<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-11(c) or 14a-12
Knight-Ridder, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[KNIGHT RIDDER LOGO]
50 West San Fernando Street
San Jose, CA 95113
Dear Shareholders:
It is my pleasure to invite you to Knight Ridder's Annual Meeting of
Shareholders.
We will hold the meeting on Tuesday, April 25, 2000, at 9:30 a.m. in the
Fairmont Hotel, 170 South Market Street, San Jose, California. The Fairmont is
immediately adjacent to our corporate headquarters. In addition to the formal
items of business, I will review the major developments of 1999 and answer your
questions.
This booklet includes the Notice of Annual Meeting and the Proxy Statement.
The Proxy Statement describes the business that we will conduct at the meeting
and provides information about Knight Ridder.
Your vote is important. Whether or not you plan to attend the meeting,
please complete, sign and return the enclosed proxy card in the envelope
provided. If you attend the meeting and prefer to vote in person, you may do so.
Again this year, we are offering telephone and Internet voting. If you have
access to a computer, the latter is an easy way to vote.
I look forward to seeing you at the Annual Meeting.
Sincerely,
By: /s/ TONY RIDDER
------------------------------------
Tony Ridder
Chairman of the Board
and Chief Executive Officer
March 23, 2000
<PAGE> 3
KNIGHT RIDDER
50 WEST SAN FERNANDO STREET
SAN JOSE, CA 95113
------------------------
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, APRIL 25, 2000
Dear Shareholders:
We will hold the 2000 Annual Meeting of Shareholders of Knight-Ridder, Inc.
at 9:30 a.m. (Pacific time) at the Fairmont Hotel, 170 South Market Street, San
Jose, California, on Tuesday, April 25, 2000. At this meeting, we will ask you
to:
- Elect three directors;
- Ratify the appointment of Ernst & Young LLP as independent auditors of
the Company for 2000;
- Approve the material terms of the Company's Annual Incentive Plan, as
amended, to preserve the tax deductibility of certain compensation paid
under the Plan;
and consider and vote upon:
- A shareholder proposal requesting that the Company prepare and distribute
a report regarding equal employment opportunity; and
- Any other business properly before the meeting.
The accompanying Proxy Statement contains additional information about the
matters to be considered at the Annual Meeting. Also enclosed is our 1999 Annual
Report, which includes the Company's financial statements.
You may vote at the Annual Meeting if you were a Knight Ridder shareholder
of record at the close of business on March 8, 2000.
We hope you will attend the meeting. However, if you cannot, we encourage
you to vote the enclosed proxy -- either by mail, or by telephone, or by
Internet -- as soon as possible. If later you decide to attend the meeting, you
can, if you wish, revoke the proxy and vote in person.
Please be assured that all proxies, ballots and votes will be kept
confidential except as necessary for the independent inspector of election to
tabulate the results.
By Order of the Board of Directors
By: /s/ POLK LAFFOON
------------------------------------
Polk Laffoon
Vice President/Corporate Relations
and Secretary
March 23, 2000
<PAGE> 4
[KNIGHT RIDDER LOGO]
50 West San Fernando Street
San Jose, CA 95113
PROXY STATEMENT OF KNIGHT RIDDER
2000 ANNUAL MEETING OF SHAREHOLDERS
INFORMATION ABOUT THE MEETING, VOTING AND PROXIES
WHY DID YOU SEND ME THIS PROXY STATEMENT?
We -- the Board of Directors of Knight Ridder -- sent you this Proxy
Statement and the enclosed proxy card because we are soliciting your proxy to
vote at the 2000 Annual Meeting of Shareholders to be held at 9:30 a.m. on
Tuesday, April 25, 2000 at the Fairmont Hotel, San Jose, California. Certain
officers, directors and other employees of the Company and D.F. King & Co. (a
proxy solicitor) may also solicit proxies on our behalf by mail, phone, fax or
in person.
This Proxy Statement summarizes the information you need to vote at the
Annual Meeting. You do not need to attend the meeting, however, to vote your
shares. You may either return the enclosed proxy card, or vote by telephone or
via the Internet.
We began mailing this Proxy Statement, along with the proxy card and Annual
Report, on March 23, 2000 to all shareholders of record as of March 8, 2000. On
that date, there were 79,042,708 shares of the Company's common stock and
1,374,100 shares of its Series B preferred stock outstanding. These are the
Company's only classes of voting stock.
WHO IS ENTITLED TO VOTE?
Shareholders at the close of business on March 8, 2000 (the record date).
Your proxy card shows the number of shares you had on that date. Each share of
the Company's common stock is entitled to one vote. Each share of the Company's
Series B Preferred Stock is entitled to two votes. The holders of the Company's
common stock and Series B Preferred Stock generally vote together as a single
class on all matters and will do so on all items specifically listed in the
Proxy Statement.
HOW DO I VOTE?
There are four methods. This year, you may vote in person, by telephone,
online via the Internet or by completing and mailing your proxy card.
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HOW DO I VOTE IN PERSON?
If you attend the Annual Meeting and vote in person, we will give you a
ballot when you arrive. If your shares are held in the name of your broker, bank
or other nominee, you must bring an account statement or letter from the
nominee. The account statement or letter must show that you were the beneficial
owner of the shares on March 8, 2000.
HOW DO I VOTE BY PROXY?
To vote by proxy, you should either:
- Complete, sign and date the enclosed proxy card and return it in the
prepaid envelope provided; or
- Call the toll-free telephone number on the proxy card and follow the
recorded instructions; or
- Access ChaseMellon's secure Web Site registration page through the
Internet at www.eproxy.com/kri as identified on the proxy card, and
follow the instructions.
Shares that are registered in your name may be voted by any of the three
methods described above. If your shares are held through your broker, bank or
other nominee, you may vote by telephone or Internet only if your broker, bank
or nominee offers that option. Although many offer telephone and Internet
voting, availability and specific procedures will depend on their particular
voting arrangements.
If you make specific choices and sign and return your proxy card, or timely
deliver your proxy by telephone or through the Internet, your shares will be
voted as you have directed. If you sign and return the proxy card but do not
make specific choices, the proxyholders will vote your shares as follows:
- "For" the election of the three nominees for director
- "For" the ratification of the appointment of Ernst & Young LLP as
independent auditors for 2000
- "For" approval of the material terms of the Annual Incentive Plan, as
amended, to preserve the tax deductibility of certain compensation paid
under the Plan
- "Against" the shareholder proposal requesting that the Company prepare
and distribute a report regarding equal employment opportunity
CAN I VOTE ON OTHER MATTERS?
The Company's by-laws limit the matters presented at our annual meeting to
(1) those in the notice of the meeting, (2) those that the Board of Directors
has properly caused to be presented and (3) those brought by a shareholder of
record entitled to vote at the meeting so long as the shareholder has notified
the Corporate Secretary in writing (at our principal office) not later than 120
days before the anniversary of the prior year's proxy statement. The notice must
briefly describe
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the business to be brought, the reasons and any material interest the
shareholder has in the business; give the shareholder's name and address; and
represent that the shareholder is a holder of record entitled to vote, or
intends to be a holder on the record date (giving the number of shares and
class) and intends to be at the meeting in person or by proxy to present the
business.
We do not expect any matters not listed in the Proxy Statement to come
before the meeting. If any other matter is presented, your signed proxy card
gives the individuals named as proxyholders the authority to vote your shares to
the extent authorized by Rule 14a-4(c) under the Securities Exchange Act of 1934
(the "Exchange Act").
IS MY VOTE CONFIDENTIAL?
Yes. Only the inspector of election, ChaseMellon Shareholder Services, will
have access to your card.
MAY I REVOKE MY PROXY?
Yes. You may change your mind after you send in your proxy card by
following any of these procedures. To revoke your proxy:
- Send in another signed proxy card with a later date; or
- Send a letter revoking your proxy to Knight Ridder's Corporate Secretary
at 50 West San Fernando Street, San Jose, CA 95113; or
- Attend the Annual Meeting and vote in person.
You may revoke your proxy if you have voted by telephone or online by
re-voting in the same manner. Only the last vote that you enter by telephone or
online will be counted. Alternatively, you may attend the Annual Meeting and
vote in person.
WHO COUNTS THE VOTES?
ChaseMellon Shareholder Services will tabulate the votes and act as
inspector of election.
WHAT DOES "BENEFICIAL OWNER" MEAN?
Under the Securities and Exchange Commission's definition, you are a
"beneficial owner" of shares if you have sole or shared voting or investment
power over the shares.
HOW DO EMPLOYEES WHO PARTICIPATE IN THE INVESTMENT SAVINGS 401(k) PLAN VOTE?
If you participate in Knight Ridder's Investment Savings 401(k) Plan, you
will receive a voting instruction card instead of a proxy card. This card will
indicate the number of shares credited to your account as of March 8, 2000.
- If you complete, sign and return the voting instruction card on time, the
plan trustee will vote the shares as you have directed.
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<PAGE> 7
- If you do not complete, sign and return the voting instruction card on
time, the plan trustee will vote the shares credited to your account in
the same proportion as those that have been voted by other plan
participants.
WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
Your shares are probably registered in more than one account. Sign and
return all proxy cards to ensure that all your shares are voted. Please have all
of your accounts registered in the same name and address. You may do this by
contacting the Company's transfer agent, ChaseMellon Shareholder Services
(1-800-982-7648).
WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
The nominees receiving the most votes are elected as directors. As a
result, if you withhold your authority to vote for any nominee, your vote will
not count for or against the nominee, nor will a broker "non-vote" affect the
outcome of the election.
Approval of all other proposals requires that the votes cast in favor
exceed the votes cast against. Abstentions and broker non-votes will not affect
the outcome of these proposals.
WHAT CONSTITUTES A QUORUM?
The holders of shares entitled to exercise a majority of the voting power
present in person or by proxy constitutes a quorum. Abstentions and broker
non-votes are included in determining whether a quorum exists.
WHO IS PAYING FOR THIS SOLICITATION?
The Company will pay for the solicitation of proxies, including D. F.
King's estimated fee of $10,000 plus out-of-pocket expenses. The Company also
will reimburse banks, brokers, custodians, nominees and fiduciaries for their
reasonable charges and expenses to forward our proxy materials to the beneficial
owners of the Company's stock.
HOW DO I OBTAIN A COPY OF THE PROXY STATEMENT, ANNUAL REPORT OR FORM 10-K
REPORT?
If you would like a printed copy, call the Corporate Secretary, Polk
Laffoon, at 408-938-7838, or his assistant, Lorraine Brenner, at 408-938-7857.
You can also leave a message on the Company's literature line at 408-938-7878.
In addition, the Company has posted these documents on the Company's Web site at
www.kri.com.
WHERE CAN I FIND VOTING RESULTS?
The Company will publish the voting results in its Form 10-Q for the second
quarter of 2000, which it will file with the Securities and Exchange Commission
in August 2000. You can also find the results on the Company's Web site at
www.kri.com.
HOW DO I NOMINATE A DIRECTOR OF KNIGHT RIDDER?
Any shareholder entitled to vote at an annual meeting may nominate
directors so long as the shareholder has notified the Corporate Secretary in
writing (at the Company's principal office) not later than 120 days before the
anniversary of the prior year's proxy statement. The notice must give
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the shareholder's name and address and those of the person(s) to be nominated;
represent that the shareholder is a holder of record entitled to vote, or
intends to be a holder on the record date (giving the number of shares and
class) and intends to be at the meeting in person or by proxy to make the
nomination(s); describe any arrangements between the shareholder, the nominee(s)
and any other person(s) (naming the person(s)) pursuant to which the nomination
is made; provide any other information about the nominee(s) that must be
disclosed in proxy solicitations under the Exchange Act; and include the consent
of each nominee to serve as a director if elected.
WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING DUE?
To be considered for inclusion in the proxy statement for the 2001 Annual
Meeting, a shareholder proposal must be received at the Company's principal
office no later than November 24, 2000. As described above, the Company's
by-laws would require the Corporate Secretary to receive notice of all proposals
by this date, whether or not they are included in the proxy statement. In the
unlikely event any proposal received after this date was presented to the annual
meeting, the proxyholders would be able to exercise discretionary authority to
vote your shares only to the extent authorized by Rule 14a-4(c) under the
Exchange Act on the proposal.
WHOM SHOULD I CALL IF I HAVE ANY QUESTIONS?
Call the Corporate Secretary, Polk Laffoon, at 408-938-7838.
If you have questions specific to your ownership of Knight Ridder stock,
call Sharon Orlando, Manager of Shareholder Services and Corporate Records, at
408-938-7713.
INFORMATION ABOUT KNIGHT RIDDER STOCK OWNERSHIP
This table shows all persons we know to be the beneficial owners of more
than 5% of the Company's common stock as of March 1, 2000.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNERS OF COMMON STOCK OWNED CLASS
----------------------------------------------------- ------------ ----------
<S> <C> <C>
Southeastern Asset Management, Inc.......................... 9,594,594(1) 11.4%
6410 Poplar Avenue, #900
Memphis, TN 38119
Capital Research and Management Company..................... 7,850,800(2) 9.4%
333 South Hope Street
Los Angeles, CA 90071
Harris Associates L.P. ..................................... 4,610,878(3) 5.69%
Two North LaSalle Street, #500
Chicago, IL 60602
</TABLE>
- ---------------
(1) According to a Schedule 13G dated February 4, 2000, Southeastern Asset
Management, Inc., a registered investment adviser, has sole voting power
over 5,225,994 shares, shared voting power over 3,134,300 shares, sole
dispositive power over 6,434,594 shares, and shared dispositive power over
3,134,300 shares.
(2) According to a Schedule 13G dated February 10, 2000, Capital Research and
Management Company, a registered investment adviser, has no voting power but
has sole dispositive power over all shares.
(3) According to a Schedule 13G dated January 10, 2000, Harris Associates L.P.,
a registered investment adviser, has shared voting power over 4,610,878
shares, sole dispositive power over 2,105,478 shares and shared dispositive
power over 2,505,400 shares.
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<PAGE> 9
We also know that as of March 1, 2000, The Walt Disney Company, located at
500 South Buena Vista Street, Burbank, CA 91525, beneficially owned 1,374,100
shares (100%) of the Company's Series B Preferred Stock.
If any shares of Series B Preferred Stock are transferred to any person
other than The Walt Disney Company or any of its affiliates, each share
automatically converts into 10 shares of common stock, subject to adjustment.
Knight Ridder can cause the conversion of shares of Series B Preferred Stock.
There are restrictions on the transfer of these shares.
ITEM 1: ELECTION OF DIRECTORS
HOW IS THE BOARD STRUCTURED?
The Company's Board of Directors is divided into three classes serving
staggered three-year terms. Three directors are to be elected at the 2000 Annual
Meeting, to hold office until the 2003 Annual Meeting of Shareholders.
WHO IS NOMINATED TO STAND FOR ELECTION?
The individuals nominated by the Board of Directors to stand for election
at the 2000 Annual Meeting for three-year terms are Barbara Barnes Hauptfuhrer,
M. Kenneth Oshman and John L. Weinberg. Alvah H. Chapman, Jr., whose term
expires at the 2000 Annual Meeting, is not standing for re-election. Immediately
prior to the Annual Meeting, the size of the Board will be reduced from the
current 11 directors to 10. Accordingly, proxyholders cannot vote for more than
three nominees.
The other seven directors who were elected at prior annual meetings will
continue to serve for their respective terms.
HOW WILL PROXIES BE VOTED?
Proxies will be voted for the election of the three nominees of the Board
of Directors unless instructions are given on the proxy to withhold authority to
vote for one or more of the nominees.
Although it is not contemplated that any nominee will decline or be unable
to serve, the shares will be voted by the proxyholders in their discretion for
another person should that occur.
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<PAGE> 10
NOMINEES FOR ELECTION FOR THREE-YEAR TERMS ENDING 2003
<TABLE>
<S> <C>
BARBARA BARNES HAUPTFUHRER, age 71 Director
since 1979
[Photo] Director of Various Public Companies
Director of The Great Atlantic & Pacific Tea Co.,
Massachusetts Mutual Life Insurance Company, IKON Office
Solutions, Inc. Director Emerita, Raytheon Company. Former
director, The Vanguard Group of Investment Companies.
Trustee Emerita of Wellesley College. Past director of the
Ladies Professional Golf Association. B.A., Wellesley
College.
M. KENNETH OSHMAN, age 59 Director
since 1996
[Photo] President, Chairman and Chief Executive Officer
Echelon Corporation
President, Chairman and Chief Executive Office of Echelon
Corporation, a developer of control network technology and
products, since 1989. Co-founded Rolm Corporation in 1969;
served as Chief Executive Officer, President and Director
until Rolm's merger with IBM in 1984. Vice president of IBM
from 1984 to 1986. Director of Sun Microsystems. B.A. and
B.S., Rice University; M.S. and Ph.D., Stanford University.
JOHN L. WEINBERG, age 75 Director
since 1969
Director
[Photo] The Goldman Sachs Group, Inc.
Director of The Goldman Sachs Group, Inc. since 1999; Senior
Chairman and Limited Partner of Goldman, Sachs & Co. from
1990 to 1999; Senior Partner and Chairman of the Management
Committee of The Goldman Sachs Group, L.P. and its principal
affiliate, Goldman, Sachs & Co. until 1990; Investment
banker with Goldman, Sachs & Co. since 1950. Director of
Providian Financial Corporation and Tricon Global
Restaurants. Member of The Business Council. B.A., Princeton
University; M.B.A., Harvard University.
</TABLE>
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<PAGE> 11
DIRECTORS CONTINUING IN OFFICE UNTIL 2002
<TABLE>
<S> <C>
JAMES I. CASH, JR., age 52 Director
since 1995
[Photo] James E. Robison Professor of Business Administration
Harvard University, Graduate School of Business
Administration
Member of the Harvard Business School faculty since 1976.
Trustee of Massachusetts General Hospital and Partners
Healthcare, Inc. Director of Cambridge Technology Partners,
Chubb Corporation, General Electric Company, State Street
Bank and Trust and WinStar Communications, Inc. B.S., Texas
Christian University; M.S. and Ph.D., Purdue University.
P. ANTHONY RIDDER, age 59 Director
since 1987
Chairman of the Board and Chief Executive Officer
Knight Ridder
[Photo] Chief Executive Officer and Chairman of Knight Ridder since
1995; President of the Company from 1989 to 1995; President
of the Newspaper Division of the Company from 1986 to 1989.
Joined the San Jose Mercury News in 1964; served as General
Manager until 1977 and Publisher from 1977 to 1986.
Previously held various editorial and business positions at
several Company newspapers. Director of the Seattle Times
Company, Associated Press, Newspaper Association of America.
Member of the Board of Trustees of the University of Santa
Clara, and Advisory Board of the Stanford Institute for
Economic Policy Research. B.A., University of Michigan.
RANDALL L. TOBIAS, age 58 Director
since 1994
Chairman Emeritus
Eli Lilly and Company
[Photo] Chairman Emeritus of Eli Lilly and Company, a pharmaceutical
research and manufacturing company; Chairman and Chief
Executive Officer of Eli Lilly and Company from 1993 to
1999. Vice Chairman of the Board of AT&T from 1986 to 1993.
Director of Phillips Petroleum, Inc., Kimberly-Clark
Corporation, Agilent Technologies, Inc. and RealMed,
Incorporated. Member of the Business Council. Chairman of
the Board of Trustees of Duke University. Trustee of the
Colonial Williamsburg Foundation. B.S., Indiana University.
</TABLE>
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<PAGE> 12
DIRECTORS CONTINUING IN OFFICE UNTIL 2001
<TABLE>
<S> <C>
JOAN RIDDER CHALLINOR, age 73 Director
since 1989
[Photo] Director of Various Educational Organizations
Presidential appointee to the U.S. National Commission on
Libraries and Information Science. Board member of
educational organizations, including the French-American
Foundation and the Schlesinger Library on the History of
Women at the Radcliffe Institute for Advanced Study
(chairperson). Member of the Editorial Advisory Committee of
the Adams Papers. B.A., M.A. and Ph.D., The American
University, Washington, D.C.
KATHLEEN FOLEY FELDSTEIN, age 59 Director
since 1998
[Photo] President Economics Studies, Inc.
President of Economics Studies, Inc., a private consulting
firm, since 1987. Director of Bank of America Corporation,
Bell South Corporation, Ionics Corporation and John Hancock
Financial Services, Inc. Trustee of the Committee for
Economic Development, the Museum of Fine Arts, Boston and
McLean Hospital. B.A., Radcliffe College; Ph.D.,
Massachusetts Institute of Technology.
THOMAS P. GERRITY, age 58 Director
since 1998
Reliance Professor of Management and
[Photo] Director, Wharton Forum on Electronic Commerce, The Wharton
School
Professor of Management at the Wharton School of the
University of Pennsylvania since 1990; Dean of the Wharton
School from 1990 to 1999. Director of CVS Corporation,
Fannie Mae, Reliance Group Holdings, Inc., Sunoco, Internet
Capital Group, Inc. and ICG-Commerce, Inc. Trustee of MAS
Funds. B.S., M.S., and Ph.D., Massachusetts Institute of
Technology. Rhodes Scholar, Oxford University.
GONZALO F. VALDES-FAULI, age 53 Director
since 1992
[Photo] Chief Executive Officer, Latin America
Barclays Group
Since 1988, Chief Executive Officer, Latin America of
Barclays Group, an international bank. International banker
with Barclays Bank since 1980; Member of the Management
Committee, Barclays Capital. Trustee of the University of
Miami. Director of Blue Cross/Blue Shield of Florida. B.S.,
Spring Hill College; M.A., Thunderbird Graduate School for
International Management.
</TABLE>
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<PAGE> 13
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
This table shows the number of shares of the Company's common stock
beneficially owned as of March 1, 2000 by each director and nominee, each
executive officer named in the Summary Compensation Table, and by all directors
and officers as a group. None of these persons beneficially owned more than 1%
of the Company's common stock. All directors and officers of the Company as a
group owned 5% of the Company's common stock. Except as noted, each person has
sole voting and investment power over the shares shown in the table.
<TABLE>
<CAPTION>
SHARES OTHER THAN SHARES SUBJECT TOTAL NUMBER OF SHARES
NAME OPTION SHARES TO OPTIONS(1) BENEFICIALLY OWNED(1)
---- ----------------- -------------- ----------------------
<S> <C> <C> <C>
James I. Cash............................................. 1,464 2,000 3,464
Joan Ridder Challinor..................................... 85,424 2,000 87,424(2)
Alvah H. Chapman, Jr...................................... 219,449 2,000 221,449(3)
Mary Jean Connors......................................... 26,963 173,200 200,163(3)
Kathleen Foley Feldstein.................................. 914 667 1,581
Thomas P. Gerrity......................................... 1,566 667 2,233
Barbara B. Hauptfuhrer.................................... 2,966 2,000 4,966
Ross Jones................................................ 20,566 113,000 133,566
Frank McComas............................................. 34,829 94,999 129,828(3)
M. Kenneth Oshman......................................... 31,132 2,000 33,132(4)
P. Anthony Ridder......................................... 167,635 376,000 543,635(3)
Steven B. Rossi........................................... 13,926 41,000 54,926(3)
Randall L. Tobias......................................... 7,566 2,000 9,566
Gonzalo F. Valdes-Fauli................................... 2,066 2,000 4,066
John L. Weinberg.......................................... 29,132 2,000 31,132
All directors and officers as a group (27 persons
including those named above)............................ 2,409,447 1,154,837 3,564,284(5)
</TABLE>
- ---------------
(1) Shares that officers and directors could acquire by exercising options
within 60 days of March 1, 2000.
(2) Does not include 90,000 shares owned by a trust in which Mrs. Challinor has
an income interest; she has neither the power to vote these shares nor the
power to direct their disposition and she disclaims beneficial ownership of
them.
(3) Includes shares owned by, or jointly held with, spouses as follows: Mr.
Chapman, 15,364 shares owned jointly with Mrs. Chapman; Ms. Connors, 2,835
shares owned by Geoffrey Tomb, her spouse; Mr. McComas, 2,210 shares owned
jointly with Mrs. McComas; Mr. Ridder, 2,801 shares owned by Mrs. Ridder,
898 shares owned jointly with Mrs. Ridder, and 4,940 shares owned by a trust
of which Mrs. Ridder is the trustee; Mr. Rossi, 4,383 shares owned jointly
with Mrs. Rossi. Ms. Connors and Mr. Ridder disclaim beneficial ownership of
the shares owned by their respective spouses, and Mrs. Ridder disclaims
beneficial ownership of the shares owned by the trust. Messrs. Chapman,
McComas and Ridder share voting and investment power with their respective
spouses as to those shares owned jointly.
(4) Includes 30,000 shares owned by a partnership in which Mr. Oshman has a 97%
income interest. Mr. Oshman has the power to vote those shares and the power
to direct their disposition and he claims beneficial ownership as to 97% of
the shares.
(5) Includes 1,708,682 shares held by the John S. and James L. Knight Foundation
as to which Mr. Chapman shares voting and investment power and disclaims
beneficial ownership.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Exchange Act requires that the Company's directors and officers file
reports of ownership and changes in ownership of the Company's equity securities
with the Securities and Exchange Commission and the New York Stock Exchange and
furnish the Company with copies of such reports. Based on its review of these
copies, the Company believes that during 1999 all directors and officers filed
on a timely basis all reports required of them, except that P. Anthony Ridder,
Chairman and Chief Executive Officer of the Company; Joan R. Challinor, a
director of the Company; Martha Claus, a Vice President of the Company; and
Marshall Anstandig, a Vice President of the Company, each filed one late report
with respect to one transaction.
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<PAGE> 14
BOARD COMMITTEES AND ATTENDANCE
The Board currently has four active standing committees: Nominating,
Compensation and Corporate Governance, Audit and Environmental Affairs.
The Nominating Committee reviews the composition of the Board and
recommends changes in its membership as needed. The committee members are
Barbara B. Hauptfuhrer, Chairman, Joan Ridder Challinor, Alvah H. Chapman, Jr.,
Thomas P. Gerrity, and M. Kenneth Oshman. The committee met once in 1999.
The Compensation and Corporate Governance Committee administers the
Company's incentive compensation plans and its stock option plans, including the
review and grant of stock options to all eligible employees and directors. In
addition, the committee reviews and approves the salary, bonus and other
benefits of the senior executive officers of the Company. The committee also
reviews and reports to the Board on matters of corporate governance, i.e., the
relationships of the Board, the shareholders and management in determining the
direction and performance of the Company. The committee members are Randall L.
Tobias, Chairman, James I. Cash, Jr., Barbara B. Hauptfuhrer, M. Kenneth Oshman
and John L. Weinberg. The committee met four times in 1999.
The Audit Committee reviews the activities of the internal audit staff, the
independent auditors' report and the qualifications, performance and
independence of the independent auditors, and makes recommendations to the Board
on those matters. Both the internal and the independent auditors have free
access to the committee and, from time to time, the committee directs them to
carry out special assignments. The members of the committee are Gonzalo F.
Valdes-Fauli, Chairman, Joan Ridder Challinor, Alvah H. Chapman, Jr. and
Kathleen Foley Feldstein. The committee met twice in 1999.
The Environmental Affairs Committee oversees the policies of the Company
designed to carry out the Company's commitment to preserving the natural
environment of the communities it serves and the safety of its workplaces. The
committee members are James I. Cash, Jr., Chairman, Thomas P. Gerrity, P.
Anthony Ridder and Randall L. Tobias. The committee met once in 1999.
In 1999, the Board of Directors met four times. Each of the nominees for
election at the Annual Meeting and each of the continuing directors attended at
least 75% of the meetings of the Board and of the committees of the Board on
which he or she served.
HOW THE COMPANY COMPENSATES DIRECTORS
Annual Cash Fee
Directors of the Company who are not employees of the Company receive an
annual retainer of $30,000. Half of this retainer is paid in the Company's
common stock, and a director may choose to receive the balance in the Company's
common stock as well.
Meeting Fees
Non-employee directors receive a fee of:
- $1,500 for each Board meeting and meeting of shareholders
11
<PAGE> 15
- $1,000 for each committee meeting.
Fee for Chairing a Committee
Each non-employee director who chairs a committee receives an annual fee of
$5,000.
Annual Stock Option Awards
Every December, each non-employee director is granted an option to purchase
2,000 shares of the Company's common stock.
The Deferred Compensation Plan
Directors are eligible to enter into individual agreements to defer with
interest all or a portion of the fees payable to them until such later dates as
may be provided in the agreements.
Expenses
The Company reimburses directors for travel and other expenses incurred in
attending meetings.
Other Benefits
Directors who have never been employed by the Company and who were age 65
or older on July 1, 1996 are eligible to receive an annual lifetime benefit
commencing upon retirement from the Board with at least five years of service
(or, if disabled, following at least two years of service). The benefit ranges
from 50% of the annual retainer for directors who retire after five years of
service to 100% of the retainer for directors who retire with 10 or more years
of service.
Directors who have never been employed by the Company and were under age 65
on July 1, 1996 participate in a program under which they are credited with 600
phantom shares of the Company's common stock annually. Their phantom share
accounts are credited with dividend equivalents and the accounts are paid in
cash in a lump sum upon termination of Board service.
Special Arrangements
Alvah H. Chapman, Jr., a director and former chief executive officer of the
Company, has a retirement agreement which provides for payment of an annual
benefit of $79,900 for life and a death benefit payable to his surviving spouse.
This is in addition to benefits payable under the Company's retirement program
and to fees paid to Mr. Chapman for service as a director.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, Knight Ridder and its subsidiaries engage in
transactions with companies where one of the Company's executive officers or
directors or a member of his or her immediate family has a direct or indirect
interest. All of these transactions, including those described below, are in the
ordinary course of business and at competitive rates and prices.
Peter B. Ridder, President and Publisher of The Charlotte Observer, is a
brother of P. Anthony Ridder. Par Ridder, Vice President/Advertising Director of
the San Luis Obispo Tribune, is the son
12
<PAGE> 16
of P. Anthony Ridder. Alvah H. Chapman, Jr.'s son-in-law, Robert L. Hilton, is
Circulation Marketing Manager of The Wichita Eagle. Geoffrey Tomb, Mary Jean
Connors' husband, is a general assignment reporter for the San Jose Mercury
News. In 1999, the Company paid Peter B. Ridder, Par Ridder, Robert L. Hilton,
and Geoffrey Tomb aggregate compensation of $544,978; $82,747; $116,143; and
$82,937, respectively.
John L. Weinberg is a director of The Goldman Sachs Group, Inc. and former
Senior Chairman of Goldman, Sachs & Co., an investment banking firm that
regularly performs services for the Company such as acting as a financial
advisor and serving as principal or agent for the Company in the purchase and
sale of securities and the acquisition or sale of certain properties of the
Company. In the future, Goldman, Sachs & Co. may be called upon to provide
similar or other services for the Company.
ITEM 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
We have appointed Ernst & Young LLP, Independent Certified Public
Accountants, to examine the books and accounts of the Company for the year 2000,
and we are asking shareholders to ratify our selection. Ernst & Young LLP has
served as the Company's independent auditors since 1951.
Representatives of Ernst & Young LLP will be present at the meeting and
will have the opportunity to make a statement if they desire to do so. They will
be available to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP.
ITEM 3: APPROVAL OF THE MATERIAL TERMS OF THE ANNUAL INCENTIVE PLAN, AS
AMENDED, TO PRESERVE THE TAX DEDUCTIBILITY OF CERTAIN COMPENSATION PAID UNDER
THE PLAN
WHAT IS THE ANNUAL INCENTIVE PLAN?
The Knight Ridder Annual Incentive Plan (the "Plan") is intended to
motivate and reward corporate executives and top management at individual
operating units who contribute significantly to the Company's success. The Plan
provides for the grant by the Compensation and Corporate Governance Committee of
annual cash awards to key Company executives and top management at individual
operating units that are conditioned upon the Company's (and/or operating
unit's) performance. At the Annual Meeting, we are asking shareholders to
approve the material terms of the Plan, as amended, to ensure that the cash
awards are fully deductible under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code").
WHY ARE WE MAKING THIS PROPOSAL?
The Board's general compensation philosophy is to make a greater percentage
of each executive's annual compensation contingent on Company performance. The
Compensation and Corporate Governance Committee views this as beneficial for
shareholders, as it more closely aligns the interests of executives with the
interests of shareholders. The amendments enable the Company, with shareholder
approval, to ensure that cash awards under the Plan that are paid to "covered
employees" within the meaning of Section 162(m) of the Code (i.e., the chief
executive officer and
13
<PAGE> 17
the four other most highly compensated executives of the Company) are fully
deductible. The amendments do not increase target awards under the Plan or
obligate the Compensation and Corporate Governance Committee to do so.
WHAT ARE THE AMENDMENTS?
The amendments to the Plan establish a maximum award of $2,500,000 payable
for a plan year to an individual participant effective January 1, 2000. The
amendments also provide that with respect to covered employees (i) the
Compensation and Corporate Governance Committee's performance goals must be
objective and quantifiable, (ii) the performance goals and targets under the
performance goals must be established within the time periods required under
Section 162(m) of the Code, (iii) the Compensation and Corporate Governance
Committee has discretion to decrease (but not increase) awards, and (iv) the
Compensation and Corporate Governance Committee must certify in writing that the
performance goals have been satisfied before making any payments to covered
employees.
WHAT ARE THE OTHER MATERIAL TERMS OF THE PLAN?
As amended, the Plan, which is administered by the Compensation and
Corporate Governance Committee, provides for the annual grant of cash awards to
participants selected by the Compensation and Corporate Governance Committee.
Those eligible to participate include key Company executives, top management of
business units and newspaper publishers. Approximately 390 individuals are
currently eligible to participate in fiscal year 2000. Each Plan participant's
award is based upon accomplishment of established financial and non-financial
performance goals for the Company and/or operating units during a calendar year.
Unless otherwise determined by the Compensation and Corporate Governance
Committee, the financial performance measure for corporate participants is based
upon shareholder value added ("SVA") which is the increase in the Company's net
operating profit after tax minus capital charge relative to budgeted SVA; the
financial performance measure for business unit participants is based upon the
business unit's SVA versus budgeted SVA. The non-financial performance measure
is based upon major elements of the Company's or the operating unit's
strategies. The nonfinancial performance goals may include: advertising share,
customer relations, product and service development, news and information
content, enhancing national and local brand identity and technology development.
The Compensation and Corporate Governance Committee has the authority to alter,
amend or discontinue the Plan at any time without shareholder approval, except
as may be required by applicable law.
HOW DO PAYMENTS WORK?
Each participant's potential annual cash award is a specified target
percentage of his or her salary. The target percentage generally varies by
salary, ranging from 25% to 50%, except for the Chief Executive Officer, whose
target is currently 70%. The actual amount awarded depends on the degree of
attainment of the performance goals. An award may be paid based on the
achievement of one type of measure even if no award was earned for another type
of measure, provided a corporate performance threshold (generally operating
income equal to at least 80% of prior year operating income) must be achieved
for any payment to be made. Participants may elect to defer all or a portion of
their awards to a later year.
14
<PAGE> 18
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN?
If the shareholders approve the material terms of the Plan, as amended, the
Company can deduct the amount of income recognized by a covered employee from
its federal income tax. However, if the amendments are not approved by
shareholders, awards may not be paid to covered employees under the Plan and the
future deductibility by the Company of other bonuses to covered employees may be
limited by Section 162(m) of the Code. The amendments do not alter the tax
consequences of the cash awards to recipients.
NEW PLAN BENEFITS
The following table shows the benefits that would have been received by the
individuals listed below if the Plan, as amended, had been in effect in 1999.
ANNUAL INCENTIVE PLAN AWARDS
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION BONUS($)(1)
--------------------------- -----------
<S> <C>
P. Anthony Ridder 804,169
Chairman and Chief Executive Officer
Frank McComas 366,244
Senior Vice President/Operations
Ross Jones 364,846
Senior Vice President/Finance and
Chief Financial Officer
Mary Jean Connors 313,823
Senior Vice President/Human Resources
Steven B. Rossi 310,468
Senior Vice President/Operations
All Executive Officers as a Group 4,123,042
All Non-Executive Directors as a Group(2) 0
All Non-Executive Officers as a Group 448,964
</TABLE>
- ---------------
(1) The amounts shown under the Plan, as amended, are the same as the amounts
the individuals listed above actually received.
(2) Non-employees are not eligible to participate in the Annual Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
TO APPROVE THE MATERIAL TERMS OF THE ANNUAL INCENTIVE PLAN AS AMENDED.
ITEM 4: SHAREHOLDER PROPOSAL
Sisters of Mercy Regional Community of Detroit, 34605 Twelve Mile Road,
Farmington Hills, Michigan 48331, owner of 900 shares of the Company's common
stock, has informed the Company that it intends to present the following
resolution at the Annual Meeting and has submitted the following supporting
statement of its reasons:
RESOLVED: The Company prepare at reasonable cost a report, omitting where
appropriate confidential information, that includes the following:
1. A report shall include the EEO-1 report in the standard federal
government categories according to their gender and races in each of
the nine major EEOC defined job categories for the previous three
years.
2. A description of how the company is working to increase its business
with female and minority suppliers and service providers.
15
<PAGE> 19
3. Report any federal audit, Corporate Management Review, and Letter of
Compliance with corrective measures enacted to protect the company's
government contracts and legal penalties.
SUPPORTING STATEMENT: Equal Employment Opportunity is a key issue for many
shareholders. The 1995 bipartisan Glass Ceiling Commission study explains
that a positive diversity record has a positive impact on the bottom line.
While women and minorities comprise 57 percent of the U.S. workforce the
Commission found that they represent only 3 percent of executive management
positions. By far the most vulnerable and most excluded from corporate
diversity initiatives are American Indians.
Corporations have discontinued discriminating images and names like Black
Sambo and Frito Bandito while similar discriminatory images and names
against American Indians, like "redskin" and "chief wahoo," remain in use.
"Redskins" originated from 1800s businessmen who coined the term from their
dealing with animal skins (deerskin and bearskin) and "red" from the dried
blood of the scalps of Indian men, women and children. Businesses used
actual heads of Indian men, women and children or images and names to
attract their customers.
Every major American Indian organization including the National Congress of
American Indians, National Indian Education Association and Society of
American Indian Psychiatrists has called for an end to American Indian
negative images/names.
Workplace discrimination has created a significant burden for shareholders
because of the high cost of litigation, potential loss of government
contracts, and the financial consequences of a damaged corporate image
resulting from discrimination complaints. For example:
(a) In 1996 Texaco settled the largest racial discrimination lawsuit in
U.S. history, costing a reported $170 million to the company and
stockholders. Texaco's public image was tarnished and the company faced
a consumer boycott.
(b) In 1997 Denny's reported it was still trying to win back its minority
customers, dating back to the 1992 discrimination complaints against
Denny's.
(c) A U.S. Patent and Trademark lawsuit by American Indians resulted in the
Washington football team losing nine corporate patents because of the
offensive name and images.
(d) Chicago area American Indian firemen won a 1998 discrimination case
because six supervisors failed to stop offensive negative names and
images about American Indians in the workplace.
(e) The Los Angeles School district, largest in the country, banned
derogatory consumer products, names and images of American Indians from
the school system.
We believe negative images and names of American Indians are contrary to
corporate business interests and create a negative social, educational and
working environment for Indian and non-Indian people.
16
<PAGE> 20
MANAGEMENT'S RESPONSE
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE
SHAREHOLDER PROPOSAL.
A significant commitment to diversity is one of the Company's core values
and an increasingly important element of its future success. The Company's
longstanding commitment to increasing the role of women and minorities in its
businesses is described in The Knight Ridder Promise, which calls upon the
Company to "reflect the diversity of the audiences we serve, including
viewpoints and cultures, in our content and in our work forces." This commitment
is demonstrated by a solid track record of recruiting, hiring, training,
developing and advancing women and minorities, and has enabled the Company to
achieve widespread diversity throughout its work force.
Knight Ridder's commitment to diversity extends to complying with all
applicable federal and state equal employment opportunity laws. It is the
Company's policy to provide equal employment opportunity without regard to race,
color, religion, gender, marital status, national origin, age, disability or
sexual orientation. The Company and its operations strive to maintain a
workplace free of discrimination and to develop and support a diverse work
force. The Company is proud of the progress it has made in developing a diverse
work force and is committed to continuing those efforts.
To attract and retain the best and the brightest talent, including women
and minorities, Knight Ridder supports a variety of recruiting, hiring, training
and development policies, programs and corporate initiatives. These include
diversity training for all employees, a minority hiring program which helps the
Company's businesses fund scholarships, internships and strategic positions, and
a supplier diversity policy and program to provide minority and women-owned
businesses with a fair opportunity to participate in the Company's supply chain.
In addition, the Company recently instituted a goal for itself and its
businesses to improve the diversity of its executive teams by increasing the
total number of women and minority executives by at least one percentage point
in the year 2000.
The Company and its newspapers and other operations have received national
recognition for their commitment to diversity in the workplace. In July 1999,
Fortune Magazine ranked Knight Ridder 21st on its list of the 50 Best Companies
for Asians, Blacks and Hispanics. In 1998 and 1999, Working Woman magazine
recognized Knight Ridder as one of the "best companies" for working women. The
Company received a similar recognition from Latina Style magazine in 1998, and
in 1996 the Company received the Catalyst Award for its initiatives to advance
women in the workplace.
As part of its equal employment opportunity compliance program, the Company
submits annual detailed reports on the Company's employment practices and the
racial and gender composition of the workforces of the Company and its
operations as required by applicable federal and state laws. These reports
require substantial time, effort and expense to produce. The production and
distribution of those reports as well as the additional reports requested in the
shareholder proposal would be administratively burdensome to the Company and
would create additional costs to the Company.
In view of Knight Ridder's demonstrated commitment to equal opportunity and
diversity in its work force and relationships with vendors and suppliers, as
well as its annual submission of detailed reports on compliance with federal and
state equal employment opportunity laws, we believe that
17
<PAGE> 21
adopting the shareholder proposal is not necessary to enhance Knight Ridder's
strong commitment to equal employment opportunity. Instead, adopting the
shareholder proposal would be redundant to the Company's considerable efforts in
this area, impose an administrative burden on the Company, create additional
costs, and would not serve to advance the goal of providing equal employment
opportunity in the workplace.
FOR THESE REASONS, THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE
SHAREHOLDER PROPOSAL.
HOW THE COMPANY COMPENSATES EXECUTIVE OFFICERS
REPORT ON EXECUTIVE COMPENSATION
BY THE COMPENSATION AND CORPORATE GOVERNANCE COMMITTEE
The Compensation and Corporate Governance Committee of the Board
administers the Company's executive compensation program. The members of the
Committee are independent, non-employee directors. The Compensation and
Corporate Governance Committee has furnished the following report on executive
compensation for 1999:
WHAT IS OUR EXECUTIVE COMPENSATION PHILOSOPHY?
We firmly believe that the interests of the Company and its employees are
inseparable. In support of that principle, the Compensation and Corporate
Governance Committee has designed the Company's executive compensation program
to support what we believe to be an appropriate relationship between executive
pay and the creation of shareholder value. To promote Company performance, we
link a significant portion of executive compensation to the Company's operating
results. The objectives of our program are:
- To align the interests of executives with the long-term interests of
shareholders through awards whose value over time depends upon the
performance of the Company's common stock;
- To provide compensation comparable to that offered by other companies in
our industry, enabling the Company to attract, retain and motivate
talented executives who are critical to the Company's long-term success;
- To motivate key executives to achieve strategic business initiatives and
to reward them for their achievement; and
- To set guidelines for substantial stock ownership by executives.
WHAT ARE THE ELEMENTS OF EXECUTIVE COMPENSATION?
We compensate our executives through base salary, bonus paid in cash and
long-term incentive awards under the Employee Stock Option Plan and the
Long-Term Incentive Plan. In this way, a significant portion of the value
ultimately realized by the executives will depend upon the Company's performance
and can be considered "at risk."
Our executives participate in a retirement plan, health plan, savings
incentive (401(k)) plan and other voluntary benefit plans that we make available
to all employees generally. Among these are relocation benefits, such as
temporary living expenses. One-time relocation bonuses are
18
<PAGE> 22
sometimes provided to employees to assist with miscellaneous moving expenses and
help compensate for housing differentials, as was the case with the relocation
benefits provided to employees who moved as part of the relocation of Knight
Ridder's corporate offices from Miami to San Jose in 1998. We also provide our
executives with a voluntary deferred compensation arrangement, which is similar
to those typically offered to executives by the companies with which we compete
for talent.
HOW DID WE DETERMINE BASE SALARIES FOR 1999?
In General
The Compensation and Corporate Governance Committee establishes senior
executive salaries based on our review of the executive's performance and
compensation history, and information on salary levels at comparable companies.
We annually review the base salaries of our executives to determine if
adjustments are appropriate to ensure that their salaries are competitive and
that they reflect any changes in the executives' responsibilities at the
Company.
For executives other than the Chief Executive Officer, we also consider the
recommendations of Mr. Ridder, the Company's Chairman and Chief Executive
Officer.
Comparative Data
In conducting our review for 1999, we considered comparative data prepared
by both the Company's senior human resources officer and by SCA Consulting, the
Compensation and Corporate Governance Committee's outside consultant for
executive compensation.
The comparison group we chose for compensation purposes (the "Comparison
Group") consisted of our competitors in the newspaper industry. The index we
chose for our performance graph was the S&P Publishing/Newspapers Index. This
was the publicly available index that we found best corresponded to our business
and included the greatest number of companies in the Comparison Group. The
performance graph follows this Report.
We obtained data for the Comparison Group from a number of sources,
including proxy statements, publicly available information and surveys by
consulting firms. We used this comparative data as a benchmark in reaching our
own determination of what were appropriate compensation levels for the Company's
executives.
Base Salaries of Executive Officers
Data for the Comparison Group supported an annual increase in base salaries
for 1999. We believe that the base salaries of our executives were generally
near the median for salaries of executives in the Comparison Group. The base
salary for each of the named executive officers is reported in the Summary
Compensation Table that follows this Report.
Base Salary of the Chief Executive Officer
The Committee also increased the base salary of Mr. Ridder effective March
1, 1999 to $850,000. We believe that Mr. Ridder's base salary in 1999 was near
the median for salaries of chief executive officers in the Comparison Group.
19
<PAGE> 23
HOW DID WE DETERMINE BONUSES FOR 1999?
Annual Incentive Plan
We award cash bonuses under, or taking into consideration, the Company's
Annual Incentive Plan. Under that Plan, participants are eligible for cash
bonuses ranging from 25% of salary in the case of participants whose annual
salary is less than $50,000 to 50% in the case of those whose salary exceeds
$250,000. Thirty-five percent of an executive's bonus potential was tied in 1999
to specific non-financial objectives for the Company that were established at
the beginning of 1999. Sixty-five percent of the bonus potential was tied to
financial performance. (For corporate participants, it was the financial
performance of the Company on a consolidated basis compared to budget; and for
newspaper participants, it was the financial performance of the individual
newspaper compared to its budget.) For 1999, the measure of financial
performance was shareholder value added ("SVA"), which is the increase in net
operating profit after taxes after deducting the cost of capital.
Under the Company's Annual Incentive Plan, if the Company (or newspaper)
meets its financial budget, the executive receives 100% of that part (65%) of
the potential bonus tied to financial performance. If SVA is above or below
budget, then the aggregate of the financial awards paid to participants will
equal their target awards plus or minus a percentage of the amount by which
actual SVA exceeds or falls below budgeted SVA. The "standard" percentages of
SVA above and below budget that will be shared with participants are about 15%
for participants whose award is tied to the performance of their individual
newspapers, and 5% for corporate participants whose award is based on the
performance of the Company on a consolidated basis. Plan participants may elect
to defer any portion of their bonus to a later year.
Bonuses for Executive Officers
The Committee awarded bonus compensation for 1999 to each executive (other
than Mr. Ridder) based on the Company's SVA as compared to budget and upon an
assessment of the Company's performance against the nonfinancial goals on a
consolidated basis. The bonus for each of the named executive officers is set
forth in the Summary Compensation Table that follows this Report.
Bonus for the Chief Executive Officer
In 1999, we awarded Mr. Ridder a bonus of $804,169. Although Mr. Ridder
has not participated in the Company's Annual Incentive Plan in the past, we have
for a number of years, including 1999, considered in part the criteria that
would have been applicable to him had he been a Plan participant. Beginning in
1996, based on advice by SCA Consulting, we set Mr. Ridder's bonus target at 70%
of salary to provide a more competitive award. The bonus Mr. Ridder could have
received under the Plan in light of the level of Company performance in 1999
would have been $804,169. Beginning in 2000, Mr. Ridder will participate in the
Plan, as amended.
WHAT IS OUR POSITION ON THE DEDUCTIBILITY OF EXECUTIVE COMPENSATION?
Provisions of federal tax law deny a company a tax deduction to the extent
certain executives' total compensation (excluding certain categories of
"performance based" compensation) exceeds $1,000,000 in any year. It is the
Company's policy that executives should defer payment of that
20
<PAGE> 24
portion of cash compensation which might exceed the $1,000,000 limit, to the
extent such amounts can be estimated before the beginning of the year, when such
deferral elections are required to be made. As a result, payment of a
significant portion of Mr. Ridder's 1999 bonus award will be deferred. The
amendments to the Annual Incentive Plan are designed to allow bonuses to Mr.
Ridder and the other four most highly compensated executives to be considered
performance based and deductible to the Company without deferral upon
shareholder approval.
WHAT WERE THE LONG-TERM INCENTIVE AWARDS IN 1999?
In General
Long-term incentives consist of stock options and Long-Term Incentive Plan
awards. Both types of awards serve to focus executive attention on the long-term
performance of the business.
1999 Stock Option Grants
After reviewing the Company's financial performance and competitive
analysis by SCA Consulting, in 1999 we provided long-term incentive awards for
executives by granting stock options under the Company's Employee Stock Option
Plan. We believe the number of the stock options awarded to each of the senior
executives (including Mr. Ridder) was at the median of recent awards given by
companies within the Comparison Group. The number of stock options awarded to
each of the named executive officers is set forth in the Stock Option Grants
table that follows this Report.
Long-Term Incentive Plan
At the 1997 Annual Meeting, shareholders approved a Long-Term Incentive
Plan, the goal of which is to consistently deliver a total shareholder return at
least in the top half of the companies in the Comparison Group. Under the Plan,
an executive's right to receive a stock award is contingent on and related
directly to the total return received by shareholders on their investment in the
Company's stock over a three-year period, compared to the return received by
holders of stock in the other companies that comprise the S&P
Publishing/Newspapers Index. The initial performance period ended on December
31, 1999 and no shares vested because the performance target was not achieved.
The Plan has been extended for an additional three-year period ending December
31, 2002. A description of the Long-Term Incentive Plan follows this Report. All
of the named executive officers participate in the Plan. No awards were granted
to the named executives in 1999.
WHAT ARE THE COMPANY'S STOCK OWNERSHIP GUIDELINES?
To support the Company's desire to increase management stock ownership, the
Company has established stock ownership guidelines for all of the Company's
executive officers and certain other key employees. The guidelines set what we
believe is an appropriate level of ownership of Knight Ridder common stock as a
multiple of the executive's annual base salary (based on the market value of the
stock). The multiple ranges from four times base salary (in the case of Mr.
Ridder) to one times base salary (in the case of corporate vice presidents and
publishers of the Company's largest newspapers).
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<PAGE> 25
The Compensation and Corporate Governance Committee believes these
guidelines have the positive effect of further aligning the interests of the
executives and key employees with all shareholders.
THE COMPENSATION AND
CORPORATE GOVERNANCE COMMITTEE
Randall L. Tobias, Chairman
James I. Cash, Jr.
Barbara Barnes Hauptfuhrer
M. Kenneth Oshman
John L. Weinberg
This table shows the compensation during the past three years of the chief
executive officer and each of the other four most highly compensated executive
officers in 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------
COMPENSATION STOCK ALL
----------------- OPTION OTHER
SALARY BONUS AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (# OF SHARES) ($)(1)(2)
--------------------------- ---- ------- ------- ------------- ------------
<S> <C> <C> <C> <C> <C>
P. Anthony Ridder........................................... 1999 877,308 804,169 150,000 77,774
Chairman and Chief Executive Officer 1998 810,000 415,242 80,000 614,448
1997 775,000 760,000 80,000 14,762
Frank McComas............................................... 1999 564,459 366,244 50,000 125
Senior Vice President/Operations 1998 492,083 180,188 45,000 607,927
1997 441,667 297,545 45,000 8,315
Ross Jones.................................................. 1999 563,632 364,846 50,000 106,110
Senior Vice President/Finance and 1998 491,250 179,883 45,000 610,145
Chief Financial Officer 1997 448,750 318,613 45,000 10,326
Mary Jean Connors........................................... 1999 482,866 313,823 50,000 6,484
Senior Vice President/Human Resources 1998 416,250 152,420 45,000 605,962
1997 362,500 256,423 45,000 6,490
Steven B. Rossi............................................. 1999 481,762 310,468 50,000 198,417
Senior Vice President/Operations 1998 268,750 189,801 70,000 580,192
</TABLE>
- ---------------
(1) Included in the 1999 amounts are relocation payments of $10,000 each to
Messrs. Jones and Rossi in connection with the relocation of the Company's
headquarters in 1998. Also included is an incidental relocation expense
allowance of $25,000 to Mr. Rossi and incidental relocation expenses of
$7,100 for Mr. Ridder, $96,110 for Mr. Jones, $125 for Mr. McComas and
$151,738 for Mr. Rossi. Also included are Company contributions to the
Company's Investment Savings (401(k)) Plan and the cost of Company-provided
insurance on the life of the executive named. The Company's 401(k)
contributions in 1999 were: Mr. Ridder, $4,800; Mr. Jones, $4,800; Mr.
McComas, $4,800; Ms. Connors, $4,800; and Mr. Rossi, $4,394. The life
insurance amounts in 1999 were: Mr. Ridder, $8,633; Mr. Jones, $5,315; Mr.
McComas, $2,675; Ms. Connors, $1,684; and Mr. Rossi, $863.
(2) Included in the 1998 amounts are one-time relocation payments of $574,163
each to Messrs. Ridder, McComas, Jones and Rossi and Ms. Connors, of which
$300,000 was a relocation bonus and $274,163 was a related tax
reimbursement. In connection with the relocation of the Company's
headquarters in 1998, each employee (including the executives named above)
received a one-time payment equal to one year's salary, subject to a minimum
payment of $70,000 and a maximum payment of $300,000, plus tax
reimbursement. Also included in the 1998 amounts are incidental relocation
expense allowances of $25,000 each to Messrs. Ridder, Jones and McComas and
Ms. Connors. Included for each year are Company contributions to the
Company's Investment Savings (401(k)) Plan and the cost of Company-provided
insurance on the life of the executive named. The Company's 401(k)
contributions in 1998 were: Mr. Ridder, $4,800; Mr. Jones, $4,800; Mr.
McComas, $4,800; Ms. Connors, $4,800; and Mr. Rossi, 0. The life insurance
amounts in 1998 were: Mr. Ridder, $10,485; Mr. Jones, $6,182; Mr. McComas,
$3,964; Ms. Connors, $1,999; and Mr. Rossi, $181.
22
<PAGE> 26
LONG-TERM INCENTIVE PROGRAMS
The Company's long-term incentive programs consist of the Employee Stock
Option Plan and the Long-Term Incentive Plan.
Employee Stock Option Plan. Under the terms of the Plan, the Compensation
and Corporate Governance Committee may grant executive officers and other key
employees options to purchase shares of the Company's common stock at the fair
market value (i.e., market price) at the option grant date. The options granted
in 1999 vest in three equal installments over a three-year period from the date
of grant and expire in 10 years.
The Plan is designed to permit those executives who contribute to the
performance of the Company and the market price of its common stock to benefit
along with shareholders from increases in the value of the Company's common
stock.
This table shows information on stock options granted in 1999 to the
executive officers named in the Summary Compensation Table:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER
OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME GRANTED FISCAL YEAR ($/SHARE) DATE ($)
---- ---------- ------------ --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
P. Anthony Ridder...................................... 150,000 8.97% 57.9688 12/15/09 2,215,500
Ross Jones............................................. 50,000 2.99% 57.9688 12/15/09 738,500
Frank McComas.......................................... 50,000 2.99% 57.9688 12/15/09 738,500
Mary Jean Connors...................................... 50,000 2.99% 57.9688 12/15/09 738,500
Steven B. Rossi........................................ 50,000 2.99% 57.9688 12/15/09 738,500
</TABLE>
- ---------------
The "grant date present value" shown is a hypothetical value based upon
application of the Black Scholes model. This model often is used to estimate the
market value of transferable options by calculating the probability -- based on
the volatility of the stock subject to the option -- that the stock price will
exceed the option exercise price at the end of the option term. The assumptions
used in calculating the Black Scholes value of the options were: expected
volatility of .164; risk-free rate of return of 6.23%; dividend yield of 1.48%;
and vest over a three-year period from the date of grant.
The stock options are not transferable. The Black Scholes estimate
notwithstanding, an option granted under the Employee Stock Option Plan will
have value only if and to the extent the optionee exercises the option at a time
when the market price of the Company's common stock is above the market price on
the date the option was granted.
23
<PAGE> 27
This table shows information on stock options exercised in 1999 by the
executive officers named in the Summary Compensation Table, as well as the
number of unexercised options held by them at the end of the year:
AGGREGATE STOCK OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-
UNEXERCISED MONEY
OPTIONS AT OPTIONS AT
SHARES FISCAL FISCAL
ACQUIRED ON VALUE YEAR-END(#) YEAR-END($)(1)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- --------- ---------------- ------------------
<S> <C> <C> <C> <C>
P. Anthony Ridder........................................ 50,000 1,635,935 376,000 / 230,000 8,675,641 / 791,345
Ross Jones............................................... 0 0 113,000 / 95,000 1,905,436 / 418,278
Frank McComas............................................ 0 0 94,999 / 95,000 1,484,464 / 418,278
Mary Jean Connors........................................ 0 0 173,200 / 95,000 3,944,309 / 418,278
Steven B. Rossi.......................................... 0 0 41,000 / 100,666 477,868 / 493,012
</TABLE>
- ---------------
(1) The amount shown is the amount by which the market value at year-end of all
shares subject to unexercised options exceeded the exercise price of those
options.
Long-Term Incentive Plan. The Plan, which initially covered the three-year
period from January 1, 1997 to December 31, 1999, is intended to motivate and
reward executives for achieving total shareholder return ("TSR") equal to or
greater than the other companies in the S&P Newspaper Index. At the start of the
initial performance period, we granted each participant restricted shares of the
Company's common stock with a value (based on the average closing price in
December 1996), equal to 75% of the participant's salary as of January 1, 1997
multiplied by the number of years (three) in the performance period. Later-added
participants received pro-rated grants based on the amount of time remaining in
the performance period. In 1999, no restricted stock awards were granted to the
executives named in the Summary Compensation Table.
The Plan provided that none of the shares would vest unless the Company's
TSR was positive and at least equal to the median TSR of the other companies in
the S&P Newspaper Index during the initial performance period. The percentage of
shares that would have vested ranged from 15% if the Company's TSR was equal to
the peer group median to 100% if the Company's TSR was 5% or more above the peer
group median. The initial performance period ended on December 31, 1999 and no
shares vested because the performance target was not achieved.
The Plan has been extended for an additional three-year period beginning
January 1, 2000 and ending December 31, 2002. At the start of the extended
performance period, we granted each participant restricted shares of the
Company's common stock with a value (based on the average closing price in
December 1999) equal to 75% of the participant's salary as of January 1, 2000
multiplied by the number of years (three) in the performance period. Later-added
participants will receive pro-rated grants based on the amount of time remaining
in the performance period.
The Plan, as extended, provides that none of the shares will vest unless
the Company's TSR is positive and at least equal to the median TSR of the other
companies in the S&P Newspaper Index during this performance period. If these
conditions are met, 15% of the shares will vest if the
24
<PAGE> 28
Company's TSR is equal to the peer group median and 100% of the shares will vest
if the Company's TSR is at the 90th percentile or more of the peer TSR or
higher.
OTHER BENEFITS
This table shows the annual benefits payable as a straight-life annuity
under the Company's pension plan to an officer retiring in 1999 at age 65 with a
specified combination of final average earnings (salary and bonus) and years of
service with the Company. The benefits shown are not subject to any reduction
for Social Security or other benefits.
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
-------------------------
REMUNERATION 15 20 25 30 35 40
------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 125,000............................................ 35,432 40,992 46,553 52,113 55,238 58,363
200,000............................................ 57,932 67,242 76,553 85,863 90,863 95,863
300,000............................................ 87,932 102,242 116,553 130,863 138,363 145,863
400,000............................................ 117,932 137,242 156,553 175,863 185,863 195,863
500,000............................................ 147,932 172,242 196,553 220,863 233,363 245,863
600,000............................................ 177,932 207,242 236,553 265,863 280,863 295,863
700,000............................................ 207,932 242,242 276,553 310,863 328,363 345,863
900,000............................................ 267,932 312,242 356,553 400,863 423,363 445,863
1,000,000........................................... 297,932 347,242 396,553 445,863 470,863 495,863
1,300,000........................................... 387,932 452,242 516,553 580,863 613,363 645,863
1,600,000........................................... 477,932 557,242 636,553 715,863 755,863 795,863
1,900,000........................................... 567,932 662,242 756,553 850,863 898,363 945,863
</TABLE>
- ---------------
The salary and bonus of the Company's five most highly compensated
executive officers are shown in the Summary Compensation Table. As of the end of
1999, Mr. Ridder had 38 years of service with the Company; Mr. Jones, 7; Mr.
McComas, 30; Ms. Connors, 20; and Mr. Rossi, 12.
No officer of the Company has an employment agreement. The Company has
agreements with its executive officers, including those named in the Summary
Compensation Table, that entitle each executive to receive a lump sum cash
severance payment equal to three times the executive's annual salary and bonus
if, after a change in control of the Company (as defined in the agreements), the
Company terminates the executive's employment or the executive resigns because
of a reduction in position, salary or benefits.
25
<PAGE> 29
PERFORMANCE OF KNIGHT RIDDER COMMON STOCK
The following graph compares the cumulative total return on the Company's
common stock during the past five years with the average cumulative total return
during the same period on the stocks which comprise the S&P 500 Stock Index and
the S&P Publishing/Newspapers Index.
The S&P 500 Stock Index is comprised of 500 U.S. companies in the
industrial, transportation, utilities and financial industries, weighted by
market capitalization. The S&P Publishing/Newspapers Index is comprised of Dow
Jones & Company, Inc., Gannett Co., Inc., Knight-Ridder, Inc., The New York
Times Company, The Times Mirror Company and Tribune Company, weighted by market
capitalization.
The graph reflects the investment of $100 on December 31, 1994 in the
Company's common stock, the S&P 500 Stock Index and the S&P
Publishing/Newspapers Index. Dividends are assumed to have been reinvested as
paid in the Company's common stock and in the stocks in the S&P 500 Stock Index
and quarterly in the stocks in the S&P Publishing/Newspapers Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
KNIGHT-RIDDER, INC., S&P 500 INDEX AND
S&P PUBLISHING/NEWSPAPERS INDEX
DECEMBER 31, 1994 - DECEMBER 31, 1999
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
KNIGHT-RIDDER, INC. $100.00 $127.24 $158.34 $219.19 $218.78 $259.23
S&P 500 $100.00 $137.54 $169.09 $225.49 $289.93 $350.93
S&P PUBLISHING/NEWSPAPERS $100.00 $126.34 $156.60 $246.02 $251.50 $345.56
</TABLE>
26
<PAGE> 30
APPENDIX I
KNIGHT RIDDER ANNUAL INCENTIVE PLAN
As Amended and Restated Effective January 1, 2000
INTRODUCTION
This Amended and Restated Knight Ridder Annual Incentive Plan (the "Plan") is
intended to motivate and reward corporate executives and top management at
individual operating units who contribute significantly to Knight Ridder's
success. Specific Plan objectives include the following:
- Focus participants on achieving key annual objectives
- Link rewards to results relative to financial and non-financial
goals at the corporate and business unit levels
- Provide participants the opportunity to earn competitive
compensation commensurate with performance
The Plan provides participants the opportunity to earn cash awards each year
based on the performance of the corporation and/or the business unit in which
they work. Awards are earned on a calendar year basis (the "Plan Year") and are
paid in cash following the end of the Plan Year.
This amendment and restatement is intended to make the Plan comply with Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code") with
respect to covered employees under such Code section. Accordingly, individuals
who may be covered employees under the Code will be designated as "Covered
Employees".
PLAN ADMINISTRATION
The Plan will be administered by the Compensation and Corporate Governance
Committee of the Knight Ridder Board of Directors (the "Committee"). The
Committee has the authority to interpret the provisions of the Plan and to make
any rules and regulations necessary to administer the Plan. The Committee's
decision is final in all matters of judgment pertaining to the Plan, and the
Committee may, without notice, amend, suspend or revoke the Plan.
ELIGIBILITY
Employees in the following categories are eligible to participate in the Plan as
determined by the Committee: corporate officers and certain director-level
corporate employees; newspaper publishers and other business unit operating
heads who report directly to top officers; top editors, general managers and all
division directors; and selected other positions that can have significant
impact on results.
Operating unit heads should present proposed changes in eligible positions to
the appropriate Vice President Operations and then to the Knight Ridder senior
Human Resources officer.
<PAGE> 31
PLAN OVERVIEW
Bonus Amounts Payable for Meeting Goals
Each plan participant will have a potential bonus award that is payable for
meeting goals. The size of this potential award varies by salary range. The
bonus potential for each salary range is stated as a percentage of the salary
earned during the year. Therefore, the dollar amount of an individual's
opportunity is computed by multiplying the applicable percentage by the salary.
The potential bonus payable for meeting goals for each salary range (other than
for Knight Ridder's Chief Executive Officer whose potential award shall be set
annually by the Committee and shall be 70% of salary for the 2000 Plan Year) is
as follows:
<TABLE>
<CAPTION>
Salary Range Potential Award
------------ ---------------
<S> <C>
$250,000 and above 50.0%
$150,000 to $249,999 45.0%
$100,000 to $149,999 40.0%
$50,000 to $99,999 32.5%
Up to $49,999 25.0%
</TABLE>
Types of Performance Measures and Their Weightings
Each participant's bonus will be determined based on measures of how well the
corporation or the business unit in which the individual works performed
relative to two type of goals: Financial Performance and Non-financial
Performance.
The potential award for meeting goals will be divided between the two types of
measures in the following way: 65% of each participant's potential award for
meeting goals will be based on Financial Performance, and 35% will be based on
Non-financial Performance, as shown in the following table:
<TABLE>
<CAPTION>
Potential Award
---------------------------------------------------
Salary Total Financial Non-financial
------ ----- --------- -------------
<S> <C> <C> <C>
$250,000 and above 50.0% 32.5% 17.5%
$150,000 to $249,999 45.0% 29.25% 15.75%
$100,000 to $149,999 40.0% 26.0% 14.0%
$50,000 to $99,999 32.5% 21.125% 11.375%
Up to $49,999 25.0% 16.25% 8.75%
</TABLE>
2
<PAGE> 32
As a general rule, the measurement will be based on the organizational level at
which the individual is employed: corporate performance for those at the
corporate level and business unit performance for those in a newspaper or other
business unit. However, the Knight Ridder CEO may determine that the measures
for selected individuals (other than Covered Employees) will consist of a
specified mix of two or more bases, or that those in a business unit will have
awards based on corporate performance.
PERFORMANCE MEASUREMENT
Financial Performance Measure
Financial performance will be evaluated relative to budgeted goals set at the
beginning of the Plan Year, subject to approved adjustments during the year.
Unless otherwise determined by the Committee, the financial measure will be
Economic Value Added, or "EVA". Definitions include:
EVA = Net operating profit after tax minus a capital charge
Capital charge = Average capital employed during the Plan Year times the
cost of that capital
Average capital employed = Average assets on the balance sheet minus the
average of any amounts owed that do not incur an interest charge (called
non-interest-bearing liabilities, or NIBLs), with the average computed
on a monthly basis
Cost of capital = Percentage approved annually by the Committee; 12% for
2000
The financial performance measure and the goals for the year will be
communicated to participants by the early part of each year.
Non-financial Performance Measures
At the beginning of each Plan Year, Knight Ridder and each of the business units
will establish Non-financial goals that represent major elements of their
strategies. Quantifiable measures are preferred, and measures that are redundant
with the financial goal should be avoided. There should be no more than eight
measures. The non-financial performance measures may include the following
items: (i) advertising share, (ii) customer relations, (iii) product and service
development, (iv) news and information content, (v) enhancing national and local
brand identity, and (vi) technology development. Such corporate measures and
goals will be approved by the Knight Ridder CEO, and business unit measures and
goals will be approved by the appropriate Knight Ridder Vice President.
All participants at corporate and in each of the business units will have the
Non-financial component of their awards based on the measures selected for their
unit. However, the weightings of these measures may vary among participants to
reflect each individual's impact on the achievement of the goals. The weightings
assigned to all measures must total 100 points for each of the participants.
3
<PAGE> 33
The achievement of a goal will result in target awards being paid for that goal.
Awards for performance on the Non-financial measures cannot exceed 100% of
target, but standards for partial achievement of goals (and therefore payouts
below 100%) as well as threshold standards for achieving any award should be
established.
The non-financial measures for Covered Employees shall be objective and
quantifiable and shall be established solely by the Committee within the time
period required by Code Section 162(m).
DETERMINING AND PAYING AWARDS
Overview
Each participant's award will be determined by adding together the award earned
based on Financial Performance and the award earned based on Non-financial
Performance. An award may be paid for one type of measure even if no award was
earned for the other type of measure. The only constraint is that a corporate
performance threshold must be achieved for any award to be payable. Normally
this threshold requirement will be that corporate operating income, as reported
in the annual report, must equal at least 80% of prior year operating income,
although the Committee reserves the right to adjust the threshold. The Committee
shall have the discretion to decrease (but not increase) awards to Covered
Employees.
Determining Financial Awards
Target awards will be paid to all participants in a unit (either corporate or
one of the business units) if that unit's EVA equals budgeted EVA. If EVA is
above (or below) budget, then the aggregate of financial awards paid to
participants at that unit will equal the aggregate of their target financial
awards plus (or minus) a percentage of the amount by which actual EVA exceeds
(or falls below) budgeted EVA. This percentage is referred to as a "sharing
percentage". For Covered Employees, the sharing percentage must be established
within the time periods required under Code Section 162(m). The "standard"
percentages of EVA above and below budget that will be shared with participants
are expected to be 15% for the newspapers and 5% for corporate. However, these
sharing percentages are at the discretion of the Committee, which may change
them from year to year or have different percentages for different newspapers
within a given year.
The process of determining the aggregate financial award paid to participants in
a unit will start with the calculation of the sum of the target financial awards
for all approved participants in the unit as of the end of the Plan Year. This
aggregate target will equal the sum of all participants' target awards, with
each participant's target equaling his or her salary for the year (or period of
participation, if less than a year) times 65% of the target award percentage for
the range in which the salary falls. The target awards are calculated before
taxes.
If EVA equals budget, then the "bonus pool" (i.e., total payments that will be
made for the financial component of the award for participants in that unit)
will equal the sum of all participants' financial target awards.
4
<PAGE> 34
If EVA is above budget, steps to calculate the financial bonus pool will
include:
- Determine the amount by which EVA (including the target bonus
accrual only) exceeds budget
- Multiply this amount by the approved sharing percentage. (For
example, if the sharing percentage is 15%, multiply 15% times
the amount by which EVA exceeds budget). This equals the
after-tax amount that will be added to the target bonus pool.
(It is after-tax because EVA is an after-tax number)
- Calculate the pre-tax amount that will be added to the target
bonus pool as a result of EVA being above budget. (It is
necessary to calculate the pre-tax amount before doing the
addition, since the target bonus pool is pre-tax). To calculate
the pre-tax amount, divide the after-tax amount by 1.00 minus
the tax rate that was used in developing the EVA budget for the
year. (For example, with a tax rate of 42%, the after-tax amount
would be divided by 1.00 minus .42, or .58. If the after-tax
amount were $100, then the pre-tax amount would be $100 divided
by .58, or $172.4)
- Add the resulting pre-tax amount to the aggregate target award
to determine the size of the financial bonus pool. This becomes
the final bonus pool, subject to two conditions:
- To be eligible for awards above 200% on the financial
component, a company's net operating profit after tax (NOPAT)
must be at least 12% above the prior year's NOPAT, and EVA
must be positive and improved over the prior year. If these
conditions are not met, then the maximum pool will equal 200%
of target
- The pool is subject to a maximum equal to 300% of target; if
the calculated pool is above the maximum, then the pool will
equal 300% of target
If EVA is below budget, steps to calculate the financial bonus pool will
include:
- Determine the amount by which EVA (including the target bonus
accrual) is below budget
- Determine the after-tax amount that will be subtracted from the
target bonus pool by multiplying the amount by which EVA is
below budget times the approved sharing percentage
- Calculate the pre-tax amount that will be subtracted from the
target bonus pool as a result of EVA being below budget, using
the methodology described above (i.e., divide the after-tax
amount by 1.00 minus the tax rate)
5
<PAGE> 35
- Subtract the resulting pre-tax amount from the aggregate target
award to determine the size of the financial bonus pool. The
minimum pool size will be zero
Once the financial bonus pool is determined, every participant in a unit will
receive the same financial award as a percentage of his or her target.
Calculation steps will include:
- Calculate the aggregate financial bonus pool for the unit as a
percentage of the aggregate target financial bonus pool
- Apply this percentage to the target financial award for each
participant. For example, if the aggregate financial bonus pool
were $1,200 and the aggregate target bonus pool were $1,000,
then that unit's financial award would be 120% of target. Every
participant in the unit would receive 120% of his or her target
financial award
The Knight Ridder Controller will calculate the corporate awards. Each business
unit's chief financial officer will calculate the business unit's awards, using
EVA results that have been agreed upon with the Knight Ridder Controller. All
calculations will be based on the approved list of participants and their target
award opportunities. Prior to the payment of any awards to Covered Employees,
the Committee must certify in writing that the performance goals have in fact
been satisfied.
The attached exhibits illustrate the calculations of the financial bonus pool
for three situations:
- Exhibit 1: EVA is above budget, and pool is below 200% of target
- Exhibit 2: EVA is above budget, and pool is potentially above
200% of target, making it necessary to apply the test of whether
the pool can exceed 200%
- Exhibit 3: EVA is below budget
Determining Non-financial Awards
A performance score will be determined for each of the Non-financial measures at
corporate and each of the business units. A score will be 100% of the points
assigned if the goal was achieved, zero if threshold performance was not
achieved, and between 0 and 100% if performance was above threshold and the goal
was partially achieved.
An individual's Non-financial award will equal the sum of the scores on each of
the measures times the weighting given to that measure for that individual.
Awards can range from 100% of the Non-financial target if all goals were
achieved, down to zero if performance on all goals was below threshold.
6
<PAGE> 36
OTHER PLAN FEATURES
Award Payment
Awards will be paid in cash following the end of the Plan Year and the
computation of results, unless deferral has been elected under the annual
incentive deferral plan. Required tax amounts will be withheld. Notwithstanding
anything to the contrary, the maximum award payable for a Plan Year to any
individual under the Code shall not exceed $2,500,000.
Partial Year Participants and Changes in Position
Individuals who are hired or promoted into positions that qualify for Plan
participation will be eligible for a pro rata award based on the amount of
salary earned while a participant and the performance levels achieved.
If a participant's responsibilities change during a year and a different part of
the company's performance is used in computing awards for the two positions,
then ordinarily the award will be determined on a pro rata basis relative to the
time spent in the two positions, although exceptions may be made on a case by
case basis.
Termination
In the event of death, permanent disability (as defined by Knight Ridder's
disability plan) or retirement prior to the date of payment, a participant (or
the participant's estate) will be entitled to receive a pro rata award based on
the time employed during the year. Pro-rated payments will be made following the
end of the Plan Year and computation of results. Required tax amounts will be
withheld.
In the event of resignation or termination for other reasons at any time during
the Plan Year, no award will be paid.
Employment Rights
The Plan does not constitute a contract of employment, nor does participation in
one Plan Year guarantee participation in another Plan Year.
7
<PAGE> 37
Exhibit 1
- --------------------------------------------------------------------------------
EXAMPLE OF CALCULATING FINANCIAL BONUS POOL
EVA IS ABOVE BUDGET
POOL IS BELOW 200% OF TARGET
================================================================================
TARGET BONUS OPPORTUNITIES AT A NEWSPAPER:
$500,000 Target bonus
$325,000 Financial component of target (65%)
DETERMINING AFTER-TAX AMOUNT TO BE ADDED TO TARGET BONUS POOL:
$750,000 EVA above budget
15% Sharing percentage
$112,500 15% of amount by which EVA is above budget
DETERMINING PRE-TAX AMOUNT TO BE ADDED TO TARGET BONUS POOL:
42% Tax rate
$193,966 $112,500 divided by .58 (1.00-.42)
DETERMINING FINANCIAL BONUS POOL (PRE-TAX):
$325,000 Target
+ $193,966 Amount above EVA budget shared with management
----------
$518,966 Financial bonus pool
160% Pool as a percentage of target
- --------------------------------------------------------------------------------
<PAGE> 38
Exhibit 2
- --------------------------------------------------------------------------------
EXAMPLE OF CALCULATING FINANCIAL BONUS POOL
EVA IS ABOVE BUDGET
POOL IS POTENTIALLY ABOVE 200% OF TARGET
================================================================================
TARGET BONUS OPPORTUNITIES AT A NEWSPAPER:
$500,000 Target bonus
$325,000 Financial component of target (65%)
DETERMINING AFTER-TAX AMOUNT TO BE ADDED TO TARGET BONUS POOL:
$1,500,000 EVA above budget
15% Sharing percentage
$225,000 15% of amount by which EVA is above budget
DETERMINING PRE-TAX AMOUNT TO BE ADDED TO TARGET BONUS POOL:
42% Tax rate
$387,931 $225,000 divided by .58 (1.00-.42)
DETERMINING POTENTIAL FINANCIAL BONUS POOL (PRE-TAX):
$325,000 Target
+ $387,931 Amount above EVA budget shared with management
----------
$712,931 Potential financial bonus pool
219% Potential pool as a percentage of target
DETERMINING ACTUAL FINANCIAL BONUS POOL (PRE-TAX):
Is NOPAT at least 12% above prior year's, and is EVA positive and
improved?
If yes: Pool = $712,931
If no: Pool = $650,000 (200% of target)
- --------------------------------------------------------------------------------
<PAGE> 39
Exhibit 3
- --------------------------------------------------------------------------------
EXAMPLE OF CALCULATING FINANCIAL BONUS POOL
EVA IS BELOW BUDGET
================================================================================
TARGET BONUS OPPORTUNITIES AT A NEWSPAPER:
$500,000 Target bonus
$325,000 Financial component of target (65%)
DETERMINING AFTER-TAX AMOUNT TO BE SUBTRACTED FROM TARGET BONUS POOL:
- $750,000 Amount of EVA below budget
15% Sharing percentage
- $112,500 15% of amount by which EVA is below budget
DETERMINING PRE-TAX AMOUNT TO BE SUBTRACTED FROM TARGET BONUS POOL:
42% Tax rate
- $193,966 $112,500 divided by .58 (1.00-.42)
DETERMINING FINANCIAL BONUS POOL (PRE-TAX):
$325,000 Target
+ $193,966 Amount below EVA budget subtracted from management pool
--------
$131,034 Financial bonus pool
40% Pool as a percentage of target
- --------------------------------------------------------------------------------
<PAGE> 40
KNIGHT-RIDDER, INC
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints P. Anthony Ridder, Ross Jones and Karen
Stevenson, or any one of them, each with full power of substitution, to vote all
the shares the undersigned is entitled to vote at the Annual Meeting of
Shareholders of Knight-Ridder, Inc. to be held at the Fairmont Hotel, 170 South
Market Street, San Jose, California at 9:30 a.m. on April 25, 2000 and any
adjournments thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION, FOR ITEMS 2 AND
3, AND AGAINST ITEM 4 AND IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS(s) THEREOF.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES, FOR ITEMS 2 AND 3 AND
AGAINST ITEM 4
<TABLE>
<S> <C>
1. Election of directors for a term ending in Nominees: 01 Barbara Barnes Hauptfuhrer
2003: 02 M. Kenneth Oshman
03 John L. Weinberg
FOR all nominees WITHHOLD
listed to the right AUTHORITY To withhold authority to vote for any
(except as marked to vote for all individual nominee, write the name of that
nominees to the listed to the right nominee in the space below.
contrary)
[ ] [ ] __________________________________________
2. Ratify the appointment of Ernst & Young LLP
3. Approval of the material terms of the
FOR AGAINST ABSTAIN Annual Incentive Plan as amended
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. Shareholder proposal concerning equal employment [ ] [ ] [ ]
opportunity
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
The Walt Disney Company 1,374,100 shares of Knight Ridder Series B
Preferred Stock
I will attend the annual meeting in San Jose,
By:___________________________________________ California.
Name:_________________________________________
Title:________________________________________ YES NO
[ ] [ ]
</TABLE>
NOTE: Please sign exactly as your name or names appear(s) hereon. For joint
accounts, each owner should sign. When signing as officer, executor,
administrator, attorney, trustee or guardian, or in any other legal
capacity please give your full title(s) under signature(s).
<PAGE> 41
KNIGHT-RIDDER, Inc.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints P. Anthony Ridder, Ross Jones and Karen
Stevenson, or any one of them, each with full power of substitution, to vote all
the shares the undersigned is entitled to vote at the Annual Meeting of
Shareholders of Knight-Ridder, Inc. to be held at the Fairmont Hotel, 170 South
Market Street, San Jose, California at 9:30 a.m. on April 25, 2000, and any
adjournments thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION, FOR ITEMS 2 AND 3
AND AGAINST ITEM 4 AND IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S) THEREOF.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1, 2 AND 3 AND "AGAINST"
ITEM 4.
(THIS PROXY IS CONTINUED ON REVERSE SIDE
PLEASE COMPLETE, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE)
* FOLD AND DETACH HERE *
<PAGE> 42
Please mark
your votes as
indicated in [X]
this example
<TABLE>
<S> <C>
1. Election of directors for a term ending in 2003: Nominees: 01 Barbara Barnes Hauptfuhrer, 2. Ratify the appointment
02 M. Kenneth Oshman and 03 John L. Weinberg of Ernst & Young LLP
FOR all nominees WITHHOLD
listed to the right AUTHORITY FOR AGAINST ABSTAIN
(except as marked to vote for all nominees To withhold authority to vote for any [ ] [ ] [ ]
to the contrary) listed to the right individual nominee, write the name of that
[ ] [ ] nominee in the space below.
____________________________________________
3. Approval of the material terms of the 4. Shareholder proposal concerning I will attend the annual meeting
Annual Incentive Plan as equal employment opportunity in San Jose,California
amended YES [ ]
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ] (***)IF YOU WISH TO VOTE BY TELEPHONE OR BY
THE INTERNET, PLEASE READ THE INSTRUCTIONS
BELOW(***)
Signature________________________________________ Signature___________________________________________ Date_________________________
</TABLE>
NOTE: Please sign exactly as your name or names appear(s), date and return
this proxy card promptly in the enclosed envelope whether or not you
plan to attend the Annual Meeting. For joint accounts, each owner should
sign. When signing as officer, executor, administrator, attorney,
trustee or guardian, or in any other legal capacity please give your
full title(s) under signature(s).
* FOLD AND DETACH HERE *
VOTE BY TELEPHONE OR INTERNET
QUICK * EASY * IMMEDIATE * AVAILABLE 24 HOURS A DAY * 7 DAYS A WEEK
Knight Ridder encourages you to take advantage of the new and convenient
way to vote your shares. If voting by proxy, this year you may vote by
mail, or choose one of the two methods described below. Your telephone or
Internet vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed, and returned your proxy card. To vote by
telephone or Internet, read the accompanying proxy statement and then
follow these easy steps:
1. To vote by telephone call toll free on a touch tone telephone
1-800-840-1208 - anytime. There is NO CHARGE to you for this call. Enter
the 11 digit control number located in the lower right hand corner.
OPTION #1: To vote as the Board of Directors recommends on ALL Items: Press
1.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
OPTION #2: If you choose to vote on each item separately, press 0. You will
hear these instructions:
Item 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees,
press 9. To withhold FOR AN INDIVIDUAL nominee, press 0 and
listen to the instructions.
Item 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Item 3: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
Item 4: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
or
2. TO VOTE BY INTERNET: FOLLOW THE INSTRUCTIONS AT OUR INTERNET
ADDRESS: http://www.eproxy.com/KRI
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE OR INTERNET.
Call ** Toll Free ** On a Touch Tone Telephone
1-800-840-1208 - ANYTIME
There is NO CHARGE to you for this call.
