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May 5, 2000
The New York Times Company
Material Provided to Certain Officers and Employees of the Company
in Connection with Certain Telephone Calls to Stockholders
PROPOSAL 3
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WHAT? Amend the Company's 1991 Executive Stock Incentive Plan (the "1991
Plan") to authorize an additional 20,000,000 shares of Class A Common
Stock that may be issued thereunder pursuant to the exercise of stock
options (p. 55*).
WHY? 1. To provide incentives for officers and key employees of the
Company and its subsidiaries through granting options under
the 1991 Plan, thereby stimulating their personal and active
interest in the Company's development and financial success
and inducing them to remain in the Company's employ (p. 55).
2. Of the 40,000,000 shares currently reserved under the 1991
Plan (as of 4/6/00**, p. 50), 6,224,445 shares remain
available for future option grants.
3. This increased authorization should provide sufficient shares
for option awards for several years and make unlikely the need
to request additional shares in the near future (p. 53).
WHO? 1999 grants were as follows (p. 52):
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS
<S> <C>
Arthur Sulzberger, Jr., Chairman of the Board and
Publisher of The New York Times 150,000
Russell T. Lewis, President and Chief Executive
Officer 150,000
Michael Golden, Vice Chairman and Senior Vice
President 80,000
John M. O'Brien, Senior Vice President and Chief
Financial Officer 80,000
Janet L. Robinson, President and General Manager,
The New York Times 80,000
All Executive Officers, as a group (2) 833,000
All Employees, as a group (3) 4,424,554
</TABLE>
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* Page references are to proxy statement.
** Record Date
(1) The Options have an exercise price of $47.2813. The Options have a
10-year term, but are subject to earlier cancellation in certain
circumstances where the optionholder is no longer employed by the
Company or one of its affiliates. The Options vest in accordance with
the following schedule: 25% on December 16, 2000; 25% on December 16,
2001; 25% on December 16, 2002; and 25% on December 16, 2003. The
optionholder must generally be employed for the Options to vest, except
that the Options will generally vest automatically upon the retirement,
death or disability of the optionholder.
(2) 15 people, including the five named executive officers.
(3) 848 people, including the 15 executive officers.
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DILUTION: Can be calculated in many different ways. Relevant data are at p. 2
and F-31 of 1999 Financial Statements in 1999 Annual Report):
Outstanding shares (as of 4/6/00): 170,208,418
12/26/99 12/27/98
-------- --------
Retirement Units Outstanding 125,000 150,000
Stock Awards Available 1,933,000 1,933,000
Stock Options
Outstanding* 21,667,000 20,317,000
Available** 6,296,000 11,256,000
Employee Stock Purchase Plan
Available 2,921,000 4,444,000
Voluntary Conversion of Class B
Common Stock
Available 847,000 849,000
============ ============
Total 33,789,000 38,949,000
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* Includes options outstanding under the 1991 plan, a predecessor plan
and the non-employee directors' plan. Does not include options under
TCD, Inc.'s option plan.
** Includes options available under the 1991 Plan and the non-employee
director's plan.
OUR PLAN DOES NOT HAVE THE FOLLOWING OBJECTIONABLE FEATURES:
1. Our options must be priced at fair market value on the date of grant,
i.e., no discounted pricing of options.
2. Our plan is NOT an evergreen plan, i.e., it does NOT authorize the
award of a set amount (or percentage) of outstanding shares each year
without an expiration date.
3. We do not engage in "smurfing," i.e., asking for fewer shares than we
will need for the remaining life of the option plan, so that the
dilution looks low to institutional holders. With smurfing, we would
repeatedly and often seek to add more shares to our plan. As noted on
p. 55 of the proxy statement, the Board believes this authorization
will be sufficient for several years and make unlikely the need to
request additional shares in the near future.
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PROPOSALS 7 & 8
WHAT IS THE NEW YORK TIMES DIGITAL GROUP?
The Digital group is a leading online provider of news, information and
community through its network of branded Web sites, which consist of:
NYTimes.com - Has over 10 million unique registered users. Contains the complete
contents of THE NEW YORK TIMES as well as news updates throughout the day and
additional material.
NYToday.com - A daily guide to life in New York City for both residents and
visitors. Focuses on arts, entertainment, restaurants, classified and
neighborhood news and information.
Boston.com - A regional portal for New England anchored by the complete daily
content of THE BOSTON GLOBE. Updated continuously throughout the day with
breaking news and current traffic and weather reports.
Winetoday.com - An international wine site published in Santa Rosa, Calif., in
the heart of the Northern California wine country.
GolfDigest.com - Seeks to become the Internet's premier golf destination.
Focuses on helping golfers improve their game and get more enjoyment from the
sport.
Abuzz.com - A sophisticated natural language question and answer Web site.
WHAT ARE THE TRACKING STOCK PROPOSALS?
1. APPROVE AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO
CREATE THE CLASS C TRACKING STOCK.
i. Increase the number of authorized shares of common stock to
cover tracking stock.
ii. Authorize the Class C stock intended to track the performance
of our Internet business.
iii. Specify the terms of the Class C stock relative to the Class A
and B stock, e.g., voting rights, dividends (none expected),
effect of asset sales, mandatory redemption or exchange.
2. ADOPT A STOCK OPTION PLAN FOR THE CLASS C TRACKING STOCK.
i. Reserve 20,000,000 shares for options (number subject to
adjustment based on offering).
ii. For grants to employees, service providers, NYT Co. outside
directors, outside Internet advisory board members.
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WHY ARE YOU PROPOSING TRACKING STOCK?
1. Permit the market to review separate information about the Digital
group and the NYT group to separately value the tracking stock and NYT
stock (including its retained interest in New York Times Digital).
2. The tracking stock will allow Class A stockholders to realize some of
the value of New York Times Digital (through the Company's retained
interest) while preserving for the Company (and its shareholders) the
financial, tax, operational, strategic and other benefits of being a
single consolidated entity.
3. Allow us to grant stock options exercisable for public stock that
tracks our Internet business. WE LOOK AT THESE OPTIONS AS WOULD ANY
OTHER COMPANY IN THE INTERNET INDUSTRY. We are providing incentives to:
i. New York Times Digital's management, employees and
consultants,
ii. outside NYTCo. directors,
iii. senior management of NYTCo., and
iv. critical newsroom and advertising sales personnel at THE NEW
YORK TIMES and THE BOSTON GLOBE who work closely with, and
have demonstrated a commitment to, the success of New York
Times Digital.
4. Provide us with greater flexibility to raise capital and respond to
strategic opportunities (including acquisitions), because it will allow
us to issue either tracking stock or Class A common stock as
appropriate under the circumstances.
HOW WILL YOU DEAL WITH CONFLICTS OF INTEREST BETWEEN THE CLASS A AND CLASS C
HOLDERS?
1. Our Board has adopted "tracking stock policies" with respect to the
ongoing relationship between the Digital group and the NYT group, and
the allocation of our businesses, assets and liabilities. In the
future, our Board, or its Capital Stock Committee acting on its behalf,
may, in its discretion, allocate businesses, assets or liabilities to
the Digital group, or dispose of or transfer businesses, assets or
liabilities from the Digital group, subject to these tracking stock
policies. These policies also set general parameters for:
i. loans, asset transfers and commercial transactions between the
Digital group and the NYT group;
ii. specified extraordinary transactions, including repurchases of
tracking stock.
2. Upon consummation of the IPO, we will have a Board committee called the
Capital Stock Committee. As initially set-up, at least 50% of the
members of this Committee will be directors who had been elected by the
holders of the Class A and, after its issuance, Class C stockholders
(i.e., Cesan and Schacht); and we intend that this will be the
composition in the future. This Committee will have the authority
to interpret and oversee implementation of the tracking stock policies
and inter-group agreement and otherwise make decisions in areas that
may have disparate
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impact on holders of NYT stock and tracking stock. Such decisions must
be made in good faith and in a manner consistent with their fiduciary
duties to the Company and all of our common stockholders after giving
fair consideration to the potentially divergent interests and all other
relevant interests of the holders of the separate classes of our common
stock, including holders of tracking stock.
3. We have granted both NYTCo. and TCD options to members of the Company's
senior management and newsroom and advertising sales personnel at
THE NEW YORK TIMES and THE BOSTON GLOBE who are critical to the Digital
group's success, so as to align their economic interests with both the
NYT group and the Digital group.
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HOW WILL THE PERCENTAGE VOTING RIGHTS OF THE CLASS A HOLDERS BE AFFECTED?
1. Generally, the tracking stock must increase in value (which would
benefit the Class A holders through the retained interest) before the
aggregate percentage voting rights of the Class A holders are reduced.
Plus, the shares underlying the Company's retained interest will NOT
vote.
2. ON THE EFFECTIVE DATE OF THE IPO, ASSUMING 170 MILLION CLASS A SHARES
OUTSTANDING AT A $50 PRICE, 13,333,333 SHARES OF THE TRACKING STOCK
ISSUED TO THE PUBLIC AT A $15 IPO PRICE?
15/50 = .3 votes per Class C share
170,000,000 votes for A or 97.7% vote (down from
current 100%)
13,333,333 x .3 = 4,000,000 votes for C or 2.3% vote
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174,000,000 total votes
3. SAME ASSUMPTIONS, BUT 6 MONTHS LATER, ASSUMING A $20 CLASS C PRICE, A
$53 CLASS A PRICE, 1 MILLION CLASS C OPTIONS EXERCISED AND 4,230,764
ABUZZ (INCLUDING SPECIAL OPTIONS) CONVERTED AND 5,700,000 SHARES ISSUED
FOR AN ACQUISITION?
20/53 = .3774 votes per Class C share
Total Class C shares outstanding = 37,597,430
170,000,000 votes for A or 94.9% (down from
current 100%)
24,264,097 x .3774 = 9,157,270 votes for C or 5.1%
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179,157,270 total votes
4. ANNEX IV-EXAMPLE #1: 40 CLASS C SHARES (@$25) AND 100 CLASS A SHARES
(@$50) OUTSTANDING:
25/50= .5 votes per Class C share
100 votes for A or 83% vote
40x.5= 20 votes for C or 17% vote
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120 total votes
5. ANNEX IV-EXAMPLE #2: 40 CLASS C SHARES (@$75) AND 100 CLASS A (@$50)
OUTSTANDING:
75/50= 1.5 votes per Class C share
100 votes for A or 63% vote
40x1.5= 60 votes for C or 37% vote
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160 total votes
6. ANNEX IV-EXAMPLE #3: CLASS C VOTING RIGHTS CAPPED AT 40%: 40 CLASS C
SHARES (@$100) AND 100 CLASS A (@$50) OUTSTANDING:
100/50= 2 votes per Class C share (racheted down to 1.675 votes)
100 votes for A or 60% vote
40x2= 80 votes but racheted down to 67 votes for C to get to 40% vote
---
167 total votes
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HOW ARE AUTHORIZED CLASS A SHARES EAR-MARKED FOR USE?
<TABLE>
<CAPTION>
After Approval of
4/6/00 Proposals(1)
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<S> <C> <C>
Authorized A shares 300,000,000 300,000,000
Outstanding A shares 170,208,418 170,208,418
A shares reserved for Retirement Units and
other Awards (2) 2,040,279 2,040,279
A shares reserved for Stock Option Exercise 26,224,445 46,224,455
A shares reserved for ESPP Purchases 2,917,166 2,917,166
A shares reserved for Conversion of B shares 847,158 847,158
A shares reserved for Exchange for C shares
with premium --- ---
============= ============
Unreserved A shares 97,761,934 77,761,934
</TABLE>
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(1) Assuming no changes due to repurchases, B conversions, exercises and grants
since 4/6/00.
(2) Includes both shares reserved for unexercised awards and for future grants.
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<PAGE>
WHAT ARE THE OTHER PROPOSALS?
1. ELECTION OF DIRECTORS (Proposal 1)
2. EXTEND PLAN TERMS by 10 years for (a) employee stock and cash bonus
plans and (b) director option plan (Proposals 2 and 6)
3. SECTION 162 (M) APPROVALS - Reapprove material terms of performance
goals for annual and long-term performance awards under employee stock
and cash bonus plans, including increasing the maximum pay potential to
$3,000,000 (Proposals 2 and 4)
4. AUTHORIZE 20,000,000 ADDITIONAL SHARES FOR CLASS A EMPLOYEE STOCK
OPTIONS (Proposal 3)
5. RATIFICATION OF AUDITORS (Proposal 6)
