAT, MR. ALIOTO.

        15    Q.   GO AHEAD.

        16               THE COURT:  COULD YOU POINT WHERE THAT SUBJECT IS

        17    DISCUSSED, MR. SIAS?

        18               THE WITNESS:  ALL RIGHT, LET ME....

        19    BY MR. ALIOTO:


        20    Q.   GO TO PAGE 2 AND THE SECOND-TO-LAST PARAGRAPH.

        21    A.   (WITNESS EXAMINES DOCUMENT.)  YES.  "HEARST WOULD

        22    CONTINUE"
--

        23    Q.   QUOTE:  


        24                   "HEARST WOULD CONTINUE TO HONOR SFNP,"

        25               THAT'S SAN FRANCISCO NEWSPAPER, "AND WOULD HAVE



                                                                          268
                                  SIAS - DIRECT / ALIOTO


         1               FULL PARTICIPATION ON SFNP'S BOARD OF DIRECTORS

         2               UNTIL SEPTEMBER 12, 2005"; CORRECT?

         3    A.   YES, SIR.

         4    Q.   OKAY.  NOW, THE IDEA THERE WAS THAT YOU ARE TELLING --

         5    YOU'RE TELLING HEARST, YOU'RE TELLING MR. BENNACK, THAT, NUMBER

         6    ONE, CHRONICLE SHAREHOLDERS DON'T WANT TO HAVE ANYTHING MORE TO

         7    DO WITH ANY KIND OF DEAL WITH HEARST; AND, SECOND, WE'RE NOT

         8    GOING PAST THE JOA OF 2005, THAT'S GOING TO BE IT, FROM THEN ON

         9    EVERYONE IS ON THEIR OWN; CORRECT?

        10    A.   (WITNESS NODS HEAD.)

        11    Q.   AND THEN YOU WERE ALSO TELLING THEM THAT IF HEARST CLOSED,

        12    YOU'D STILL PAY THEM 50 PERCENT; CORRECT?  IF HEARST CLOSED THE

        13    EXAMINER, YOU'D STILL PAY THEM 50 PERCENT UNTIL 2005?

        14    A.   THE CONSEQUENCES OF WHAT WE WOULD DO WOULD BE THAT THEY

        15    WOULD HAVE 50 PERCENT OF THE REVENUE.  THE CONSEQUENCES.  BUT

        16    WHAT WE SAID WAS THEY WOULD CONTINUE TO OWN THE -- THEIR HALF

        17    OF THE JOA FOR THE REMAINING TERMS OF THE JOA.

        18    Q.   EVEN THOUGH THEY DIDN'T HAVE A PAPER?

        19    A.   EVEN THOUGH THEY DIDN'T HAVE A PAPER.

        20    Q.   SO THAT -- 


        21               MR. ALIOTO:  IF I MAY USE THE EASEL, YOUR HONOR.

        22               THE COURT:  VERY WELL.

        23    BY MR. ALIOTO:


        24    Q.   SO THAT WHAT YOU WERE SAYING -- SO THAT WHAT YOU WERE

        25    SAYING IS THAT EVEN THOUGH THERE WOULD NO LONGER BE A SAN



                                                                          269
                                  SIAS - DIRECT / ALIOTO


         1    FRANCISCO EXAMINER AND ALL THE REVENUE WOULD BE COMING IN FROM

         2    THE SAN FRANCISCO CHRONICLE INTO THE SAN FRANCISCO NEWSPAPER --

         3    A.   AGENCY.

         4    Q.   -- AGENCY, YOU'RE SAYING YOU'LL STILL PAY THE HEARST

         5    CORPORATION EVEN THOUGH THEY NO LONGER HAVE A PAPER; CORRECT?

         6    A.   THAT'S CORRECT.

         7    Q.   AND THAT WAS IN -- THAT WAS TO ENTICE THEM, WAS IT NOT, TO

         8    CLOSE THE EXAMINER?

         9               MR. ROSCH:  OBJECTION, YOUR HONOR.  I THINK IT

        10    MISSTATES THE DOCUMENT, WHICH SPEAKS IN TERMS OF --

        11               THE COURT:  OBJECTION OVERRULED.  

        12               YOU MAY ANSWER.

        13               THE WITNESS:  "ENTICE" IS AN INTERESTING WORD.  I

        14    DON'T KNOW THAT I WOULD USE THAT, BUT THIS WAS TO LET THE

        15    HEARST CORPORATION KNOW WHAT WE WOULD DO IF THEY DECIDED TO

        16    STOP PUBLISHING THE EXAMINER OR OFFER IT FOR SALE.

        17    BY MR. ALIOTO:


        18    Q.   SO THEN YOU ANTICIPATED THAT IF, IN FACT, THEY DID THAT --

        19    WELL, WAIT A MINUTE.  YOU DON'T SAY HERE ABOUT -- YOU


        20    ANTICIPATE -- STRIKE THAT.  LET ME BEGIN AGAIN.

        21               YOU ANTICIPATED THAT IF, IN FACT, THEY DID THAT,

        22    THAT YOU MIGHT HAVE A MONOPOLY IN THE MARKET; ISN'T THAT RIGHT?

        23    A.   MR. ALIOTO, WHEN YOU USE THE TERM "MONOPOLY," I'M NOT AN

        24    ATTORNEY, OBVIOUSLY THE CASE, BUT IT HAS WIDE-RANGING

        25    IMPLICATIONS.  I DO NOT BELIEVE THERE ARE MANY MEDIA MONOPOLIES



                                                                          270
                                  SIAS - DIRECT / ALIOTO


         1    OF ANY KIND LEFT IN TODAY'S FRAGMENTED MEDIA MARKETPLACE.  SO

         2    I'M NOT PREPARED TO SAY THAT THERE WOULD BE A MONOPOLY.

         3    Q.   YOU BELIEVED, DID YOU NOT, THAT YOU WOULD BE THE ONLY

         4    DAILY NEWSPAPER IN SAN FRANCISCO IF THE EXAMINER -- IF HEARST

         5    AGREED TO SHUT DOWN OR CLOSE THE EXAMINER; CORRECT?

         6    A.   WE WOULD BE THE ONLY DAILY NEWSPAPER PUBLISHED IN SAN

         7    FRANCISCO.  THERE ARE A NUMBER OF OTHER DAILY NEWSPAPERS THAT

         8    CIRCULATE IN THE CITY.

         9    Q.   AND YOU BELIEVED THAT YOU WOULD BE SO POWERFUL AND STRONG

        10    THAT YOU WOULD BE ABLE TO SPLIT 50-50 WITH HEARST EVEN THOUGH

        11    THEY DIDN'T HAVE A PAPER IN THE MARKET; CORRECT?

        12    A.   ONCE AGAIN, YOU'RE --

        13    Q.   IS THAT CORRECT?

        14    A.   NO.  THOSE ARE YOUR WORDS, NOT MINE.

        15    Q.   I'M ASKING YOU IF IT'S CORRECT, THAT YOU BELIEVED --

        16    A.   ALL I'M SAYING -- I'M NOT PREPARED TO SAY THAT YOUR

        17    PHRASEOLOGY IS CORRECT.  YOU'RE IMPUTING MOTIVES TO ME AND SO

        18    FORTH.  SO, NO.  


        19               WHAT I DO KNOW IS THAT IF THEY HAD DONE THAT, WE

        20    WOULD HAVE ENJOYED A MORE PROFITABLE POSITION AND WE WOULD HAVE

        21    BEEN IN A POSITION TO PUT OUT A MUCH STRONGER NEWSPAPER THAN IS

        22    CURRENTLY THE CASE UNDER THE JOINT OPERATING AGREEMENT; AND

        23    WE'RE VERY CONCERNED WITH OUR EDITORIAL FRANCHISE, THE HEART OF

        24    THE BUSINESS, AND THAT IS THE HEART OF THIS PRESENT JOINT

        25    OPERATING AGREEMENT.



                                                                          271
                                  SIAS - DIRECT / ALIOTO


         1               THE CHRONICLE IS THE CORE BUSINESS, AND WE ARE NOT

         2    DOING AS WELL IN THE CIRCULATION AREA AS WE SHOULD; AND I

         3    WANTED MORE RESOURCES GOING INTO OUR PRODUCT TO MAKE IT A

         4    STRONGER, MORE COMPETITIVE PRODUCT IN THE GREATER MEDIA

         5    ENVIRONMENT THAT EXISTS IN THIS MARKET, THE GREATER -- AND I

         6    MEAN THE GREATER BAY AREA.

         7    Q.   AND YOU BELIEVED THAT ONE OF THE THINGS YOU CERTAINLY

         8    COULD DO IF YOU WERE THE ONLY DAILY NEWSPAPER IN SAN FRANCISCO

         9    IS THAT WHAT YOU COULD DO IS IF YOU WANTED TO RAISE YOUR RATES

        10    FOR ADVERTISING, YOU COULD DO THAT; COULDN'T YOU?

        11    A.   NOW, ONCE AGAIN, WE'RE GETTING INTO WIDE-RANGING THINGS

        12    WHERE RATES GO UP AND THEY GO DOWN.  I DON'T KNOW WHAT WE WOULD

        13    HAVE DONE WITH RATES.

        14    Q.   WELL, YOU SAID THAT YOU WOULD BE MORE PROFITABLE IF THE

        15    EXAMINER SHUT DOWN; CORRECT?

        16    A.   YES.

        17    Q.   BUT YOU'RE STILL GIVING THEM 50 PERCENT OF THE BUSINESS;

        18    AREN'T YOU?

        19    A.   THAT'S CORRECT.

        20    Q.   YOU STILL WOULD MAKE MORE PROFIT WITH THEM OUT OF THE

        21    MARKET; IS THAT RIGHT?  IS THAT WHAT YOU'RE SAYING?


        22    A.   I'M SAYING THAT WE WOULD HAVE -- I DIDN'T SAY THAT IN THIS

        23    LETTER, SO YOU
--

        24    Q.   I'M ASKING YOU, SIR.  YOU SAID THAT YOU WANTED THEM -- YOU

        25    SAID IF THEY SHUT DOWN, IF THEY SHUT DOWN THEIR NEWSPAPER,



                                                                          272
                                  SIAS - DIRECT / ALIOTO


         1    YOU'RE STILL GOING TO SHARE WITH THEM 50-50; CORRECT?

         2    A.   WE'RE STILL GOING TO CONTINUE THE JOA AND ITS TERMS, YES.

         3    Q.   BUT YOU SAID THAT IF THEY DID SHUT DOWN, THE SAN FRANCISCO

         4    CHRONICLE WOULD BE MORE PROFITABLE.

         5    A.   IT WOULD.

         6    Q.   YOU JUST SAID THAT.

         7    A.   I DID, YOU'RE RIGHT.

         8    Q.   OKAY.  AND IT WOULD BE MORE PROFITABLE EVEN THOUGH YOU'RE

         9    SHARING 50-50 WITH THE EXAMINER?

        10    A.   YES, SIR.

        11    Q.   SO THE WAY IT WOULD BE MORE PROFITABLE IS YOU'D UP YOUR

        12    RATES; ISN'T THAT TRUE?

        13    A.   I DON'T THINK YOU'VE BEEN IN THE NEWSPAPER BUSINESS.

        14    Q.   I DIDN'T ASK WHETHER I WAS IN THE NEWSPAPER BUSINESS.  I

        15    SAID ISN'T THAT TRUE.

        16                              (LAUGHTER) 

        17    Q.   ISN'T THAT TRUE?

        18    A.   IT'S NOT CORRECT.  IT IS NOT CORRECT.

        19    Q.   DESPITE THE NERVOUS LAUGHTER, ISN'T THAT TRUE?

        20    A.   IT IS NOT CORRECT.  IT IS NOT CORRECT.

        21               THE COURT:  ALL RIGHT.  ALL RIGHT.

        22               THE WITNESS:  THE EXPENSES WOULD GO DOWN.  

        23               THE COURT:  WHAT ABOUT THE SUNDAY NEWSPAPER UNDER

        24    THIS SCENARIO?  HEARST PUTS OUT, AS YOU POINTED OUT, THE BULK

        25    OF THE SUNDAY NEWSPAPER.  UNDER THIS SCENARIO, WHO WOULD BEAR



                                                                          273
                                  SIAS - DIRECT / ALIOTO


         1    THE COSTS OF THE EDITORIAL PRODUCT THAT WAS PUT OUT ON SUNDAY? 

         2    IS THAT COVERED IN THIS LETTER?

         3               THE WITNESS:  YES, SIR, AND THERE IS A -- THANK YOU

         4    FOR ASKING.  

         5               HALF OF THE INCREMENTAL EDITORIAL COST OF PUTTING

         6    OUT A SUNDAY PAPER WOULD HAVE BEEN BORNE BY HEARST AND HALF BY

         7    THE CHRONICLE.  

         8               AND ONE OF THE GREAT PROBLEMS WITH OUR JOA IS

         9    MR. ALIOTO HAS REFERRED TO THE FACT THAT SOMETHING LIKE

        10    40 PERCENT OF THE COMBINED REVENUE FOR THE NEWSPAPERS COMES

        11    FROM THE SUNDAY NEWSPAPER; AND IN SAN FRANCISCO, UNLIKE OTHER

        12    MARKETS, THE SUNDAY PAPER IS NOT SUBSTANTIALLY HIGHER IN

        13    CIRCULATION THAN THE DAILY, COMBINED DAILY CIRCULATION.

        14               AND ONE OF THE POTENTIAL REASONS IS THAT THERE IS A

        15    LARGE DISCONNECT FOR ABOUT 80 PERCENT OF THE COMBINED

        16    CIRCULATION ON SUNDAY IN THAT ALL OF THE LIVE SECTIONS ARE

        17    PRODUCED BY THE EXAMINER SO THAT CHRONICLE READERS DO NOT GET

        18    THEIR REGULAR COLUMNISTS, THEY DO NOT GET THEIR STYLE OF

        19    WRITING, THEY DO NOT GET THEIR REGULAR SECTIONS.  

        20               AND I'M NOT -- THIS IS NOT SAID IN A PEJORATIVE

        21    SENSE AT ALL.  IT'S SIMPLY A DISCONNECT OF A VERY IMPORTANT

        22    PART OF THE MARKET, AND ONE THAT WE WOULD VERY DEFINITELY FEEL

        23    WOULD BE IN THE LONG-TERM INTEREST OF THE NEWSPAPER THAT WE

        24    WOULD PUBLISH, NAMELY THE CHRONICLE.

        25   



                                                                          274
                                  SIAS - DIRECT / ALIOTO


         1    BY MR. ALIOTO:


         2    Q.   YOU -- LET ME SHOW YOU -- IF I MAY APPROACH THE WITNESS,

         3    YOUR HONOR.

         4               THE COURT:  BEFORE YOU DO THAT, LET ME FOLLOW UP ON

         5    THAT, MR. SIAS.

         6               DID YOU EVER HAVE ANY DISCUSSIONS WITH THE HEARST

         7    CORPORATION ABOUT THIS DISCONNECT?

         8               THE WITNESS:  YES, WE DID, BUT UNDERSTANDABLY HEARST

         9    WAS VERY RELUCTANT.  THIS WAS -- THEY GOT THIS BECAUSE THEY GOT

        10    AFFLICTED WITH THE EVENING FIELD, AND EVENING PAPERS WITH THE

        11    CHANGE IN LIFESTYLE IN THE LAST 30 YEARS HAVE BEEN A VERY,

        12    ALMOST AN IMPOSSIBLE POSITION.  AND THEY WERE NOT GOING TO GIVE

        13    UP THAT LEVERAGE THAT THEY HAD WITH THAT SUNDAY PAPER, AND --

        14               THE COURT:  SO THERE WAS NO APPROACH TO THEM
--

        15               THE WITNESS:  WE NEVER HAD ANY DETAILED DISCUSSIONS. 

        16    IT WAS JUST THAT THAT WAS THEIR RESPONSIBILITY AND THEY DID A

        17    NUMBER OF THINGS TO TRY TO MAKE THE SUNDAY PAPER STRONG, AND SO

        18    FORTH.  

        19               THE CHRONICLE, I MIGHT ADD, MY ATTITUDE TOWARD THIS

        20    SITUATION IS THAT WE WERE PARTNERS WITH THE HEARST CORPORATION

        21    FOR THE TERMS OF THIS AGREEMENT, AND I DON'T THINK THERE'S

        22    ANYTHING THAT ANYONE WILL EVER FIND THAT I ACTED ANY OTHER WAY.

        23               INCLUDED IN THAT WE TURNED OVER THE NEW YORK TIMES

        24    SERVICE, WHICH WAS THE CHRONICLE'S, TO HEARST TO USE ON SUNDAY

        25    TO HELP BOLSTER THEIR PAPER.  AND THERE ARE OTHER THINGS.  AND



                                                                          275
                                  SIAS - DIRECT / ALIOTO


         1    HEARST INCREASED AND TOTALLY REVAMPED THEIR MAGAZINE ABOUT FOUR

         2    YEARS AGO TO VERY GOOD ADVANTAGE.

         3               BUT YOU CAN'T ESCAPE THE ISSUE THERE.  THE HEARST OR

         4    THE EXAMINER DOESN'T REALLY HAVE BUREAUS OUT IN THE SUBURBS,

         5    AND THE CHRONICLE -- AND OUR CIRCULATION IS REGIONAL.  WE'RE IN

         6    SIX COUNTIES PRETTY GOOD SIZED, AND ALL OF THESE THINGS COMBINE

         7    TO MAKE A PROBLEM FOR BOTH COMPANIES.

         8               THE COURT:  BUT THERE WAS NO -- I GATHER THERE WAS

         9    NO SERIOUS DISCUSSION WITH HEARST CORRECTING THIS DISCONNECT

        10    PROBLEM, AS YOU CHARACTERIZE IT, IN ORDER TO IMPROVE THE

        11    EDITORIAL PRODUCT AND PRESUMABLY GENERATE GREATER REVENUES FOR

        12    THE COMBINED ENTITY, NO SERIOUS DISCUSSIONS?

        13               THE WITNESS:  NO, THERE WAS NOT.

        14               THE COURT:  ALL RIGHT.  EXCUSE THE INTERRUPTION,

        15    MR. ALIOTO.

        16               MR. ALIOTO:  YOUR HONOR.  THANK YOU, YOUR HONOR.

        17    Q.   LET ME HAND YOU -- IF I MAY APPROACH THE WITNESS, YOUR

        18    HONOR.

        19               THE COURT:  VERY WELL.

        20    BY MR. ALIOTO:


        21    Q.   LET ME HAND YOU WHAT IS PLAINTIFF'S EXHIBIT 5 IN EVIDENCE. 

        22    PLAINTIFF'S EXHIBIT 5 IN EVIDENCE IS A PRESENTATION.  IT IS

        23    ENTITLED "PROJECT GOLDEN."  IT'S DATED MAY 4, 1999, AND THIS IS

        24    IN FACT A PRESENTATION PREPARED WITH REGARD TO THE CHRONICLE

        25    AND THE EXAMINER.  



                                                                          276
                                  SIAS - DIRECT / ALIOTO


         1               PROJECT GOLDEN BEING WHAT?

         2    A.   PROJECT GOLDEN WAS THE STUDY DONE BY DONALDSON, LUFKIN,

         3    JENRETTE, AN INVESTMENT BANKING FIRM HIRED BY CHRONICLE

         4    CORPORATION TO EVALUATE THE PROSPECTS OF THE CORPORATION AND

         5    MANY BUSINESSES AND WHAT TO DO ABOUT THEM OR WHAT POTENTIAL

         6    COURSES OF ACTION CHRONICLE SHAREHOLDERS MIGHT TAKE.

         7    Q.   AND THIS EXHIBIT 5 IS, IN FACT, A COPY OF PROJECT GOLDEN,

         8    IS IT NOT, OF THE MAY --

         9    A.   YES.

        10    Q.   -- 1999?  CORRECT?

        11    A.   YES.

        12    Q.   AND ONE OF THE ITEMS THAT WAS BEING DISCUSSED AT THIS TIME

        13    AND ONE OF THE OBLIGATIONS OF DONALDSON, LUFKIN, WAS TO GIVE

        14    SOME KIND OF COMPARISON AS TO WHAT WOULD HAPPEN IF THE EXAMINER

        15    DROPPED OUT OR IF THE EXAMINER AND THE CHRONICLE COMPETED HEAD

        16    TO HEAD AFTER THE JOA; CORRECT?

        17    A.   NOT QUITE.  THEIR ASSIGNMENT WAS TO EVALUATE THE POTENTIAL

        18    PRICES THEY COULD GET FOR OUR BUSINESSES, EACH OF THE

        19    BUSINESSES, AND TO GIVE THE CHRONICLE SHAREHOLDERS THEIR

        20    ASSESSMENT OF WHAT THEIR CAPACITY WOULD BE TO GET THAT KIND OF

        21    MONEY FOR EACH ONE OF THESE THINGS.  SO OUT OF THAT THEY DID

        22    SOME ANALYSES AND INCLUDING THE ONE TO WHICH YOU REFER.

        23    Q.   OKAY.  WE'LL GET TO THAT IN ONE MINUTE, BUT YOU REMINDED

        24    ME OF SOMETHING.

        25               YOU SAID PREVIOUSLY THAT 30 TO 40 PERCENT OF THE



                                                                          277
                                  SIAS - DIRECT / ALIOTO


         1    TOTAL ADVERTISING VOLUME PER WEEK IS IN THE SUNDAY NEWSPAPER;

         2    CORRECT?

         3    A.   I DIDN'T SAY 30.  YOU DID EARLIER, BUT 40 PERCENT IS --

         4    Q.   40 PERCENT?

         5    A.   I THINK 40 PERCENT NOW IS, OF THE ADVERTISING VOLUME AND

         6    PROBABLY A LITTLE HIGHER, IS RUNNING ON SUNDAY.

         7    Q.   ON SUNDAY, OKAY.

         8               SO WOULD YOU SAY THAT A PAPER NEEDS THE SUNDAY PAPER

         9    TO MAKE IT IN SAN FRANCISCO, A DAILY NEWSPAPER?

        10    A.   NOT NECESSARILY.

        11    Q.   YOU SHARED IN THE BUSINESS OF THE SUNDAY PAPER, DID YOU

        12    NOT?  "YOU" MEANING THE CHRONICLE.

        13    A.   WE SHARED -- DO YOU MEAN WE SHARED THE REVENUE DERIVED

        14    FROM IT?

        15    Q.   YES.

        16    A.   YES, SIR.

        17    Q.   AND IN YOUR PROPOSAL WHEN YOU WANTED THE EXAMINER, IF THE

        18    EXAMINER SHUT DOWN, YOU SAID ON SUNDAY THEY WOULD HAVE TO PAY

        19    THEIR SHARE OF THE EXPENSES FOR THE SUNDAY PAPER; CORRECT?

        20    A.   THEIR SHARE OF EDITORIAL EXPENSES.

        21    Q.   FOR THE SUNDAY PAPER?

        22    A.   YES.

        23    Q.   OKAY.  BUT NOT FOR ANY OTHER -- NOT FOR ANY OTHER DAY OF

        24    THE WEEK?

        25    A.   NO.



                                                                          278
                                  SIAS - DIRECT / ALIOTO


         1    Q.   NOW, IF YOU'LL GO TO PROJECT GOLDEN, AND I WANT TO DIRECT

         2    YOUR ATTENTION TO THE SECOND PART.  THERE'S A SUPPLEMENT AND

         3    IT'S PAGE 26 OF THE SUPPLEMENT.  SO THIS DOCUMENT, EXHIBIT 5,

         4    IS BOTH THE ORIGINAL REPORT AND THEN THE SUPPLEMENT.  


         5               MR. ALIOTO:  THAT WOULD BE, IF IT PLEASE YOUR HONOR,

         6    THE BATES NUMBER IS 350227.  OTHERWISE IT MIGHT GET CONFUSED.

         7    Q.   ARE YOU ON PAGE 26, SIR?

         8    A.   I'M ON PAGE 26, YES.

         9               MR. ALIOTO:  OKAY.  I NEED PAGE 26.  ARE YOU GOING

        10    TO PUT IT BACK UP?

        11               MR. SHULMAN:  YES.

        12    BY MR. ALIOTO:


        13    Q.   OKAY.  I WANT TO DIRECT YOUR ATTENTION TO PAGE 26.  NOW,

        14    THERE ARE THREE VERTICAL COLUMNS, AND IT'S HEADNOTED, QUOTE,

        15    "IF THE JOA IS UNRESOLVED, HEARST COULD LEAVE THE MARKET AFTER

        16    2005."

        17    A.   I MAY HAVE A DIFFERENT PAGE 26.

        18    Q.   OKAY.

        19    A.   I'VE GOT A SUMMARY OF ALTERNATIVES.

        20               MR. ALIOTO:  OKAY.  THERE'S TWO.  

        21               MAY I APPROACH THE WITNESS, YOUR HONOR?

        22               THE COURT:  YES.  GIVE HIM A HAND IF YOU WOULD,

        23    MR. ALIOTO.

        24    BY MR. ALIOTO:


        25    Q.   THERE'S TWO, AND THEN THERE'S A SUPPLEMENT.



                                                                          279
                                  SIAS - DIRECT / ALIOTO


         1    A.   SORRY ABOUT THAT.

         2    Q.   IT'S ALL RIGHT.

         3                        (PAUSE IN PROCEEDINGS.)

         4               THE WITNESS:  THANK YOU.

         5    BY MR. ALIOTO:


         6    Q.   OKAY.  AND THIS IS HEADNOTED "JOA OPERATING SCENARIOS." 

         7    AND IT STATES:  

         8                   "IF THE JOA IS UNRESOLVED, HEARST COULD

         9               LEAVE THE MARKET AFTER 2005 RESULTING IN ONE

        10               SURVIVING NEWSPAPER, THE CHRONICLE, OR STAY IN

        11               THE MARKET AFTER 2005 RESULTING IN WAR."

        12               DO YOU SEE THAT?

        13    A.   I SEE IT.

        14    Q.   OKAY.  NOW, THERE ARE THREE VERTICAL COLUMNS.  ON THE

        15    LEFT-HAND COLUMN IT STATES THE MAJOR PROFIT AND LOSS COMPONENT. 

        16    AND GOING DOWN
-- GOING DOWN ON VERTICALLY THERE'S CIRCULATION

        17    PRICING, AD REVENUE, CIRCULATION PRODUCTION AND CIRCULATION

        18    EDITORIAL, CAPITAL EXPENDITURE AND LENGTH OF COMPETITION.  DO

        19    YOU SEE THAT, THEY COME DOWN ON THE LEFT-HAND SIDE?  SEE HOW

        20    THEY COME DOWN ON THE LEFT-HAND SIDE?

        21    A.   YES.

        22    Q.   OKAY.  THE SECOND COLUMN IS ENTITLED "JOA RESOLUTION OF

        23    HEARST WALKS IN 2006."

        24               SO THAT WOULD -- AND THEN IT HAS UNDERNEATH THAT,

        25    PARENTHESES, "ONE NEWSPAPER."  DO YOU SEE THAT?



                                                                          280
                                  SIAS - DIRECT / ALIOTO


         1    A.   YES.

         2    Q.   IT'S THE SECOND COLUMN.  

         3               AND SO THEN IT WOULD SHOW, IF THERE WERE JUST ONE

         4    NEWSPAPER, WHAT THE CIRCULATION WOULD BE.  AND THEN IT WOULD

         5    SHOW WHAT THE CIRCULATION PRICING WOULD BE AND THE AD REVENUE,

         6    AND THEN WHAT THE PRODUCTION CIRCULATION WOULD BE AND THE

         7    EDITORIAL AND THEN THE CAPITAL EXPENDITURES AND THEN THE LENGTH

         8    OF COMPETITION.  DO YOU SEE THAT?

         9    A.   YES.

        10    Q.   THEN ON THE FAR RIGHT-HAND SIDE IT HAS "NO RESOLUTION" AND

        11    IT HAS "WAR."  IT STATES, QUOTE, "NO RESOLUTION - WAR," RIGHT

        12    ON THE TOP.

        13               AND IT ALSO HAS, GOING DOWN VERTICALLY, WHAT WOULD

        14    HAPPEN IF THERE WERE COMPETITION AFTER 2005 ON EACH OF THOSE

        15    ITEMS:  CIRCULATION, AD REVENUE, PRODUCTION, ET CETERA.  DO YOU

        16    SEE THAT?

        17    A.   YES, SIR.

        18    Q.   OKAY.  NOW, ACCORDING TO THIS DOCUMENT, IF THERE WERE ONLY

        19    ONE PAPER, IF ONE OF THE PAPERS FOLDED, IF THERE WERE ONLY ONE

        20    PAPER, IT STATES, QUOTE:  

        21                   "92 PERCENT OF THE COMBINED CIRCULATION IS

        22               KEPT (OTHER MARKETS AVERAGE 80 PERCENT)."  

        23               DO YOU SEE THAT?

        24    A.   YES.

        25    Q.   YOU READ THIS; DIDN'T YOU?



                                                                          281
                                  SIAS - DIRECT / ALIOTO


         1    A.   I READ IT.

         2    Q.   OKAY.

         3    A.   I DIDN'T AGREE WITH IT.

         4    Q.   WELL, THEN I'M GOING TO ASK YOU WHAT PART YOU AGREE AND

         5    WHICH PART YOU DON'T AGREE.  BUT WAS IT YOUR UNDERSTANDING THAT

         6    WHEN THEY SAY "92 PERCENT OF THE COMBINED CIRCULATION IS KEPT,"

         7    THAT MEANS IF YOU JUST ADDED THE CIRCULATION OF BOTH THE

         8    EXAMINER AND THE CHRONICLE, BOTH DAILY AND SUNDAY, THAT

         9    92 PERCENT OF THAT FIGURE WOULD BE WHAT WOULD REMAIN IF THERE

        10    WERE JUST ONE PAPER; CORRECT?

        11    A.   THAT'S WHAT THIS SAYS.

        12    Q.   IS IT CORRECT THAT THE OTHER MARKETS AVERAGE --

        13    A.   I'M NOT SAYING --

        14    Q.   -- 80 PERCENT --

        15    A.   IF I MIGHT, PLEASE.

        16    Q.   DO YOU DISAGREE --

        17    A.   WHEN I SAY "CORRECT," I AM SAYING CORRECT TO YOUR READING

        18    OF WHAT'S SAID HERE.  I AM NOT AGREEING THAT WHAT IS SAID IS

        19    CORRECT.

        20    Q.   DO YOU AGREE THAT IF ONE OF THE PAPERS DROPPED OUT, THAT

        21    THE SURVIVING PAPER WOULD HAVE 92 PERCENT OF THE COMBINED

        22    CIRCULATION?

        23    A.   I DON'T KNOW.  IT WOULD HAVE MOST OF THE COMBINED

        24    CIRCULATION, BUT I DO NOT KNOW WHAT THAT WOULD BE AND I DON'T

        25    THINK ANYBODY DOES.  EXPERIENCE WOULD HAVE TO RULE THAT.



                                                                          282
                                  SIAS - DIRECT / ALIOTO


         1    Q.   WITH REGARD TO NO RESOLUTION OR WAR, IT STATES, QUOTE:  

         2                   "EXAMINER LOSES 25,000 OVERLAPPING

         3               SUBSCRIBERS BUT GAINS 50,000 SUBSCRIBERS WITH

         4               PRICE COMPETITION RESULTING IN 25 PERCENT NET

         5               SUBSCRIBER LOSS FOR THE CHRONICLE."

         6               DO YOU SEE THAT?

         7    A.   I SEE IT.

         8    Q.   DO YOU DISAGREE WITH THAT?

         9               MR. ROSCH:  I THINK IT'S 25,000.

        10               MR. HALLING:  25,000.

        11               MR. ALIOTO:  INSTEAD OF WHAT?

        12               MR. ROSCH:  YOU SAID 25 PERCENT.

        13    BY MR. ALIOTO:


        14    Q.   ALL RIGHT.  LET ME DO IT AGAIN.  WHAT IT SAYS IS EXAMINER

        15    LOSES --

        16               THE COURT:  I THINK I'VE GOT IT.

        17               MR. ALIOTO:  OKAY.  THANK YOU, YOUR HONOR.  ALL

        18    RIGHT.

        19    Q.   SO, IN OTHER WORDS, WHAT THEY'RE SAYING HERE IS IF THERE'S

        20    HEAD-TO-HEAD COMPETITION, THE EXAMINER WILL GAIN 25,000

        21    SUBSCRIBERS BECAUSE OF PRICE COMPETITION?  THAT'S WHAT IT SAYS;

        22    RIGHT?

        23    A.   THAT'S WHAT IT SAYS.

        24    Q.   DO YOU AGREE WITH THAT?

        25    A.   ABSOLUTELY NOT.



                                                                          283
                                  SIAS - DIRECT / ALIOTO


         1    BY MR. ALIOTO:


         2    Q.   OKAY?

         3               ALL RIGHT, THEN, WITH REGARD TO CIRCULATION PRICING,

         4    IF THERE IS ONE NEWSPAPER, IT SAYS "NO PRICE INCREASE."

         5               DO YOU SEE THAT?

         6    A.   YES, SIR.

         7    Q.   DO YOU AGREE WITH THAT, THAT IF THE EXAMINER SHUT DOWN,

         8    THE CHRONICLE WOULD NOT INCREASE THE PRICE?

         9    A.   I THINK THAT THAT IS CORRECT BUT I DON'T KNOW THIS.  WE

        10    ARE TALKING OUT IN THE -- INTO A SPECULATIVE AREA, AND I DON'T

        11    CHOOSE TO GET INTO SPECULATION.

        12    Q.   YOU WERE MAKING THAT OFFER TO HEARST, WERE YOU NOT, THAT

        13    THEY CLOSED THEIR PAPER AND YOU WOULD BE THE ONLY PAPER,

        14    CORRECT?

        15    A.   YES.

        16    Q.   DID YOU HAVE ANY IDEA WHATSOEVER AS TO WHAT YOU WOULD DO

        17    IF, IN FACT, HEARST AGREED?

        18    A.   CIRCULATION PRICING?

        19    Q.   YES.

        20    A.   WAS THE IMMEDIATE SUBJECT.

        21    Q.   ALL RIGHT, FOR THAT ONE.

        22    A.   NOT REALLY BECAUSE CIRCULATION THESE DAYS IS ANYTHING

        23    WE -- THE NEWSPAPER INDUSTRY MAY BE GOING TO LOWER CIRCULATION

        24    PRICES AND MAYBE EVEN FREE DISTRIBUTION.  SO I AM NOT PREPARED

        25    TO GIVE YOU A DEFINITIVE ANSWER ON WHAT WE WILL DO SIX YEARS



                                                                          284
                                  SIAS - DIRECT / ALIOTO


         1    HENCE.  OF COURSE, THIS IS SPECULATING.

         2    Q.   WELL, IN THIS REPORT -- YOU GAVE THIS REPORT TO YOUR BOARD

         3    OF DIRECTORS, CORRECT?

         4    A.   EXCUSE ME.  I DIDN'T GIVE THE REPORT.  DONALDSON, LUFKIN &

         5    JENRETTE GAVE IT AS PART OF THEIR -- OKAY.

         6    Q.   LET'S DO IT THIS WAY:

         7    A.   THIS REPORT WAS PREPARED BY SOME DONALDSON, LUFKIN

         8    BACK-ROOM PERSONNEL WHO WOULD HAVE GOTTEN MOST OF THEIR THINGS

         9    FROM VARIOUS SOURCES, I KNOW NOT WHAT, AND I DID NOT AGREE WITH

        10    MANY OF THESE BUT . . . AND I AM NOT SURE THAT MANY OF OUR

        11    DIRECTORS EVEN UNDERSTOOD IT, MUCH LESS AGREED WITH IT OR

        12    DISAGREED.

        13    Q.   THIS WAS PRESENTED TO THE BOARD OF DIRECTORS, WAS IT NOT?

        14    A.   YES, SIR.

        15    Q.   IT WAS PRESENTED TO THE BOARD OF DIRECTORS IN MAKING THE

        16    DETERMINATION AS TO WHETHER THEY WOULD SELL TO HEARST, WAS IT

        17    NOT?

        18    A.   I AM NOT SURE THAT -- IT WAS PRESENTED TO THE BOARD AS

        19    PART OF THE OVERALL PROJECT GOLDEN PROSPECT, AND IN EACH OF THE

        20    BUSINESSES THE INVESTMENT BANK WAS GOING TO CONTACT A VARIETY

        21    OF POTENTIAL BUYERS, INCLUDING IN THIS CASE THE HEARST

        22    CORPORATION.  YOUR QUESTION -- IF YOU WANT TO REPEAT IT, I WILL

        23    TRY TO ANSWER IT MORE DEFINITIVELY THAN THAT BUT . . .

        24    Q.   THE PERSON FROM DLJ ACTUALLY ADDRESSED THE BOARD OF

        25    DIRECTORS ABOUT THIS AT THE MEETING AT WHICH THE BOARD OF



                                                                          285
                                  SIAS - DIRECT / ALIOTO


         1    DIRECTORS AGREED TO SELL TO HEARST; ISN'T THAT TRUE?

         2    A.   NO, THAT IS NOT CORRECT.  THE BOARD OF DIRECTORS, AS A

         3    RESULT OF THE MEETING AT WHICH THIS (INDICATING) WAS INCLUDED,

         4    VOTED TO SELL ALL COMPONENTS OF THE CHRONICLE PUBLISHING

         5    COMPANY.  AND WE DID NOT DIRECT THE INVESTMENT BANK TO SELL ANY

         6    OF THEM TO ANY GIVEN PROSPECT.

         7    Q.   OKAY.  LET'S BACK UP, THEN.

         8               THIS DOCUMENT WAS PREPARED FOR THE BOARD OF

         9    DIRECTORS OF THE CHRONICLE PUBLISHING COMPANY?

        10    A.   YES, SIR.

        11    Q.   IT WAS PRESENTED TO THEM AT THE BOARD OF DIRECTORS

        12    MEETING?

        13    A.   YES, SIR.

        14    Q.   A PRESENTATION WAS MADE BY A REPRESENTATIVE
-- BY

        15    REPRESENTATIVES OF DONALDSON, LUFKIN & JENRETTE, CORRECT?

        16    A.   YES, SIR.

        17    Q.   AT THAT MEETING THEY VOTED TO SELL, AMONG OTHER THINGS,

        18    THE CHRONICLE, CORRECT?

        19    A.   YES, SIR.

        20    Q.   OKAY.  NOW, IF YOU WILL GO BACK TO THE DOCUMENT THAT WAS

        21    PRESENTED TO THE BOARD OF DIRECTORS, AT THAT TIME, AT THE

        22    MEETING AT WHICH THEY DECIDED TO SELL, IF YOU GO TO THE ONE ON

        23    CIRCULATION PRICING, IT SAYS WITH REGARD TO ONE NEWSPAPER NO

        24    PRICE INCREASE, BUT IF THE EXAMINER AND THE CHRONICLE WERE HEAD

        25    TO HEAD COMPETING, IT STATES, QUOTE:



                                                                        
 286
                                  SIAS - DIRECT / ALIOTO


         1                   "SUBSTANTIAL PRICE CUTS AT EXAMINER WITH

         2               MODEST PRICE CUTS AT CHRONICLE."  


         3               DO YOU BELIEVE THAT IF THE EXAMINER AND THE

         4    CHRONICLE WENT HEAD TO HEAD COMPETITION THAT ON CIRCULATION

         5    PRICING THE EXAMINER WOULD MAKE SUBSTANTIAL PRICE CUTS AND THE

         6    CHRONICLE WOULD MAKE MODEST PRICE CUTS?

         7    A.   I BELIEVE THAT THE CHRONICLE WOULD BE VERY AGGRESSIVE IN

         8    MEETING COMPETITIVE PRESSURES, VERY AGGRESSIVE, AND THE

         9    CONSEQUENCES OF THAT SIX YEARS HENCE I AM NOT PREPARED TO GET

        10    INTO QUANTIFYING.

        11    Q.   BUT WHEN YOU SAY YOU WOULD BE VERY AGGRESSIVE, YOU MEAN,

        12    COMPETE ON PRICE?

        13    A.   WE COMPETE ON A LOT OF AREAS, INCLUDING PRICE.

        14    Q.   INCLUDING PRICE.

        15               BY THE WAY, YOU MENTIONED THAT WHEN YOU WERE HAVING

        16    THESE -- OR -- IN SOME OF THESE QUESTIONS YOU SAID YOU WEREN'T

        17    SURE WHAT YOU WERE GOING TO DO.  ONE OF THE THINGS YOU MIGHT DO

        18    IS -- IF IT WERE JUST THE CHRONICLE, ONE OF THE THINGS YOU

        19    MIGHT DO IS GIVE SOME OF THE PAPER AWAY FOR FREE.  YOU SAID

        20    "FREE DISTRIBUTION."

        21    A.   I SAID THAT THAT IS -- IN THE NEWSPAPER BUSINESS THERE IS

        22    SUBSTANTIAL -- THE INDUSTRY, NOT -- THERE IS A SUBSTANTIAL MOVE

        23    TO LOOK AT CIRCULATION PATTERNS AND PRICING, WHICH THERE IS

        24    MORE AND MORE OF A TENDENCY TO OFFER DISCOUNTED OR LOWER-PRICED

        25    CIRCULATION.  AND THE ALAMEDA NEWSPAPER GROUP IS NOT A BAD



                                                                          287
                                  SIAS - DIRECT / ALIOTO


         1    EXAMPLE OF THAT.  I THINK YOU CAN GET A -- YOU CAN BUY A DAILY

         2    OVER THERE FOR
$7 A YEAR, HOME SUBSCRIPTION PRICE -- DENVER. 


         3    ANYWAY.

         4    Q.   BUT YOU MENTIONED FREE DISTRIBUTION.

         5    A.   I DID MENTION.  FREE DISTRIBUTION IS AN AREA THAT IS

         6    COMING INTO THE BUSINESS.  AND I WOULD NOT EXCLUDE THAT IN A

         7    SAN FRANCISCO SITUATION AT SOME POINT IN TIME.

         8    Q.   AND YOU DID CONSIDER THAT IN THE PAST, RIGHT?

         9    A.   NOT TO MY KNOWLEDGE.

        10    Q.   BUT YOU WOULD CONSIDER IT IF IN FACT HEARST CORPORATION

        11    SAID, "OKAY, WE'RE GOING TO CLOSE THE EXAMINER AND IT WILL BE

        12    JUST THE CHRONICLE."  ONE OF THE THINGS THAT YOU CONSIDERED WAS

        13    FREE DISTRIBUTION?


        14    A.   NO.  WE HAVEN'T GOT -- I HAVE NOT GONE INTO THE KIND OF

        15    DETAIL THAT YOU ARE BRINGING UP NOW.  WE DON'T HAVE ANY KIND OF

        16    FORMAL PLANS OR WHATEVER.  I DON'T KNOW.

        17    Q.   WELL, YOU KNOW THAT THERE ARE A NUMBER OF INDEPENDENT

        18    SMALLER NEWSPAPERS IN THE SAN FRANCISCO AREA THAT OPERATE ON

        19    THE BASIS OF FREE DISTRIBUTION, DON'T YOU?

        20    A.   YES, SIR.

        21    Q.   OKAY.  AND ONE OF THE THINGS, ARE YOU SAYING THAT IF

        22    YOU -- IF THE EXAMINER SHUT DOWN THAT ONE OF THE THINGS YOU

        23    MIGHT DO IS TARGET THOSE NEWSPAPERS?

        24    A.   ABSOLUTELY NOT.

        25    Q.   THERE WAS A REASON, HOWEVER, WHY YOU MENTIONED IT IN YOUR



                                                                          288
                                  SIAS - DIRECT / ALIOTO


         1    TESTIMONY, ISN'T THERE?

         2               WELL, DID YOU CONSIDER IT OR DIDN'T YOU, MR. SIAS?

         3    A.   I WAS DESCRIBING WHAT'S GOING ON IN THE NEWSPAPER INDUSTRY

         4    GENERALLY.

         5    Q.   YOU SAID THAT YOU WOULD DO IT.

         6               MR. ROSCH:  OBJECTION, YOUR HONOR.  MISSTATES THE

         7    PRIOR TESTIMONY.

         8               THE WITNESS:  I CERTAINLY DID NOT SAY WE WOULD DO

         9    IT.  I SAID WE WOULD CONSIDER AMONG OTHER THINGS THAT.  THERE

        10    IS A BIG DIFFERENCE BY SAYING WE WOULD DO IT.  I DON'T KNOW HOW

        11    TO MAKE -- DO SOMETHING SIX YEARS HENCE.

        12               THE COURT:  ALL RIGHT.  LET'S MOVE ON.

        13    BY MR. ALIOTO:


        14    Q.   WITH REGARD TO AD REVENUES, ACCORDING TO THIS DOCUMENT

        15    THAT WAS PRESENTED TO THE BOARD OF DIRECTORS OF THE CHRONICLE

        16    ON THE DAY THAT THEY VOTED TO SELL THE CHRONICLE, IT STATES

        17    THAT -- WITH ONE NEWSPAPER IT STATES AS FOLLOWS, QUOTE:

        18                   "ONE TIME 20 PERCENT INCREASE IN RETAIL

        19               NATIONAL AD RATES OFFSET BY MODEST DECLINES OF

        20               COMBINED CIRCULATION."

        21               DO YOU SEE THAT?

        22    A.   YES.

        23    Q.   UNDER THE COLUMN OF "HEAD TO HEAD COMPETITION BETWEEN THE

        24    EXAMINER AND THE CHRONICLE" IT STATES, QUOTE:

        25                   "SIGNIFICANT AD PRICE COMPETITION WITH



                                                                          289
                                  SIAS - DIRECT / ALIOTO


         1               15 PERCENT AND 10 PERCENT RATE DECLINES AT THE

         2               EXAMINER AND THE CHRONICLE, RESPECTIVELY."

         3               DO YOU SEE THAT?

         4    A.   YES, I DO.

         5    Q.   SO THAT ACCORDING TO THIS REPORT, IF IT WERE HEAD-TO-HEAD

         6    COMPETITION, AD PRICES WOULD BE GOING DOWN AT BOTH PAPERS, BUT

         7    IF IT WERE JUST ONE PAPER, IT WOULD GO UP 20 PERCENT, CORRECT?

         8    A.   ACCORDING TO THIS REPORT (INDICATING).

         9    Q.   AND THAT'S A 30 AND 35 PERCENT DIFFERENCE ONLY BECAUSE

        10    THERE IS A COMPETING PAPER, CORRECT?

        11    A.   ONCE AGAIN, IF ONE WANTS TO MEMORIALIZE THIS PARTICULAR

        12    REPORT WRITTEN BY PEOPLE WHO HAVE HAD NO NEWSPAPER EXPERIENCE

        13    AND HAVE NEVER LIVED IN SAN FRANCISCO AND ARE WRITING IT FOR

        14    OTHER PURPOSES, THEN THAT WOULD BE CORRECT.  I DO NOT AGREE

        15    WITH THE REPORT AND, TO MY KNOWLEDGE, I DON'T THINK THAT THE

        16    CHRONICLE DIRECTORS DID.

        17    Q.   WELL, YOU SAID THAT IF THERE WERE HEAD-TO-HEAD COMPETITION

        18    YOU WOULD COMPETE AND YOU WOULD COMPETE AGGRESSIVELY, RIGHT?

        19    A.   YES, SIR, I DID SAY THAT.

        20    Q.   INCLUDING PRICE, CORRECT?

        21    A.   IT COULD INCLUDE PRICE.

        22    Q.   AND THE PRICE WOULD NOT ONLY BE CIRCULATION BUT AD RATES,

        23    TOO, CORRECT?

        24    A.   POSSIBLY.

        25    Q.   AND YOU WOULD EXPECT THAT THE HEARST CORPORATION HEAD TO



                                                                          290
                                  SIAS - DIRECT / ALIOTO


         1    HEAD WOULD ALSO BE AGGRESSIVE, WOULDN'T YOU?

         2    A.   I WOULD -- IF THEY -- IF THEY CHOSE TO STAY IN THE MARKET?

         3    Q.   YES.

         4    A.   I WOULD ASSUME THEY WOULD MAKE A MAJOR EFFORT.

         5    Q.   AND DO YOU THINK THAT THEIR MAJOR EFFORT WOULD INCLUDE

         6    COMPETITION ON PRICE, DON'T YOU?

         7    A.   I THINK THAT THAT CAN BEST BE ASKED OF THE HEARST

         8    CORPORATION.

         9    Q.   YOU WOULD EXPECT IT FROM THEM, WOULDN'T YOU?

        10    A.   I WOULD EXPECT IT AS A POSSIBILITY.

        11    Q.   AND THAT POSSIBILITY WOULD BE BOTH FOR CIRCULATION AND

        12    RATES; ISN'T THAT RIGHT?

        13    A.   AGAIN, IT IS WELL WITHIN THE REALM OF POSSIBILITY.

        14    Q.   WITH REGARD TO PRODUCTION -- I WANT TO GO DOWN TO CAPITAL

        15    EXPENDITURES BECAUSE I WOULD LIKE TO TALK TO YOU ABOUT THIS FOR

        16    A MINUTE.

        17    A.   ALL RIGHT.

        18    Q.   UNDER THE CAPITAL EXPENDITURES UNDER THE COLUMN WHERE

        19    THERE WOULD JUST BE ONE SURVIVING NEWSPAPER, IT STATES, QUOTE:

        20                   "NO NEW PLANT IF JOA RESOLVED NOW."

        21               THEN IT SAYS, "IF NO RESOLUTION," SOMETHING ELSE.  I

        22    AM GOING TO GET TO THAT IN A MINUTE.

        23               DO YOU SEE THAT?

        24    A.   YES, I SEE IT.

        25    Q.   HOWEVER, ON A HEAD-TO-HEAD BASIS IT STATES, QUOTE:



                                                                          291
                                  SIAS - DIRECT / ALIOTO


         1                   "CHRONICLE CONSTRUCTS NEW PLANT AT TOTAL

         2               COST OF $125 MILLION IN 2003-2005 PLUS LAND

         3               COSTS OF $15 MILLION.  ASSUMES EXAMINER DOES NOT

         4               CONSTRUCT NEW PLANT BUT RECEIVES TWO PLANTS AT

         5               TERMINATION AND CHRONICLE RECEIVES ONE PLANT AND

         6               $8 MILLION FROM HEARST."

         7               DO YOU SEE THAT?

         8    A.   YES.

         9    Q.   DO YOU AGREE THAT IF YOU WERE GOING HEAD TO HEAD

        10    COMPETITION WITH THE EXAMINER YOU'D HAVE TO CONSTRUCT A NEW

        11    PRESSING PLANT?

        12    A.   I AGREE TO THE FOLLOWING:  IF THE PRODUCTION FACILITIES OF

        13    THE NEWSPAPER AGENCY WERE DIVIDED IN HALF PROPORTIONATE TO THE

        14    OWNERSHIP OF THE TWO OWNERS, THAT IT WOULD BE IMPOSSIBLE TO PUT

        15    OUT THE CHRONICLE IN A TIMELY FASHION AND WITH A PRODUCT THAT

        16    WOULD BE SATISFACTORY TO ADVERTISERS.  SO THAT WOULD ENTAIL

        17    UNDER THOSE CIRCUMSTANCES THE CONSTRUCTION OF SOME KIND OF

        18    SUPPLEMENTAL OR NEW FACILITIES.

        19    Q.   AND IF YOU DID CONSTRUCT A NEW PLANT OR, AS YOU SAY,

        20    FACILITIES, WOULD THE COST BE APPROXIMATELY $125 MILLION?

        21    A.   IT WOULD --

        22    Q.   OR MORE?

        23    A.   IT WOULD NOT BE.

        24    Q.   WOULD IT BE MORE?

        25    A.   THIS IS TYPICAL OF WHY THIS REPORT IS -- IS AT THE BEST



                                                                          292
                                  SIAS - DIRECT / ALIOTO


         1    VERY, VERY SUPERFICIAL.  NO, IT WOULD PROBABLY BE MORE IN THE

         2    AREA OF 250 TO
$275 MILLION.

         3    Q.   250 TO $275 MILLION?

         4    A.   THAT IS CORRECT.

         5    Q.   SO THAT IF THERE IS COMPETITION, THAT'S WHAT YOU WOULD

         6    HAVE TO DO.  YOU WOULD HAVE TO SPEND OR MAKE THAT KIND OF

         7    CAPITAL INVESTMENT TO BE COMPETITIVE, YOU THINK?

         8    A.   LET ME GO OVER THIS ONE MORE TIME.  IF WE HAVE A -- AND

         9    HERE IS WHERE I MIGHT -- THE NEWSPAPER AGENCY, THE JOINT

        10    OPERATING AGREEMENT WE HAVE HERE, IS DIFFERENT THAN MOST

        11    NEWSPAPER JOINT OPERATING AGREEMENTS, WHICH CALLED -- WHICH

        12    ENTAIL A HOST NEWSPAPER.  AND THE HOST NEWSPAPER -- IN SEATTLE

        13    THE HEARST CORPORATION IS IN A JOINT OPERATING AGREEMENT WITH

        14    THE SEATTLE TIMES.  THE SEATTLE TIMES IS THE HOST NEWSPAPER. 

        15    AND IN THESE ARRANGEMENTS THE HOST NEWSPAPER OWNS ALL THE

        16    PRODUCTION FACILITIES AND ALL THE BUSINESS SYSTEMS AND

        17    ADVERTISING AND DOES EVERYTHING THAT THE JOINT OPERATING

        18    AGREEMENT CALLS FOR THE SFNA TO DO.  AND SO THE -- SOME OF THE

        19    ISSUES THAT COME UP HERE ARE PECULIAR TO SAN FRANCISCO BECAUSE

        20    OF THIS JOA WHERE WE'RE SHARING ASSETS.

        21               NOW, TO COME BACK TO YOUR POINT, IF THE EXAMINER

        22    IS -- IF WE -- IF WE HAVE TO SPLIT THE AGENCY IN HALF, IT WILL

        23    BE NECESSARY
-- WE CANNOT PRINT THE CHRONICLE WITH HALF OF

        24    THOSE FACILITIES.  AND WE WOULD HAVE TO MAKE A MAJOR INVESTMENT

        25    IN THE PRODUCTION OF A PLANT.



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                                  SIAS - DIRECT / ALIOTO


         1    Q.   WAS THAT DISCUSSED AT THE BOARD OF DIRECTORS MEETING AT

         2    WHICH THEY MADE THE DETERMINATION TO SELL THE CHRONICLE, THAT

         3    IF THEY WENT TO HEAD-TO-HEAD COMPETITION, THEY MIGHT HAVE TO

         4    MAKE A CAPITAL INVESTMENT OF ALMOST A QUARTER OF A BILLION

         5    DOLLARS, OR MORE?

         6    A.   WELL, I DON'T REMEMBER WITH ANY SPECIFICITY HOW MUCH

         7    DISCUSSION AND TIME WAS SPENT ON THIS.  I AM SURE THERE WOULD

         8    HAVE BEEN SOME PASSING REFERENCE, AT LEAST, AND PROBABLY MORE. 

         9    IT DOESN'T JUMP OUT AT ME.

        10    Q.   NOW, IT ACCORDS WITH YOUR UNDERSTANDING OF COMPETITION,

        11    DOES IT NOT, THAT WHEN YOU ARE GOING HEAD TO HEAD IN

        12    COMPETITION, YOU HAVE TO CONTINUALLY ATTEMPT TO IMPROVE THE

        13    QUALITY OF YOUR PRODUCT?

        14    A.   I THINK WE HAVE TO DO THAT WHETHER WE HAVE WHAT YOU REFER

        15    TO AS "COMPETITION" OR NOT.  WE NEED TO -- WE NEED TO APPEAL --

        16    HAVE A PRODUCT, AN EDITORIAL PRODUCT, THAT CONTAINS

        17    INFORMATION, ENTERTAINMENT, USEFUL -- USEFUL COMPONENTS FOR THE

        18    LIVES OF READERS, AND WE HAVE TO ATTRACT READERS.  AND THEY'VE

        19    GOT -- WHAT WE DO IS THE PRODUCT.  SO WE HAVE TO DO THAT.  AND

        20    WE DO IT WHETHER THERE IS ANOTHER NEWSPAPER OR THERE IS NOT

        21    ANOTHER NEWSPAPER IN HOPE -- TO USE YOUR TERM, "COMPETITION."

        22    Q.   IF IN FACT YOU HAD TO GO HEAD-TO-HEAD COMPETITION WITH THE

        23    EXAMINER, ONE OF THE THINGS THAT YOU WOULD HAVE TO DO, WOULD IT

        24    NOT, IS THAT YOU HAVE TO ENSURE -- I AM TALKING ABOUT THE --

        25    FIRST THE PHYSICAL QUALITY OF THE PAPER BUT ALSO ITS EDITORIAL



                                                                          294
                                  SIAS - DIRECT / ALIOTO


         1    AND REPORTORIAL QUALITY, WOULDN'T YOU?  

         2    A.   YES.  WE HAVE.

         3    Q.   AND IN THAT REGARD -- AND IN THAT REGARD YOU WOULD HAVE TO

         4    ATTEMPT TO -- IF YOU WERE GOING HEAD TO HEAD TO COMPETE FOR

         5    THE, AMONG OTHER THINGS, REPORTERS?

         6    A.   CLARIFICATION.  WHEN YOU SAY "HEAD TO HEAD," DO YOU MEAN

         7    COME OUT IN THE SAME TIME CYCLE AS THE --

         8    Q.   YES.

         9    A.   SO IN THIS CASE, THEN, IT WOULD BE THE MORNING CYCLE.

        10    Q.   CORRECT.

        11    A.   AND NOW IF YOU -- DO WE COMPETE -- WE COMPETE FOR

        12    REPORTERS WITH
-- WITH PUBLICATIONS ALL OVER THE COUNTRY.  WE

        13    LOSE THEM WHEN WE GET THEM, INCLUDING THE EXAMINER.  AND RIGHT

        14    NOW THEY'RE -- THEY'RE NOT IN THE SAME PUBLISHING CYCLE.  SO I

        15    DON'T KNOW THAT ANYTHING WOULD CHANGE IF THEY CHANGE THE CYCLE

        16    WHERE THEY ARE PUBLISHED.  THERE STILL IS COMPETITION FOR GOOD

        17    EDITORIAL TALENT.  AND IT'S NOT CONFINED TO JUST SAN FRANCISCO. 

        18    IT COMES FROM ALL OVER THE COUNTRY.

        19    Q.   AS AN ANECDOTE, THE HELM THAT HERB CAEN WENT FIRST FROM

        20    THE -- FIRST IN THE CHRONICLE, THEN THE EXAMINER AND THEN BACK

        21    TO THE CHRONICLE.

        22    A.   YES.

        23    Q.   AND, I TAKE IT, THAT -- DO YOU KNOW ANYTHING ABOUT THAT?

        24    A.   NO, I DON'T.

        25    Q.   DID IT HAVE ANYTHING TO DO WITH PAYING HIM MORE MONEY?



                                                                          295
                                  SIAS - DIRECT / ALIOTO


         1    A.   OTHERS WHO WERE HERE AT THE TIME -- THERE AREN'T TOO MANY

         2    LEFT -- WOULD BE ABLE TO GIVE YOU THAT.  I AM UNDER THE

         3    IMPRESSION THAT MONEY DID HAVE SOMETHING TO DO WITH HIS LEAVING

         4    THE CHRONICLE.


         5    Q.   OKAY.

         6    A.   AND PROBABLY ON HIS RETURN.

         7    Q.   ALL RIGHT.  WITH REGARD TO EDITORIAL -- AND THIS IS WHAT I

         8    WANTED TO ASK YOU ABOUT -- WITH THE EDITORIAL COLUMN ON THE --

         9    ON -- UNDERNEATH WHERE THERE WOULD BE ONLY ONE SURVIVING

        10    NEWSPAPER, IT STATES, QUOTE:

        11                   "INCREMENTAL $5 MILLION FOR SUNDAY."

        12               DO YOU SEE THAT?  THIS IS --

        13    A.   YES.

        14    Q.   BUT HEAD TO HEAD IT STATES, QUOTE:

        15                   "EXAMINER INCREASES SPENDING BY 25 MILLION

        16               AND CHRONICLE INCREMENTALLY SPENDS 5 MILLION FOR

        17               SUNDAY."

        18               DO YOU SEE THAT?

        19    A.   YES, SIR.

        20    Q.   OKAY.  DO YOU AGREE WITH THAT?

        21    A.   NO, NOT NECESSARILY.  I THINK YOU ARE PULLING FIGURES

        22    RIGHT OUT OF THIN AIR BY PEOPLE WHO DON'T KNOW DOODLY-SQUAT

        23    ABOUT THE BUSINESS.  AND SO I -- CHRONICLE INCREMENTALLY, WE'VE

        24    HAD VARIOUS ESTIMATES.  IT DEPENDS ON WHEN YOU MAKE THEM HOW

        25    MUCH INCREMENTAL SPENDING WE HAVE DONE.  AND I HAVE NOT A CLUE



                                                                          296
                                  SIAS - DIRECT / ALIOTO


         1    AS TO HOW THEY CAME UP WITH WHAT THE HEARST CORPORATION WOULD

         2    SPEND ON THE EXAMINER.  BUT I AM CONFIDENT THAT WHOEVER CAME UP

         3    WITH IT IS TOTALLY INCOMPETENT TO MAKE THAT KIND OF A DECISION.

         4    Q.   WHEN THIS PRESENTATION WAS MADE TO THE BOARD OF DIRECTORS

         5    OF THE CHRONICLE ON THE DAY -- BY REPRESENTATIVES OF DONALDSON,

         6    LUFKIN & JENRETTE?

         7    A.   YES, HEADED BY JILL GREENTHAL.

         8    Q.   HEADED BY JILL GREENTHAL, ON THE DAY THAT THEY VOTED TO

         9    SELL THE CHRONICLE, DID YOU TELL THE BOARD OF DIRECTORS, BEING

        10    THE CHAIRMAN OF THE BOARD -- DID YOU TELL THEM, "YOU ARE GOING

        11    TO HEAR FROM THESE PEOPLE BUT THEY'RE INCOMPETENT AND DON'T

        12    KNOW WHAT THEY'RE TALKING ABOUT"?

        13    A.   WE DIDN'T VOTE TO SELL THE CHRONICLE.  WE VOTED TO SELL

        14    THE CHRONICLE CORPORATION AND ITS ATTENDANT ASSETS, NUMBER ONE.

        15               NUMBER TWO, THIS DID NOT GET THE KIND OF ATTENTION

        16    THAT YOU ARE GIVING IT HERE NOW, THIS -- THIS PARTICULAR

        17    ANALYSIS.  AND, NO, I DIDN'T USE SUCH COLORFUL LANGUAGE, BUT I

        18    MADE IT QUITE CLEAR THAT I DID NOT THINK A GREAT DEAL OF

        19    THIS -- OF THESE ASSUMPTIONS -- BECAUSE MANY OF THEM WERE

        20    DERIVED FROM WHAT THEY HAD PICKED UP BY STUDIES AND THEY

        21    WEREN'T REALLY ASSIGNED TO DO ALL OF THESE -- MAKE SCENARIOS ON

        22    OPERATING THINGS.  THEY WERE ASSIGNED TO FIND OUT HOW MUCH

        23    MONEY OR GIVE US, BASED ON THEIR EXPERIENCE, WHAT THEY THOUGHT

        24    THEY COULD GENERATE IN TERMS OF RESULTS OR SALES PRICES FOR OUR

        25    VARIOUS BUSINESSES.



                                                                          297
                                  SIAS - DIRECT / ALIOTO


         1    Q.   BUT THESE PEOPLE MADE A PRESENTATION, ISN'T IT CORRECT,

         2    NOT ONLY OF THE DOCUMENT BUT THEY MADE AN ORAL PRESENTATION TO

         3    YOUR BOARD.

         4    A.   YES, THEY DID.

         5    Q.   IF YOU THOUGHT AND BELIEVED THAT THEY WERE INCOMPETENT,

         6    THERE WOULD BE NO REASON FOR YOU TO PERMIT THEM TO DO THAT AS

         7    THE CHAIRMAN, WOULD THERE?

         8    A.   MR. ALIOTO, I DIDN'T SAY DONALDSON, LUFKIN
& JENRETTE WAS

         9    INCOMPETENT AS IT RELATES TO THEIR ASSIGNMENT, WHICH WAS TO

        10    EVALUATE THE BUSINESS AND TELL THE SHAREHOLDERS WHAT THEY

        11    THOUGHT THEY WOULD BE ABLE TO OBTAIN IN PRICES FOR THESE

        12    BUSINESSES AND WHAT THE TIME FRAME AND WHAT CONDITIONS MIGHT

        13    PERTAIN TO THOSE TRANSACTIONS.  THAT'S WHAT THEY ARE VERY

        14    COMPETENT TO DO.

        15    Q.   ARE YOU STATING OR WOULD IT BE YOUR TESTIMONY BEFORE THE

        16    COURT THAT -- THAT THIS PARTICULAR DOCUMENT AND THE DONALDSON,

        17    LUFKIN, JENRETTE PRESENTATION HAD NOTHING TO DO WITH THE

        18    DECISION BY THE BOARD TO VOTE TO SELL, AMONG OTHER ASSETS, THE

        19    CHRONICLE?

        20    A.   NO, I AM NOT SAYING THAT.

        21               MR. ALIOTO:  MAY WE TAKE A SHORT RECESS, YOUR HONOR?

        22               THE COURT:  ALL RIGHT.  IS TEN MINUTES ENOUGH?

        23               MR. ALIOTO:  YES, SIR.  THANK YOU.

        24               THE COURT:  ALL RIGHT.  FINE.  WE WILL BE IN RECESS

        25    FOR TEN MINUTES.



                                                                          298
                                  SIAS - DIRECT / ALIOTO


         1               AND I THINK WE CAN GO UNTIL BETWEEN 1:00 AND 1:30.

         2               MR. ALIOTO:  VERY GOOD, YOUR HONOR.

         3               THE COURT:  IF THAT IS AGREEABLE --

         4               MR. ALIOTO:  YES.

         5               THE COURT:  -- WE WILL PLAN TO DO THAT.

         6               VERY WELL.

         7               (RECESS TAKEN FROM 11:16 TO 11:29 A.M.)

         8               THE COURT:  YOU MAY CONTINUE, MR. ALIOTO.

         9               MR. ALIOTO:  THANK YOU, YOUR HONOR.  MAY IT PLEASE

        10    YOUR HONOR.

        11    BY MR. ALIOTO:


        12    Q.   IN REFERENCE TO THE -- IN REFERENCE TO THIS PRESENTATION,

        13    THE DLJ PRESENTATION, YOU UNDERSTOOD THAT MOST OF IT WAS

        14    DERIVED FROM THE DLJ PEOPLE TALKING WITH PEOPLE AT THE

        15    CHRONICLE CORPORATION, DIDN'T YOU?

        16    A.   AT OUR DIVISIONS.

        17    Q.   AT YOUR DIVISIONS?

        18    A.   YES.

        19    Q.   SO THAT YOU UNDERSTOOD THAT --

        20    A.   AND THE CHRONICLE CORPORATION, THE CORPORATE FINANCIAL

        21    PEOPLE AND THEN AT EACH INDIVIDUAL OPERATION.

        22    Q.   BUT I AM SAYING THAT MOST OF IT -- YOU UNDERSTOOD THAT

        23    MOST OF IT WAS DERIVED DIRECTLY FROM TALKING WITH PEOPLE AT THE

        24    CHRONICLE CORPORATION OR CHRONICLE.

        25               THE COURT:  WELL, I THINK YOU ARE TALKING ABOUT TWO



                                                                          299
                                  SIAS - DIRECT / ALIOTO


         1    DIFFERENT -- I THINK THE WITNESS IS TALKING ABOUT SOMETHING

         2    DIFFERENT FROM WHAT YOU HAVE IN MIND, MR. ALIOTO.

         3    BY MR. ALIOTO:


         4    Q.   ALL RIGHT.  LET ME DO IT THIS WAY.

         5    A.   WHAT DO YOU MEAN BY THE CHRONICLE?  THERE IS A CHRONICLE

         6    CORPORATION AND IT OPERATES EIGHT -- AT THE TIME EIGHT

         7    DIFFERENT BUSINESSES.  AND IN PREPARING THIS DOCUMENT, THE

         8    INVESTMENT BANK TALKED FIRST WITH THE CORPORATE GROUP -- WE

         9    HAVE A SMALL ONE BUT THE FINANCIAL, MYSELF AND THE EXECUTIVE

        10    VICE PRESIDENT AND OUR CHIEF FINANCIAL OFFICER, ALAN NICHOLS,

        11    MR. JAFFE, AND OUR CONTROLLER AND OTHERS.  AND THEN THEY

        12    VISITED IN VARIOUS TEAMS, EACH OF OUR EIGHT DIFFERENT OPERATING

        13    BUSINESSES.  SO THAT'S HOW THIS
-- AND FROM THAT . . .

        14    Q.   "THIS" MEANING EXHIBIT 5?

        15    A.   EXHIBIT 5 -- "THIS" MEANING PROJECT GOLDEN, THE WHOLE

        16    THING (INDICATING), YES.

        17    Q.   YES, THIS WHOLE THING.

        18    A.   UH-HUH.

        19    Q.   BEFORE THIS RECESS JUST A WHILE AGO, I THOUGHT YOU SAID

        20    YOU THOUGHT THIS WAS INCOMPETENT?

        21    A.   NO, I WAS VERY CLEAR, MR. ALIOTO.

        22    Q.   YOU THOUGHT THE PEOPLE WERE INCOMPETENT?

        23    A.   NO.  I WAS VERY CLEAR.  I REFERRED TO THE PARTICULAR

        24    CONCLUSIONS THAT YOU WERE READING FROM PAGE NUMBER 26 IN THE

        25    ADDENDUM, AND I GOT A LITTLE COLORFUL.  I SHOULDN'T HAVE.  THE



                                                                          300
                                  SIAS - DIRECT / ALIOTO


         1    WAY THESE THINGS ARE PUT TOGETHER IS PEOPLE FROM THE INVESTMENT

         2    BANK GO OUT TO VISIT THE INDIVIDUAL OPERATIONS AND THEY PREPARE

         3    A SUMMARY, AND THEN THE SUMMARY IS SENT BACK TO THE GIVEN

         4    BUSINESS WHO THEN EDITS AND MAKES CHANGES AND HELPS TO CORRECT

         5    MANY THINGS THAT ARE NOT IN IT.

         6               AND OUT OF THAT EVENTUALLY YOU GET A DOCUMENT LIKE

         7    THIS (INDICATING) AND YOU GET AN OFFERING MEMORANDUM ON EACH OF

         8    THE BUSINESSES.

         9               AND WHAT I REFERRED TO WAS THAT THIS PARTICULAR

        10    SECTION, PAGE HERE, AND THE TERMINOLOGY AND SOME OF THE

        11    CONCLUSIONS I DO NOT AGREE WITH.  AND I -- I COULD NOT BE MORE

        12    EXPRESSIVE THAN THAT.

        13               THE COURT:  ALL RIGHT.  LET'S MOVE ON.

        14    BY MR. ALIOTO:


        15    Q.   I SHOW YOU EXHIBIT 86.

        16               MAY I APPROACH THE WITNESS, YOUR HONOR?

        17               THE COURT:  YES, YOU MAY.

        18    BY MR. ALIOTO:


        19    Q.   EXHIBIT 86 IS A DOCUMENT DATED JULY 9, 1998.  IT IS

        20    DIRECTED TO YOU.  IT IS FROM THE HEARST CORPORATION AND

        21    PARTICULARLY MR. FRANK BENNACK.

        22               DID YOU RECEIVE THAT DOCUMENT ON OR ABOUT THE DATE

        23    INDICATED FROM MR. BENNACK?

        24    A.   YES, SIR.

        25    Q.   I WOULD LIKE TO DIRECT YOUR ATTENTION TO PAGE 2 OF THE



                                                                          301
                                  SIAS - DIRECT / ALIOTO


         1    DOCUMENT.

         2    A.   YES.

         3    Q.   AND IT STATES AT PAGE 2 IN THE SECOND FULL PARAGRAPH -- DO

         4    YOU SEE WHERE IT SAYS, QUOTE:

         5                   "I HAVE CERTAINLY NOTED YOUR ORAL COMMENTS"?

         6    A.   YES.

         7    Q.   OKAY.  NOW, IT STATES, QUOTE:

         8                   "I HAVE CERTAINLY NOTED YOUR ORAL COMMENTS

         9               IN OUR LAST MEETING CONCERNING THE DIFFICULTY OF

        10               THE SO-CALLED FIRST REFUSAL PROVISION."

        11               LET ME MAKE SURE ABOUT THIS.  THIS IS IN JULY OF

        12    1998.  BY THIS TIME DID THE -- WERE THE DISCUSSIONS BACK ON

        13    TRACK?

        14    A.   THIS -- THIS LETTER FROM MR. BENNACK WAS IN RESPONSE TO

        15    THAT LETTER THAT WE -- EXHIBIT -- THE OCTOBER 24TH, 1997,

        16    EXHIBIT 85, THERE WERE DISCUSSIONS THAT MR. BENNACK AND I HAD

        17    AFTER HE RECEIVED A COPY OF THAT.  WE HAD ABOUT AN HOUR OR TWO

        18    IN NEW YORK.  AND WE TALKED IN GENERAL WITH WHAT MIGHT BE,

        19    NOTHING OF ANY CONSEQUENCE IN TERMS OF ACTIONABLE THINGS.

        20               AND THEN, AS A FOLLOW-UP, I SOMEWHERE ALONG THE LINE

        21    ASKED HIM IF HE WOULD BE GOOD ENOUGH TO LET US KNOW WHAT --

        22    WHAT IT MIGHT BE -- UNDER WHAT CONDITIONS HEARST WOULD

        23    CONTINUE.  AND THIS WAS DONE AT THE INSTIGATION OF OUR

        24    SHAREHOLDERS AND SHAREHOLDER DIRECTORS.

        25    Q.   SO THEY WANTED TO BRING IT UP AGAIN --



                                                                          302
                                  SIAS - DIRECT / ALIOTO


         1    A.   YES.

         2    Q.   -- SOMETIME AT LEAST BY THIS TIME PERIOD IN 1998, EARLY

         3    '98 AND THE SUMMER OF '98?  

         4    A.   YES.

         5    Q.   AND AT THAT TIME, THEN, IF YOU LOOK AT -- ON PAGE 2, THERE

         6    IS REFERENCE AGAIN TO DISCUSSING THE DIFFERENT SPLIT IF THE

         7    EXAMINER WERE TO CLOSE, CORRECT, THE FIRST FULL PARAGRAPH?

         8    A.   YES.  THANK YOU.  THAT IS CORRECT.

         9    Q.   OKAY.  THEN GOING DOWN TO THE NEXT FULL PARAGRAPH HE

        10    STATES, QUOTE:


        11                   "I HAVE CERTAINLY NOTED YOUR ORAL COMMENTS

        12               IN OUR LAST MEETING CONCERNING THE DIFFICULTY OF

        13               THE SO-CALLED FIRST REFUSAL PROVISION.  SINCE

        14               HEARST'S DESIRE, AND INDEED INTENTION, IS TO

        15               REMAIN IN THE SAN FRANCISCO NEWSPAPER MARKET,

        16               GOING FORWARD, THE PRESERVATION OF THE FIRST

        17               REFUSAL RIGHTS CURRENTLY ENJOYED BY THE PARTIES

        18               REMAINS A VITAL INGREDIENT."

        19               WHAT DID YOU UNDERSTAND THAT TO MEAN?

        20    A.   IN REGARD TO HEARST'S INTENTIONS ABOUT THE SAN FRANCISCO

        21    NEWSPAPER MARKET OR THE FIRST REFUSAL RIGHTS?

        22    Q.   FIRST WITH REGARD TO THEIR INTENTION TO REMAIN IN THE SAN

        23    FRANCISCO NEWSPAPER MARKET.

        24    A.   WHAT I UNDERSTOOD OR WHAT I THOUGHT WAS -- AND I HAVE

        25    ALWAYS THOUGHT
-- THAT MR. BENNACK SAYING THAT WITH GREAT



                                                                          303
                                  SIAS - DIRECT / ALIOTO


         1    ELOQUENCE, I DID NOT BELIEVE IT, AND SO I DON'T KNOW WHETHER TO

         2    SAY THAT'S MY UNDERSTANDING OR NOT.  I DID NOT BELIEVE THAT

         3    THEY WOULD INDEED STAY IN THE MARKET AFTER 2005.  THAT'S NUMBER

         4    ONE.

         5               NUMBER TWO, IF -- FIRST REFUSAL RIGHTS, MR. BENNACK

         6    ALWAYS SAID THAT IN THE EVENT THERE WAS ANY KIND OF A

         7    RESOLUTION OF THE JOA, ONE OF THE THINGS THAT HEARST WOULD

         8    REQUIRE WOULD BE SOME FORM OF CONTINUUM OF FIRST REFUSAL.  IT

         9    WAS SUBJECT TO BEING REWRITTEN.  IT'S VERY RESTRICTIVE AS IT'S

        10    CURRENTLY WRITTEN.  BUT HE WAS VERY CONSISTENTLY EMPHATIC THAT

        11    THAT WAS ONE OF THE TERMS OR CONDITIONS UNDER WHICH THEY WOULD

        12    CONSIDER SOME FORM OF A CLOSING OR SELLING THE EXAMINER.

        13    Q.   WELL, WHAT YOU WERE DOING HERE IS THAT YOU WERE GOING TO

        14    ENTER INTO THIS NEW PARTNERSHIP, AND AGAIN IT WAS GOING TO BE

        15    50/50 UNTIL THE CONCLUSION OF THE JOA, CORRECT?

        16    A.   YES.

        17    Q.   AND THEN IT WAS GOING TO GO TO 72 PERCENT AND 27 PERCENT,

        18    CORRECT?

        19    A.   THAT'S WHAT MR. BENNACK WAS PROPOSING.

        20    Q.   AND WHAT YOU WERE DOING, IN EFFECT -- AND THIS ASSUMED

        21    THAT THE EXAMINER CLOSED; IS THAT RIGHT?

        22    A.   IT ASSUMED THAT THE EXAMINER WOULD EITHER HAVE BEEN BOUGHT

        23    BY SOMEBODY AFTER HAVING BEEN OFFERED FOR SALE OR -- OR CLOSED

        24    IF IT HAD -- IF THERE WERE NO TAKERS.

        25    Q.   WELL, LET ME SHOW YOU EXHIBIT 120 AND 131.



                                                                          304
                                  SIAS - DIRECT / ALIOTO


         1               MAY I APPROACH THE WITNESS, YOUR HONOR?

         2               THE COURT:  YES, YOU MAY.

         3    BY MR. ALIOTO:


         4    Q.   120 PURPORTS TO BE A HEARST JULY 9, 1998 PROPOSAL.  AND

         5    THEN ATTACHED TO IT ARE SOME -- IS A SPREADSHEET.  AND THIS IS

         6    FROM -- THESE WERE PRODUCED FROM THE CHRONICLE FILES.

         7               AND THEN EXHIBIT 131 IS ALSO A HEARST JULY 9, 1998

         8    PROPOSAL, AND IT SEEMS TO BE ALMOST THE SAME AS 120, AND IT

         9    GOES FOR TWO PAGES AND IT'S JUST A LITTLE BIGGER.

        10               WOULD YOU LOOK AT BOTH OF THOSE DOCUMENTS AND TELL

        11    US WHETHER OR NOT THOSE WERE DOCUMENTS THAT EITHER WERE

        12    PREPARED BY YOU OR FOR YOU AS TO THE HEARST PROPOSAL OF JULY 9,

        13    1998, WHICH IS THE LETTER OF MR. BENNACK, WHICH IS EXHIBIT 86?

        14    A.   EXHIBIT 120 WOULD HAVE BEEN PREPARED BY -- UNDER NICHOLS

        15    AND JAFFE WITH SOME OF THE -- WITH THE PRESUMPTIONS THAT YOU

        16    SEE HERE AS A
-- AND NOW EXHIBIT 131 IS -- IT WILL TAKE ME A

        17    MINUTE TO GO OVER THIS, COUNSEL.  (WITNESS READING DOCUMENT).

        18               EXHIBIT 131, YEAH, I HAVE SEEN IT.  IT'S GOT A LOT

        19    ON IT.  

        20               AND NOW IF YOU WOULD BE GOOD ENOUGH TO REPEAT THE

        21    QUESTION, I WILL TRY TO . . .

        22    Q.   ARE THESE DOCUMENTS THAT WERE EITHER PREPARED BY YOU OR

        23    FOR YOU OR AT LEAST PREPARED BY SOMEONE IN THE CHRONICLE?

        24    A.   THEY WERE PREPARED BY CHRONICLE PUBLISHING COMPANY.

        25    Q.   OKAY.  AND THEY ATTEMPTED -- AND YOU SAW THEM AT OR ABOUT



                                                                          305
                                  SIAS - DIRECT / ALIOTO


         1    THIS TIME, SOMETIME IN '98?

         2    A.   YES.

         3    Q.   ALL RIGHT.  AND -- AND THEY WERE WITH REGARD TO

         4    MR. BENNACK'S PROPOSAL OF JULY 9, CONTAINED IN MR. BENNACK'S

         5    LETTER OF JULY 9, 1998?

         6    A.   YES.

         7               MR. ALIOTO:  WE WOULD OFFER INTO EVIDENCE WHAT ARE

         8    MARKED FOR IDENTIFICATION, YOUR HONOR, AS 120 AND 131.

         9               MR. ROSCH:  NO OBJECTION, YOUR HONOR.

        10               THE COURT:  VERY WELL.  120 AND 131 ARE ADMITTED.

        11                             (PLAINTIFF'S EXHIBITS 120 AND 131 

        12                              RECEIVED IN EVIDENCE)

        13    BY MR. ALIOTO:


        14    Q.   OKAY.  NOW, EXHIBIT 131 ASSUMES THAT THE -- NUMBER 1,

        15    ARABIC NUMBER 1, STATES, QUOTE, "EXAMINER CLOSED." 


        16               DO YOU SEE THAT?

        17    A.   YES.

        18    Q.   THAT'S THE FIRST ITEM, NUMBER 1.

        19               AND THAT WAS THE -- THAT WAS THE ASSUMPTION OF ALL

        20    OF THIS; IS THAT RIGHT?

        21    A.   WELL, I -- THAT'S WHAT THIS SAYS, AND THESE PEOPLE --

        22    CLOSED OR SOLD.  I MEAN, I HAVE TO -- I HAVE NEVER HAD ANY

        23    CONVERSATION WITH -- OF ANY CONSEQUENCE WITH MR. BENNACK WHERE

        24    IT HASN'T BEEN EMPHASIZED THAT THE EXAMINER WOULD BE OFFERED

        25    FOR SALE.  AND IF THERE WERE NOT -- IT WAS ONLY AFTER THAT THAT



                                                                          306
                                  SIAS - DIRECT / ALIOTO


         1    THE EXAMINER COULD BE CLOSED.

         2               THE PREPARER OF THIS WOULD NOT GO THROUGH THAT

         3    BUT -- EXCUSE ME.  I HIT THIS (INDICATING).

         4    Q.   OKAY.  WELL, IT SAYS "EXAMINER CLOSED"?

         5    A.   IT DOES SAY THAT.

         6    Q.   NOW, IF YOU WILL GO TO 120, THE VERY FIRST BULLET OF 120,

         7    IT IS ABOUT THE SAME OFFER.  BULLET 1 STATES:

         8                   "ASSUMES EXAMINER CLOSED.  EFFECTIVE

         9               JANUARY 1, '99."

        10    A.   UH-HUH.

        11    Q.   DO YOU SEE THAT?

        12    A.   YES.

        13    Q.   OKAY.  SO AT LEAST BOTH OF THESE THAT WERE PREPARED BY THE

        14    CHRONICLE FOLKS OF THE OFFER -- BOTH OF THEM ASSUMED THAT THE

        15    EXAMINER WOULD CLOSE, CORRECT?

        16    A.   YES.

        17    Q.   AND --

        18    A.   YES.

        19    Q.   OKAY.  AND THEN THEY PUT OUT -- THEY PUT OUT THE

        20    PERCENTAGES AT 72 AND A HALF PERCENT TO THE CHRONICLE AND 27

        21    AND A HALF PERCENT TO HEARST, CORRECT?

        22    A.   YES.

        23    Q.   OKAY.  NOW, WAS THIS REJECTED BY THE BOARD OF DIRECTORS OF

        24    THE CHRONICLE?


        25    A.   WAS THIS HEARST JULY 9TH (INDICATING) PROPOSAL?



                                                                          307
                                  SIAS - DIRECT / ALIOTO


         1    Q.   YES.

         2    A.   I DON'T BELIEVE THE BOARD REJECTED IT.  I BELIEVE THAT WE

         3    HAD A DISCUSSION WITH SEVERAL.  WE DIDN'T HAVE ANY BOARD

         4    MEETINGS AT THAT TIME.  AND WE DID HAVE A TELEPHONE CONFERENCE

         5    CALL WITH MR. BENNACK AND MR. GANZI -- AND "WE" BEING SIAS,

         6    NICHOLS AND JAFFE AND INGRAM -- IN WHICH WE WERE TRYING TO GET

         7    SOME CLARIFICATION ON WHAT THE BASIS FOR HEARST'S PROPOSALS

         8    WERE.  

         9               AND
-- AND AFTER WE DID THAT WE CONSIDERED IT AND

        10    TOLD -- I ADVISED MR. BENNACK THAT WE THOUGHT THAT IT WAS TOO

        11    HIGH AND WE WERE NOT PREPARED TO CONTINUE ON.

        12    Q.   NOW, WAS THE TOO HIGH FOR THE ENTIRE THING OR BECAUSE

        13    THERE WAS OBJECTION THAT THEY WOULD HAVE ANY INTEREST

        14    WHATSOEVER AFTER 2005?

        15    A.   IT WAS VERY -- IN TRYING TO FIND OUT HOW HEARST ARRIVED AT

        16    WHAT WOULD GIVE THEM 27 AND A HALF PERCENT GOING FORWARD.  THEY

        17    WENT THROUGH THE REASONING, AND THAT WAS FOR HEARST -- THE

        18    VALUE THEY PUT ON THEIR PORTION OF THE NEWSPAPER AGENCY'S

        19    ASSETS.  AND THEY THEN DID SOME CALCULATIONS AND CONVERTED THAT

        20    VALUE THAT THEY THOUGHT THAT IT WAS WORTH TO AN ONGOING EQUITY

        21    INTEREST IN THE CHRONICLE.

        22               AND SO I -- WE -- WE FELT THAT IT WAS MUCH TOO HIGH

        23    A FIGURE, AND EXPLORING IT THERE WAS NO APPARENT EVIDENCE ON

        24    THE PART OF HEARST TO BACK OFF FROM THAT, AND SO WE TOLD THEM

        25    THAT WE WERE NOT PREPARED TO DISCUSS THIS ANY FURTHER.



                                                                          308
                                  SIAS - DIRECT / ALIOTO


         1    Q.   NOW, IN JANUARY 1999, MR. WHITE CAME TO SERVE AS THE

         2    PUBLISHER OF THE EXAMINER.  DID YOU MEET HIM AT OR ABOUT THAT

         3    TIME?

         4    A.   YES.  MR. GEORGE IRISH BROUGHT HIM BY MY OFFICE, I THINK,

         5    THE DAY THAT HE WAS INTRODUCED OUT THERE AND WE MET FOR ABOUT

         6    TEN MINUTES.

         7    Q.   AND THAT WAS THE FIRST TIME THAT YOU HAD MET MR. WHITE?

         8    A.   YES, SIR.

         9    Q.   AND THEN SUBSEQUENTLY -- NOW, LET ME BACK UP FOR ONE

        10    MOMENT.

        11               DID YOU AGREE SOMETIME IN 1997 OR '96 OR EVEN '98 TO

        12    A JOINT PROMOTION AGREEMENT TO BE CONDUCTED BY MR. FALK OF THE

        13    SAN FRANCISCO NEWSPAPER AGENCY?

        14    A.   YOU MENTIONED SEVERAL DATES.  SO THE -- THE ANNUAL BUDGET

        15    PROCESS OF THE NEWSPAPER AGENCY, I BELIEVE, WOULD HAVE BEEN FOR

        16    THE 1997 BUDGET.  SO THE MEETING WOULD HAVE BEEN IN OCTOBER OF

        17    '96 -- INCLUDED IN THE CIRCULATION PLAN THIS JOINT PROMOTION

        18    PROJECT.  AND WHEN THE APPROVAL CAME IT WAS FOR THE WHOLE

        19    BUDGET, INCLUDING THAT.  AND I DID APPROVE THE WHOLE BUDGET,

        20    INCLUDING THAT PROMOTION.

        21    Q.   OKAY.  NONETHELESS, SOMETIME IN MARCH OF 1999, YOU

        22    COMPLAINED TO MR. FALK, DID YOU NOT, ABOUT THE COMBINATION

        23    PROMOTION?

        24    A.   NO, I DIDN'T COMPLAIN.  I DID THE FOLLOWING:

        25    Q.   YOU DIDN'T WHAT?



                                                                          309
                                  SIAS - DIRECT / ALIOTO


         1    A.   I DID NOT COMPLAIN TO MR. FALK AT THAT MOMENT.  THE FIRST

         2    THING I DID WAS GO DOWN TO THE CIRCULATION DEPARTMENT ONE

         3    MORNING WHEN IT DAWNED ON ME THAT WE WERE STILL DOING THIS

         4    BECAUSE SOME FRIENDS OF MINE FROM MARIN COUNTY WHO ARE

         5    LONG-TIME CHRONICLE SUBSCRIBERS WERE BAFFLED THAT THEY GOT A

         6    CALL AT 8:30 IN THE EVENING TO SUBSCRIBE TO THE EXAMINER AT NO

         7    COST.  AND THEY WERE CONFUSED AND DIDN'T KNOW ABOUT IT AND

         8    WHAT -- WHY THIS WAS GOING ON.  AND I WAS NOT A HAPPY CAMPER

         9    BECAUSE WE HAD BEEN SUFFERING VERY SIGNIFICANT CIRCULATION

        10    LOSSES AT THE CHRONICLE.  AND THE NEWSPAPER AGENCY, IN MY

        11    JUDGMENT, WAS NOT DOING A VERY GOOD JOB ON OUR CIRCULATION AND

        12    CIRCULATION ACQUISITION AND RETENTION.

        13               AND SO I WENT DOWN TO THE CIRCULATION DEPARTMENT --

        14    I BELIEVE IT WAS ONE MR. JERRY HILL, AND SAID, "STOP THIS,

        15    EFFECTIVE IMMEDIATELY, CALLING CHRONICLE SUBSCRIBERS AND

        16    OFFERING EXAMINER AT NO CHARGE."

        17               I MADE A MISTAKE IN ONE THING ONLY THAT I REGRET,

        18    AND THAT IS I DIDN'T LET TIM WHITE KNOW AT THAT SAME TIME.  I

        19    JUST DIDN'T THINK OF IT.  BUT THAT'S HOW -- AND IT WAS AFTER

        20    THAT THAT MR. FALK GOT -- WAS ADVISED AND SO FORTH AND THEN

        21    MR. WHITE AND SO FORTH.  BUT I REGRET NOT ADVISING MR. WHITE

        22    THAT MORNING.  I HAD OTHER THINGS IN MY MIND AND THAT WAS A

        23    MISTAKE.

        24    Q.   LET ME HAND YOU -- 

        25               MAY I APPROACH THE WITNESS, YOUR HONOR?



                                                                          310
                                  SIAS - DIRECT / ALIOTO


         1               THE COURT:  YOU MAY.

         2    BY MR. ALIOTO:


         3    Q.   LET ME HAND YOU EXHIBIT 111.  THIS IS A LETTER DIRECTED OR

         4    SENT BY YOU TO MR. STEPHEN FALK ON MARCH 11, 1999.  AND YOU

         5    HAVE COPIES TO MR. WHITE AND TO MR. INGRAM.

         6    A.   YES.

         7    Q.   OKAY.  DID YOU SEND THIS TO MR. FALK ON OR ABOUT THIS DATE

         8    (INDICATING)?

         9    A.   YES, I DID.

        10    Q.   AND IN THIS LETTER WHAT YOU WANTED TO DO WAS YOU WERE

        11    OBJECTING TO MR. FALK USING THE PROGRAM OF CALLING UP SAN

        12    FRANCISCO -- OF CALLING UP SUBSCRIBERS TO THE CHRONICLE AND

        13    OFFERING THEM A FREE SUBSCRIPTION TO THE EXAMINER, CORRECT?

        14    A.   YES, THAT'S CORRECT.

        15    Q.   DID YOU KNOW AT THE TIME THAT THEY WERE ALSO CALLING UP

        16    EXAMINER SUBSCRIBERS AND GIVING THOSE SUBSCRIBERS AN OFFER OF A

        17    FREE CHRONICLE?

        18    A.   YES, SIR.

        19    Q.   DID YOU OBJECT TO THAT?

        20    A.   I DIDN'T REALLY CARE ONE WAY OR THE OTHER.

        21    Q.   SO THAT YOU JUST OBJECTED TO THE PROGRAM ITSELF?

        22    A.   AT THIS POINT IN TIME I DID.

        23    Q.   OKAY.  NOW, YOU WERE OF THE OPINION THAT IF -- THAT WHAT

        24    IN EFFECT WAS HAPPENING, AT LEAST AS FAR AS YOU WERE CONCERNED

        25    FROM THE CHRONICLE SIDE, WAS THAT THEY WERE USING THE CHRONICLE



                                                                          311
                                  SIAS - DIRECT / ALIOTO


         1    TO PROMOTE THE EXAMINER, CORRECT?

         2    A.   I DON'T THINK THAT -- THAT MAY BE CORRECT, BUT WHAT I WAS

         3    CONCERNED ABOUT IS THE CHRONICLE, CIRCULATION WAS IN A

         4    SIGNIFICANT DECLINE, AND THE AGENCY WAS NOT VERY SUCCESSFUL IN

         5    STEMMING IT, AND THERE WAS A LOT OF WORK THAT HAD TO BE DONE IN

         6    THE CIRCULATION ACQUISITION AREA.

         7               THIS IS -- WHILE THIS IS TECHNICALLY PAID

         8    CIRCULATION, ACCORDING TO ABC RULES, IT IS JUST A CRUTCH FOR

         9    COVERING OVER FAR MORE FUNDAMENTAL PROBLEMS AND DISCOURAGES THE

        10    USE OF OTHER DEVICES TO RETAIN SUBSCRIBERS.  AND MY INTEREST IS

        11    IN RETAINING CHRONICLE SUBSCRIBERS.  CHRONICLE CIRCULATION IS

        12    MY PRIMARY INTEREST.  AND I DID NOT FEEL THAT THIS WAS AN

        13    APPROPRIATE ACTION FOR THEM TO TAKE.

        14    Q.   OKAY.  NOW --

        15               MAY I USE THE EASEL, YOUR HONOR?

        16               THE COURT:  YOU MAY.

        17    BY MR. ALIOTO:


        18    Q.   YOU MENTIONED A COUPLE OF THINGS IN THAT ANSWER.  AND YOU,

        19    FIRST OF ALL, MENTIONED ABC.  WOULD YOU STATE TO THE COURT WHAT

        20    ABC IS?

        21    A.   IT IS THE AUDIT BUREAU OF CIRCULATIONS, AN INDEPENDENT

        22    AGENCY THAT AUDITS NEWSPAPERS, MAGAZINES AND OTHER PUBLICATIONS

        23    FOR PAID CIRCULATION.  THEY HAVE A VARIETY OF RULES.

        24    Q.   OKAY.  IT'S FOR PAID CIRCULATION, CORRECT?

        25    A.   YES, SIR.



                                                                          312
                                  SIAS - DIRECT / ALIOTO


         1    Q.   AND YOU UNDERSTAND, IT HAS BEEN YOUR EXPERIENCE, THAT --

         2    THAT ADVERTISERS USE ABC GUIDES?

         3    A.   THEY DO.  AND THEY ARE ON THE ABC BOARD.

         4    Q.   AND IT'S IMPORTANT FOR THEM TO KNOW THAT IN
-- THAT

         5    THESE -- THAT THESE CIRCULATIONS ARE PAID CIRCULATIONS IN

         6    DETERMINING HOW MUCH THEY ARE GOING TO PAY FOR ADVERTISING?

         7    A.   IT IS ONE OF THEIR CONSIDERATIONS.

         8    Q.   OKAY.  NOW, UNDER THIS PROGRAM IF WE HAVE THE CHRONICLE--

         9    THIS WOULD BE A SUBSCRIBER OF THE CHRONICLE HERE (INDICATING). 

        10    AND IF HE IS PAYING -- HOW MUCH IS THE SUBSCRIPTION FOR THE

        11    CHRONICLE?

        12    A.   WELL, AT THAT TIME I BELIEVE IT WAS $13.

        13    Q.   OKAY.

        14    A.   NO.  EXCUSE ME.  IT HAD GONE UP TO 14
-- 14.40.  THAT'S

        15    ANOTHER PART OF THIS STORY THAT I'D LIKE TO COME TO.

        16    Q.   WELL, WE WILL TALK ABOUT THAT PART OF THE STORY LATER.

        17    A.   OKAY.  LET'S SAY IT'S $14.

        18    Q.   OKAY.

        19    A.   SEVEN-DAY SUBSCRIBER, TOO, MR. ALIOTO.

        20    Q.   OKAY.  WE WILL PUT "SEVEN DAYS."

        21    A.   AND THE -- AND THE FREE BUSINESS IS FOR SIX DAYS.

        22    Q.   OKAY.  NOW, WHEN -- WHEN THE CHRONICLE SUBSCRIBER -- AT

        23    THIS TIME DID YOU KNOW WHAT THE SUBSCRIPTION PRICE WAS FOR THE

        24    EXAMINER?

        25    A.   I BELIEVE IT WAS THE SAME FOR SEVEN DAYS AS IT WAS FOR THE



                                                                     
    313
                                  SIAS - DIRECT / ALIOTO


         1    CHRONICLE.

         2    Q.   OKAY.  SO, NOW, IF THE -- NOW, WHAT YOU UNDERSTOOD THE

         3    PROGRAM WOULD BE IS THE PERSON WHO IS PAYING THE $14 WOULD THEN

         4    GET THE EXAMINER FOR SIX DAYS; IS THAT RIGHT?

         5    A.   YES.

         6    Q.   AND DIDN'T HAVE TO PAY ANY MORE THAN THE
$14, CORRECT?

         7    A.   THAT IS CORRECT.

         8    Q.   OKAY.  BUT WHEN ABC IS TAKING A COUNT OF THE CIRCULATION,

         9    IN ORDER TO DO SO THEY WANT TO KNOW WHAT THE -- MAKE SURE THAT

        10    IT'S A PAID CIRCULATION, CORRECT?

        11    A.   WELL, THE TERMINOLOGY -- BUT BASICALLY THEY
-- THE RULE

        12    IS -- AND MAYBE THIS WILL BE HELPFUL.  THE RULE IS THAT AS LONG

        13    AS YOU HAVE 51 PERCENT OF YOUR -- OF YOUR RATE.  YOU CAN SET

        14    WHATEVER RATE ONE WANTS.  BUT AS LONG AS A PUBLICATION IS

        15    GETTING 51 PERCENT OF THAT RATE, THEN IT CAN BE COUNTED AS

        16    PAID.  SO A SEVEN-DAY SUBSCRIPTION, $14, GIVING SIX DAYS OF

        17    EITHER PAPER IS -- IS MORE THAN 50 PERCENT -- OR IS LESS THAN

        18    50 PERCENT.

        19    Q.   OKAY.  SO THAT, FIRST OF ALL, THIS -- THIS CIRCULATION

        20    THAT THE EXAMINER ACHIEVES BY REASON OF THIS PROGRAM, THEY GET

        21    COUNTED FOR THIS CIRCULATION --

        22    A.   AS PAID.

        23    Q.   -- EVEN THOUGH -- EVEN THOUGH NO ONE IS PAYING FOR THE

        24    EXAMINER, CORRECT?

        25    A.   THAT'S CORRECT.



                                                                          314
                                  SIAS - DIRECT / ALIOTO


         1    Q.   BUT THEY ARE GETTING IT BECAUSE WHAT THE SAN FRANCISCO

         2    NEWSPAPER AGENCY IS DOING IS THEY ARE SAYING, "WELL, WE CAN

         3    TAKE 50 PERCENT -- 51 PERCENT OF THAT AND COUNT IT," RIGHT?

         4    A.   I'M -- MY ONLY HESITATION IS THE COUNTING IS SUFFICIENTLY

         5    BIZARRE THAT I
-- I WOULD NOT BE CONFIDENT THAT I WOULD GIVE

         6    YOU A CORRECT ANSWER.

         7    Q.   WELL, THE BOTTOM LINE IS --

         8    A.   THE RULE IS IS THE RULES CHANGE AND PAPERS CAN START

         9    OFFERING IN THIS CASE WITH THE COMBO SIX DAYS OF THE -- FOR A

        10    SEVEN-DAY SUBSCRIBER, AND THEY WOULD BE COUNTED AS PAID

        11    CIRCULATION.

        12    Q.   OKAY.  THE FACT, HOWEVER, IS -- IS, FINALLY, THOUGH, IN

        13    THIS PROGRAM, WHETHER IT'S THE EXAMINER GIVEN AWAY FOR FREE FOR

        14    SIX DAYS OR THE CHRONICLE GIVEN AWAY FOR FREE FOR SIX DAYS, THE

        15    SAN FRANCISCO
-- THE SAN FRANCISCO NEWSPAPER AGENCY ATTEMPTS TO

        16    HAVE THAT COUNTED AS PAID CIRCULATION EVEN THOUGH NO ONE PAID

        17    FOR IT?

        18    A.   IT IS PAID CIRCULATION -- IT IS LISTED AS PAID BECAUSE IT

        19    CONFORMS TO THE ABC REGULATIONS.

        20    Q.   NOW, YOU WERE -- ONE OF THE CONCERNS THAT YOU HAD -- AND

        21    THIS IS IN EXHIBIT 111.  ONE OF THE CONCERNS YOU HAVE, YOU

        22    STATE IN THE THIRD PARAGRAPH AND THE SECOND SENTENCE OF THE

        23    THIRD PARAGRAPH -- OR THE FIRST TWO SENTENCES.  YOU STATE,

        24    QUOTE:

        25                   "IN ANY EVENT, CPC DOES NOT CONSENT OR



                                                                          315
                                  SIAS - DIRECT / ALIOTO


         1               APPROVE THE CONTINUATION OF THE PROMOTION AND IS

         2               HEREBY INSTRUCTING THE AGENCY PURSUANT TO

         3               PARAGRAPH 3.15(G) OF THE JOA TO TERMINATE THE

         4               PROMOTION.  PARAGRAPH 3.15(G) GRANTS TO CPC THE

         5               EXCLUSIVE RIGHT TO SET BOTH THE CIRCULATION

         6               PRICES FOR THE CHRONICLE AND ALL TERMS AND

         7               CONDITIONS APPLICABLE THERETO."

         8               DO YOU SEE THAT?

         9    A.   YES.

        10    Q.   AND WHEN YOU WROTE THIS YOU BELIEVED, DID YOU NOT, THAT

        11    THE CHRONICLE HAD THE EXCLUSIVE RIGHT TO SET CIRCULATION

        12    PRICES?

        13    A.   I DID.  THE BACKGROUND ON WHY THIS WAS WRITTEN, IT WAS

        14    DRAFTED BY MR. INGRAM, WHO IS AN EXPERT ON THE JOA.  AND I

        15    OBVIOUSLY AM NOT WHEN YOU GET DOWN TO INDIVIDUAL PARAGRAPHS.

        16               AND MR. FALK HAD BEEN --

        17    Q.   DID YOU READ THE PARAGRAPH --

        18    A.   -- IN THE MIDDLE OF THE TWO PARTIES, PARTNERS, AT ODDS ON

        19    THIS PARTICULAR ISSUE AND TO CLARIFY WHERE CHRONICLE -- WE HAD

        20    A MEETING AND MR. WHITE STATED WHAT THE HEARST'S CHRONICLE

        21    CORPORATION'S FEELING WAS AND I STATED WHERE WE WERE, AND, AS A

        22    FOLLOW-UP AND TO CONFIRM IT, THIS LETTER WAS DISPATCHED TO

        23    MR. FALK.

        24    Q.   NOW, BACK TO THE QUESTION, THE QUESTION IS:  YOU BELIEVED

        25    THAT THE CHRONICLE HAD THE EXCLUSIVE RIGHT TO SET THE



                                                                          316
                                  SIAS - DIRECT / ALIOTO


         1    CIRCULATION PRICES FOR THE CHRONICLE, CORRECT?

         2    A.   YES, SIR.

         3    Q.   YOU BELIEVED AND UNDERSTOOD THAT THE JOA ALSO GAVE YOU THE

         4    EXCLUSIVE RIGHT TO SET THE RATES FOR ADVERTISING FOR THE

         5    CHRONICLE, CORRECT?

         6    A.   THAT IS CORRECT.

         7    Q.   YOU UNDERSTOOD THAT THE JOA GAVE THE EXCLUSIVE RIGHT TO

         8    THE EXAMINER TO SET THEIR CIRCULATION PRICE, CORRECT?

         9    A.   YES, SIR.

        10    Q.   AND YOU BELIEVED THAT THE JOA GAVE THE EXCLUSIVE RIGHT TO

        11    THE EXAMINER TO FIX THEIR ADVERTISING RATES, CORRECT?

        12    A.   YES, SIR.

        13    Q.   SO --

        14    A.   IF I MIGHT, THERE IS AN AMBIGUITY IN -- TO THIS EXTENT: 

        15    THE SUNDAY PAPER, WHICH IS JOINTLY PUBLISHED, HAS TO BE

        16    APPROVED BY -- BOTH RATES HAVE TO BE APPROVED BY BOTH PARTIES.

        17    Q.   OKAY.  THAT IS ALSO A PART OF THE JOA, HOWEVER, ISN'T IT?

        18    A.   YES.

        19    Q.   YOU HAVE THE JOA IN FRONT OF YOU, EXHIBIT 1?  IT'S THE BIG

        20    ONE.

        21    A.   OH, WOW, OKAY.

        22    Q.   I THINK YOU HAVE IT.

        23    A.   THIS ONE HERE -- THIS HERE (INDICATING)?  THIS IS WHAT

        24    (INDICATING).

        25    Q.   NO.  I MUST HAVE TAKEN IT DOWN.  HERE IT IS (INDICATING).



                                                                          317
                                  SIAS - DIRECT / ALIOTO


         1               ALL RIGHT.  I HAVE PLACED IN FRONT OF YOU THE JOA. 

         2    AND YOU WILL SEE IF YOU GO TO THE SECOND
-- IF YOU WILL GO TO

         3    THE SECOND PAGE OF THE JOA --

         4    A.   UH-HUH.

         5    Q.   -- AND YOU WILL SEE AS YOU GO DOWN THE PAGE TO THE

         6    "WHEREAS," THE LAST "WHEREAS," WHERE IT STATES, QUOTE:

         7                   "WHEREAS, CHRONICLE AND HEARST."

         8               DO YOU SEE THAT?

         9    A.   YES.

        10    Q.   OKAY.  IT STATES, QUOTE:

        11                   "WHEREAS, CHRONICLE AND HEARST WILL HAVE

        12               COMPLETE CONTROL OVER THE ADVERTISING RATES AND

        13               CIRCULATION PRICES RELATING TO THE RESPECTIVE

        14               DAILY, MORNING AND AFTERNOON NEWSPAPERS OPERATED

        15               BY THEM."

        16               DO YOU SEE THAT?

        17    A.   YES, SIR.

        18    Q.   OKAY.  AND I ALSO WANT TO DIRECT YOUR ATTENTION TO PAGE

        19    32.  PAGE 32 IS THE PORTION THAT YOU QUOTE FROM IN YOUR LETTER. 

        20    AND IT'S PARAGRAPH 3.15.  AND IT BEGINS UNDERLINED ON THE

        21    BOTTOM OF THE PAGE, QUOTE:  

        22                   "PUBLICATION AND CIRCULATION OF THE SAN

        23               FRANCISCO CHRONICLE, EXAMINER AND SAN FRANCISCO

        24               SUNDAY EXAMINER AND CHRONICLE.  CHRONICLE AND

        25               HEARST AGREE THAT DURING THE TERM HERE OF" --



                                                                          318
                                  SIAS - DIRECT / ALIOTO


         1               AND THEN IF YOU WILL GO TO PAGE 34, THE VERY LAST

         2    LINE IS G, IT STATES, QUOTE:

         3                   "CHRONICLE AND HEARST WILL HAVE AUTHORITY

         4               OVER AND RESPONSIBILITY FOR DETERMINING THE

         5               ADVERTISING RATES AND CIRCULATION PRICES

         6               (INCLUDING BUT NOT LIMITED TO TERMS AND

         7               CONDITIONS RELATING TO SUCH RATES AND PRICES) OF

         8               THEIR RESPECTIVE DAILY NEWSPAPERS AND SUCH

         9               DETERMINATION SHALL NOT BE SUBJECT TO

        10               ARBITRATION."

        11               DO YOU SEE THAT?  DO YOU SEE THAT?

        12    A.   YES, I DO, MR. ALIOTO.

        13    Q.   AND THEN IF YOU WILL JUST GO DOWN TO THE NEXT FULL

        14    PARAGRAPH, IT STATES, QUOTE:

        15                   "CHRONICLE AND HEARST WILL DETERMINE JOINTLY

        16               THE ADVERTISING RATES AND CIRCULATION PRICES OF

        17               THE SUNDAY NEWSPAPER," END OF QUOTE.

        18               DO YOU SEE THAT?

        19    A.   YES, SIR.

        20    Q.   OKAY.  SO THE JOA, IN FACT, AS YOU KNOW AND BELIEVE AND

        21    UNDERSTAND -- THE JOA GIVES YOU THE EXCLUSIVE RIGHT AND

        22    RESPONSIBILITY TO SET THE RATES FOR YOUR ADVERTISING AND FOR

        23    CIRCULATION FOR THE CHRONICLE ALONE.

        24    A.   YES, SIR.

        25    Q.   HOWEVER, YOU ARE ALLOWED TO SET A JOINT PRICE WITH THE



                                                                          319
                                  SIAS - DIRECT / ALIOTO


         1    EXAMINER ON THE SUNDAY PAPER UNDER THE JOA, CORRECT?

         2    A.   YES.

         3    Q.   NOW, YOU, IN FACT, FROM TIME TO TIME PRICE YOUR PAPER

         4    DIFFERENTLY THAN THE EXAMINER.  FOR EXAMPLE, ON STREET SALES,

         5    YOU PRICE THE CHRONICLE AT A DIFFERENT PRICE THAN THE EXAMINER;

         6    IS THAT RIGHT?


         7               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)

         8   

         9   

        10   

        11   

        12   

        13   

        14   

        15   

        16   

        17   

        18   

        19   

        20   

        21   

        22   

        23   

        24   

        25   



                                                                          320
                                  SIAS - DIRECT / ALIOTO


         1    A.   PRICE OF THE PAPER, YOU'RE REFERRING NOW JUST TO

         2    CIRCULATION, YOU'RE NOT INCLUDING ADVERTISING?

         3    Q.   WE'LL DO CIRCULATION FIRST.

         4    A.   CIRCULATION.

         5    Q.   I'M TALKING ABOUT STREET SALES.

         6    A.   ALL RIGHT.

         7    Q.   HOLD ON.  WE SHOULD MAKE THAT CLEAR TOO.

         8    A.   SINGLE COPY SALES WOULD BE MORE ACCURATE.  YESTERDAY THE

         9    TERM WAS "STREET SALES."  "SINGLE COPY SALES" IS A MORE

        10    ACCURATE DESCRIPTION.

        11    Q.   ONE MORE.  EXCUSE ME A MINUTE.  

        12               MR. ALIOTO:  MAY I APPROACH THE EASEL, YOUR HONOR?

        13               THE COURT:  VERY WELL.

        14    BY MR. ALIOTO:


        15    Q.   LET'S MAKE SURE WE UNDERSTAND THIS.  WE'LL DO IT ON THE

        16    BOTTOM HERE.  ADVERTISING AND CIRCULATION ARE THE TWO BASIC

        17    FORMS OF REVENUE FOR THE NEWSPAPERS; IS THAT RIGHT?

        18    A.   YES, SIR.

        19    Q.   OKAY.  AND ADVERTISING IS DIVIDED INTO NATIONAL

        20    ADVERTISING, CORRECT, IS ONE?

        21    A.   YES.

        22    Q.   CLASSIFIED ADVERTISING?

        23    A.   YES.

        24    Q.   WHAT OTHER ADVERTISING?

        25    A.   RETAIL ADVERTISING.



                                                                          321
                                  SIAS - DIRECT / ALIOTO


         1    Q.   OKAY.  I'M GOING TO HAVE YOU EXPLAIN EACH ONE.  RETAIL

         2    ADVERTISING.

         3    A.   ZONED RETAIL.

         4    Q.   OKAY, THAT'S THE SAME.

         5    A.   AND PREPRINTS OR --

         6    Q.   OKAY.  NOW, NATIONAL ADVERTISING.  THE NATIONAL


         7    ADVERTISING WOULD BE LIKE FOR WHAT?

         8    A.   NEWSPAPER RATE STRUCTURES ARE RATHER ARCHAIC AND HAVE

         9    BEEN, BUT THE NATIONAL CATEGORY IS GENERAL BUSINESS THAT IS --

        10    THAT ORIGINATES OUTSIDE OF THE HOME MARKET.  IT WOULD BE A

        11    MANUFACTURER LIKE FORD MOTOR COMPANY.

        12    Q.   CAR COMPANIES?

        13    A.   CAR COMPANIES, AIRLINES, FINANCIAL INSTITUTIONS.  THERE'S

        14    A FINANCIAL RATE TOO, BUT IT'S REALLY A CLASSIFIED -- I MEAN A

        15    NATIONAL RATE.


        16    Q.   OKAY.  CLASSIFIED.  WHAT IS CLASSIFIED ADVERTISING?


        17    A.   CLASSIFIED IS THERE'S DISPLAY CLASSIFIED FROM AUTOMOTIVE

        18    COMPANIES, REAL ESTATE COMPANIES AND THE EMPLOYMENT OR CAREER

        19    SECTION, THE THREE MAJOR CATEGORIES OF CLASSIFIED.  AND THAT'S

        20    PLACED IN COLUMNS AND/OR DISPLAY ADS.  IT IS HANDLED BY A

        21    SEPARATE SALES STAFF.

        22    Q.   OKAY.  SEPARATE FROM THE NATIONAL ADVERTISING GROUP?

        23    A.   YES, THAT'S RIGHT.

        24    Q.   OKAY.  AND RETAIL?

        25    A.   RETAIL WOULD BE ADVERTISING FROM RETAILERS, DEPARTMENT



                                                                          322
                                  SIAS - DIRECT / ALIOTO


         1    STORES, ANY KIND OF RETAILER THAT SELLS -- THAT HAS A PLACE OF

         2    BUSINESS AND SELLS TO CUSTOMERS.  IT COULD BE INCLUDING EVEN --

         3    OH, WE HAVE OTHER CATEGORIES, BUT --

         4    Q.   OKAY.  AND YOU HAVE A GROUP THAT DOES THAT TOO?

         5    A.   YOU DO.

         6    Q.   AND THEN PREPRINT.

         7    A.   PREPRINTS ARE THE THINGS THAT ARE IN YOUR PAPER THAT HAVE

         8    BEEN PREPRINTED BY THE ADVERTISER AND ARE INSERTED INTO THE

         9    PAPER IN THE PRINTING PLANTS OR BY THE CARRIERS, AND THEY

        10    ARE -- THEY ARE A SIGNIFICANT COMPONENT BUT NOT AS LARGE AS

        11    EITHER NATIONAL, CLASSIFIED OR RETAIL, BUT THEY'RE GROWING.

        12    Q.   OKAY.  NOW, THESE COSTS FOR THE PEOPLE -- AND ABOUT HOW

        13    MANY PEOPLE ARE WE TALKING ABOUT WHO DO THIS?

        14    A.   WOW.  THAT I WOULD NOT BE ABLE TO GIVE YOU, BUT THE

        15    BIGGEST DEPARTMENT IN TERMS OF NUMBERS OF SOLICITORS WOULD BE

        16    THE CLASSIFIED AND THEN RETAIL CLOSE BY AND NATIONAL SOLICITORS

        17    MUCH FEWER -- FEWER.  YOU HAVE A REP AND SO FORTH.  AND THE

        18    PREPRINTS, THEY'RE HANDLED BY THESE SPECIALISTS BUT THE LABOR

        19    PART OF THEM, THEY ARE INSERTED IN THE PLANTS IN MOST CASES

        20    OR -- IN THE PLANT.

        21    Q.   OKAY.  NOW, THESE ARE UNDER THE SAN FRANCISCO NEWSPAPER

        22    AGENCY?

        23    A.   YES, SIR.

        24    Q.   OKAY.  NOW, THEN, CIRCULATION.  CIRCULATION YOU HAVE HOME

        25    DELIVERY --



                                                                          323
                                  SIAS - DIRECT / ALIOTO


         1    A.   YES.

         2    Q.   -- CORRECT?

         3               AND THAT'S SIMPLY DELIVERED TO THE HOMES.

         4    A.   YES.

         5    Q.   OKAY.  THEN YOU HAVE YOU CALL IT STREET SALES?

         6    A.   SINGLE COPY SALES.

         7    Q.   OKAY.  AND SINGLE COPY SALES ARE BY RACKS?

         8    A.   THEY ARE BY RACKS.

         9    Q.   AND?

        10    A.   THEY ARE BY DEALERS.

        11    Q.   DEALERS.

        12    A.   AND MAYBE ASSORTED OTHER THINGS MAY BE IN THERE.

        13    Q.   ALL RIGHT.  NOW, LET'S TALK --

        14    A.   RETAILERS.

        15    Q.   LET'S TALK ABOUT THE SINGLE COPY GROUP.  NOW, THE SINGLE

        16    COPY GROUP YOU CHARGE A DIFFERENT PRICE THAN THE EXAMINER

        17    CHARGES FOR ITS PAPER?

        18    A.   IN MOST -- WE HAVE A 50-CENT PRICE WHICH WE'VE HAD FOR

        19    SOME TIME FOR THE CHRONICLE EXCEPT IN SOUTHERN SAN MATEO COUNTY

        20    AND NORTHERN SANTA CLARA COUNTY WE HAVE A 25-CENT PRICE FOR THE

        21    CHRONICLE.  WE'VE HAD IT FOR ABOUT FOUR YEARS.  

        22               AND THE OBJECTIVE THERE WAS TO TRY TO INCREASE OUR

        23    PRESENCE IN READERSHIP IN THE SILICON VALLEY AREA WHERE THE

        24    RECRUITMENT ADVERTISING IS A VERY, VERY BIG ADVERTISING

        25    CATEGORY.  AND THE MERCURY NEWS DOES VERY WELL WITH IT, AND WE



                                                                          324
                                  SIAS - DIRECT / ALIOTO


         1    WANTED TO TRY TO INCREASE OUR PRESENCE CIRCULATION-WISE AS WELL

         2    AS ADVERTISING-WISE AND HAVE.

         3               AND THEN WE CHARGE ON -- IN SOME BART STATIONS IN

         4    THE EAST BAY WE PUT IN A 25-CENT PRICE SEVERAL YEARS AGO.

         5    Q.   OKAY.  NOW, THE 50-CENT PRICE IS IN SAN FRANCISCO; IS THAT

         6    RIGHT?

         7    A.   IN A LOT OF AREAS OF SAN FRANCISCO, YES.

         8    Q.   THE 25-CENT PRICE IS DOWN NEAR SAN JOSE, SILICON VALLEY?

         9    A.   SOME OF IT'S THERE AND OVER IN THE EAST BAY IN BART

        10    STATIONS.

        11    Q.   OKAY.  WE'LL GET TO THE BART STATIONS IN A MINUTE.

        12               NOW, THE ONE -- NOW, THE 25 CENTS THAT YOU CHARGE IN

        13    SILICON VALLEY, YOU CHARGE 25 CENTS EVEN THOUGH IT COSTS YOU

        14    MORE TO GET THE PAPER DOWN THERE THAN IT DOES TO GET THE PAPERS

        15    HERE IN THE CITY; ISN'T THAT RIGHT?

        16    A.   THE TRANSPORTATION COST OF GETTING IT DOWN THERE, I THINK

        17    WE'VE BEEN -- THE -- THE ANSWER IS I BELIEVE THAT THAT WOULD BE

        18    CORRECT, BUT WE HAVE NOT DONE A COST ANALYSIS THAT WOULD PROVE

        19    THAT TO BE CORRECT.

        20    Q.   AND THE REASON YOU'RE CHARGING 25 CENTS DOWN IN SILICON

        21    VALLEY IS BECAUSE YOU HAVE TO COMPETE DOWN THERE; IS THAT

        22    RIGHT?

        23    A.   THE REASON WE -- THE REASON WE'RE CHARGING 25 CENTS IN

        24    SILICON VALLEY IS TO TRY TO GET MORE MARKET PRESENCE SO THAT

        25    OUR SOLICITORS FOR CLASSIFIED RECRUITMENT ADVERTISING WILL BE



                                                                          325
                                  SIAS - DIRECT / ALIOTO


         1    ABLE TO TALK WITH THE BUYERS ABOUT A PAPER THAT THE BUYERS SEE.

         2    Q.   OKAY.  BUT WHEN YOU SAY "GET MORE PRESENCE," YOU MEAN

         3    COMPETE.  YOU HOPE THAT PEOPLE WILL BUY YOUR NEWSPAPER AND

         4    INCREASE YOUR PRESENCE IN SILICON VALLEY; CORRECT?

         5    A.   YES.

         6    Q.   AND YOU'RE CHARGING 25 CENTS RATHER THAN 50 CENTS BECAUSE

         7    YOU THINK THEY'LL BE MORE LIKELY TO BUY YOUR PAPER THAN IF IT'S

         8    50 CENTS; RIGHT?

         9    A.   YES.

        10    Q.   AND ONE OF THE REASONS YOU'RE CHARGING 50 CENTS -- I MEAN

        11    25 CENTS IS BECAUSE YOU'RE TRYING TO SELL A DAILY PAID

        12    NEWSPAPER IN COMPETITION WITH THE SAN JOSE MERCURY NEWS AND

        13    SILICON VALLEY; CORRECT?

        14    A.   YES.

        15    Q.   OKAY.  AND THE SAN JOSE MERCURY NEWS IS KNIGHT RIDDER SO

        16    THEY'RE NOT IN A JOA WITH YOU; ISN'T THAT RIGHT?

        17    A.   THAT IS CORRECT.

        18    Q.   IN THE EAST BAY YOU SAY AT THE BART STATIONS YOU'RE

        19    CHARGING 25 CENTS ALSO; CORRECT?

        20    A.   YES.

        21    Q.   AND, AGAIN, ANOTHER ONE OF THE REASONS THERE IS THAT IN

        22    THE MORNING WHEN PEOPLE GO USE THE BART STATIONS, OR THE

        23    AFTERNOON FOR THAT MATTER, YOU WANT THEM TO BUY YOUR PAPER

        24    RATHER THAN THE EAST BAY PAPERS; CORRECT?

        25    A.   YES, WE WANT -- I DON'T KNOW WHETHER IT'S RATHER BECAUSE I



                                                                          326
                                  SIAS - DIRECT / ALIOTO


         1    DON'T KNOW THAT THEY ARE NECESSARILY EXCLUSIVE, BUT THEY ARE

         2    PEOPLE COMING INTO SAN FRANCISCO AND WE WANT TO MAKE IT EASIER

         3    FOR THEM TO BUY US BY HAVING A SINGLE COIN TO PUT IN THE BOX,

         4    AND HOPEFULLY WE WILL DO WELL.  NOW, WHETHER THAT CAUSES THEM

         5    TO BUY US VERSUS THE CONTRA COSTA, I DON'T KNOW.

         6    Q.   WELL, WHEN YOU SAY THAT YOU WANT TO MAKE IT EASIER FOR

         7    THEM BECAUSE
--

         8    A.   THEY MIGHT NOT BE BUYING ANY PAPER.

         9    Q.   WHEN YOU SAY THAT YOU WANT TO MAKE IT EASIER FOR THEM

        10    BECAUSE THEY ONLY HAVE TO JUST PUT ONE COIN IN --

        11    A.   THAT'S RIGHT.

        12    Q.   -- DON'T YOU WANT TO MAKE IT EASIER FOR THE PEOPLE IN SAN

        13    FRANCISCO TO JUST PUT ONE COIN IN?

        14                              (LAUGHTER) 

        15    Q.   THE REASON IS, IS BECAUSE THERE'S NO COMPETITION HERE;

        16    ISN'T IT?  THE REASON IS BECAUSE THERE'S NO COMPETITION HERE;

        17    ISN'T THAT THE ANSWER?  THAT'S THE ANSWER.

        18    A.   YOU'VE ANSWERED YOUR OWN QUESTION.

        19               THE COURT:  WELL, LET'S LET THE WITNESS ANSWER THE

        20    QUESTION.

        21    BY MR. ALIOTO:


        22    Q.   IS IT?  IS THAT THE ANSWER?

        23    A.   THAT'S A SIMPLISTIC ANSWER.

        24    Q.   IS IT THE ANSWER?

        25    A.   YES.



                                                                          327
                                  SIAS - DIRECT / ALIOTO


         1    Q.   OKAY.  NOW, YOU MAKE MONEY ON THE 25-CENT SALE IN SILICON

         2    VALLEY, DON'T YOU, ON THE PAPERS IN SILICON VALLEY?

         3    A.   ABSOLUTELY NOT.

         4    Q.   ABSOLUTELY WHAT?

         5    A.   NOT, N-O-T, NOT.

         6    Q.   NOT.  ARE YOU SELLING THEM AT A LOSS?

         7    A.   APPARENTLY WE ARE.

         8    Q.   ARE YOU SELLING THE PAPERS AT THE BART --

         9    A.   LET ME PUT IT THIS WAY:  THE CIRCULATION REVENUE OF THE

        10    NEWSPAPER, COMBINED NEWSPAPERS, IS LESS THAN THE CIRCULATION

        11    EXPENSES OF THE JOINT OPERATING AGREEMENT.  

        12               SO NOW WE GET INTO WHETHER WE'RE SELLING IT --

        13    NEWSPAPERS AT A LOSS OR NOT.  I WOULD NOT BE PREPARED TO SAY

        14    WITH CERTAINTY WHAT THE SIZE OF THAT LOSS IS OR WHERE.  WE HAVE

        15    ALL KINDS OF CIRCULATION RATES AND I'M RELUCTANT TO GIVE YOU A

        16    DEFINITIVE ANSWER ON A VERY COMPLEX SUBJECT.

        17    Q.   DO YOU BELIEVE THAT YOU ARE SELLING THE PAPERS IN SILICON

        18    VALLEY AT A LOSS?

        19               THE COURT:  I BELIEVE HIS ANSWER IS THEY'RE SELLING

        20    THE NEWSPAPERS AT A LOSS ALL OVER; IS THAT CORRECT?

        21               THE WITNESS:  YES, SIR.

        22               THE COURT:  IS THAT YOUR ANSWER?

        23               THE WITNESS:  THAT WOULD APPARENTLY BE THE CASE

        24    BECAUSE, AGAIN, I'M GOING TO COME BACK AND SAY THAT THE

        25    CIRCULATION REVENUE THAT FLOWS THROUGH THE NEWSPAPER AGENCY IS



                                                                          328
                                  SIAS - DIRECT / ALIOTO


         1    SUBSTANTIALLY LESS IN THE MILLIONS OF DOLLARS THAN THE

         2    CIRCULATION COSTS OF RUNNING THE CIRCULATION DEPARTMENT, THE

         3    ACQUISITIONS, THE DISTRIBUTION COSTS, AND ALL THOSE MATTERS.  

         4               MR. ALIOTO:  EXCUSE ME.  MAY I USE THE EASEL?

         5    Q.   ARE YOU SAYING -- WE WENT OVER THIS THIS MORNING.  '99,

         6    THESE ARE THE REVENUES TO THE SAN FRANCISCO NEWSPAPER AGENCY

         7    ACCORDING TO YOUR BEST RECOLLECTION.

         8    A.   YES.  YES, SIR.

         9    Q.   THOSE REVENUES -- AND THEN THE NEXT ONE, THE 330 MILLION

        10    ARE THE COSTS?


        11    A.   YES, SIR.

        12    Q.   THIS MORNING YOU SAID THE REVENUES WERE GREATER THAN THE

        13    COSTS, YOU HAD
$114 MILLION NET EXCESS.

        14    A.   I DID.

        15    Q.   ARE YOU SAYING THAT THAT'S NOT SO NOW?

        16    A.   NO.  I'M SAYING THAT'S STILL SO.  WHAT IS -- MR. ALIOTO --

        17               THE COURT:  THIS IS A MATTER --

        18               THE WITNESS:  THE CIRCULATION --

        19               THE COURT:  THIS IS A MATTER OF APPLES AND ORANGES.

        20               THE WITNESS:  NOT EVEN THAT, YOUR HONOR.

        21               THE COURT:  CIRCULATION REVENUE IS DIFFERENT FROM

        22    ADVERTISING REVENUE.

        23               THE WITNESS:  YES, SIR.

        24               THE COURT:  AND I THINK THE PREMISE OF THE QUESTION

        25    IS FAULTY.  WHY DON'T YOU MOVE ON, MR. ALIOTO.



                                                                          329
                                  SIAS - DIRECT / ALIOTO


         1    BY MR. ALIOTO:


         2    Q.   JUST SO I --

         3    A.   ADVERTISING -- OF THE TOTAL $444 MILLION, ROUGHLY

         4    80 PERCENT IS ADVERTISING REVENUE.

         5    Q.   OH, I SEE.  OKAY.

         6               IN OTHER WORDS, WHAT YOU WERE SAYING JUST NOW, YOU

         7    WERE TRYING TO TAKE OUT CIRCULATION ALONE, IS THAT WHAT YOU

         8    WERE DOING?

         9    A.   THE CIRCULATION DEPARTMENT HAS REVENUE OF THE AGENCY AND

        10    IT HAS COSTS, AND I AM SAYING THAT THE COSTS FOR THE AGENCY OF

        11    THE CIRCULATION DEPARTMENT ARE IN EXCESS OF THE REVENUES THAT

        12    ARE REPORTED FOR BOTH NEWSPAPERS IN THE CIRCULATION DEPARTMENT.

        13    Q.   OH, I SEE.  OKAY.

        14               SO THAT AS FAR AS THE CIRCULATION, IF YOU SEPARATED

        15    OUT THE CIRCULATION, THE CIRCULATION, IT COSTS YOU MORE TO DO

        16    THE CIRCULATION THAN THE REVENUES YOU GET FROM THE STREET SALES

        17    OR FROM THE HOME DELIVERY?

        18    A.   YES, SIR.

        19    Q.   BUT THE IMPORTANCE OF THE CIRCULATION IS NOT THE STREET

        20    SALES AND IT'S NOT THE HOME DELIVERY, IT'S TO GET ADVERTISING

        21    REVENUE; RIGHT?

        22    A.   YES, SIR.

        23    Q.   THAT'S THE WHOLE PURPOSE OF THE CIRCULATION?

        24    A.   YES.

        25    Q.   OKAY.  NOW LET ME SHOW YOU EXHIBITS 112 AND 113.



                                                                          330
                                  SIAS - DIRECT / ALIOTO


         1               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR?

         2               THE COURT:  YES, YOU MAY.

         3    BY MR. ALIOTO:


         4    Q.   OKAY.  EXHIBIT 112 IS A LETTER DATED MARCH 12, 1999, TO

         5    MR. FALK FROM MR. WHITE OF THE EXAMINER WITH A COPY TO YOU,

         6    AMONG OTHERS.  AND EXHIBIT 113 IS A COPY OF A LETTER DATED

         7    MARCH 12 ALSO, ALSO DIRECTED TO MR. FALK, ALSO WITH A COPY TO

         8    YOU.  BOTH ON THE SAME DATE.

         9               DID YOU GET COPIES OF BOTH OF THOSE LETTERS ON OR

        10    ABOUT THAT DATE?

        11    A.   (WITNESS EXAMINES DOCUMENTS.)  I'M SURE I DID.

        12    Q.   OKAY.  NOW, I WANT TO DIRECT YOUR ATTENTION TO

        13    EXHIBIT 113.  EXHIBIT 113 ALSO MARCH 12, 1999.

        14               OKAY.  NOW, IN EXHIBIT 113 THERE ARE CERTAIN NUMBERS

        15    THAT ARE PUT OUT BY MR. WHITE AS TO THE RESULTS OF THIS JOINT

        16    PROMOTION PROGRAM SHOWING THAT THERE WAS A SUBSTANTIAL NUMBER

        17    OF EXAMINER PERSONS WHO TOOK ON THE PAPER AND ALSO IN THE

        18    THOUSANDS NUMBER OF CHRONICLE FOLKS WHO TOOK ON -- I MEAN

        19    EXAMINER FOLKS WHO TOOK ON THE CHRONICLE.  DO YOU SEE THOSE?

        20    A.   YES, SIR.

        21    Q.   DID YOU DOUBT THOSE AT ALL?

        22    A.   NO.

        23    Q.   DID YOU CHECK THEM OUT?

        24    A.   I DON'T THINK I DID.  I ACCEPTED THEM.

        25    Q.   OKAY.  NOW, IN THE LAST SENTENCE OF THAT LETTER MR. WHITE



                                                                          331
                                  SIAS - DIRECT / ALIOTO


         1    IS REFERRING TO -- HE STATES THAT:  

         2                   "THE EXAMINER SUBSCRIPTIONS ARE AN IMPORTANT

         3               PART OF THE EXAMINER'S TOTAL CIRCULATION AND

         4               ACCOUNT FOR APPROXIMATELY 16 PERCENT OF THE

         5               EXAMINER'S HOME DELIVERY CIRCULATION."

         6               DO YOU SEE THAT?  IT'S THE SECOND PARAGRAPH, THE

         7    VERY LAST SENTENCE.

         8    A.   SECOND -- ON PAGE 2?

         9    Q.   NO.  PAGE 1, SIR.

        10    A.   PAGE 1.

        11    Q.   SORRY.

        12    A.   SECOND PARAGRAPH.

        13    Q.   YES.

        14    A.   (WITNESS EXAMINES DOCUMENT.)

        15    Q.   SEE ON THE BOTTOM?

        16    A.   YES, ALL RIGHT, I DO.  THANK YOU.

        17    Q.   OKAY.  NOW, YOU UNDERSTOOD, DID YOU NOT, THAT MR. WHITE

        18    WAS COMPLAINING THAT YOU WANTED THE PROGRAM SHUT DOWN?

        19    A.   YES.

        20    Q.   AND ONE OF THE REASONS HE WAS COMPLAINING YOU UNDERSTOOD,

        21    IS IT NOT CORRECT, WAS THAT HE THOUGHT THAT YOU WERE ATTEMPTING

        22    TO HARM THE EXAMINER?

        23    A.   WILL YOU PLEASE -- I THINK I FOLLOW IT, BUT
--

        24    Q.   YOU UNDERSTOOD THAT HE WAS CHARGING THAT YOU WERE HARMING

        25    THE EXAMINER IF YOU TRIED TO STOP THE PROGRAM?



                                                                          332
                                  SIAS - DIRECT / ALIOTO


         1    A.   WELL, I DON'T RECALL EXACTLY, BUT THAT'S CLEARLY WHAT HE

         2    WAS DOING.

         3    Q.   WELL, ACTUALLY HE CHARGED THAT WHAT YOU WERE DOING IN

         4    ATTEMPTING TO STOP THE PROGRAM, IF YOU SUCCEEDED, WOULD VIOLATE

         5    THE ANTITRUST LAWS; RIGHT?

         6    A.   ARE YOU REFERRING TO A LETTER THAT'S GOING TO BE GIVEN TO

         7    US LATER?

         8    Q.   GO TO PAGE 2 OF THAT LETTER.

         9    A.   ALL RIGHT.

        10               THE COURT:  PAGE 2 OF 113?

        11               MR. ALIOTO:  YES, SIR.

        12    Q.   THIS IS A LONG PARAGRAPH AND IT INVOLVES A COUPLE OF

        13    ITEMS, BUT I'M GOING TO READ IT ALL THE WAY THROUGH FIRST.

        14               THE COURT:  WELL, WE HAD IT READ YESTERDAY.

        15               MR. ALIOTO:  OKAY.

        16               THE COURT:  SO UNLESS THE WITNESS NEEDS TO HAVE IT

        17    READ ORALLY --


        18               THE WITNESS:  NO.  I'M NOT AN AUTHORITY ON THE

        19    ANTITRUST LAWS AND I NO DAMN WELL THAT MR. -- EXCUSE ME, DARN

        20    WELL, THAT MR. WHITE ISN'T, SO I DON'T KNOW THAT I CAN GIVE YOU

        21    MUCH MORE IN THE WAY OF A COMMENT ON THAT.

        22    BY MR. ALIOTO:


        23    Q.   DID YOU UNDERSTAND THAT AS PART OF THE JOA, THAT IT

        24    REQUIRED THAT THERE BE SOME COOPERATION BETWEEN THE TWO IN

        25    ORDER TO ENABLE THE TWO PARTIES TO BE ABLE TO ENGAGE



                                                                          333
                                  SIAS - DIRECT / ALIOTO


         1    INDEPENDENTLY AT THE CONCLUSION OF THE JOA?  DID YOU KNOW THAT?

         2    A.   WELL, I PROBABLY WAS AWARE OF IT IN THE BACKGROUND.

         3               MAY I POINT OUT THE DATE ON THIS, SIR, IS MARCH

         4    12TH, 1999.  I BELIEVE THE END OF THE JOA IS SEPTEMBER 12TH,

         5    2005.  AND I THINK IT WOULD BE CLEAR TO SAY I WASN'T THINKING

         6    AHEAD LIKE -- THAT FAR AHEAD, AND I DON'T OPERATE THAT WAY.

         7    Q.   WELL, WOULDN'T IT BE CORRECT THAT IF YOU DID, IN FACT,

         8    THINK THAT FAR AHEAD AND IF YOU DID BELIEVE -- IF YOU WERE

         9    GOING TO BEGIN TO COMPETE HEAD TO HEAD IN 2005, THAT YOU'D HAVE

        10    TO TAKE AT LEAST TWO OR THREE YEARS TO PREPARE FOR THAT?

        11    A.   TO PREPARE FOR A DISSOLUTION OF THE --

        12    Q.   YES.

        13    A.   YES, THAT IS CORRECT.

        14    Q.   YES.  ABOUT THREE OR FOUR YEARS; IS THAT RIGHT?

        15    A.   PROBABLY.

        16    Q.   AND ALSO THAT IF YOU WERE GOING TO --

        17    A.   THIS IS SIX.

        18    Q.   PARDON ME?

        19    A.   THIS IS SIX, SIR.

        20    Q.   OKAY.  AND IF YOU WERE GOING TO COMPETE HEAD TO HEAD, AND

        21    YOU NEEDED TO, WE ALREADY WENT OVER THIS SLIGHTLY ON ONE POINT,

        22    BUT IF YOU NEEDED PRESSES, YOU FIGURED THAT YOU'D HAVE TO HAVE

        23    THOSE PRESSES IN BY 2002 OR '3; CORRECT?

        24    A.   I BELIEVE WE'D HAVE TO HAVE THEM IN BY SEPTEMBER 12TH,

        25    2005, OR ELSE IT WOULD NOT BE POSSIBLE TO PRINT THE CHRONICLE



                                                                          334
                                  SIAS - DIRECT / ALIOTO


         1    WITH HALF OF THE EXISTING AGENCY FACILITIES.

         2    Q.   AND THAT WOULD REQUIRE THE SAME -- THAT WOULD REQUIRE

         3    TIMING, WOULD IT NOT --

         4    A.   YES.

         5    Q.   -- AT LEAST OF A YEAR, MAYBE TWO, WITH REGARD TO THE

         6    PRESSES?

         7    A.   YES.  THE SUGGESTION HERE THAT I DID THIS WITH THE IDEA OF

         8    HARMING THE EXAMINER, THEY'RE ATTRIBUTING MOTIVE TO ME AND I

         9    DISPUTE THAT.

        10    Q.   DID YOU RESPOND TO THIS LETTER AND SAY, "THAT'S NOT TRUE"?

        11    A.   (WITNESS EXAMINES DOCUMENT.)  THERE WAS ANOTHER LETTER

        12    THAT MR. WHITE ADDRESSED TO ME PERSONALLY, SO I --

        13    Q.   THAT'S THE NEXT ONE.  THAT'S APRIL 15.  WE'RE GOING TO GET

        14    TO THAT.

        15    A.   ALL RIGHT.  BUT I DID REMIND MR. WHITE SOMEWHERE ALONG THE

        16    LINE BEFORE HE ARRIVED, WHEN WE GET INTO MOTIVES, MY PHILOSOPHY

        17    IS THAT WE ARE IN BUSINESS WITH THE HEARSTS AS PARTNERS IN THIS

        18    ENTERPRISE UNTIL THE JOA IS EITHER DISSOLVED OR SEPTEMBER 12TH,

        19    2005, ARRIVES.  AND AS A PARTNER, I AGREED TO DO THINGS

        20    SOMETIMES THAT I DIDN'T THINK WERE IN THE BEST INTEREST OF OUR

        21    ENTERPRISE; BUT IN THE INTEREST OF PARTNERSHIP, I'VE DONE THAT.

        22               AND, MOST SPECIFICALLY, IN THE SPRING OF 1997, THE

        23    CHRONICLE AND SUNDAY CIRCULATION WAS IN A VERY SERIOUS DECLINE. 

        24    AND TO MAKE UP FOR THE REVENUE LOSS, THE AGENCY PROPOSED

        25    RAISING THE HOME SUBSCRIPTION PRICES OF BOTH PAPERS, AND THERE



                                                                          335
                                  SIAS - DIRECT / ALIOTO


         1    WAS A SUBSTANTIAL DESCRIPTION OR A DISCUSSION.  I DID NOT WANT

         2    TO DO IT.  I DID NOT WANT TO DO IT BECAUSE WE WEREN'T HANDLING

         3    IT WITH THE EXISTING PRICE AND THE AGENCY WAS RECOMMENDING

         4    GOING UP A DOLLAR A MONTH OR FOUR WEEKS, AND WE WENT ON AND ON.  

         5               THEY WOULD TAKE CERTAIN STEPS TO SPEND MONEY, A

         6    MILLION DOLLARS IN PROMOTION, ET CETERA.  AND MR. LEE GUITTAR,

         7    WHO WAS THE PREDECESSOR OF MR. WHITE, WANTED TO DO THAT AND I

         8    WAFFLED AND SAID, "I REALLY DON'T WANT TO.  I THINK THAT THE

         9    PROPER THING TO DO IS WAIT UNTIL SEPTEMBER AND WE SEE IF,

        10    INDEED, THESE PROMOTIONS AND OTHER ELEMENTS OF WHAT THE AGENCY

        11    SAID THEY WERE GOING TO DO WOULD AFFECT OUR DECLINE AND THEN WE

        12    CAN MAKE A DETERMINATION."

        13               THAT STILL WAS ON THE TABLE AND LEE OBVIOUSLY WANTED

        14    IT AND IN THE INTEREST IT WAS A BUM DECISION.  I AGREED TO IT,

        15    AND IT WAS A MATTER OF RECORD; AND I THINK THAT FOR HEARST TO

        16    SUGGEST THAT MY MOTIVE IS TO DISRUPT THEM OR HURT THEM IS

        17    BALONEY.  THEY MIGHT HAVE HURT THEMSELVES BY THAT PARTICULAR

        18    DECISION.

        19    Q.   OKAY.  BUT LET ME ASK YOU THE QUESTION AGAIN AND JUST

        20    MAYBE YOU CAN ANSWER JUST MY QUESTION AND THEN IF YOU WANT

        21    ANOTHER EXPLANATION, IT'S UP TO YOU.  

        22               BUT MY QUESTION IS:  WHEN YOU READ THAT, DID YOU

        23    UNDERSTAND THAT TO MEAN THAT HE, MR. WHITE, WAS SAYING TO YOU

        24    THAT THE PARTIES HAD AN OBLIGATION TO COOPERATE WITH EACH OTHER

        25    SO THAT AT THE END OF THE JOA, THEY WOULD BOTH BE IN A POSITION



                                                                          336
                                  SIAS - DIRECT / ALIOTO


         1    TO COMPETE?

         2    A.   I UNDERSTOOD THAT'S WHAT HE SAID.

         3    Q.   AND YOU UNDERSTOOD THAT THAT'S WHAT'S IN THE JOA?

         4    A.   YES.

         5    Q.   OKAY.  NOW LET ME SHOW YOU EXHIBIT 72.

         6               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR?

         7    Q.   EXHIBIT 72 IS A LETTER DATED APRIL 15, 1999.  IT IS

         8    DIRECTED TO YOU.  IT IS FROM MR. WHITE.

         9               DID YOU RECEIVE A COPY OF THAT LETTER ON OR ABOUT

        10    THE DATE INDICATED?

        11    A.   YES, SIR.

        12    Q.   NOW, THIS -- MR. WHITE, FIRST OF ALL, REFERS IN THE

        13    FIRST -- SECOND PARAGRAPH, HE STATES, QUOTE, "THE OVERARCHING

        14    INTENT"
-- NOW, THIS FOLLOWS, BY THE WAY, EXCUSE ME, BUT THIS

        15    FOLLOWS A MEETING WITH MR. GEORGE IRISH AND MR. WHITE AND YOU. 

        16    YOU HAD A MEETING; CORRECT?

        17    A.   YES, SIR.

        18    Q.   BY THE WAY, DID YOU ULTIMATELY AGREE TO THE JOINT

        19    PROMOTION?

        20    A.   NO.

        21    Q.   WAS IT DISCONTINUED?

        22    A.   IT WAS DISCONTINUED, AND I'M JUST TRYING TO REMEMBER,

        23    UNTIL -- I THINK THEY HAD A FEW -- ANOTHER WEEK OR SO TO GO,

        24    AND IT WAS DISCONTINUED AND IT WAS RECENTLY I WAS ASKED IF I

        25    WOULD AGREE TO IT AND I AGREED TO IT.



                                                                          337
                                  SIAS - DIRECT / ALIOTO


         1    Q.   SO THEY'RE DOING IT AGAIN, PUTTING IT BACK IN; IS THAT

         2    WHAT'S GOING ON?

         3    A.   I BELIEVE THAT'S THE CASE.

         4    Q.   AND YOU AGREED TO THAT?

         5    A.   I DID.

         6    Q.   WHEN WAS THAT?

         7    A.   WHEN WAS IT?

         8    Q.   YEAH.  WHEN DID THEY PUT IT BACK IN?

         9    A.   THERE'S BEEN SO MUCH GOING ON, I THINK IT MIGHT HAVE BEEN

        10    WITHIN THE LAST SIX WEEKS.

        11    Q.   OKAY.  IF YOU'LL GO BACK TO THE LETTER, THIS IS AFTER A

        12    MEETING WITH YOU, MR. GEORGE IRISH AND MR. WHITE, AND MR. WHITE

        13    STATES, QUOTE:  

        14                   "THE OVERARCHING INTENT AND PURPOSE OF THE

        15               JOINT OPERATING AGREEMENT IS TO 'ENABLE BOTH

        16               CHRONICLE AND HEARST TO SURVIVE AS PUBLISHERS OF

        17               INDEPENDENT NEWSPAPERS,' AND UPON TERMINATION OF

        18               THE AGREEMENT IN THE ABSENCE OF ITS RENEWAL OR

        19               EXTENSION, TO '... ENABLE EACH OF SAID PAPERS TO

        20               ENGAGE INDEPENDENTLY OF THE PRINTING COMPANY IN

        21               THE NEWSPAPER PUBLISHING BUSINESS."

        22    Q.   DO YOU SEE THAT?

        23    A.   YES.

        24    Q.   DO YOU AGREE THAT THE INTENT AND PURPOSE OF THE JOINT

        25    OPERATING AGREEMENT WAS TO ENABLE BOTH THE CHRONICLE AND THE



                                                                          338
                                  SIAS - DIRECT / ALIOTO


         1    HEARSTS -- AND HEARST TO SURVIVE AS PUBLISHERS OF INDEPENDENT

         2    NEWSPAPERS?

         3               MR. ROSCH:  OBJECTION, YOUR HONOR, LACK OF

         4    FOUNDATION.  THIS WITNESS WAS NOT THERE IN '65.

         5               THE COURT:  WELL, I THINK THE WITNESS CAN ANSWER

         6    THAT.  OBJECTION OVERRULED.

         7               DO YOU KNOW?

         8               THE WITNESS:  NO, I DON'T KNOW.

         9    BY MR. ALIOTO:


        10    Q.   DO YOU AGREE THAT -- IS IT YOUR UNDERSTANDING THAT THE

        11    INTENT AND PURPOSE OF THE JOINT OPERATING AGREEMENT IS TO

        12    ENABLE BOTH CHRONICLE AND HEARST TO SURVIVE AS PUBLISHERS OF

        13    INDEPENDENT NEWSPAPERS?

        14    A.   I BELIEVE THAT TERMINOLOGY IS IN THE JOINT OPERATING

        15    AGREEMENT.  IT WOULD BE SUBJECT TO A LOT OF INTERPRETATION, AND

        16    I --

        17    Q.   WELL, DO YOU --

        18    A.   -- I WOULD AGREE TO DOING A LOT OF DISCUSSION ON THAT

        19    MATTER.

        20    Q.   OKAY.  YOU HAVE EXHIBIT 1 IN FRONT OF YOU, THE JOINT

        21    OPERATING AGREEMENT?  IT'S RIGHT IN FRONT OF YOU.

        22    A.   THIS ONE (INDICATING)?

        23    Q.   YES.

        24    A.   YES.

        25    Q.   IS THAT THE JOINT OPERATING AGREEMENT?



                                                                          339
                                  SIAS - DIRECT / ALIOTO


         1    A.   YES, SIR.

         2    Q.   OKAY.  WOULD YOU TURN TO PAGE 2, PLEASE, OF THE JOINT

         3    OPERATING AGREEMENT?

         4    A.   YES.

         5    Q.   AND IF YOU WILL LOOK AT THE -- IT ACTUALLY STARTS ON PAGE

         6    1, THE "WHEREAS CHRONICLE AND HEARST ARE CONVINCED"?

         7    A.   UH-HUH.

         8    Q.   DO YOU SEE THAT?

         9    A.   YES.

        10    Q.   OKAY.  IT STATES, QUOTE:  

        11                   "WHEREAS, CHRONICLE AND HEARST ARE CONVINCED

        12               THAT ONLY BY THE CREATION OF A JOINT PRINTING

        13               PRODUCING FACILITY IN WHICH THEIR RESPECTIVE

        14               MECHANICAL ADVERTISING BUSINESS AND CIRCULATION

        15               DEPARTMENTS ARE INTEGRATED (CONFORMING TO WHAT

        16               HAS BECOME AN ACCEPTED PROCEDURE IN THE

        17               NEWSPAPER BUSINESS AND IN MANY CITIES THROUGHOUT

        18               THE UNITED STATES) AND BY CONSOLIDATION OF

        19               HEARST'S MORNING DAILY NEWS" -- SORRY, "HEARST'S

        20               DAILY AND MORNING DAILY NEWSPAPERS INTO AN

        21               AFTERNOON DAILY NEWSPAPER CAN THE NECESSARY

        22               OPERATIONAL EFFICIENCIES BE EFFECTED WHICH IN

        23               THE FACE OF INCREASING PUBLISHING COSTS AND

        24               EXPENSES WILL ENABLE BOTH CHRONICLE AND HEARST

        25               TO SURVIVE AS PUBLISHERS OF SEPARATE AND



                                                                          340
                                  SIAS - DIRECT / ALIOTO


         1               INDEPENDENT NEWSPAPERS."

         2               DO YOU AGREE WITH THAT?

         3    A.   YES.

         4    Q.   AND THEN IF YOU'LL GO TO PAGE 47, AND I WOULD LIKE TO

         5    DIRECT YOUR ATTENTION ON PAGE 47 UNDER TERM 4.4, PARAGRAPH 4.4

         6    AND SUBSECTION (A), WHICH IS APPROXIMATELY ONE -- TWO THIRDS OF

         7    THE WAY DOWN THE PAGE.  DO YOU SEE THAT SMALL "(A)"?

         8    A.   YES.

         9    Q.   IT STATES, QUOTE:  

        10                   "CHRONICLE AND HEARST WILL REASONABLY

        11               COOPERATE IN THE FORMULATION AND ORDERLY

        12               EXECUTION OF A JUST AND EQUITABLE PLAN WHICH

        13               SHALL," SMALL ROMAN ONE, "ENABLE EACH OF SAID

        14               PARTIES TO ENGAGE INDEPENDENTLY OF PRINTING

        15               COMPANY IN THE NEWSPAPER PUBLISHING BUSINESS."

        16               DO YOU SEE THAT?

        17    A.   YES.

        18    Q.   DO YOU AGREE WITH THAT?

        19    A.   WHETHER I AGREE WITH IT -- THIS IS IN THE AGREEMENT.  SO

        20    WHETHER I AGREE WITH IT OR NOT IS IRRELEVANT I GUESS.

        21               THE COURT:  WHAT IS YOUR QUESTION, MR. ALIOTO?

        22               MR. ALIOTO:  YES.

        23    Q.   DO YOU BELIEVE THAT -- IN THE SAME LETTER, WHICH IS IN

        24    FRONT OF YOU, EXHIBIT 72, IN THAT LETTER YOU -- IT WAS STATED

        25    BY THE HEARST CORPORATION OR MR. WHITE THAT HE INTENDED TO GO



                                                                          341
                                  SIAS - DIRECT / ALIOTO


         1    PUT HIS PAPER IN THE MORNING; CORRECT?

         2    A.   SO FAR EXHIBIT 112 OR --

         3    Q.   NO, 72.

         4    A.   72.

         5    Q.   IT'S APRIL 15, 1999.

         6    A.   OH, HERE.  I'M SORRY.  I'M SORRY.  THERE ARE A LOT OF

         7    THINGS HERE.

         8    Q.   OKAY.

         9    A.   NOW I'VE GOT IT.

        10               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR?

        11               THE WITNESS:  NOW I'VE GOT EXHIBIT 72.  YES, OKAY.

        12    BY MR. ALIOTO:

        13    Q.   YOU'VE GOT IT.  ALL RIGHT.

        14    A.   YES.  HE DOES....

        15    Q.   IF YOU'LL LOOK ON THE SECOND PAGE --

        16    A.   YES.

        17    Q.   -- AND THE SECOND FULL PARAGRAPH BEGINNING "IN ADDITION."

        18    A.   YES.

        19    Q.   AND THEN THE ONE FOLLOWING IT, "ACCORDINGLY."  DO YOU SEE

        20    THAT?

        21    A.   YES, I DO.

        22    Q.   OKAY.  FIRST HE SAYS, QUOTE:  

        23                   "IN ADDITION, WE'RE FOCUSING ON THE LEGAL

        24               QUESTION OF UNFORESEEN CIRCUMSTANCES.  WHAT IS

        25               CLEAR TODAY WAS NOT CLEAR TO THE DRAFTERS OF THE



                                                                          342
                                  SIAS - DIRECT / ALIOTO


         1               JOA IN 1964.  NO MATTER HOW SUPERIOR THE

         2               NEWSPAPER PRODUCT, WE NOW KNOW THAT PUBLISHING

         3               IN THE P.M. CYCLE IS A DEATH WARRANT FOR A MAJOR

         4               METROPOLITAN DAILY NEWSPAPER.  THE STATED INTENT

         5               AND PURPOSE OF THE AGREEMENT IS NOW CLEARLY

         6               FRUSTRATED BY REQUIRING THE EXAMINER TO REMAIN

         7               IN THE AFTERNOON FIELD."

         8               DO YOU SEE THAT?

         9    A.   YES, SIR. 


        10    Q.   DID HE MENTION THAT WHEN YOU HAD THE MEETING WITH

        11    MR. IRISH?

        12    A.   YES, HE DID.

        13    Q.   IT GOES ON TO SAY, QUOTE:  

        14                   "ACCORDINGLY, WE HEREBY FORMALLY REQUEST

        15               YOUR CONCURRENCE IN OUR MOVING THE EXAMINER

        16               EXPEDITIOUSLY TO THE A.M. CYCLE ALONGSIDE THE

        17               CHRONICLE."

        18               DO YOU SEE THAT?

        19    A.   YES.

        20    Q.   OKAY.  NOW, DID YOU AGREE WITH HIM THAT PUBLISHING IN THE

        21    P.M. CYCLE IS A DISADVANTAGE TO PUBLISHING IN THE A.M. CYCLE?

        22    A.   (WITNESS EXAMINES DOCUMENT.)  YES, I DO AGREE WITH

        23    PUBLISHING IN THE P.M. IS --

        24    Q.   OKAY, YOU DID.  AND DIDN'T YOU BELIEVE --

        25    A.   THOUGH I DIDN'T AGREE -- IF I MIGHT, IN THE MEETING -- I'M



                                                                          343
                                  SIAS - DIRECT / ALIOTO


         1    NOT QUITE CLEAR IF YOU'RE TALKING ABOUT THIS LETTER.  IF YOU'RE

         2    TALKING ABOUT THE MEETING I HAD, I DID NOT AGREE OR DISAGREE. 

         3    I LISTENED TO THEM AND THEY WENT THROUGH THIS.

         4    Q.   NO.  I'M ASKING YOU, INDEPENDENT OF THE LETTER --

         5    A.   UH-HUH.

         6    Q.   -- DO YOU AGREE THAT A MORNING DAILY NEWSPAPER HAS A

         7    COMPETITIVE ADVANTAGE OVER AN AFTERNOON DAILY NEWSPAPER?

         8    A.   YES, SIR, I DO.

         9    Q.   AND I'M ASKING YOU IF YOU FEEL THAT THERE IS A COMPETITIVE

        10    ADVANTAGE JUST BY REASON OF WHEN THE PAPER IS PUT OUT, MORNING

        11    AGAINST AFTERNOON.

        12    A.   YES.

        13    Q.   OKAY.  SO, THEREFORE, WHEN HE SAID THAT, THEN HE SAID,

        14    QUOTE, "ACCORDINGLY, WE HEREBY FORMALLY REQUEST YOUR

        15    CONCURRENCE IN OUR MOVING THE EXAMINER EXPEDITIOUSLY TO THE

        16    A.M. CYCLE ALONGSIDE THE CHRONICLE," DID YOU BELIEVE THAT IT

        17    WOULD BE THE JUST AND EQUITABLE THING TO DO TO ENABLE HEARST OR

        18    THE EXAMINER TO BE ABLE TO ENGAGE INDEPENDENTLY IN THE BUSINESS

        19    AFTER THE JOA TO ALLOW HIM TO COME TO THE A.M. MARKET?

        20    A.   WELL, YOUR QUESTION IS QUITE -- I -- THIS PARTICULAR

        21    REQUEST IS NOTABLE BY WHAT IT DOESN'T SAY.  I DON'T BELIEVE

        22    THAT MR. WHITE WROTE IT.  I DIDN'T BELIEVE AT THE TIME.  I

        23    BELIEVE IT WAS COMPOSED BY PROBABLY A LAWYER; AND WHAT HE

        24    DOESN'T SAY IS, A, IT IS NOT -- IF IT WAS REALLY A SERIOUS

        25    REQUEST, THERE WOULD HAVE BEEN SOME REFERENCE TO HOW COULD WE



                                                                          344
                                  SIAS - DIRECT / ALIOTO


         1    PUBLISH OR PRINT BOTH NEWSPAPERS IN THE MORNING CYCLE AND THE

         2    ANSWER IS, WITH OUR EXISTING FACILITIES WE COULD NOT DO SO. 

         3    THAT'S NUMBER ONE.

         4               HE DID NOT -- IT'S A PROFOUND CHANGE IN THE JOINT

         5    OPERATING AGREEMENT, WHICH HEARST REMINDS US OF ITS PROVISIONS

         6    CONSTANTLY.  THERE WAS NO REFERENCE TO THE REST OF THE

         7    CONDITIONS OF THE JOINT OPERATING AGREEMENT BEING SUBJECT TO

         8    CHANGE BUT JUST THIS.  SO I DIDN'T TAKE IT VERY SERIOUSLY.  IN

         9    FACT, I ALMOST CONSIDERED IT JUNK MAIL.

        10    Q.   DID YOU SAY THAT TO -- DID YOU TELL MR. WHITE THAT OR

        11    MR. BENNACK THAT?

        12    A.   I DIDN'T BOTHER TO REPLY.

        13               MR. ALIOTO:  MAY I HAVE JUST ONE MINUTE, YOUR HONOR?

        14               THE COURT:  YES.

        15                        (PAUSE IN PROCEEDINGS.)

        16    BY MR. ALIOTO:


        17    Q.   OKAY.  IS IT CORRECT THAT UNTIL THE HEARST CORPORATION

        18    PURCHASED OR AGREED TO PURCHASE THE CHRONICLE, THAT THEY

        19    CONTINUALLY TOLD YOU THAT THEY INTENDED TO STAY IN THE MARKET

        20    AND, IF NECESSARY, BEYOND 2005 AND COMPETE HEAD TO HEAD AGAINST

        21    THE CHRONICLE?


        22    A.   YES, THAT IS CORRECT.

        23    Q.   AND THEY TOLD YOU THAT ON NUMEROUS OCCASIONS; IS THAT

        24    RIGHT?

        25    A.   YES, SIR.



                                                                          345
                                  SIAS - DIRECT / ALIOTO


         1    Q.   DID YOU PARTICIPATE IN THE ACTUAL NEGOTIATIONS OF THE SALE

         2    OF THE CHRONICLE TO THE HEARST CORPORATION?

         3    A.   NO, I DID NOT.  I DID NOT.

         4    Q.   DO YOU KNOW HOW THE $660 MILLION WAS ARRIVED AT?

         5    A.   THE 660 --

         6    Q.   $660 MILLION.

         7    A.   I DID NOT PARTICIPATE IN THE NEGOTIATIONS, SO I CANNOT SAY

         8    FROM FIRSTHAND KNOWLEDGE.

         9               THE COURT:  YOU DIDN'T PARTICIPATE IN THE

        10    NEGOTIATIONS?

        11               THE WITNESS:  NO, SIR.  THAT'S A -- WHEN AN

        12    INVESTMENT BANK IS HIRED, THEY REQUIRE THAT YOU TURN OVER, THE

        13    COMPANY THAT YOU'RE SELLING, ALL THE INTERESTED PARTIES YOU MAY

        14    KNOW ABOUT, ET CETERA, AND ALL NEGOTIATIONS ARE CONDUCTED BY

        15    THE INVESTMENT BANK.

        16               THE COURT:  BUT YOU HAVE A RIGHT TO ACCEPT OR REJECT

        17    THE OFFER?

        18               THE WITNESS:  OH, ABSOLUTELY.  THIS IS -- BUT THEY

        19    WOULD -- BUT THE ACTUAL NEGOTIATIONS WOULD BE CONDUCTED WITH --

        20    I BELIEVE HEARST ENDED UP WITH AN INVESTMENT BANK, BUT --

        21    BY MR. ALIOTO:


        22    Q.   AND WERE YOU ADVISED THAT -- WERE YOU ADVISED BY THE

        23    INVESTMENT BANKERS THAT THEY EITHER RECEIVED OR ANTICIPATED

        24    RECEIVING OFFERS FROM OTHERS THAN THE HEARST CORPORATION ONLY

        25    IN THE RANGE OF 400 TO $500 MILLION?



                                                                          346
                                  SIAS - DIRECT / ALIOTO


         1    A.   I BELIEVE THAT THAT IS CORRECT.

         2    Q.   SO THAT YOU UNDERSTOOD THAT OTHERS MAY BE OFFERING OR MAY

         3    HAVE OFFERED BETWEEN FOUR OR $500 MILLION, SUBSTANTIALLY LESS

         4    THAN WHAT THE HEARST CORPORATION PAID?

         5    A.   MY UNDERSTANDING IS THAT THERE WERE NO FORMAL OFFERS, BUT

         6    EXPRESSIONS OF INTEREST INDICATED 400 TO $500 MILLION.

         7    Q.   AND UNDER THE JOA, THE HEARST CORPORATION HAD THE FIRST

         8    RIGHT OF REFUSAL; IS THAT RIGHT?

         9    A.   YES.

        10    Q.   AND ALSO UNDER THE JOA, IS IT CORRECT THAT THEY HAD ONE

        11    HALF OF THE ASSETS?

        12    A.   YES.

        13    Q.   AND UNDER THIS FIRST RIGHT OF REFUSAL, THE IDEA WOULD BE

        14    IS THAT IF THE CHRONICLE WANTED TO TRY TO SELL IT TO SOMEONE

        15    ELSE, THEY COULDN'T WITHOUT FIRST GIVING A CHANCE TO HEARST; IS

        16    THAT RIGHT?

        17    A.   YES.  THE SPECIFICS OF IT ARE THE TWO PARTIES -- THE

        18    SELLING PARTY WOULD NEGOTIATE WITH THE STAYING PARTY AND

        19    THERE'S NO TIME LIMIT.  IF THEY COULD NOT REACH AN AGREEMENT,

        20    THE SELLING PARTY WAS FREE TO GO OUT IN THE MARKET AND TRY TO

        21    FIND ALTERNATIVE BUYERS.  IF THEY CAME UP WITH ONE, THEY WERE

        22    REQUIRED TO GO BACK TO THE REMAINING PARTY AND OFFER THAT PRICE

        23    TO IN THIS CASE HEARST.

        24    Q.   SO UNDER THAT PROVISION --

        25    A.   IT DISCOURAGES COMPETITIVE BIDS.



                                                                          347
                                  SIAS - DIRECT / ALIOTO


         1    Q.   THANK YOU.

         2               NOW, DO YOU KNOW THE DIFFERENCE BETWEEN THESE

         3    EXPRESSIONS OF INTEREST, FOUR TO $500 MILLION, AND WHAT THE

         4    HEARST CORPORATION ULTIMATELY PAID, $660 MILLION, DO YOU KNOW

         5    WHAT ACCOUNTS FOR THAT DIFFERENCE?

         6    A.   I BELIEVE THAT THE --

         7    Q.   DO YOU KNOW WHAT ACCOUNTS FOR THAT DIFFERENCE?

         8               MR. ROSCH:  I THINK HE WAS STARTING TO ANSWER, YOUR

         9    HONOR.

        10               MR. ALIOTO:  HE STARTED WITH "I BELIEVE."

        11               THE COURT:  WELL, LET'S --

        12               THE WITNESS:  WELL --

        13               THE COURT:  LET'S GET THE ANSWER OF THE WITNESS.

        14               THE WITNESS:  DO I KNOW?  NO, I DON'T KNOW.  ONLY

        15    THE HEARST CORPORATION KNOWS IT, BUT -- BUT IT SEEMS TO ME IT'S

        16    RATHER OBVIOUS THAT THE SIX YEARS LEFT TO GO IN THE JOINT

        17    OPERATING AGREEMENT, THAT A BUYER OF THE CHRONICLE WOULD BE --

        18    WOULD BE ASSUMING WOULD DISCOURAGE BUYERS IN TERMS OF THE PRICE

        19    THEY'D BE WILLING TO PAY.  

        20               WHETHER THAT MEANS I KNOW OR DON'T KNOW, BUT I THINK

        21    THE ONLY PEOPLE WHO KNOW WHAT THE DIFFERENCE IS, IS THE HEARST

        22    CORPORATION.

        23    BY MR. ALIOTO:


        24    Q.   DO YOU KNOW -- IF THE INTEREST THAT YOU UNDERSTOOD WAS

        25    BEING EXPRESSED WAS BETWEEN FOUR AND $500 MILLION, DO YOU KNOW



                                                                          348
                                  SIAS - DIRECT / ALIOTO


         1    THE REASONS WHY HEARST WAS WILLING TO PAY A DIME MORE THAN

         2    THAT?

         3    A.   NO, I DON'T KNOW THAT.  I'M NOT THE BUYER.

         4    Q.   TO YOUR KNOWLEDGE DID THE PURCHASING OUT OF THE REMAINING

         5    JOINT VENTURE HAVE ANYTHING TO DO WITH THAT DIFFERENCE IN MONEY

         6    BETWEEN THE FOUR AND $500 MILLION AND THE
$660 MILLION?

         7    A.   DID THE PURCHASING OUT?  I'M NOT SURE WHAT THAT --

         8    Q.   YES.  WELL, THE IDEA WAS, IS IT NOT, IS THAT IF HEARST

         9    BOUGHT THE CHRONICLE, THE JOA WAS SUPPOSED TO THEN DISAPPEAR;

        10    CORRECT?

        11    A.   YES.

        12    Q.   AND IF THE CHRONICLE WANTED TO JUST HANG AROUND UNTIL THE

        13    END OF THE JOA, THEY WOULD BE BEING PAID MORE THAN $20 MILLION

        14    EVERY YEAR; WOULDN'T THEY?

        15    A.   WHO WOULD BE PAID MORE THAN $20 MILLION A YEAR?

        16    Q.   THE CHRONICLE UNDER THE JOA.

        17    A.   NO.  WE WOULD BE PAID WHATEVER THE -- BE PAID, YOU MEAN

        18    THE EARNINGS OR THE CASH FLOW?

        19    Q.   YES.

        20    A.   IF THE CASH FLOW LAST YEAR WAS $18 MILLION, WHICH IS

        21    EBITDA, THE EARNINGS WERE $9 MILLION AND I DON'T KNOW WHAT TO

        22    EXPECT IN THE NEXT FIVE YEARS.  A LOT OF TIMES LONG-RANGE PLANS

        23    DON'T SEEM TO BEAR MUCH RELATION TO THE OUTCOME, SO I DON'T

        24    KNOW WHERE THE
$20 MILLION COMES FROM.

        25    Q.   MR. SIAS, HAVE YOU SEEN ANY STATEMENTS OR ANALYSES OF WHAT



                                                                          349
                                  SIAS - DIRECT / ALIOTO


         1    THE POTENTIAL
-- WELL, WHAT THE NET PROFITS HAVE BEEN FOR THE

         2    LAST FEW YEARS OF THE JOA AND THEN WHAT THE POTENTIAL PROFITS

         3    ARE TO BE GOING FORWARD?  HAVE YOU SEEN DOCUMENTS THAT INDICATE

         4    THAT?

         5    A.   YOU ARE USING THE TERM "PROFITS" AND THE JOA HAS A NET

         6    EXCESS.  SO FOR THEM -- FROM THEIR STANDPOINT, I DO NOT KNOW

         7    THE HEARST CORPORATION'S INTERNAL ACCOUNTING OR HOW THEY -- I

         8    KNOW THAT THE EXAMINER GETS $57 MILLION A YEAR LAST YEAR FROM

         9    THE AGENCY.  WE HAVE $18 MILLION OF CASH FLOW, 9 MILLION OF

        10    EARNINGS LAST YEAR, AND THIS YEAR IF WE HAD OPERATED THE WHOLE

        11    YEAR WE MIGHT HAVE HAD MORE.  THE WAY THE YEAR IS SHAPING UP,

        12    WE PROBABLY WOULD HAVE.

        13    Q.   IN ANY EVENT, IN 1999, IN 1999, IF THE AVERAGE WOULD BE

        14    ABOUT $20 MILLION, THERE WOULD BE APPROXIMATELY FIVE YEARS LEFT

        15    WITH THE JOA; ISN'T THAT RIGHT?

        16    A.   YES.

        17    Q.   AND IF YOU ADDED THAT UP, AND EVEN IF THERE WERE NO

        18    INCREASE, THAT WOULD BE OVER A HUNDRED MILLION DOLLARS?

        19    A.   WELL, YOU'D DISCOUNT IT BECAUSE OF THE TIMEFRAME, AND IT

        20    WOULD BE PROBABLY LESS THAN A HUNDRED MILLION DOLLARS.

        21    Q.   AND SO MY QUESTION TO YOU IS:  DO YOU KNOW WHETHER OR NOT

        22    ANY PART OF THE JOA, EXTINGUISHING THE JOA, WAS IN ANY WAY PAID

        23    FOR BY HEARST WHEN IT PAID MORE THAN EVERYONE ELSE WAS SHOWING

        24    INTEREST IN PAYING?

        25               THE COURT:  DO YOU UNDERSTAND THE QUESTION?



                                                                    
     350
                                  SIAS - DIRECT / ALIOTO


         1               THE WITNESS:  I GUESS I DO.

         2               THE COURT:  LET'S SEE IF I DO.

         3                              (LAUGHTER)

         4               THE COURT:  WHAT I THINK THE QUESTION IS, BY ALL

         5    MEANS CORRECT ME IF I'M WRONG, MR. ALIOTO, IS WHETHER OR NOT

         6    THE THEN SIX YEARS REMAINING IN THE JOA DEPRESSED THE PRICE

         7    WHICH A WILLING BUYER WOULD OFFER TO BUY THE CHRONICLE.  ISN'T

         8    THAT THE ESSENCE OF YOUR QUESTION?

         9               MR. ALIOTO:  NO, IT IS NOT, YOUR HONOR.  WHAT I AM

        10    TRYING TO -- ON THAT ISSUE, THAT WAS NEXT; BUT THIS ONE IS

        11    WHETHER OR NOT THE AMOUNT THAT -- IF I MAY USE THE EASEL, YOUR

        12    HONOR.

        13               THE COURT:  ALL RIGHT.

        14    BY MR. ALIOTO:


        15    Q.   HEARST CORPORATION PAID 660 OR IS OFFERING TO PAY

        16    $660 MILLION; CORRECT?

        17    A.   YES.

        18    Q.   WHAT YOU HEARD WERE THE EXPRESSIONS OF INTEREST WERE IN

        19    THE RANGE OF 400 TO $500 MILLION; CORRECT?

        20    A.   YES.

        21    Q.   CORRECT?

        22    A.   YES.

        23    Q.   OKAY.  SO PUTTING FOUR TO $500 MILLION, THAT'S A

        24    DIFFERENCE OF ANYWHERE BETWEEN $260 MILLION AND $160 MILLION

        25    BETWEEN THE PRICE THAT HEARST AGREED TO PAY AND WHAT OTHERS



                                                                          351
                                  SIAS - DIRECT / ALIOTO


         1    WERE PROPOSING TO PAY; CORRECT?

         2    A.   YES.

         3    Q.   WAS ANY PART OF THIS, TO YOUR KNOWLEDGE, ANY PART OF THIS

         4    EXCESS?  DID ANY PART OF THAT HAVE TO DO WITH HEARST PAYING THE

         5    CHRONICLE FOR THE REMAINING YEARS OF THE JOA?

         6               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)

         7   

         8   

         9   

        10   

        11   

        12   

        13   

        14   

        15   

        16   

        17   

        18   

        19   

        20   

        21   

        22   

        23   

        24   

        25   



                                                                          352
                                  SIAS - DIRECT / ALIOTO


         1               THE COURT:  OKAY.

         2               THE WITNESS:  I DON'T KNOW HOW HEARST WOULD.


         3    BY MR. ALIOTO:


         4    Q.   WHO WOULD KNOW THAT?

         5    A.   I BEG YOUR PARDON?

         6    Q.   WHO WOULD KNOW THAT?

         7    A.   I THINK THE HEARST CORPORATION WOULD KNOW WHAT THEIR

         8    MOTIVATION AND WHAT THEIR COMPONENTS OF THEIR BID -- WHAT THE

         9    REASONS WERE FOR THEIR BID.

        10    Q.   DO YOU KNOW WHETHER -- THE PERSON WHO NEGOTIATED FOR YOU

        11    WAS THE DLJ?

        12    A.   JILL GREENTHAL.

        13    Q.   SHE NEGOTIATED --

        14    A.   YES.

        15    Q.   -- THE SALE OF THE CHRONICLE FOR THE CHRONICLE?

        16    A.   YES.

        17    Q.   SHE CAME BACK TO YOU AND GAVE YOU --

        18    A.   RIGHT.

        19    Q.   SHE CAME BACK TO YOU AND GAVE YOU JUST THE AMOUNT, 660,

        20    660 MILLION?

        21    A.   CAME BACK WITH THAT BEING THE AMOUNT THAT SHE FINALLY WAS

        22    ABLE TO GET.  SOME CHRONICLE SHAREHOLDERS WERE VERY CONCERNED

        23    WITH THE DLJ'S ORIGINAL ESTIMATE OF WHAT THEY COULD GET FOR THE

        24    CHRONICLE, WHICH WAS LESS THAN $660 MILLION, A RANGE OF PRICES.

        25    Q.   WOULD YOU SAY THAT AGAIN, PLEASE?



                                                                          353
                                  SIAS - DIRECT / ALIOTO


         1    A.   THE -- THE PROJECT GOLDEN IN THE MEETING THAT YOU WERE

         2    REFERRING TO THIS MORNING, THE DLJ CAME IN WITH A RANGE OF

         3    ESTIMATED PRICES THEY COULD OBTAIN FOR OUR VARIOUS PROPERTIES.

         4               AND IN THE CASE OF THE CHRONICLE MY RECOLLECTION WAS

         5    IT WAS SOMEWHERE 400 -- 450 TO 600 AND -- NOT 600 -- 580 OR

         6    SOME SUCH.  AND THAT'S IN THE RANGE.

         7               AND THERE WERE SOME CHRONICLE SHAREHOLDERS THAT WERE

         8    EMPHATIC THEY WERE NOT GOING TO SELL THE THING -- IF THAT WAS

         9    THE CASE, THEY WOULDN'T SELL.  SO SHE IN HER NEGOTIATIONS ENDED

        10    UP WITH THIS PRICE.

        11    Q.   DO YOU KNOW WHETHER OR NOT IN HER NEGOTIATIONS WITH HEARST

        12    THE JOA WAS EVEN -- WAS MENTIONED?

        13    A.   NO, I DO NOT KNOW WHAT WAS MENTIONED.  I WAS NOT IN THOSE

        14    CONVERSATIONS.  I ASSUME IT WAS.

        15               MR. ALIOTO:  THAT'S ALL I HAVE, YOUR HONOR.

        16               THE COURT:  VERY WELL.

        17               DIRECT EXAMINATION, MR. ROSCH?

        18               MR. ROSCH:  THANK YOU, YOUR HONOR.

        19               MR. ALIOTO:  IF I CAN HAVE JUST ONE SECOND TO CLEAN

        20    UP HERE.

        21               THE COURT:  ALL RIGHT, MR. ROSCH?

        22               MR. ROSCH:  THANK YOU, YOUR HONOR.

        23               I HAVE A FEW QUESTIONS, MR. SIAS.

        24   

        25   



                                                                          354
                                   SIAS - CROSS / ROSCH


         1                           CROSS-EXAMINATION

         2    BY MR. ROSCH:

         3    Q.   DO YOU HAVE EXHIBIT 50 BEFORE YOU, THAT IS, YOUR

         4    DECLARATION?

         5               I THINK IT'S PROBABLY RIGHT AT THE BOTTOM OF YOUR

         6    PILE.

         7    A.   I HAVE IT.

         8    Q.   OKAY.  I WOULD LIKE YOU TO TURN, PLEASE, TO PAGE 2,

         9    PARAGRAPH 3.  AND THE FIRST SENTENCE I WOULD LIKE TO HAVE YOU

        10    READ THAT.  THAT'S THE SENTENCE THAT MR. ALIOTO QUESTIONED YOU

        11    ABOUT AT THE BEGINNING OF THE DAY TODAY.  IT SAYS:

        12                   "ONLY HEARST HAS THE ABILITY TO BUY THE

        13               CHRONICLE WITHOUT ASSUMING THE CHRONICLE'S

        14               OBLIGATIONS UNDER THE JOA TO SUBSIDIZE THE

        15               EXAMINER."

        16               DO YOU SEE THAT?

        17    A.   YES.


        18    Q.   NOW, WILL YOU PLEASE TELL THE COURT WHAT PROVISIONS OF THE

        19    JOA YOU HAD IN MIND WHEN YOU SAID THAT?

        20    A.   THE FACT THAT HEARST ALREADY OWNS HALF OF THE JOA AND IS

        21    ABLE -- TEARING APART THE JOA IS AN IMPROBABLE -- ALMOST AN

        22    IMPROBABLE JOB.  AND HEARST, HAVING HALF OWNERSHIP, WOULD NOT

        23    HAVE TO GO THROUGH THAT.  AND THEY -- THEY ARE IN THE MARKET

        24    AND KNOW THE SITUATION AND, MOST IMPORTANTLY, WILL NOT HAVE TO

        25    GO THROUGH THE PROCESS OF DISENGAGING FROM -- FROM THE JOA IN



                                                                          355
                                   SIAS - CROSS / ROSCH


         1    SOME FORM, THAT IS, NEGOTIATING -- IF A THIRD PARTY WERE TO BUY

         2    THE CHRONICLE, THEY WOULD HAVE TO NEGOTIATE WITH HEARST THE

         3    DISSOLUTION OF THE JOA.

         4    Q.   MR. ALIOTO QUESTIONED YOU ABOUT A POSSIBLE NEW PLANT AND

         5    EQUIPMENT.  DO YOU RECALL THAT LINE OF QUESTIONS?

         6    A.   YES.

         7    Q.   DID YOU CONSIDER BUILDING A NEW PLANT FOR THE CHRONICLE

         8    REGARDLESS OF WHETHER YOU COULD OBTAIN THE CURRENT PLANT FROM

         9    HEARST AT THE END OF THE JOA?

        10               THE COURT:  DID --

        11               MR. ROSCH:  YES.  THE QUESTION IS --

        12               THE COURT:  DID THE CHRONICLE CONSIDER BUILDING A

        13    NEW PRINTING PLANT?

        14               MR. ROSCH:  YES.

        15               THE COURT:  FOR PUBLIC --

        16               MR. ROSCH:  REGARDLESS OF WHETHER THEY COULD GET THE

        17    CURRENT PRINTING PLANT FROM HEARST.

        18               THE COURT:  A PRINTING PLANT THAT WOULD GO ONLINE IN

        19    SEPTEMBER OF 2005?

        20               MR. ROSCH:  YES.  REGARDLESS -- BASICALLY, I AM

        21    ASKING YOU, WERE THERE ANY REASONS -- LET ME BE LESS LEADING

        22    ABOUT THAT.

        23               THE COURT:  ALL RIGHT.

        24    BY MR. ROSCH:

        25    Q.   DID YOU CONSIDER BUILDING A NEW PRINTING PLANT FOR THE



                                                                          356
                                   SIAS - CROSS / ROSCH


         1    CHRONICLE NO MATTER WHAT?

         2               THE COURT:  YOU MEAN, AT ANY TIME?

         3               MR. ROSCH:  YES.  HAS HE CONSIDERED DOING THAT.

         4               THE WITNESS:  NO, WE HAVE NOT IN ANY FORMAL WAY.  WE

         5    HAVE COMMISSIONED A STUDY BY THE MCCLEAR GROUP TO GIVE US SOME

         6    SENSE OF WHAT WOULD BE INVOLVED WITH A PRINTING PLANT, AND IT

         7    WAS THE BEGINNING OF THE PREPARATIONS FOR -- FOR NEGOTIATIONS.

         8    Q.   ARE THERE ANY REASONS WHY IT WOULD BE TO THE CHRONICLE'S

         9    BENEFIT TO BUILD A NEW PRINTING PLANT REGARDLESS?

        10    A.   YES.

        11               THE COURT:  REGARDLESS OF?

        12               MR. ROSCH:  OF WHETHER IT COULD OBTAIN THE CURRENT

        13    PRINTING PLANT FROM HEARST.

        14               THE WITNESS:  YES.

        15    BY MR. ROSCH:

        16    Q.   AND WHAT ARE THOSE REASONS?

        17    A.   THE EFFICIENCY OF OPERATION.  OPERATING THREE PRINTING

        18    PLANTS IS VERY INEFFICIENT, PARTICULARLY WHEN THEY ARE LOCATED

        19    OUTSIDE OF SOME OF THE AREAS WHERE YOUR CIRCULATION HAS MORE

        20    INTENSITY.

        21               THERE IS A VERY DEFINITE LIMITATION ON OUR PAGE

        22    CAPACITY OF OUR PRESSES.  SO WE HAVE TO PUT OUT PAPERS IN

        23    WHAT'S KNOWN AS A COLLECT MODE, AND IT IS -- IT DELAYS OUR

        24    TIMELY DELIVERY OF THE PAPERS.  SO THAT IS AN IMPORTANT

        25    CONSIDERATION AND WILL SOME DAY HAVE TO BE ADDRESSED.



                                                                          357
                                   SIAS - CROSS / ROSCH


         1               AND, LASTLY, BUT BY NO MEANS LEAST, WE HAVE VERY

         2    LIMITED COLOR CAPACITY.

         3               I WOULD REGARD THE EFFICIENCY OF THE THREE PLANTS --

         4    OR THE INEFFICIENCY -- TO BE QUITE -- QUITE AN IMPORTANT

         5    ELEMENT.  BUT THE MOST IMPORTANT OF ALL IS THE INABILITY TO

         6    PRODUCE NEWSPAPERS AND GET THEM TO -- WE ARE A MORNING

         7    NEWSPAPER -- AND GET THEM TO THE SUBSCRIBER BEFORE THEY LEAVE

         8    FOR WORK.

         9               THE COURT:  LET ME INTERRUPT, IF I MIGHT, MR. ROSCH.

        10               MR. ROSCH:  OF COURSE, YOUR HONOR.

        11               THE COURT:  JUST TO CLARIFY THE SITUATION.  

        12               YOU REFER TO THREE PRINTING PLANTS.

        13               THE WITNESS:  YES, SIR.

        14               THE COURT:  DOES THE JOINT OPERATING AGREEMENT

        15    PRESENTLY HAVE TWO PRINTING PLANTS?

        16               THE WITNESS:  IT HAS THREE, YOUR HONOR.

        17               THE COURT:  IT HAS THREE PRESENTLY?

        18               THE WITNESS:  YES.

        19               THE COURT:  AND WHERE ARE THE THREE LOCATED?


        20               THE WITNESS:  ONE IS IN SAN FRANCISCO ON CAESAR

        21    CHAVEZ BOULEVARD.  ONE IS IN UNION CITY.  THAT IS THE LARGEST

        22    OF THE PLANTS.  THAT HAS 48 UNITS.  AND THE SAN FRANCISCO PLANT

        23    HAS 32, SEVEN-UNIT PRESSES.  AND THE RICHMOND PLANT HAS 32

        24    SEVEN-UNIT PRESSES -- 24.  I BEG YOUR PARDON, 24, NOT 32.  SO

        25    WE'VE GOT TWO SMALLER PLANTS AND ONE LARGE ONE.  THEY'RE OUT IN



                                                                          358
                                   SIAS - CROSS / ROSCH


         1    UNION CITY -- WHICH PRODUCES MANY OF THE -- OF THE INSERTS, ET

         2    CETERA, THAT WE RUN.

         3               THE COURT:  YOU SAID "UNION CITY"?


         4               THE WITNESS:  UNION CITY, YES.

         5               THE COURT:  OH, I MISUNDERSTOOD.  I THOUGHT YOU SAID

         6    "DALY CITY."

         7               THE WITNESS:  AND THAT IS, AGAIN, ONE OF THE
--

         8    SPLITTING THAT IN HALF IS -- FOR EITHER PARTY WOULD BE A --

         9    JUST THE PRODUCTION, NOT TO MENTION THE SYSTEMS AND EVERYTHING

        10    ELSE, IT'S -- IT'S AT THE LEAST A HERCULEAN TASK.

        11               MR. ROSCH:  DOES THE COURT HAVE ANY FURTHER

        12    QUESTIONS ON THAT?

        13               THE COURT:  I THINK I AM CLEARED UP.

        14               MR. ROSCH:  THANK YOU.

        15               THE COURT:  THANK YOU.

        16    BY MR. ROSCH:

        17    Q.   MR. ALIOTO ASKED YOU ABOUT THE PROVISIONS OF THE JOINT

        18    OPERATING AGREEMENT THAT GIVE YOU THE EXCLUSIVE RIGHT TO SET

        19    CIRCULATION AND AD RATES FOR THE CHRONICLE.  

        20               DO YOU RECALL THOSE QUESTIONS?

        21    A.   YES.

        22    Q.   AND, AS I UNDERSTAND YOUR ANSWERS, YOU SAID THAT IN

        23    EXERCISING THOSE RIGHTS, YOU DID NOT ENGAGE IN PRICE

        24    COMPETITION WITH THE EXAMINER; IS THAT CORRECT?

        25    A.   THE AGENCY RECOMMENDS TO EACH PARTNER ADVERTISING RATES



                                                                          359
                                   SIAS - CROSS / ROSCH


         1    AND CIRCULATION RATES.  AND EACH PARTNER MUST INDIVIDUALLY

         2    APPROVE THOSE.  SO THAT --

         3    Q.   I UNDERSTAND THAT.

         4               BUT IN APPROVING THEM, I UNDERSTAND YOU TO SAY THAT

         5    YOU HAVE NOT ENGAGED IN PRICE COMPETITION WITH THE EXAMINER?

         6    A.   NO, WE'RE NOT.

         7    Q.   AND WHY IS THAT?

         8    A.   WELL, IT'S PRETTY OBVIOUS.  THE 50/50 SPLIT OF REVENUE, IT

         9    WOULD BE A SELF-DEFEATING PROJECT.

        10    Q.   AND, FINALLY, YOU SAID THAT YOU WERE CONCERNED ABOUT

        11    STEMMING THE LOSS OF CIRCULATION OF THE CHRONICLE AND THAT THAT

        12    WAS YOUR PRIMARY CONCERN.

        13    A.   THAT'S CORRECT.

        14    Q.   NOW, WHY DID YOU THINK THAT THE CIRCULATION OF THE

        15    CHRONICLE WAS SO IMPORTANT?

        16    A.   WELL, IT'S THE KEY TO A SUCCESSFUL NEWSPAPER SO FAR.  IT

        17    IS THE LARGEST NEWSPAPER.  WE HAVE 462,000, 465,000, DAILY

        18    CIRCULATION.  AND IT IS VERY CRITICAL TO MAINTAIN THAT SIZE AND

        19    SCALE IN THE COMPETITIVE ENVIRONMENT THAT PERSISTS IN THE

        20    IMMEDIATE BUSINESS HERE IN THE GREATER BAY AREA.

        21               MR. ROSCH:  THANK YOU, YOUR HONOR.

        22               THE COURT:  REDIRECT?

        23               OH, I'M SORRY.

        24               MR. HALLING:  YOUR HONOR, MAY I?

        25               THE COURT:  YES, MR. HALLING?



                                                                          360
                                  SIAS - CROSS / HALLING


         1                           CROSS-EXAMINATION

         2    BY MR. HALLING:

         3    Q.   MR. SIAS, WHO DO YOU CONSIDER TO BE THE CHRONICLE'S

         4    PRINCIPAL COMPETITORS?

         5    A.   FOR ADVERTISING?  IT WOULD BE THE WORLD.  AND NOT -- NOT

         6    QUITE.  BUT TODAY'S ADVERTISING OR MANY OF THEM ARE IN -- IN

         7    MORE THAN ONE MEDIUM.  AND, THEREFORE, WE HAVE VERY -- A NUMBER

         8    OF THE ADVERTISERS THAT ARE -- THE AGENCY SOLICITS.  THEY ARE

         9    IN -- ON TELEVISION HERE IN THIS MARKET.  THEY ARE ON

        10    BILLBOARDS.  THEY ARE IN OTHER NEWSPAPERS IN THIS GREATER

        11    AREA -- SAN JOSE, CONTRA COSTA, MARIN, INDEPENDENT JOURNAL,

        12    MAYBE THE OAKLAND TRIBUNE, ALAMEDA NEWSPAPER GROUP.

        13               SO I -- I DON'T KNOW -- I WOULDN'T CONFINE IT. 


        14    RADIO IS VERY ACTIVE AND ENJOYS ADVERTISERS THAT ALSO USE THE

        15    SAN FRANCISCO NEWSPAPERS.

        16    Q.   DOES THE MERCURY NEWS SELL ITS PAPERS IN SAN FRANCISCO?

        17    A.   IT DOES AND IT PLANS TO START A SAN FRANCISCO EDITION

        18    STARTING IN -- I BELIEVE, IT'S LATE JULY.

        19    Q.   DO YOU HAVE ANY FURTHER INFORMATION AS TO WHAT TYPE OF

        20    OPERATION OR PLANS THE MERCURY NEWS HAS?

        21               MR. ALIOTO:  I OBJECT, YOUR HONOR, ON THE GROUND

        22    THAT THIS IS HEARSAY EVIDENCE.

        23               THE COURT:  WELL, IT IS -- IT IN ALL LIKELIHOOD IS

        24    HEARSAY, ISN'T IT?

        25               MR. HALLING:  YOUR HONOR, HE IS THE PRESIDENT OF THE



                                                                          361
                                  SIAS - CROSS / HALLING


         1    CHRONICLE AND WE ARE TALKING ABOUT THE COMPETITORS.

         2               THE COURT:  I UNDERSTAND THAT, BUT IT'S HEARSAY.

         3               MR. HALLING:  I WILL REPHRASE THE QUESTION.

         4    BY MR. HALLING:

         5    Q.   DO YOU HAVE ANY INFORMATION CONCERNING ANNOUNCEMENTS THAT

         6    THE MERCURY NEWS HAS MADE ABOUT OPERATING IN SAN FRANCISCO?

         7    A.   THEY HAVE ANNOUNCED --

         8               MR. ALIOTO:  NO.  I OBJECT TO THAT.  HE CAN ANSWER

         9    THAT YES OR NO, IT SEEMS TO ME, YOUR HONOR, WITHOUT HEARSAY.

        10               THE COURT:  I GATHER THE ANSWER TO THAT IS YES?

        11               THE WITNESS:  YES.

        12               THE COURT:  ALL RIGHT.

        13               WELL, I THINK IN VIEW OF THE NATURE OF THE

        14    PROCEEDINGS, I WILL LET THIS IN UNDER THE RESIDUAL EXCEPTION.  

        15               GO AHEAD.

        16    BY MR. HALLING:

        17    Q.   PLEASE ANSWER THE QUESTION.

        18    A.   THEY HAVE ANNOUNCED AND ARE STARTING TO RECRUIT AN

        19    ENLARGED EDITORIAL STAFF, IN PARTICULAR REFERENCE TO

        20    INDIVIDUALS IN THE ENTERTAINMENT AREA AND THE BUSINESS AREA. 


        21    AND THEY HAVE SUGGESTED THAT THEY MIGHT HAVE AS MANY AS 40

        22    ADDITIONAL JOURNALISTS UP HERE.

        23               THE COURT:  THEY MIGHT HAVE A WHAT, SIR?

        24               THE WITNESS:  FORTY ADDITIONAL JOURNALISTS.

        25    ////



                                                                          362
                                  SIAS - CROSS / HALLING


         1    BY MR. HALLING:

         2    Q.   IS THE MERCURY NEWS CURRENTLY SOLD IN NEWS RACKS IN SAN

         3    FRANCISCO?

         4    A.   YES, IT IS.

         5    Q.   WHAT OTHER DAILY NEWSPAPERS ARE AVAILABLE IN NEWS RACKS IN

         6    SAN FRANCISCO?


         7    A.   USA TODAY, THE NEW YORK TIMES, THE WALL STREET JOURNAL,

         8    THE LOS ANGELES TIMES IN A FEW LOCATIONS AND -- WELL, THAT'S --

         9    THERE MIGHT BE A FEW, BUT THAT'S AS MUCH AS I KNOW, THAT I CAN

        10    GIVE YOU WITH SPECIFICITY.

        11    Q.   MR. ALIOTO ASKED YOU SOME QUESTIONS -- I THINK THE NUMBERS

        12    ARE STILL UP ON THE EASEL -- ABOUT THE DIFFERENCE IN PRICE

        13    BETWEEN WHAT HEARST OFFERED TO PAY AND A LOWER FIGURE OF 400 TO

        14    500 MILLION.

        15               DO YOU RECALL THAT?

        16    A.   YES.

        17    Q.   AND I BELIEVE YOU RESPONDED -- STRIKE THAT.


        18               WOULD A PURCHASER OF THE CHRONICLE OTHER THAN HEARST

        19    BE ABLE TO PRINT THE CHRONICLE WITH ONE-HALF OF THE AGENCY'S

        20    PRINTING ASSETS?

        21    A.   NO.

        22    Q.   WOULD THEY HAVE TO BUILD A NEW PRINTING FACILITY, ASSUMING

        23    THEY DIDN'T ACQUIRE THOSE OTHER PRINTING ASSETS FROM HEARST?

        24               MR. ALIOTO:  I OBJECT TO LEADING THIS WITNESS, YOUR

        25    HONOR.  HE IS THE CEO.



                                                                          363
                                  SIAS - CROSS / HALLING


         1               THE COURT:  WELL, OBJECTION OVERRULED.

         2               PROCEED, COUNSEL.

         3               COUNSEL IS ATTEMPTING TO LAY FOUNDATION FOR A

         4    FOLLOW-UP QUESTION.

         5               THE WITNESS:  THE -- I DON'T KNOW ABOUT HAVE TO. 

         6    BUT IF THEY WANTED TO GET A NEWSPAPER, A COMPETITIVE NEWSPAPER,

         7    OUT, THEY WOULD NEED TO HAVE A -- A PRINTING FACILITY THAT IS

         8    SUBSTANTIALLY LARGER THAN WHAT THEY WOULD HAVE WITH HALF OF THE

         9    PRESENT AGENCY FACILITIES.

        10    BY MR. HALLING:

        11    Q.   HOW MUCH WOULD THAT COST?

        12    A.   WE HAVE A PRELIMINARY ESTIMATE FROM THE MCCLEAR

        13    CORPORATION THAT WITH WHAT IS CURRENTLY INVOLVED WITH THE

        14    CHRONICLE PROJECTED FOR THE YEAR 2005, SOMETHING IN THE ORDER

        15    OF TODAY'S PRICES OF $250 MILLION PLUS $30 MILLION FOR LAND.

        16    Q.   NOW, YOU ALSO TESTIFIED, MR. SIAS, THAT IT WOULD BE AN

        17    ADVANTAGE TO BE AN A.M. OR MORNING PAPER RATHER THAN A P.M. OR

        18    EVENING NEWSPAPER.

        19               DO YOU RECALL THAT?

        20    A.   YES.

        21    Q.   WHAT'S THE BASIS FOR YOUR VIEW THAT IT'S PREFERABLE TO BE

        22    A MORNING PAPER?

        23    A.   THE EXPERIENCE OF MAJOR METROPOLITAN EVENING NEWSPAPERS IN

        24    THE UNITED STATES OVER THE PAST 30 YEARS.

        25    Q.   ARE THERE PARTICULAR FACTORS THAT WOULD DISADVANTAGE OR



                                                                          364
                                  SIAS - CROSS / HALLING


         1    ADVANTAGE A MORNING VERSUS AN EVENING NEWSPAPER?

         2    A.   I AM NOT SURE I UNDERSTAND THE QUESTION.  BUT EVENING --

         3    THE RECORD IS THAT THE EVENING NEWSPAPERS ARE NOT ABLE TO

         4    ATTRACT THE CIRCULATION THAT MORNING PAPERS ARE AND --

         5               THE COURT:  AND I THINK COUNSEL'S QUESTION IS WHY. 

         6    WHY IS THAT?

         7               MR. HALLING:  THANK YOU, YOUR HONOR.

         8               THE WITNESS:  OKAY.  WHY.

         9               WELL, I DON'T KNOW ALL OF THEM, BUT PROBABLY MOST

        10    IMPORTANTLY THE CHANGED LIFESTYLES THAT TELEVISION BROUGHT ON

        11    US.  PEOPLE ARE NOT -- AND, ALONG WITH THAT, THE
-- THE COMMUTE

        12    BY CAR THAT HAS TAKEN PLACE WITH SO MUCH OF OUR WORKFORCE AND

        13    THE THOUGHT OF BUYING A NEWSPAPER, A SINGLE COPY, IF YOU WILL,

        14    AND LEAVING WORK AND/OR -- AND GOING HOME AND READING THE

        15    NEWSPAPER INSTEAD OF DOING A NUMBER OF THINGS IS CLEARLY A

        16    MAJOR CONTRIBUTOR.

        17    BY MR. HALLING:

        18    Q.   CAN YOU THINK OF ANYTHING ELSE?

        19    A.   JUST THAT THE EXPERIENCE IS THAT -- I ASSUME IT'S -- THOSE

        20    ARE THE TWO PRIMARY REASONS.

        21               MR. HALLING:  THANK YOU.

        22               THE COURT:  MR. BALABANIAN?

        23               MR. BALABANIAN:  NO QUESTIONS, YOUR HONOR.

        24               THE COURT:  VERY WELL.  ANY REDIRECT?

        25               MR. ALIOTO:  JUST A FEW, I THINK, YOUR HONOR.



                                                                          365
                                 SIAS - REDIRECT / ALIOTO


         1                         REDIRECT EXAMINATION

         2    BY MR. ALIOTO:


         3    Q.   YOU HAVE EXHIBIT 5 IN FRONT OF YOU STILL, MR. SIAS?

         4    A.   EXHIBIT 5?

         5    Q.   YES, EXHIBIT 5.  AND WE HAD THAT PAGE 26 OF THE

         6    SUPPLEMENT.  IT IS THE BATES NUMBER 350227.

         7    A.   EXCUSE ME, COUNSELOR.  I AM STILL LOOKING FOR 5.

         8               THE COURT:  5 IS THE PROJECT GOLDEN?

         9               MR. ALIOTO:  YES, SIR.

        10               THE WITNESS:  OH, PROJECT GOLDEN.  THANK YOU.

        11    BY MR. ALIOTO:


        12    Q.   SORRY.

        13    A.   ALL RIGHT.  NOW, YES.  AND NOW GO TO?

        14    Q.   PAGE 26.

        15    A.   OF THE SUPPLEMENT OR THE FIRST PAPER?

        16    Q.   SUPPLEMENT.

        17               THE COURT:  THE PAGE WE WERE LOOKING AT, I GATHER.

        18               MR. ALIOTO:  YES.

        19               THE WITNESS:  IS THIS THE JOA OPERATING SCENARIOS?

        20    BY MR. ALIOTO:


        21    Q.   YES, IT IS.

        22    A.   ALL RIGHT.  I HAVE IT.

        23    Q.   NOW, IF YOU WILL LOOK ON THE CAPITAL EXPENDITURES, YOU

        24    WERE JUST BEING ASKED QUESTIONS ABOUT THE PLANTS AND THE PRICES

        25    FOR THE PLANTS.



                                                                          366
                                 SIAS - REDIRECT / ALIOTO


         1               SO
-- ALL RIGHT.  UNDER THIS -- UNDER THIS

         2    PARTICULAR SCENARIO, IT STATES THAT IF THERE IS ONLY ONE

         3    NEWSPAPER, IT SAYS, QUOTE:

         4                   "NO NEW PLANT OF JOA RESOLVED NOW."

         5               DO YOU SEE THAT?

         6    A.   YES.

         7    Q.   WOULD YOU AGREE WITH THAT, THAT THERE WOULD BE NO NEW

         8    PLANT IF THE JOA WAS RESOLVED BY THIS ACQUISITION OF THE -- BY

         9    THIS ACQUISITION OF THE CHRONICLE BY HEARST?

        10    A.   I AM NOT SURE, BECAUSE THAT'S A DECISION THAT THE BUYER

        11    WOULD -- WOULD MAKE.

        12    Q.   DO YOU KNOW WHETHER OR NOT -- OR UP TO THE TIME OF --

        13    STRIKE THAT.

        14               DO YOU KNOW WHETHER OR NOT HEARST INTENDS TO BUILD A

        15    NEW PLANT?

        16    A.   NO, I DO NOT.

        17    Q.   ALL RIGHT.  NOW, IF YOU WILL LOOK ON THE -- WHERE THERE IS

        18    COMPETITION, HEAD-TO-HEAD COMPETITION, IT STATES:

        19                   "CHRONICLE CONSTRUCTS NEW PLANT AT TOTAL

        20               COST OF 125 MILLION IN 2003 AND 2005, PLUS LAND

        21               COST OF $15 MILLION.  IT ASSUMES EXAMINER DOES

        22               NOT CONSTRUCT NEW PLANT BUT RECEIVES" -- NOW,

        23               HERE WE JUST TALKED ABOUT IT -- "RECEIVES TWO

        24               PLANTS AT TERMINATION AND CHRONICLE RECEIVES ONE

        25               PLANT AND $8 MILLION FROM HEARST."



                                                                          367
                                 SIAS - REDIRECT / ALIOTO


         1               SO, IN OTHER WORDS, WAS THERE EVER -- AT LEAST TO

         2    YOUR KNOWLEDGE, WAS THERE EVER ANY DISCUSSION WITHIN CHRONICLE

         3    TO GIVE THIS INFORMATION TO DONALDSON, LUFKIN & JENRETTE, THAT

         4    WHAT WOULD HAPPEN WOULD BE THAT OUT OF THE THREE PLANTS, TWO

         5    WOULD GO TO HEARST, ONE WOULD GO TO THE CHRONICLE, THE

         6    CHRONICLE WOULD GET $8 MILLION FOR THE DIFFERENCE BETWEEN THE

         7    ONE PLANT THAT HEARST GETS, PLUS THEN CHRONICLE WOULD HAVE TO

         8    CONSTRUCT ANOTHER PLANT FOR 125 MILLION?

         9    A.   WELL, I MUST CONFESS TO YOU, I HAVE NO IDEA HOW THE

        10    WRITERS OF THIS CAME UP WITH THIS TWO PLANTS AT TERMINATION AND

        11    $8 MILLION.  I DON'T HAVE A CLUE.  BECAUSE, TO MY KNOWLEDGE, IT

        12    NEVER -- THAT WOULD BE -- WHATEVER IT WOULD BE, DISPOSITION,

        13    WOULD HAVE BEEN THE RESULT OF NEGOTIATIONS BETWEEN HEARST AND

        14    THE PRINCIPALS.  AND SO THESE THIRD-PARTIES, I AM UNPLEASANT

        15    AND IT BOGGLES MY MIND.  I DON'T KNOW WHY HEARST WOULD GET TWO

        16    PLANTS AND CHRONICLE ONE.

        17    Q.   DID YOU SAY IN RESPONSE TO YOUR COUNSEL'S QUESTIONS THAT

        18    YOU HAD COMMISSIONED SOME STUDY OR SOMETHING?

        19    A.   YES, SIR.

        20    Q.   AND THAT WAS A STUDY WITH REGARD TO PLANTS?


        21    A.   IT WAS --

        22    Q.   CONSTRUCTION OF PLANTS?

        23    A.   IT WAS A STUDY BY THE MCCLEAR CORPORATION AFTER THE

        24    DISCUSSION WITH MR. BENNACK IN WHICH WE DECIDED -- AND VIC

        25    GANZI-- WHICH CHRONICLE FELT THAT IT WAS TOO -- TOO RICH, WHAT



                                                                          368
                                 SIAS - REDIRECT / ALIOTO


         1    THEY PROPOSED, IN RESPONSE TO OUR REQUEST.


         2               I SAID, "WE MUST START THE PLANNING FOR A POTENTIAL

         3    DISSOLUTION OF THE AGENCY BECAUSE THAT'S WHAT HEARST HAS

         4    THREATENED.  WE DON'T THINK THEY WILL -- WE DON'T THINK THEY

         5    ARE GOING TO DO IT, BUT WE CANNOT AVOID THE PLANNING."

         6               AND SO WITH THAT STUDY PRODUCED BY THE MCCLEAR

         7    CORPORATION GAVE A PRELIMINARY -- AFTER A GREAT DEAL OF TALK

         8    WITH THE AGENCY.

         9    Q.   WAS THIS IN WRITING, THIS STUDY?

        10    A.   WAS THE MCCLEAR CORPORATION?

        11    Q.   YES.

        12    A.   YES, I BELIEVE IT WAS.

        13    Q.   AND DID IT HAVE ANYTHING WITH REGARD TO PLANTS, BUILDING A

        14    NEW PLANT?

        15    A.   YES.  THAT'S WHAT IT WAS ALL ABOUT.  THEY INTERVIEWED THE

        16    NEWSPAPER AGENCY PEOPLE, AND THEY WERE INVOLVED IN IT, AND

        17    WERE -- BASED UPON LOOKING FOR IT, ADVERTISING, IT WAS A WISH

        18    LIST, IF YOU HAD A THING WHAT WOULD IT BE, AND OUT OF THIS --

        19    IT WAS ABOUT A THREE AND A HALF, FOUR-MONTH PROCESS.  MR. MATT

        20    WILSON OF THE CHRONICLE, THE EXECUTIVE EDITOR, WAS IN CHARGE OF

        21    IT FOR US.  AND OUT OF IT CAME A REPORT, A PRELIMINARY REPORT,

        22    BECAUSE WE CLOSED THE THING DOWN OR ABORTED IT AFTER IT WAS

        23    CLEAR WE WERE GOING TO BE SELLING THE PAPER.

        24    Q.   OKAY.  SO THE SEQUENCE OF EVENTS IS THAT, FIRST, YOU WERE

        25    TURNED DOWN BY MR. BENNACK -- I MEAN, MR. BENNACK'S OFFER,



                                                                          369
                                 SIAS - REDIRECT / ALIOTO


         1    HEARST'S OFFER, WAS TURNED DOWN BY THE CHRONICLE --

         2    A.   YES.

         3    Q.   -- BOARD OF DIRECTORS?

         4    A.   YES.

         5    Q.   AFTER THEY TURNED IT DOWN BECAUSE OF THE THREATS OF HEARST

         6    BEING INTERESTED IN STAYING IN THE MARKET AFTER 2005, YOU

         7    CONDUCTED A SURVEY WITH MR. -- OR A STUDY?

         8    A.   WITH MCCLEAR CORPORATION, A STUDY.

         9    Q.   TO LOOK FORWARD TO BUILDING A NEW PLANT IN ANTICIPATION OF

        10    COMPETING HEAD TO HEAD WITH HEARST AFTER 2005?

        11    A.   IN ANTICIPATION OF ENDING UP IN NEGOTIATIONS WITH HEARST

        12    ON THE DISSOLUTION OF THE AGENCY BEFORE 2005.  IT WAS --

        13    WHILE -- IT WAS REPRESENTED BY HEARST CONSTANTLY THAT THEY

        14    INTENDED TO -- IF WE COULD NOT RESOLVE THE JOA, THEY INTENDED

        15    TO MOVE THE EXAMINER TO THE MORNING FIELD IN 2005 AND COMPETE

        16    WITH THE CHRONICLE.  AND WE DID NOT BELIEVE THAT THEY WOULD DO

        17    THAT.

        18               WE DID BELIEVE THEY WOULD PUT US THROUGH THE RINGER

        19    IF WE CAME TO THAT, AND WE WOULD HAVE NO CHOICE BUT TO MAKE

        20    PLANS AND PROVISIONS FOR WHAT WE WOULD DO SO WE WOULD NOT BE

        21    HUNG OUT TO DRY AT THE CONCLUSION WHEN WE DON'T HAVE A NEW

        22    PRINTING PLANT AND WE HAVE HEARST SAYING, "IF YOU WANT TO PRINT

        23    YOUR PAPER, YOU ARE GOING TO HAVE TO PAY US X AMOUNT FOR OUR

        24    HALF OF THESE FACILITIES."

        25    Q.   AND WHEN YOU JUST SAID "PUT YOU THROUGH THE RINGER" SO



                                                                          370
                                 SIAS - REDIRECT / ALIOTO


         1    THAT YOU COULD HAVE TO MAKE YOUR PLANS AND PROVISIONS -- WHEN

         2    YOU SAID "PUT YOU THROUGH THE RINGER," THAT MEANS PREPARE FOR

         3    COMPETITION; IS THAT RIGHT?

         4    A.   NO, THAT DOES NOT MEAN THAT.  FIGURATIVELY, IT MEANS THE

         5    NEGOTIATIONS UNDER WHICH WE WOULD RESOLVE THE NEWSPAPER AGENCY

         6    PRIOR TO 2005.


         7    Q.   I THOUGHT YOU SAID YOU DIDN'T WANT TO BE HUNG OUT TO DRY.

         8    A.   THAT'S RIGHT.

         9    Q.   AND THAT --

        10    A.   AND IF WE DIDN'T HAVE ANY PLAN AND WE DIDN'T HAVE -- AND

        11    WE KNOW THAT THE -- FOLLOW THIS.  HEARST CAN SAY, "THIS IS WHAT

        12    WE ARE GOING TO DO."  THEY DON'T HAVE TO DO A DARN THING.  AT

        13    THE END OF THE THING THEY COULD SAY, "OOPS, SORRY," WHAT HAVE

        14    YOU.

        15               BUT WE WOULD BE -- THEY ARE HOLDING TO IT.  WE ARE

        16    LEFT OUT THERE WITH THE INABILITY TO PUBLISH THE NEWSPAPER

        17    BECAUSE THE PRESSES -- HALF OF THOSE PRESSES -- ALL OF THEM IS

        18    ENOUGH PROBLEM.  HALF OF THEM WE WOULD BE IN DEEP KEEKY.  AND

        19    SO WE HAD TO DO THE ADVANCED PLANNING AS PART OF OUR

        20    NEGOTIATING POSTURE WITH THE HEARST CORPORATION.

        21    Q.   OKAY.  SO YOU DID NOT WANT TO BE LEFT OUT HUNG TO DRY

        22    BECAUSE YOU DIDN'T WANT TO BE PUT IN A SITUATION WHERE YOU HAD

        23    NO PLAN AND YOU HAD MADE NO PROVISION TO PUBLISH YOUR PAPER IF

        24    IN FACT A DEAL WITH HEARST COULDN'T BE MADE, CORRECT?

        25    A.   IF -- AS WE NEGOTIATED -- WE -- WE DID NOT BELIEVE THAT



                                                                          371
                                 SIAS - REDIRECT / ALIOTO


         1    HEARST WOULD INDEED PRINT OR PUBLISH THE EXAMINER IN THE

         2    MORNING FIELD IN 2005.

         3               WE DID BELIEVE THAT THEY WOULD USE THAT AGGRESSIVELY

         4    TO NEGOTIATE RESOLUTION OF THE JOA AND THAT IF WE DID NOT

         5    PURSUE THE PREPLANNING AND BE READY TO PUBLISH WITHOUT HALF OF

         6    THE PRINTING PLANTS, HEARST WOULD BE IN A POSITION TO DEMAND A

         7    VERY HIGH PRICE FOR THEIR RESIDUAL INTEREST IN THE JOA.

         8    Q.   RESIDUAL INTEREST IN THE JOA?  DID ANY OF THIS --

         9    A.   EXCUSE ME, THEIR ASSETS.  THEIR "RESIDUAL INTEREST," I

        10    HAVE USED THE WRONG TERM.  THEY HAVE 50 PERCENT OF AN

        11    INVESTMENT IN THE JOINT OPERATING AGREEMENT, IN THE AGENCY, AND

        12    THEY OWN 50 PERCENT OF THOSE ASSETS AND ARE ENTITLED TO THEM AT

        13    THE DISSOLUTION.

        14    Q.   DID ANY PART OF THIS DIFFERENCE IN MONEY HAVE TO DO WITH

        15    THE RESIDUAL INTERESTS OF THE CHRONICLE AND THE JOA OR WHAT YOU

        16    DESCRIBE AS THE "RESIDUAL INTERESTS" OF THE JOA?

        17    A.   AGAIN, I AM NOT TRYING TO BE CUTE, BUT, OBVIOUSLY, THAT'S

        18    A QUESTION WHICH SHOULD BE PUT TO HEARST, AND I AM NOT IN A

        19    POSITION TO ANSWER IT.

        20    Q.   OKAY.  DO YOU THINK THAT THE CHRONICLE, AS OF 1966 WHEN

        21    THEY MADE THEIR DEAL WITH THE -- WITH HEARST HAD A RESIDUAL

        22    INTEREST IN THE JOA?

        23    A.   THEY HAD AN ONGOING INTEREST, YES.

        24    Q.   SO -- AND THEY HAD SOME SIX YEARS TO GO, CORRECT?

        25    A.   YES.



                                                                          372
                                 SIAS - REDIRECT / ALIOTO


         1    Q.   AND YOU WOULD CONSIDER THAT RESIDUAL INTEREST, CORRECT?

         2    A.   YES.

         3    Q.   AND YOU WOULD WANT TO BE PAID FOR THAT IF YOU GAVE IT UP,

         4    WOULDN'T YOU?

         5    A.   YES.

         6               MR. ALIOTO:  MAY I APPROACH THE WITNESS, YOUR HONOR?

         7               THE COURT:  VERY WELL.

         8    BY MR. ALIOTO:


         9    Q.   LET ME SHOW YOU EXHIBIT 3.

        10               EXHIBIT 3 IS CATEGORIZED AS ATTACHMENT 3, SMALL

        11    (B)(1).  IT'S IN EVIDENCE.  THIS PURPORTS TO BE THE SHARE OF

        12    FIELD, 1996 DAILY NEWSPAPER CIRCULATION IN SAN FRANCISCO DMA. 

        13               HAVE YOU EVER SEEN THESE FIGURES AND NUMBERS THAT

        14    PURPORT TO SHOW THE SHARE OF DAILY NEWSPAPERS IN PARTICULAR

        15    MARKETS?

        16    A.   YES, I THINK I HAVE.

        17    Q.   OKAY.  AND YOU WILL SEE IF YOU GO DOWN ON THE LEFT-HAND

        18    COLUMN, THE LEFT-HAND COLUMN IS THE COUNTY OR THE -- THE COUNTY

        19    AND THE SHARE OF FIELD.

        20               DO YOU SEE THAT COLUMN, THE LEFT-HAND COLUMN ALL THE

        21    WAY DOWN?

        22    A.   YES.

        23    Q.   AND DO YOU SEE THAT THE FOURTH COLUMN OR THE FOURTH ONE IS

        24    SAN FRANCISCO
-- OR FIFTH?  IT'S RIGHT -- OOPS.

        25    A.   I SEE IT UNDER "MARIN."



                                                                          373
                                 SIAS - REDIRECT / ALIOTO


         1    Q.   YEAH, UNDER "MARIN."  IT'S THE FIFTH ONE, "SAN FRANCISCO,"

         2    ON THE LEFT SIDE.

         3    A.   YES, YES.

         4    Q.   OKAY.  AND THEN TO THE RIGHT OF SAN FRANCISCO, SHARE OF

         5    THE FIELD --

         6    A.   YES.

         7    Q.   -- YOU SEE THAT FOR THE CHRONICLE, IF YOU GO TO THE RIGHT,

         8    IT SAYS SAN FRANCISCO CHRONICLE HAS 61.5 PERCENT.

         9               DO YOU SEE THAT?

        10    A.   YES.

        11    Q.   AND SAN FRANCISCO EXAMINER HAS 32.1 PERCENT.

        12               DO YOU SEE THAT?

        13    A.   YES.

        14    Q.   AND SO IF YOU ADD THOSE UP, THAT'S -- THAT IS

        15    93 PERCENT -- NO, 93.6 PERCENT.  CORRECT?

        16    A.   YES.

        17    Q.   AND THEN THE REST IS SHARED BY OTHER NEWSPAPERS.

        18               DO YOU HAVE ANY REASON TO DOUBT THOSE NUMBERS?

        19    A.   NO, I DO NOT.

        20               MR. ALIOTO:  THAT'S ALL.

        21               THANK YOU, YOUR HONOR.

        22               THE COURT:  MR. SIAS, WHILE WE ARE ON EXHIBIT 3, IF

        23    YOU DON'T MIND.  THERE HAS BEEN TESTIMONY, I BELIEVE, THAT THE

        24    SAN JOSE MERCURY NEWS AND CONTRA COSTA TIMES ARE UNDER THE SAME

        25    OWNERSHIP.



                                                                          374
                                 SIAS - REDIRECT / ALIOTO


         1               THE WITNESS:  YES.

         2               THE COURT:  WHAT IS THE OWNERSHIP OF THE SANTA ROSA 

         3    PRESS DEMOCRAT?

         4               THE WITNESS:  IT'S THE NEW YORK TIMES, YOUR HONOR.

         5               THE COURT:  AND THE OAKLAND TRIBUNE IS?

         6               THE WITNESS:  IS ALAMEDA NEWSPAPER GROUP, A MEDIA

         7    GENERAL.

         8               THE COURT:  SINGLETON?

         9               THE WITNESS:  YES.

        10               THE COURT:  AND IS THAT TRUE ALSO OF THE VALLEY

        11    TIMES, THE VALLEY HERALD?

        12               THE WITNESS:  I BELIEVE IT'S --

        13               THE COURT:  AND THE HAYWARD DAILY NEWS -- DAILY

        14    REVIEW?

        15               THE WITNESS:  YES, YES, I THINK THAT'S THE
-- THE

        16    ALAMEDA NEWSPAPER GROUP.

        17               THE COURT:  ALL RIGHT.  AND THE OWNERSHIP OF THE

        18    MARIN INDEPENDENT JOURNAL?

        19               THE WITNESS:  THAT IS THE GANNETT CORPORATION.

        20               THE COURT:  AND THE SAN MATEO TIMES?

        21               THE WITNESS:  THAT'S SINGLETON.

        22               THE COURT:  THAT'S SINGLETON?

        23               THE WITNESS:  YES.

        24               THE COURT:  AND THE WEST COUNTY TIMES?

        25               THE WITNESS:  THAT, I BELIEVE, IS PART OF THE CONTRA



                                                                          375
                                 SIAS - REDIRECT / ALIOTO


         1    COSTA TIMES.  I THINK THEY MAY HAVE CHANGED.  I COULD BE WRONG

         2    ON THAT, YOUR HONOR.

         3               THE COURT:  SO THAT'S KNIGHT RIDDER?

         4               THE WITNESS:  THAT WOULD BE KNIGHT RIDDER NOW IF IT

         5    IS PART OF THAT -- THE CONTRA COSTA TIMES.

         6               THE COURT:  AND THE FREMONT NEWARK ARGUS?

         7               THE WITNESS:  THAT'S SINGLETON.

         8               THE COURT:  AND THE ANTIOCH LEDGER DISPATCH?


         9               THE WITNESS:  I AM OVER MY HEAD AT THIS POINT ON

        10    SOME OF THESE CHANGES.  I AM NOT SURE ABOUT THAT ONE.

        11               THE COURT:  WELL, LET'S JUST FINISH OFF.

        12               THE VALLEJO TIMES HERALD?

        13               THE WITNESS:  THAT -- I THINK THAT WAS A SCRIPPS 

        14    REGAN PAPER THAT MAY HAVE CHANGED HANDS RECENTLY.  BUT IT'S

        15    NONE OF THE OTHER PEOPLE WE HAVE MENTIONED SO FAR.

        16               THE COURT:  NAPA VALLEY REGISTER?

        17               THE WITNESS:  THAT IS A PULITZER PAPER NOW.

        18               THE COURT:  PULITZER.

        19               THE WITNESS:  YES, IT WAS SCRIPPS REGAN, NOW IT'S

        20    PULITZER.

        21               THE COURT:  THE VACAVILLE REPORTER?

        22               THE WITNESS:  I DON'T KNOW THE OWNERSHIP OF THAT.

        23               THE COURT:  AND, FINALLY, THE FAIRFIELD DAILY

        24    REPUBLIC?

        25               THE WITNESS:  I HAVE FORGOTTEN WHO OWNS THAT ONE.



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                                 SIAS - REDIRECT / ALIOTO


         1               THE COURT:  ALL RIGHT.

         2               NOW, YOU CAME TO THE CHRONICLE IN APRIL OF 1993, I

         3    BELIEVE YOU TESTIFIED.

         4               THE WITNESS:  YES.

         5               THE COURT:  AND AT THE TIME YOU CAME, IT WAS YOUR

         6    MISSION TO LIQUIDATE THE ASSETS OF THE COMPANY, OR WAS THAT A

         7    PLAN WHICH DEVELOPED AFTER YOU CAME IN APRIL 1993?

         8               THE WITNESS:  IT CAME -- IT CAME AFTERWARDS,


         9    CONSIDERABLY.  THERE WAS A GOOD DEAL OF -- OF INTERNAL FAMILY

        10    DISCUSSION, AND THERE WERE SOME FOLKS THAT WANTED TO SELL RIGHT

        11    ON THE SPOT AND THERE WERE OTHERS THAT DID NOT.  

        12               AND MY INITIAL MISSION REALLY WAS TO DO A LOT OF --

        13    OF BLOCKING AND TACKLING TO GET OPERATIONS AND OTHER THINGS IN

        14    ORDER TO IMPROVE -- WE WERE BORROWING MONEY TO PAY DIVIDENDS --

        15    NOT A GOOD IDEA -- AND THROUGH -- THROUGH A NUMBER OF THINGS

        16    WE -- WE GOT THAT TAKEN CARE OF.

        17               BUT THE -- THE INTEREST IN SELLING FROM THE PART OF

        18    SOMETHING THAT WAS A FAMILY, IT WAS GROWING BECAUSE IT IS AN S

        19    CORP AND A LACK OF LIQUIDITY FOR -- THERE WERE 24 SHAREHOLDERS

        20    DURING THIS TIME -- WAS A MAJOR CONCERN TO MANY OF THEM WHO HAD

        21    MOST OF THEIR FAMILY WEALTH -- OR THEIR WEALTH TIED UP IN STOCK

        22    IN THE CHRONICLE AND WHO WERE CONCERNED ABOUT THEIR LACK OF

        23    LIQUIDITY AND THE CONCENTRATION OF THEIR WEALTH IN A SINGLE

        24    COMPANY.

        25               THE COURT:  ALL RIGHT.  AND DID THERE COME A TIME



                                                                          377
                                 SIAS - REDIRECT / ALIOTO


         1    WHEN A CORPORATE DECISION WAS REACHED TO LIQUIDATE THE ASSETS

         2    OF THE COMPANY?

         3               THE WITNESS:  IT WOULD HAVE BEEN REACHED IN THE

         4    SPRING OF 1999.

         5               THE COURT:  CAN YOU PLACE A MONTH ON IT?

         6               THE WITNESS:  THE FORMAL -- THE FORMAL BOARD VOTE

         7    WAS IN EITHER VERY LATE MAY OR EARLY JUNE.

         8               THE COURT:  YOU SAID THAT IT WOULD BE EXTREMELY

         9    DIFFICULT TO DISENTANGLE THE ASSETS OF THE JOINT OPERATING

        10    AGREEMENT.

        11               THE WITNESS:  YES, SIR.

        12               THE COURT:  THAT IS, BETWEEN HEARST AND CHRONICLE

        13    PUBLISHING COMPANY.  WOULD THAT FACT FORECLOSE A THIRD PARTY

        14    FROM PURCHASING THE INTERESTS OF BOTH HEARST AND CHRONICLE

        15    PUBLISHING IN THE JOINT OPERATING AGREEMENT?

        16               THE WITNESS:  I DON'T BELIEVE IT WOULD BECAUSE THE

        17    CONSEQUENCE OF A THIRD PARTY NEGOTIATING AND DOING THAT WOULD

        18    BE THE -- WOULD BE THE END OF THE JOA.

        19               THE COURT:  AT LEAST AS BETWEEN THE TWO PARTIES?

        20               THE WITNESS:  YES.  THEY WOULD BE BUYING THE JOINT

        21    OPERATING AGREEMENT PRESUMABLY WITH THE PURCHASE OF BOTH OF

        22    THOSE PAPERS.

        23               THE COURT:  ALL RIGHT.  AND THEN WOULD BE ABLE TO

        24    MAKE A DECISION WITH RESPECT TO THE TWO NEWSPAPER PRODUCTS OF

        25    THE JOINT OPERATING AGREEMENT, I ASSUME --



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                                 SIAS - REDIRECT / ALIOTO


         1               THE WITNESS:  THAT --

         2               THE COURT:  -- IS YOUR UNDERSTANDING?

         3               THE WITNESS:  -- WOULD BE MY ASSUMPTION ALSO.

         4               THE COURT:  ALL RIGHT.  NOW, I GATHER FROM YOUR

         5    TESTIMONY, ALTHOUGH YOU WERE CERTAINLY NOT ON THE SCENE AT THE

         6    TIME AND ONLY CAME ALONG A GOOD MANY YEARS LATER, AND WITH THE

         7    OBVIOUS BENEFIT OF 20/20 HINDSIGHT, IT'S YOUR OPINION THAT FOR

         8    THE CHRONICLE THE JOINT OPERATING AGREEMENT WAS A MISTAKE.  IS

         9    THAT CORRECT?

        10               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)

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                                                                          379
                                 SIAS - REDIRECT / ALIOTO


         1               THE WITNESS:  I'M NOT SURE, YOUR HONOR, SINCE I WAS

         2    NOT HERE AT THE TIME; AND SO TO CHARACTERIZE IT AS A MISTAKE,

         3    WOULD BE PRESUMPTUOUS OF ME.  I HAVE NEVER DONE THAT.  

         4               I'M DEALING WITH THE PRESENT; AND AS THE INDUSTRY

         5    HAS CHANGED, IT HAS MEANT THAT THE EXAMINER IS A NEWSPAPER THAT

         6    IS, WE BELIEVE, FAILING AND BECAUSE OF THE TERMS OF THIS THING,

         7    50-50, THEY'RE GETTING BENEFITS DISPROPORTIONATE TO THEIR SIZE

         8    AS IT EXISTS TODAY.

         9               THE COURT:  I UNDERSTOOD YOUR TESTIMONY TO BE THAT

        10    IT WAS YOUR BELIEF THAT AT PRESENT, AT ANY RATE, THE EXISTENCE

        11    OF THE JOINT OPERATING AGREEMENT HAS IMPAIRED THE ABILITY OF

        12    THE CHRONICLE TO PUBLISH A QUALITY NEWSPAPER AND VIGOROUSLY TO

        13    COMPETE IN THIS MARKET WITH ALL THESE OTHER NEWSPAPERS THERE

        14    ARE ARRAYED IN EXHIBIT 3 AND THE OTHER MEDIA WITH WHICH THE

        15    CHRONICLE COMPETES; IS THAT A FAIR STATEMENT?

        16               THE WITNESS:  I THINK WE BELIEVE THAT IT HAS. 

        17    BECAUSE OF THE MODEST FINANCIAL PERFORMANCE, WE ARE NOT PUTTING

        18    AS MUCH MONEY AS WE BELIEVE WE OTHERWISE WOULD INTO THE PRODUCT

        19    ITSELF AND WE BELIEVE THAT WE ARE NOT PUTTING AS MUCH MONEY

        20    INTO SOME OF THE CIRCULATION AREAS THAT WE THINK WE SHOULD.

        21               THE COURT:  SO IT WOULD BE YOUR BELIEF THAT ENDING

        22    THE JOINT OPERATING AGREEMENT WOULD ELIMINATE THAT OBSTACLE OR

        23    HINDRANCE TO THESE MEASURES THAT YOU THINK WOULD IMPROVE THE

        24    QUALITY OF THE PAPER AND ITS ABILITY TO COMPETE IN THIS MARKET?

        25               THE WITNESS:  WELL, ENDING THE JOINT OPERATING



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                                 SIAS - REDIRECT / ALIOTO


         1    AGREEMENT WOULD ENHANCE THE CHRONICLE'S FINANCIAL PERFORMANCE

         2    AND SOME OF THOSE RESOURCES COULD BE DEVOTED TOWARD WHAT I CALL

         3    PRODUCT IMPROVEMENTS.

         4               THE COURT:  ALL RIGHT.  THANK YOU, MR. SIAS.

         5               COUNSEL, IN VIEW OF THE HOUR, I THINK WE'LL ADJOURN

         6    FOR THE DAY.  MR. SIAS MAY BE EXCUSED, I GATHER.


         7               MR. ALIOTO:  YOUR HONOR, I JUST HAVE -- MAY I JUST

         8    ASK ONE OR TWO FOLLOWUP QUESTIONS TO YOUR HONOR'S QUESTIONS?

         9               THE COURT:  VERY BRIEFLY.  VERY BRIEFLY.

        10                         REDIRECT EXAMINATION

        11    BY MR. ALIOTO:


        12    Q.   THE NEWSPAPERS THAT YOU LISTED THAT ARE LISTED ON

        13    EXHIBIT 3 AND YOU IDENTIFIED THE OWNERS OF THE DIFFERENT

        14    NEWSPAPERS, INCLUDING THE NEW YORK TIMES I THINK YOU SAID IN

        15    ONE OF THEM --


        16    A.   SANTA ROSA PRESS DEMOCRAT.

        17    Q.   -- AND OTHERS, OKAY, NOW, ISN'T IT CORRECT THAT ALL OF

        18    THESE NEWSPAPERS AND THEIR OWNERS WOULD BE PROHIBITED BY THE

        19    JOA, OR A MEMBER OF THE JOA COULD PROHIBIT ANY OF THESE PEOPLE

        20    FROM BUYING THE OTHER PARTNER IN THE JOA BECAUSE THEY'RE ALL

        21    WITHIN 60 MILES?  ISN'T THAT RIGHT?

        22    A.   I THINK SO, MR. ALIOTO, BUT I DON'T KNOW WHETHER -- I

        23    ASSUME THAT THE REMAINING PARTNER COULD SAY YES.

        24    Q.   I KNOW.  BUT, I MEAN, HE COULD VETO IT.  THE REMAINING

        25    PARTNER OF THE JOA COULD VETO ANY OF THESE PAPERS OR THEIR



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                                 SIAS - REDIRECT / ALIOTO


         1    OWNERS, NEW YORK TIMES, KNIGHT RIDDER, ALL THESE OWNERS, THEY

         2    COULD BE PROHIBITED FROM BUYING THE OTHER PARTNER IN THE JOA;

         3    ISN'T THAT RIGHT?  THE PARTNER COULD VETO IT?

         4    A.   I AM NOT SURE BECAUSE YOU'RE GETTING INTO A LEGAL AREA,

         5    AND THAT'S MY RELUCTANCE TO SAY IT'S CORRECT OR NOT.

         6               MR. ALIOTO:  THANK YOU.

         7               THE COURT:  ALL RIGHT.  PERHAPS COUNSEL CAN IN DUE

         8    COURSE FURNISH THE ANSWERS TO THE OWNERSHIP OF THE NEWSPAPERS

         9    THAT MR. SIAS WAS NOT ABLE TO RECALL OFFHAND.  YOU CAN SUBMIT

        10    THAT IN DUE COURSE OF THE TRIAL.

        11               MR. ROSCH:  YOUR HONOR, MAY I JUST NOTE THAT WE DID

        12    FILE TODAY A MOTION IN LIMINE TO EXCLUDE CERTAIN TESTIMONY OF

        13    DR. COMANOR WHO IS SCHEDULED TO BE THE FIRST WITNESS TOMORROW. 

        14    I KNOW WE'RE INTRUDING ON YOUR CALENDAR THIS AFTERNOON, BUT I

        15    WONDER IF WE MIGHT TAKE THAT UP BEFORE COURT TOMORROW.  


        16               THE COURT:  IF HE'S GOING TO BE THE NEXT WITNESS, IT

        17    SEEMS WE'RE GOING TO HAVE TO.

        18               MR. ROSCH:  I COULD WAIT AND MOVE TO STRIKE, BUT I

        19    WOULD PREFER IF THE COURT COULD LOOK AT IT.

        20               THE COURT:  DO YOU HAVE A MEMORANDUM IN SUPPORT OF

        21    YOUR MOTION IN LIMINE?

        22               MR. ROSCH:  WE DO, AND IT'S BEEN SUBMITTED TO YOUR

        23    HONOR.

        24               THE COURT:  I'M SORRY?

        25               MR. ROSCH:  YES, WE DO, AND IT HAS BEEN SUBMITTED TO



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         1    YOUR HONOR, AND IT'S BEEN SERVED ON --

         2               THE COURT:  ALL RIGHT.  WHEN WAS IT SUBMITTED?

         3               MR. ROSCH:  THIS MORNING.

         4               THE COURT:  AH, ALL RIGHT.

         5               ALL RIGHT.  WELL, I'LL TAKE A LOOK AT IT AND WE'LL

         6    TAKE IT UP TOMORROW MORNING 8:30.

         7               MR. ROSCH:  THANK YOU, YOUR HONOR.

         8               THE COURT:  ANYTHING FURTHER, COUNSEL?

         9               MR. ALIOTO:  NO, SIR.

        10               THE COURT:  VERY WELL.  SEE YOU AT THAT TIME.

        11               MR. HALLING:  NO, YOUR HONOR.

        12               THE COURT:  AND, MR. SIAS, I THINK YOU CAN BE

        13    EXCUSED.

        14               THE WITNESS:  THANK YOU, SIR.

        15                          (WITNESS EXCUSED.)

        16               (WHEREUPON PROCEEDINGS ADJOURNED AT 1:30 P.M.)  

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