DEFA14A 1 shell.txt SCHEDULE 14A - JUNE 1, 2006 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A 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)) | | Definitive Proxy Statement | | Definitive Additional Materials |X| Soliciting Material Pursuant to ss.240.14a-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)(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 (Set forth the amount on which the filing fee is calculated and state how it was determined): -------------------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: -------------------------------------------------------------------------------- 5) Total fee paid: -------------------------------------------------------------------------------- | | 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 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: -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- The following materials were mailed to employees of Knight-Ridder, Inc. [KNIGHT RIDDER LOGO] MEMO TO: Corporate Officers DATE: June 1, 2006 SUBJECT: Executive Compensation FROM: Mary Jean Connors Summary Attached is an Executive Compensation Summary that provides a brief description of certain components of your compensation package and the impact of the change in control resulting from the sale of Knight Ridder to McClatchy. This summary includes anticipated payment or conversion dates which are intended only as a guideline for you. Actual payment and conversion dates may depend on various factors, including the availability of all necessary information (such as company financial results for MBO payments) and payroll considerations. If you have any questions on this, please feel free to call me or Cathy King. Attachment [KNIGHT RIDDER LOGO] EXECUTIVE COMPENSATION SUMMARY IMPORTANT: THIS EXECUTIVE COMPENSATION SUMMARY IS INTENDED ONLY TO PROVIDE YOU WITH A BRIEF DESCRIPTION OF THE CHANGE IN CONTROL AND/OR TERMINATION PROVISIONS OF CERTAIN KNIGHT RIDDER PLANS AND AGREEMENTS AND THE IMPACT OF THE SALE OF KNIGHT RIDDER TO MCCLATCHY (THE "MERGER" AND THE AGREEMENT SETTING FORTH THE TERMS OF THE MERGER, THE "MERGER AGREEMENT"). THIS SUMMARY DOES NOT CONTAIN ALL OF THE DETAILS AND TERMS AND CONDITIONS OF THE APPLICABLE DOCUMENTS. THIS SUMMARY IS NOT MEANT TO INTERPRET, EXTEND OR CHANGE THE PROVISIONS OF THE PLANS, AGREEMENTS AND MERGER AGREEMENT IN ANY WAY. THE APPLICABLE PLAN DOCUMENT OR AGREEMENT OR THE MERGER AGREEMENT WILL GOVERN IN THE EVENT OF ANY DISCREPANCY BETWEEN THIS SUMMARY AND THE PROVISIONS OF THE PLAN, AGREEMENT OR MERGER AGREEMENT.
------------------------------------------------------------------------------------------------------------------------------------ MERGER AGREEMENT AND/OR PLAN PROVISIONS ON CHANGE IN CONTROL PAYOUT/CONVERSION CALCULATION ANTICIPATED PAYMENT/ CONVERSION DATE PLAN (CIC) OR UPON TERMINATION ------------------------------------------------------------------------------------------------------------------------------------ Income Security Agreements provide for Severance benefits: o Lump sum severance benefits Agreements severance benefits to be paid o Lump sum payment equal to 3 and life insurance payment will to participants in the event of times the greater of (i) the be payable on the first business qualifying terminations (as set sum of current base salary and date that is six months after forth in the employee's income maximum cash bonus opportunity termination. security agreement) during a or (ii) the sum of salary and o Continued health insurance specified period after a change cash bonus payable for the last will be available at active group in control (CIC). calendar year preceding the rates from termination until the severance payment. end of the third anniversary of o Lump sum payment equal to date of termination, provided an agreed upon amount (set that continued health insurance forth in the amendment to the will be at the expense of the employee's income security employee until the first business agreement) to be received in day that is 6 months after lieu of life insurance benefits termination at which time the for three years following employee will be reimbursed for termination. such expense. o Continued health insurance o Gross-up payment to employee will be available at active after a determination has been group rates from termination made by the applicable accounting until the third anniversary of firm that a gross-up payment is date of termination, provided due. that continued health insurance will be at the expense of the employee until the first business day that is 6
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------------------------------------------------------------------------------------------------------------------------------------ MERGER AGREEMENT AND/OR PLAN PROVISIONS ON CHANGE IN CONTROL PAYOUT/CONVERSION CALCULATION ANTICIPATED PAYMENT/ CONVERSION DATE PLAN (CIC) OR UPON TERMINATION ------------------------------------------------------------------------------------------------------------------------------------ months after termination at which time the employee will be reimbursed for such expense. o Gross-up payment to employee for any excess parachute payment excise tax that is triggered. o To the extent not otherwise exempted under applicable law, payments will be ordinary income to the employee and federal and state income and employment tax withholding will apply. ------------------------------------------------------------------------------------------------------------------------------------ 2006 Annual The 2006 Annual Incentive Plan o The Annual Incentive Plan Subject to the employee's continued Incentive Bonus (MBO) will be paid on a will be measured based on employment through the payment date, pro-rated basis through the Company performance through the payments will be made immediately last month prior to the close last month prior to the close prior to the closing date in of the Merger. of the Merger. accordance with the Merger Agreement. o Any non-financial goals (i.e., content) that are not measurable at that time will be deemed to have been met (see attachment). o Awards will be pro-rated based on the percentage of the year from 1/1/06 through the end of the month prior to the close of the Merger. o Payments will be ordinary income to the employee and federal and state income and employment tax withholding will apply. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ MERGER AGREEMENT AND/OR PLAN PROVISIONS ON CHANGE IN CONTROL PAYOUT/CONVERSION CALCULATION ANTICIPATED PAYMENT/ CONVERSION DATE PLAN (CIC) OR UPON TERMINATION ------------------------------------------------------------------------------------------------------------------------------------ Transitional Phantom share grants under the o Performance under the LTIP Payment be made as soon as practical LTIP - Phantom LTIP transition plan will be transition plan will be on or after the close of the Merger. Shares paid based on KR's performance measured based on KR's total through the date immediately shareholder return ("TSR") prior to the close of the relative to peer companies for Merger on a pro-rated basis. the shortened performance period beginning Nov. 1, 2005 through the date immediately prior to the close of the Merger. o Target award opportunities will be pro-rated based on the percentages determined by dividing the time that has elapsed since the original grant date (i.e., 1/1/2006) through the date immediately prior to the close of the Merger by (i) the period attributable to the first Performance Period ending in December 2006 or (ii) the period attributable to the second Performance Period ending in December 2007. o For each earned phantom share determined based on KR's TSR relative to peer companies, employee will receive a cash payment equal to $40 plus the value of .5118th of a share of McClatchy Class A stock. Payments will be ordinary income to the employee and federal and state income and employment tax withholding will apply. The price of McClatchy stock will be determined on the last trading day immediately preceding the closing date. ------------------------------------------------------------------------------------------------------------------------------------ 3-Year long term RSU grants under the Equity o Performance will be Payment will be made as soon as plan RSUs Incentive Plan will be paid measured based on KR's TSR practical on or after the close of the based on KR's performance relative to peer companies for Merger. through the date immediately the shortened performance prior to the close of the period beginning Nov. 1, 2005 Merger on a pro-rated basis. through the date immediately prior to the close of the Merger. o Target award opportunities will be pro-rated based on the percentage determined by dividing the time that has elapsed since the original grant date (i.e., 1/1/2006) through the date immediately prior to the close of the Merger by the 3-year commencing January 1, 2006 and ending December 31, 2008.
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------------------------------------------------------------------------------------------------------------------------------------ MERGER AGREEMENT AND/OR PLAN PROVISIONS ON CHANGE IN CONTROL PAYOUT/CONVERSION CALCULATION ANTICIPATED PAYMENT/ CONVERSION DATE PLAN (CIC) OR UPON TERMINATION ------------------------------------------------------------------------------------------------------------------------------------ o For each earned RSU determined based on KR's TSR relative to peer companies, employee will receive a cash payment equal to $40 plus the value of .5118th of a share of McClatchy Class A stock. Payments will be ordinary income to the employee and federal and state income and employment tax withholding will apply. The price of McClatchy stock will be determined on the last trading day immediately preceding the closing date. ------------------------------------------------------------------------------------------------------------------------------------ Stock KR vested stock options may be For each KR stock option that has Payment will be made as soon as Options-vested exercised up until the close of not been exercised before the practical on or after the close of the the Merger (subject to the Merger, employee will receive a cash Merger. terms of the applicable plan payment equal to the excess, if any, and insider trading rules). of the sum of $40 plus the value of FOR CORPORATE OFFICERS AND THE .5118th of a share of McClatchy BOARD OF DIRECTORS, THE WINDOW Class A stock over the per share PERIOD IS AND HAS BEEN CLOSED, exercise price of the stock option. AND IS EXPECTED TO REMAIN Payments will be ordinary income to CLOSED THROUGH THE CLOSE OF THE the employee and federal and state MERGER. income and employment tax withholding will apply. The price of McClatchy stock will be determined on the last trading day immediately preceding the closing date. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ MERGER AGREEMENT AND/OR PLAN PROVISIONS ON CHANGE IN CONTROL PAYOUT/CONVERSION CALCULATION ANTICIPATED PAYMENT/ CONVERSION DATE PLAN (CIC) OR UPON TERMINATION ------------------------------------------------------------------------------------------------------------------------------------ Stock Options - Unvested KR stock options will For each KR stock option that has not Payment will be made as soon as unvested become fully vested seven days been exercised before the Merger, practical on or after the close of the prior to the close of the employee will receive a cash payment Merger. Merger. After that time, such equal to the excess, if any, of the options may be exercised any sum of $40 plus the value of .5118th time prior to the close of the of a share of McClatchy Class A stock Merger (subject to the terms of over the per share exercise price of the applicable plan and insider the stock option. Payments will be trading rules). FOR CORPORATE ordinary income to the employee and OFFICERS AND THE BOARD OF federal and state income and DIRECTORS, THE WINDOW PERIOD IS employment tax withholding will AND HAS BEEN CLOSED, AND IS apply. The price of McClatchy stock EXPECTED TO REMAIN CLOSED will be determined using the closing THROUGH THE CLOSE OF THE MERGER. price on the last trading day immediately preceding the closing date. ------------------------------------------------------------------------------------------------------------------------------------ Restricted RSUs granted on December 16, For each outstanding annual grant Payment will be made as soon as Stock Units 2005 in conjunction with the RSU, employee will receive a cash practical on or after the close of the (Annual Grant) annual equity grant will become payment equal to the sum of $40 in Merger. fully vested immediately prior cash plus the value of .5118 of a to the close of the Merger and share of McClatchy Class A stock. the performance requirement will Payments will be ordinary income to be deemed to have been met. the employee and federal and state income and employment tax withholding will apply. The price of McClatchy stock will be determined on the last trading day immediately preceding the closing date. ------------------------------------------------------------------------------------------------------------------------------------ Employee Stock CIC triggers plan termination at For each full share of KR stock, As soon as reasonably practical Purchase Plan the time of the close of the employee will receive $40 and .5118th following the close of the Merger, an Merger. Seven days prior to of a share of McClatchy Class A exchange agent will mail to each close of the Merger, the final stock. Both the cash payment and the record holder of Knight Ridder stock ESPP purchase of shares from McClatchy stock will be deposited in instructions for surrendering KR payroll deductions will occur. their E*Trade account. For employees shares. Payment will be made as soon Any dollars remaining in the who have ESPP shares at the Bank of as practical after the surrender of employee's ESPP payroll NY (BONY), the McClatchy shares will such shares and completion of any deduction account after the be deposited in their brokerage necessary documents. final purchase will be refunded account and a check for the cash through payroll. portion will be paid to the shareholder from the transfer agent. No fractional shares of McClatchy stock will be issued. Any fractional shares of McClatchy stock to which the employee would have been entitled will be cashed out. ------------------------------------------------------------------------------------------------------------------------------------
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------------------------------------------------------------------------------------------------------------------------------------ MERGER AGREEMENT AND/OR PLAN PROVISIONS ON CHANGE IN CONTROL PAYOUT/CONVERSION CALCULATION ANTICIPATED PAYMENT/ CONVERSION DATE PLAN (CIC) OR UPON TERMINATION ------------------------------------------------------------------------------------------------------------------------------------ 3 week Payroll Upon termination of Amount of payback varies by Payment will be deducted from final Conversion employment, employees who individual. Only employees who paycheck. Payback have a 3-week payback received the 3-week overpayment (due (Only applies to obligation will be required to payroll conversion) have this those who were to reimburse the company obligation. Corporate from their final paycheck. employees at the time of payroll conversion) ------------------------------------------------------------------------------------------------------------------------------------ MBO Deferral Plan In the event of a CIC, Each equivalent of a share in the KR Vanguard will collect tax withholding Vanguard, the Trustee of Stock Fund will be replaced with $40 elections and payment elections (i.e., the plan, is required to plus the value of .5118th of a share check or direct deposit). As soon as distribute all deferral of McClatchy Class A stock. practical after the close of the accounts in a lump sum. Merger, payments will be made to NOTE: In order to allow purchases of participants by Vanguard. fractional shares, the KR Stock Fund is made up of fractional units - not by actual shares of KR stock. One unit in the KR Stock Fund is equal to approximately 1/4 of a KR share. Participants will then receive a lump sum payment equal to 100% of their total deferral account balance, paid as ordinary income. ------------------------------------------------------------------------------------------------------------------------------------
6 IMPORTANT ADDITIONAL INFORMATION On May 10, 2006, McClatchy filed with the SEC a Registration Statement on Form S-4 (Registration No. 333-133321) containing a final Prospectus/Proxy Statement/Information Statement regarding the proposed transaction between McClatchy and Knight Ridder. Investors and security holders of McClatchy and Knight Ridder are urged to read the Prospectus/Proxy Statement/Information Statement carefully because it contains important information about McClatchy, Knight Ridder, the transaction and related matters. The Prospectus/Proxy Statement/Information Statement is being mailed on or about May 15, 2006 to stockholders of McClatchy and shareholders of Knight Ridder. Investors and security holders can obtain additional free copies of the Registration Statement and the Prospectus/Proxy Statement/Information Statement and other documents filed with the SEC by McClatchy and Knight Ridder through the web site maintained by the SEC at www.sec.gov. In addition, investors and security holders can obtain additional free copies of the Registration Statement and the Prospectus/Proxy Statement/Information Statement from McClatchy by contacting Investor Relations at www.mcclatchy.com, by mail to 2100 Q Street, Sacramento, CA 95816 or by telephone at 916-321-1846 or from Knight Ridder by contacting Investor Relations at www.knightridder.com, by mail to Suite 1500, 50 W. San Fernando St., San Jose, CA 95113 or by telephone at 408-938-7838. McClatchy and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Knight Ridder in connection with the proposed transaction between McClatchy and Knight Ridder. Information regarding the special interests of these directors and executive officers in the transaction described herein is included in the Prospectus/Proxy Statement/Information Statement described above. Additional information regarding these directors and executive officers is also included in McClatchy's proxy statement for its 2006 Annual Meeting of Stockholders, which was filed with the SEC on or about March 29, 2006. This document is available free of charge at the SEC's web site at www.sec.gov and from McClatchy by contacting Investor Relations at www.mcclatchy.com, by mail to 2100 Q Street, Sacramento, CA 95816 or by telephone at 916-321-1846. Knight Ridder and its directors and executive officers also may be deemed to be participants in the solicitation of proxies from the shareholders of Knight Ridder in connection with the proposed transaction between McClatchy and Knight Ridder. Information regarding the special interests of these directors and executive officers in the proposed transaction between McClatchy and Knight Ridder and additional information regarding these directors and executive officers is included in the Prospectus/Proxy Statement/Information Statement described above, which also serves as Knight Ridder's proxy statement for its 2006 Annual Meeting of Shareholders and was filed by Knight Ridder on May 11, 2006. This document is available free of charge at the SEC's web site at www.sec.gov and from Knight Ridder by contacting Investor Relations at www.knightridder.com, by mail to Suite 1500, 50 W. San Fernando St., San Jose, CA 95113 or by telephone at 408-938-7838. 7 Knight Ridder 2006 Goals Circulation > Knight Ridder will achieve copies and circulation revenue targets for Knight Ridder newspapers collectively > Points: 20; 10, copies (4, daily; 6, Sunday); 10, revenue. In each case, points will be pro-rated for performance, with 7 points if performance is 1/2% under target; 4 points for 1% under target and no points if achievement falls 1 1/2% or more below target. * > Interpolation to be used to determine exact number of points awarded for performance between percentages mentioned above. Circulation mid-year grading > At close of performance period, determine achievement, copies and revenue, using previous page formula, based on performance against budget up to the last date of performance period, with award pro-rated against annualized target award for portion of the year completed. > Grading includes caps on counting NIE circulation (4% daily and 1% Sunday) and for "other circulation," including 3rd party and NIE (9% daily and Sunday) Content Knight Ridder newspapers will improve reader perceptions collectively on these three of the seven tenets of good journalism: 1.) Watchdog 2.) Utility 3.) People like me > Points: 10 > Methodology: Measured by year-over-year increases in the average percent of readers giving an excellent or very good rating on items included in these three categories of the 20-item KR Reader Survey; must achieve at least a one percentage point average increase Content mid-year grading > This goal cannot be graded mid-year, as it is based on an annual survey and so points should be awarded as though achieved. Revenue Knight Ridder will achieve targeted ad revenue performance - Points: 20. Award will be scaled for performance, with 14 points if achievement falls 1/2% short; 7 points if achievement is 1% short, and no points if achievement is 1 1/2% or more short of target > Interpolation to be used to determine exact number of points awarded for performance between percentages mentioned above. Revenue mid-year grading > At close of performance period, determine achievement of total advertising revenue - core, non-core, print and online, using previous page formula, based on performance against budget up to the last date of performance period, with award pro-rated against annualized target award for portion of the year completed. Knight Ridder Digital > KR's top 9 newspapers collectively must achieve 6 percent growth (KR-wide budget for 2006) in local unique visitors above 2005 baseline - Points: 10 - Methodology: comScore > Knight Ridder will achieve budgeted digital revenue - Points: 10 KR Digital mid-year grading > For unique visitors, determine performance against budget for the year-to-date average monthly visitors, then pro-rate award against annualized target award for portion of the year completed. > At close of performance period, determine achievement of total digital revenue, using previous page formula, based on performance against budget up to the last date of performance period, with award pro-rated against annualized target award for portion of the year completed. Other (Targeted) Publications > Knight Ridder will achieve revenue and profit growth targets from other publications* - Points: 20, with 10 for achieving revenue target, and 10 for achieving profit target; all or nothing in each case * Includes all print publications except core newspapers Other (targeted) pubs mid-year grading > At close of performance period, determine achievement of total revenue and profit growth from all print publications besides the core newspapers, using previous page formula, based on performance against budget up to the last date of performance period, with award pro-rated against annualized target award for portion of the year completed. Diversity > Knight Ridder will increase the percentage of women and minorities at the level of division director and above > Points: 10; 7 points will be awarded if current diversity is maintained, 10 if it increases. Diversity mid-year grading > At end of performance period, measure diversity of division directors and above against end of 2005 baseline, and award points based on the previous page's formula, pro-rated against annualized target award for the portion of the year completed. 2006 goals > Circulation - 20 pts > Content - 10 pts > Advertising - 20 pts > Digital Business - 20 pts > Other Publications - 20 pts > Diversity - 10 pts * Goals are all or nothing unless otherwise stated