I can forgive America for wrongly imprisoning me and victimizing my shareholders. I now know that the lowest echelons of American society are in some ways more endearing than the highest, an unsuspected insight. I still love the country, though I do not now especially like it. And if, as I hope, I have been able to contribute anything to overcoming this terrible erosion of the justice system, it is my honour.
The treatment of the accused, as Thoreau, among other prominent American intellectuals, wrote, is one of the greatest criteria of the civility, integrity, and moral strength by which societies are themselves judged. When the unanswerable mass of sensible American opinion recognizes this, the United States will no longer fail that test, but much more sorrow and anguish will have been needlessly brought upon the land.
I will return to prison, finish my sentence, and leave the country for the great world beyond as soon as possible.
APPENDIX A: HOLLINGER, Inc.
My Successors violated six of eight clauses of the Restructuring Proposal
November 15, 2003
Restructuring Proposal
1. Hollinger International Inc. (the “Company”) will immediately give notice of intent to terminate the Ravelston Management Agreement effective June 1, 2004.
2. The Company and Ravelston will negotiate a new Management Fee applicable to the period January 1, 2004 through June 1, 2004. The new Fee will be reduced from the 2003 Fee in respect of, among other things, the personnel and other changes contemplated by this Restructuring Proposal. The Company may elect to prepay all or a portion of the Management Fee for the period January 1 to June 1, 2004, provided that the Company receives appropriate security ensuring repayment of such prepaid amounts in the event the services related to such Fee are not provided.
3. The investigation presently being conducted by the Special Committee will continue and will not be affected by the restructuring described herein.
4. As used in this Restructuring Proposal, the term “Payments” shall mean the aggregate US$16,550,000 paid to Hollinger Inc. (“HLG”), the aggregate US$7,197,500 paid to each of Messrs. Black and Radler, and the aggregate US$602,500 paid to each of Messrs. Atkinson and Boultbee from 1999 to 2001. The payments were not properly authorized on behalf of the Company. The Payments received by HLG and Messrs. Black, Radler, Atkinson and Boultbee will be repaid to the Company by each such recipient in full, with interest calculated from the date of receipt of the payment to the date of repayment at the applicable Federal rate of interest in effect on the date of the receipt of the Payment. Each of Messrs. Black, Radler, Atkinson and Boultbee will make an initial, partial repayment on or before December 31, 2003 in an amount of not less than ten percent (10%) of the total amount of the Payments received by each of them, plus interest. The balance will be evidenced by a promissory note and will be repaid on or before the earlier of a Liquidity Event (as defined below) or June 1, 2004. The Special Committee and the Audit Committee will entertain proposals from HLG with respect to the schedule of repayment by HLG of the Payments it has received, provided that repayment in full is received on or before the earlier of a Liquidity Event and June 1, 2004. As used herein, the term “Liquidity Event” means (i) in the case of HLG, the consummation by the Company of a transaction (or series of related transactions) that result in HLG realizing net proceeds of at least US$50,000.000; (ii) in the case of Messrs. Black and Radler, the consummation by the Company of a transaction (or series of related transactions) that result in either of them realizing net proceeds of at least US$5,000,000; and (iii) in the case of Messrs. Atkinson and Boultbee, the consummation by the Company of a transaction (or series of related transactions) that result in either of them realizing net proceeds of at least US$400,000.
5. Appropriate disclosure will be made by the Company to correct prior public disclosures by the Company that were incomplete or inaccurate. Such corrective disclosure will be subject to comment by Lord Black and the Audit and Special Committees, but will be subject to final approval solely by the Audit and Special Committees.
6. The full Board of Directors will engage Lazard as financial advisor to pursue a range of alternative strategic transactions (“Strategic Process”). The Chairman of the Company will devote his principal time and energy to pursuing the Strategic Process with the advice and consent of the Executive Committee and overall control by the Board. Lazard will be directed to give regular reports of progress and developments in the Strategic Process to Lord Black and Gordon Paris; in addition, Lazard will be directed to give periodic reports to the Company’s Executive Committee or upon request of the Executive Committee.
7. During the pendency of the Strategic Process, in his capacity as the majority stockholder of HLG, Lord Black will not support a transaction involving ownership interests in HLG if such transaction would negatively affect the Company’s ability to consummate a transaction resulting from the Strategic Process unless the HLG transaction is necessary to enable HLG to avoid a material default or involvency. In any such event, Lord Black shall give the Company as much advance notice as reasonably possible of any such proposed HLG transaction.
8. The following changes will be implemented:
A. F. David Radler will resign in writing all positions he holds with the Company or its affiliates or subsidiaries, including his positions as an officer and director of the Company, and as the Publisher of the Chicago Sun-Times, effective immediately.
B. Jack Boultbee will resign in writing as an officer of the Company, effective immediately.
C. Peter Atkinson will resign in writing as director of the Company, effective immediately. Atkinson’s continued involvement with the Company will be directed at assisting with the Strategic Process and assisting the Special Committee.
D. Mark Kipnis will resign in writing as an officer and employee of the Company.
E. Lord Black will retire in writing as the CEO of the Company, but will retain the position of Chairman to pursue the Strategic Process. He will continue as Chairman of the Telegraph Group.
F. Gordon Paris will be appointed as interim President and CEO of the Company. Paris will maintain his existing role as a Managing Director at Berenson & Company. In his capacity as interim President and CEO, Paris will have the authority to hire or retain such resources as he reasonably believes necessary to support his role as interim President and CEO.
G. Daniel Colson will be appointed Chief Operating Officer of the Company.
H. The Executive Committee of the Company will be reconstituted to include the following persons:
1. Raymond Seitz, Chair
2. Lord Black
3. Richard Burt
4. Graham Savage
5. Governor James R. Thompson
I. The interim CEO and the Chairman will jointly develop a proposal to the Board regarding the appropriate policy for ownership, lease and use of corporate aircraft, which shall be restricted solely to business purposes.
Accepted and agreed:
James R. Thompson
Chairman
Audit Committee
GordonParis
Chairman
Special Committee
Lord Black
BY FAX AND OVERNIGHT MAIL
Press Holdings International Limited
Le Montaigne
7 Avenue de Grande Bretagne
98000 Monaco
(Correspondence address)
Tel: +377 93 15 94 93
Fax: +377 93 30 20 13
January 18, 2004
Board of Directors
Hollinger International Inc
401 North Wabash Avenue
Suite 740
Chicago
Illinois 60611
Dear Sir:
We wish to take this opportunity to inform the Board of Directors (the “Board”) of Hollinger International Inc (“Hollinger International”) that Press Holdings International Limited (“PHI”) has signed an agreement today with The Ravelston Corporation Limited and The Lord Black
of Crossharbour, which provides for PHI to make a tender offer for all outstanding common and preferred shares of Hollinger Inc. The tender offer will be fully financed at the time of commencement. Upon completion of the tender offer and second-step acquisition of any shares not tendered, Hollinger Inc will become a privately-owned company.
We are convinced that PHI’s acquisition of Hollinger Inc is in the best interests of Hollinger International and its stockholders. We would like to meet with the Board at the earliest possible time, to discuss in detail the benefits to Hollinger International and its stockholders that we believe would result from the transaction and the role we envision for the Board in the process. Aidan Barclay is prepared to meet with you in person, or, if you prefer, to speak by telephone.
Press Holdings International Limited
PHI is the sister company of Press Holdings Limited, itself the holding company for a media group which owns and operates the following newspapers in the UK: The Scotsman Publications, which includes “The Scotsman”, “Edinburgh Evening News”, “Scotland on Sunday” and, separately. “The Business” newspaper which is printed and sold throughout the UK and Europe.
Hollinger International Inc
Board of Directors
January 18, 2004
Page 2/4
PHI and Press Holdings Limited are both ultimately controlled by Sir David and Sir Frederick Barclay. Aidan Barclay is the Chairman and Chief Executive of Press Holdings Limited.
Privately-owned business activities of Sir David and Sir Frederick Barclay include newspapers (detailed above); hotels – The Ritz, London, and the Mirabeau, Monte Carlo as well as UK retail businesses – Littlewoods Stores. Littlewoods mail order catalogues, Index Catalogue shops and Shop Direct mail order catalogues, and business operations to Japan, Sweden and Ireland These businesses have combined annual gross revenues of over US$7 billion.
Benefits to Hollinger International and its Stockholders
After careful study and consideration, we are confident the acquisition of Hollinger Inc by PHI will provide immediate and long-term benefits to the stockholders of Hollinger international for a variety of reasons, including:
a) Lord Black’s controlling interest in Hollinger International and his associates’ and affiliated companies’ relationship with Hollinger International and its subsidiaries have brought (and most likely will continue to bring) significant media controversy to Hollinger International. We believe this continued media controversy is significantly harming the public image and stock price of Hollinger International and undermining its credibility in the financial markets. As part of the acquisition, the negative media attention should cease.
b) The purchase of Hollinger Inc by Press Holdings International Limited which is part of a financially strong and well-managed organisation with extensive experience in owning and operating a broad range of industries, including UK newspapers, we believe will have a substantial benefit on the stock price of Hollinger International as it will bring credibility to the company and enable it to renegotiate its financial borrowings on improved terms.
We have carefully considered the potential impact that the acquisition could have on the financial position and liquidity of Hollinger International and its subsidiaries and, in particular, the impact of a change of control on Hollinger International’s and its subsidiaries’ debt instruments. We are prepared to work constructively with the Board and its senior management to ensure that Hollinger International will continue to have sufficient financing in place after the acquisition to enable Hollinger International to continue to operate and grow its businesses.
Our intentions are well meaning and constructive and we have no wish to interfere with the review that Lazard LLC has been instructed to undertake at the direction of the Board as well as the Special Committee work that is currently being undertaken. We should mention that we have had a longstanding business relationship with Lazards spanning some 20 years.
After completion of the acquisition, we will arrange the payment to Hollinger International of amounts acknowledged by Hollinger Inc to be owed to Hollinger International, subject to confirmation that these amounts are due.
We would be prepared to explore the possibilities, with the approval of the Board, of commercial opportunities that exist to increase shareholder value for all Hollinger international stockholders. In particular these would include substantial synergies between the existing Hollinger publications and ours in the UK.
We have established a level of trust and confidence in our ongoing negotiations with Lord Black to ensure a timely and successful transaction for all parties involved. We believe that our acquisition of Hollinger Inc is the only viable alternative that brings to a positive conclusion the existing relationships among Lord Black and his associates and affiliated companies, on the one hand, and Hollinger Inc and Hollinger International and their respective subsidiaries, on the other hand. In addition, our acquisition of Hollinger Inc removes the uncertainty in the financial markets regarding the financial health and viability of Hollinger International.
It is clear to us that our acquisition of Hollinger Inc is the best way to start the process of improving stockholder value at Hollinger international.
We look forward to hearing from you at your earliest convenience, so that we can begin discussing how to realise the benefits of our acquisition of Hollinger Inc for all parties involved.
Yours faithfully
Sir David Barclay
On behalf of Press Holdings International Limited
January 18, 2004
Dear Members of the Hollinger International Board of Directors:
I am writing to you today about three major developments regarding issues facing the Board:
• First, my legal counsel has determined that documents not available to us in November clearly show that certain disputed non-compete payments were in fact known to and approved or ratified by the independent directors of Hollinger International, including Audit Committee Chairman James Thompson. And, as a result of these discoveries, I am not obligated to and do not feel it is appropriate to return these non-compete payments to the company. The entire sequence of events breed on the premise that these were “unauthorized payments” has been invalid. I am of the view that this Board was misled.
• Second, the restructuring proposal that I agreed to on November 15 is Invalid since I relied upon the false claims that these non-compete payments were unapproved in agreeing to the proposal, and since the Special Committee has breached that agreement in any event by breaching most of its provisions.
• Third, Ravelston and Argus have accepted an offer from Press Holdings International Ltd. for their shares of Hollinger Inc. They have done so as the two-week standstill with respect to selling shares of Hollinger Inc., having been violated by the Special and Audit Committees in their improper collusion, expired today, I believe that this agreement will not only provide substantial value to all Hollinger Inc. shareholders, but also will allow the media properties of Hollinger International to move forward unhindered by recent controversy and uncertainty,
Let me expand on these points. As you know, in November, I agreed to the Restructuring Proposal made by Special Committee Chairman Gordon Paris and Audit Committee Chairman James Thompson based on their representation to me of certain facts. Specifically, Mr, Paris and Mr. Thompson told me that after months of joint investigation by their committees, they had concluded that $32.15 million in non-compete payments paid to Hollinger Inc. and certain executives of Hollinger International were not authorized by cither the Audit Committee or the full Board.
Mr. Paris and Mr. Thompson provided no documentation to support their conclusions and offered me just three days to accept their proposal. Nonetheless, I assumed that they were acting in good faith, since our legal officers could not contradict them, and I had nothing to do with generating the payments myself I accepted their factual findings, and I ultimately accepted the agreement reached on November 15.
• Notes of a conversation that Mr. Thompson had with legal counsel at Shearman & Sterling and others regarding due diligence on several transactions that included the disputed non-compete payments. Handwritten notes include the answer “CONFIRMED – APPROVALS OBTAINED AND ITEMS DISCLOSED” as the response to a question for Mr. Thompson regarding Audit Committee approval of the transactions’ terms, including the non-compete payments.
• Minutes of the February 25, 2002 Hollinger International Joint Audit Committee and Compensation Committee Meeting indicating unanimous approval of financials previously distributed to the Audit Committee with notes that said:
“In connection with the sales of United States newspaper properties in 2000 … the Company. Lord Black and three senior executives entered into non-competition agreements with the purchasers … for onsideration paid in 2001 of $0.6 million. These amounts were in addition to the aggregate consideration paid in respect to these non-competition agreements in 2000 of $15.0 million. Such amounts were paid to Lord Black and the three senior executive?.”
• Minutes from March 12, 2002 indicating that senior partners at KPMG, which served as auditors for both Hollinger Inc. and Hollinger International, confirmed to the Audit Committee of Hollinger Inc. that having attended the February 25 meeting “all such payments had been approved by an independent committee of the Board of Hollinger International and the Auditors had reviewed the relevant Minutes of the independent committee and were satisfied.”
Conrad Black Page 65