UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 26, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number 1-7553
KNIGHT-RIDDER, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 38-0723657
--------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
50 W. SAN FERNANDO ST., SAN JOSE, CA 95113
---------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(408) 938-7700
----------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of May 3, 2000, 77,669,855 shares of Common Stock, $.02 1/12 par value, were
outstanding.
<PAGE>
Table of Contents for Form 10-Q
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet 3
Consolidated Statement of Income 5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURE 19
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
(UNAUDITED IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 26, December 26,
2000 1999
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash, including short-term cash investments of $0 in 2000,
and $5,598 in 1999 $ 34,989 $ 34,084
Accounts receivable, net of allowances of $17,174 in 2000,
and $15,917 in 1999 386,276 423,016
Inventories 41,060 39,238
Prepaid expense 36,818 32,246
Other current assets 41,784 41,720
------------- -------------
Total Current Assets 540,927 570,304
------------- -------------
INVESTMENTS AND OTHER ASSETS
Equity in unconsolidated companies and joint ventures 194,058 206,880
Other 400,345 181,583
------------- -------------
Total Investments and Other Assets 594,403 388,463
------------- -------------
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 94,453 93,995
Buildings and improvements 484,390 484,163
Equipment 1,260,008 1,244,110
Construction and equipment installations in progress 66,248 67,922
------------- -------------
1,905,099 1,890,190
Less accumulated depreciation (857,045) (831,041)
------------- -------------
Net Property, Plant and Equipment 1,048,054 1,059,149
GOODWILL
Less accumulated amortization of $348,531 in 2000,
and $331,504 in 1999 2,159,136 2,174,418
------------- -------------
Total $ 4,342,520 $ 4,192,334
============= =============
</TABLE>
See "Notes to Consolidated Financial Statements."
3
<PAGE>
<TABLE>
<CAPTION>
March 26, December 26,
2000 1999
------------- -------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 123,498 $ 142,460
Accrued expenses and other liabilities 126,066 100,668
Accrued compensation and amounts withheld from employees 98,015 126,529
Federal and state income taxes 71,786 16,039
Deferred revenue 75,045 71,505
Short-term borrowings and current portion of long-term debt 39,940 39,940
------------- -------------
Total Current Liabilities 534,350 497,141
------------- -------------
NONCURRENT LIABILITIES
Long-term debt 1,439,164 1,260,814
Deferred federal and state income taxes 313,889 306,636
Postretirement benefits other than pensions 146,090 145,143
Employment benefits and other noncurrent liabilities 197,687 197,045
------------- -------------
Total Noncurrent Liabilities 2,096,830 1,909,638
------------- -------------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES 4,922 4,871
COMMITMENTS AND CONTINGENCIES (NOTE 6)
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value; shares authorized-
2,000,000; shares issued - 1,374,100 in 2000 and 1999 1,374 1,374
Common stock, $.02 1/12 par value; shares authorized -
250,000,000; shares issued - 76,173,422 in 2000, 1,587 1,659
and 79,654,493 in 1999
Additional capital 926,097 938,969
Retained earnings 772,166 798,971
Accumulated other comprehensive income 7,518 42,084
Treasury stock, at cost, 41,627 shares in 2000 and 42,510 shares in 1999 (2,324) (2,373)
------------- -------------
Total Shareholders' Equity 1,706,418 1,780,684
------------- -------------
Total $ 4,342,520 $ 4,192,334
============= =============
</TABLE>
See "Notes to Consolidated Financial Statements."
4
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
(Unaudited, in thousands, except per share data)
Quarter Ended
----------------------------
March 26, March 28,
2000 1999
------------ ------------
<S> <C> <C>
OPERATING REVENUE
Advertising
Retail $ 245,184 $ 248,586
General 88,570 74,857
Classified 279,238 261,904
------------ ------------
Total 612,992 585,347
Circulation 144,280 146,757
Other 50,430 38,695
------------ ------------
Total operating revenue 807,702 770,799
OPERATING COSTS
Labor and employee benefits 315,468 305,099
Newsprint, ink and supplements 114,029 126,870
Other operating costs 184,271 166,015
Depreciation and amortization 48,514 47,153
------------ ------------
Total operating costs 662,282 645,137
------------ ------------
OPERATING INCOME 145,420 125,662
------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (26,049) (24,764)
Interest expense capitalized 561 2,317
Interest income 331 430
Equity in earnings (losses) of unconsolidated
companies and joint ventures (1,127) 4,868
Minority interests (2,605) (2,599)
Other, net 152,372 (900)
------------ ------------
Total 123,483 (20,648)
------------ ------------
Income before income taxes 268,903 105,014
Income taxes 108,048 42,147
------------ ------------
Net Income $ 160,855 $ 62,867
============ ============
NET INCOME PER SHARE
Basic $ 2.03 $ 0.76
============ ============
Diluted $ 1.74 $ 0.65
============ ============
DIVIDENDS DECLARED PER COMMON SHARE $ 0.23 $ 0.20
============ ============
AVERAGE SHARES OUTSTANDING
Basic 77,779 78,425
============ ============
Diluted 92,668 97,320
============ ============
</TABLE>
See "Notes to Consolidated Financial Statements."
5
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in thousands of dollars)
Quarter Ended
----------------------------
March 26, March 28,
2000 1999
------------ ------------
<S> <C> <C>
CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES
Net income $ 160,855 $ 62,867
Noncash items deducted from (included in) income:
Gains on sale of investments (153,982)
Depreciation and amortization 48,514 47,153
Provision (benefit) for deferred taxes 30,538 (1,669)
Provision for bad debt 6,429 5,441
Distributions in excess of (less than) earnings 4,839 (4,117)
Minority interests in earnings of consolidated subsidiaries 2,605 2,599
Other items, net 728 5,749
Change in certain assets and liabilities:
Accounts receivable 30,311 30,320
Inventories (1,822) 2,225
Other assets (82,444) 2,762
Accounts payable (18,962) (35,694)
Federal and state income taxes 55,747 39,017
Other liabilities (21,167) 7,849
------------ ------------
Net Cash Provided by Operating Activities 62,189 164,502
------------ ------------
CASH PROVIDED BY (REQUIRED FOR) INVESTING ACTIVITIES
Proceeds from sale of investments 1,965 8,818
Acquisition of subsidiary, investees, and other investments, net (21,922) (43,039)
Additions to property, plant and equipment (16,501) (25,158)
Other items, net 173 (876)
------------ ------------
Net Cash Required for Investing Activities (36,285) (60,255)
------------ ------------
CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES
Proceeds from sale of commercial paper, notes payable and
senior notes payable 864,795 950,855
Reduction of total debt, net of unamortized discount (686,685) (754,375)
------------ ------------
Net Change in Total Debt 178,110 196,480
Payment of cash dividends (21,110) (19,186)
Sale of common stock to employees 6,806 9,189
Purchase of treasury stock (186,251)
Other items, net (2,554) 9,249
------------ ------------
Net Cash Provided by (Required for) Financing Activities (24,999) 195,732
------------ ------------
Net Increase in Cash 905 299,979
Cash and short-term cash
investments at beginning of the period 34,084 26,836
------------ ------------
Cash and short-term cash
investments at end of the period $ 34,989 $ 326,815
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Non cash investing activities
Stock proceeds from sale of unconsolidated investment $ 195,624 $ 37,678
</TABLE>
See "Notes to Consolidated Financial Statements".
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter are not necessarily indicative
of the results that may be expected for the year ending December 31, 2000. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K/A for the
year ended December 26, 1999.
Certain amounts in 1999 have been reclassified to conform to the 2000
presentation.
NOTE 2 - COMPREHENSIVE INCOME
The following table sets forth the computation of comprehensive income (in
thousands):
<TABLE>
<CAPTION>
Quarter Ended
----------------------------
March 26, March 28,
2000 1999
------------ ------------
<S> <C> <C>
Net income $ 160,855 $ 62,867
Total gains (losses) on securities available for sale (29,019) 15,016
Less: reclassification adjustment for realized losses, net of taxes (5,547) --
------------ ------------
Change in accumulated comprehensive income (34,566) 15,016
------------ ------------
Total comprehensive income $ 126,289 $ 77,883
============ ============
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NOTE 3 - DEBT
(In Thousands of Dollars)
Effective
Interest Balance At
Rate at -----------------------------
March 26, March 26, December 26,
2000 2000 1999
---------- ------------- ------------
<S> <C> <C> <C>
Commercial paper, net of discount(a) 6.1% $ 611,906 $ 433,796
Debentures, net of discount(b) 9.9% 198,506 198,464
Debentures, net of discount(c) 7.6% 94,583 94,534
Debentures, net of discount(d) 7.0% 296,471 296,443
Notes payable, net of discount(e) 8.5% 79,942 79,903
Notes payable, net of discount(f) 6.7% 98,266 98,209
Senior notes, net of discount(g) 6.3% 99,430 99,405
------------- ------------
Total Debt(h) 7.1% 1,479,104 1,300,754
Less amounts classified as current 39,940 39,940
------------- ------------
Total long-term debt 7.0% $ 1,439,164 $ 1,260,814
============= ============
</TABLE>
(a) Commercial paper is supported by $900 million of revolving credit and term
loan agreements, $500 million of which matures on June 22, 2003 and $400
million of which matures June 20, 2000. The company has the option and
intention to renew the $400 million facility before June 19, 2000, for an
additional 364-day term through June 2001.
(b) Represents $200 million of a 20-year 9 7/8% debenture due in 2009.
(c) Represents $100 million of a 7.15% debenture due in 2027.
(d) Represents $300 million of a 6.875% debenture due in 2029.
(e) Represents $80 million of 8 1/2% notes payable ratably at September 1, 2000
and September 1, 2001.
Annual maturities are represented under current liabilities.
(f) Represents $100 million of a 6.625% note due in 2007.
(g) Represents $100 million of 10 year 6.3% senior notes due in 2005.
(h) Interest payments for the three months ended March 2000 and March 1999 were
$24.3 million and $11.6 million, respectively.
NOTE 4 - INCOME TAX PAYMENTS
Income tax payments for the quarters ended March 26, 2000 and March 28, 1999,
were $20.6 million and $4.2 million, respectively.
8
<PAGE>
NOTE 5 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):
<TABLE>
<CAPTION>
Quarter Ended
---------------------------
March 26, March 28,
2000 1999
------------ ------------
<S> <C> <C>
Net income $ 160,855 $ 62,867
Less dividends on preferred stock 3,160 3,510
------------ ------------
Net income attributable to common stock $ 157,695 $ 59,357
============ ============
Average shares outstanding (basic) 77,779 78,425
Effect of dilutive securities:
Weighted average preferred stock, as converted 13,741 17,549
Stock options 1,148 1,346
------------ ------------
Average shares outstanding (diluted) 92,668 97,320
------------ ------------
Net income per share (basic) $ 2.03 $ 0.76
============ ============
Net income per share (diluted) $ 1.74 $ 0.65
============ ============
</TABLE>
9
<PAGE>
NOTE 6 - COMMITMENTS AND CONTINGENCIES
On July 13, 1995, six unions struck the Detroit Free Press, The Detroit News and
the Detroit Newspaper Agency (Agency), which operates both newspapers.
Subsequently, the unions filed numerous unfair labor practice charges against
the newspapers and the Agency. In June 1997, after a lengthy trial, a National
Labor Relations Board (NLRB) administrative judge ruled that the strike was
caused by the unfair labor practices of the Agency and The Detroit News and
ordered that the Agency and the newspapers reinstate all strikers, displacing
permanent replacements if necessary. The Agency and the newspapers appealed the
decision to the NLRB.
On August 27, 1998, the NLRB affirmed certain unfair labor practice findings
against The Detroit News and the Agency, and reversed certain findings of unfair
labor practices against the Agency. The Agency and the newspapers filed a motion
to reconsider with the NLRB, which was denied on March 4, 1999. The unions and
the Agency filed appeals to the U.S. Court of Appeals for the District of
Columbia Circuit. The case is pending in the U.S. Court of Appeals, where oral
argument was heard on May 4, 2000.
Various libel actions and environmental and other legal proceedings that have
arisen in the ordinary course of business are pending against the Company and
its subsidiaries. In the opinion of management, the ultimate liability to the
Company and its subsidiaries as a result of all legal proceedings, including
Detroit, will not be material to its financial position or results of
operations, on a consolidated basis.
NOTE 7 - BUSINESS SEGMENT INFORMATION
Beginning in the quarter ended March 26, 2000, although the Company is not
required to do so, the Company elected to begin reporting its Online operations
as a separate reportable business segment from its newspaper operations pursuant
to FASB 131, Disclosures about Segments of an Enterprise and Related
Information. FASB 131 requires disclosure of certain information about
reportable operating segments management believes are important and allows users
to assess the performance of individual operating segments in the same way that
management reviews performance and makes decisions.
Financial data for the Company's segments is as follows (in thousands):
Quarter Ended
-------------------------------------
March 26, 2000 March 28, 1999
-------------- --------------
Operating revenue
Newspapers $ 797,359 $ 764,605
Online 10,343 6,194
-------------- --------------
$ 807,702 $ 770,799
============== ==============
Operating income (loss)
Newspapers $ 163,027 $ 142,273
Online (8,204) (4,985)
Corporate (9,403) (11,626)
-------------- --------------
$ 145,420 $ 125,662
============== ==============
Depreciation and amortization
Newspapers $ 46,365 $ 45,207
Online 588 452
Corporate 1,561 1,494
-------------- --------------
$ 48,514 $ 47,153
============== ==============
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
FORWARD LOOKING STATEMENTS
Certain statements contained herein are forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results and events to differ materially from those
anticipated.
Potential risks and uncertainties that could adversely affect the Company's
ability to obtain these results include, without limitations, the following
factors: (a) increased consolidation among major retailers or other events that
may adversely affect business operations of major customers and depress the
level of local and national advertising; (b) an economic downturn in some or all
of the Company's principal newspaper markets that may lead to decreased
circulation or decreased local or national advertising; (c) a decline in general
newspaper readership patterns as a result of competitive alternative media or
other factors; (d) an increase in newsprint costs over the levels anticipated;
(e) labor disputes which may cause revenue declines or increased labor costs;
(f) acquisitions of new businesses or dispositions of existing businesses; (g)
increases in interest or financing costs; and (h) rapid technological changes
and frequent new product introductions prevalent in electronic publishing,
including the evolution of the Internet.
RESULTS OF OPERATIONS: FIRST QUARTER 2000 COMPARED WITH FIRST QUARTER 1999
The following table sets forth the results of operations for the quarters ended
March 26, 2000 and March 28, 1999 (in thousands of dollars, except per share
amount):
<TABLE>
<CAPTION>
Quarter Ended
--------------------------
March 26, March 28,
2000 1999 Change
----------- ----------- -------------
<S> <C> <C> <C>
Operating revenues $ 807,702 $ 770,799 4.8%
Operating income $ 145,420 $ 125,662 15.7%
Net income
Before gains on investment sales 68,743 62,867 9.3%
Gains on investment sales 92,112 -
----------- -----------
Net income $ 160,855 $ 62,867 155.9%
=========== ===========
Diluted earnings per share
Before gains on investment sales $ 0.74 $ 0.65 13.8%
Gains on investment sales 1.00 -
----------- -----------
Net income $ 1.74 $ 0.65 167.7%
=========== ===========
</TABLE>
During the quarter, the Company recorded a gain of $1.00 per diluted share
related to InfoSpace.com's acquisition of Prio and GoTo.com's acquisition of
Cadabra.
11
<PAGE>
NEWSPAPERS
OPERATING REVENUE
The table below presents operating revenue and related statistics for newspaper
operations for the quarter ended March 26, 2000 compared to the quarter ended
March 28, 1999 (in thousands):
Quarter Ended
------------------------
March 26, March 28,
2000 1999 Variance Change
---------- ---------- ---------- -------
Operating revenue
Advertising
Retail $ 245,184 $ 248,586 $ (3,402) -1.4%
General 88,570 74,857 13,713 18.3%
Classified 279,238 261,904 17,334 6.6%
---------- ---------- ----------
Total 612,992 585,347 27,645 4.7%
---------- ---------- ----------
Circulation 144,280 146,757 (2,477) -1.7%
Other 40,087 32,501 7,586 23.3%
---------- ---------- ----------
Total operating revenue $ 797,359 $ 764,605 $ 32,754 4.3%
========== ========== ==========
Average daily circulation
Daily 3,984 3,979 5 0.1%
Sunday 5,423 5,433 (10) -0.2%
Advertising linage
Full run (6 column inches)
Retail 4,176 4,252 (76) -1.8%
General 823 647 176 27.2%
Classified 5,096 4,867 229 4.7%
---------- ---------- ----------
Total full run 10,095 9,766 329 3.4%
========== ========== ==========
Retail advertising revenue decreased by $3.4 million, or 1.4%, on a full-run run
of press (ROP) linage decrease of 1.8%. The decrease was primarily due to out of
business accounts and weakness in department stores and national chain stores.
General advertising revenue was up $13.7 million, or 18.3%, on a full-run ROP
linage increase of 27.2%. The increase was primarily from continued strong
demand in high-tech, dot-com, telecommunications, automotive, and travel.
Classified advertising revenue improved $17.3 million, or 6.6%, on a full-run
ROP linage increase of 4.7%. Help wanted and recruitment contributed
significantly to the classified growth.
The increase of 23.3% in other revenue resulted from specialized publication
revenue generated by companies acquired during 1999.
OPERATING COSTS
The following table summarizes operating costs for newspaper operations for the
quarters ended March 26, 2000 and March 28, 1999 (in thousands of dollars):
12
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------
March 26, March 28,
2000 1999 Variance Change
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Operating costs
Labor and employee benefits $ 301,958 $ 292,068 $ 9,890 3.4%
Newsprint, ink and supplements 117,081 129,932 (12,851) -9.9%
Other operating costs 168,928 155,125 13,803 8.9%
Depreciation and amortization 46,365 45,207 1,158 2.6%
---------- ---------- ----------
Total operating costs $ 634,332 $ 622,332 $ 12,000 1.9%
---------- ---------- ----------
</TABLE>
Labor and employee benefit costs increased $9.9 million, or 3.4%. The increase
resulted primarily from an increase in the average wage rate per employee of
3.2%, while the workforce remained relatively flat.
Newsprint, ink and supplement costs decreased $12.9 million, or 9.9%, from the
first quarter of 1999 on a 13.1% decrease in the average newsprint price, offset
in part by a 1.5% increase in newsprint consumption.
Other operating costs increased $13.8 million, or 8.9%, from the first quarter
of 1999. The increase was primarily due to the inclusion of the operations of
three recently acquired businesses - Promedia Publishing Company in February,
1999, MACDirect in March, 1999 and Consumer and Community Publishing in
September, 1999. Increases in relocation, repairs and maintenance, and
volume-related expenses also affected operating costs.
ONLINE
OPERATING REVENUE
The table below presents operating revenue and related statistics for online
operations for the quarter ended March 26, 2000 compared to March 28, 1999 (in
thousands):
<TABLE>
<CAPTION>
Quarter Ended
---------------------
March 26, March 28,
2000 1999 Variance Change
--------- --------- -------- ------
<S> <C> <C> <C> <C>
Operating revenue $ 10,343 $ 6,194 $ 4,149 67.0%
Monthly Averages
Unique visitors 3,562 3,247 315 9.7%
Page views 134,893 95,820 39,073 40.8%
</TABLE>
Operating revenue for the first quarter of 2000 increased $4.1 million, or 67.0%
from the same period in 1999. This increase consisted primarily of banner and
sponsorship revenue and classified listings revenue.
13
<PAGE>
OPERATING COSTS
The following table summarizes operating costs for online operations for the
quarters ended March 26, 2000 and March 28, 1999 (in thousands of dollars):
<TABLE>
<CAPTION>
Quarter Ended
--------------------
March 26, March 28,
2000 1999 Variance Change
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Operating costs
Labor and employee benefits $ 7,536 $ 5,906 $ 1,630 27.6%
Other operating costs 10,423 4,821 5,602 116.2%
Depreciation and amortization 588 452 136 30.1%
--------- -------- --------
Total operating costs $ 18,547 $ 11,179 $ 7,368 65.9%
========= ======== ========
</TABLE>
The increase of $1.6 million, or 27.6%, in labor and employee benefits was
primarily due to increases in sales and volume-related full-time employees.
Other operating costs increased $5.6 million, or 116.2% from 1999 to 2000,
primarily as a result of increased promotion-related expenses and volume related
fees paid to advertising and content providers. Depreciation and amortization
expense increased $136,000, or 30.1%, due to the acquisition of additional
equipment.
CORPORATE AND OTHER RELATED NON-OPERATING ITEMS
Interest expense, net of interest income and capitalized interest, increased in
the first quarter of 2000 by $3.1 million, or 14.3%, from the first quarter of
1999. The quarter's increase was due to additional debt levels as a result of
additional share repurchases and a higher weighted average interest rate
compared to the first quarter of 1999.
Earnings from equity investments for the first quarter of 2000 were $6.0 million
below the comparable period in 1999. The year-over-year decline resulted from
losses at the Company's newsprint mill investments due to lower newsprint
prices.
"Other, net" income was $153.3 million above the first quarter of 1999 due to
the gain related to InfoSpace.com's acquisition of Prio and GoTo.com's
acquisition of Cadabra. In connection with these gains from investments, the
Company received stock in GoTo.com and InfoSpace.com.
The effective tax rate was 40.2% in the quarter ended March 26, 2000 compared to
40.1% for the comparable quarter in 1999. Excluding the gain attributable to the
exchange of Cadabra and Prio stock for InfoSpace.com and GoTo.com stock in 2000,
the effective tax rate was 40.0%.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations is the Company's primary source of liquidity. The
Company uses financial leverage to minimize the overall cost of capital and
maintain adequate operating and financial flexibility. The Company invests
excess cash in short- and long-term investments, depending on projected cash
needs from operations, capital expenditures and other business purposes.
For the quarter ended March 26, 2000, the Company's total debt to total equity
ratio was 46.4%, compared to 50.1% for the same period in 1999. Interest
coverage ratio (defined as operating income plus depreciation and amortization
divided by interest expense) was 7.4 at March 26, 2000, compared to 7.0 at March
28, 1999.
Cash and short-term investments were $35.0 million at March 26, 2000, compared
to $326.8 million at March 28, 1999. The balance at March 28, 1999, included the
proceeds received from the issuance of $300 million of 30-year debentures on
March 26, 1999. These proceeds were used in April, 1999 to reduce short-term
commercial paper borrowings. During the first quarter of 2000, proceeds from
borrowings and by cash provided by operations were used to fund treasury stock
purchases of $186.3 million.
During the first quarter of 2000, total debt increased by $178.1 million from
fiscal year-end 1999. Approximately $288.1 million in aggregate unused credit
lines remained at the end of the quarter. In February 2000, Moody's upgraded the
Company's short- and long-term debt to P1 and A2, respectively.
Additions to property, plant and equipment decreased by $8.7 million from the
first quarter of 1999 to $16.5 million, due primarily to the completion of major
projects and Year 2000 (Y2K) computer-related expenditures in 1999. During the
quarter the Company invested $21.6 million for the acquisitions of two
businesses and for increases in ownership interest of certain minority-owned
companies.
Other assets increased by $82.4 million primarily as a result of a contribution
to a trust that pays employee benefits.
In the first quarter of 2000, the Company purchased 3.6 million shares of its
common stock at a total cost of $186.3 million at an average cost of $51.05 per
share. At quarter-end, the Company had remaining authorization to purchase
approximately 1.9 million shares. In April 2000, the Board of Directors
authorized the Company to repurchase an additional 6 million shares of its
common stock.
The Company's operations have historically generated strong positive cash flow,
which, along with the Company's commercial paper program, revolving credit lines
and ability to issue public debt, has provided adequate liquidity to meet the
Company's short- and long-term cash requirements, including requirements for
working capital and capital expenditures.
15
<PAGE>
YEAR 2000 READINESS DISCLOSURE
All Year 2000 statements in this Form 10-Q are Year 2000 Readiness Disclosures
under the Year 2000 Information and Readiness Disclosure Act. The Year 2000
(Y2K) issue results from computer programs using two digits rather than four to
define the applicable year. Company computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. Failure to recognize the correct date may result in a system failure,
disruption of operations, and/or a temporary inability to conduct normal
business activities.
The Company has not experienced any Year 2000-related problems. The Company
believes all existing computer hardware, software and software conversions are
Year 2000 capable; however, there can be no assurance the company will not
experience Year 2000 problems in the future. The Company continues to monitor
its hardware and software systems for any Year 2000-related problems and the
Company continues to have contingency plans in place with alternative solutions
in the event that they are required to deal with any Year 2000 computer problems
that may arise.
16
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There are no material changes to the disclosure made on this matter in the
Company's annual report on Form 10-K/A for the year ended December 26, 1999.
17
<PAGE>
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Part 1, Item 1, Note 6, incorporated herein by
reference, for a discussion of legal proceedings relating to the
Detroit Free Press.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(g) - KnightRidder.com, Inc. 2000 Stock Option Plan,
effective as of March 1, 2000
(h) - Knight-Ridder, Inc. Form of Executive Income
Security Agreement, effective as of April 25, 2000
27 - Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter
ended March 26, 2000.
18
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KNIGHT-RIDDER, INC.
(Registrant)
Date: May 5, 2000
/s/ GARY R. EFFREN
-----------------------------------
Gary R. Effren
Vice President/Controller
(Chief Accounting Officer and Duly
Authorized Officer of Registrant)
19
<PAGE>
EXHIBIT INDEX
10 (g) - KnightRidder.com, Inc. 2000 Stock Option Plan, effective as of
March 1, 2000
(h) - Knight-Ridder, Inc., Form of Executive Income Security Agreement,
effective as of April 25, 2000
27 - Financial Data Schedule
20
EXHIBIT 10 (g)
KNIGHTRIDDER.COM, INC.
2000 STOCK OPTION PLAN
EFFECTIVE AS OF MARCH 1, 2000
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. INTRODUCTION.........................................1
SECTION 2. DEFINITIONS..........................................1
(a) "Affiliate".......................................1
(b) "Board"...........................................1
(c) "Change In Control"...............................1
(d) "Code"............................................2
(e) "Committee".......................................2
(f) "Common Stock"....................................2
(g) "Company".........................................2
(h) "Consultant"......................................2
(i) "Director"........................................2
(j) "Disability"......................................2
(k) "Employee"........................................3
(l) "Exchange Act"....................................3
(m) "Exercise Price"..................................3
(n) "Fair Market Value"...............................3
(o) "Grant"...........................................3
(p) "Incentive Stock Option" or "ISO".................3
(q) "Key Employee"....................................3
(r) "Non-Employee Director"...........................3
(s) "Nonstatutory Stock Option" or "NSO"..............3
(t) "Option"..........................................3
(u) "Optionee"........................................4
(v) "Parent"..........................................4
(w) "Plan"............................................4
(x) "Retirement"......................................4
(y) "Securities Act"..................................4
(z) "Service".........................................4
(aa) "Share"...........................................4
(bb) "Stock Option Agreement"..........................4
(cc) "Subsidiary"......................................4
(dd) "10-Percent Shareholder"..........................4
-i-
<PAGE>
Page
SECTION 3. ADMINISTRATION.......................................4
(a) Committee Composition.............................4
(b) Authority of the Committee........................5
(c) Indemnification...................................5
(d) Financial Reports.................................5
SECTION 4. ELIGIBILITY..........................................6
(a) General Rules.....................................6
(b) Incentive Stock Options...........................6
SECTION 5. SHARES SUBJECT TO PLAN...............................6
(a) Basic Limitation..................................6
(b) Additional Shares.................................6
(c) Dividend Equivalents..............................6
(d) Per Person Limit..................................6
SECTION 6. TERMS AND CONDITIONS OF OPTIONS......................6
(a) Stock Option Agreement............................6
(b) Number of Shares..................................6
(c) Exercise Price....................................7
(d) Exercisability and Term...........................7
(e) Modifications or Assumption of Options............7
(f) Transferability of Options........................7
(g) No Rights as a Stockholder........................7
(h) Restrictions on Transfer..........................8
SECTION 7. PAYMENT FOR OPTION SHARES............................8
(a) General Rule......................................8
(b) Surrender of Stock................................8
(c) Promissory Note...................................8
(d) Other Forms of Payment............................8
SECTION 8. PROTECTION AGAINST DILUTION..........................8
(a) Adjustments.......................................8
(b) Optionee Rights...................................9
SECTION 9. EFFECT OF A CHANGE IN CONTROL........................9
SECTION 10. LIMITATIONS ON RIGHTS................................9
-ii-
<PAGE>
Page
(a) Retention Rights..................................9
(b) Stockholders' Rights..............................9
(c) Regulatory Requirements...........................9
SECTION 11. WITHHOLDING TAXES...................................10
(a) General..........................................10
(b) Share Withholding................................10
SECTION 12. DURATION AND AMENDMENTS.............................10
(a) Term of the Plan.................................10
(b) Right to Amend or Terminate the Plan.............10
SECTION 13. EXECUTION...........................................10
-iii-
<PAGE>
KNIGHTRIDDER.COM, INC.
2000 STOCK OPTION PLAN
EFFECTIVE AS OF MARCH 1, 2000
SECTION 1. INTRODUCTION.
The Company's Board of Directors adopted the KnightRidder.com, Inc. 2000
Stock Option Plan on March 1, 2000. The Company's stockholder adopted the
Plan on March 1, 2000. The Plan is effective on March 1, 2000.
The purpose of the Plan is to promote the long-term success of the Company
and the creation of shareholder value by offering Key Employees an opportunity
to acquire a proprietary interest in the success of the Company, or to increase
such interest, and to encourage such selected persons to continue to provide
services to the Company and to attract new individuals with outstanding
qualifications.
The Plan seeks to achieve this purpose by providing for Options (which may
constitute Incentive Stock Options or Nonstatutory Stock Options).
The Plan shall be governed by, and construed in accordance with, the laws
of the State of Delaware (except its choice-of-law provisions). Capitalized
terms shall have the meaning provided in Section 2 unless otherwise provided in
this Plan or Stock Option Agreement.
SECTION 2. DEFINITIONS.
(a) "AFFILIATE" means any entity other than the Company or a Subsidiary,
if a Parent, the Company and/or one or more Subsidiaries own not less than 50%
of such entity.
(b) "BOARD" means the Board of Directors of the Company, as constituted
from time to time.
(c) "CHANGE IN CONTROL" except as may otherwise be provided in the Stock
Option Agreement, means the occurrence of any of the following:
(i) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the
continuing or surviving entity's securities outstanding immediately
after such merger, consolidation or other reorganization is owned by
persons who were not stockholders of the Company immediately prior to
such merger, consolidation or other reorganization;
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets;
<PAGE>
(iii) A change in the composition of the Board, as a result of
which fewer that one-half of the incumbent directors are directors
who either (i) had been directors of the Company on the date 24
months prior to the date of the event that may constitute a Change in
Control (the "original directors") or (ii) were elected, or nominated
for election, to the Board with the affirmative votes of at least a
majority of the aggregate of the original directors who were still in
office at the time of the election or nomination and the directors
whose election or nomination was previously so approved; or
(iv) Any transaction as a result of which any person is the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing at
least 20% of the total voting power represented by the Company's then
outstanding voting securities. For purposes of this Paragraph (iv),
the term "person" shall have the same meaning as when used in
sections 13(d) and 14(d) of the Exchange Act but shall exclude:
(A) A trustee or other fiduciary holding securities under
an employee benefit plan of the Company or a subsidiary of the
Company; and
(B) A corporation owned directly or indirectly by the
stockholders of the Company in substantially the same
proportions as their ownership of the common stock of the
Company.
A transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or to create
a holding company that will be owned in substantially the same proportions
by the persons who held the Company's securities immediately before such
transactions.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee consisting of one or more members of the
Board that is appointed by the Board (as described in Section 3) to administer
the Plan.
(f) "COMMON STOCK" means the Company's common stock.
(g) "COMPANY" means KnightRidder.com, Inc., a Delaware corporation.
(h) "CONSULTANT" means an individual who performs bona fide services to
the Company, a Parent, a Subsidiary or an Affiliate other than as an Employee or
Director or Non-Employee Director.
(i) "DIRECTOR" means a member of the Board who is also an Employee.
(j) "DISABILITY" means that the Key Employee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.
2
<PAGE>
(k) "EMPLOYEE" means any individual who is a common-law employee of the
Company, a Parent, a Subsidiary or an Affiliate.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "EXERCISE PRICE" means the amount for which a Share may be purchased
upon exercise of such Option, as specified in the applicable Stock Option
Agreement.
(n) "FAIR MARKET VALUE" means the market price of Shares, determined by
the Committee as follows:
(i) If the Shares were traded over-the-counter on the date in
question but were not classified as a national market issue, then the Fair
Market Value shall be equal to the mean between the last reported
representative bid and asked prices quoted by the NASDAQ system for such
date;
(ii) If the Shares were traded over-the-counter on the date in
question and were classified as a national market issue, then the Fair
Market Value shall be equal to the last-transaction price quoted by the
NASDAQ system for such date;
(iii) If the Shares were traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date;
and
(iv) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee
shall be based on the prices reported in the WALL STREET JOURNAL. Such
determination shall be conclusive and binding on all persons.
(o) "GRANT" means any grant of an Option under the Plan.
(p) "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock option
described in Code section 422(b).
(q) "KEY EMPLOYEE" means an Employee, Director, Non-Employee Director or
Consultant who has been selected by the Committee to receive an Option under the
Plan.
(r) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
Employee.
(s) "NONSTATUTORY STOCK OPTION" or "NSO" means a stock option that is not
an ISO.
(t) "OPTION" means an ISO or NSO granted under the Plan entitling the
Optionee to purchase Shares.
(u) "OPTIONEE" means an individual, estate or other entity that holds an
Option.
3
<PAGE>
(v) "PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if each of the corporations other
than the Company owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain. A corporation that attains the status of a Parent on a date after
the adoption of the Plan shall be considered a Parent commencing as of such
date.
(w) "PLAN" means this KnightRidder.com, Inc. 2000 Stock Option Plan as it
may be amended from time to time.
(x) "RETIREMENT" means retirement pursuant to the terms of a retirement
plan sponsored by the Company, a Parent, a Subsidiary or an Affiliate.
(y) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(z) "SERVICE" means service as an Employee, Director, Non-Employee
Director or Consultant.
(aa) "SHARE" means one share of Common Stock.
(bb) "STOCK OPTION AGREEMENT" means the agreement described in Section 6
evidencing each Grant of an Option.
(cc) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company or a Parent, if each
of the corporations other than the last corporation in the unbroken chain owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.
(dd) "10-PERCENT SHAREHOLDER" means an individual who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company, its Parent or any of its subsidiaries. In determining
stock ownership, the attribution rules of section 424(d) of the Code shall be
applied.
SECTION 3. ADMINISTRATION.
(a) COMMITTEE COMPOSITION. A Committee appointed by the Board shall
administer the Plan. The Board shall designate one of the members of the
Committee as chairperson. If no Committee has been approved, the entire Board
shall constitute the Committee. Members of the Committee shall serve for such
period of time as the Board may determine and shall be subject to removal by the
Board at any time. The Board may also at any time terminate the functions of the
Committee and reassume all powers and authority previously delegated to the
Committee.
Effective with the Company's initial public offering, the Committee shall
consist either (i) of those individuals who shall satisfy the requirements of
Rule 16b-3 (or its successor) under the Exchange Act with respect to Options to
persons who are officers or directors of the Company under Section 16 of the
Exchange Act or (ii) of the Board itself.
4
<PAGE>
The Committee may consist of the Compensation and Corporate Governance
Committee of Knight-Ridder, Inc. with respect to such Grants of Options as the
Board may determine.
The Board may also appoint one or more separate committees of the Board,
each composed of one or more directors of the Company who need not qualify under
Rule 16b-3, who may administer the Plan with respect to Key Employees who are
not considered officers or directors of the Company under Section 16 of the
Exchange Act, may grant Options under the Plan to such Key Employees and may
determine all terms of such Options.
(b) AUTHORITY OF THE COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have full authority and discretion to take any actions it deems
necessary or advisable for the administration of the Plan. Such actions shall
include:
(i) selecting Key Employees who are to receive Options under the
Plan;
(ii) determining the type, number, vesting requirements and other
features and conditions of such Options;
(iii) interpreting the Plan; and
(iv) making all other decisions relating to the operation of the
Plan.
The Committee may adopt such rules or guidelines, as it deems appropriate
to implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
(c) INDEMNIFICATION. Each member of the Committee, or of the Board, shall
be indemnified and held harmless by the Company against and from (i) any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
him or her in connection with or resulting from any claim, action, suit, or
proceeding to which he or she may be a party or in which he or she may be
involved by reason of any action taken or failure to act under the Plan or any
Stock Option Agreement, and (ii) from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such claim, action, suit, or proceeding
against him or her, provided he or she shall give the Company an opportunity, at
its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under
any power that the Company may have to indemnify them or hold them harmless.
(d) FINANCIAL REPORTS. To the extent required by applicable law, the
Company shall furnish to Optionees the Company's summary financial information
including a balance sheet regarding the Company's financial condition and
results of operations, unless such Optionees have duties with the Company that
assure them access to equivalent information. Such financial statements need not
be audited.
SECTION 4. ELIGIBILITY.
(a) GENERAL RULES. Only Employees, Directors, Non-Employee Directors and
Consultants shall be eligible for designation as Key Employees by the Committee.
5
<PAGE>
(b) INCENTIVE STOCK OPTIONS. Only Key Employees who are common-law
employees of the Company, a Parent or a Subsidiary shall be eligible for the
grant of ISOs. In addition, a Key Employee who is a 10-Percent Shareholder shall
not be eligible for the grant of an ISO unless the requirements set forth in
section 422(c)(5) of the Code are satisfied.
SECTION 5. SHARES SUBJECT TO PLAN.
(a) BASIC LIMITATION. The stock issuable under the Plan shall be
authorized but unissued Shares or treasury Shares. The aggregate number of
Shares reserved for Grants under the Plan shall not exceed 20,000,000 Shares on
a fully diluted basis, subject to adjustment pursuant to Section 8.
(b) ADDITIONAL SHARES. If Options are forfeited or terminate for any other
reason before being exercised, then such Options shall again become available
for Grants under the Plan.
(c) DIVIDEND EQUIVALENTS. Any dividend equivalents distributed under the
Plan shall not be applied against the number of Options available for Grants.
(d) PER PERSON LIMIT. No Key Employee shall receive Options to purchase
Shares during any fiscal year covering in excess of 3,000,000.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each Grant under the Plan shall be evidenced
by a Stock Option Agreement between the Optionee and the Company. Such Option
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions that are not inconsistent with the
Plan and that the Committee deems appropriate for inclusion in a Stock Option
Agreement. The provisions of the various Stock Option Agreements entered into
under the Plan need not be identical. A Stock Option Agreement may provide that
new Options will be granted automatically to the Optionee when he or she
exercises the prior Options. The Stock Option Agreement shall also specify
whether the Option is an ISO or an NSO.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the number
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 8.
(c) EXERCISE PRICE. An Option's Exercise Price shall be established by the
Committee and set forth in a Stock Option Agreement. To the extent required by
applicable law the Exercise Price of an ISO shall not be less than 100% of the
Fair Market Value (110% for 10-Percent Shareholders) of a Share on the date of
Grant. In the case of an NSO, a Stock Option Agreement may specify an Exercise
Price that varies in accordance with a predetermined formula while the NSO is
outstanding. To the extent required by applicable law, the Exercise Price for an
NSO shall not be less than 85% of the Fair Market Value (110% for 10-Percent
Shareholders) of a Share on the date of Grant.
6
<PAGE>
(d) EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, Options shall vest at least as rapidly as 20%
annually over a five-year period. The Stock Option Agreement shall also specify
the term of the Option; provided that the term of an ISO, and to the extent
required by applicable law a NSO, shall in no event exceed ten (10) years from
the date of Grant. An ISO that is granted to a 10-Percent Shareholder shall have
a maximum term of five (5) years. To the extent required by applicable law,
vested Options shall be exercisable for a minimum period of six (6) months
following termination of employment due to death or Disability and thirty (30)
days following termination of employment (other than terminations for cause, as
defined in the Company's personnel policies). Notwithstanding the previous
sentence, no Option can be exercised after the expiration date provided in the
applicable Stock Option Agreement. A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. A Stock
Option Agreement may permit an Optionee to exercise an Option before it is
vested, subject to the Company's right of repurchase over any Shares acquired
under the unvested portion of the Option (an "early exercise"), which right of
repurchase shall lapse at the same rate the Option would have vested had there
been no early exercise. In no event shall the Company be required to issue
fractional Shares upon the exercise of an Option.
(e) MODIFICATIONS OR ASSUMPTION OF OPTIONS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new Options for the same or a
different number of Shares and at the same or a different Exercise Price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
(f) TRANSFERABILITY OF OPTIONS. Except as otherwise provided in the
applicable Stock Option Agreement and then only to the extent permitted by
applicable law, no Option shall be transferable by the Optionee other than by
will or by the laws of descent and distribution. Except as otherwise provided in
the applicable Stock Option Agreement, an Option may be exercised during the
lifetime of the Optionee only or by the guardian or legal representative of the
Optionee. No Option or interest therein may be assigned, pledged or hypothecated
by the Optionee during his lifetime, whether by operation of law or otherwise,
or be made subject to execution, attachment or similar process.
(g) NO RIGHTS AS A STOCKHOLDER. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Common Stock
covered by an Option until such person becomes entitled to receive such Common
Stock by filing a notice of exercise and paying the Exercise Price pursuant to
the terms of such Option.
(h) RESTRICTIONS ON TRANSFER. Any Shares issued upon exercise of an Option
shall be subject to such rights of repurchase, rights of first refusal and other
transfer restrictions as the Committee may determine. Such restrictions shall
apply in addition to any restrictions that may apply to holders of Shares
generally and shall also comply to the extent necessary with applicable law.
7
<PAGE>
SECTION 7. PAYMENT FOR OPTION SHARES.
(a) GENERAL RULE. The entire Exercise Price of Shares issued upon exercise
of Options shall be payable in cash at the time when such Shares are purchased,
except as follows:
(i) In the case of an ISO granted under the Plan, payment shall be
made only pursuant to the express provisions of the applicable Stock
Option Agreement. The Stock Option Agreement may specify that payment
may be made in any form(s) described in this Section 7.
(ii) In the case of an NSO granted under the Plan, the Committee may
in its discretion, at any time accept payment in any form(s) described
in this Section 7.
(b) SURRENDER OF STOCK. To the extent that this Section 7(b) is
applicable, payment for all or any part of the Exercise Price may be made with
Shares which have already been owned by the Optionee for such duration as shall
be specified by the Committee. Such Shares shall be valued at their Fair Market
Value on the date when the new Shares are purchased under the Plan.
(c) PROMISSORY NOTE. To the extent that this Section 7(c) is applicable,
payment for all or any part of the Exercise Price may be made with a
full-recourse promissory note.
(d) OTHER FORMS OF PAYMENT. To the extent that this Section 7(d) is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
SECTION 8. PROTECTION AGAINST DILUTION.
(a) ADJUSTMENTS. In the event of a subdivision of the outstanding
Shares, a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Shares in an amount that has a material
effect on the price of Shares, a combination or consolidation of the outstanding
Shares (by reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of:
(i) the number of Options available for future Grants under
Section 5;
(ii) the number of Shares covered by each outstanding Option;
or
(iii) the Exercise Price under each outstanding Option.
(b) OPTIONEE RIGHTS. Except as provided in this Section 8, an
Optionee shall have no rights by reason of any issue by the Company of stock of
any class or securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class.
8
<PAGE>
SECTION 9. EFFECT OF A CHANGE IN CONTROL.
(a) MERGER OR REORGANIZATION. In the event that the Company is a
party to a merger or other reorganization, outstanding Options shall be subject
to the agreement of merger or reorganization. Such agreement may provide,
without limitation, for the assumption of outstanding Options by the surviving
corporation or its parent, for their continuation by the Company (if the Company
is a surviving corporation), for accelerated vesting or for their cancellation
with or without consideration, in all cases without the consent of the Optionee.
(b) ACCELERATION. The Committee may determine, at the time of
granting an Option or thereafter, that such Option shall become fully
exercisable as to all Shares subject to such Option in the event that a Change
in Control occurs with respect to the Company.
SECTION 10. LIMITATIONS ON RIGHTS.
(a) RETENTION RIGHTS. Neither the Plan nor any Option granted under
the Plan shall be deemed to give any individual a right to remain an employee,
consultant or director of the Company, a Parent, a Subsidiary or an Affiliate.
The Company and its Parents and Subsidiaries and Affiliates reserve the right to
terminate the Service of any person at any time, and for any reason, subject to
applicable laws, the Company's Certificate of Incorporation and Bylaws and a
written employment agreement (if any).
(b) STOCKHOLDERS' RIGHTS. An Optionee shall have no dividend rights,
voting rights or other rights as a stockholder with respect to any Shares
covered by his or her Option prior to the issuance of a stock certificate for
such Shares. No adjustment shall be made for cash dividends or other rights for
which the record date is prior to the date when such certificate is issued,
except as expressly provided in Section 8.
(c) REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Shares under the Plan
shall be subject to all applicable laws, rules and regulations and such approval
by any regulatory body as may be required. The Company reserves the right to
restrict, in whole or in part, the delivery of Shares pursuant to any Option
prior to the satisfaction of all legal requirements relating to the issuance of
such Shares, to their registration, qualification or listing or to an exemption
from registration, qualification or listing.
SECTION 11. WITHHOLDING TAXES.
(a) GENERAL. An Optionee or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with his or her Option. The Company
shall not be required to issue any Shares or make any cash payment under the
Plan until such obligations are satisfied.
(b) SHARE WITHHOLDING. If a public market for the Company's Shares
exists, the Committee may permit an Optionee to satisfy all or part of his or
her withholding or income tax obligations by having the Company withhold all or
a portion of any Shares that otherwise would be issued to him or her or by
surrendering all or a portion of any Shares that he or she previously
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acquired. Such Shares shall be valued at their Fair Market Value on the date
when taxes otherwise would be withheld in cash. Any payment of taxes by
assigning Shares to the Company may be subject to restrictions, including, but
not limited to, any restrictions required by rules of the Securities and
Exchange Commission.
SECTION 12. DURATION AND AMENDMENTS.
(a) TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board. No Options shall be
exercisable until stockholder approval is obtained. In the event that the
stockholder fails to approve the Plan within twelve (12) months after its
adoption by the Board, any Options made shall be null and void and no additional
Grants shall be made. To the extent required by applicable law, the Plan shall
terminate on the date that is ten (10) years after its adoption by the Board and
may be terminated on any earlier date pursuant to Section 12(b).
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board may amend or
terminate the Plan at any time and for any reason. The termination of the Plan,
or any amendment thereof, shall not affect any Option previously granted under
the Plan. No Options shall be granted under the Plan after the Plan's
termination. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws,
regulations or rules.
SECTION 13. EXECUTION.
To record the adoption of the Plan by the Board, the Company has caused
its duly authorized officer to execute this Plan on behalf of the Company.
KNIGHTRIDDER.COM, INC.
By /s/ DANIEL J. FINNIGAN
----------------------
Daniel J. Finnigan
President
10
EXHIBIT 10(h)
EXECUTIVE INCOME SECURITY AGREEMENT
AGREEMENT dated as of __________________, 200_, by and between
Knight-Ridder, Inc., a Florida corporation having its principal offices at 50 W.
San Fernando Street, San Jose, California, 95113 (the "Company"), and
_____________ (the "Executive").
The Company considers the continued services of key executives of the
Company to be in the best interests of the Company and its shareholders.
The Company desires to assure, and has determined that it is appropriate
and in the best interests of the Company and its shareholders to reinforce and
encourage, the continued attention and dedication of key executives of the
Company to their duties of employment without personal distraction or conflict
of interest in circumstances arising from the possibility or occurrence of a
change in control of the Company.
The Compensation and Corporate Governance Committee of the Board of
Directors of the Company (the "Committee") has authorized the Company to enter
into agreements with those key executives of the Company who are designated by
the Committee, such agreements to set forth the severance compensation which the
Company agrees under certain circumstances to pay such executives.
The Executive is a key executive of the Company and has been designated by
the Committee as an executive to be offered such a severance compensation
agreement with the Company.
In consideration of the premises and the covenants and agreements
contained herein, and other good and valuable consideration, the Company and the
Executive agree as follows:
1. CHANGE IN CONTROL OF THE COMPANY. For purposes of this Agreement, a
"Change in Control of the Company" shall be deemed to have occurred if:
(a) individuals who, as of the date of this Agreement, constitute
the entire Board of Directors of the Company ("Incumbent Directors") cease for
any reason to constitute at least a majority of the Board of Directors of the
Company (the "Board"); PROVIDED, HOWEVER, that any individual becoming a
director subsequent to the date of this Agreement whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the then Incumbent Directors (other than any such individual whose
initial assumption of office is the result of an actual or threatened election
contest relating to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Company) shall also be an Incumbent Director;
(b) any merger, consolidation or reorganization of the Company (or,
if the capital stock of the Company is affected, any Subsidiary (as defined
below)) or any sale, lease, or other disposition (in one transaction or a series
of transactions contemplated or arranged by any party as a single plan) of all
or substantially all of the assets of the Company (each of the foregoing being
an "Acquisition Transaction") shall have been effected and (A) the shareholders
of the Company immediately prior to such Acquisition Transaction do not
immediately after such Acquisition Transaction beneficially own, directly or
indirectly, shares representing in the aggregate more than 65% of (I) the
then-outstanding common stock of the corporation surviving or resulting from
such merger, consolidation or recapitalization or acquisition of such assets of
the Company, as the case may be (the "Surviving Corporation") (or of its
ultimate parent corporation, if any) and (II) the Combined Voting Power (as
defined below) of the then outstanding Voting Securities (as defined below) of
the Surviving Corporation (or of its ultimate parent corporation, if any); (B)
the Incumbent Directors at the time of the initial approval of such Acquisition
Transaction do not immediately after such Acquisition Transaction constitute a
majority of the Board of Directors of the Surviving Corporation (or of its
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ultimate parent corporation, if any); or (C) any Person (including any
corporation resulting from such Acquisition Transaction and any employee benefit
plan (or related trust) of such corporation) beneficially owns, directly or
indirectly, 20% or more of either (i) the then-outstanding shares of common
stock of the corporation resulting from such Acquisition Transaction or (ii) the
Combined Voting Power of all then-outstanding Voting Securities of the Surviving
Corporation except to the extent that such ownership existed prior to the
Acquisition Transaction; or
(c) the shareholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company; or
(d) any Person (as defined below) shall become the beneficial owner
(as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")), directly or indirectly, of securities of the
Company representing in the aggregate 20% or more of either (i) the then
outstanding shares of Company Common Stock ("Common Stock"), or (ii) the
Combined Voting Power of all then outstanding Voting Securities of the Company;
PROVIDED, HOWEVER, that notwithstanding the foregoing, a Change in Control of
the Company shall not be deemed to have occurred for purposes of this clause (d)
solely as the result of:
(A) an acquisition of securities by the Company which, by
reducing the number of shares of Common Stock or other Voting Securities
outstanding, increases (I) the proportionate number of shares of Common
Stock beneficially owned by any Person to 20% or more of the shares of
Common Stock then outstanding or (II) the proportionate voting power
represented by the Voting Securities beneficially owned by any Person to
20% or more of the Combined Voting Power of all then outstanding Voting
Securities; or
(B) an acquisition of securities directly from the Company,
except that this subsection (B) shall not apply to:
(I) any conversion or exercise of a security
that was not acquired directly from the Company; or
(II) any acquisition of securities if the Incumbent
Directors at the time of the initial approval of such
acquisition would not immediately after (or otherwise as a
result of) such acquisition constitute a majority of the Board;
PROVIDED, HOWEVER, that if any Person referred to in subsections (A) or
(B) of this clause (d) shall thereafter become the beneficial owner of any
additional shares of Company Common Stock or other Voting Securities of
the Company (other than pursuant to a stock split, stock dividend or
similar transaction or an acquisition exempt under such subsection (B)),
then a Change in Control of the Company shall be deemed to have occurred
for purposes of this clause (d).
(e) Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a Change in
Control of the Company and the Executive reasonably demonstrates that such
termination (i) was at the request of a Third Party (as defined below) or
(ii) otherwise occurred in connection with or in anticipation of a Change
in Control of the Company, then for all purposes of the Agreement, the
date of such Change in Control of the Company shall mean the date
immediately prior to the date of such termination of the Executive's
employment.
(f) For purposes of this Agreement:
(i) "Person" shall mean any individual, entity (including,
without limitation, any corporation, partnership, trust, joint venture,
association or governmental body and any successor to any such entity) or
group (as defined in Sections 13(d)(3) or 14(d)(2) of the Exchange Act and
the rules and regulations thereunder); PROVIDED, HOWEVER, that Person
shall not include the Executive, the Company, any of its Subsidiaries, any
employee benefit plan (or related trust) of the Company or its
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Subsidiaries or any entity organized, appointed or established by the
Executive, the Company or any of its Subsidiaries for or pursuant to the
terms of any such plan, or any of their affiliates;
(ii) "Voting Securities" shall mean all securities of a
corporation having the right under ordinary circumstances to vote in an
election of the board of directors of such corporation; and
(iii)"Combined Voting Power" shall mean the aggregate votes
entitled to be cast generally in the election of directors of a
corporation by holders of then outstanding Voting Securities of such
corporation.
(iv) "Third Party" shall mean a third party who has indicated an
intention, or taken steps reasonably calculated, to effect a Change in
Control of the Company.
2. TERMINATION FOLLOWING CHANGE IN CONTROL OF THE COMPANY.
(a) GENERAL. If a Change in Control of the Company shall have
occurred while the Executive is an employee of the Company, the Executive shall
be entitled to the compensation provided in Section 3 hereof upon the subsequent
termination of the Executive's employment with the Company at any time during
the Term (as defined below) of this Agreement, whether such termination is
effected by the Executive or by the Company, unless such termination occurs as a
result of (i) the Executive's death, (ii) the Executive's Disability (as defined
below), (iii) the Executive's Retirement (as defined below), (iv) the
termination by the Company of the employment of the Executive for Cause (as
defined below), or (v) the termination by the Executive of his employment other
than for Good Reason (as defined below).
(b) DISABILITY. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which has rendered the Executive unable to
substantially perform his or her duties (such term to include performance of the
Executive's part-time duties if the Executive is employed on a part-time basis)
with the Company for a period of 180 consecutive days, unless within 30 days
after the date a Notice of Termination (as defined below) is given by the
Company after an absence for such period the Executive shall have returned to
the full-time performance of such duties.
(c) RETIREMENT. For purposes of this Agreement, "Retirement" shall
mean termination, whether by the Company or by the Executive, of the Executive's
employment with the Company on or after the Executive's early retirement date or
normal retirement date, as the case may be, under the Company's retirement
policy then generally applicable to its salaried employees or in accordance with
any retirement plan or arrangement with respect to the Executive established by
the Company with the Executive's consent.
(d) CAUSE. For purposes of this Agreement, the Company shall have
"Cause" to terminate the Executive's employment only if the Executive (i) has
willfully engaged in illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company, (ii) has engaged in fraud,
misappropriation, embezzlement or any other act or acts of dishonesty resulting
or intended to result directly or indirectly in a substantial gain or personal
enrichment to the Executive at the expense of the Company, or (iii) has
willfully and continually failed substantially to perform his or her duties with
the Company (other than a failure resulting from the Executive's incapacity due
to physical or mental illness), which failure has continued for a period of at
least 30 days after a written notice of demand for substantial performance has
been delivered to the Executive specifying in reasonable detail the manner in
which the Executive has failed to substantially perform. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution (x) duly adopted by three-quarters (3/4) of the entire membership of
the Committee, or of the Board, at a meeting called and held for such purpose
after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Committee or the
Board, as the case may be, and (y) finding that in the good faith opinion of the
Committee or the Board, as the case may be, the Executive was guilty of conduct
described in the first sentence of this Section 2(d) and specifying the
particulars of such conduct in detail. For purposes of this provision, no act or
failure to act, on the part of the Executive, shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad faith or
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without reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board, or, for any Executive
other than the Chief Executive Officer of the Company, upon the instructions of
the Chief Executive Officer of the Company, or based upon the advice of counsel
for the Company, shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
(e) GOOD REASON. For purposes of this Agreement, "Good Reason" shall
mean the occurrence after a Change in Control of the Company of any of the
following without the Executive's express written consent.
(i) The assignment to the Executive by the Company of duties
or responsibilities inconsistent in some material respect with the
Executive's title, position, duties, responsibilities and status with the
Company immediately prior to a Change in Control of the Company, or a
change in the Executive's titles or offices with the Company from those
held by the Executive immediately prior to a Change in Control of the
Company, excluding for these purposes an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive,
or any removal of the Executive from or any failure to reelect or
reappoint the Executive to any of such positions except in connection with
the termination of the Executive's employment as a result of the
Executive's death, Disability or Retirement, by the Company for Cause or
by the Executive other than for Good Reason;
(ii) Any reduction by the Company in the Executive's base
salary as in effect on the date hereof or as such base salary may be
increased from time to time during the Term of this Agreement or any
failure to pay the Executive any compensation or benefits to which he is
entitled within five days of the date due;
(iii) Any failure by the Company either to continue in effect
any benefit plan or arrangement (including, without limitation, the
Company's Employees Stock Purchase Plan, Section 401(k) plan, Retirement
Plan for Employees, Retirement Benefit Restoration Plan, or substitute
plans adopted by the Company prior to a Change in Control of the Company,
group life insurance plan and medical, dental, accident and disability
plans) in which the Executive shall be participating at the time of a
Change in Control of the Company or to provide other plans or arrangements
providing the Executive with substantially similar benefits, or the taking
by the Company of any action which would directly or indirectly materially
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such benefit plan or arrangement or deprive
the Executive of any material fringe benefit enjoyed by the Executive at
the time of a Change in Control of the Company.
(iv) Any failure by the Company either to continue in effect
any incentive or compensation plan or arrangement (including, without
limitation, the Company's Incentive Compensation Plan and Employee Stock
Option Plan, or substitute plans adopted by the Company prior to a Change
in Control of the Company) in which the Executive shall be participating
at the time of a Change in Control of the Company, or to provide other
plans or arrangements providing the Executive with substantially similar
benefit levels and/or reward opportunities, or the taking by the Company
of any action which would directly or indirectly materially adversely
affect the Executive's participation (including the level of the
Executive's participation relative to other participants and the terms of
benefit levels and/or reward opportunities) or materially reduce the
Executive's benefits under any such plan or arrangement;
(v) Any relocation of the Executive's base of employment to a
location more than 20 miles away from the location at which the Executive
performed the Executive's duties of employment prior to a Change in
Control of the Company, except for required travel by the Executive on
business of the Company to an extent substantially consistent with the
Executive's business travel obligations at the time of a Change in Control
of the Company;
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(vi) Any failure by the Company to provide the Executive with
the number of paid vacation days per year to which the Executive is
entitled at the time of a Change in Control of the Company;
(vii) Any material breach by the Company of any provision of
this Agreement;
(viii) Any failure by the Company to obtain from any successor
to the Company a satisfactory agreement to assume and perform this
Agreement, as contemplated by Section 8(a) hereof;
(ix) The insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company, which petition is
not dismissed within sixty days; and
(x) Any purported termination of the Executive's employment
by the Company, other than as a result of the Executive's death, which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Section 2(f) hereof (and, if applicable, Section 2(d)
hereof).
Any event or condition described in subsections (i) through (x) above which
occurs prior to a Change in Control of the Company but which the Executive
reasonably demonstrates (A) was at the request of a Third Party, or (B)
otherwise arose in connection with, or in anticipation of, a Change in Control
of the Company, shall constitute Good Reason for purposes of this Agreement,
notwithstanding that it occurred prior to the Change in Control of the Company.
(f) NOTICE OF TERMINATION. Any purported termination of the
Executive's employment with the Company other than as a result of the
Executive's death shall be communicated by a Notice of Termination to the
Executive, if such termination is by the Company, or to the Company, if such
termination is by the Executive. For purposes of this Agreement, "Notice of
Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. For
purposes of this Agreement, no purported termination of the Executive's
employment with the Company other than as a result of the Executive's death
shall be effective without such a Notice of Termination having been given.
(g) DATE OF TERMINATION. For purposes of this Agreement, "Date of
Termination" shall mean: (i) if the Executive's employment by the Company is
terminated by the Company for Disability, the thirtieth day after the date on
which the Notice of Termination is given, provided that the Executive shall not
have returned to the full-time performance of the Executive's duties of
employment during such 30-day period; (ii) if the Executive's employment by the
Company is terminated by the Executive for Good Reason, such date as shall be
specified in the Notice of Termination (which date shall not be fewer than 20
nor more than 60 days after the date on which the Notice of Termination is
given); or (iii) if the Executive's employment by the Company is terminated for
any other reason, the twentieth day after the date on which the Notice of
Termination is given.
3. COMPENSATION UPON TERMINATION AFTER A CHANGE IN CONTROL OF THE COMPANY.
(a) If after a Change in Control of the Company the Executive's
employment by the Company shall terminate at any time during the Term of this
Agreement for any reason other than (a) the Executive's death, (b) the
Executive's Disability, (c) the Executive's Retirement, (d) the termination by
the Company of the Executive's employment for Cause, or (e) the termination by
the Executive of his employment other than for Good Reason, then not later than
the fifth business day following the Date of Termination, the Company shall
(subject only to any applicable payroll and other taxes required to be withheld)
pay or cause to be paid to the Executive a lump sum cash payment (the "Severance
Payment") equal to three times the greater of (i) the sum of the salary and cash
bonus payable to the Executive for the last full calendar year preceding the
Severance Payment or (ii) the sum of the Executive's annualized salary and the
maximum cash bonus the Executive could have earned for the then current calendar
year.
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(b) THREE YEARS OF LIFE INSURANCE AND HEALTH PLAN COVERAGE. The
coverage described in this subsection (b) shall be provided for a "Continuation
Period" beginning on the Date of Termination and ending on the earlier of (1)
the third anniversary of the Date of Termination or (2) the date of the
Executive's death. During the Continuation Period, the Executive (and, where
applicable, the Executive's dependents) shall be entitled to continue
participation in the group term life insurance plan and in the health care plan
for Executives maintained by the Company as if the Executive were still an
Executive of the Company. The coverage provided under this subsection (b) shall
run concurrently with and shall be offset against any continuation coverage
under Part 6 of Title I of the Employee Retirement Income Security Act of 1974,
as amended. Where applicable, the Executive's compensation for purposes of such
plans shall be deemed to be equal to the Executive's compensation (as defined in
such plans) in effect on the Date of Termination. To the extent that the Company
finds it undesirable to cover the Executive under the group life insurance and
health plans of the Company, the Company shall provide the Executive (at its own
expense) with the same level of coverage under individual policies.
(c) ACCELERATED VESTING. All stock and stock options held by the
Executive shall become fully vested on the effective date of the Change in
Control.
4. ADDITIONAL PAYMENTS.
(a) In the event that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), to the Executive or for his or her benefit paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise in connection with, or arising out of, his or her employment (a
"Payment" or "Payments"), would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive will be entitled to receive from the Company an additional payment
(a "Gross-Up Payment") in an amount such that after payment by the Executive of
all taxes (including any interest or penalties, other than interest and
penalties imposed by reason of the Executive's failure to file timely a tax
return or pay taxes shown due on his or her return), imposed with respect to
such Gross-Up Payment, including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this Agreement and the amount of such Gross-Up Payment
shall be made at the Company's expense by an accounting firm selected by the
Company and reasonably acceptable to the Executive which is designated as one of
the five largest accounting firms in the United States (the "Accounting Firm").
The Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation, to the Company
and the Executive within five days of the Date of Termination if applicable, or
such other time as requested by the Company or by the Executive (provided the
Executive reasonably believes that any of the Payments may be subject to the
Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable
by the Executive with respect to a Payment or Payments, it shall furnish the
Executive with an opinion reasonably acceptable to the Executive that no Excise
Tax will be imposed with respect to any such Payment or Payments. Within ten
days of the delivery of the Determination to the Executive, the Executive shall
have the right to dispute the Determination (the "Dispute"). The Gross-Up
Payment, if any, as determined pursuant to this Section 4(b) shall be paid by
the Company to the Executive within five days of the receipt of the
Determination. The existence of the Dispute shall not in any way affect the
Executive's right to receive the Gross-Up Payment in accordance with the
Determination. If there is no Dispute, the Determination shall be binding, final
and conclusive upon the Company and the Executive subject to the application of
Section 4(c) below.
(c) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a portion
thereof) will be paid which should not have been paid (an "Excess Payment") or a
Gross-Up Payment (or a portion thereof) which should have been paid will not
have been paid (an "Underpayment"). An Underpayment shall be deemed to have
occurred (i) upon notice (formal or informal) to the Executive from any
governmental taxing authority that the Executive's tax liability (whether in
respect of the Executive's current taxable year or in respect of any prior
taxable year) may be increased by reason of the imposition of the Excise Tax on
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a Payment or Payments with respect to which the Company has failed to make a
sufficient Gross-Up Payment, (ii) upon a determination by a court, (iii) by
reason of determination by the Company (which shall include the position taken
by the Company, together with its consolidated group, on its federal income tax
return) or (iv) upon the resolution of the Dispute to the Executive's
satisfaction. If an Underpayment occurs, the Executive shall promptly notify the
Company and the Company shall promptly, but in any event, at least five days
prior to the date on which the applicable government taxing authority has
requested payment, pay to the Executive an additional Gross-Up Payment equal to
the amount of the Underpayment plus any interest and penalties (other than
interest and penalties imposed by reason of the Executive's failure to file
timely a tax return or pay taxes shown due on the Executive's return) imposed on
the Underpayment. An Excess Payment shall be deemed to have occurred upon a
Final Determination (as hereinafter defined) that the Excise Tax shall not be
imposed upon a Payment or Payments (or portion thereof) with respect to which
the Executive had previously received a Gross-Up Payment. A Final Determination
shall be deemed to have occurred when the Executive has received from the
applicable government taxing authority a refund of taxes or other reduction in
the Executive's tax liability by reason of the Excise Payment and upon either
(x) the date a determination is made by, or an agreement is entered into with,
the applicable governmental taxing authority which finally and conclusively
binds the Executive and such taxing authority, or in the event that a claim is
brought before a court of competent jurisdiction, the date upon which a final
determination has been made by such court and either all appeals have been taken
and finally resolved or the time for all appeals has expired or (y) the statute
of limitations with respect to the Executive's applicable tax return has
expired. If an Excess Payment is determined to have been made, the amount of the
Excess Payment shall be treated as a loan by the Company to the Executive and
the Executive shall pay to the Company on demand (but not less than 10 days
after the determination of such Excess Payment and written notice has been
delivered to the Executive) the amount of the Excess Payment plus interest at an
annual rate equal to the Applicable Federal Rate provided for in Section 1274(d)
of the Code from the date the Gross-Up Payment (to which the Excess Payment
relates) was paid to the Executive until the date of repayment to the Company.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Determination, an Excise Tax will
be imposed on any Payment or Payments, the Company shall pay to the applicable
government taxing authorities as Excise Tax withholding, the amount of the
Excise Tax that the Company has actually withheld from the Payment or Payments.
5. NO MITIGATION; OBLIGATIONS ABSOLUTE; NO EFFECT ON OTHER RIGHTS
(a) The Executive shall not be required to mitigate the amount of
any payment provided for in Section 3 hereof by seeking other employment or
otherwise; nor shall the amount of any payment or benefits provided for in
Section 3 hereof be reduced by any compensation or benefits earned by the
Executive as the result of employment by another employer, or by retirement
benefits, after the effective date of termination of the Executive's employment
with the Company or otherwise.
(b) The obligations of the Company to make the payments to the
Executive, and to make the arrangements provided for herein shall be absolute
and unconditional and shall not be reduced by any circumstances, including
without limitation any setoff, counterclaim, recoupment, defense or other right
which the Company may have against the Executive or any third party at any time.
(c) The provisions of this Agreement, and any payment provided for
herein, shall not supersede or in any way limit the rights, benefits, duties or
obligations which the Executive may now or in the future have under any benefit,
incentive or other plan or arrangement of the Company or any other agreement
with the Company.
(d) Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.
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6. NOT AN EMPLOYMENT AGREEMENT. This Agreement is not, and nothing herein
shall be deemed to create, a contract of employment between the Executive and
the Company. The Company may terminate the employment of the Executive by the
Company at any time, subject to the terms of any employment agreement between
the Company and the Executive that may then be in effect.
7. TERM OF AGREEMENT. The term of this Agreement (the "Term") shall
commence on the date hereof and shall continue through the third following
December 31st; PROVIDED, HOWEVER, that commencing on the first December 31st
after the date hereof, and on each anniversary of such first December 31st (such
date and each anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Agreement shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at 60 days prior to the Renewal Date the Company shall give Notice to the
Executive that the Term will not be extended. Notwithstanding any such notice
not to extend the Term, if a Change in Control of the Company shall have
occurred during the original or extended Term of this Agreement, this Agreement
shall continue in effect for a period of not less than 36 months beyond the date
of such Change in Control of the Company.
8. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT
(a) This Agreement shall be binding upon and shall inure to the
benefit of the Company, its successors and assigns. Neither this Agreement nor
any right or interest hereunder shall be assignable or transferable by the
Company other than to a successor. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance reasonably satisfactory to the Executive, expressly,
absolutely and unconditionally to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean (i) the Company as hereinbefore defined, and (ii) any
successor to all or substantially all of the Company's business or assets which
executes and delivers an agreement provided for in this Section 8(a) or which
otherwise become bound by all the terms and provisions of this Agreement by
operation of law.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would be payable to the Executive hereunder if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee or other designee or, if there be no such designee,
to the Executive's estate. Neither this Agreement nor any right or interest
arising hereunder may be assigned or transferred by the Executive or his or her
heirs, beneficiaries or legal representatives. In the event of the Executive's
death or a judicial determination of his or her incompetence, reference in this
Agreement to the Executive shall be deemed, where appropriate, to refer to the
Executive's executor, heirs or other legal representative.
9. NOTICES. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed to (i) the respective addresses set forth in this Agreement,
provided that all notices to the Company shall be directed to the attention of
the Committee with a copy directed to the Secretary of the Company, or (ii) such
other address for a party as such party may have furnished to the other in
writing in accordance with this Section 9; except that notices of change of
address shall be effective only upon receipt.
10. CONFIDENTIALITY. The Executive shall retain in confidence any and all
confidential information concerning the Company or any of its Subsidiaries and
their respective businesses which is now or hereafter becomes known to the
Executive, except information (i) ascertainable or obtained from public
information, (ii) received by the Executive at any time after the Executive's
employment by the Company shall have terminated from a third party not employed
by or otherwise affiliated with the Company or under an obligation to the
Company to maintain the confidentiality of that information, or (iii) which is
or becomes known to the public by any means other than a breach of this Section
10.
8
<PAGE>
11. SUBSIDIARY. For purposes of this Agreement, "Subsidiary" shall mean
any corporation, partnership or other entity, at least 50% of the outstanding
voting power for the election of directors or other management is then owned,
directly or indirectly, by the Company or another Subsidiary of the Company.
12. MODIFICATION; WAIVER OR DISCHARGE. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in a writing signed by the Executive and the Company. No waiver by
either party at any time of any breach by the other party of, or of compliance
by the other party with, any condition or provision of this Agreement to be
performed or complied with by such other party shall be deemed a waiver of any
similar or dissimilar provision or condition of this Agreement or any other
breach of or failure to comply with the same condition or provision at the same
time or at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Florida without giving effect to its conflict of laws rules.
14. HEADINGS OF NO EFFECT. The Section headings contained in this
Agreement are included solely for convenience of reference and shall not in any
way affect the meaning or interpretation of any of the provisions of this
Agreement.
15. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (i) termination of the Executive's
employment after a Change in Control of the Company (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination of
employment), (ii) the Executive seeking to obtain or enforce any right or
benefit provided by (x) this Agreement (including, but not limited to, any such
fees and expenses incurred in connection with the dispute) or (y) any other plan
or arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits, and (iii) the Executive's hearing before the Board
as contemplated by the definition of Cause.
16. DISPUTE CONCERNING TERMINATION.
(a) If within 20 days after any Notice of Termination is given or,
if later, prior to the Date of Termination (as determined without regard to this
Section 16(a)), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally resolved, either
by mutual written agreement of the parties or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time of appeal therefrom has expired and no appeal has been
perfected); PROVIDED that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
(b) In the event of any dispute between the Company and the
Executive with respect to the subject matter of this Agreement and the
enforcement of rights hereunder, the Executive may, in his or her sole
discretion by notice to the Company, require such dispute or difference to be
submitted to arbitration. The arbitrator or arbitrators shall be selected by
agreement of the parties or, if they cannot agree on an arbitrator or
arbitrators within 30 days after the Executive has notified the Company of the
submission of the question for settlement by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration Association (the
"AAA") in San Jose, California, upon the application of the Executive. The
determination reached in such arbitration shall be final and binding on both
parties without any right of appeal or further dispute. Execution of the
determination by such arbitrator may be sought in any court of competent
jurisdiction. The arbitrators shall not be bound by judicial formalities and may
abstain from following the strict rules of evidence and shall interpret this
Agreement as an honorable engagement and not merely as a legal obligation.
Unless otherwise agreed by the parties, any such arbitration shall take place in
San Jose, California, and shall be conducted in accordance with the Rules of
AAA. The Company shall pay all costs of the arbitration.
9
<PAGE>
(c) If a purported termination occurs following a Change in Control
of the Company and during the Term of this Agreement, and such termination is
disputed in accordance with Section 16(a) , the Company shall continue to pay
the Executive the full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which the Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in accordance with Section
16(a). Amounts paid under this Section 16(c) are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.
17. SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party hereto
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
KNIGHT-RIDDER, INC.
By: /s/ P. ANTHONY RIDDER
------------------------------------
P. Anthony Ridder
Chairman and Chief Executive Officer
------------------------------------
[Name of Executive]
[Address]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000205520
<NAME> Knight-Ridder, Inc.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> DEC-27-1999
<PERIOD-END> MAR-26-2000
<EXCHANGE-RATE> 1
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<CURRENT-ASSETS> 540,927
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<TOTAL-ASSETS> 4,342,520
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<BONDS> 867,198 <F1>
0
1,374
<COMMON> 1,587
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<INCOME-TAX> 108,048
<INCOME-CONTINUING> 160,855
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<NET-INCOME> 160,855
<EPS-BASIC> 2.03
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<FN>
<F1> Bonds consist of total debt less commercial paper.
<F2> Cost of goods sold consists of newsprint, ink and supplements.
<F3> Other expenses consist of all other non-operating income and costs, net,
excluding income taxes. Amounts include interest expense, net of interest
income and other non-operating costs, net of non-operating income.
</FN>
</TABLE>
