<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
McClatchy Newspapers, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
McClatchy Newspapers, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / 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 paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
MCCLATCHY NEWSPAPERS, INC.
2100 Q STREET
SACRAMENTO, CA 95816
MARCH 30, 1994
To Our Stockholders:
You are invited to attend the annual meeting of stockholders to be held at
9:00 a.m. on Wednesday, May 18, 1994 in Edgewater Room E of the Radisson Hotel,
500 Leisure Lane, Sacramento, CA 95815.
At the meeting, you will be asked to (i) elect directors for the coming
year, (ii) approve the McClatchy Newspapers, Inc. 1994 Employee Stock Option
Plan, and (iii) ratify the selection of the firm of Deloitte & Touche as
independent auditors of the Company for the 1994 fiscal year.
In addition, the Board of Directors will report on the Company's affairs
and a discussion period will be provided for questions and comments.
Whether or not you plan to attend the meeting, it is important that your
shares be represented. Accordingly, we ask that you sign, date and mail the
enclosed proxy in the envelope provided at your earliest convenience. By doing
so, your right to attend or vote at the meeting will in no way be limited.
Sincerely,
ERWIN POTTS
President and Chief Executive Officer
JAMES B. MCCLATCHY
Chairman of the Board
<PAGE> 3
MCCLATCHY NEWSPAPERS, INC.
2100 Q STREET
SACRAMENTO, CA 95816
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
MCCLATCHY NEWSPAPERS, INC.
TO BE HELD MAY 18, 1994
To the Stockholders:
The annual meeting of stockholders of McClatchy Newspapers, Inc. (the
"Company") will be held in Edgewater Room E of the Radisson Hotel, 500 Leisure
Lane (Highway 16 & Canterbury Road), Sacramento, California 95815, on Wednesday,
May 18, 1994, at 9:00 a.m. local time, for the following purposes:
1. The election of Directors;
2. To approve the McClatchy Newspapers, Inc. 1994 Employee Stock
Option Plan;
3. To ratify the appointment of Deloitte & Touche as the Company's
independent auditors for 1994; and
4. To transact such other business as may properly come before the
meeting and any postponement or adjournment thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement. Stockholders of record on the books of the Company on March 21, 1994
are entitled to notice of and to vote at the meeting or any postponement or
adjournment thereof. A list of stockholders entitled to vote at the meeting will
be available for inspection at the Company's offices, 2100 Q Street, Sacramento,
California, at least 10 days before the meeting.
By Order of the Board of Directors
WILMA C. FLACH,
Secretary
March 30, 1994
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED REPLY ENVELOPE. THIS WILL NOT
LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING.
<PAGE> 4
MCCLATCHY NEWSPAPERS, INC.
2100 Q STREET
SACRAMENTO, CALIFORNIA 95816
------------------------
PROXY STATEMENT
------------------------
Your proxy in the form enclosed is solicited by the Board of Directors of
the Company for use in voting at the annual meeting of stockholders to be held
on Wednesday, May 18, 1994. This Proxy Statement and the accompanying form of
proxy are being mailed to stockholders on or about March 30, 1994.
The shares represented by the proxies received, properly dated and
executed, and not revoked will be voted at the meeting. A proxy may be revoked
at any time before it is exercised by delivering to the Company a written notice
of revocation or a duly executed proxy bearing a later date, or by attending the
meeting and voting in person. Subject to any such revocation, all shares
represented by properly executed proxies will be voted in accordance with the
specifications on the enclosed proxy. If no such specifications are made, the
Class A shares will be voted FOR the election of the four nominees for Class A
Directors listed in this Proxy Statement and FOR approval of proposals 2 and 3
set forth in the Notice of Annual Meeting of Stockholders and described in this
Proxy Statement. Similarly, if no specifications are made, the Class B shares
will be voted FOR the election of the nine Class B Directors listed in this
Proxy Statement and FOR approval of proposals 2 and 3.
The Company will bear the expense of preparing, printing and mailing this
Proxy Statement and the proxies solicited hereby and will reimburse brokerage
firms and nominees for their reasonable expenses in forwarding solicitation
materials to beneficial owners of shares held of record by such brokerage firms
and nominees. In addition to the solicitation of proxies by mail, officers and
regular employees of the Company may communicate with stockholders either in
person or by telephone or telegraph for the purpose of soliciting such proxies;
no additional compensation will be paid for such solicitation.
OUTSTANDING SHARES AND VOTING RIGHTS
March 21, 1994 has been fixed as the record date for determining the
holders of Class A Common Stock and Class B Common Stock entitled to notice of
and to vote at the annual meeting. As of the close of business on such date, the
Company had outstanding 5,368,706 shares of Class A Common Stock, each of which
is entitled to one vote in the election of the four Class A Directors, no vote
in the election of the nine Class B Directors and one-tenth vote upon other
matters presented at the meeting, and 23,481,789 shares of Class B Common Stock,
each of which is entitled to no vote in the election of the four Class A
Directors, one vote in the election of the nine Class B Directors and one vote
upon other matters presented at the meeting. Election of the Class A and Class B
Directors will be by plurality of the votes cast by each respective class. The
affirmative vote of the holders of a majority of the aggregate voting power of
the shares of Class A Common Stock and Class B Common Stock present or
represented at the meeting is required for the approval of proposals 2 and 3.
Thus, abstentions have the same effect as a negative vote; broker non-votes are
not abstentions for this purpose.
ELECTION OF DIRECTORS
(PROPOSAL 1 ON PROXY)
The Restated Certificate of Incorporation of the Company provides that the
holders of Class A Common Stock have the exclusive right as a class to elect 25%
of the Company's directors, or the nearest larger whole number, but no vote with
respect to the election of the other directors. The holders of the Class B
Common Stock have the right to elect the remaining directors. At the meeting,
nine Class B Directors will be elected by the Class B Stockholders and four
Class A Directors will be elected by the Class A Stockholders.
<PAGE> 5
Unless you request on your proxy card that voting of your proxy be withheld
for any one or more of the following nominees for director, proxies of Class A
Common Stock will be voted for the election of the four nominees for Class A
Directors named below and proxies of Class B Common Stock will be voted for the
election of the nine nominees for Class B Directors named below, all to serve
until the next annual meeting of stockholders and until their successors are
elected or chosen. In the event any nominee is unable or declines to serve as a
director at the time of the meeting, the proxy will be voted for any nominee who
shall be designated by the present Board to fill such vacancy.
NOMINEES FOR CLASS A DIRECTORS
Joan F. Lane has been a Director of the Company since March 1989. From 1982
to 1992, Mrs. Lane served as Special Assistant to the Dean of the School of
Humanities and Sciences of Stanford University. She is currently a Special
Assistant to the Board of Trustees of Stanford University. She has served on the
board of directors of The Brown Group, Inc. from 1985 to the present, as a
director of the James Irvine Foundation from 1990 to the present, and as a
trustee of the San Francisco Foundation from 1984 to November 1991. She was a
member of the board of trustees of Smith College from 1978 to 1985, and chairman
of that board from 1982 to 1985. Mrs. Lane is 65 years old.
S. Donley Ritchey has been a Director of the Company since July 1985. He
retired from Lucky Stores in 1986, where he was chief executive officer and
chairman of its board of directors. Mr. Ritchey is a director of Pacific Telesis
Group, The Brown Group, Inc., Spreckels Industries, Hughes Markets, Inc., De La
Salle Institute and the Rosenberg and East Bay Community Foundations. He was
elected to the city council of the town of Danville, California in November 1987
and is currently Mayor of Danville. Mr. Ritchey is 60 years old.
William M. Roth has been a Director of the Company since September 1980. He
was chief financial officer for Matson Navigation Company from 1952 to 1961,
chairman of the board of Pacific Life Assurance Company from 1960 to 1963, and
U. S. Ambassador and Special Trade Representative from 1963 to 1969. He was a
member of the University of California Board of Regents for 16 years. Mr. Roth
is President of Roth Properties, a family controlled investment management
company. Mr. Roth is 77 years old.
Frederick R. Ruiz has been a Director of the Company since July 1993. He is
Chairman and chief executive officer of Ruiz Foods, Inc., a family-owned frozen
food manufacturer, having been a co-founder with his father of that business in
1964. He has served on the board of directors of Gottschalks, Inc. since 1992.
In 1992, Mr Ruiz' company received the U.S. Small Business Association's
National Entrepreneurial Success Award and was inducted into the SBA Hall of
Fame in Washington, D.C. Mr. Ruiz is a member of the board of the College of the
Sequoias Foundation; a member of the President's Advisory Board, Business
Advisory Council of the School of Business, and Board of Governor's Foundation,
and past chairman of the Valley Business Center, School of Business, all at
California State University, Fresno. He is a member of the board of trustees of
Valley Children's Hospital, Fresno, and serves on the boards of the American
Frozen Food Institute, California Hispanic Business College Fund, and is a
review board member for the U.S. Military Academy, as well as a member of the
steering committee of the Valley Business Conference. Mr. Ruiz is 50 years old.
NOMINEES FOR CLASS B DIRECTORS
William K. Coblentz has been a Director of the Company since March 1979. He
is a senior partner in the San Francisco law firm of Coblentz, Cahen, McCabe &
Breyer. He was a member of the board of directors of Pacific Telesis Group from
1976 to 1992 and is a member of the boards of directors of the Koret Foundation
and The Central Valley Foundation. From 1964 through 1980 Mr. Coblentz was a
member of the University of California Board of Regents and was its chairman for
two years. Mr. Coblentz is 71 years old.
Booth Gardner has been a Director of the Company since July 1993. In 1993
he was nominated to serve as the U.S. Ambassador to the General Agreement on
Tariffs and Trade (GATT) in Geneva, Switzerland. He was elected Governor of the
State of Washington in 1984 and held that office from 1985 to 1993. While
Governor, he served as chairman of the Western Governors' Association and
chaired the National Governors'
2
<PAGE> 6
Association's Committee on International Trade. Prior to his tenure as Governor
of Washington, he was county executive of Pierce County, Washington from 1980 to
1984. Mr. Gardner is a member of the board of trustees of the Menninger
Foundation and the board of advisors of the PEW Charitable Trusts. Mr. Gardner
is 57 years old.
William L. Honeysett has been a Director of the Company since July 1993 and
its Executive Vice President since February 1994. Prior to that date, he had
been Vice President, Operations since October 1991. Until October 1991 he was
publisher of The (Tacoma, Washington) News Tribune. Mr. Honeysett was a regional
president for Gannett Co., Inc. before becoming publisher in Tacoma. He is a
former director of the Pacific Northwest Newspaper Association. Mr. Honeysett is
56 years old.
Betty Lou Maloney(1) has been a Director of the Company since July 1975 and
Assistant Secretary of the Company since August 1980. Ms. Maloney is 73 years
old.
James B. McClatchy(1) is Chairman of the Company's Board of Directors,
having been elected to that position in April 1989; he also held that position
from August 1980 through July 1987. He has served as the Company's Publisher
from July 1987 to the present. Mr. McClatchy was a Director of the Company from
1943 through 1965, was again elected a Director in March 1976 and has served in
that capacity since that time. He is a former owner and publisher of several
weekly newspapers in California and Nevada. He is a board member and past
president of the Inter-American Press Association, board chairman and director
of the French American International School, and a director and president of The
Central Valley Foundation. Mr. McClatchy is 73 years old.
William Ellery McClatchy(1) has been a Director of the Company since March
1976 and Assistant Secretary since August 1980. Mr. McClatchy is 69 years old.
Erwin Potts has been the President of the Company since July 1987, its
chief executive officer since April 1989 and its chief operating officer since
1985. He was the Company's Executive Vice President from March 1985 through July
1987, and a Vice President from March 1979 through March 1985. In addition, Mr.
Potts has served as a Director of the Company since March 1976. He has served on
the board of directors of The News and Observer Publishing Company from 1990 to
the present. He is a member of the advisory board of the John S. Knight
Fellowship at Stanford University, and was a member of the advisory board of
University of North Carolina School of Journalism from 1989 to 1992. He is a
member of the Newspaper Association of America board of governors, a director of
the Sacramento Regional Foundation, and a former director of the California
Newspaper Publishers Association. Mr. Potts is 61 years old.
James P. Smith is Vice President, Finance and Treasurer of the Company. He
has been a Director of the Company since March 1982. He was named Vice
President, Finance in December 1985 and Treasurer in July 1980. Prior to that
time he had served as Assistant Treasurer. Mr. Smith served as Secretary from
July 1980 through January 1987. Mr. Smith has been the Company's chief financial
officer since 1980. Mr. Smith is 56 years old.
H. Roger Tatarian has been a Director of the Company since March 1982. He
was employed by United Press International from 1938 through 1972, and was its
vice president and editor-in-chief from 1963 through 1972. From 1972 until 1987
he was a professor of journalism and since 1987 he has been professor emeritus
of journalism at California State University, Fresno. He was a trustee, New York
Correspondents Fund, 1969 through 1972; member, Board of Governors, Overseas
Press Club, 1968 through 1969; member, Western Region Advisory Board, American
Press Institute, 1981 through 1984; and Consultant to the U. S. National
Commission for UNESCO, 1978 through 1982. Mr. Tatarian is 77 years old.
- ---------------
(1) James B. McClatchy and William Ellery McClatchy are brothers. Betty Lou
Maloney is their cousin by marriage.
3
<PAGE> 7
OTHER EXECUTIVE OFFICERS
Peter M. CaJacob has been Vice President, Human Resources of the Company
since December 1993. He joined the Company as its Director of Human Resources in
February 1990. From 1989 to February 1990 he was director of human resources for
the GenCorp Automotive Group and prior to that time held management positions in
human resources with Aerojet General Corporation and Whirlpool Corporation. Mr.
CaJacob served on the board of directors of the Industrial Relations Bureau of
the California Newspaper Publishers Association in 1990 and 1991. Mr. CaJacob is
50 years old.
Gregory E. Favre has been Vice President, News of the Company since January
1990 and Executive Editor of The Sacramento Bee since 1984. Prior to that he was
managing editor of the Chicago Sun Times and managing editor of the Chicago
Daily News. Mr. Favre is outgoing Vice President and incoming President (April
1, 1994) and member of the board of directors of the American Society of
Newspaper Editors. He was named California Newspaper Executive of the Year by
the California Newspaper Publishers Association in 1993. He served as President
of the California Society of Newspaper Editors during the 1988-1989 term. Mr.
Favre is 58 years old.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held five regular meetings and one organizational
meeting during 1993. The Board of Directors of the Company has standing
compensation and audit committees. The Company does not have a nominating
committee.
Mr. Coblentz, Mrs. Lane, Mr. Ritchey and Mr. Tatarian are the members of
the Compensation Committee. The Compensation Committee adopts and administers
compensation plans for executive officers and certain other employees of the
Company, including the Management By Objective Plan, the Executive Performance
Plan, the Employee Stock Purchase Plan, the 1987 Employees Stock Option Plan
and, if approved at the meeting, the 1994 Employees Stock Option Plan. The
Compensation Committee held three meetings in 1993.
Mr. Ritchey, Mr. Coblentz, Mrs. Lane and Mr. Tatarian are the members of
the Audit Committee. The Audit Committee recommends selection of the independent
auditors for the Company to the Board (selection being subject to ratification
by the stockholders), reviews the scope and results of the annual audit,
approves the services to be performed by the independent auditors, and reviews
the independence of the auditors, the performance and fees of the independent
auditors, the effectiveness and adequacy of the systems of financial reporting
and internal accounting controls, and the scope and results of internal auditing
procedures. The Audit Committee held four meetings during 1993.
All Board and Committee members attended more than 75% of the meetings of
the Board and/or Committees on which he or she served except H. Roger Tatarian,
who attended 69% of such meetings, and Frederick R. Ruiz and Booth Gardner, who
attended 67% of such meetings.
4
<PAGE> 8
STOCK OWNERSHIP
CLASS B COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class B Common Stock as of March 21, 1994 by (i) each
of the Company's Directors and nominees for Director, (ii) all executive
officers and Directors of the Company as a group, and (iii) each person known by
the Company to own beneficially more than 5% of the outstanding shares of its
Class B Common Stock.
<TABLE>
<CAPTION>
DIRECTORS, DIRECTORS AND NUMBER OF SHARES OF
EXECUTIVE OFFICERS AS A GROUP, AND 5% STOCKHOLDERS(2) CLASS B COMMON STOCK PERCENT
- --------------------------------------------------------------- -------------------- -------
<S> <C> <C>
James B. McClatchy............................................. 13,112,198(3) 55.8%
William K. Coblentz............................................ 11,215,240(4) 47.8%
William Ellery McClatchy....................................... 11,078,865(5) 47.2%
Erwin Potts.................................................... 10,000,000(6) 42.6%
William M. Roth................................................ 10,000,000(6) 42.6%
Molly Maloney Evangelisti...................................... 3,050,000 13.0%
Brown McClatchy Maloney........................................ 2,984,600(7) 12.7%
Betty Lou Maloney.............................................. 1,500,000 6.4%
All executive officers and directors as a group (15 persons)... 14,748,573 62.8%
</TABLE>
- ---------------
(2) All addresses: c/o McClatchy Newspapers, Inc., P.O. Box 15779, Sacramento,
CA 95852-0779.
(3) Includes: (i) 10,000,000 shares held under five separate trusts each with
2,000,000 shares and different income beneficiaries. James B. McClatchy,
William Ellery McClatchy, William K. Coblentz, William M. Roth and Erwin
Potts share joint voting and investment control with respect to these
trusts. James B. McClatchy disclaims beneficial ownership of all but the
2,000,000 shares in one such trust as to which he has a present income
interest. (ii) 1,078,865 shares over which James B. McClatchy, William
Ellery McClatchy and William K. Coblentz share joint voting and investment
control as co-executors under the will of Charles K. McClatchy, deceased.
James B. McClatchy disclaims beneficial ownership of these shares.
(4) Includes: (i) 10,000,000 shares held under five separate trusts each with
2,000,000 shares and different income beneficiaries. James B. McClatchy,
William Ellery McClatchy, William K. Coblentz, William M. Roth and Erwin
Potts share joint voting and investment control with respect to these
trusts. William K. Coblentz disclaims beneficial ownership of these shares.
(ii) 1,078,865 shares over which James B. McClatchy, William Ellery
McClatchy and William K. Coblentz share joint voting and investment control
as co-executors under the will of Charles K. McClatchy, deceased. William K.
Coblentz disclaims beneficial ownership of these shares. (iii) 136,375
shares with regard to which William K. Coblentz acts as co-trustee under one
trust agreement with voting and investment control shared with other
trustees. William K. Coblentz and his co-trustees disclaim beneficial
ownership of these shares.
(5) Includes: (i) 10,000,000 shares held under five separate trusts each with
2,000,000 shares and different income beneficiaries. James B. McClatchy,
William Ellery McClatchy, William K. Coblentz, William M. Roth and Erwin
Potts share joint voting and investment control with respect to these
trusts. William Ellery McClatchy disclaims beneficial ownership of all but
the 2,000,000 shares in one such trust as to which he has a present income
interest. (ii) 1,078,865 shares over which James B. McClatchy, William
Ellery McClatchy and William K. Coblentz share joint voting and investment
control as co-executors under the will of Charles K. McClatchy, deceased.
William Ellery McClatchy disclaims beneficial ownership of these shares.
(6) These shares are held under five separate trusts each with 2,000,000 shares
and different income beneficiaries. James B. McClatchy, William Ellery
McClatchy, William K. Coblentz, William M.
5
<PAGE> 9
Roth and Erwin Potts share joint voting and investment control with respect
to these trusts. Both Erwin Potts and William M. Roth disclaim beneficial
ownership of these shares.
(7) Includes 79,520 shares held in four trusts for the benefit of each of his
four children, one containing 22,380 shares, a second containing 20,980
shares, a third containing 19,080 shares, and a fourth containing 17,080
shares. Brown McClatchy Maloney has sole voting and investment control with
respect to these trusts. Brown McClatchy Maloney disclaims beneficial
ownership of these shares.
CLASS A COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock as of March 21, 1994 by (i) each
of the Company's Directors and nominees for Director, (ii) each of the Company's
executive officers, (iii) all executive officers and Directors of the Company as
a group, and (iv) each person known by the Company to own beneficially more than
5% of the outstanding shares of its Class A Common Stock. In addition, holders
are deemed to beneficially own shares of Class A Common Stock subject to stock
options which are currently exercisable or exercisable within sixty days of the
record date. A holder of Class B Common Stock is deemed to be the beneficial
owner of the same number of shares of Class A Common Stock under Rule 13d-3
under the Securities Exchange Act of 1934, as amended, on the basis that he or
she has the right, subject to the terms of the Stockholders Agreement discussed
later in this Proxy Statement, to acquire beneficial ownership of Class A Common
Stock by converting Class B Common Stock into Class A Common Stock. In
calculating the percentage of outstanding shares of Class A Common Stock
beneficially owned by each stockholder, the shares of Class A Common Stock which
each stockholder is deemed to own because of such stockholder's ownership of
Class B Common Stock are considered outstanding only with respect to such
stockholder. Consequently, the column which presents the percentage of deemed
beneficial ownership of Class A Common Stock does not reflect the beneficial
ownership of Class A Common Stock which is actually outstanding as of March 21,
1994.
<TABLE>
<CAPTION>
DEEMED
BENEFICIAL
OWNERSHIP OF
BENEFICIAL OWNERSHIP OF CLASS A COMMON STOCK
OUTSTANDING SHARES --------------------------
DIRECTORS, EXECUTIVE OF CLASS A NUMBER OF
OFFICERS, DIRECTORS AND COMMON STOCK SHARES OF
EXECUTIVE OFFICERS AS A GROUP, (INCLUDING SHARES CLASS A
AND 5% STOCKHOLDERS(8) HELD BY SPOUSE) COMMON STOCK PERCENT
---------------------------------------- ------------------------ ------------- --------
<S> <C> <C> <C>
James B. McClatchy...................... 60,000 13,172,198 71.3%
William K. Coblentz..................... 6,750(9) 11,221,990 67.7%
William Ellery McClatchy................ 3,850(9) 11,082,715 67.4%
Erwin Potts............................. 89,703(10) 10,089,703 65.3%
William M. Roth......................... 8,950(9) 10,008,950 65.1%
Molly Maloney Evangelisti............... 9,842 3,059,842 36.3%
Brown McClatchy Maloney................. -- 2,984,600 35.7%
Betty Lou Maloney....................... 3,750(9) 1,503,750 21.9%
Sue Maloney Stiles...................... -- 1,111,866 17.2%
Adair Rideout McClatchy................. -- 386,375 6.7%
Kevin Sorensen McClatchy................ -- 386,375 6.7%
William Briggs McClatchy................ -- 290,000 5.1%
Carlos Fugitt McClatchy................. -- 290,000 5.1%
James P. Smith.......................... 35,993(11) 35,993 (12)
Gregory E. Favre........................ 27,375(13) 27,375 (12)
William L. Honeysett.................... 23,186(14) 23,186 (12)
Peter M. CaJacob........................ 9,209(15) 9,209 (12)
S. Donley Ritchey....................... 5,750(9) 5,750 (12)
Joan F. Lane............................ 4,750(9) 4,750 (12)
H. Roger Tatarian....................... 4,750(9) 4,750 (12)
</TABLE>
6
<PAGE> 10
<TABLE>
<CAPTION>
DEEMED
BENEFICIAL
OWNERSHIP OF
BENEFICIAL OWNERSHIP OF CLASS A COMMON STOCK
OUTSTANDING SHARES --------------------------
DIRECTORS, EXECUTIVE OF CLASS A NUMBER OF
OFFICERS, DIRECTORS AND COMMON STOCK SHARES OF
EXECUTIVE OFFICERS AS A GROUP, (INCLUDING SHARES CLASS A
AND 5% STOCKHOLDERS(8) HELD BY SPOUSE) COMMON STOCK PERCENT
---------------------------------------- ------------------------ ------------- --------
<S> <C> <C> <C>
Frederick R. Ruiz....................... 1,000 1,000 (12)
Booth Gardner........................... -- --
The Capital Group, Inc. ................ 555,300 555,300 10.3%
The Central Valley Foundation........... 500,000 500,000 9.3%
Wellington Management Company........... 454,470 454,470 8.5%
Vanguard/PrimeCap Fund, Inc. ........... 300,000 300,000 5.6%
The Times Mirror Company................ 293,900 293,900 5.5%
All executive officers and directors as
a group (14 persons as Beneficial
Owners, 14 persons as Deemed
Beneficial Owners).................... 285,016 15,033,589 74.0%
</TABLE>
- ---------------
(8) All addresses are c/o McClatchy Newspapers, Inc., P. O. Box 15779,
Sacramento, CA 95852-0779, except as follows:
<TABLE>
<S> <C>
The Capital Group, Inc. Vanguard/PrimeCap Fund, Inc.
333 South Hope Street P. O. Box 2600
Los Angeles, CA 90071 Valley Forge, PA 19482
The Central Valley Foundation The Times Mirror Company
235 Montgomery Street, Suite 1120 Times Mirror Square
San Francisco, CA 94104 Los Angeles, CA 90053
Wellington Management Company
75 State Street
Boston, MA 02109
</TABLE>
(9) Includes 3,750 shares subject to stock options which are currently
exercisable.
(10) Includes 76,375 shares subject to stock options which are currently
exercisable.
(11) Includes 31,250 shares subject to stock options which are currently
exercisable.
(12) Percentage is less than one percent.
(13) These shares are subject to stock options which are currently exercisable.
(14) Includes 15,300 shares subject to stock options which are currently
exercisable.
(15) Includes 8,950 shares subject to stock options which are currently
exercisable.
AGREEMENT AMONG CLASS B STOCKHOLDERS
The owners of all outstanding shares of Class B Common Stock of the Company
are parties to an agreement which will terminate September 17, 2047 (unless
terminated earlier in accordance with its terms), in which they have agreed, for
themselves, their successors and assigns, that subject to certain exceptions no
one of them may make any transfer of any shares of Class B Common Stock (unless
such shares are, as generally permitted by the agreement, first converted into
Class A Common Stock) except to one or more "Permitted Transferees." For
purposes of the agreement, a Permitted Transferee is any current holder of Class
B Common Stock of the Company; any lineal descendant of Charles K. McClatchy
(1858-1936); or a trust for the exclusive benefit of, or in which all of the
remainder beneficial interests are owned by, one or more of such lineal
descendants.
In the event that a party to the agreement attempts to transfer any shares
of Class B Common Stock or any interest therein in violation of the agreement,
or upon the happening of certain other events enumerated in the agreement as
"Option Events," the remaining parties will acquire options to purchase the
Class B
7
<PAGE> 11
Common Stock of the party attempting to transfer the same or otherwise affected
by the particular Option Event. Such options to purchase will entitle each
remaining party to purchase that number of shares of Class B Common Stock which
is proportionate to that party's respective holdings of Class B Common Stock
prior to such purchase. If all such shares are not purchased by the remaining
parties, the Company will have the option to purchase the remaining shares. In
general, any shares not so purchased pursuant to this procedure may thereafter
be converted into shares of Class A Common Stock and then transferred freely
(unless following such conversion the outstanding shares of Class B Common Stock
would constitute less than 25% of the total number of all outstanding shares of
Common Stock of the Company). The intent of the foregoing agreement is to
preserve family control of the Company. Such agreement may be terminated by the
vote of the holders of 80% of the outstanding shares of Class B Common Stock who
are subject to such agreement.
COMPENSATION
DIRECTORS' COMPENSATION
Nonemployee Directors, including for this purpose Betty Lou Maloney and
William Ellery McClatchy, are currently compensated at the rate of $24,000 per
year plus $1,000 per day for attendance at meetings of the Board of Directors
and $750 per day for attendance at Committee meetings, subject to a limitation
to two meetings in any one day, whether Committee or Board and Committee.
S. Donley Ritchey and H. Roger Tatarian receive additional compensation for
consulting services in connection with special long-range planning projects at
the rate of $900 per day for attendance at planning meetings; Mr. Ritchey
receives an additional $2,000 per quarter for his services relating to these
projects. H. Roger Tatarian also receives $625 per month for services rendered
as an editorial consultant.
In 1991, the Company's stockholders approved the 1990 Directors' Stock
Option Plan, pursuant to which each nonemployee Director receives on the date of
each annual meeting of stockholders at which he or she is elected an automatic
grant of an option for 1,500 shares of Class A Common Stock. The stock options
are granted at fair market value, have a ten-year term and vest equally over
four years commencing on March 1 following the date of award.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is composed entirely of Directors who are not
employees of the Company. The Compensation Committee sets the compensation of
the Chief Executive Officer and Chairman of the Board and otherwise reviews and
administers the Company's compensation program as it applies to other executive
officers.
The principal elements of the Company's executive compensation program are
(1) annual base salary, (2) annual cash bonus based on assessment of success in
meeting performance objectives on an individual, unit and/or Company-wide basis,
(3) cash compensation under the Executive Performance Plan based upon growth in
earnings per share of the Company's stock and year-over-year improvement in
pretax income, and (4) stock option awards under the employee stock option plans
providing equity compensation, the value of which will ultimately be determined
by growth over time in the market price of the Company's stock. Together these
elements constitute an integrated compensation program which focuses on both
short-term and long-term performance utilizing a combination of cash and equity
incentives. The program is designed to reward and create incentives for
excellence in individual achievement as well as Company performance.
In evaluating Company performance, the Committee considers not only
increase in value of the Company's stock, but other performance factors, such as
improvement in revenue and earnings, growth in circulation, product excellence
and market acceptance, sound strategic planning, development of new products and
services, and community involvement and good corporate citizenship. In
evaluating individual performance of key executives, the Committee also reviews
such factors as leadership, employee morale and individual achievement.
8
<PAGE> 12
The Committee believes the Company's established compensation program is
vital to the achievement of Company objectives, in that it will:
- Enable the Company to attract and retain key executives essential to the
long-term success of the Company;
- Motivate and reward senior executives for development and achievement of
sound strategic business objectives; and
- Provide opportunity to selected executives to acquire a proprietary
interest in the success of the Company through stock ownership under the
Company's employee stock option plans and employee stock purchase plan.
The Committee sets the salary and annual cash bonus of the Chairman of the
Board and the Chief Executive Officer and, after review, acting on the
recommendation of the CEO, approves the annual cash compensation of other named
executive officers. The Committee also administers the Company's Employee stock
option plans and the Executive Performance Plan, and in so doing, designates all
persons who will receive awards and sets the amount, form and other conditions
of the award.
It is the Company's policy generally to qualify compensation paid to
executive officers for deductibility under applicable provisions of the Internal
Revenue Code, including new Section 162(m). The Company is submitting for a vote
of its stockholders at its 1994 annual meeting its 1994 Employee Stock Option
Plan, which is intended to meet the applicable requirements of Section 162(m).
However, the Company may determine from time to time to pay compensation to its
executive officers that may not be deductible.
COMPENSATION OF EXECUTIVE OFFICERS, 1993
Salary and incentive levels of the Company's executive officers for fiscal
year 1993 were reviewed by the Compensation Committee in late 1992. Bonuses were
subsequently fixed and paid in the same manner based on a year-end assessment of
results versus predetermined objectives.
Salaries. The Committee granted increases in salary to executive officers
ranging from 0% to 5.1% over the prior year salary based upon an internal
comparative review of salary levels at nine companies within the industry (all
of which are included in the Company's established peer group), internal pay
equity considerations, general economic conditions, financial performance of the
Company, and individual responsibility, experience and job performance. These
increases were consistent with the wage and salary increases granted throughout
the Company. While all of this information was taken into consideration by the
Committee, no special attempt was made to set executive salaries in any
particular relationship to any of these factors.
Bonus Awards. Except as to the CEO and the Chairman, awards under the MBO
annual bonus plan were based on full or partial achievement of preestablished
performance goals. Each performance objective was weighted to reflect its
relative importance to specific short-term and long-term financial, strategic
and/or management practices goals. To determine the bonus to which a participant
is entitled, a certain number of points up to 100 were awarded to each executive
officer based upon his performance during the year. A certain percentage of
total points possible, typically not exceeding 10%, is reserved for subjective
evaluation. Points are applied as a percentage, to an amount equal to a
predetermined percent (depending on the particular participant) of his or her
base salary during the year.
In the case of the CEO, a maximum bonus award is specified in his
employment contract with the Company. The bonus award as respects the Chairman
is unspecified and at the discretion of the Committee. For these two executive
officers, the Committee subjectively assessed overall accomplishments. Typical
performance objectives applicable to Mr. Honeysett, Mr. Smith and Mr. Favre
include achievement of (i) Company-wide financial performance levels against
annual budgets, (ii) predetermined functional operating goals, and (iii) product
and management improvement objectives.
Stock Option Awards. No stock options were awarded in 1993. Stock option
awards are usually granted each year to selected management personnel, including
all executive officers permitted by the terms of the employee stock option plans
to participate, but the 1994 awards which customarily would have been made in
9
<PAGE> 13
late 1993 were not made until January 1994.(16) In fixing these grants, the
Committee through subjective evaluation processes determines the award for the
CEO, and as to the three remaining executive officers participating in the stock
option plan, considers the recommendation of the CEO. Elements given weight by
the Committee in considering the number of options to be awarded include
individual responsibility and accountability, anticipated contributions, and
long-term value of the participant to the Company. The process employed by the
Committee in determining individual awards under the Company's employee stock
option plans, including those of executive officers, relates primarily to levels
of responsibility but also includes subjective factors not subject to
predetermined specific criteria.
Executive Performance Incentive Awards. Awards for 1993 under the Company's
Executive Performance Plan ("EPP") were made in late 1992. These awards are
comprised of EPS Units and Performance Units. An EPS Unit represents a
contingent right to receive cash in an amount equal to the earnings (as defined
in the EPP) attributable to one share of the Company's stock. An Improvement
Unit represents a contingent right to receive cash in an amount equal to $1
times the number of percentage points not in excess of 25 by which pretax
earnings for the year of grant exceed the pretax earnings for the prior year.
The award vests over a period of four years, commencing March 1 of the year
following the year for which the grant is made. In 1993, a total of $156,591 was
awarded to the Company's executive officers under the EPP.
While EPP compensation is tied to the Company's stock and financial
performance, executives selected as participants and the number of EPS Units and
Improvement Units awarded is set after review, acting on the recommendation of
the CEO. EPP awards contribute to keeping participating executives sharply
focused upon maintenance of strong stockholder value even in challenging
economic environments. The selection of participants and determination of award
units relates primarily to levels of responsibility, but also includes
subjective factors not subject to specific criteria.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER, 1993
Erwin Potts, the Company's Chief Executive Officer, has entered into an
employment agreement with the Company, described below at page 15, which
provides that his annual cash bonus will not exceed fifty percent of his annual
base salary.
Mr. Potts' 1993 salary was $485,000, the same as in 1992, reflecting the
Company's goals of tightly restraining costs and maintaining profitability in
the face of an anticipated recessionary-to-flat economy in the Company's
principal markets for 1993.
Mr. Potts' annual bonus for 1993, awarded in January 1994, was not based on
specific predetermined financial targets. The Committee based his bonus award
upon a year-end 1993 review of the Company's overall results, taking into
account the level of his responsibility and accountability, and his individual
performance as the Company's Chief Executive Officer. The $220,000 bonus awarded
to Mr. Potts by the Compensation Committee at year end reflected the Company's
financial and operational successes in 1993 under his direction. Revenues for
the year increased 2.0% while operating expenses were held to a modest 1.5%
increase, for a record cash flow of $90.7 million, despite a California economy
which continued in recession, lagging the upturn in the national economy.
Revenues from the Company's non-California properties reached a high of 32% of
total Company revenue for the year. These financial results produced an accrual
to Mr. Potts under the fixed formula of the EPP of cash compensation of
$48,843.(17) A significant accomplishment in 1993 under Mr. Potts' leadership
was the initiation of the expansion of Big Valley Distribution Co., the
Company's regional preprint distribution company, into a national company known
as The Newspaper Network, Inc., qualifying it to do business in all 50 states,
and the launching of a campaign to make it the nation's leading network for the
one-order, one-bill sale of advertising preprints in the nation's newspapers.
The Company also expanded its experiments with audiotex, facsimile on demand,
and similar
- ---------------
(16) On January 12, 1994, stock option awards were granted to the named
executive officers in the following amounts: to Erwin Potts, 19,600; to
William L. Honeysett, 11,600; to James P. Smith, 9,600; and to Gregory E.
Favre, 9,000. James B. McClatchy does not participate in the employee stock
option plan.
(17) These sums are not immediately available to Mr. Potts, but vest at the rate
of 25% over a four-year period commencing March 1, 1994.
10
<PAGE> 14
new technologies, and anticipates becoming a supplier to the nation's
"information superhighways" of customized information from each of its newspaper
markets.
The Committee, in setting Mr. Potts' salary and bonus, and in fixing the
number of stock option awards awarded him under the 1987 Employee Stock Option
Plan, and EPS and Improvement Units awarded him under the EPP, weighed the level
of responsibility and accountability to which he is held as the Chief Executive
Officer of the Company, as well as individual performance expectations and
standards set for him by the Committee.
The tables which follow, and accompanying narrative, reflect the decisions
covered by the above discussion.
WILLIAM K. COBLENTZ, Chairman
JOAN F. LANE
S. DONLEY RITCHEY
H. ROGER TATARIAN
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company for the fiscal years December 31, 1991, 1992
and 1993:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(18) OPTIONS(#) ($)(19)
- ----------------------------------- ----- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Potts, Erwin 1993 485,000 220,000 48,843 0 15,792
President 1992 485,000 200,000 101,532 25,000 16,587
& CEO 1991 470,000 155,000 8,809 25,000 17,320
Honeysett, William L.(20) 1993 315,016 87,511 38,253 0 8,418
Executive Vice President 1992 300,000 82,524 70,810 12,000 10,271
1991 258,015 48,750 0 15,000 6,320
Smith, James P. 1993 253,500 49,433 28,082 0 8,718
Vice President, 1992 245,000 47,673 58,420 10,000 10,283
Finance & CFO 1991 235,000 37,850 5,061 9,000 10,642
McClatchy, James B. 1993 206,024 30,000 0 0 20,158
Chairman of the 1992 208,000 30,000 0 0 10,283
Board & Publisher 1991 200,000 25,000 0 0 10,642
Favre, Gregory E. 1993 205,010 47,040 23,822 0 8,714
Vice President, 1992 195,000 42,829 49,360 9,000 10,172
News 1991 185,000 39,294 4,308 8,000 10,284
</TABLE>
- ---------------
(18) Represents earnings accrued under the Company's Executive Performance Plan.
These earnings are vested and paid out in four equal annual installments of
25% each commencing March 1 following the year for which the award is made;
no portion of the amount earned in 1993 was paid to the participants in
1993.
(19) This sum includes (i) Company contributions to the Company's 401(k) Plan on
behalf of each of the named executive officers to match pre-tax elective
deferral contributions (included under Salary) made by each to such Plan,
and (ii) premium payments to continue life insurance coverage under the
Group Executive Life Insurance Plan at a level not otherwise available
under the Company's standard life insurance coverage. The amount of the
contribution to the Company's 401(k) Plan for the named executive officers
for 1993 was $5,996; for 1992 the amount was $5,819; for 1991 the amount
was $5,650, except as to Mr. Honeysett, for whom the Company contributed
$3,986.
(20) Mr. Honeysett became an executive officer on October 1, 1991.
11
<PAGE> 15
STOCK OPTION AWARDS
No options were awarded in calendar year 1993. The Company customarily
awards options annually in the latter part of a year for the ensuing year, but
this practice was not followed in 1993 and the granting of 1994 awards was
delayed until January 12, 1994.
The following table contains information concerning the grant of stock
options on January 12, 1994 under the Company's 1987 Employee Stock Option Plan
to the five most highly compensated executive officers. In addition, there are
shown the hypothetical gains or "option spreads" that would exist for the
respective options based on assumed rates of annual compound stock price
appreciation of 5% and 10% from the date of grant over the full option term.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS(21) REALIZABLE VALUE AT
-------------------------------------------------- ASSUMED ANNUAL
SECURITIES % OF TOTAL RATES OF STOCK
UNDERLYING OPTIONS EXERCISE PRICE APPRECIATION
OPTIONS GRANTED TO OR BASE FOR OPTION TERM(22)
GRANTED EMPLOYEES IN PRICE EXPIRATION -------------------
NAME (#) JANUARY 1994 ($/SH) DATE 5% 10%
- --------------------------------- ----------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Potts, Erwin..................... 19,600 18.75% $ 22.625 1-12-2004 $278,883 $706,745
Honeysett, William L. ........... 11,600 11.10% 22.625 1-12-2004 165,053 418,277
Smith, James P. ................. 9,600 9.19% 22.625 1-12-2004 136,596 346,161
McClatchy, James B. ............. 0 N/A
Favre, Gregory E. ............... 9,000 8.61% 22.625 1-12-2004 128,058 324,526
</TABLE>
- ---------------
(21) Annual stock option grants consist of stock options granted based upon
assessment by the Compensation Committee of the individual's past
performance, level of responsibility and accountability, anticipated future
contributions and long-term value to the Company. Stock options are granted
at fair market value, have a ten-year term and vest equally over four years
commencing on March 1 following the date of award.
(22) Since the ten-year option term extends beyond the normal retirement date of
the named executive officers and by the terms of the 1987 Employee Stock
Option Plan cannot then be exercised, the table below illustrates the
option values for these executive officers at their normal retirement
dates:
<TABLE>
<CAPTION>
NORMAL
OPTIONS RETIREMENT
NAME GRANTED (#) DATE 5% 10%
------------------------------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C>
Potts, Erwin........................ 19,600 1-12-1997 $ 69,899 $146,782
Honeysett, William L. .............. 11,600 1-12-2002 125,308 300,135
Smith, James P. .................... 9,600 1-12-2003 119,748 294,947
Favre, Gregory E. .................. 9,000 1-12-2000 69,252 157,109
</TABLE>
In addition to the foregoing table, the following supplemental information
should be considered, using the same ten-year option term:
<TABLE>
<CAPTION>
5% 10%
------------- -------------
<S> <C> <C>
Per share value, base price plus
appreciation................................ $36.8537 $58.6834
Shareholder value of $1,000 invested at
$22.625 per share........................... $1,629 $2,594
McClatchy Newspapers, Inc. Shareholder Value
at $22.625 per share-$653 million at January
12, 1994.................................... $1.1 billion $1.7 billion
</TABLE>
12
<PAGE> 16
OPTION EXERCISES AND HOLDINGS
The following table shows the number of shares of Class A Common Stock
represented by outstanding stock options held by each of the five most highly
compensated executive officers as of December 31, 1993 and the value of such
options based on the closing price of the Company's Class A Common Stock on
December 31, 1993. The exercise price of shares represented by certain of these
options was higher than the closing price of the stock at year end with the
result that those options were "out of the money" on that date. No stock option
was exercised by any executive officer in 1993.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FY-END (#) AT FY-END ($)
------------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------- ------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
Potts, Erwin........................... 55,875 56,125 $385,468.75 $374,218.75
Honeysett, William L. ................. 7,850 24,450 55,875.00 145,937.50
Smith, James P. ....................... 23,375 21,625 144,500.00 125,937.50
McClatchy, James B. ................... 0 0
Favre, Gregory E. ..................... 20,125 19,875 127,312.50 118,312.50
</TABLE>
13
<PAGE> 17
FIVE-YEAR PERFORMANCE GRAPH
The SEC requires that the Company include in this proxy statement a
line-graph presentation comparing cumulative, five-year stockholder returns on
an indexed basis with (i) a broad equity market index and (2) an industry index
or peer group. Set forth below is a line graph comparing the percentage change
in the cumulative total stockholder return on the Company's Class A Common Stock
against the cumulative total return of the S&P Midcap 400 Index and a Peer Group
Index for a period of five fiscal years ended December 31, 1993.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG MCCLATCHY NEWSPAPERS, INC.,
S&P MIDCAP 400 INDEX, AND NEWSPAPER INDUSTRY INDEX
<TABLE>
<CAPTION>
S&P MIDCAP NEWSPAPER
MEASUREMENT PERIOD MNI 400 INDEX INDUSTRY INDEX
<S> <C> <C> <C>
12/31/88 100 100 100
12/31/89 140 136 121
12/31/90 120 129 96
12/31/91 119 193 115
12/31/92 133 216 131
12/31/93 168 246 153
</TABLE>
* $100 INVESTED ON 12/31/88 IN STOCK OR INDEX --
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDED DECEMBER 31.
The Peer Group Index is comprised of the following publicly-traded
newspaper publishing companies, and is weighted according to market
capitalization as of the end of each year: (1) A. H. Belo Corporation, (2)
Central Newspapers, Inc., (3) Dow Jones & Company, (4) E. W. Scripps Company,
(5) Gannett Co., Inc., (6) Knight-Ridder, Inc., (7) Lee Enterprises, Inc., (8)
McClatchy Newspapers, Inc., (9) Media General, Inc., (10) The New York Times
Company, (11) Pulitzer Publishing Company, (12) Times Mirror Company, (13)
Tribune Company and (14) Washington Post Company.
Central Newspapers, Inc. and E. W. Scripps Company were added to the Peer
Group Index this year because five-year stock information became available for
both companies. The addition of these two companies did not change the graph for
the peer group.
14
<PAGE> 18
PENSION PLANS
The following table shows the estimated annual pension benefits payable to
the executive officers named in the Summary Compensation Table at normal
retirement age (age 65) under the Company's qualified defined benefit pension
plan, as well as its nonqualified supplemental pension plan that provides
benefits that would otherwise be denied participants by reason of certain
Internal Revenue Code limitations on qualified plan benefits, based on
remuneration that is covered under the plans and years of service with the
Company:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------------------------------------
REMUNERATION 5 10 15 20 25 30 35
- ------------ -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$200,000 $ 15,000 $ 30,000 $ 45,000 $ 60,000 $ 75,000 $ 90,000 $ 105,000
350,000 26,250 52,500 78,750 105,000 131,250 157,500 183,750
500,000 37,500 75,000 112,500 150,000 187,500 225,000 262,500
650,000 48,750 97,500 146,250 195,000 243,750 292,500 341,250
800,000 60,000 120,000 180,000 240,000 300,000 360,000 420,000
950,000 71,250 142,500 213,750 285,000 356,250 427,500 498,750
</TABLE>
Benefits under the qualified defined pension plan are computed using basic
compensation exclusive of overtime and other compensation; benefits under the
supplemental plan are calculated using basic salary plus any annual cash bonus
awarded. Covered compensation for the named executive officers would consist of
the salary and bonus set forth in the Summary Compensation Table above, and for
the named executive officers as of the end of the last calendar year is: Erwin
Potts, $705,000; William L. Honeysett, $402,527; James P. Smith, $302,933; James
B. McClatchy, $236,024; Gregory E. Favre, $252,050.
The estimated credited years of service at December 31, 1993, for each
named executive is as follows: Erwin Potts, 17.67; William L. Honeysett, 7.42;
James P. Smith 19.00; James B. McClatchy 24.23; Gregory E. Favre, 9.17.
EMPLOYMENT AGREEMENT
The Company has an Employment Agreement (the "Agreement") with its Chief
Executive Officer, Erwin Potts. The Agreement expires on October 16, 1994, and
provides for a base salary of not less than $400,000 per year. If during the
term of the Agreement Mr. Potts' employment is involuntarily terminated for any
reason other than "cause," "mental incompetence" or "disability," or if he
resigns for "good reason" (as these terms are defined in the Agreement), he
would be entitled to a severance payment in an amount equal to his base salary,
at the rate then in effect, for the balance of the term. The severance payment
may be made in a lump sum or in five equal annual installments, at Mr. Potts'
election (subject to the approval of the Board of Directors). In addition, if a
severance payment is made, Mr. Potts' group insurance coverage would be
continued for the balance of the term of the Agreement or until he becomes
eligible for comparable coverage as a result of reemployment, whichever is
earlier. If during the term of the Agreement Mr. Potts' employment is terminated
because of his disability, he would be entitled to a disability benefit in an
amount equal to 50% of his base salary at the rate then in effect, reduced by
all other disability benefits that are payable to him under the Company's group
insurance plan and all federal or state insurance programs. The disability
benefit would be payable for the balance of the term of the Agreement or until
disability benefits under the Company's group insurance plan are discontinued,
whichever is earlier. In addition, Mr. Potts' group insurance benefits would be
continued as long as the disability benefit is payable. In the event of Mr.
Potts' death during the term of the Agreement, his surviving spouse may continue
her coverage under the Company's group health insurance for her life.
15
<PAGE> 19
APPROVAL OF 1994 EMPLOYEE STOCK OPTION PLAN
(PROPOSAL 2 ON PROXY)
On January 26, 1994, the Company's Board of Directors adopted the 1994
Employee Stock Option Plan (the "1994 Option Plan"). A total of 650,000 shares
of Class A Common Stock is reserved for issuance upon the exercise of options
which may be granted under the 1994 Option Plan. If any option granted under the
1994 Option Plan expires or terminates for any reason without having been
exercised in full, then the unpurchased shares subject to that option will once
again be available for additional option grants.
The purpose of the 1994 Option Plan is to obtain for the Company and its
stockholders the commitment and motivation inherent in stock ownership by those
persons upon whose judgment, initiative and efforts the Company is substantially
dependent for the successful operation of its business. The Company believes
that stock ownership will provide such persons with a significant incentive to
remain with and increase their efforts on behalf of the Company and its
subsidiaries. The Company also believes that the existence of the 1994 Option
Plan is an effective means for attracting outstanding new employees.
Employees of the Company (including officers and directors who are
employees) are eligible for the grant of options under the 1994 Option Plan.
Approximately 26 employees are currently considered for such grants. The awards
may be granted in the form of nonqualified options or as incentive stock options
("ISOs") intended to qualify for favorable tax treatment under Section 422 of
the Internal Revenue Code of 1986 (the "Code.") The exercise price for all
options is 100% of the fair market value of Class A Common Stock on the date of
grant. With respect to any optionee who owns shares possessing more than 10% of
the voting rights of the Company's outstanding capital stock, the exercise price
for any ISO must be equal to at least 110% of the fair market value of the Class
A Common Stock on the date of grant. The term of an option cannot exceed 10
years. Options expire not later than 30 days following a termination of
employment other than by death, disability or retirement, 90 days following
retirement (unless a longer period is specified in the option agreement) or 12
months following the optionee's permanent disability or death. In addition, no
optionee may be granted options in any calendar year to purchase shares of Class
A Common Stock in excess of 150,000 shares.
A committee consisting of two or more disinterested members of the Board of
Directors of the Company administers the Option Plan. The Committee selects the
optionees, determines the number of shares to be made subject to each grant, and
prescribes the other terms and conditions of each award, including, but not
limited to, the exercisability or vesting of options. An option agreement may
provide that the exercise price may be paid in cash, by surrendering shares of
Class A Common Stock held by the optionee for at least 12 months, or by a
combination of these methods. The Committee, in its sole discretion, may cancel
options which are exercisable and pay the optionee cash and/or stock in
settlement of the cancelled options.
The Committee has full discretion to determine the number and amount of
options to be granted to key employees under the 1994 Option Plan, subject to an
annual limitation on the total number of options that may be granted to any
optionee. Therefore, the benefits and amounts that will be received by each of
the named executive officers, the executive officers as a group and all other
key employees under the 1994 Option Plan are not presently determinable.
No options have been awarded under the 1994 Option Plan. The market value
of the Class A Common Stock as of March 21, 1994 was $23.625 per share.
Federal Income Tax Consequences. The federal tax consequences of
nonqualified (nonstatutory) stock options and ISOs are complex and subject to
change. The following summary is intended only as a general guide as to federal
income tax consequences. A taxpayer's particular situation may be such that some
variation of the general rules is applicable.
Options designated as ISOs are intended to fall within the provisions of
Section 422 of the Code. An optionee does not realize any taxable income as the
result of the grant or exercise of such an option. For
16
<PAGE> 20
employees who do not dispose of their shares for two years following the date
the option was granted nor within 12 months following the transfer of the shares
upon exercise of the option, the gain on sale of the shares (which is defined to
be the difference between the sale price and the purchase price of the shares)
will be taxed as long-term capital gain. If an employee is entitled to long-term
capital gain treatment upon a sale of the stock, the Company will not be
entitled to any deduction for federal income tax purposes. If an optionee
disposes of shares within two years after the date of grant or within one year
from the date of exercise, the transaction is deemed a "disqualifying
disposition." In a disqualifying disposition, the difference between the option
price and the fair market value of the shares at date of exercise (not to exceed
the gain realized on the sale) will be taxed at ordinary income rates at the
time of the disposition. Any gain in excess of that amount will be long-term or
short-term capital gain, depending on the length of time the stock was held. If
no gain is realized, there will be no ordinary income, and any loss will be a
long-term or short-term capital loss. Any ordinary income realized by the
optionee upon the disposition of stock will be deductible by the Company for
federal income tax purposes.
Nonstatutory stock options have no special tax status. An optionee does not
realize any taxable income as the result of the grant of an option. Upon
exercise of an option, the optionee normally realizes ordinary income in the
amount of the difference between the option price and the fair market value of
the stock on the date of exercise and is subject to withholding of tax. Upon the
sale of option shares, any gain or loss, based on the difference between the
sale price and the fair market value on the date of recognition of income, will
be taxed as short-term or long-term capital gain or loss, depending upon the
holding period from the date of recognition of income. No tax deduction is
available to the Company with respect to the grant of the option or the sale of
stock acquired pursuant thereto. The Company is entitled to a deduction equal to
the amount of ordinary income that the optionee is required to recognize as a
result of the exercise of the option.
Somewhat different tax rules apply to optionees who are directors, officers
or 10% stockholders of the Company.
Unless marked to the contrary, proxies received will be voted FOR approval
of the 1994 Option Plan. The affirmative vote of the holders of a majority of
the aggregate voting power of the shares of Class A and Class B Common Stock
present or represented at the meeting is required for approval of the 1994
Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 1994
EMPLOYEE STOCK OPTION PLAN.
RATIFICATION OF INDEPENDENT AUDITORS
(PROPOSAL 3 ON PROXY)
The Board of Directors has appointed, subject to ratification by the
stockholders, Deloitte & Touche as independent auditors for the current fiscal
year ending December 31, 1994. Representatives of Deloitte & Touche are expected
to be present at the annual meeting with the opportunity to make a statement if
they desire to do so and to be available to respond to appropriate questions.
An affirmative vote of a majority of the aggregate voting power of the
shares of Class A and Class B Common Stock present or represented at the meeting
is required for ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF DELOITTE &
TOUCHE AS THE COMPANY'S INDEPENDENT AUDITORS.
OTHER MATTERS
The Board of Directors does not know of any business to be presented at the
annual meeting other than the matters set forth above, but if other matters
properly come before the meeting it is the intention of the persons named in the
proxies to vote in accordance with their best judgment on such matters.
Pursuant to SEC regulations, the Company is required to identify the names
of persons who failed to file or filed late a report required under Section 16
of the Securities Exchange Act. Generally, the reporting regulations under
Section 16 require directors, executive officers and greater than 10%
stockholders to report changes in ownership of Company securities. Peter M.
CaJacob, an executive officer of the Company, filed
17
<PAGE> 21
Form 3, Initial Statement of Beneficial Ownership of Securities, reporting his
being named the Company's Vice President, Human Resources, approximately nine
weeks late.
Proposals of stockholders intended to be presented at the Company's 1995
annual meeting of stockholders must be received at the corporate Secretary's
Office, 2100 Q Street, Sacramento, California 95816, no later than November 30,
1994, to be considered for inclusion in the proxy statement and form of proxy
for that meeting.
By Order of the Board of Directors
WILMA C. FLACH
Secretary
March 30, 1994
18
<PAGE> 22
MCCLATCHY NEWSPAPERS, INC.
CLASS A COMMON PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 1994.
The undersigned hereby appoints James B. McClatchy, Erwin Potts and Wilma C.
Flach, or any of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
herein, all the shares of the Class A Common Stock of McClatchy Newspapers, Inc.
that the undersigned is entitled to vote at the Annual Meeting of Stockholders
to be held on May 18, 1994, or any postponement or adjournment thereof.
This proxy when properly executed will be voted as directed by the undersigned
stockholder. If no such directions are made, this proxy will voted FOR the
election of directors and FOR proposals 2 and 3.
(CONTINUED AND TO BE DATED AND SIGNED, ON OTHER SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 23
----------------
CLASS A COMMON
Proposal 1: To elect directors to serve until the next annual meeting of
stockholders and until their successors are elected or chosen.
<TABLE>
<S> <C> <C> <C>
For all nominees / / Withhold / /
listed below (except Authority (to vote
as marked to the for all nominees
contrary at right) listed at right)
</TABLE>
Nominees: Joan F. Lane, S. Donley Ritchey, William M. Roth, Frederick R. Ruiz
(Instruction: To withhold authority to vote for any individual nominee write
the nominees name below)
- --------------------------------------------------------------------------------
Proposal 2: Approval of the McClatchy Newspapers, Inc. 1994 Employee Stock
Option Plan.
For / / Against / / Abstain / /
Proposal 3: Ratification of the appointment of Deloitte & Touche as the
Company's independent auditors for 1994.
For / / Against / / Abstain / /
Please sign exactly as name appears on your stock certificate. When shares are
held by joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated:________________________________________________, 1994
- ------------------------------------------------------------
Signature
- ------------------------------------------------------------
Signature (if held jointly)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
<PAGE> 24
MCCLATCHY NEWSPAPERS, INC.
CLASS B COMMON PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 18, 1994.
The undersigned hereby appoints James B. McClatchy, Erwin Potts and Wilma C.
Flach, or any of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
herein, all the shares of the Class B Common Stock of McClatchy Newspapers, Inc.
that the undersigned is entitled to vote at the Annual Meeting of Stockholders
to be held on May 18, 1994, or any postponement or adjournment thereof.
This proxy when properly executed will be voted as directed by the undersigned
stockholder. If no such directions are made, this proxy will voted FOR the
election of directors and FOR proposals 2 and 3.
(CONTINUED AND TO BE DATED AND SIGNED, ON OTHER SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 25
----------------
CLASS B COMMON
Proposal 1: To elect directors to serve until the next annual meeting of
stockholders and until their successors are elected or chosen.
<TABLE>
<S> <C> <C> <C>
For all nominees / / Withhold / /
listed below (except Authority (to vote
as marked to the for all nominees
contrary at right) listed at right)
</TABLE>
Nominees: William K. Coblentz, Booth Gardner, William L. Honeysett, Betty Lou
Maloney, James B. McClatchy, William Ellery McClatchy, Erwin Potts,
James P. Smith, H. Roger Tatarian
(Instruction: To withhold authority to vote for any individual nominee write
the nominees name below)
- --------------------------------------------------------------------------------
Proposal 2: Approval of the McClatchy Newspapers, Inc. 1994 Employee Stock
Option Plan.
For / / Against / / Abstain / /
Proposal 3: Ratification of the appointment of Deloitte & Touche as the
Company's independent auditors for 1994.
For / / Against / / Abstain / /
Please sign exactly as name appears on your stock certificate. When shares are
held by joint tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated:________________________________________________, 1994
- ------------------------------------------------------------
Signature
- ------------------------------------------------------------
Signature (if held jointly)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
