May I revoke my proxy?
Yes. You may change your mind after you send in your
proxy card by following any of these procedures.
To revoke your proxy:
|
|
Send in another signed proxy card with a later date;
or |
|
|
Send a letter revoking your proxy to our Corporate Secretary at
50 West San Fernando Street, Suite 1500, San Jose, CA 95113; or |
|
|
Attend the Annual Meeting and vote in person. |
If you voted by telephone or Internet, you may
revoke your proxy by re-voting in the same manner. Only the last vote that you enter by telephone or Internet will be counted. Alternatively, you may
attend the Annual Meeting and vote in person.
Who counts the votes?
The Bank of New York will tabulate the votes and act
as inspector of election.
What does beneficial owner mean?
Under the Securities and Exchange Commissions
(SEC) definition, you are a beneficial owner of shares if you have sole or shared voting or investment power over the
shares.
How do employees who participate in the Companys Investment Savings
401(k) Plans or the Employees Stock Purchase Plan vote?
If you participate in the Knight Ridder Investment
Savings Plan or another 401(k) plan available to employees in your business unit, or the Knight Ridder Employees Stock Purchase Plan, you will receive
voting instructions instead of a proxy card. Vanguard, as trustee of the 401(k) plans, and E*Trade Securities LLC, as nominee of the Employees Stock
Purchase Plan, are the shareholders of record of your plan shares and will vote those shares according to the instructions that you provide by mail,
telephone or the Internet.
If you provide instructions to the plan trustees
and/or nominee, as applicable, by April 21, 2005, they will vote the shares as you have directed.
If you do not provide voting instructions to the
plan trustees and/or nominee by April 21, 2005, they will vote the shares credited to your account in the same proportion as those that have been voted
by other plan participants.
What does it mean if I get more than one proxy card?
Your shares are probably registered in more than one
account. Sign and return all proxy cards to ensure that all your shares are voted. If any of these accounts can be consolidated, you may do this by
contacting our transfer agent, The Bank of New York, at 1-800-524-4458.
What vote is required to approve the proposals?
The nominees receiving the most votes are elected as
directors. As a result, if you withhold your authority to vote for any nominee, your vote will not count for or against the nominee, nor will a broker
non-vote count for or against the nominee. Abstentions and broker non-votes will not affect the outcome of these proposals. Approval of all
other proposals require that the votes cast for exceed the votes cast against, provided that, in the case of votes for
proposals 3, 4 and 5, the total votes cast represent at least a majority of the shares entitled to vote.
3
What is a quorum?
The holders of shares entitled to exercise a
majority of the voting power present in person or by proxy constitutes a quorum. Abstentions and broker non-votes are included in determining whether a
quorum exists.
Who is paying for this proxy solicitation?
The Company will pay for the solicitation of
proxies, including D. F. Kings estimated fee of $9,000 plus reasonable out-of-pocket expenses. The Company also will reimburse banks, brokers,
custodians, nominees and fiduciaries for their reasonable charges and expenses to forward our proxy materials to the beneficial owners of the
Companys common stock.
How do I obtain a printed copy of the Proxy Statement, Annual Report or Form
10-K?
You may leave a message on the Companys
literature line at 408-938-7878 or write to us at Knight Ridder, 50 West San Fernando Street, Suite 1500, San Jose, CA 95113, Attn: Investor Relations.
We will provide you with a copy at no charge. In addition, the Company has made these documents as well as all of the documents it files with the SEC
available through the Companys website at www.kri.com.
You may also elect to receive future proxy
statements and annual reports online instead of receiving paper copies in the mail. You may choose this option by marking the appropriate box on your
proxy card or by following the instructions provided if you vote by telephone or Internet. If you choose this option, you will receive a proxy card in
the mail next year with instructions containing the Internet address to those materials. If you hold your shares in street name, contact your bank or
broker to determine whether this service is available to you. Your choice will remain in effect until you notify us otherwise. Opting to receive your
proxy materials online will save us the cost of producing and mailing documents to your home or business.
Will I receive multiple copies of the Proxy Statement if I share a household
with another shareholder?
We have adopted a procedure approved by the SEC
called householding. Under this procedure, shareholders of record who have the same address and last name and do not participate in
electronic delivery of proxy materials will receive only one copy of our Annual Report and Proxy Statement unless one or more of these shareholders
notifies us that they wish to continue receiving individual copies. This procedure will reduce the costs of producing and mailing these materials.
Shareholders who participate in householding will continue to receive separate proxy cards. Also, householding will not in any way affect dividend
check mailings. If you are eligible for householding, but you and other shareholders of record with whom you share an address currently receive
multiple copies of the Annual Report and/or Proxy Statement, or if you hold stock in more than one account, and in either case you wish to receive only
a single copy of each of these documents for your household, please contact our transfer agent, The Bank of New York, at 1-800-524-4458. If you hold
your shares in street name, you may request information about householding from your bank, broker or other nominee.
If you participate in householding and wish to
receive a separate copy of the 2004 Annual Report or this Proxy Statement, or if you do not wish to participate in householding and prefer to receive
separate copies of these documents in the future, please contact The Bank of New York at 1-800-524-4458.
Where can I find voting results?
Preliminary voting results will be announced at the
Annual Meeting. The Company will publish the final voting results in its Form 10-Q for the second quarter of 2005. You will also be able to find the
results on the Companys website at www.kri.com.
4
How can shareholders communicate with the Board of
Directors?
Shareholders may communicate with the Board by
writing to the Board of Directors, care of the Corporate Secretary, Knight Ridder, 50 West San Fernando Street, Suite 1500, San Jose, CA 95113. The
Corporate Secretary will forward any such correspondence to the entire Board of Directors.
Whom should I contact if I have any questions?
Call the Corporate Secretary, Polk Laffoon, at
408-938-7838. If you have questions about your ownership of Knight Ridder stock, call Sharon Orlando, Manager of Shareholder Services and Corporate
Records, at 408-938-7713.
Information About Knight Ridder Stock Ownership
Principal Holders of the Companys Stock
The following table sets forth all persons known to
the Company to be the beneficial owners of more than 5% of the Companys common stock as of February 28, 2005. As of February 28, 2005, there were
75,375,799 shares of the Companys common stock outstanding.
Name and Address of Beneficial Owners of Common Stock
|
|
|
|
Shares Beneficially Owned
|
|
Percent of Class
|
Private
Capital Management |
|
|
|
|
12,110,999 |
(1) |
|
|
16 |
% |
8889 Pelican
Bay Boulevard, Suite 500 Naples, FL 34108
|
|
|
|
|
|
|
|
|
|
|
Southeastern
Asset Management, Inc. |
|
|
|
|
6,617,100 |
(2) |
|
|
8.8 |
% |
6410 Poplar
Avenue, #900 Memphis, TN 38119
|
|
|
|
|
|
|
|
|
|
|
Harris
Associates, L.P. |
|
|
|
|
5,860,862 |
(3) |
|
|
7.8 |
% |
Two North
LaSalle Street, Suite 500 Chicago, IL 60602
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
According to a Schedule 13G/A filed February 10, 2005, Private
Capital Management, a registered investment adviser, has shared voting power and shared dispositive power over all of the shares. |
(2) |
|
According to a Schedule 13G/A filed February 8, 2005,
Southeastern Asset Management, Inc., a registered investment adviser, has sole voting power over 2,933,100 shares, shared voting power over 2,973,300
shares, no voting power over 650,700 shares, sole dispositive power over 3,633,000 shares, shared dispositive power 2,973,300 shares and no dispositive
power over 10,800 shares. |
(3) |
|
According to a Schedule 13G/A filed February 14, 2005, Harris
Associates, L.P., a registered investment adviser, has shared voting power over all shares, sole dispositive power over 2,338,362 shares and shared
dispositive power over 3,522,500 shares. |
5
Stock Ownership of Directors and Executive Officers
The following table sets forth the number of shares
of the Companys common stock beneficially owned as of February 28, 2005 by each director, nominee and executive officer named in the Summary
Compensation Table, and by all directors, nominees and executive officers as a group. Except as noted, each person has sole voting and investment power
over the shares shown in the table.
Name
|
|
|
|
Common Stock
|
|
Shares Subject to Options (1)
|
|
Total Shares Beneficially Owned
|
|
Other Common Stock Equivalents (5)
|
|
Mary Jean
Connors |
|
|
|
|
52,643 |
|
358,667 |
|
411,310 |
(2) |
13,675 |
|
Gary R.
Effren |
|
|
|
|
10,974 |
|
171,000 |
|
181,974 |
|
2,794 |
|
Mark A.
Ernst |
|
|
|
|
865 |
|
0 |
|
865 |
|
0 |
|
Kathleen
Foley Feldstein |
|
|
|
|
3,654 |
|
16,334 |
|
19,988 |
|
3,237 |
|
Thomas P.
Gerrity |
|
|
|
|
2,404 |
|
8,334 |
|
10,738 |
|
3,237 |
|
Ronald D. Mc
Cray |
|
|
|
|
1,580 |
|
1,667 |
|
3,247 |
|
156 |
|
Patricia
Mitchell |
|
|
|
|
1,426 |
|
4,334 |
|
5,760 |
|
626 |
|
M. Kenneth
Oshman |
|
|
|
|
34,808 |
|
18,334 |
|
53,142 |
(3) |
4,261 |
|
Vasant
Prabhu |
|
|
|
|
959 |
|
1,667 |
|
2,626 |
|
156 |
|
P. Anthony
Ridder |
|
|
|
|
669,941 |
|
774,001 |
|
1,443,942 |
(2) |
0 |
|
Steven B.
Rossi |
|
|
|
|
21,133 |
|
378,333 |
|
399,466 |
(2) |
13,155 |
|
Gonzalo F.
Valdes-Fauli |
|
|
|
|
3,975 |
|
18,334 |
|
22,309 |
|
4,435 |
|
John E.
Warnock |
|
|
|
|
2,515 |
|
4,334 |
|
6,849 |
|
784 |
|
Gordon
Yamate |
|
|
|
|
9,579 |
|
115,000 |
|
124,579 |
|
0 |
|
All directors
and executive officers as a group (28 persons including those named above) |
|
|
|
|
467,211 |
|
2,708,015 |
|
3,175,226 |
(4) |
63,008 |
|
(1) |
|
Represents stock options that are exercisable on February 28,
2005 or become exercisable within 60 days of February 28, 2005. |
(2) |
|
Includes shares owned by, or jointly with spouses as follows:
(a) 2,736 shares owned by Ms. Connors husband; (b) 3,398 shares owned by Mr. Ridders wife, 898 shares jointly owned by Mr. Ridder and his
wife, 16,732 shares held in a trust of which Mrs. Ridder is the trustee, and 530,000 shares held in a family limited partnership of which Mr. Ridder is
the general partner and has a pecuniary interest in 71,738 of the shares; and (c) 4,760 shares jointly owned by Mr. Rossi and his wife. Ms. Connors and
Mr. Ridder disclaim beneficial ownership of the shares owned by their respective spouses, who have sole voting and dispositive power over such shares.
Messrs. Ridder and Rossi share voting and investment power with their respective spouses as to those shares jointly owned. |
(3) |
|
Includes 30,000 shares owned by a partnership in which Mr.
Oshman has a 97% income interest. Mr. Oshman has the power to vote these shares and the power to direct their disposition and he claims beneficial
ownership as to 97% of the shares. |
(4) |
|
Except for Mr. Ridder who beneficially owned 1.9% of the
Companys common stock, no director or executive officer beneficially owned more than 1% of the Companys common stock. All directors and
executive officers as a group owned 4.2% of the Companys common stock. |
(5) |
|
Includes common stock units held in Knight Ridder stock accounts
under the Companys Annual Incentive Deferral Plan and Compensation Plan for Nonemployee Directors. |
6
Section 16(a) Beneficial Ownership Reporting Compliance
The Securities Exchange Act of 1934, as amended (the
Exchange Act) requires that the Companys directors, executive officers and persons who beneficially own more than 10% of the
Companys common stock (i.e., insiders) file reports of ownership and changes in ownership of the Companys equity securities with the SEC
and the New York Stock Exchange (NYSE) and furnish the Company with copies of such reports. Based solely on its review of copies of these
reports, the Company believes that during 2004 all directors, executive officers and persons who beneficially own more than 10% of the Companys
common stock filed on a timely basis all reports required of them with these exceptions: Hilary Schneider, Senior Vice President, and Arden Dickey,
Vice President/Circulation, each filed one late report with respect to one transaction in 2004, and Steven B. Rossi, Senior Vice President/Finance and
Chief Financial Officer, Gary R. Effren, Vice President/Finance and Michael Petrak, Vice President of Marketing, each filed one late report in
connection with stock options granted to them in 2001. All of these were due to administrative oversights and the reports were promptly filed upon
discovery of the oversight.
Item 1: Election of Directors
How is the Board structured?
The Companys Board of Directors is divided
into three classes, generally serving staggered three-year terms so that the term of one class expires at each annual meeting. The Companys Board
of Directors currently consists of ten directors. Four directors will be elected at this years annual meeting for three-year terms expiring in
2008 until their successors are elected and qualified, or until his or her earlier death, resignation or removal. The other six directors who were
elected at prior annual meetings will continue to serve for their respective terms.
Who is nominated to stand for election?
The following individuals, each of whom is a current
director of the Company, have been nominated to stand for election at the 2005 Annual Meeting for three-year terms expiring in 2008: Mark A. Ernst,
Vasant Prabhu, P. Anthony Ridder and John Warnock. The principal occupation and certain other information about each of the nominees, as well as the
continuing directors, including each directors age as of February 1, 2005, are set forth on the following pages.
We have no reason to believe that any of the
nominees will be unable or unwilling to serve if elected. However, if any nominee should become unable or unwilling for any reason to serve, proxies
may be voted for another person nominated as a substitute by the Board of Directors, or the Board of Directors may reduce the number of
Directors.
The Board of Directors recommends that
shareholders vote FOR each of the following nominees.
7
Nominees for Election for a Three-Year Term Expiring in 2008
![](ernst-photo.jpg) |
MARK A.
ERNST, age 46 Director since 2004 Chairman, President
& Chief Executive Officer H&R Block, Inc. Mr. Ernst has served as Chairman of the Board of
Directors of H&R Block, Inc., a provider of tax preparation, mortgage services and financial products and services, since 2002, Chief Executive
Officer since 2001, President since 1999, Chief Operating Officer from September 1998 through December 2000 and Executive Vice President from September
1998 until September 1999. Prior to joining H&R Block, Inc. Mr. Ernst served as a senior executive with American Express Company. Mr. Ernst is a
director of Great Plains Energy Incorporated and a member of the board of directors of numerous civic organizations. |
![](prabhu-photo.jpg) |
VASANT
PRABHU, age 45 Director since 2003 Executive Vice
President and Chief Financial Officer Starwood Hotels & Resorts Worldwide, Inc. Mr. Prabhu has served as Executive Vice President
and Chief Financial Officer of Starwood Hotels & Resorts Worldwide, Inc., a hotel and leisure company, since January 2004. Previously, Mr. Prabhu
served as Executive Vice President/Chief Financial Officer and President/E-Commerce of Safeway, Inc. from 2000 through December 2003,
President/Information and Media Group at McGraw-Hill Companies from 1998 to 2000, and in various finance roles at PepsiCo, Inc. from 1992 to
1998. |
![](ridder-photo.jpg) |
P.
ANTHONY RIDDER, age 64 Director since 1987 Chairman of the Board
and Chief Executive Officer Knight-Ridder, Inc. Mr. Ridder has served as Chairman and Chief
Executive Officer of Knight Ridder since 1995, as President of the Company from 1989 to 1995, and as President of the Newspaper Division of the Company
from 1986 to 1995. Mr. Ridder joined the San Jose Mercury News in 1964, served as General Manager from 1975 until 1977 and Publisher from 1977 to 1986.
Mr. Ridder is a director of Newspaper Association of America and is a member of the Board of Trustees of the University of Santa Clara and the Advisory
Board of the Graduate School of Business at Stanford University. |
![](warnock-photo.jpg) |
JOHN E.
WARNOCK, age 64 Director since 2001 Co-Chairman Adobe
Systems, Inc. Mr. Warnock is a founder of Adobe Systems, Inc., a
developer of software solutions for network publishing, and has served as Chairman from 1989 to 1997 and as Co-Chairman since 1997. Mr. Warnock served
as Chief Executive Officer of Adobe Systems, Inc. from 1982 through December 2000 and Chief Technical Officer from December 2000 to March 2001. Mr.
Warnock is a director of Salon Media Group, Inc. and a member of the Board of Trustees of the American Film Institute and Folger Shakespeare
Library. |
8
Directors Continuing in Office Until 2007
![](feldstein-photo.jpg) |
KATHLEEN
FOLEY FELDSTEIN, age 63 Director since 1998 President
Economics Studies, Inc. Ms. Feldstein has served as President of Economics
Studies, Inc., a private consulting firm, since 1987. She serves as a director of Bell South Corporation, Ionics Corporation and BlackRock Closed End
Mutual Funds. She is also a Trustee of the Committee for Economic Development, the Museum of Fine Arts, Boston and McLean Hospital. |
![](gerrity-photo.jpg) |
THOMAS
P. GERRITY, age 63 Director since 1998 Professor of
Management and Operations and Information Management The Wharton School Mr. Gerrity has served as Professor of Management
at the Wharton School of the University of Pennsylvania since 1990 and served as Dean from 1990 to 1999. Mr. Gerrity serves as a director of CVS
Corporation, Fannie Mae, Sunoco, Hercules Incorporated and Internet Capital Group, Inc. |
![](valdesfauli-photo.jpg) |
GONZALO
F. VALDES-FAULI, age 58 Director since 1992 Retired
Vice-Chairman Barclays Capital Mr. Valdes-Fauli is a retired Vice-Chairman of
Barclays Capital, the investment banking division of Barclays Bank, London, England. Mr. Valdes-Fauli served as a member of the management committee of
Barclays Capital from 1988 to 2001. He was Group Chief Executive of Barclays Bank Latin America from 1988 to 2001. He is a director of Blue Cross/Blue
Shield of Florida, Chairman of the Board of Directors of Broadspan Capital, LLC and Chairman of Banco Mercantil, Dominican Republic. Mr. Valdes-Fauli
is a Trustee of the University of Miami. |
9
Directors Continuing in Office Until 2006
![](mccray-photo.jpg) |
RONALD
D. MC CRAY, age 47 Director since 2003 Senior Vice President
Law and Government Affairs & Chief Compliance Officer Kimberly-Clark Corporation Mr. Mc Cray has served as Senior Vice President
Law and Government Affairs and Chief Compliance Officer of Kimberly-Clark Corporation, a global health and hygiene company which produces
tissue, personal care and health care products, since November 2004 and Senior Vice President Law and Government Affairs from 2003 to November
2004. He is responsible for legal management, corporate governance and internal audit matters. Mr. Mc Cray has held a variety of positions with
Kimberly-Clark since 1987, including Vice President/Associate General Counsel and Secretary from 2001 to 2003, Vice President/Chief Counsel and
Secretary from 1999 to 2001, Vice President and Chief Counsel (Latin American and Neenah Operations) from 1996 to 2001. |
![](mitchell-photo.jpg) |
PATRICIA
MITCHELL, age 62 Director since 2002 President and Chief
Executive Officer Public Broadcasting Service Ms. Mitchell has served as the President and Chief
Executive Officer of the Public Broadcasting Service, a private, nonprofit corporation whose members are American public television stations, since
March 2000. Prior to that she served as President of CNN Productions and Time Inc. Television at Time Warner from 1992 to 2000. Ms. Mitchell serves as
a director of Bank of America Corporation and is a member of the Board of Trustees of the Sundance Institute and the Womens Leadership Advisory
Council of the Kennedy School of Government. |
![](oshman-photo.jpg) |
M.
KENNETH OSHMAN, age 64 Director since 1996 Chairman and Chief
Executive Officer Echelon Corporation Since 1989, Mr. Oshman has served as Chairman and
Chief Executive Office of Echelon Corporation, a networking company providing hardware and software products that enable everyday products to be made
smart and connected to one another and the Internet. Mr. Oshman co-founded Rolm Corporation in 1969 and served as Chief Executive Officer, President
and Director until Rolms merger with IBM in 1984. From 1984 to 1986, Mr. Oshman served as a vice president of IBM. He is also a director of Sun
Microsystems, Inc. |
10
Corporate Governance at Knight Ridder
The Board of Directors is responsible for overseeing
the Companys affairs for the benefit of its shareholders. The principal functions of the Board and its committees are to:
|
|
Review and approve specific corporate actions as required by law
and by applicable stock exchanges and/or trading systems on which the Companys shares are listed or traded; |
|
|
Select, regularly evaluate and, as necessary, replace the chief
executive officer; determine senior management compensation; and review executive succession planning; |
|
|
Review and, where appropriate, approve major strategies,
financial objectives and other plans of the Company; |
|
|
Advise management on specific issues facing the
Company; |
|
|
Oversee processes for evaluating the adequacy of internal
controls, risk management, financial reporting and compliance, and satisfy itself as to the adequacy of such processes; and |
|
|
Nominate directors and ensure that the structure and practices
of the board provide for sound corporate governance. |
The principal functions of the Board and its
committees are more fully described in the corporate governance guidelines (Corporate Governance Guidelines) adopted by our Board. We have
also adopted a written code of ethics (Code of Business Ethics) that applies to our principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing similar functions and all other officers. Any amendments to, or waivers of,
this code of ethics will be disclosed on our Web site promptly following the date of such amendment or waiver. Both the Corporate Governance Guidelines
and the Code of Business Ethics are available on our website at www.kri.com on the Corporate Governance page, under the Investor
Information section. You may also obtain a copy of the Corporate Governance Guidelines or the Code of Business Ethics without charge by writing to:
Knight Ridder, 50 West San Fernando Street, Suite 1500, San Jose, CA 95113, Attn: Corporate Secretary.
Director Independence
Currently, the Board consists of ten members, nine
of whom the Board has determined are independent under the rules of the NYSE and the Companys Corporate Governance Guidelines. Mr.
Ridder, the Companys Chairman and Chief Executive Officer, is the only non-independent director on the Board. Under the NYSE rules, a director is
considered independent if the Board affirmatively determines that he or she has no material relationship with the Company, either directly
or as a partner, shareholder or officer of an organization that has a relationship with the Company. The NYSE rules permit the adoption of, and the
Board has adopted, categorical standards to assist it in making determinations of independence. Under these standards, the Board has determined a
director will not be considered independent if any of the following standards apply:
|
|
he or she is, or has been, an employee of the Company or an
affiliate of the Company during the last three years; |
|
|
he or she receives, or has received, any direct compensation
from the Company or from an affiliate of the Company, other than director and committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way on continued service) during the last three years; |
|
|
he or she is, or has been, affiliated with or employed in a
professional capacity by the present or former internal or external auditor of the Company during the last three years; |
11
|
|
he or she is, or has been, employed as an executive officer of
another company where any of the Companys present executives serve or have served on that other companys compensation committee during the
last three years; |
|
|
he or she is an executive officer or an employee of a company
that makes payments to, or receives payments from, the Company for property or services in an amount that, in any single fiscal year, exceeds the
greater of $1 million or 2% of such other companys consolidated gross revenues during the last three years; and |
|
|
he or she has any immediate family members who (i) serve or have
served as an executive officer of the Company or an affiliate of the Company during the last three years, (ii) receive or have received direct
compensation of more than $100,000 per year from the Company or an affiliate of the Company during the last three years or (iii) satisfy the criteria
set forth in the third through fifth bullet points above. |
Executive Sessions of the Board
On a regular basis, including annually when it
reviews Mr. Ridders performance, the non-management Board members meet in executive session without Mr. Ridder or other members of management.
Although the Board does not formally designate a presiding director for such executive sessions, the non-management Board members may designate a
director to chair the meeting whenever they believe that would be useful. Absent such a designation, the chairs of each of the Audit Committee,
Nominating and Corporate Governance Committee and Compensation Committee rotate as the presiding director of such meetings. Interested parties may
provide their concerns to the Companys non-management directors by writing to the Presiding Director, care of the Corporate Secretary, Knight
Ridder, 50 West San Fernando Street, Suite 1500, San Jose, CA 95113. The Corporate Secretary will forward all such correspondence to each of the
non-management Board members.
Board Committees and Attendance
Each director is expected to attend all meetings of
the Board and all meetings of Board committees of which the director is a member. Directors are also expected to attend the Companys Annual
Meeting. In 2004, all of the Companys directors attended the Annual Meeting except Messrs. Ernst, Gerrity and Oshman. During fiscal year 2004,
the Board of Directors met four times and the committees of the Board held a total of 18 meetings. Each of the nominees for election at the Annual
Meeting and each of the continuing directors attended at least 75% of the meetings of the Board and of the committees of the Board on which he or she
served except Mr. Ernst. Mr. Ernst was appointed to the Board on February 6, 2004 and attended two of the three remaining Board meetings for the
year.
The Board currently has five active standing
committees: Audit, Compensation, Nominating and Corporate Governance, Environmental Affairs and Executive. All of these committees are comprised of
non-employee directors who are independent in accordance with the NYSEs listing standards except for the Environmental Affairs and
Executive Committees on which Mr. Ridder, the Companys Chairman and Chief Executive Officer, serves. The Audit, Compensation and Nominating and
Corporate Governance Committees operate under written charters which are available on the Companys website at www.kri.com on the Corporate
Governance page, under the Investor Information section. You may also obtain a copy of the Corporate Governance Guidelines without charge by
writing to: Knight Ridder, 50 West San Fernando Street, Suite 1500, San Jose, CA 95113, Attn: Corporate Secretary. Below is a brief description of each
committee.
12
Audit Committee
Members
|
|
Principal
Functions
|
|
Meetings
in 2004
|
Gonzalo
Valdes-Fauli, Chair
Mark A. Ernst
Kathleen Foley Feldstein
Vasant Prabhu
|
|
|
Ensures that the Company conducts its business in conformance with appropriate
legal and regulatory standards and requirements. |
|
8* |
|
|
Annually selects, appoints, evaluates, determines the compensation of,
and retains the independent auditors, reviews the services to be performed
by the independent auditors and the terms of their engagement, exercises
oversight of their activities and, where appropriate, terminates and/or
replaces the independent auditors. |
|
|
|
|
Reviews with management and the independent auditors the Companys
quarterly and annual periodic reports and other financial disclosures such
as earnings releases. |
|
|
|
|
Reviews the results of each external audit and considers the adequacy
of the Companys internal controls. |
|
|
|
|
Determines the duties and responsibilities of the internal auditors,
reviews the internal audit program, and oversees other activities of the
internal auditing staff. |
|
|
|
|
Prepares a report to shareholders included in the Companys annual
proxy statement. |
|
|
* |
|
Management and the independent auditors also met with the
Committee chair four times in 2004 to review earnings releases. |
The Board has determined that each member of the
Committee is independent and financially literate in accordance with the listing standards of the NYSE, and, in accordance with
SEC and NYSE requirements, meets additional independence standards applicable to audit committee members. In addition, the Board has determined that
Messrs. Ernst and Prabhu are audit committee financial experts as defined under by SEC rules.
Compensation Committee
Members
|
|
Principal
Functions
|
|
Meetings
in 2004
|
M.
Kenneth Oshman, Chair Thomas P. Gerrity
Patricia Mitchell
Vasant Prabhu
Gonzalo Valdes-Fauli
|
|
|
Administers the Companys incentive compensation plans and its stock
option plans, including the review and grant of stock options to all eligible
employees and directors. |
|
5 |
|
|
Reviews and approves corporate goals and objectives relevant to Mr. Ridders
compensation, evaluates his performance, and together with the other independent
directors, determines and approves Mr. Ridders compensation. |
|
|
|
|
After receiving input from the chief executive officer, makes recommendations
to the Board regarding non-chief executive officer compensation, incentive
compensation plans and equity-based plans. |
|
|
|
|
Oversees the selection of the chief executive officer and recommends
to the Board the process by which a new chief executive officer is selected. |
|
|
|
|
Prepares a report to shareholders included in the Companys annual
proxy statement. |
|
|
13
Nominating and Corporate Governance Committee
Members
|
|
Principal
Functions
|
|
Meetings
in 2004
|
Kathleen
Foley Feldstein, Chair
Thomas P. Gerrity
Ronald D. Mc Cray
M. Kenneth Oshman
John Warnock |
|
|
Makes recommendations to the Board regarding the size and composition
of the Board. |
|
2 |
|
|
Establishes procedures for the nomination process and recommends candidates
for election to the Board. |
|
|
|
|
Makes committee assignments and selects committee chairs. |
|
|
|
|
Reviews and reports to the Board on corporate governance matters. |
|
|
|
|
Reviews and makes recommendations to the Board regarding non-employee
director compensation (including equity plans). |
|
|
|
|
Oversees the evaluation of the Board and management. |
|
|
In accordance with its charter, when a vacancy
exists on the Board, the Nominating and Corporate Governance Committee identifies and evaluates potential director candidates and recommends to the
Board individuals to fill such vacancy either through appointment by the Board or through election by shareholders. The Committee considers
recommendations of management, shareholders and others. The Committee has the sole authority to retain and terminate any consultants or search firms
used to identify director candidates.
When evaluating a potential director candidate, the
Committee considers such criteria as it deems appropriate, including a candidates judgment, skill, diversity, experience with businesses and
other organizations of comparable nature or size, and the interplay of a candidates experience with the experience of other Board members. This
evaluation process is the same for nominees submitted by our shareholders. The Committee did not receive any recommendations from shareholders
proposing candidates for election at the 2005 Annual Meeting.
All shareholder nominations for director must be
submitted to the Corporate Secretary in writing at the Companys principal office not later than 120 days before the anniversary of the prior
years proxy statement in the case of an annual meeting and in the case of a special meeting, the close of business on the tenth day following the
date on which the Company first publicly discloses the date of the special meeting. The notice must (i) give the shareholders name and address
and those of the person(s) to be nominated; (ii) represent that the shareholder is a holder of record at the time of the notice and intends to be a
holder on the record date (giving the number of shares and class) and intends to be at the meeting in person or by proxy to make the nomination(s);
(iii) describe any arrangements or understandings between the shareholder, the nominee(s) and any other person(s) (naming the person(s)) pursuant to
which the nomination is made; (iv) provide any other information about the nominee(s) that must be disclosed in a proxy statement under the SECs
proxy rules; and (v) include the consent of each nominee to serve as a director if elected.
Environmental Affairs Committee
Members
|
|
|
|
Principal Functions
|
|
Meetings in 2004
|
Patricia D.
Mitchell, Chair Ronald D. Mc Cray P. Anthony Ridder John Warnock
|
|
|
|
Oversees the policies of the Company designed to carry out the Companys commitment to preserving the natural environment of the
communities it serves and the safety of its workplaces. |
|
1 |
14
Executive Committee
Members
|
|
|
|
Principal Functions
|
|
Meetings in 2004
|
P. Anthony
Ridder, Chair Kathleen Foley Feldstein M. Kenneth Oshman
|
|
|
|
When
the Board is not in session, the Executive Committee may exercise all powers of the Board delegated to it, except certain actions specified in the
Companys bylaws, a copy of which is available on the Companys website at www.kri.com. |
|
None |
Director Compensation
Director compensation is established in accordance
with the Companys Compensation Plan for Nonemployee Directors (the Director Plan). Our Board of Directors adopted the Director Plan
effective July 1, 1997. Only non-employee directors are eligible to receive awards under the Director Plan. As described below, the Director Plan
provides that non-employee directors receive the following compensation: (1) an annual retainer fee payable one half in Knight Ridder common stock and
one half in cash or stock, at the directors election; (2) board and committee meeting attendance fees; (3) an annual stock option grant; and (4)
and in certain cases, retirement benefits.
Currently, non-employee directors receive an annual
retainer of $60,000. Half of this retainer is paid in our common stock, and a director may choose to receive the balance in cash or stock. The annual
retainer fee is paid in equal quarterly installments. Employee directors do not receive any compensation for serving as a member of our Board of
Directors.
Non-employee directors receive a fee of $1,500 for
each Board meeting and meeting of shareholders and $1,000 for each committee meeting attended except for Audit Committee members who receive $1,500 per
meeting. Each non-employee director who chairs a committee receives the following annual fee: Audit Committee $10,000; Compensation Committee $8,000;
Nominating and Corporate Governance Committee $8,000; and Environmental Affairs Committee $5,000. The Company also reimburses directors for travel and
other expenses incurred in attending meetings.
Each December, each non-employee director is granted
an option to purchase 5,000 shares of the Companys common stock at the fair market value of the Companys common stock on the date the
option is granted. Options have a term of ten years and vest in equal annual installments over a three-year period from the date of grant. Vested
options may be exercised: (1) while serving as a director; (2) within five years after termination of service due to disability or retirement; (3) the
earlier of three years after death or five years after termination of service if a director dies while serving on the Board; or (4) within three months
after an optionee ceases to be a director for any other reason. Payment is required upon exercise of an option and may be made in cash or by delivery
to the Company of shares of the Companys common stock or a combination of cash and shares.
In accordance with the Director Plan, directors who
met the following eligibility requirements when they retired from the Board receive an annual lifetime benefit commencing upon retirement from the
Board if: (i) they were never employed by the Company; (ii) were age 65 or older on July 1, 1996; and (iii) had at least five years of service (or, if
disabled, following at least two years of service) when they retired from the Board. The benefit ranges from 50% of the annual retainer fee for
directors who retired after five years of service to 100% of the annual retainer fee for directors who retired with ten or more years of service. None
of our current non-employee directors are eligible for this retirement benefit.
Compensation Committee Interlocks and Insider
Participation
During 2004, the Compensation Committee was
comprised of the following five non-employee directors: M. Kenneth Oshman, Chair, Thomas P. Gerrity, Patricia Mitchell, Vasant Prabhu and Gonzalo
Valdes-Fauli. No member of the Compensation Committee served as an officer or employee of the Company or any of its subsidiaries during 2004. In
addition, during 2004, no executive officer of the Company served as a director or as a member of the compensation committee of a company which employs
a director of the Company.
15
Certain Relationships and Related Transactions
From time to time, Knight Ridder and its
subsidiaries engage in transactions with companies where one of the Companys executive officers or directors or a member of his or her immediate
family has a direct or indirect interest. All of these transactions, including those described below, are in the ordinary course of business and at
competitive rates and prices.
Mark Ernst, a director of the Company, is Chairman,
President and Chief Executive Officer H&R Block, and Vasant Prabhu, a director of the Company, is Executive Vice President/Chief Financial Officer
of Starwood Hotels & Resorts Worldwide, Inc., each of which purchases advertising from certain of the Companys newspapers.
Gonzalo F. Valdes-Fauli, a director of the Company,
is a former Vice-Chairman of Barclays Capital and former Group Chief Executive Officer of Barclays Bank, Latin America, an affiliate of Barclays Bank
plc, which provides certain pension management services to the Company.
In addition, Peter B. Ridder, President and
Publisher of The Charlotte Observer, is a brother of the Companys Chairman and Chief Executive Officer, P. Anthony Ridder, and Par Ridder,
President and Publisher of the St. Paul Pioneer Press, is the son of P. Anthony Ridder. In 2004, Peter B. Ridder and Par Ridder received
aggregate compensation of $411,589 and $394,045, respectively. Par Ridder also received a one-time relocation bonus of $248,253 in connection with his
relocation to St. Paul, Minnesota when he was named publisher in 2004.
Item 2: Ratification of Appointment of Independent Auditors
The Audit Committee of the Board has selected Ernst
& Young LLP, an Independent Registered Public Accounting Firm (Ernst & Young), to examine the books and accounts of the Company for
the year 2005, and we are asking shareholders to ratify its selection. Ernst & Young has served as the Companys independent auditors since
1951. Representatives of Ernst & Young will be present at the meeting and will have the opportunity to make a statement if they desire to do so.
They will also be available to respond to appropriate questions from shareholders.
Our By-laws do not require that the shareholders
ratify the appointment of Ernst & Young as our independent auditors. We are seeking ratification because we believe it is a matter of good
corporate governance practice. If shareholders do not ratify the appointment, the Audit Committee will reconsider whether to retain Ernst & Young,
but may retain Ernst & Young as the Companys independent auditors. Even if the appointment is ratified, the Audit Committee in its discretion
may change the appointment at any time during the year if it determines that a change would be in the best interests of the Company and its
shareholders.
Fees and Services of Ernst & Young
For the fiscal years 2004 and 2003, fees for
professional services provided by Ernst & Young were as follows (in thousands):
|
|
|
|
2004
|
|
2003
|
Audit Fees
(1) |
|
|
|
$ |
2,122 |
|
|
$ |
1,344 |
|
Audit-Related
Fees (2) |
|
|
|
|
350 |
|
|
|
381 |
|
Tax Fees
(3) |
|
|
|
|
80 |
|
|
|
141 |
|
All Other
Fees |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
2,552 |
|
|
$ |
1,866 |
|
(1) |
|
Includes fees associated with the annual audit of the
Companys consolidated financial statements, reviews of the Companys quarterly reports on Form 10-Q, fees related to regulatory filings and
in 2004, the audit of internal controls over financial reporting. |
16
(2) |
|
Audit-related fees relate principally to audits of
Company-sponsored employee benefit plans, as well as other audits and audit-related services for subsidiaries and affiliates. |
(3) |
|
Tax fees relate to tax compliance services. |
Audit Committees Pre-Approval Policies and
Procedures
In accordance with the SECs requirements
regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent
auditor. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit
services provided Ernst & Young.
Under the policy, particular services or categories
of services are pre-approved, subject to a specific budget. During 2004, all services provided by Ernst & Young were approved by the Audit
Committee pursuant to this policy.
The Audit Committee and the Board of Directors
recommends that shareholders vote FOR ratification of the appointment of Ernst & Young.
17
Report
of the Audit Committee
The Audit Committee of the Board is comprised of
four non-employee directors. The Board has determined that each member of the Committee is independent and financially literate
in accordance with the listing standards of the NYSE, and, in accordance with SEC and NYSE requirements, meets additional independence standards
applicable to audit committee members. In addition, the Board has determined that Messrs. Ernst and Prabhu are audit committee financial
experts as defined by the SEC.
Pursuant to the Committees charter, the
Committee is responsible for assisting the Companys Board of Directors in fulfilling its oversight responsibilities in reviewing (i) the quality
and integrity of the Companys financial statements, (ii) the Companys audit process, financial reporting function, systems of internal
controls and compliance programs, (iii) the independent auditors qualifications and independence and (iv) the Companys compliance with
legal and regulatory standards and requirements. The Companys management retains primary responsibility for the Companys financial
statements and the financial reporting process, including the system of internal control over financial reporting. The Companys independent
auditors, Ernst & Young, are responsible for performing an independent audit of the Companys consolidated financial statements in accordance
with the standards of the Public Company Accounting Oversight Board and for issuing a report on such audit.
In fulfilling its responsibilities, during fiscal
year 2004, the Committee met eight times, and held discussions with management, the Companys internal auditors and Ernst & Young. The
Committee Chair met with management and Ernst & Young four additional times in 2004 to review the Companys quarterly earnings releases. The
full Committee reviewed the Companys quarterly and annual financial statements with both management and Ernst & Young prior to issuance.
Management has represented to the Committee, and Ernst & Young has confirmed, that the financial statements were prepared in accordance with U.S.
generally accepted accounting principles.
The Committee discussed with the Companys
internal and external auditors the scope and plans for their respective audits. The Committee met with the internal and external auditors, with and
without management present, to discuss the results of their examinations, evaluations of the Companys internal controls and the quality of the
Companys financial reporting. We also reviewed and discussed with management, the internal auditors and Ernst & Young managements
report on the Companys internal control over financial reporting and Ernst & Youngs attestation.
The Committee has also discussed with Ernst &
Young the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees). In addition,
the Committee has received from and discussed with Ernst & Young its written disclosures and letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and has discussed with Ernst & Young the independent auditors independence
from management and the Company. The Committee has also considered whether the provision of non-audit services by Ernst & Young in 2004 is
compatible with maintaining the auditors independence.
Based upon these reviews and discussions, the
Committee has recommended to the Board that the Companys audited financial statements for the fiscal year ended December 26, 2004 be included in
the Companys Annual Report on Form 10-K for fiscal year ended December 26, 2004. The Committee has also selected Ernst & Young as the
Companys independent auditors for fiscal year 2005 and we are presenting the selection to shareholders for ratification.
The Audit
Committee
Gonzalo F. Valdes-Fauli,
Chair
Mark Ernst
Kathleen Foley Feldstein
Vasant Prabhu
18
Item 3: Re-Approval of the Material Terms of our Annual Incentive
Plan
We are asking shareholders to re-approve the
material terms of our Annual Incentive Plan (the Plan). At the 2000 Annual Meeting, shareholders approved the material terms of the Plan,
including the performance goals. However, we are asking for re-approval of the material terms of the Plan, including the performance goals, because we
believe that it is consistent with good corporate governance practices and federal tax laws. The Board of Directors has determined that it is in the
Companys best interests to continue to provide annual incentives for achievement of key financial and other business growth goals under the Plan.
Accordingly, we are seeking re-approval of the material terms of the Plan.
Description of the Material Terms of the Performance Goals
The Plan is designed to comply with Section 162(m)
of the Internal Revenue Code. Section 162(m) limits our ability to claim a federal income tax deduction for compensation in excess of $1 million paid
in any year to our chief executive officer and any of the other four most highly compensated executive officers, unless it constitutes qualified
performance-based compensation, as defined by the Internal Revenue Service (IRS). Under the IRS rules, the material terms of the
performance goals under the Plan are: (i) the class of employees eligible to receive awards; (ii) the performance criteria upon which the performance
goals are based; and (iii) the maximum amount payable to a participant during a specified period.
Eligible Employees
Certain of our key executives and employees and top
management at our business units are eligible to receive cash bonus awards under the Plan. Approximately 237 individuals are currently eligible to
participate in fiscal year 2005. See the caption Eligibility below for a complete description of eligible
participants.
Performance Criteria
The performance criteria that may be used to
establish performance goals are financial performance (65%) and non-financial performance (35%). Unless otherwise determined by the Compensation
Committee of the Board (the Committee), the financial performance criteria will be operating profit, while the non-financial measures will
be based upon major elements of the Companys or business units strategies that may include circulation/audience growth, strategic revenue
initiatives, quality journalism and leadership/diversity.
Maximum Awards
The maximum award payable for a plan year to a
participant is $2,500,000.
Description of the Material Terms of the Plan
The following is a brief description of the material
terms of the Plan.
Purpose. The Plan is intended to motivate and
reward corporate executives and top management at individual operating units who contribute significantly to the Companys
success.
Administration of the Plan. The Plan is
administered by the Committee. The Committee has the authority to interpret the provisions of the Plan and to make any rules and regulations necessary
to administer the Plan.
Eligibility. The following individuals are
eligible to participate in the Plan:
|
|
Corporate officers and certain director-level corporate
employees; |
|
|
Newspaper publishers and other business unit operating heads who
report directly to top officers; |
|
|
Top editors, general managers and all division directors;
and |
|
|
Certain other positions that can have significant impact on the
Companys and/or a business units results. |
19
Awards. Only cash awards may be granted under
the Plan. As described in detail in the Report of the Compensation Committee on page 29, a participants cash award is a specified target
percentage of his or her salary. The target percentage varies by salary ranging from up to 25% to 50%, except for our chief executive officer, whose
target is currently 80%. The Committee will annually establish the target award for the chief executive officer and the next highest ranking executive
officer. The actual amount of the award depends on the degree of attainment of the performance goals. Actual financial awards can range between 0% and
300% of the financial target award and actual non-financial awards can range between 0% and 100% of the non-financial target award. An award may be
paid based on the achievement of one type of measure even if no award was earned for another type of measure. The Committee has the discretion to
decrease (but not increase) awards under the Plan.
Termination and Amendment of the Plan. The
Committee may, without notice, amend, suspend or revoke the Plan.
Payment and Deferral. Awards will be paid in
cash following the end of the plan year, unless a participant has elected to defer any portion of their bonus under our Annual Incentive Deferral Plan,
as described under the caption Deferred Compensation Plan on page 37.
Federal Tax Consequences of the Plan
Awards under the Plan will constitute ordinary
income to the participants for federal income tax purposes upon receipt. We will generally be entitled to a federal tax deduction equal to the taxable
ordinary income realized by the participant. However, if shareholders do not approve this proposal, cash awards paid under the Plan to a covered
employee i.e., the chief executive officer and the other four most highly compensated executive officers, will be included in the compensation subject
to the $1 million deductibility limit under Section 162(m).
Plan Benefits
The overall structure of the Plan and the method of
calculation of awards under the Plan are substantially the same as when the material terms of the Plan were originally approved by the shareholders at
the 2000 Annual Meeting. However, since the non-financial performance criteria differ in certain respects from year to year, we cannot now determine
the amount that would be paid in the future or would have been paid for the last completed fiscal year to any particular person or group under the
Plan.
The Board of Directors recommends that
shareholders vote FOR the proposal to approve the material terms of the Annual Incentive Plan.
20
Overview of Managements Proposals in Items 4 and 5
This year we are asking shareholders to approve two
proposals in connection with our Employee Stock Option Plan (the Option Plan). The Board believes that approval of these proposals is
critical to the Companys ability to attract, retain and motivate the talent necessary to support the Companys continued
success.
The first proposal seeks shareholder approval to
amend and restate the Option Plan as the Knight-Ridder, Inc. Employee Equity Incentive Plan (the 2005 Plan) to, among other things, expand
the types of equity and long-term incentive vehicles we can grant to employees and directors to include restricted stock and awards that vest based on
achievement of performance objectives. It also prohibits repricing stock options without shareholder approval.
The second proposal seeks shareholder approval to
increase the total number of shares available for grant under the Option Plan, or under the 2005 Plan, if Item 4 is approved by shareholders, by 2.2
million shares, which the Board expects will provide sufficient shares to make competitive equity grants for three years, through 2007. It also seeks a
corresponding increase in the number of shares that may be issued as awards of restricted stock, stock bonuses, restricted stock units and cash
performance rights under the 2005 Plan.
The Board of Directors believes that approval of the
proposals described in Items 4 and 5 below is in the best interest of the Company and our shareholders and recommends that shareholders vote
FOR Items 4 and 5.
The 2005 Plan is designed to achieve the following
objectives:
1. |
|
Empower the Board to grant competitive equity incentives to
key executives and employees, while maintaining net annual share awards at below 1.5% of total shares outstanding. We are requesting under Item 5
an additional 2,200,000 shares, which we anticipate using over three years. |
2. |
|
Enable the Company to respond to changes in the competitive
marketplace by making available a broader variety of stock compensation awards, including: stock options, restricted stock awards subject to either
time-based or performance-based vesting criteria, stock appreciation rights and stock bonus awards. Today, stock options are the only form of
equity compensation being used by Knight Ridder. However, the variety of awards available under the 2005 Plan will give us the flexibility to respond
to changes in the competitive marketplace and to make equity compensation grants that balance shareholder dilution concerns, financial cost impact, and
the desire to link compensation to Company performance. |
3. |
|
Further compensation and corporate governance best
practices. The 2005 Plan prohibits stock option repricing without shareholder approval, and does not contain an evergreen provision. The 2005 Plan
also limits the number of shares that may be issued under stock compensation awards other than stock options or stock appreciation rights priced at
full market value on the date of grant. The maximum number of shares which may be granted to a continuing employee in a single year has been reduced by
33% (from 300,000 to 200,000). |
Background on Stock Compensation at Knight Ridder
Shareholders may remember that the Company last
sought shareholder approval for an increase in the number of shares available for issuance under our Option Plan in 2002. At that time, we estimated
that the increase, together with remaining available shares, would last two years, through 2003. Through prudent use of our stock option program, we
extended the life of that equity pool an additional year, through 2004. However, only 1,700,000 shares are currently available for future awards under
the Option Plan.
21
In addition, since 2001, we have reduced the total
number of shares granted in our annual stock option grant process by approximately 15% per year. Also, as illustrated in the table below, the cost of
our equity compensation programs has been among the lowest in recent years when compared to the companies in the S&P 500 Publishing
Index.(1)
|
|
|
|
Stock-Based Compensation Expense as a % of Revenue
|
|
Stock-Based Compensation Expense as a % of Net Income
|
|
|
|
|
|
2001
|
|
2002
|
|
2003
|
|
2001
|
|
2002
|
|
2003
|
|
20012003 Change in Stock-Based Compensation Expense
|
Dow
Jones |
|
|
|
|
0.96 |
% |
|
|
1.17 |
% |
|
|
1.31 |
% |
|
|
17.39 |
% |
|
|
9.05 |
% |
|
|
11.86 |
% |
|
|
18.41 |
% |
Gannett |
|
|
|
|
0.55 |
% |
|
|
0.82 |
% |
|
|
0.95 |
% |
|
|
4.19 |
% |
|
|
4.55 |
% |
|
|
5.29 |
% |
|
|
84.03 |
% |
McGraw
Hill |
|
|
|
|
0.34 |
% |
|
|
0.28 |
% |
|
|
0.19 |
% |
|
|
2.18 |
% |
|
|
2.25 |
% |
|
|
2.44 |
% |
|
|
38.79 |
% |
Meredith |
|
|
|
|
0.54 |
% |
|
|
0.65 |
% |
|
|
0.64 |
% |
|
|
7.97 |
% |
|
|
7.06 |
% |
|
|
299.65 |
% |
|
|
22.17 |
% |
New York
Times |
|
|
|
|
1.56 |
% |
|
|
1.59 |
% |
|
|
1.50 |
% |
|
|
10.61 |
% |
|
|
16.34 |
% |
|
|
15.99 |
% |
|
|
2.56 |
% |
Tribune |
|
|
|
|
1.06 |
% |
|
|
1.59 |
% |
|
|
1.36 |
% |
|
|
50.09 |
% |
|
|
19.30 |
% |
|
|
8.51 |
% |
|
|
36.21 |
% |
Average |
|
|
|
|
0.84 |
% |
|
|
1.02 |
% |
|
|
0.99 |
% |
|
|
15.41 |
% |
|
|
9.76 |
% |
|
|
57.29 |
% |
|
|
20.76 |
% |
Median |
|
|
|
|
0.76 |
% |
|
|
1.00 |
% |
|
|
1.13 |
% |
|
|
9.29 |
% |
|
|
8.06 |
% |
|
|
10.18 |
% |
|
|
20.29 |
% |
Knight
Ridder |
|
|
|
|
0.73 |
% |
|
|
0.51 |
% |
|
|
0.50 |
% |
|
|
11.85 |
% |
|
|
5.84 |
% |
|
|
4.94 |
% |
|
|
33.20 |
% |
(1) |
|
Represents stock-based compensation expense reported in the
footnotes to each companys financial statements as reported in each Companys Form 10-K for fiscal year 2003. Revenue and net income are
as-reported GAAP figures. |
Item 4: Approval of the Amendment and Restatement of the
Companys
Employee Stock Option Plan
General
On February 1, 2005, the Compensation Committee and
the Board of Directors approved the amendment and restatement of our Employee Stock Option Plan as the Knight-Ridder, Inc. Employee Equity Incentive
Plan (the 2005 Plan), subject to approval of the Companys shareholders at the 2005 Annual Meeting.
The following is a brief description of the material
terms of the 2005 Plan and the material differences between the 2005 Plan and the Option Plan.
Description of the 2005 Plan
Administration of the 2005 Plan. The 2005
Plan will be administered by the Compensation Committee of the Board or by the Board acting as the Committee (the Committee). The Committee
will have the authority to (i) interpret the 2005 Plan, (ii) establish and revise rules and regulations relating to the 2005 Plan, (iii) select
individuals to receive awards, (iv) determine the vesting, exercisability, transferability and payment of awards, and (v) make any other determinations
that it believes necessary or advisable for the administration of the 2005 Plan.
Duration. The 2005 Plan will terminate on
April 27, 2015, unless terminated earlier by the Board.
Amendment; Termination. The Board may
terminate or amend the 2005 Plan at any time. However, no amendment may be made without the approval of our shareholders to the extent approval is
required by applicable law. In addition, no amendment that is detrimental to a 2005 Plan participant may be made to any outstanding award without the
consent of the participant.
Eligibility. Employees and directors of the
Company and its subsidiaries who are selected by the Committee may be granted awards under the 2005 Plan, provided that only employees may receive
incentive stock options.
Awards. The following types of awards may be
granted under the 2005 Plan.
|
|
Non-qualified and incentive stock options; |
|
|
Restricted stock awards; |
22
|
|
Stock appreciation rights (SARs); |
|
|
Restricted stock units; and |
|
|
Cash performance rights. |
Shares Subject to the 2005 Plan. A total of
41.5 million shares net of canceled or terminated shares have been awarded or currently are subject to outstanding awards since approval
of the Employee Stock Option Plan by shareholders thirty-four years ago. That leaves just 1.7 million shares remaining for future awards of the current
maximum number of shares that previously had been approved as available for issuance. If Item 5 is approved, the number of shares available for future
issuance under the 2005 Plan would increase to 3.9 million shares. Shares that are subject to: (a) issuance upon exercise of an option or SAR granted
under the 2005 Plan but are not issued by reason of forfeiture of the option or SAR; (b) an award granted under the 2005 Plan but are forfeited or are
repurchased by us at the original issue price; or (c) an award granted under the 2005 Plan that otherwise terminates without shares being issued, will
return to the pool of shares available for grant and issuance under the 2005 Plan. The shares to be delivered under the 2005 Plan will be made
available from authorized but unissued shares of our common stock or from treasury shares.
Limit On Awards Under the 2005 Plan. No
employee will be eligible to receive more than 300,000 shares under awards in the year of his or her hire or 200,000 shares annually thereafter. In
addition, unless shareholders approve Item 5 below, the maximum number of shares that may be issued under the 2005 Plan as restricted stock, stock
bonuses, restricted stock units and cash performance rights will be 500,000. The exercise price of stock options and the grant price of SARs may not be
less than the fair market value of our common stock on the date of grant.
Performance-based Awards. The Committee may
specify that the achievement of certain performance measures as described below will determine the degree of granting, vesting and/or payout with
respect to awards that the Committee intends will qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code (the
Code). The performance measures include (i) revenue and/or revenue growth; (ii) earnings before interest expense, income taxes,
depreciation and amortization and/or earnings before interest expense, income taxes, depreciation and amortization growth; (iii) operating income
and/or operating income growth; (iv) net income and/or net income growth; (v) earnings per share and/or earnings per share growth; (vi) total
shareholder return and/or total shareholder return growth; (vii) return on equity; (viii) operating cash flow margin; (ix) adjusted operating cash flow
margin; (x) economic value added; (xi) individual business objectives; and (xii) Company specific operational metrics.
Certain Corporate Transactions. The 2005 Plan
provides that, upon a Corporate Transaction (as defined in the 2005 Plan), the successor corporation may assume or replace outstanding awards or
provide substitute equivalent awards or substantially similar consideration to participants as was provided to shareholders. If the successor
corporation, if any, refuses to assume or replace the awards, the awards will immediately vest as to 100% of the shares subject to and on such
conditions as the Board determines. If a participant is terminated by the Company or any subsidiary without cause or resigns for good reason within one
year from the date of the Corporate Transaction, then the vesting of all outstanding awards for such participant will accelerate in full as to 100% of
the shares on the date of such termination.
Repricing Prohibited. Repricing, or reducing
the exercise price of a stock option or stock appreciation right without shareholder approval is prohibited.
Transferability. Awards generally will be
non-transferable except upon a participants death, although the Committee may allow a participant to transfer a nonqualified stock option award
to an authorized transferee.
Tax Withholding. We may deduct or withhold,
or require a participant to remit, an amount sufficient to satisfy federal, state, local, domestic or foreign taxes required by law or regulation to be
withheld with respect to any taxable event arising as a result of the 2005 Plan. The withholding requirement may be satisfied, in
23
whole or in part, by having us withhold, or by tendering to us,
shares having a fair market value equal to the minimum withholding obligation.
The table below summarizes the material differences
between the proposed 2005 Plan and the existing Option Plan.
Material
Terms
|
|
Proposed
2005 Plan
|
|
Existing
Option Plan
|
Plan
Term: |
|
10
years from date of shareholder approval. |
|
No
term. |
|
Eligible
Participants: |
|
Non-employee directors and employees of the Company and its subsidiaries. |
|
Employees of the Company and its subsidiaries. Non-employee directors
are not eligible. |
|
Award
Types: |
|
(1) Non-qualified and incentive stock options;
(2) Restricted stock awards;
(3) Stock bonus awards;
(4) Stock appreciation rights;
(5) Restricted stock units; and
(6) Cash performance rights. |
|
(1) Non-qualified and incentive stock options; and
(2) Stock appreciation rights. |
|
Share
Limits: |
|
No
employee will be eligible to receive more than 300,000 shares under awards
in the year of hire or 200,000 shares annually thereafter.
No more than 500,000 shares may be granted pursuant to awards of restricted
stock, stock bonuses, restricted stock units and cash performance rights. |
|
No
person may receive options and/or stock appreciation rights for more than
300,000 shares in a calendar year. |
|
Repricing: |
|
Prohibited without shareholder approval. |
|
Plan
is silent. |
Federal Income Tax Consequences Under the 2005 Plan
The discussion set forth below is intended for
general information only. Foreign, state and local income tax consequences are not discussed, and may vary from locality to locality.
Incentive Stock Options. An incentive stock
option results in no taxable income to the optionee or a deduction to us at the time it is granted or exercised. However, the excess of the fair market
value of the shares acquired over the option price is an item of adjustment in computing the alternative minimum taxable income of the optionee upon
exercise. If the optionee holds the stock received as a result of an exercise of an incentive stock option for at least two years from the date of the
grant and one year from the date of exercise, then the gain realized on disposition of the stock is treated as a long-term capital gain. If the shares
are disposed of during this period, however, (i.e., a disqualifying disposition), then the optionee will include in income, as compensation
for the year of the disposition, an amount equal to the excess, if any, of the fair market value of the shares, upon exercise of the option over the
option price (or, if less, the excess of the amount realized upon disposition over the option price). The excess, if any, of the sale price over the
fair market value on the date of exercise will be a short-term capital gain. In such case, we will be entitled to a deduction, in the year of such a
disposition, for the amount includible in the optionees income as compensation. The optionees basis in the shares acquired upon exercise of
an incentive stock option is equal to the option price paid, plus any amount includible in his or her income as a result of a disqualifying
disposition.
Non-Qualified Stock Options. A non-qualified
stock option results in no taxable income to the optionee or deduction to us at the time it is granted. An optionee exercising such an option will, at
that time, realize taxable compensation in the amount of the difference between the option price and the then market value of the
shares.
24
Subject to the applicable provisions of the
Code, a deduction for federal income tax purposes will be allowable to us in the year of exercise in an amount equal to the taxable compensation
realized by the optionee.
Stock Appreciation Rights. Generally, the
recipient of a stand-alone SAR will not recognize taxable income at the time the stand-alone SAR is granted. If an employee receives the appreciation
inherent in the SARs in cash, the cash will be taxed as ordinary income to the employee at the time it is received. If an employee receives the
appreciation inherent in the SARs in stock, the spread between the then current market value and the grant price will be taxed as ordinary income to
the employee at the time it is received.
In general, there will be no federal income tax
deduction allowed to the Company upon the grant or termination of SARs. However, upon the exercise of a SAR, the Company will be entitled to a
deduction equal to the amount of ordinary income the recipient is required to recognize as a result of the exercise.
Stock Awards/Performance Awards. No income
will be recognized at the time of grant by the recipient of a stock award or performance award if such award is subject to a substantial risk of
forfeiture. Generally, at the time the substantial risk of forfeiture terminates with respect to a stock award, the then fair market value of the stock
will constitute ordinary income to the employee. Subject to the applicable provisions of the Code, a deduction for federal income tax purposes will be
allowable to the Company in an amount equal to the compensation realized by the employee.
New Plan Benefits
Granting awards under the 2005 Plan is
discretionary, and we cannot now determine the number or type of awards to be granted in the future to any particular person or group under the 2005
Plan. Since adoption of the 2005 Plan in February 2005, no awards have been granted under the 2005 Plan.
On March 7, 2005, the closing price of our common
stock on the New York Stock Exchange was $67.62.
The Board of Directors recommends that
shareholders vote FOR the amendment and restatement of the Employee Stock Option Plan.
Item 5: Approval of Amendments to the Employee Stock Option Plan
Relating
to the Share Reserve
In addition to asking shareholders to approve the
amendment and restatement of our Employee Stock Option Plan (Option Plan) as the Knight-Ridder, Inc. Employee Equity Incentive Plan (the
2005 Plan) as described in detail in Item 4 above, we are also asking shareholders to approve an additional amendment. Except as described
above in Item 4, the Option Plan is substantially similar to the 2005 Plan.
On February 1, 2005, the Compensation Committee and
the Board of Directors, subject to approval by the Companys shareholders at the 2005 Annual Meeting, approved an amendment to our Employee Stock
Option Plan current or as amended and restated to increase by 2.2 million the number of shares of common stock reserved for issuance
thereunder, and increase (under the 2005 Plan) the limit on any awards of restricted stock, stock bonuses, restricted stock units and cash performance
rights from 500,000 to 1,160,000 shares.
We are requesting an additional 2.2 million shares
to be used over three years. Currently, only approximately 1.7 million shares are available for future awards under the Option Plan. We believe that
our stock option program has been an important factor in attracting and retaining key executives and employees and that continuation of the stock
option program in combination with the other types of equity and long-term incentives such as restricted stock that we propose to make under the 2005
Plan is important for the Company to remain competitive. Therefore, subject to shareholder approval, we amended the Option Plan to make available for
grant an additional 2.2 million shares of the Companys common stock. In light of historical usage and expected future grants, we believe that
this increase, together with current available shares, will be sufficient to meet the Companys projected needs through 2007.
We believe that our stock compensation program, as
proposed to be amended in Items 4 and 5, would result in limited net annual share awards of less than 1.5% of total shares outstanding as of fiscal
year end.
25
Over the past three fiscal years, our net annual
stock option grants have averaged 1.7%. If shareholders approve the 2005 Plan, we plan to limit our use of stock options even further, which will
result in less dilution. Our share repurchase program, if continued consistent with historical practices, would more than offset this dilution.
Historically, repurchasing shares has been an integral part of our financial strategy. Since we initiated our share repurchase program in 1994, we have
typically repurchased more than the number of shares issued during each year, and in some cases many more.
Also, we have actively (and we believe, prudently)
managed our equity compensation programs. We stretched the 2002 increase approved by shareholders to three years instead of the two we originally
anticipated. We have also reduced the total number of stock options granted on an annual basis by approximately 15% per year.
As described under the caption Description
of the 2005 Plan Limit on Awards Under the 2005 Plan on page 23 of our discussion of Item 4, the 2005 Plan would limit the number of
shares that may be issued as awards of restricted stock, stock bonuses, restricted stock units and cash performance rights because we believe that it
is simply good corporate governance to do so. We are asking shareholders, in approving the 2.2 million additional shares available for grant, to
increase the limit on the number of shares that may be issued as awards of restricted stock, stock bonuses, restricted stock units and cash performance
rights.
The Board of Directors recommends that shareholders vote FOR this
proposal.
Equity Compensation Plan Information
The following table sets forth information regarding
securities authorized for issuance under our equity compensation plans as of December 26, 2004. The table does not include information about our
proposed 2005 Plan which is being submitted for shareholder approval at the Annual Meeting.
|
|
|
|
(a) |
|
(b) |
|
(c) |
Plan Category
|
|
|
|
Number of securities to be issued upon exercise of outstanding
options, warrants and rights
|
|
Weighted-average exercise price of outstanding options,
warrants and rights ($)
|
|
Number of securities remaining available for future issuance
under equity compensation plans (excluding securities reflected in column (a)
|
Equity
compensation plans approved by shareholders (1) |
|
|
|
|
11,061,259 |
(2) |
|
$ |
61.53 |
|
|
|
2,101,454 |
(3) |
Equity
compensation plans not approved by shareholders (4) |
|
|
|
|
179,000 |
(5) |
|
|
64.28 |
|
|
|
176,997 |
(6) |
Total |
|
|
|
|
11,240,259 |
|
|
$ |
61.75 |
|
|
|
2,278,451 |
|
(1) |
|
Consists of our Employees Stock Purchase Plan and Employee Stock
Option Plan. |
(2) |
|
Represents shares issuable upon the exercise of outstanding
stock options under our Employee Stock Option Plan. |
(3) |
|
Represents 1,631,092 shares available for future issuance under
our Employee Stock Option Plan and 470,362 shares available for future issuance under our Employees Stock Purchase Plan. These shares do not include
the additional shares we are asking shareholders to approve in accordance with our proposal in Item 5 on page 25. |
(4) |
|
Consists of our Compensation Plan for Nonemployee Directors (the
Director Plan). Our Board of Directors adopted the Director Plan effective July 1, 1997. Under the then-current rules of the NYSE, no
shareholder approval was required for the Director Plan. Only non-employee directors are eligible to receive awards under the Director Plan. As
described in greater detail under the captions Director |
26
|
|
Compensation beginning on page 15, the Director Plan
provides that non-employee directors receive the following compensation: (1) an annual retainer fee payable one half in Knight Ridder common stock and
one half in cash or stock, at the directors election; (2) board and committee meeting attendance fees; (3) an annual stock option grant; and (4)
and in certain cases, retirement benefits. All options vest in three equal installments over a three-year period from the date of grant. |
(5) |
|
Represents shares issuable upon the exercise of outstanding
stock options under the Director Plan. |
Item 6: Shareholder Proposal
The International Brotherhood of Teamsters General
Fund, 25 Louisiana Avenue, N.W., Washington, D.C. 20001-2198, holder of 80 shares of Knight Ridder common stock, has given notice of its intention to
propose the resolution set forth below at the Annual Meeting. If the shareholder proponent, or a representative who is qualified under state law, is
present and submits the proposal for a vote, shareholders will vote on the proposal at the Annual Meeting.
RESOLVED: The shareholders of Knight-Ridder,
Inc. (Knight-Ridder or the Company) urge the Board of Directors (the Board) to amend the by-laws to require that an
independent director who has not served as the chief executive of the Company serve as Board Chair. Implementation will be deferred until the 2006
Annual Meeting of Shareholders.
The International Brotherhood of Teamsters General
Fund has submitted the following statement in support of its resolution:
SUPPORTING STATEMENT: It is the responsibility
of the Board of Directors to protect shareholders interests by providing independent oversight of management, including the Chief Executive
Officer (CEO), in directing the corporations business and affairs. The Board exists to ensure that management acts in the best long-term
interests of the shareholders.
Currently at Knight Ridder, Mr. P. Anthony Ridder
holds the positions of both Chairman of the Board and CEO. We believe that one person cannot adequately represent the interests of shareholders and
provide the necessary leadership and objectivity as Chairman when he holds both positions. Further, an appearance of a conflicted Board Chair can
damage the credibility of the Companys market worth. We believe a clear delineation between the roles of Chair and CEO promotes greater
accountability to Knight-Ridder shareholders.
In lieu of splitting the positions of Chairman and
CEO many companies have decided to formally appoint a lead director. According to Knight-Ridders Corporate Governance Guidelines there is no lead
director at the Company, and it is not necessary (to appoint one). We believe that such a position is in direct conflict with enhancing
independent Board leadership at Knight-Ridder.
Other institutional investors and corporate
governance experts agree that oversight of management in the form of an independent chairman of the board promotes corporate
accountability:
|
|
CalPERS Corporate Governance Guidelines state,
The independence of a majority of the Board is not enough. The leadership of the board must embrace independence, and must ultimately
change the way in which directors interact with management. |
|
|
The Ethical Funds and Domini Social Investments Proxy Voting
Guidelines call for a strong independent director as Board Chair to represent the interests of shareholders. |
|
|
The Conference Board Commission on Public Trust and Private
Enterprise has found that, ...separating the positions of Chairman and CEO is fully consistent with the objectives of the [Sarbanes-Oxley] Act,
the proposed New York Stock Exchange listing requirements, and the proposed |
1 |
|
Ethical Funds Proxy Voting Guidelines, The Ethical Funds,
§ 3.0 (3.2.3), 2003, and Proxy Voting Guidelines & Shareholder Activism, Proxy Season 2002, 7th Edition. Domini Social
Investments, Pg. 25 (2002). |
27
|
|
NASDAQ requirements, and that separating the roles of Chairman
and CEO enhances implementation of the Act and stock exchange reforms.2 |
We believe the recent wave of corporate scandals
demonstrate that no matter how many independent directors there are on the Board, that Board is less able to provide independent oversight of the
officers if the Chairman of that Board is also the CEO of the Company.
We urge shareholders to vote FOR this
proposal.
Managements Response
The Board of Directors recommends a vote AGAINST
the adoption of this shareholder proposal.
We believe that the separation it seeks to require
is neither necessary nor in the best interests of the Company or its shareholders. Here are the reasons:
(1) |
|
Our Board has already established comprehensive corporate
governance practices (including those listed below) that we believe are more effective in ensuring independent oversight of managements
performance for the benefit of our shareholders than the shareholder proposal. |
|
|
The business and affairs of the Company are managed under the
direction of a very active Board that is overwhelmingly independent. Currently, all members of the Board except Mr. Ridder are independent as defined
by New York Stock Exchange rules. |
|
|
The independent directors meet regularly in executive session
without management present to review, among other things, Mr. Ridders performance. Although we do not have a lead director, the independent
directors may designate a director to chair these sessions; otherwise the chair of the audit, nominating and corporate governance and compensation
committees rotate as the presiding director. |
|
|
A great deal of the Boards business is conducted by the
independent committees and reported to the full Board in presentations by the committee chairs. |
(2) |
|
Any decision to separate or combine the offices of CEO and Board
Chairman should be evaluated on its merits by the Board in light of the relevant circumstances facing the Company. The shareholder proposal would
undermine the Boards flexibility in that respect. It would circumvent the Boards ability to make fundamental decisions regarding the
leadership of the Company. |
(3) |
|
We believe that to be an effective chairman, an individual must
be intimately familiar with the business and operations of a company. As an actively engaged chief executive officer, we believe that Mr. Ridder well
fulfills that requirement. |
(4) |
|
We believe that to separate the positions of
chairman and chief executive officer could result in a structure that is nominal, but not actual. |
All that said, we believe that such a separation may
be appropriate under certain specific circumstances (e.g., during periods of leadership transition). But we believe that the Board should be the final
arbiter of those circumstances. Currently, we believe that it is in the best interests of the Company and its shareholders for Mr. Ridder to serve as
Chairman and CEO. Our current leadership model strikes an appropriate balance between strong executive leadership and independent oversight of
managements performance and is working well for the Company and delivering results for shareholders.
For the reasons stated above, the Board of
Directors recommends a vote AGAINST the adoption of this shareholder proposal.
2 |
|
The Conference Board Commission on Public Trust and Private
Enterprise, Findings and Recommendations, Jan. 9, 2003. |
28
Executive Compensation
Report
on Executive Compensation
by the Compensation Committee
Overview
The Compensation Committee of the Board administers
the Companys executive compensation program, and in consultation with senior management, establishes the Companys general compensation
philosophy and oversees the development and implementation of compensation programs. Each member of the Committee is independent as defined by the
NYSEs listing standards.
In July 2003, the Committee adopted a charter that
describes the Committees purpose, goals and responsibilities and membership guidelines. A copy of the charter is available on the corporate
governance section of the Companys website at www.kri.com.
The Committee has furnished the following report on
executive compensation for 2004:
What is our executive compensation philosophy?
We firmly believe that the interests of the Company
and its employees are inseparable. In support of that principle, the Committee has designed the Companys executive compensation program to
support what we believe to be an appropriate relationship between executive pay and the creation of shareholder value. To promote Company performance,
we link a significant portion of executive compensation to the Companys operating results. The objectives of our program are:
|
|
To align the interests of executives with the long-term
interests of shareholders through awards whose value over time depends upon the performance of the Companys common stock; |
|
|
To provide compensation comparable to that offered by other peer
companies, enabling the Company to attract, retain and motivate talented executives who are critical to the Companys long-term
success; |
|
|
To motivate key executives to achieve strategic business
initiatives and to reward them for their achievement; and |
|
|
To set guidelines for substantial stock ownership by
executives. |
What are the elements of executive compensation?
In 2004, the Committee structured executive
compensation to consist principally of base salary, annual bonus, long-term incentive awards and stock options. In this way, a significant portion of
the value ultimately realized by the executives, including the Chairman and Chief Executive Officer, will depend upon the Companys performance
and can be considered at risk.
The Companys executives also participate in a
retirement plan, health plan, 401(k) plan and other voluntary benefit plans that the Company makes available to all employees generally. Among these
are relocation benefits, such as temporary living expenses. One-time relocation bonuses are sometimes provided to employees to assist with
miscellaneous moving expenses and help compensate for housing differentials. The Company also provides executives with a voluntary deferred
compensation arrangement, which is similar to those typically offered to executives by the companies with which the Company competes for
talent.
How did we determine base salaries for 2004?
The Committee establishes senior executive salaries
based on our review of the executives performance and compensation history, and information on salary levels at comparable companies. Each year
the Committee
29
conducts a competitive compensation analysis for
the top five executives. For 2004, this analysis was based on comparative data prepared by both the Companys senior human resources officer and
by an outside compensation consultant that the Committee has retained to advise it on executive compensation matters.
The comparison group we chose for compensation
purposes consisted of our competitors in the newspaper industry (the Comparison Group). We obtained data for the Comparison Group from a
number of sources, including proxy statements, other publicly available information and surveys by consulting firms.
Base Salaries of Executive
Officers
Data for the Comparison Group supported an annual
increase in base salaries for 2004. The base salaries of our executives were generally between the median and 75th percentile for salaries
of executives in the Comparison Group. The base salary for each of the named executive officers in 2004 is reported in the Summary Compensation Table
that follows this report.
Base Salary of the Chief Executive
Officer
In 2004, Mr. Ridder received a base salary of
$980,000, which is the salary rate that has been in effect for him since March 1, 2003. Although Mr. Ridder did not receive a base salary increase in
2004, his performance-based annual incentive opportunity was increased from 70% to 80% of base salary. We believe that Mr. Ridders current base
salary is consistent with the salaries of chief executive officers in the Comparison Group and with the Committees evaluation of Mr.
Ridders leadership and management of the Company.
How did we determine bonuses for 2004?
Annual Incentive Plan
We award cash bonuses under the Companys
Annual Incentive Plan. Under the plan, participants are eligible for cash bonuses ranging from 25% of salary in the case of participants whose annual
salary is less than $50,000 to 50% in the case of those whose salary exceeds $250,000, and 80% for Mr. Ridder. In 2004, sixty-five percent of an
executives bonus potential was tied to financial performance. Thirty-five percent was tied to specific non-financial objectives for the Company.
For corporate participants, it was the financial performance of the Company on a consolidated basis compared to budget. For business unit participants,
it was the financial performance of the individual business unit compared to its budget. In 2004, the measure of financial performance was operating
profit.
Under the plan, if the Company (or a business unit)
meets its financial budget, the executive receives 100% of the portion of the potential bonus tied to financial performance (i.e., 65%). If operating
profit is above or below budget, then the financial awards paid to plan participants will range from 0% of the targeted bonus (in the case of financial
performance less than or equal to 90% of budget) to 300% of the targeted bonus (if the budget is exceeded by more than 20%). In order to achieve a
payout under the plan greater than 200%, two criteria must be met: business unit operating profit must be at least 12% above prior year; and business
unit operating profit must exceed Year 2000 levels. The total financial award payout for all participants in a business unit will be capped once the
aggregate bonus amount above target bonus equals 25% of the amount that actual operating profit performance exceeds target. Plan participants may elect
to defer any portion of their bonus to a later year.
Bonuses for Executive Officers
In 2004, the Committee awarded bonuses to each
executive officer under the Annual Incentive Plan. The bonus for each of the named executive officers is set forth in the Summary Compensation Table
that follows this report.
30
Bonus for the Chief Executive
Officer
Mr. Ridder participates in the Companys Annual
Incentive Plan which aligns participating executives compensation directly to the Companys operating results and ultimately to shareholder
value. For 2004, Mr. Ridders bonus target was set at 80% of his salary.
What is our position on the deductibility of executive
compensation?
Provisions of federal tax law deny a company a tax
deduction to the extent certain executives total compensation (excluding certain categories of performance based compensation)
exceeds $1,000,000 in any year. At the 2000 Annual Meeting, shareholders of the Company approved certain amendments to the material terms of the
Companys Annual Incentive Plan to ensure that compensation paid by the Company to executive officers pursuant to the plan would be deductible by
the Company for federal income tax purposes.
What were the long-term incentive awards in 2004?
Long-term incentives consist of stock options and
Long-Term Incentive Plan awards. Both types of awards serve to focus executive attention on the long-term performance of the Company.
2004 Stock Option Grants
Under the terms of the Companys Employee Stock
Option Plan, the Committee may grant executive officers and other key employees options to purchase shares of the Companys common stock at the
fair market value (i.e., market price) on the option grant date. The options granted in 2004 vest in three equal installments over a three-year
period from the date of grant and expire ten years after the date of grant.
The plan is designed to permit those executives who
contribute to the performance of the Company and the market price of its common stock to benefit along with shareholders from increases in the value of
the Companys common stock.
In 2004, after reviewing the Companys
financial performance and the competitive analysis prepared by the Committees compensation consultant, Compensia, we provided long-term incentive
awards to executives by granting employee stock options. The value of stock options awarded to each of the senior executives (including Mr. Ridder) was
between the median and 75th percentile of recent awards given by companies in the Comparison Group. The number of stock options of the Company awarded
to each of the named executive officers is set forth in the Stock Option Grants Table that follows this report.
Long-Term Incentive Plan
In January 2003, upon the recommendation of this
Committee, the Board approved and adopted a cash-based long-term incentive plan. The plan is intended to motivate and reward executives for achieving
total shareholder return (TSR) equal to or greater than the median TSR of the companies in the Comparison Group. Participants are selected
to participate in the plan prior to the commencement of a three-year performance period and are eligible to receive a cash award at the end of each
performance period if certain specified performance targets are achieved. An executives ability to receive an award is contingent upon and
related directly to the total return received by shareholders on their investment in the Companys stock over a three-year period, compared to the
return received by shareholders of the companies in the Comparison Group. TSR is calculated by adding a companys annual stock appreciation and
dividends (assuming dividends were reinvested at the end of each quarter in which a dividend is paid). All of the named executive officers participate
in the plan.
What are the Companys stock ownership guidelines?
To support the Companys desire to increase
management stock ownership, the Company established stock ownership guidelines for all of the Companys executive officers and certain other key
employees. The guidelines set what we believe is an appropriate level of ownership of Knight Ridder common stock as a
31
multiple of the executives annual base
salary (based on the market value of the stock). The multiple ranges from five times base salary (in the case of Mr. Ridder), to three times base
salary (in the case of corporate senior vice presidents), to two times base salary (in the case of corporate vice presidents and publishers of the
Companys largest newspapers). The Companys executive officers and certain other key employees are expected to achieve the applicable level
of ownership over a three-year period.
The Committee believes these guidelines have the
positive effect of further aligning the interests of the executives and key employees with that of all shareholders.
The Compensation
Committee
M. Kenneth Oshman, Chair
Thomas P.
Gerrity
Patricia Mitchell
Vasant Prabhu
Gonzalo Valdes-Fauli
32
Compensation of Executive Officers
The following table sets forth information regarding
the compensation during the past three years of the Chief Executive Officer and each of the other four most highly compensated executive officers in
2004:
Summary Compensation Table
|
|
|
|
|
|
Annual Compensation
|
|
Long-Term Compensation
|
|
Name/Principal Position (1)
|
|
|
|
Year
|
|
Salary ($)
|
|
Bonus ($)(2)
|
|
Securities Underlying Options (#)
|
|
LTIP Payouts ($)(3)
|
|
All Other Compensation ($)(4)
|
P. Anthony
Ridder |
|
|
|
|
2004 |
|
|
|
980,000 |
|
|
|
718,105 |
|
|
|
155,000 |
|
|
|
|
|
|
|
20,172 |
|
Chairman and
CEO
|
|
|
|
|
2003 |
|
|
|
972,405 |
|
|
|
455,637 |
|
|
|
175,000 |
|
|
|
2,219,178 |
|
|
|
19,614 |
|
|
|
|
|
|
2002 |
|
|
|
940,500 |
|
|
|
802,825 |
|
|
|
175,000 |
|
|
|
|
|
|
|
16,277 |
|
|
Steven B.
Rossi |
|
|
|
|
2004 |
|
|
|
673,000 |
|
|
|
370,299 |
|
|
|
60,000 |
|
|
|
|
|
|
|
13,112 |
|
Senior Vice
President/
|
|
|
|
|
2003 |
|
|
|
645,962 |
|
|
|
216,285 |
|
|
|
110,000 |
|
|
|
1,370,669 |
|
|
|
10,459 |
|
Finance and
Chief
|
|
|
|
|
2002 |
|
|
|
615,000 |
|
|
|
374,981 |
|
|
|
90,000 |
|
|
|
|
|
|
|
8,573 |
|
Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mary Jean
Connors |
|
|
|
|
2004 |
|
|
|
564,308 |
|
|
|
258,768 |
|
|
|
58,000 |
|
|
|
|
|
|
|
10,035 |
|
Senior Vice
President
|
|
|
|
|
2003 |
|
|
|
540,577 |
|
|
|
180,944 |
|
|
|
65,000 |
|
|
|
1,253,183 |
|
|
|
9,715 |
|
|
|
|
|
|
2002 |
|
|
|
535,000 |
|
|
|
326,203 |
|
|
|
60,000 |
|
|
|
|
|
|
|
8,077 |
|
|
Gary R.
Effren |
|
|
|
|
2004 |
|
|
|
511,923 |
|
|
|
234,768 |
|
|
|
27,000 |
|
|
|
|
|
|
|
8,973 |
|
Vice
President/Finance
|
|
|
|
|
2003 |
|
|
|
470,289 |
|
|
|
157,933 |
|
|
|
60,000 |
|
|
|
652,699 |
|
|
|
8,589 |
|
|
|
|
|
|
2002 |
|
|
|
425,000 |
|
|
|
259,133 |
|
|
|
60,000 |
|
|
|
|
|
|
|
6,557 |
|
|
Gordon
Yamate |
|
|
|
|
2004 |
|
|
|
437,885 |
|
|
|
200,696 |
|
|
|
27,000 |
|
|
|
|
|
|
|
8,167 |
|
Vice
President
|
|
|
|
|
2003 |
|
|
|
424,385 |
|
|
|
142,107 |
|
|
|
30,000 |
|
|
|
840,388 |
|
|
|
8,324 |
|
and General
Counsel
|
|
|
|
|
2002 |
|
|
|
420,000 |
|
|
|
256,085 |
|
|
|
30,000 |
|
|
|
|
|
|
|
6,500 |
|
(1) |
|
Except for Messrs. Rossi and Effren, the positions listed are
the principal positions held by each of the named executive officers during fiscal year 2004. Messrs. Rossi and Effren became Senior Vice
President/Finance and Chief Financial Officer and Vice President/Finance, respectively, effective January 1, 2005. Previously, Mr. Rossi served as the
Companys President/Newspaper Division and Mr. Effren served as Senior Vice President/Finance and Chief Financial Officer. |
(2) |
|
Amounts represent the value of shares and accrued dividends
issued to the named executive officers in accordance with the Companys 1997 Long-Term Incentive Plan. The performance period under the
Companys 1997 Long-Term Incentive Plan ended on December 31, 2002. The plan provided that none of the shares would vest unless the Companys
total shareholder return (TSR) was positive and at least equal to the median TSR of the other companies in the Companys comparison
group during the performance period (January 1, 2000 through December 31, 2002). Upon satisfaction of those conditions, 15% of the shares would vest if
the Companys TSR was equal to the peer group median and 100% of the shares would vest if the Companys TSR was at the 90th
percentile of the peer TSR or higher. In accordance with the plan, 100% of the shares granted to the participants vested because the Companys TSR
was greater than that of all other companies in the peer group during the performance period. In January 2003, the Company issued the vested shares and
accrued dividends to plan participants, including the named executive officers. |
(3) |
|
The amounts listed for 2004, 2003, and 2002, respectively,
represent (i) matching contributions to the named executive officers under the Companys 401(k) Plan as follows: Mr. Ridder, $6,000, $5,553, and
$5,500; Mr. Rossi, $6,150, $6,000, and $6,000; Ms. Connors, $6,150, $6,000, and $6,000; Mr. Effren, $6,150, $6,000, and $5,500; and Mr. Yamate, $5,766,
$6,000, and $5,484; and (ii) the cost of life insurance on the lives of the named executive officers in 2004, 2003, and 2002, respectively, as
follows: |
33
Mr. Ridder, $14,172, $14,061 and $10,777; Mr. Rossi, $6,962, $4,459 and $2,412; Ms.
Connors, $3,885, $3,715 and $2,077; Mr. Effren, $2,823, $2,589 and $1,057; and Mr. Yamate, $2,401, $2,324 and $1,016.
The following table sets forth information regarding
stock options granted in 2004 to the executive officers named in the Summary Compensation Table:
Option/SAR Grants In Last Fiscal Year
Name
|
|
|
|
Number of Securities Underlying Options/SARs Granted
(#)
|
|
% of Total Options/SARs Granted to Employees in Fiscal
Year(%)
|
|
Exercise or Base Price ($/share)
|
|
Expiration Date
|
|
Grant Date Present Value ($)(1)(2)
|
P. Anthony
Ridder |
|
|
|
|
155,000 |
|
|
|
8.4 |
|
|
|
67.315 |
|
|
|
12/13/2014 |
|
|
|
1,701,156 |
|
Steven B.
Rossi |
|
|
|
|
60,000 |
|
|
|
3.2 |
|
|
|
67.315 |
|
|
|
12/13/2014 |
|
|
|
658,512 |
|
Mary Jean
Connors |
|
|
|
|
58,000 |
|
|
|
3.1 |
|
|
|
67.315 |
|
|
|
12/13/2014 |
|
|
|
636,562 |
|
Gary R.
Effren |
|
|
|
|
27,000 |
|
|
|
1.5 |
|
|
|
67.315 |
|
|
|
12/13/2014 |
|
|
|
296,330 |
|
Gordon
Yamate |
|
|
|
|
27,000 |
|
|
|
1.5 |
|
|
|
67.315 |
|
|
|
12/13/2014 |
|
|
|
296,330 |
|
(1) |
|
The grant date present value shown is a hypothetical
value for the options on the date of grant based upon application of the Black-Scholes model. This model often is used to estimate the market value of
transferable options by calculating the probability based on the volatility of the stock subject to the option that the stock price will
exceed the option exercise price at the end of the option term. The assumptions used in calculating the Black-Scholes value of the options were:
expected volatility of .1807; risk-free rate of return of 3.54%; dividend yield of 1.976%; and vesting over a three-year period from the date of grant.
Based on this model, the calculated value of each option on December 13, 2004, was $10.9752 per share underlying each option. |
(2) |
|
The stock options are not transferable. The Black-Scholes
estimate notwithstanding, an option granted under the Employee Stock Option Plan will have value only if and to the extent the optionee exercises the
option at a time when the market price of the Companys common stock is above the market price on the date the option was granted. |
The following table sets forth information regarding
Company stock options exercised in 2004 by the executive officers named in the Summary Compensation Table, as well as the number of unexercised options
held by each of them at the end of the 2004:
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End
Option/SAR Values
|
|
|
|
|
|
|
|
Number of Securities Underlying Unexercised Options/SARs at
Fiscal Year-End (#)
|
|
Value of Unexercised In-the-Money Options/SARs at Fiscal Year-End
($)(1)
|
|
Name
|
|
|
|
Shares Acquired on Exercise (#)
|
|
Value Realized ($)
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
P. Anthony
Ridder |
|
|
|
|
70,000 |
|
|
|
2,490,327 |
|
|
|
785,001 |
|
|
|
329,999 |
|
|
|
6,546,219 |
|
|
|
240,332 |
|
Steven B.
Rossi |
|
|
|
|
0 |
|
|
|
|
|
|
|
378,333 |
|
|
|
163,333 |
|
|
|
3,337,891 |
|
|
|
123,600 |
|
Mary Jean
Connors |
|
|
|
|
20,000 |
|
|
|
800,829 |
|
|
|
358,667 |
|
|
|
121,333 |
|
|
|
4,462,127 |
|
|
|
82,400 |
|
Gary R.
Effren |
|
|
|
|
0 |
|
|
|
|
|
|
|
171,000 |
|
|
|
87,000 |
|
|
|
1,447,443 |
|
|
|
82,400 |
|
Gordon
Yamate |
|
|
|
|
0 |
|
|
|
|
|
|
|
115,000 |
|
|
|
57,000 |
|
|
|
1,017,180 |
|
|
|
41,200 |
|
(1) |
|
The amount shown is the amount by which the market value at
year-end of all shares subject to unexercised options exceeded the exercise price of those options and is based on the average of the high and low
trading prices of the Companys common stock on the NYSE on December 23, 2004. |
34
Other Benefits
Retirement Plans
401(k) Plan
We sponsor a defined contribution retirement savings
plan qualified under section 401(k) of the Internal Revenue Code (the 401(k) Plan). Eligible employees may contribute up 75% of their
earnings on a pre-tax basis and 20% on an after-tax basis, subject to certain annual limitations. We make matching contributions for eligible
participants which are initially invested in Knight Ridder common stock. However, participants may, at their option, diversify the investment of the
Company match by selling the Knight Ridder common stock held in their plan accounts and investing the proceeds in the other investment funds available
under the 401(k) plan. In fiscal year 2004, we made matching contributions of $11.7 million, which includes $30,216 in the aggregate for matching
contributions to named executive officers, as further described in the All Other Compensation column of the Summary Compensation Table on
page 33.
Pension Plan
The Retirement Plan for Employees of Knight-Ridder,
Inc. and Certain Subsidiaries (the Retirement Plan) is a funded, tax-qualified, noncontributory defined benefit pension plan that covers
certain non-union employees, including each of the named executive officers. Benefits under the Retirement Plan are based on an employees years
of service and the employees final average earnings, i.e., average earnings over the five years for which earnings are the highest during the
employees final ten years of service. Benefits are payable as a single life annuity beginning at age 65. Earnings covered by the Retirement Plan
include salary and bonus. The amount of annual earnings that may be considered in calculating benefits under the Retirement Plan is limited by law. For
2004, the annual limit was $205,000. Contributions to the Retirement Plan are paid into a trust from which the benefits of participants are
paid.
We also sponsor an unfunded benefit restoration plan
that provides out of our general assets for the difference between the amount that would have been payable under the Retirement Plan absent legal
limits and the amount actually payable under the Retirement Plan. We do not have any other arrangements to pay any significant supplemental pension
amount to a named executive officer, although payments may be made after retirement under equity awards or deferred compensation
arrangements.
The following table shows, for the final average
earnings and years of service indicated, the estimated annual benefits payable beginning upon retirement at age 65 under the current benefit formula of
the Retirement Plan. The estimated benefits are calculated based on the assumption that payments will be made as a single-life annuity to an officer,
hired prior to January 1, 1989 and retiring in 2004 at age 65 with a specified combination of final average earnings (salary and bonus) and years of
service. The benefits shown are not subject to any reduction for Social Security or other offset amounts.
35
Estimated Annual Retirement Benefits
|
|
|
|
Years of Service at Age 65
|
|
Final Average Earnings
|
|
|
|
15
|
|
20
|
|
25
|
|
30
|
|
35
|
|
40 or more
|
125,000 |
|
|
|
|
24,997 |
|
|
|
39,579 |
|
|
|
44,786 |
|
|
|
49,993 |
|
|
|
53,118 |
|
|
|
56,243 |
|
200,000 |
|
|
|
|
41,872 |
|
|
|
65,829 |
|
|
|
74,786 |
|
|
|
83,743 |
|
|
|
88,743 |
|
|
|
93,743 |
|
300,000 |
|
|
|
|
64,372 |
|
|
|
100,829 |
|
|
|
114,786 |
|
|
|
128,743 |
|
|
|
136,243 |
|
|
|
143,743 |
|
400,000 |
|
|
|
|
86,872 |
|
|
|
135,829 |
|
|
|
154,786 |
|
|
|
173,743 |
|
|
|
183,743 |
|
|
|
193,743 |
|
500,000 |
|
|
|
|
109,372 |
|
|
|
170,829 |
|
|
|
194,786 |
|
|
|
218,743 |
|
|
|
231,243 |
|
|
|
243,743 |
|
600,000 |
|
|
|
|
131,872 |
|
|
|
205,829 |
|
|
|
234,786 |
|
|
|
263,743 |
|
|
|
278,743 |
|
|
|
293,743 |
|
700,000 |
|
|
|
|
154,372 |
|
|
|
240,829 |
|
|
|
274,786 |
|
|
|
308,743 |
|
|
|
326,243 |
|
|
|
343,743 |
|
900,000 |
|
|
|
|
199,372 |
|
|
|
310,829 |
|
|
|
354,786 |
|
|
|
398,743 |
|
|
|
421,243 |
|
|
|
443,743 |
|
1,000,000 |
|
|
|
|
221,872 |
|
|
|
345,829 |
|
|
|
394,786 |
|
|
|
443,743 |
|
|
|
468,743 |
|
|
|
493,743 |
|
1,300,000 |
|
|
|
|
289,372 |
|
|
|
450,829 |
|
|
|
514,786 |
|
|
|
578,743 |
|
|
|
611,243 |
|
|
|
643,743 |
|
1,600,000 |
|
|
|
|
356,872 |
|
|
|
555,829 |
|
|
|
634,786 |
|
|
|
713,743 |
|
|
|
753,743 |
|
|
|
793,743 |
|
1,900,000 |
|
|
|
|
424,372 |
|
|
|
660,829 |
|
|
|
754,786 |
|
|
|
848,743 |
|
|
|
896,243 |
|
|
|
943,743 |
|
As of the end of 2004, Mr. Ridder had 43 years of
service with the Company; Mr. Rossi 17 years; Ms. Connors 25 years; Mr. Effren 24 years and Mr. Yamate 4 years.
Income Security Agreements
None of our officers have employment agreements.
However, we have entered into income security agreements with certain executive officers of the Company and its subsidiaries designated by the
Compensation Committee of the Board, including the named executive officers. The agreements continue through December 31 of each year and are
automatically extended for additional three-year terms (a renewal date) unless we notify the executive that the agreement will not be extended 60 days
prior to a renewal date. The agreement provides that each executive will be entitled to receive the following, if after a change in control (as defined
in the agreements), an executives employment is terminated for any reason other than (a) death, (b) disability, (c) retirement, (d) cause, or (e)
resignation by the executive for any reason other than good reason, each as defined in the agreement:
|
|
A lump sum cash severance payment equal to three times the
greater of (i) the sum of the salary and cash bonus payable to the participant for the last full calendar year preceding the severance payment or (ii)
the sum of the participants annualized salary and the maximum cash bonus the participant could have earned for the then current calendar
year; |
|
|
Continued participation in the Companys group term life
insurance plan and health plan for a period of three years following the date of termination; and |
|
|
Accelerated vesting of stock issued and stock options granted,
in accordance with the provisions of our Employee Stock Option Plan, which provides that the unvested portion of any option will be deemed to have
vested and become fully exercisable immediately prior to any such termination. |
The agreements also provide that if any payments
made in connection with a change in control would be subject to excise tax imposed by Section 4999 of the Internal Revenue Code, we will gross
up the participants compensation for all federal, state and local income and excise taxes and any penalties and interest.
Long-Term Incentive Plan
In accordance with the Companys Long-Term
Incentive Plan (described in the Compensation Committee Report on page 31) (the LTIP), participants who were selected to participate at the
beginning of a three-year performance period will be eligible to receive an award equal to three times 75% of the participants salary as of first
day of January in the first year of the performance period. The award potential for participants added to the plan after the commencement of the
performance period will be reduced from three times 75% of salary on a pro rata basis to reflect the number of full calendar months remaining in the
performance period. The
36
salary used for later-added participants will be the annual rate
of salary in effect for the participant as of the first day of the month in which the award is made. The maximum amount award payable under the LTIP to
a participant is $5 million. Plan participants may elect to defer any portion of their award under the Companys Annual Incentive Deferral Plan,
as described in more detail below under the caption Deferred Compensation Plan.
Termination of employment prior to the date of
payment of an award for reasons other than death, disability or retirement will result in immediate forfeiture of any rights to receive an award from
the LTIP and termination of participation in the Plan.
In the event of a change in control of the Company
(as defined in the plan) during a performance period, the performance period will immediately end and all awards, if any, will be calculated based on
the abbreviated performance period and paid to participants.
All of the named executive officers participate in
the plan and are eligible to receive an award equal to three times 75% of their respective salaries in effect on January 1, 2003.
Deferred Compensation Plan
We sponsor a non-qualified unfunded Annual Incentive
Deferral Plan designed to allow eligible participants to defer payment of certain elements of their compensation until a future date. Only certain
members of managements and other highly compensated employees of the Company and participating subsidiaries are eligible to participate in the plan.
The Compensation Committee of the Board administers the plan. Participants may elect to defer up to 100% of base salary and bonus. Amounts deferred
under the plan are credited or charged with the performance of the investment options offered under the plan and selected by participants. Participants
may elect to receive distributions as a lump sum or in up to five substantially equal annual installments at retirement or earlier as provided in the
plan. In the event of a change of control, as defined in the plan, participants will receive a lump sum distribution.
If the Compensation Committee determines that any
portion of a distribution will not be deductible by the Company under Section 162(m) of the Internal Revenue Code, distribution of the amount that
would exceed the Section 162(m) limit will be deferred until the first date following the participants termination of employment on which the
plan administrator determines that distribution of the excess amount would be deductible by the Company.
Each of the named executive officers participates in
the Annual Incentive Deferral Plan.
37
Performance of Knight Ridder Common Stock
The following graph compares the cumulative total
return on the Companys common stock during the past five years with the cumulative total return during the same period on the stocks that
comprise the S&P 500 Stock Index and the S&P 500 Publishing Index. The S&P 500 Stock Index is comprised of 500 U.S. companies in the
industrial, transportation, utilities and financial industries, weighted by market capitalization. The S&P 500 Publishing Index consists of the
Company, Dow Jones & Company, Inc., Gannett Co., Inc., The McGraw-Hill Corporation, Inc., Meredith Corporation, The New York Times Company and
Tribune Company, weighted by market capitalization.
The following graph reflects the investment of $100
on December 31, 1999 in the Companys common stock, the S&P 500 Stock Index and the S&P 500 Publishing Index. Dividends are assumed to
have been reinvested as paid in the Companys common stock and in the stocks in the S&P 500 Stock Index and quarterly in the stocks in the
S&P 500 Publishing Index.
Company/Index
|
|
|
|
Dec-99
|
|
Dec-00
|
|
Dec-01
|
|
Dec-02
|
|
Dec-03
|
|
Dec-04
|
KNIGHT-RIDDER
INC |
|
|
|
|
100 |
|
|
|
97.21 |
|
|
|
112.88 |
|
|
|
111.72 |
|
|
|
139.01 |
|
|
|
122.56 |
|
S&P 500
INDEX |
|
|
|
|
100 |
|
|
|
90.90 |
|
|
|
80.09 |
|
|
|
62.39 |
|
|
|
80.29 |
|
|
|
89.03 |
|
S&P 500
PUBLISHING |
|
|
|
|
100 |
|
|
|
89.71 |
|
|
|
92.84 |
|
|
|
98.92 |
|
|
|
117.52 |
|
|
|
114.13 |
|
38
Other Matters
When are shareholder proposals for the 2006 Annual Meeting
due?
To be considered for inclusion in the proxy
statement for the 2006 Annual Meeting, a shareholder proposal must be received at the Companys principal office no later than November 24, 2005.
Such proposals should be addressed to Knight Ridder, 50 West San Fernando Street, Suite 1500, San Jose, California 95113, Attn: Corporate Secretary. As
previously described, the Companys By-laws require the Corporate Secretary to receive notice of all proposals by this date, whether or not they
are included in the proxy statement. In the unlikely event any proposal received after this date was presented at the 2006 Annual Meeting, the
proxyholders would be able to exercise discretionary authority to vote your shares on the proposal only to the extent authorized by Rule 14a-4(c) under
the Exchange Act.
By Order of the Board of Directors
Polk Laffoon
Vice President/Corporate
Relations
and Corporate Secretary
San Jose, California
March 24, 2005
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Appendix A
KNIGHT-RIDDER, INC.
EMPLOYEE EQUITY INCENTIVE PLAN
As Amended and Restated by the Compensation Committee
and the Board of
Directors on February 1, 2005
1. PURPOSE. The purpose of the Plan is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent or Subsidiaries by offering
them an opportunity to participate in the Companys future performance through awards of Options, Restricted Stock, Stock Bonuses, Stock
Appreciation Rights (SARs), Restricted Stock Units and Cash Performance Rights. Capitalized terms not defined in the text are defined in Section 25. In
order to accomplish this purpose, the Companys Employee Stock Option Plan as in effect on the Restatement Effective Date (as defined below) is
amended and restated as the Knight-Ridder, Inc. Employee Equity Incentive Plan.
2. SHARES SUBJECT TO THE
PLAN.
2.1 Number of Shares
Available. Subject to Sections 2.2 and 21, 43,200,000 Shares have previously been granted or are available for grant and
issuance under the Plan. Shares that are subject to: (a) issuance upon exercise of an Option or SAR granted under this Plan but cease to be subject to
the Option or SAR by reason of forfeiture of the Option; (b) an Award granted under this Plan but are forfeited or are repurchased by the Company at
the original issue price; or (c) an Award granted under this Plan that otherwise terminates without Shares being issued, will return to the pool of
Shares available for grant and issuance under this Plan. No more than 500,000 Shares may be made subject to Awards having an Exercise Price or Purchase
Price per Share that is less than Fair Market Value on the date of grant. In order that ISOs may be granted under this Plan, no more than 43,200,000
shares shall be issued as ISOs. The Company may issue Shares which are authorized but unissued or treasury shares pursuant to the Awards granted under
this Plan. At all times the Company will reserve and keep available a sufficient number of Shares to satisfy the requirements of all outstanding
Options and SARs granted under the Plan and all other outstanding but unvested Awards granted under the Plan.
2.2 Adjustment of
Shares. If the number of outstanding Shares is changed by a stock dividend, recapitalization, stock split, reverse stock
split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then (a) the number
of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, (b) the Exercise Prices of and number of Shares subject to
outstanding Options and SARs, (c) the number of Shares subject to other outstanding Awards, (d) the 43,200,000 maximum number of shares that may be
issued as ISOs set forth in Section 2.1; (e) the 300,000 and 200,000 maximum number of shares that may be issued to an individual in any one calendar
year set forth in Section 3 and (f) the 500,000 Share limit on the aggregate number of Shares that may be made subject to Awards having an Exercise
Price or Purchase Price per Share that is less than Fair Market Value on the date of grant, will be proportionately adjusted, subject to any required
action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided that fractions of a Share will not be
issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction of a Share or will be rounded up to the nearest
whole Share, as determined by the Committee; and provided further that the Exercise Price of any Option may not be decreased to below the par value of
the Shares.
3. ELIGIBILITY. ISOs may be granted only to employees (including officers and directors
who are also employees) of the Company or of a Parent or a Subsidiary; provided that such Subsidiary is a corporation or partnership in an unbroken
chain of corporations and/or partnerships beginning with the Company if, at the time of granting the ISO, each of the corporations and partnerships
other than the last corporation or
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partnership in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of stock in a corporation in such chain or at least a 50% partnership interest
in such chain. All other Awards may be granted to employees, officers and directors of the Company or any Parent or Subsidiary. The Committee will from
time to time determine and designate among the eligible persons who will be granted one or more Awards under the Plan. A person may be granted more
than one Award under the Plan. However, no person will be eligible to receive more than 200,000 Shares issuable under Awards granted in any calendar
year, other than new employees of the Company or of a Parent or Subsidiary (including new employees who are also officers and directors of the Company
or any Parent or Subsidiary), who are eligible to receive up to a maximum of 300,000 Shares issuable under Awards granted in the calendar year in which
they commence their employment.
4.1 Committee
Authority. The Plan shall be administered by the Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of the Plan, the Committee will have full power to implement and carry out the Plan. Without limiting the previous
sentence, the Committee will have the authority to:
(a) construe and interpret
the Plan, any Award and any other agreement or document executed pursuant to the Plan;
(b) prescribe, amend and
rescind rules and regulations relating to the Plan or any Award, including determining the forms and agreements used in connection with the Plan and
that are not inconsistent with the Plan or with any resolutions of the Committee relating to the Plan;
(c) select persons to receive
Awards;
(d) determine the terms of
Awards;
(e) determine the number of
Shares or other consideration subject to Awards;
(f) determine whether Awards
will be granted singly, in combination, or in tandem with, in replacement of, or as alternatives to, other Awards under the Plan or any other incentive
or compensation plan of the Company or any Parent or Subsidiary;
(g) grant waivers of Plan or
Award conditions;
(h) determine the vesting,
exercisability, transferability, and payment of Awards;
(i) correct any defect,
supply any omission, or reconcile any inconsistency in the Plan, any Award or any Award documentation;
(j) determine whether an
Award has been earned;
(k) amend the Plan;
or
(l) make all other
determinations necessary or advisable for the administration of the Plan.
4.2 Committee
Interpretation and Discretion. Any determination made by the Committee with respect to any Award shall be made in its sole
discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such
determination shall be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the
interpretation of the Plan or any Award shall be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute
by the Committee shall be final and binding on the Company and Participant. The Committee may delegate to one or more Executive Officers, the authority
to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution shall be final and binding on the
Company and Participant.
5. OPTIONS. The Committee may grant Options to Participants and will determine (a)
whether the Options will be ISOs or NSOs; (b) the number of Shares subject to the Option, (c) the Exercise Price of the
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Option, (d) the period during which the Option
may be exercised, (e) the exercisability of the Option and (f) all other terms and conditions of the Option, subject to the provisions of this Section
5 and the Plan.
5.1 Form of Option
Grant. Each Option granted under the Plan will be evidenced by a Stock Option Agreement that will expressly identify the
Option as an ISO or NSO. The Stock Option Agreement will be substantially in a form and contain such provisions (which need not be the same for each
Participant) that the Committee has from time to time approved, and will comply with and be subject to the terms and conditions of the
Plan.
5.2 Date of
Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant the Option,
unless a later date is otherwise specified by the Committee. The Stock Option Agreement and a copy of the Plan (plus any additional documents required
to be delivered under applicable laws) will be delivered to the Participant within a reasonable time after the Option is granted. The Stock Option
Agreement, Plan and other documents may be delivered in any manner (including electronic distribution or posting) that meets applicable legal
requirements.
5.3 Exercise Period and
Expiration Date. An Option will vest and become exercisable within the times or upon the occurrence of events determined by
the Committee and set forth in the Stock Option Agreement governing such Option, subject to the provisions of Section 5.6, and subject to Company
policies established by the Committee from time to time. The Committee may provide for Options to vest and become exercisable at one time or from time
to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on
Performance Factors), in such number of Shares or percentage of Shares subject to the Option as the Committee determines. The Stock Option Agreement
shall set forth the Expiration Date; provided that no Option will be exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a Ten Percent Stockholder will be exercisable after the expiration of five years from the date the
Option is granted. Notwithstanding the foregoing, any Option granted less than one year before a Participants Retirement shall terminate
immediately upon such Participants Retirement.
An Option may only be exercised by the personal
representative of a Participant or an Authorized Transferee or by the person or persons to whom a Participants rights under the Option shall pass
by such persons will or by the laws of descent and distribution of the state of such persons domicile at the time of death, and then only
as and to the extent that such person was entitled to exercise the Option on the date of death.
5.4 Exercise
Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and will not be less
than the Fair Market Value of the Shares on the date of grant; provided that the Exercise Price of any ISO granted to a Ten Percent Stockholder will
not be less than 110% of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with
Section 11 of the Plan and the Stock Option Agreement.
5.5 Procedures for
Exercise. A Participant or Authorized Transferee may exercise Options by following the procedures established by the
Companys Stock Administration Department, as communicated and made available to Participants.
5.6 Termination.
(a) Vesting. Any Option granted to a Participant will cease to vest on the
Participants Termination Date except as set forth in Section 5.6(b).
(b) Post-Termination
Exercise Period. Following a Participants Termination, the Participants Option may be exercised to the extent
vested as set forth below:
(i) Except as set forth in the Participants
Stock Option Agreement and this Section 5.6, any Option may be exercised to the extent vested no later than 90 days after the Termination Date if a
Participant is Terminated for any reason except Retirement, Disability or death, unless a longer time period,
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not exceeding five years, is specifically set
forth in the Participants Stock Option Agreement; provided that no Option may be exercised after the Expiration Date of the
Option.
(ii) In the event of Participants Retirement
while in the employ of the Company or a Subsidiary, any Option granted one year or more prior to the Participants Retirement shall continue to
vest and remain exercisable during such period of time as the Committee shall specify in the Stock Option Agreement either at the time of grant or by
amendment, which period shall not exceed the first to expire of: (A) one (1) year after the date of such Retirement with respect to ISOs, (B) five (5)
years after the date of such Retirement with respect to NSOs, and (C) the expiration of the term of such Option prescribed pursuant to Section
5.3.
(iii) In the event of a Participants Disability
or death while in the employ of the Company or a Subsidiary, or during the post-employment period referred to in the immediately preceding paragraph,
any Option shall continue to vest and remain exercisable during such period of time as the Committee shall specify in the Stock Option Agreement, which
period shall not exceed the first to expire of: (A) one (1) year after the date of such Disability or death with respect to ISOs, (B) five (5) years
after the date of such Disability with respect to NSOs, (C) three (3) years after the date of such death in the case of NSOs, (D) the applicable
post-Retirement period as set forth in the preceding paragraph and (E) the expiration of the term of such Option prescribed pursuant to Section
5.3.
5.7 Limitations on
Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an
Option; provided that the minimum number will not prevent a Participant from exercising an Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on
ISOs. The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under the Plan or under any other incentive stock option plan of the Company
or any Parent or Subsidiary) shall not exceed $100,000. If the Fair Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds $100,000, the Options for the first $100,000 worth of Shares to become
exercisable in that calendar year will be ISOs, and the Options for the Shares with a Fair Market Value in excess of $100,000 that become exercisable
in that calendar year will be NSOs. If the Code is amended to provide for a different limit on the Fair Market Value of Shares permitted to be subject
to ISOs, such different limit shall be automatically incorporated into the Plan and will apply to any Options granted after the effective date of the
Codes amendment.
5.9 Notice of
Disqualifying Dispositions of Shares Acquired on Exercise of an ISO. If a Participant sells or otherwise disposes of any
Shares acquired pursuant to the exercise of an ISO on or before the later of (a) the date two years after the Date of Grant, and (b) the date one year
after the exercise of the ISO (in either case, a Disqualifying Disposition), the Company may require the Participant to
immediately notify the Company in writing of such Disqualifying Disposition.
5.10 Modification,
Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options
in substitution therefor; provided that any such action may not, without the written consent of Participant, impair any of Participants rights
under any Option previously granted; and provided, further that without stockholder approval, the modified, extended, renewed or new Option may not
have a lower Exercise Price than the outstanding Option. Any outstanding ISO that is modified, extended, renewed or otherwise altered shall be treated
in accordance with Section 424(h) of the Code. The Committee may reduce the Exercise Price of outstanding Options without the consent of Participants
affected, by a written notice to them; provided, however, that unless prior stockholder approval is secured, the Exercise Price may not be reduced
below that of the outstanding Option.
5.11 No
Disqualification. Notwithstanding any other provision in the Plan, no term of the Plan relating to ISOs will be interpreted,
amended or altered, and no discretion or authority granted under the Plan will be exercised, so as to disqualify the Plan under Section 422 of the Code
or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.
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6. |
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RESTRICTED STOCK AWARDS. |
6.1 Awards of Restricted
Stock. A Restricted Stock Award is an offer by the Company to sell to a Participant Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the Purchase Price, the restrictions under
which the Shares will be subject and all other terms and conditions of the Restricted Stock Award, subject to the following:
6.2 Restricted Stock
Purchase Award. All purchases under a Restricted Stock Award will be evidenced by the Restricted Stock Award, which will be
in substantially a form (which need not be the same for each Participant) that the Committee has from time to time approved, and will comply with and
be subject to the terms and conditions of the Plan. A Participant accepts a Restricted Stock Award with full payment of the Purchase Price, within
thirty days from the date the Restricted Stock Award was delivered to the Participant. If the Participant does not accept the Restricted Stock Award
within thirty days, then the offer of the Restricted Stock Award will terminate, unless the Committee determines otherwise.. The Restricted Stock
Award, Plan and other documents may be delivered in any manner (including electronic distribution or posting) that meets applicable legal
requirements.
6.3 Purchase
Price. The Purchase Price for a Restricted Stock Award will be determined by the Committee and, subject to the 500,000 Share
limit of Section 2.1 hereof on the aggregate number of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share
that is less than Fair Market Value on the date of grant, may be less than Fair Market Value (but not less than the par value of the Shares) on the
date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 11 of the Plan and the Restricted
Stock Award, and in accordance with any procedures established by the Company and made available to Participants.
6.4 Terms of Restricted
Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose. These restrictions
may be based on completion of a specified number of years of service with the Company or upon completion of the performance goals based on Performance
Factors during any Performance Period as set out in advance in the Participants Restricted Stock Award. Prior to the grant of a Restricted Stock
Award, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Restricted Stock Award; (b) select
from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the
Participant. Prior to the payment for Shares to be purchased under any Restricted Stock Award, the Committee shall determine the extent to which such
Restricted Stock Award has been earned. Performance Periods may overlap and a Participant may participate simultaneously with respect to Restricted
Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria. Notwithstanding the
foregoing, any Restricted Stock Award granted less than one year before a Participants Retirement shall terminate immediately upon such
Participants Retirement.
6.5 Termination. Except as set forth in the Participants Restricted Stock Award,
any Restricted Stock Award vesting will cease to vest on the Participants Termination Date.
7.1 Awards of Stock
Bonuses. A Stock Bonus Award is an award to a Participant of Shares (which may consist of Restricted Stock or Restricted
Stock Units) for services to be rendered or for past services already rendered to the Company or any Parent or Subsidiary. All Stock Bonus Awards shall
be made pursuant to a Stock Bonus Award, which shall be in substantially a form (which need not be the same for each Participant) that the Committee
has from time to time approved, and will comply with and be subject to the terms and conditions of the Plan. No payment will be required for Shares
awarded pursuant to a Stock Bonus Award. Stock Bonus Awards shall be subject to the 500,000 share limit of Section 2.1 hereof on the aggregate number
of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than the Fair Market Value on the date
of grant.
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7.2 Terms of Stock Bonus
Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any
restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with the Company or upon satisfaction
of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participants Stock Bonus Award. If
the Stock Bonus Award is to be earned upon the satisfaction of performance goals, the Committee shall: (a) determine the nature, length and starting
date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals; and
(c) determine the number of Shares that may be awarded to the Participant. Prior to the issuance of any Shares or other payment to a Participant
pursuant to a Stock Bonus Award, the Committee will determine the extent to which the Stock Bonus Award has been earned. Performance Periods may
overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and
different performance goals and other criteria. The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as
may be determined by the Committee. The Committee may adjust the performance goals applicable to a Stock Bonus Award to take into account changes in
law and accounting or tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or
unusual items, events or circumstances to avoid windfalls or hardships. Notwithstanding the foregoing, any Stock Bonus Award granted less than one year
before a Participants Retirement shall terminate immediately upon such Participants Retirement. The Stock Bonus Award, Plan and other
documents may be delivered in any manner (including electronic distribution or posting) that meets applicable legal requirements.
7.3 Form of Payment to
Participant. The Stock Bonus Award will be paid currently. Payment may be made in the form of cash, whole Shares, or a
combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, either in a lump sum payment
or in installments, all as the Committee determines.
7.4 Termination. Except as set forth in the Participants Stock Bonus Award, any
Stock Bonus Award vesting will cease to vest on the Participants Termination Date.
8. |
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STOCK APPRECIATION RIGHTS. |
8.1 Awards of
SARs. A Stock Appreciation Right (SAR) is an award to a Participant that may be settled in cash,
or Shares (which may consist of Restricted Stock), having a value equal to the value determined by multiplying the difference between the Fair Market
Value on the date of exercise over the Exercise Price and the number of Shares with respect to which the SAR is being settled. The SAR may be granted
for services to be rendered or for past services already rendered to the Company, or any Parent or Subsidiary. All SARs shall be made pursuant to a SAR
Agreement, which shall be in substantially a form (which need not be the same for each Participant) that the Committee has from time to time approved,
and will comply with and be subject to the terms and conditions of this Plan. Notwithstanding the foregoing, any SAR granted less than one year before
a Participants Retirement shall terminate immediately upon such Participants Retirement.
8.2 Terms of
SARs. The Committee will determine the terms of a SAR including, without limitation: (a) the number of Shares deemed subject
to the SAR; (b) the Exercise Price and the time or times during which the SAR may be settled; (c) the consideration to be distributed on settlement of
the SAR; and (d) the effect on each SAR of the Participants Termination. The Exercise Price of the SAR will be determined by the Committee when
the SAR is granted and may not be less than Fair Market Value on the date of grant. A SAR may be awarded upon satisfaction of such performance goals
based on Performance Factors during any Performance Period as are set out in advance in the Participants individual SAR Agreement. If the SAR is
being earned upon the satisfaction of performance goals, then the Committee will: (x) determine the nature, length and starting date of any Performance
Period for each SAR; and (y) select from among the Performance Factors to be used to measure the performance, if any. Prior to settlement of any SAR
earned upon the satisfaction of performance goals pursuant to a SAR Agreement, the Committee shall determine the extent to which such SAR has been
earned. Performance Periods may overlap and Participants may participate
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simultaneously with respect to SARs that are
subject to different performance goals and other criteria. The SAR Agreement, Plan and other documents may be delivered in any manner (including
electronic distribution or posting) that meets applicable legal requirements.
8.3 Exercise Period and
Expiration Date. A SAR will vest and become exercisable within the times or upon the occurrence of events determined by the
Committee and set forth in the SAR Agreement governing such SAR. The SAR Agreement shall set forth Expiration Date; provided that no SAR will be
exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to vest and become
exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period
of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee
determines.
8.4 Termination.
(a) Vesting. Any SAR granted to a Participant will cease to vest on the
Participants Termination Date except as set forth in Section 8.4(b).
(b) Post-Termination
Exercise Period. Following a Participants Termination, the Participants SAR may be exercised to the extent
vested as set forth below:
(i) Except as set forth in the Participants SAR
Agreement and this Section 8.4, any SAR may be exercised to the extent vested no later than 90 days after the Termination Date if a Participant is
Terminated for any reason except Retirement, Disability or death, unless a longer time period not exceeding five years is specifically set forth in the
Participants SAR Agreement; provided that no SAR may be exercised after the Expiration Date of the SAR.
(ii) In the event of Participants Retirement
while in the employ of the Company or a Subsidiary, any SAR granted one year or more prior to the Participants Retirement shall continue to vest
and remain exercisable during such period of time as the Committee shall specify in the SAR Agreement either at the time of grant or by amendment,
which period shall not exceed the first to expire of: (A) five (5) years after the date of such Retirement, and (B) the expiration of the term of such
SAR prescribed pursuant to Section 8.3.
(iii) In the event of a Participants Disability
or death while in the employ of the Company or a Subsidiary, or during the post-employment period referred to in the immediately preceding paragraph,
the SARs theretofore granted to him shall continue to vest and remain exercisable during such period of time as the Committee shall specify in the SAR
Agreement, which period shall not exceed the first to expire: (A) five (5) years after the date of such Disability, (B) three (3) years after the date
of such death, (C) the applicable post-Retirement period as set forth in the preceding paragraph, and (D) the expiration of the term of said SAR
prescribed pursuant to Section 8.3.
(iv) A SAR may only be exercised by the personal
representative of a Participant or an Authorized Transferee or by the person or persons to whom a Participants rights under the SAR shall pass by
such persons will or by the laws of descent and distribution of the state of such persons domicile at the time of death, and then only as
and to the extent that such person was entitled to exercise the SAR on the date of death.
8.5 Form and Timing of
Settlement. The portion of a SAR being settled shall be paid currently. Payment may be made in the form of cash or whole
Shares or a combination thereof, either in a lump sum payment or in installments, as the Committee determines.
9. |
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RESTRICTED STOCK UNITS |
9.1 Awards of Restricted
Stock Units. A Restricted Stock Unit (RSU) is an award to a Participant covering a number of
Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock) for services to be rendered or for past
services already rendered to the Company or any Parent or Subsidiary. All RSUs shall be evidenced by an RSU Award, which shall be in
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substantially a form (which need not be the same
for each Participant) that the Committee has from time to time approved, and will comply with and be subject to the terms and conditions of the Plan.
RSUs are subject to the 500,000 share limit of Section 2.1 hereof on the aggregate number of Shares that may be made subject to Awards having an
Exercise Price or Purchase Price per Share that is less than the Fair Market Value on the date of grant.
9.2 Terms of
RSUs. The Committee will determine the terms of a RSU including, without limitation: (a) the number of Shares deemed subject
to the RSU; (b) the time or times during which the RSU may be exercised; (c) the consideration to be distributed on settlement, and the effect on each
RSU of the Participants Termination. A RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any
Performance Period as are set out in advance in the Participants individual RSU Award. If the RSU is being earned upon satisfaction of
performance goals, then the Committee will: (x) determine the nature, length and starting date of any Performance Period for the RSU; (y) select from
among the Performance Factors to be used to measure the performance, if any; and (z) determine the number of Shares deemed subject to the RSU. Prior to
settlement of any RSU earned upon the satisfaction of performance goals pursuant to an RSU Award, the Committee shall determine the extent to which
such RSU has been earned. Performance Periods may overlap and participants may participate simultaneously with respect to RSUs that are subject to
different Performance Periods and different performance goals and other criteria. The number of Shares may be fixed or may vary in accordance with such
performance goals and criteria as may be determined by the Committee. The Committee may adjust the performance goals applicable to the RSUs to take
into account changes in law and accounting and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of
extraordinary or unusual items, events or circumstances to avoid windfalls or hardships. Notwithstanding the foregoing, any RSU granted less than one
year before a Participants Retirement shall terminate immediately upon such Participants Retirement. The RSU Award, Plan and other
documents may be delivered in any manner (including electronic distribution or posting) that meets applicable legal requirements.
9.3 Form and Timing of
Settlement. The portion of a RSU being settled shall be paid currently. To the extent permissible under law, the Committee
may also permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned provided that the terms of the RSU and any
deferral satisfy the requirements of Section 409A of the Code and any regulations or rulings promulgated by the Internal Revenue Service. Payment may
be made in the form of cash or whole Shares or a combination thereof, either in a lump sum payment or in installments, all as the Committee
determines.
9.4 Termination. Except as set forth in the Participants RSU Award, any RSU Award
vesting will cease to vest on the Participants Termination Date.
10. |
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CASH PERFORMANCE RIGHTS. |
10.1 Awards of Cash
Performance Right. A Cash Performance Right is an award of a cash dollar amount that is payable in cash or Shares upon
satisfaction of certain Performance Factors and subject to such performance conditions as may be specified by the Committee. The Committee may exercise
its discretion to reduce the amounts payable under any Award subject to Performance Factors.
10.2 Awards of Cash
Performance Right. Cash Performance Right Awards shall be subject to the 500,000 share limit of Section 2.1 hereof on the
aggregate number of Shares that may be made subject to Awards having an Exercise Price or Purchase Price per Share that is less than the Fair Market
Value on the date of grant. The Cash Performance Right Award, Plan and other documents may be delivered in any manner (including electronic
distribution or posting) that meets applicable legal requirements.
10.3 Terms of Cash
Performance Right. The Committee will determine the number of Shares to be awarded to the Participant under a Cash
Performance Right Award and any restrictions thereon. These restrictions may be based upon completion of a specified number of years of service with
the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the
Participants Cash Performance Right Award. If the Cash Performance Right Award is
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to be earned upon the satisfaction of
performance goals, the Committee shall: (a) determine the nature, length and starting date of any Performance Period for the Cash Performance Right
Award; (b) select from among the Performance Factors to be used to measure performance goals; and (c) determine the number of Shares that may be
awarded to the Participant. Prior to the issuance of any Shares or other payment to a Participant pursuant to a Cash Performance Right Award, the
Committee will determine the extent to which the Cash Performance Right Award has been earned. Performance Periods may overlap and a Participant may
participate simultaneously with respect to Cash Performance Right Awards that are subject to different Performance Periods and different performance
goals and other criteria. The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as may be determined by
the Committee. The Committee may adjust the performance goals applicable to a Cash Performance Right Award to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships. Notwithstanding the foregoing, any Cash Performance Right granted less than one year
before a Participants Retirement shall terminate immediately upon such Participants Retirement. The Cash Performance Right Award, Plan and
other documents may be delivered in any manner (including electronic distribution or posting) that meets applicable legal
requirements.
10.4 Form of Payment to
Cash Performance Right Participant. The Cash Performance Right Award being settled will be paid currently. To the extent
permissible under law, the Committee may also permit a Participant to defer payment under a Cash Performance Right Award to a date or dates after the
Cash Performance Right Award is earned, provided that the terms of the Cash Performance Right and any deferred satisfy the requirements of Section 409A
of the Code and any regulations promulgated by the Internal Revenue Service. Payment may be made in the form of cash, whole Shares, or a combination
thereof, based on the Fair Market Value of the Shares earned under a Cash Performance Right Award on the date of payment, either in a lump sum payment
or in installments, all as the Committee determines.
10.5 Termination. Except as set forth in the Participants Cash Performance Right
Award, any Cash Performance Right Award vesting will cease to vest on the Participants Termination Date.
11. |
|
PAYMENT FOR SHARE PURCHASES. |
11.1 Payment. Payment for Shares purchased pursuant to the Plan may be made by any of the
following methods (or any combination of such methods) that are described in the applicable Award and that are permitted by law:
(a) in cash (by
check);
(b) in the case of exercise
by the Participant, Participants guardian or legal representative or the authorized legal representative of Participants heirs or legatees
after Participants death, by cancellation of indebtedness of the Company to the Participant;
(c) by surrender of shares of
the Companys Common Stock that either: (1) were obtained by the Participant or Authorized Transferee in the public market; or (2) if the shares
were not obtained in the public market, they have been owned by the Participant or Authorized Transferee for more than six months and have been paid
for within the meaning of SEC Rule 144 (and, if the shares were purchased from the Company by use of a promissory note, the note has been fully paid
with respect to the shares);
(d) in the case of exercise
by the Participant, Participants guardian or legal representative or the authorized legal representative of Participants heirs or legatees
after Participants death, by waiver of compensation due or accrued to Participant for services rendered;
(e) by tender of property;
or
(f) with respect only to
purchases upon exercise of an Option, and provided that a public market for the Companys stock exists:
A-9
(i) through a same day sale commitment
from the Participant or Authorized Transferee and an NASD Dealer meeting the requirements of the Companys same day sale procedures
and in accordance with law; or
(ii) through a margin commitment from
Participant or Authorized Transferee and an NASD Dealer meeting the requirements of the Companys margin procedures and in accordance
with law.
11.2 Issuance of
Shares. Upon payment of the applicable Purchase Price or Exercise Price (or a commitment for payment from the NASD Dealer
designated by the Participant or Authorized Transferee in the case of an exercise by means of a same-day sale or margin
commitment), and compliance with other conditions and procedures established by the Company for the purchase of shares, the Company shall issue the
Shares registered in the name of Participant or Authorized Transferee (or in the name of the NASD Dealer designated by the Participant or Authorized
Transferee in the case of an exercise by means of a same-day sale or margin commitment) and shall deliver certificates
representing the Shares (in physical or electronic form, as appropriate). The Shares may be subject to legends or other restrictions as described in
Section 15 of the Plan.
12. WITHHOLDING
TAXES.
12.1 Withholding
Generally. Whenever Shares are to be issued in satisfaction of Awards granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any
certificate(s) for the Shares. If a payment in satisfaction of an Award is to be made in cash, the payment will be net of an amount sufficient to
satisfy federal, state, and local withholding tax requirements.
12.2 Stock
Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting
of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee
may, in its sole discretion, allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the
Shares to be issued that number of whole Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date
that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose shall be made in
accordance with the requirements established by the Committee and be in writing in a form acceptable to the Committee.
13. PRIVILEGES OF STOCK
OWNERSHIP. No Participant or Authorized Transferee will have any rights as a stockholder of the Company with respect to any
Shares until the Shares are issued to the Participant or Authorized Transferee. After Shares are issued to the Participant or Authorized Transferee,
the Participant or Authorized Transferee will be a stockholder and have all the rights of a stockholder with respect to the Shares including the right
to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if the Shares are Restricted Stock,
any new, additional or different securities the Participant or Authorized Transferee may become entitled to receive with respect to the Shares by
virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same
restrictions as the Restricted Stock; provided further, that the Participant or Authorized Transferee will have no right to retain such dividends or
distributions with respect to Shares that are repurchased at the Participants original Exercise Price or Purchase Price pursuant to Section
15.
14. TRANSFERABILITY. No Award and no interest therein, shall be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution, and no Award may be made subject
to execution, attachment or similar process; provided, however that with the consent of the Committee a Participant may transfer a NSO to an Authorized
Transferee. Transfers by the Participant for consideration are prohibited.
15. RESTRICTIONS ON
SHARES. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award
documentation a right to repurchase all or a portion of a Participants Shares that are not Vested (as defined in the Award
documentation), following the Participants Termination, at any time within ninety days after the later of (a) the Participants Termination
Date or (b) the date the Participant purchases Shares under the Plan, for cash or cancellation of purchase money indebtedness with respect to
Shares,
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at the Participants original Exercise
Price or Purchase Price; provided that upon assignment of the right to repurchase, the assignee must pay the Company, upon assignment of the right to
repurchase, cash equal to the excess of the Fair Market Value of the Shares over the original Purchase Price.
16. CERTIFICATES. All certificates for Shares or other securities delivered under the
Plan (whether in physical or electronic form, as appropriate) will be subject to stock transfer orders, legends and other restrictions that the
Committee deems necessary or advisable, including without limitation restrictions under any applicable federal, state or foreign securities law, or any
rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system on which the Shares may be
listed.
17. ESCROW. To enforce any restrictions on a Participants Shares, the Committee may
require the Participant to deposit all certificates representing Shares, together with stock powers or other transfer instruments approved by the
Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company, to hold in escrow until such restrictions have
lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates.
18. SECURITIES LAW AND
OTHER REGULATORY COMPLIANCE. An Award shall not be effective unless the Award is in compliance with all applicable state,
federal and foreign securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation
system on which the Shares may then be listed, as they are in effect on the date of grant of the Award and also on the date of exercise or other
issuance. Notwithstanding any other provision in the Plan, the Company shall have no obligation to issue or deliver certificates for Shares under the
Plan prior to (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (b) completion of
any registration or other qualification of such shares under any state, federal or foreign law or ruling of any governmental body that the Company
determines to be necessary or advisable. The Company shall be under no obligation to register the Shares with the SEC or to effect compliance with the
registration, qualification or listing requirements of any state, federal or foreign securities laws, stock exchange or automated quotation system, and
the Company shall have no liability for any inability or failure to do so.
19. NO OBLIGATION TO
EMPLOY. Nothing in the Plan or any Award granted under the Plan shall confer or be deemed to confer on any Participant any
right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary or limit in any way the right
of the Company or any Parent or Subsidiary to terminate Participants employment or other relationship at any time, with or without
cause.
20. REPRICING PROHIBITED;
EXCHANGE AND BUYOUT OF AWARDS. The repricing of Options or SARs is prohibited without prior stockholder approval. The
Committee may, at any time or from time to time, authorize the Company, with prior stockholder approval, in the case of an Option or SAR exchange, and
the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The
Committee may at any time buy from a Participant an Option previously granted with payment in cash, Shares or other consideration, based on such terms
and conditions as the Committee and the Participant shall agree.
21. |
|
CORPORATE TRANSACTIONS. |
21.1 Assumption or
Replacement of Awards by Successor. In the event of a Corporate Transaction any or all outstanding Awards may be assumed or
replaced by the successor corporation, which assumption or replacement shall be binding on all Participants. In the alternative, the successor
corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company
held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant.
However, in the event a Participant is Terminated by the Company or any Subsidiary without Cause or a Resignation for Good Reason within one (1) year
from the date of the Corporate Transaction, then the vesting of all outstanding Awards for such
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Participant will accelerate in full as to 100%
of the Shares that are unvested on the date of such Termination. In the event such successor corporation, if any, refuses to assume or replace the
Awards, as provided above, pursuant to a Corporate Transaction or if there is no successor corporation due to a dissolution or liquidation of the
Company, such Awards shall immediately vest as to 100% of the Shares subject thereto at such time and on such conditions as the Board shall determine
and the Awards shall expire at the closing of the transaction or at the time of dissolution or liquidation.
21.2 Other Treatment of
Awards. Subject to any greater rights granted to Participants under Section 21.1, in the event of a Corporate Transaction,
any outstanding Awards shall be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation or sale of
assets.
21.3 Assumption of Awards
by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company,
whether in connection with an acquisition of such other company or otherwise, by either (a) granting an Award under the Plan in substitution of such
other companys award, or (b) assuming such award as if it had been granted under the Plan if the terms of such assumed award could be applied to
an Award granted under the Plan. Such substitution or assumption shall be permissible if the holder of the substituted or assumed award would have been
eligible to be granted an Award under the Plan if the other company had applied the rules of the Plan to such grant. In the event the Company assumes
an award granted by another company, the terms and conditions of such award shall remain unchanged (except that the exercise price and the number and
nature of Shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the
Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise
Price.
22. TERM OF
PLAN. The Plan will terminate ten years following the Restated Effective Date.
23. AMENDMENT OR
TERMINATION OF PLAN. The Board may at any time terminate or amend the Plan in any respect, including without limitation
amendment of any form of Award documentation or instrument to be executed pursuant to the Plan. Notwithstanding the foregoing, neither the Board nor
the Committee shall, without the approval of the stockholders of the Company, amend the Plan in any manner that requires such stockholder approval
pursuant to the Code or the regulations promulgated thereunder as such provisions apply to ISO plans, or pursuant to the Exchange Act or any rule
promulgated thereunder. In addition, no amendment that is detrimental to a Participant may be made to any outstanding Award without the consent of the
Participant.
24. NONEXCLUSIVITY OF THE
PLAN; UNFUNDED PLAN. Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the
Company for approval, nor any provision of the Plan shall be construed as creating any limitations on the power of the Board to adopt such additional
compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and bonuses otherwise than under the
Plan, and such arrangements may be either generally applicable or applicable only in specific cases. The Plan shall be unfunded. Neither the Company
nor the Board shall be required to segregate any assets that may at any time be represented by Awards made pursuant to the Plan. Neither the Company,
the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under the Plan.
25. DEFINITIONS. As used in the Plan, the following terms shall have the following
meanings:
(a) Authorized
Transferee means the permissible recipient, as authorized by this Plan and the Committee, of an NSO that is transferred during the
Participants lifetime by the Participant by gift or domestic relations order. For purposes of this definition a permissible recipient
is: (i) a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law of the Participant, including any such person with such relationship to the Participant by
adoption; (ii) any person (other than a tenant or employee) sharing the Participants household; (iii) a trust in which the persons in (i) or (ii)
have more than fifty percent of the beneficial interest; (iv) a foundation in which the persons in (i) or (ii) or the Participant control
the
A-12
management of assets; or (v) any other entity in
which the person in (i) or (ii) or the Participant own more than fifty percent of the voting interest.
(b) Award
means any award under the Plan, including any Option, Restricted Stock, Stock Bonus, Stock Appreciation Right, Restricted Stock Unit or Cash
Performance Right.
(c) Board
means the Board of Directors of the Company.
(d) Cash Performance
Right means an Award granted pursuant to Section 10 of the Plan.
(e) Cash Performance
Right Award means an agreement evidencing a Cash Performance Right granted pursuant to Section 10 of the Plan.
(f) Cause
means termination of the Participants employment on the basis of the Participants conviction (or a plea of nolo contendere) of
fraud, misappropriation, embezzlement or any other act or acts of dishonesty constituting a felony and resulting or intended to result directly or
indirectly in a substantial gain or personal enrichment to the Participant at the expense of the Company or any Subsidiary. Notwithstanding the
foregoing, the Participant shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to the Participant a
copy of a resolution (i) duly adopted by three-quarters (3/4) of the entire membership of the Committee, or of the Board, at a meeting called and held
for such purpose after reasonable notice to the Participant and an opportunity for the Participant, together with the Participants counsel, to be
heard before such Committee or Board, as the case may be, and (ii) finding that in the good faith opinion of such Committee or Board, as the case may
be, the Participant was guilty of conduct described in the preceding sentence of this subparagraph and specifying the particulars of such conduct in
detail.
(g) Code
means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
(h) Committee means the Compensation Committee of the Board or such other committee appointed by the
Board to administer the Plan, or if no committee is appointed, the Board. Each member of the Committee shall be (i) a non-employee director
for purposes of Section 16 and Rule 16b-3 of the Exchange Act, and (ii) an outside director for purposes of Section 162(m) of the Code,
unless the Board has fewer than two such outside directors.
(i) Company means Knight-Ridder, Inc., a corporation organized under the laws of the State of
Florida, or any successor corporation.
(j) Corporate
Transaction means (i) the consummation of a merger or consolidation of the Company with or into another entity or any other corporate
reorganization, if more than 65% of the combined voting power of the continuing or surviving entitys securities outstanding immediately after
such merger, consolidation or other reorganization is owned by persons who were not stockholders of the Company immediately prior to such merger,
consolidation or other reorganization; (ii) the sale, transfer or other disposition of all or substantially all of the Companys assets; (iii) a
change in the composition of the Board of the Company, as a result of which fewer that one-half of the incumbent directors are directors who either (a)
had been directors of the Company on the date 24 months prior to the date of the event that may constitute a Corporate Transaction (the original
directors) or (b) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of the
original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously so
approved; or (iv) any transaction as a result of which any person is the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing at least 20% of the total voting power represented by the Companys then
outstanding voting securities. For purposes of this subparagraph, the term person shall have the same meaning as when used in sections
13(d) and 14(d) of the Exchange Act but shall exclude: (A) trustee or other fiduciary holding securities under an employee benefit plan of the Company
or a subsidiary of the Company; and (B) corporation owned directly or indirectly by the shareholders of the Company in substantially the same
proportions as their ownership of the common stock of the Company. A transaction shall not constitute a
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Corporate Transaction if its sole purpose is to
change the state of the Companys incorporation or to create a holding company that will be owned in substantially the same proportions by the
persons who held the Companys securities immediately before such transactions.
(k) Disability means a disability within the meaning of Section 22(e)(3) of the Code, as determined
by the Committee.
(l) Exchange
Act means the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder.
(m) Executive
Officer means a person who is an executive officer of the Company as defined in Rule 3b-7 promulgated under the Exchange
Act.
(n) Exercise
Price means the price at which a Participant who holds an Option or SAR may purchase the Shares issuable upon exercise of the Option or
SAR.
(o) Expiration
Date means the last date on which an Option or SAR may be exercised as determined by the Committee.
(p) Fair Market
Value means, as of any date, the value of a share of the Companys Common Stock determined as follows:
(i) if such Common Stock is then quoted on the New
York Stock Exchange, its high-low average price on the New York Stock Exchange on such date;
(ii) if such Common Stock is publicly traded and is
then listed on a national securities exchange, the last reported sale price on such date or, if no such reported sale takes place on such date, the
average of the closing bid and asked prices on the principal national securities exchange on which the Common Stock is listed or admitted to
trading;
(iii) if such Common Stock is publicly traded but is
not quoted on the New York Stock Exchange nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked
prices on such date, as reported by The Wall Street Journal, for the over-the-counter market; or
(iv) if none of the foregoing is applicable, by the
Board of Directors in good faith.
(q) Insider means an officer or director of the Company or any other person whose transactions in
the Companys Common Stock are subject to Section 16 of the Exchange Act.
(r) ISO
means an Incentive Stock Option within the meaning of the Code.
(s) NSO
means a nonqualified stock option that does not qualify as an ISO.
(t) Option
means an Award pursuant to Section 5 of the Plan.
(u) Parent
means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if at the time of the granting of an Award
under the Plan, each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain or such lesser percentage as determined by the Committee.
(v) Participant means a person who receives an Award under the Plan.
(w) Performance
Factors means the factors selected by the Committee from among the following measures (whether or not in comparison to other peer companies)
to determine whether the performance goals established by the Committee and applicable to Awards have been satisfied:
(i) Net revenue and/or net revenue
growth;
(ii) Earnings before income taxes and amortization
and/or earnings before income taxes and amortization growth;
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|
(iii) |
|
Operating
income and/or operating income growth; |
|
(iv) |
|
Net income
and/or net income growth; |
|
(v) |
|
Earnings
per share and/or earnings per share growth; |
|
(vi) |
|
Total
stockholder return and/or total stockholder return growth; |
|
(vii) |
|
Return
on equity; |
|
(viii) |
|
Operating
cash flow return on income; |
|
(ix) |
|
Adjusted
operating cash flow return on income; |
|
(x) |
|
Economic
value added; |
|
(xi) |
|
Individual
business objectives; and |
|
(xii) |
|
Company
specific operational metrics |
(x) Performance
Period means the period of service determined by the Committee, not to exceed five years, during which years of service or performance is to
be measured for the Award.
(y) Plan
means this Knight-Ridder, Inc. Amended and Restated Employee Equity Incentive Plan, as amended from time to time.
(z) Purchase
Price means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option.
(aa) Resignation for
Good Reason means the Participants resignation due to (i) a material diminution of Participants duties without Participants
consent, (ii) a diminution of Participants base salary in effect immediately prior to a Corporate Transaction, or (iii) a requirement that
Participants commute distance increase by more than fifty (50) miles without Participants consent.
(bb) Restatement
Effective Date means the date this amendment and restatement is approved by stockholders of the Company.
(cc) Restricted
Stock Award means an award of Shares pursuant to Section 6 of the Plan.
(dd) Restricted
Stock Unit means an Award granted pursuant to Section 9 of the Plan.
(ee) RSU
Award means an agreement evidencing a Restricted Stock Unit Award granted pursuant to Section 9 of the Plan.
(ff) SAR
Agreement means an agreement evidencing a Stock Appreciation Right granted pursuant to Section 8 of the Plan.
(gg) SEC
means the Securities and Exchange Commission.
(hh) Securities
Act means the Securities Act of 1933, as amended, and the regulations promulgated thereunder.
(ii) Shares means shares of the Companys Common Stock reserved for issuance under the Plan, as
adjusted pursuant to Sections 2 and 21, and any successor security.
(jj) Stock
Appreciation Right means an Award granted pursuant to Section 8 of the Plan.
(kk) Stock
Bonus means an Award granted pursuant to Section 7 of the Plan.
(ll) Stock Option
Agreement means the agreement which evidences a Stock Option, granted pursuant to Section 5 of the Plan.
(mm) Subsidiary means any entity directly or indirectly controlled by the Company, as determined by
the Committee.
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(nn) Ten Percent
Stockholder means any person who directly or by attribution owns more than ten percent of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary.
(oo) Termination or Terminated means, for purposes of the Plan with respect to a
Participant, that the Participant has ceased to provide services as an employee or director of the Company or a Parent or Subsidiary; provided that a
Participant shall not be deemed to be Terminated if the Participant is on a leave of absence approved by the Committee or by an officer of the Company
designated by the Committee; and provided further, that during any approved leave of absence, vesting of Awards shall be suspended or continue in
accordance with guidelines established from time to time by the Committee. Subject to the foregoing, the Committee shall have sole discretion to
determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the
Termination Date).
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Appendix B
KNIGHT-RIDDER, INC.
EMPLOYEE STOCK OPTION PLAN
(As amended through
January 28, 2003)
The purpose of this Stock Option Plan (hereinafter
referred to as the Plan) is to attract and retain key employees of Knight-Ridder, Inc. (hereinafter referred to as the Company)
and its subsidiaries, by the grant of options and stock appreciation rights.
Subsidiaries as used herein means
entities directly or indirectly controlled by the Company, as determined by the Compensation Committee (as defined below).
The term fair market value of a share of
common stock as of any date shall be the mean between the highest and lowest sales price of a share of common stock on the date in question as reported
on the composite tape for issues listed on the New York Stock Exchange. If no transaction was reported on the composite tape in the common stock on
such date, the prices used shall be the prices reported on the nearest day preceding the date in question. If the common stock is not then quoted on
the composite tape, fair market value shall be the closing sales price or the mean between the closing bid and asked prices on the date in
question, as applicable, as furnished by any member firm of the New York Stock Exchange selected from time to time for that purpose by the Compensation
Committee.
The term incentive stock option shall
mean an option described in Section 422(b) of the Internal Revenue Code of 1986, as amended.
2. |
|
ADMINISTRATION OF THE PLAN |
The Plan shall be administered by a committee as
appointed from time to time by the Board of Directors of the Company, which committee shall consist of not less than three (3) members of such Board of
Directors, all of whom shall be nonemployee directors within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of
1934. Said committee shall be called the Compensation Committee.
In administering the Plan, the Compensation
Committee may adopt rules and regulations for carrying out the Plan. The interpretation and decision with regard to any question arising under the Plan
made by the Committee shall, unless overruled or modified by the Board of Directors of the Company, be final and conclusive on all employees of the
Company and its subsidiaries participating or eligible to participate in the Plan.
The stock which may be issued and sold pursuant to
the exercise of options or stock appreciation rights granted under the Plan may be authorized and unissued common stock or shares of common stock
reacquired by the Company and held in treasury of a total number not exceeding 43,200,000 shares.
The shares deliverable under the Plan shall be fully
paid and nonassessable shares. Any shares, in respect of which an option is granted under the Plan which shall have for any reason expired or
terminated, may be again allotted under the Plan. Any shares covered by options which have been canceled by reason of the exercise of related stock
appreciation rights as provided in the immediately following paragraph or which are used to exercise other options or to satisfy tax withholding
obligations shall not be available for other options under the Plan.
The exercise of options with respect to which stock
appreciation rights shall have been granted shall cause a corresponding cancellation of such stock appreciation rights, and the exercise of stock
appreciation rights issued in respect of options shall cause a corresponding cancellation of such options.
Each option and stock appreciation right granted
under the Plan shall be subject to the requirement and condition that if the Board of Directors shall determine that the listing, registration or
qualification upon any
B-1
securities exchange or under any state or
federal law, or the approval or consent of any governmental body is necessary or desirable as a condition of granting such option or stock appreciation
right, or the issue or purchase of any shares thereunder, then no such option or stock appreciation right may be exercised in whole or in part unless
or until such listing, registration, qualification, approval or consent has been obtained, free of any conditions which are not acceptable to the Board
of Directors of the Company.
Options and stock appreciation rights will be
granted only to persons who are employees of the Company and its subsidiaries (including officers and directors except for persons acting as directors
only); provided, however, that options that are intended to qualify as incentive stock options may be granted only to employees of the
Company and employees of subsidiaries of the Company that are corporations or partnerships in an unbroken chain of corporations and/or partnerships
beginning with the Company if, at the time of the granting of such option, each of the corporations and partnerships other than the last corporation or
partnership in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in a corporation in such
chain or at least a 50% partnership interest in such chain. The Compensation and Corporate Governance Committee of the Board of Directors of the
Company shall determine in its sole discretion the employees to be granted options, the number of shares subject to each option, the employees to be
granted stock appreciation rights and the options with respect to which such stock appreciation rights shall be granted. Subject to the provisions of
Section 13 of the Plan, the maximum number of shares with respect to which options or stock appreciation rights, or a combination thereof, may be
granted under the Plan to any person in any calendar year is 300,000.
The purchase price under each option shall be
determined by the Compensation Committee subject to approval by the Board of Directors of the Company, but such price shall not be less than one
hundred percent (100%) of the fair market value of the common stock at the time such option is granted.
6. |
|
THE PERIOD OF THE OPTION AND THE EXERCISE OF THE
SAME |
Each option granted under the Plan shall expire no
later than ten (10) years from the date such option is granted, but the Compensation Committee may prescribe a shorter period for any individual option
or options.
The shares subject to the option may be purchased
from time to time during the option period, subject to any waiting period or vesting schedule the Compensation Committee may specify for any individual
option or options.
In order to exercise the option or any part thereof,
the employee shall give notice in writing to the Company of his or her intention to purchase all or part of the shares subject to the option, and in
said notice the employee shall set forth the number of shares as to which he or she desires to exercise such option, and shall pay for such shares at
the time of exercise of such option. Such payment may be made in such manner as the Compensation Committee may specify, which may include cash,
delivery to the Company of shares of common stock of the Company, delivery of proceeds of the sale of the option shares by the Companys
designated broker on behalf of the employee, and any other manner permitted by law specified by the Committee. At the time of granting an option, the
Committee may impose conditions on the right to exercise an option.
Except as specified in Sections 10 and 11 below, no
option may be exercised except by the Optionee personally while the Optionee is in the employ of the Company or its subsidiaries.
No Optionee or his or her legal representative,
legatees or distributees, as the case may be, shall be or have any of the rights and privileges of a shareholder of the Company by reason of such
option unless and until the shares are issued to him or her under the terms of the Plan.
7. |
|
MERGER; REORGANIZATION; ACCELERATION |
In the event that the Company is a party to a merger
or other reorganization, outstanding Options shall be subject to the agreement of merger or reorganization. Such agreement may provide, without
limitation, for the
B-2
assumption of outstanding Options by the
surviving corporation, or a parent or subsidiary of such corporation (Successor Corporation), for their continuation by the Company (if the
Company is a surviving corporation), for accelerated vesting or for their cancellation with or without consideration, in all cases without the consent
of the Optionee.
Upon a Change in Control, all Options granted under
the Plan and held by Optionees whose employment with the Company has not terminated shall vest and become exercisable as to all Shares subject to such
Option in accordance with the following provisions:
(i) If any of the Optionees
outstanding Options are assumed or an equivalent option is substituted by a Successor Corporation, or if any of the Optionees outstanding Options
are continued by the Company (if the Company is a surviving corporation), then the entire unvested portion of any Option shall remain subject to the
vesting schedule in effect for such Option immediately prior to the Change in Control; unless, within one year of the Change in Control, (A) the
Optionee is terminated without cause (as provided in Section 10), or (B) the Optionee Resigns for Good Reason, in which case, the entire unvested
portion of any Option shall be deemed to have vested and become fully exercisable immediately prior to any such termination or
resignation.
(ii) If any of the Optionees
outstanding options are not assumed or an equivalent option is not substituted by the Successor Corporation, and if any of the Optionees
outstanding Options are not continued by the Company (if the Company is a surviving corporation), all of the then unvested portion of the Option shall
be deemed to have vested immediately prior to the Change in Control.
Change in Control
means the occurrence of any of the following:
(i) The consummation of a merger
or consolidation of the Company with or into another entity or any other corporate reorganization, if more than 65% of the combined voting power of the
continuing or surviving entitys securities outstanding immediately after such merger, consolidation or other reorganization is owned by persons
who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization;
(ii) The sale, transfer or other
disposition of all or substantially all of the Companys assets;
(iii) A change in the composition
of the Board of Directors of the Company, as a result of which fewer that one-half of the incumbent directors are directors who either (i) had been
directors of the Company on the date 24 months prior to the date of the event that may constitute a Change in Control (the original
directors) or (ii) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the aggregate of
the original directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously
so approved; or
(iv) Any transaction as a result
of which any person is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of securities of the Company representing at least 20% of the total voting power represented by the Companys then outstanding voting securities.
For purposes of this subparagraph, the term person shall have the same meaning as when used in sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 but shall exclude:
(A) |
|
trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a subsidiary of the Company; and |
(B) |
|
corporation owned directly or indirectly by the shareholders
of the Company in substantially the same proportions as their ownership of the common stock of the Company. |
|
|
A transaction shall not constitute a Change in Control if its
sole purpose is to change the state of the Companys incorporation or to create a holding company that will be owned in substantially the same
proportions by the persons who held the Companys securities immediately before such transactions. |
B-3
Resignation for Good Reason means the
Optionees resignation due to (i) a material diminution of Optionees duties without Optionees consent, (ii) a diminution of
Optionees base salary in effect immediately prior to a Change in Control, or (iii) a requirement that Optionees commute distance increase
by more than fifty (50) miles without Optionees consent.
Notwithstanding the above provisions of this Section
7, if any agreement between the Optionee and the Company provides greater rights to the Optionee than does this Section 7 upon the occurrence of one or
more of the events described in this Section 7, the provisions of such other agreement shall govern and shall supersede this Section
7.
8. |
|
PROVISIONS REGARDING STOCK APPRECIATION RIGHTS |
A stock appreciation right granted under the Plan
shall entitle the holder thereof to receive from the Company, upon surrender of the related option, payment of an amount, in cash, shares of common
stock or a combination thereof, as determined by the Compensation Committee, equal in value to (A) the excess of the fair market value of a share of
common stock on the date the stock appreciation right is exercised over the option price provided for in the related option, multiplied by (B) the
number of shares with respect to which the stock appreciation right was exercised. A stock appreciation right shall be exercisable during the period
commencing on a date specified by the Compensation Committee and ending on the date on which the related option expires or is earlier canceled or
terminated. Notwithstanding the preceding sentence, the Compensation Committee may provide for the grant of a stock appreciation right which may be
exercised only within a sixty-day period following certain events specified by the Compensation Committee in the grant of such stock appreciation
right. Moreover, the Compensation Committee may provide that such stock appreciation right shall be payable only in cash and that, in addition to
payment of the amount otherwise due upon exercise of such stock appreciation right, the holder thereof shall receive (unless such stock appreciation
right is in tandem with an incentive stock option), an amount equal to the excess of the highest price paid for a share of common stock in the open
market or otherwise over the sixty-day period prior to exercise over the fair market value of a share of common stock on the date the stock
appreciation right is exercised.
In order to exercise the stock appreciation right or
any part thereof, the employee shall give notice in writing to the Company of his or her intention to exercise such right, and in said notice the
employee shall set forth the number of shares as to which such employee desires to exercise the stock appreciation right, provided that such right may
not be exercised with respect to a number of shares in excess of the number for which the related option could then be exercised. Any limitations on
the right to exercise the related option shall also apply to the stock appreciation right.
No holder of a stock appreciation right or such
holders legal representatives, legatees or distributees, as the case may be, shall be or have any of the rights and privileges of a shareholder
of the Company by reason of such stock appreciation right unless and until the shares are issued to such holder under the terms of the
Plan.
9. |
|
NON-TRANSFERABILITY OF OPTION AND STOCK APPRECIATION
RIGHT |
No option or stock appreciation right granted under
the Plan to an employee shall be transferred by him or her otherwise than by will or by the laws of descent and distribution, and such option or stock
appreciation right shall be exercisable during the employees lifetime only by him or her.
10. |
|
TERMINATION OF EMPLOYMENT |
All options granted less than one year before an
Optionees termination of employment shall terminate immediately upon such Optionees termination of employment. The remaining provisions of
this Section 10 shall apply to options granted one year or more before an Optionees termination of employment.
Except as provided below, if an Optionee shall cease
to be employed by the Company or one of its subsidiaries, as the case may be, for any reason other than death, disability or retirement pursuant to a
retirement plan of the Company or one of its subsidiaries, any option theretofore granted to the Optionee which has not been exercised shall forthwith
cease and terminate. The Compensation Committee may provide
B-4
in the grant of any option or in an amendment of such grant that
in the event of any such termination of employment (except termination for cause as defined below), such option shall be exercisable
(solely to the extent it was exercisable on the date of the Optionees termination of employment) within the ninety days after the Optionees
termination, but in no event after the expiration of the term of said option prescribed pursuant to Section 6./FONT>
The Company or any of its subsidiaries shall have
cause to terminate the Optionees employment only on the basis of the Optionees having been guilty of fraud, misappropriation,
embezzlement or any other act or acts of dishonesty constituting a felony and resulting or intended to result directly or indirectly in a substantial
gain or personal enrichment to the Optionee at the expense of the Company or any of its subsidiaries. Notwithstanding the foregoing, the Optionee shall
not be deemed to have been terminated for cause unless and until there shall have been delivered to the Optionee a copy of a resolution (i) duly
adopted by three-quarters (3/4) of the entire membership of the Compensation Committee, or of the Board of Directors of the Company, at a meeting
called and held for such purpose after reasonable notice to the Optionee and an opportunity for the Optionee, together with the Optionees
counsel, to be heard before such Committee or Board, as the case may be, and (ii) finding that in the good faith opinion of such Committee or Board, as
the case may be, the Optionee was guilty of conduct described in the preceding sentence of this paragraph and specifying the particulars of such
conduct in detail. However, an Optionees right to exercise his outstanding options shall automatically be suspended from the moment the Optionee
is notified that the Company has commenced an investigation into whether there are grounds for terminating the Optionees employment for
cause until a determination has been made that no such grounds exist.
In the case of an Optionee employed by any of the
subsidiaries of the Company that were sold during 1997 or 1998 and whose employment with the group consisting of the Company and its subsidiaries
ceased as a result of such sale, any option (other than an incentive stock option) theretofore granted to the Optionee which has not been exercised as
of the Optionees termination of employment shall become 100% vested and shall be exercisable within one (1) year after the date of the
subsidiarys sale by the Company, but in no event after the expiration of the term of said option prescribed pursuant to Section
6.
In the case of any Optionee employed at the Miami,
Florida headquarters of the Company at the time of the May 1998 announcement of the reorganization of the Company who terminates employment with the
Company because (i) the Optionees position is eliminated as a result of the reorganization or (ii) the Optionee declines employment at the
Companys new headquarters in San Jose, California, any option (other than an incentive stock option) theretofore granted to the Optionee which
has not been exercised as of the Optionees termination of employment shall become 100% vested and shall be exercisable within three (3) years
following termination of employment, but in no event after the expiration of the term of said option prescribed pursuant to Section 6.
11. |
|
RETIREMENT, DISABILITY OR DEATH |
All options granted less than one year before an
Optionees retirement, disability, or death shall terminate immediately upon such Optionees retirement, disability, or death. The remaining
provisions of this Section 11 shall apply to options granted one year or more before an Optionees retirement, disability, or
death.
In the event of the retirement of an Optionee
pursuant to a retirement plan of the Company or one of its subsidiaries, as the case may be, the options theretofore granted to the Optionee shall be
exercisable during such period of time as the Compensation Committee shall specify in the option grant either at the time of grant or by amendment,
which period shall not exceed the first to expire of: (i) one (1) year after the date of such retirement with respect to incentive stock options, (ii)
three (3) years after the date of such retirement for Optionees whose retirement date is prior to July 1, 1997, (iii) five (5) years after the date of
such retirement for Optionees whose retirement date is on or after July 1, 1997, and (iv) the expiration of the term of said option prescribed pursuant
to Section 6. Options not exercisable on the date of an Optionees retirement shall continue to become exercisable during such period in
accordance with the schedule specified by the Compensation Committee pursuant to Section 6; provided that no additional options shall become
exercisable following an Optionees death.
B-5
In the event of the disability or death of an
Optionee while in the employ of the Company or one of its subsidiaries, or during the post-employment period referred to in the immediately preceding
paragraph, the options theretofore granted to him shall be exercisable during such period of time as the Compensation Committee shall specify in the
option grant either at the time of grant or by amendment, which period shall not exceed the first to expire of the following: (i) one (1) year after
the date of such disability or death, with respect to incentive stock options, (ii) three (3) years after the date of such disability if the date of
such disability is prior to July 1, 1997, (iii) five (5) years after the date of such disability if the date of such disability is on or after July 1,
1997, (iv) three (3) years after the date of such death, (v) the applicable post-retirement period as set forth in the preceding paragraph, and (vi)
the expiration of the term of said option prescribed pursuant to Section 6. Options not exercisable on the date of an Optionees termination of
employment by reason of disability shall continue to become exercisable during such period in accordance with the schedule specified by the
Compensation Committee pursuant to Section 6; provided that no additional options shall become exercisable following an Optionees
death.
Such option (or the related stock appreciation
right) may only be exercised by the personal representative of such decedent or by the person or persons to whom such employees rights under the
option shall pass by such employees Will or by the laws of Descent and Distribution of the state of such employees domicile at the time of
death, and then only as and to the extent that such employee was entitled to exercise the option on the date of death.
Within a reasonable time after the date of grant of
an option, an option and stock appreciation right, or a stock appreciation right related to a previously granted option, a written agreement in a form
approved by the Compensation Committee shall be duly executed and delivered to the Optionee.
13. |
|
ADJUSTMENT BY REASON OF RECAPITALIZATION, STOCK SPLITS,
STOCK DIVIDENDS, ETC. |
If, after the effective date of this Plan, there
shall be any changes in the common stock structure of the Company by reason of the declaration of stock dividends, recapitalization resulting in stock
split-ups, or combinations or exchanges of shares by reason of merger, consolidation, or by any other means, then the number of shares available under
the Plan, the shares subject to any outstanding options, and the maximum number of shares with respect to which options may be granted to any person
shall be equitably and appropriately adjusted by the Board of Directors of the Company as in its sole and uncontrolled discretion shall seem just and
reasonable in the light of all the circumstances pertaining thereto.
14. |
|
RIGHT TO TERMINATE EMPLOYMENT |
The Plan shall not confer upon any employee any
right with respect to being continued in the employ of the Company and its subsidiaries or interfere in any way with the right of the Company and its
subsidiaries to terminate his or her employment at any time, nor shall it interfere in any way with the employees right to terminate his or her
employment.
15. |
|
WITHHOLDING AND OTHER TAXES |
The Company or one of its subsidiaries shall have
the right to withhold from salary or otherwise or to cause an Optionee (or the executor or administrator of the Optionees estate or his legatees
or distributees) to make payment of any Federal, State, or other (to the extent permitted by applicable law, rule or regulation) taxes required to be
withheld with respect to any exercise of a stock option or a stock appreciation right. An Optionee may elect to have the withholding tax obligation or,
if the Compensation Committee so determines, any additional tax obligation with respect to any exercise of a stock option or stock appreciation right
satisfied by (a) having the Company or one of its subsidiaries withhold shares otherwise deliverable to the Optionee with respect to such exercise, or
(b) delivering shares of common stock to the Company.
B-6
16. |
|
AMENDMENT TO THE PLAN |
The Board of Directors shall have the right to
amend, suspend or terminate the Plan at any time; provided, however, that no such action shall affect or in any way impair the rights of the holder of
any option or stock appreciation right theretofore granted under the Plan; and provided further, that unless first duly approved by the common
shareholders of the Company entitled to vote thereon at a meeting (which may be the annual meeting) duly called and held for such purpose, no amendment
or change shall be made in the Plan (a) increasing the total number of shares which may be purchased or transferred upon exercise of options or stock
appreciation rights under the Plan by all employees; (b) changing the minimum purchase price hereinbefore specified for the optioned shares; (c)
changing the maximum option period; (d) increasing the amount that may be received upon exercise of a stock appreciation right; or (e) allowing a stock
appreciation right to be exercised after the expiration date of the related option.
17. |
|
EFFECTIVE DATE OF THE PLAN |
The Plan shall be effective as of February 24,
1971.
Each option and stock appreciation right shall be
governed by the terms of the Plan as in effect on the date of its grant unless the option or stock appreciation right is expressly amended to include
one or more Plan provisions adopted after the date of grant. The Compensation Committee shall have authority to amend outstanding options to include
any provisions permitted by the Plan as in effect at the time of such amendment.
B-7
Appendix C
KNIGHT RIDDER ANNUAL INCENTIVE PLAN
(As Amended and Restated Effective
January 1, 2004)
INTRODUCTION
This Amended and Restated Knight Ridder Annual Incentive Plan (the
Plan) is intended to motivate and reward corporate executives and top management at individual operating units who contribute significantly
to Knight Ridders success. Specific Plan objectives include the following:
|
|
Focus participants on achieving key annual
objectives |
|
|
Link rewards to results relative to financial and non-financial
goals at the corporate and business unit levels |
|
|
Provide participants the opportunity to earn competitive
compensation commensurate with performance |
The Plan provides participants the opportunity to earn cash awards each year based
on the performance of the corporation and/or the business unit in which they work. Awards are earned on a calendar year basis (the Plan
Year) and are paid in cash following the end of the Plan Year.
This Plan complies with Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code) with respect to covered employees under such Code section. Accordingly, individuals who may be covered employees under
the Code will be designated as Covered Employees.
PLAN ADMINISTRATION
The Plan will be administered by the Compensation and Corporate Governance
Committee of the Knight Ridder Board of Directors (the Committee). The Committee has the authority to interpret the provisions of the Plan
and to make any rules and regulations necessary to administer the Plan. The Committees decision is final in all matters of judgment pertaining to
the Plan, and the Committee may, without notice, amend, suspend or revoke the Plan.
ELIGIBILITY
Employees in the following categories are eligible to participate in the Plan as
determined by the Committee: corporate officers and certain director-level corporate employees; newspaper publishers and other business unit operating
heads who report directly to top officers; top editors, general managers and all division directors; and selected other positions that can have
significant impact on results.
Operating unit heads should present proposed changes in eligible positions to the
appropriate Vice President Operations and then to the Knight Ridder senior Human Resources officer.
PLAN OVERVIEW
Bonus Amounts Payable for Meeting
Goals
Each plan participant will have a potential target bonus award that is payable for
meeting goals. The size of this potential award varies by salary range. The bonus potential for each salary range is stated as a maximum percentage of
the annual salary earned during the year. Therefore, the dollar amount of an individuals opportunity is computed by multiplying the applicable
percentage times the salary. The maximum potential bonus payable for meeting goals for each salary range (other than for Knight Ridders Chief
Executive Officer and second-highest ranking officer as described below) is as follows:
C-1
Base Salary Range
|
|
|
|
Target Award
|
$250,000 and
above |
|
|
|
Up to
50% |
$150,000 to
$249,999 |
|
|
|
Up to
45% |
$100,000 to
$149,999 |
|
|
|
Up to
40% |
$50,000 to
$99,999 |
|
|
|
Up to
35% |
Up to
$49,999 |
|
|
|
Up to
25% |
The Committee may reduce a participants target bonus award calculated under
the preceding formula in its sole discretion.
The Committee will also annually establish the target award for the Chief Executive
Officer and the next highest-ranking executive officer.
Types of Performance Measures and Their
Weightings
Each participants bonus will be determined based on measures of how well the
corporation or the business unit in which the individual works performed relative to two type of goals: Financial Performance and Non-financial
Performance.
The potential award for meeting goals will be divided between the two types of
measures in the following way: 65% of each participants potential award for meeting goals will be based on Financial Performance, and 35% will be
based on Non-financial Performance, as shown in the following table:
|
|
|
|
Potential Award
|
|
Base Salary
|
|
|
|
Total
|
|
Financial
|
|
Non-financial
|
$250,000 and
above |
|
|
|
|
50 |
% |
|
|
32.5 |
% |
|
|
17.5 |
% |
$150,000 to
$249,999 |
|
|
|
|
45 |
% |
|
|
29.25 |
% |
|
|
15.75 |
% |
$100,000 to
$149,999 |
|
|
|
|
40 |
% |
|
|
26 |
% |
|
|
14 |
% |
$50,000 to
$99,999 |
|
|
|
|
35 |
% |
|
|
22.75 |
% |
|
|
12.25 |
% |
Up to
$49,999 |
|
|
|
|
25 |
% |
|
|
16.25 |
% |
|
|
8.75 |
% |
As a general rule, the measurement will be based on the organizational level at
which the individual is employed: corporate performance for those at the corporate level and business unit performance for those in a newspaper or
other business unit. However, the Knight Ridder CEO may determine that the measures for selected individuals (other than Covered Employees) will
consist of a specified mix of two or more bases, or that those in a business unit will have awards based on corporate performance.
PERFORMANCE MEASUREMENT
Financial Performance
Measure
Financial performance will be evaluated relative to budgeted goals set at the
beginning of the Plan Year, subject to approved adjustments during the year. Unless otherwise determined by the Committee, the financial measure will
be operating profit.
The financial performance measure and the goals for the year for covered employees
shall be established by the Committee within the time period required by Code Section 162 (m). The financial performance measures and goals will be
communicated to participants by the early part of each year.
Non-financial Performance
Measures
At the beginning of each Plan Year, Knight Ridder and each of the business units
will establish non-financial goals that represent major elements of their strategies. Quantifiable measures are preferred, and measures that are
redundant with the financial goal should be avoided. There should be no more than eight measures. Such corporate measures and goals will be approved by
the Knight Ridder CEO, and business unit measures and goals will be approved by the appropriate Knight Ridder Vice President.
C-2
All participants at corporate and in each of the business units will have the
non-financial component of their awards based on the measures selected for their unit. However, the weightings of these measures may vary among
participants to reflect each individuals impact on the achievement of the goals. The weightings assigned to all measures must total 100 points
for each of the participants.
The achievement of a goal will result in target awards being paid for that goal.
Awards for performance on the non-financial measures cannot exceed 100% of target, but standards for partial achievement of goals (and therefore
payouts below 100%) as well as threshold standards for achieving any award should be established.
The non-financial measures for Covered Employees shall be objective and
quantifiable and shall be established solely by the Committee within the time period required by Code Section 162(m).
DETERMINING AND PAYING AWARDS
Overview
Each participants award will be determined by adding together the award
earned based on financial performance and the award earned based on non-financial performance. An award may be paid for one type of measure even if no
award was earned for the other type of measure. The only constraint is that a corporate performance threshold must be achieved for any award to be
payable. Normally this threshold requirement will be that corporate operating income, as reported in the annual report, must equal at least 80% of
prior year operating income, although the Committee reserves the right to adjust the threshold. The Committee shall have the discretion to decrease
(but not increase) awards to Covered Employees.
If a Plan participants base salary changes during the Plan Year, the
potential award is calculated on a pro rata basis, based on the amount of base salary earned at each salary level.
Determining Financial Awards
Financial awards will be based on actual operating profit performance compared to
goal for each participants unit (either corporate or business unit). Individual unit operating profit goals have been set to support the overall
Knight Ridder operating profit goal. Threshold and maximum operating profit performance are set as a percent of target operating profit. Actual
financial awards can range between 0% and 300% of target award opportunity. In order to achieve a financial award over 200%, a business units
operating profit must be at least 12% above prior year and operating profit must exceed Yr. 2000 levels. Notwithstanding the foregoing, the total
financial award payout for all participants in a business unit will be capped once the aggregate bonus amount above target equals 25% of the amount
that actual operating profit performance exceeds target. No cap will apply if the aggregate bonus amount above target bonus is less than 25% of the
amount that actual operating profit performance exceeds target.
|
|
If actual results are equal to budget, 100% of the Financial
Performance award will be paid. |
|
|
If actual results are at or below 90% of budgeted results, no
award will be paid for Financial Performance. |
|
|
If actual results are above 90% of budget, but below 100% of
budget, then the award will be less than the amount payable for meeting budget, with each 1% shortfall in performance versus budget resulting in a 10%
reduction of the amount payable for meeting budget. |
|
|
The Actual vs. Budget is calculated to one decimal
place. Awards percentages should be interpolated for achievement between amounts shown in the table below. |
C-3
Actual vs. Budget
|
|
|
|
Award Percentage
|
100% |
|
|
|
100% |
99% |
|
|
|
90% |
98% |
|
|
|
80% |
97% |
|
|
|
70% |
96% |
|
|
|
60% |
95% |
|
|
|
50% |
94% |
|
|
|
40% |
93% |
|
|
|
30% |
92% |
|
|
|
20% |
91% |
|
|
|
10% |
90% |
|
|
|
0% |
If actual results are above 100% of budget, then the award will be greater than the
amount payable for meeting budget, up to 300% of that amount. Each 1% improvement in performance versus budget will result in an incremental award
equal to 10% of the amount payable for meeting budget, up to 200% of the financial portion of the award. If financial results exceed 110% two criteria
must be met in order to achieve payout greater than 200% of target: business unit operating profit must be at least 12% above prior year, and business
unit operating profit must exceed Yr. 2000 levels. If these two criteria are met, award payouts may reach 300% of target. In this scenario, each 1%
improvement in performance versus budget will result in an incremental award equal to 10% of amount payable. Notwithstanding the foregoing, the total
financial award payout for all participants in a business unit will be capped once the aggregate bonus amount above target bonus equals 25% of the
amount that actual operating profit performance exceeds target.
Actual vs. Budget
|
|
|
|
Percentage of Financial Award
|
|
|
|
|
(65% of total potential) |
100% |
|
|
|
100% |
101% |
|
|
|
110% |
102% |
|
|
|
120% |
103% |
|
|
|
130% |
104% |
|
|
|
140% |
105% |
|
|
|
150% |
106% |
|
|
|
160% |
107% |
|
|
|
170% |
108% |
|
|
|
180% |
109% |
|
|
|
190% |
110% |
|
|
|
200% |
If operating profit exceeds 110% and the business unit meets the criteria for
payout above 200%, bonus payouts may be paid in excess of 200% of target, up to a maximum of 300% of target, as follows:
Actual vs. Budget
|
|
|
|
Percentage of Financial Award
|
|
|
|
|
(65% of total potential) |
111% |
|
|
|
210% |
112% |
|
|
|
220% |
113% |
|
|
|
230% |
114% |
|
|
|
240% |
115% |
|
|
|
250% |
116% |
|
|
|
260% |
117% |
|
|
|
270% |
118% |
|
|
|
280% |
119% |
|
|
|
290% |
120% |
|
|
|
300% |
C-4
Determining Non-financial
Awards
A performance score will be determined for each of the non-financial measures at
corporate and each of the business units. A score will be 100% of the points assigned if the goal was achieved, zero if threshold performance was not
achieved, and between 0 and 100% if performance was above threshold and the goal was partially achieved.
An individuals non-financial award will equal the sum of the scores on each
of the measures times the weighting given to that measure for that individual. Awards can range from 100% of the non-financial target if all goals were
achieved, to zero if performance on all goals was below threshold.
OTHER PLAN FEATURES
Award Payment
Awards will be paid in cash following the end of the Plan Year, unless deferral has
been elected under the annual incentive deferral plan, upon completion of the computation of results. Required tax amounts will be withheld.
Notwithstanding anything to the contrary, the maximum award payable for a Plan Year to any individual under the Code shall not exceed
$2,500,000.
Partial Year Participants and Changes in
Position
Individuals who are hired or promoted into positions that qualify for Plan
participation will be eligible for a pro rata award based on the amount of salary earned while a participant and the performance levels
achieved.
If a participants responsibilities change during a year and a different part
of the companys performance is used in computing awards for the two positions, then ordinarily the award will be determined on a pro rata basis
relative to the time spent in the two positions, although exceptions may be made on a case by case basis.
Termination
In the event of death, permanent disability (as defined by Knight Ridders
disability plan) or retirement (as defined in a retirement plan of Knight Ridder or one of its subsidiaries) prior to the date of payment, a
participant (or the participants estate) will be entitled to receive a pro rata award based on the time employed during the year. Pro-rated
payments will be made following the end of the Plan Year and computation of results. Required tax amounts will be withheld.
In the event of resignation or termination for other reasons at any time during the
Plan Year, no award will be paid.
Employment Rights
The Plan does not constitute a contract of employment, nor does participation in
one Plan Year guarantee participation in another Plan Year.
C-5
EXHIBIT 1
Exhibit 1 illustrates calculation of the award payout for two scenarios
Example 1: |
|
Operating Profit Equals 105% of Target Performance |
Participant earns a salary as follows:
1/1/2002
through 12/31/2002 |
|
$90,000 |
|
|
|
Award Payout Opportunity
at target: |
|
35% of salary or
$31,500 |
|
|
|
Broken
down by components: |
|
65%
financial performance or $20,475
35% non-financial performance or $11,025 |
|
|
|
Example: Operating
profit achievement:
Non-financial achievement:
|
|
105% of target
100% of goals |
|
|
|
Financial portion
of award:
Non-financial portion of award:
Total Award Payout |
|
$20,475 x 150%
= $30,712.50
$11,025 x 100% = $11,025.00
$41,737.50
|
Example 2: |
|
Operating Profit Equals 111% of Target Performance |
Participant
earns a salary as follows: |
|
|
|
|
|
1/1/20026/30/2002
7/1/200212/31/2003 |
$45,000
$49,000
$94,000 |
(6 months @ $90,000 annual base)
(6 months @ $98,000 annual base)
Total annual salary |
|
|
|
Award Payout Opportunity
at target: |
|
35% of salary or
$32,900 |
|
|
|
Broken
down by components: |
|
65% financial performance
or $21,385
35% non-financial performance or $11,515 |
|
|
|
Example: Operating
profit achievement:
Non-financial achievement:
|
|
111% of target
90% of goals |
|
|
|
|
|
|
Financial portion
of award:
Non-financial portion of award:
Total Award Payout |
|
$21,385 x 210*%
= $44,908.50
$11,515 x 90% = $10,363.50
$55,272.00 |
* |
|
Operating profit must be at least 12% above prior year and
must exceed Yr. 2000 levels in order to achieve a financial award over 200%. However, the total financial award payout for all participants in a
business unit will be capped once the aggregate bonus amount above target equals 25% of the amount that actual operating profit performance exceeds
target. |
C-6
BONUS AS
A PERCENTAGE OF BASE SALARY FINANCIAL PORTION ONLY
EXHIBIT 2
|
|
|
|
|
|
|
% of Base Salary
|
|
|
|
|
|
Financial Performance as a % of Target
|
Financial Payout %
|
|
$250,000 and above
|
|
$150,000 to $249,999
|
|
$100,000 to $149,999
|
|
$50,000 to $99,999
|
|
Up to $49,000
|
|
Maximum |
|
|
|
|
120.0 |
% |
300.0% |
|
97.5% |
|
87.8% |
|
78.0% |
|
68.3% |
|
48.8% |
|
|
|
|
|
|
119.0 |
% |
290.0% |
|
94.3% |
|
84.8% |
|
75.4% |
|
66.0% |
|
47.1% |
|
|
|
|
|
|
118.0 |
% |
280.0% |
|
91.0% |
|
81.9% |
|
72.8% |
|
63.7% |
|
45.5% |
|
|
|
|
|
|
117.0 |
% |
270.0% |
|
87.8% |
|
79.0% |
|
70.2% |
|
61.4% |
|
43.9% |
|
|
|
|
|
|
116.0 |
% |
260.0% |
|
84.5% |
|
76.1% |
|
67.6% |
|
59.2% |
|
42.3% |
|
|
|
|
|
|
115.0 |
% |
250.0% |
|
81.3% |
|
73.1% |
|
65.0% |
|
56.9% |
|
40.6% |
|
|
|
|
|
|
114.0 |
% |
240.0% |
|
78.0% |
|
70.2% |
|
62.4% |
|
54.6% |
|
39.0% |
|
|
|
|
|
|
113.0 |
% |
230.0% |
|
74.8% |
|
67.3% |
|
59.8% |
|
52.3% |
|
37.4% |
|
|
|
|
|
|
112.0 |
% |
220.0% |
|
71.5% |
|
64.4% |
|
57.2% |
|
50.1% |
|
35.8% |
|
|
|
|
|
|
111.0 |
% |
210.0% |
|
68.3% |
|
61.4% |
|
54.6% |
|
47.8% |
|
34.1% |
|
|
|
|
|
|
110.0 |
% |
200.0% |
|
65.0% |
|
58.5% |
|
52.0% |
|
45.5% |
|
32.5% |
|
|
|
|
|
|
109.0 |
% |
190.0% |
|
61.8% |
|
55.6% |
|
49.4% |
|
43.2% |
|
30.9% |
|
|
|
|
|
|
108.0 |
% |
180.0% |
|
58.5% |
|
52.7% |
|
46.8% |
|
41.0% |
|
29.3% |
|
|
|
|
|
|
107.0 |
% |
170.0% |
|
55.3% |
|
49.7% |
|
44.2% |
|
38.7% |
|
27.6% |
|
|
|
|
|
|
106.0 |
% |
160.0% |
|
52.0% |
|
46.8% |
|
41.6% |
|
36.4% |
|
26.0% |
|
|
|
|
|
|
105.0 |
% |
150.0% |
|
48.8% |
|
43.9% |
|
39.0% |
|
34.1% |
|
24.4% |
|
|
|
|
|
|
104.0 |
% |
140.0% |
|
45.5% |
|
41.0% |
|
36.4% |
|
31.9% |
|
22.8% |
|
|
|
|
|
|
103.0 |
% |
130.0% |
|
42.3% |
|
38.0% |
|
33.8% |
|
29.6% |
|
21.1% |
|
|
|
|
|
|
102.0 |
% |
120.0% |
|
39.0% |
|
35.1% |
|
31.2% |
|
27.3% |
|
19.5% |
|
|
|
|
|
|
101.0 |
% |
110.0% |
|
35.8% |
|
32.2% |
|
28.6% |
|
25.0% |
|
17.9% |
|
Target |
|
|
|
|
100.0 |
% |
100.0% |
|
32.5% |
|
29.3% |
|
26.0% |
|
22.8% |
|
16.3% |
|
|
|
|
|
|
99.0 |
% |
90.0% |
|
29.3% |
|
26.3% |
|
23.4% |
|
20.5% |
|
14.6% |
|
|
|
|
|
|
98.0 |
% |
80.0% |
|
26.0% |
|
23.4% |
|
20.8% |
|
18.2% |
|
13.0% |
|
|
|
|
|
|
97.0 |
% |
70.0% |
|
22.8% |
|
20.5% |
|
18.2% |
|
15.9% |
|
11.4% |
|
|
|
|
|
|
96.0 |
% |
60.0% |
|
19.5% |
|
17.6% |
|
15.6% |
|
13.7% |
|
9.8% |
|
|
|
|
|
|
95.0 |
% |
50.0% |
|
16.3% |
|
14.6% |
|
13.0% |
|
11.4% |
|
8.1% |
|
|
|
|
|
|
94.0 |
% |
40.0% |
|
13.0% |
|
11.7% |
|
10.4% |
|
9.1% |
|
6.5% |
|
|
|
|
|
|
93.0 |
% |
30.0% |
|
9.8% |
|
8.8% |
|
7.8% |
|
6.8% |
|
4.9% |
|
|
|
|
|
|
92.0 |
% |
20.0% |
|
6.5% |
|
5.9% |
|
5.2% |
|
4.6% |
|
3.3% |
|
|
|
|
|
|
91.0 |
% |
10.0% |
|
3.3% |
|
2.9% |
|
2.6% |
|
2.3% |
|
1.6% |
|
Minimum |
|
|
|
|
90.0 |
% |
0.0% |
|
0.0% |
|
0.0% |
|
0.0% |
|
0.0% |
|
0.0% |
|
C-7
|
|
|
|
|
![(KNIGHTRIDDER LOGO)](knightridder.gif) |
|
YOUR VOTE IS IMPORTANT
VOTE BY INTERNET / TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK |
|
|
|
|
|
INTERNET |
|
TELEPHONE |
|
MAIL |
|
|
|
|
|
https://www.proxyvotenow.com/kri |
|
1-866-214-3763 |
|
|
|
|
|
|
|
Go to the website address listed above. |
OR |
Use any touch-tone telephone. |
OR |
Mark, sign and date your proxy card. |
Have your proxy card ready. |
|
Have your proxy card ready. |
|
Detach your proxy card. |
Follow the simple instructions that appear on your computer screen. |
|
Follow the simple recorded instructions. |
|
Return your proxy card in the postage-paid envelope provided. |
|
|
|
|
Knight Ridder encourages you to take advantage of a convenient way to vote your shares. If voting by proxy, you may vote by mail or choose one of the two methods
described above. Your telephone or Internet vote
authorizes the named proxies to vote your shares in the same manner as if you marked, signed, and returned your proxy card. To vote by telephone or Internet, read the accompanying proxy statement and then follow the instructions above.
|
|
|
PLEASE DO NOT RETURN YOUR PROXY CARD IF YOU VOTED BY PHONE OR INTERNET. |
|
6 DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET 6
|
|
|
|
|
|
|
|
|
|
|
Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. |
x Votes must be indicated (x) in Black or Blue ink. |
|
|
|
|
|
|
|
|
|
|
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4 AND 5. |
1. |
Election of directors: |
|
|
|
|
|
|
|
|
|
|
|
FOR ALL |
¨ |
WITHHOLD FOR ALL |
¨ |
EXCEPTIONS* |
¨ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees: 01 - Mark A. Ernst, 02 - Vasant Prabhu, 03 - P. Anthony Ridder and 04 - John E. Warnock |
|
|
|
|
|
|
|
|
|
|
(Instructions: To withhold authority to vote for any individual nominee, mark the Exceptions* box and write that nominees name on the following blank line.) |
|
|
|
|
|
|
|
|
|
|
Exceptions* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR |
AGAINST |
ABSTAIN |
|
|
|
|
|
|
|
|
|
|
2. |
Ratify the appointment of Ernst & Young LLP |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
|
|
|
|
3. |
Approve the material terms of the Annual Incentive Plan |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
|
|
|
FOR |
AGAINST |
ABSTAIN |
|
|
|
|
|
|
4. |
Approve the amendment and restatement of the Employee Stock Option Plan. |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
5. |
Approve the amendment of the Employee Option Plan regarding share reserve. |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 6. |
|
|
|
|
|
|
6. |
Shareholder proposal relating to separating the positions of Chairman and CEO. |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
I will attend the annual meeting in San Jose, California. |
YES |
¨ |
NO |
¨ |
|
|
|
|
|
Note: Please sign exactly as your name or name(s) appear(s), date and return this proxy card promptly in the enclosed envelope whether or not you plan to attend the Annual Meeting. For joint accounts, each
owner
should sign. When signing as officer, executor, administrator, attorney, trustee or guardian, or in any other legal capacity please give your full title(s) under the Signature(s). |
|
|
|
|
|
|
Date Share Owner sign here |
|
Co-Owner sign here |
|
|
|
|
|
|
|
KNIGHT-RIDDER, INC. |
|
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS |
|
|
|
The undersigned hereby appoints P. Anthony Ridder, Polk Laffoon and Gordon Yamate, or any one of them, each with full
power of substitution, to vote all the shares the undersigned is entitled to vote at the Annual Meeting of Shareholders of
Knight-Ridder, Inc. to be held at The Fairmont Hotel, 170 South Market Street, San Jose, California at 9:30 a.m. on April 26, 2005, and any adjournments thereof.
|
|
|
|
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION, FOR ITEMS 2, 3, 4 AND 5, AGAINST ITEM 6, AND IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT(S) THEREOF. |
|
(THIS PROXY IS CONTINUED ON REVERSE SIDE
PLEASE COMPLETE, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE)
|
|
|
|
|
To change your address, please mark this box. |
|
¨ |
|
|
|
|
|
|
|
To include any comments, please mark this box. |
|
¨ |
|
KNIGHT-RIDDER, INC. P.O. BOX 11090 NEW YORK, N.Y. 10203-0090 |
|
|
|
|
If you agree to access our Annual Report and Proxy Statement electronically in the future, please mark this box. |
|
¨ |
|
|
|
|
|
|
![(KNIGHTRIDDER LOGO)](knightridder.gif) |
|
YOUR VOTE IS IMPORTANT
VOTE BY INTERNET / TELEPHONE
24 HOURS A DAY, 7 DAYS A WEEK |
|
|
|
|
|
INTERNET |
|
TELEPHONE |
|
MAIL |
|
|
|
|
|
https://www.proxyvotenow.com/kri |
|
1-866-214-3763 |
|
|
|
|
|
|
|
Go to the website address listed above. |
OR |
Use any touch-tone telephone. |
OR |
Mark, sign and date your proxy card. |
Have your proxy card ready. |
|
Have your proxy card ready. |
|
Detach your proxy card. |
Follow the simple instructions that appear on your computer screen. |
|
Follow the simple recorded instructions. |
|
Return your proxy card in the postage-paid envelope provided. |
|
|
|
|
Knight Ridder encourages you to take advantage of a convenient way to vote your shares. If voting by proxy, you may vote by mail or choose one of the two methods
described above. Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, and returned your proxy card. To vote by telephone or Internet, read the accompanying proxy statement and
then follow the instructions above.
|
|
|
PLEASE DO NOT RETURN YOUR PROXY CARD IF YOU VOTED BY PHONE OR INTERNET. |
|
6 DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET 6
|
|
|
|
|
|
|
|
|
|
|
Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. |
x Votes must be indicated (x) in Black or Blue ink. |
|
|
|
|
|
|
|
|
|
|
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4 AND 5. |
1. |
Election of directors: |
|
|
|
|
|
|
|
|
|
|
|
FOR ALL |
¨ |
WITHHOLD FOR ALL |
¨ |
EXCEPTIONS* |
¨ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominees: 01 - Mark A. Ernst, 02 - Vasant Prabhu, 03 - P. Anthony Ridder and 04 - John E. Warnock |
|
|
|
|
|
|
|
|
|
|
(Instructions: To withhold authority to vote for any individual nominee, mark the Exceptions* box and write that nominees name on the following blank line.) |
|
|
|
|
|
|
|
|
|
|
Exceptions* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR |
AGAINST |
ABSTAIN |
|
|
|
|
|
|
|
|
|
|
2. |
Ratify the appointment of Ernst & Young LLP |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
|
|
|
|
3. |
Approve the material terms of the Annual Incentive Plan |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
|
|
|
FOR |
AGAINST |
ABSTAIN |
|
|
|
|
|
|
4. |
Approve the amendment and restatement of the Employee Stock Option Plan. |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
5. |
Approve the amendment of the Employee Option Plan regarding share reserve. |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST ITEM 6. |
|
|
|
|
|
|
6. |
Shareholder proposal relating to separating the positions of Chairman and CEO. |
|
¨ |
¨ |
¨ |
|
|
|
|
|
|
I will attend the annual meeting in San Jose, California. |
YES |
¨ |
NO |
¨ |
|
|
|
|
|
Note: Please sign exactly as your name or name(s) appear(s), date and return this proxy card promptly in the enclosed envelope whether or not you plan to attend the Annual Meeting. For joint accounts, each
owner
should sign. When signing as officer, executor, administrator, attorney, trustee or guardian, or in any other legal capacity please give your full title(s) under the Signature(s). |
|
|
|
|
|
|
Date Share Owner sign here |
|
Co-Owner sign here |
|
|
|
|
|
To Our Knight Ridder Employee Shareholders:
The Knight Ridder 2005 Annual Meeting will be held at 9:30 a.m. Tuesday, April 26, at the Fairmont Hotel, 170 South Market Street, San Jose, California.
We are asking participants in the Companys 401(k) Plans, Employees Stock Purchase Plan and Annual Incentive Plan to vote on the items of business which will
come before the Annual Meeting. These matters are described in detail in the notice of annual meeting and proxy statement described below. The administrators of your benefit plans are the shareholders of record of your plan shares and will vote those
shares according to the instructions you provide using the Internet, by telephone, or by this proxy card.
In an effort to reduce costs and facilitate voting, the proxy statement and annual report will be supplied electronically. Please visit Knight Ridders Web
site, www.kri.com choose Investing in Knight Ridder, then choose Annual Reports and Proxies.
If you wish to receive a printed copy of these documents contact the Knight Ridder proxy request line at 408-938-0288.
To vote on the items contained in the proxy, you will need to access our secure electronic voting site at https://www.proxyvotenow.com/kri and follow the
instructions. You will need your unique control number printed on the reverse of this card.
You may also vote your shares by telephone. To do so, call the toll-free number printed on the reverse of this card anytime and follow the recorded instructions.
You will need your unique control number printed on the reverse of this card.
You may also vote your shares by returning this proxy card in the envelope provided.
Your vote is important to us. Please vote (by Internet, telephone or this proxy card) as soon as possible before April 21st.
Thank you for your participation.
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KNIGHT-RIDDER, INC. |
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PROXY FOR ANNUAL MEETING OF SHAREHOLDERS |
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The undersigned hereby appoints P. Anthony Ridder, Polk Laffoon and
Gordon Yamate, or any one of them, each with full power of
substitution, to vote all the shares the undersigned is entitled to
vote at the Annual Meeting of Shareholders of Knight-Ridder, Inc. to
be held at The Fairmont Hotel, 170 South Market Street, San Jose,
California at 9:30 a.m. on May 4, 2004, and any adjournments thereof.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR
ELECTION, FOR ITEM 2 AND IN THE DISCRETION OF THE PROXIES, ON ANY
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT(S) THEREOF.
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(THIS PROXY IS CONTINUED ON REVERSE SIDE PLEASE COMPLETE, DATE AND SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE)
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KNIGHT-RIDDER, INC. P.O. BOX 11316 NEW YORK, N.Y. 10203-0316 |
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