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SCHEDULE 14A
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
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GANNETT
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[LOGO]
Douglas H. McCorkindale
Chairman, President and Chief Executive Officer
March 23, 2001
Dear Shareholder:
On behalf of your Board of Directors and management, we cordially invite
you to attend the Annual Meeting of Shareholders to be held on Tuesday, May 8,
2001, at 10:00 a.m., at the Company's headquarters, 1100 Wilson Boulevard,
Arlington, Virginia.
At this meeting you will be asked to vote for the election of three
directors, for the election of PricewaterhouseCoopers as the Company's
independent auditors for 2001 and to approve an Omnibus Incentive Compensation
Plan. These matters are discussed in detail in the attached proxy statement.
Your Board of Directors believes these proposals are in the best interests
of the Company and its shareholders and recommends that you vote for them.
There also are two shareholder proposals that we understand will be
presented for consideration at the meeting. The shareholder proposals are
discussed in the attached proxy statement. Your Board believes these proposals
are not in the best interests of the Company and its shareholders and recommends
that you vote against them.
It is important that your shares be represented at the meeting whether or
not you plan to attend. Please note that this year you may vote your shares by
telephone, by mail or online. The toll-free telephone number, Internet address
and instructions are shown on the enclosed proxy card. Alternatively, you can
vote by signing and dating the proxy card and returning it in the envelope
provided.
An admission ticket is required for attendance at the Annual Meeting.
Please see page 1 of the proxy statement for instructions about obtaining
tickets.
Thank you for your continued support.
Cordially,
/s/ DOUGLAS H. MCCORKINDALE
Douglas H. McCorkindale
1100 Wilson Boulevard, Arlington, VA 22234 (703) 284-6000
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[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 8, 2001
------------------------
To Our Shareholders:
The Annual Meeting of Shareholders of Gannett Co., Inc. will be held at the
Company's headquarters, 1100 Wilson Boulevard, Arlington, Virginia, at 10:00
a.m. on May 8, 2001 for the following purposes:
(1) to elect three directors;
(2) to act upon a proposal to elect PricewaterhouseCoopers as the
Company's independent auditors for the 2001 fiscal year;
(3) to approve the 2001 Omnibus Incentive Compensation Plan;
(4) to consider two shareholder proposals; and
(5) to transact such other business, if any, as may properly come before
the meeting.
The Board of Directors has set the close of business on March 9, 2001 as
the record date to determine the shareholders entitled to notice of and to vote
at the meeting.
YOUR VOTE IS IMPORTANT. PLEASE FOLLOW THE INSTRUCTIONS ON THE ENCLOSED
PROXY CARD TO VOTE USING THE INTERNET OR BY TELEPHONE, OR VOTE BY SIGNING AND
DATING THE PROXY CARD AND RETURNING IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE,
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY AND
VOTE IN PERSON IF YOU DECIDE TO ATTEND THE MEETING.
By Action of the Board of Directors
/s/ THOMAS L. CHAPPLE
Thomas L. Chapple
Secretary
Arlington, Virginia
March 23, 2001
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[LOGO]
PROXY STATEMENT
2001 ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Gannett for the Annual Meeting of
Shareholders to be held on May 8, 2001.
The Board set March 9, 2001 as the record date. Shareholders of record on
that date may attend and vote at the Annual Meeting or have their votes by proxy
counted if they do not attend in person. On that date, there were 264,543,040
shares of Common Stock outstanding and entitled to vote. Each share is entitled
to one vote. The presence, in person or by proxy, of the holders of a majority
of the shares of Common Stock outstanding on March 9, 2001 will constitute a
quorum to conduct business. Proxies received but marked as abstentions will be
included in the calculation of the number of shares considered to be present at
the meeting. Proxies held in a broker's account that are not voted by the broker
or other nominee ("broker non-votes") on all matters will be treated as shares
present for purposes of determining the presence of a quorum, but will not be
treated as shares present and entitled to vote at the Annual Meeting with
respect to those matters for which no vote was cast.
Admission to the meeting is by ticket only. We will provide each
shareholder with one admission ticket. Either you or your proxy are allowed to
use your ticket. If you are a shareholder of record and plan to attend the
meeting, please check the appropriate box on your proxy card and return it in
the enclosed return envelope. If you vote using the Internet or by telephone,
you can request a ticket when you vote. If you hold shares through an
intermediary, such as a bank or broker, and you plan to attend the meeting, you
will need to send a written request for a ticket, along with proof of share
ownership, such as a bank or brokerage firm account statement or a letter from
the broker, trustee, bank or nominee holding your shares, confirming ownership,
to: Secretary, Gannett Co., Inc., 1100 Wilson Boulevard, Arlington, VA 22234.
Requests for admission tickets will be processed in the order in which they are
received and must be received by no later than May 1, 2001. If you decide not to
attend the meeting, please return your ticket to the Secretary, Gannett Co.,
Inc. at the above address.
To assist the Company in reducing costs related to the Annual Meeting, we
ask all shareholders who vote via the Internet to consent to electronic delivery
of mailings related to future annual shareholder meetings. Companies may make
their proxy statements and annual reports available online and eliminate mailing
hard copies of these documents to those shareholders who consent in advance to
electronic distribution. If you hold shares in your own name and you are voting
via the Internet, you can consent online when you vote. If you hold shares
through an intermediary such as a bank or broker, please refer to the
information provided by that entity for instructions on how to consent to
electronic distribution.
You may grant a proxy either by signing a proxy card, by telephone or using
the Internet. Shares represented by proxies will be voted as directed by the
shareholder. Unless you direct otherwise, your shares will be voted for the
Board's nominees for director, for the election of auditors, for the
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approval of the 2001 Omnibus Incentive Compensation Plan and against the
shareholder proposals. If you deliver a proxy by mail, by telephone or via the
Internet, you have the right to revoke it in writing (by another proxy bearing a
later date), by phone (by another call at a later time), via the Internet (by
voting online at a later time), by attending the meeting and voting in person,
or by notifying the Company before the meeting that you want to revoke it. Votes
submitted via the Internet or by telephone must be cast by 10:00 a.m., Eastern
time on May 7, 2001.
If you participate in the Company's Dividend Reinvestment or 401(k) Plans,
your Gannett stock in those plans can be voted on the proxy card accompanying
this Proxy Statement, by telephone or via the Internet. If no instructions are
given by you, shares held in the Dividend Reinvestment Plan will not be voted.
All shares in the 401(k) Plan for which no instructions are received will be
voted by the trustee of the 401(k) Plan in the same proportion as shares for
which the trustee receives instructions.
This Proxy Statement and the enclosed proxy card are being furnished to
shareholders on or about March 23, 2001.
PROPOSAL 1--ELECTION OF DIRECTORS
YOUR BOARD
The Board of Directors is composed of 7 directors. The By-laws of the
Company provide that each director must own at least one thousand shares of
Gannett stock, and each director meets or exceeds this requirement. The Board is
divided into three classes, as equal in number as possible. At each Annual
Meeting of Shareholders, one class of directors is elected for a three-year
term.
The Board of Directors conducts its business through meetings of the Board
and its committees. The Management Continuity Committee, the Executive
Compensation Committee, the Audit Committee and the Public Responsibility and
Personnel Practices Committee are four of those committees.
The Management Continuity Committee develops long-range management
succession plans and recommends to the Board candidates for nomination as
directors and for election as officers. In making recommendations for directors
for the 2002 Annual Meeting, the Committee will consider any written suggestions
of shareholders received by the Secretary of the Company by February 6, 2002.
The Committee members are Meredith A. Brokaw, Chair, James A. Johnson and
Douglas H. McCorkindale. This Committee met five times during 2000.
The Executive Compensation Committee makes recommendations concerning the
compensation and benefits of elected officers and senior executives and
administers the Company's executive incentive plans. The Committee members are
James A. Johnson, Chair, Samuel J. Palmisano and Karen Hastie Williams. None of
the members of the Committee is an employee of the Company. This Committee met
five times during 2000.
The Audit Committee reviews the Company's auditing practices and procedures
and recommends independent auditors to be elected by the shareholders. The Audit
Committee members are Karen Hastie Williams, Chair, H. Jesse Arnelle and Samuel
J. Palmisano. None of the members of the Committee is an employee of the
Company. This Committee met three times during 2000.
The Public Responsibility and Personnel Practices Committee monitors the
Company's performance in meeting its obligations of fairness in internal and
external matters and under its equal employment opportunity programs. The
Committee's members are H. Jesse Arnelle, Chair, Meredith A. Brokaw and Douglas
H. McCorkindale. This Committee met twice during 2000.
The Board of Directors held nine meetings during 2000, and all of the
directors attended at least 75% of the total meetings of the Board and any
committee on which they served.
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NOMINEES
The Board intends to nominate James A. Johnson, Douglas H. McCorkindale and
Stephen P. Munn for election this year. All three nominees are currently
directors. If they are elected, their term will run until the Annual Meeting in
2004 or until their successors are elected. The Company's By-laws provide that a
director must retire on or before the annual meeting following his or her 70th
birthday or, in the case of directors who are also employees, his or her 65th
birthday. Retiring directors include John Curley who retired as Chairman of the
Board on January 31, 2001, Drew Lewis who retired in December, 2000 and Stuart
T.K. Ho who retired in January, 2001.
The Board believes that all the nominees will be available and able to
serve as directors. If any nominee is unable to serve, the Board may do one of
three things. The Board may recommend a substitute nominee, reduce the number of
directors to eliminate the vacancy, or fill the vacancy later. The shares
represented by all valid proxies may be voted for the election of a substitute
if one is nominated.
The three nominees receiving the highest number of votes will be elected.
If a shareholder, present in person or by proxy, withholds a vote from one or
more directors, the shareholder's shares will not be counted in determining the
votes for those directors. If a shareholder holds shares in a broker's account
and has given specific voting instructions, the shares will be voted as the
shareholder directs. If no instructions are given, under New York Stock Exchange
rules the broker may decide how to vote on the Board nominees.
The principal occupations and business experience of the management
nominees and of the continuing directors are described below.
THE FOLLOWING HAVE BEEN NOMINATED FOR ELECTION AT THE 2001 ANNUAL MEETING:
JAMES A. JOHNSON
Mr. Johnson, 57, is Chairman and Chief Executive Officer of Johnson Capital
Partners, a private investment company. He served as Chairman of the Board of
Directors of Fannie Mae in 1999 and was Chairman and Chief Executive Officer of
Fannie Mae from February 1991 through 1998. He is a director of Cummins Engine
Company, Target Corporation, The Goldman Sachs Group, Inc., Temple-Inland
Corporation, United Health Group and KB Home Corporation. He also is Chairman of
the John F. Kennedy Center for the Performing Arts and Chairman of the Board of
Trustees of The Brookings Institution. He has been a director since December,
2000.
DOUGLAS H. MCCORKINDALE
Mr. McCorkindale, 61, is Chairman, President and CEO of Gannett. He was
Vice Chairman, President and CEO from June 2000 to January 2001 and Vice
Chairman and President from 1997 to June 2000. He was Vice Chairman and Chief
Financial and Administrative Officer from 1985 to 1997. He has served the
Company in various other executive capacities since 1971. He is a director of
Continental Airlines, Inc. and a director or trustee of a number of investment
companies in the family of Prudential Mutual Funds. He has been a director since
1977.
STEPHEN P. MUNN
Mr. Munn, 58, is Chairman of Carlisle Companies, Inc. He was Chairman and
Chief Executive Officer of Carlisle from 1988 to February 2001. He is a director
or trustee of a number of investment companies in the family of Prudential
Mutual Funds. He became a director in March, 2001.
THE FOLLOWING DIRECTORS ARE SERVING ON THE BOARD FOR A TERM THAT ENDS AT
THE 2002 ANNUAL MEETING:
MEREDITH A. BROKAW
Mrs. Brokaw, 60, is the founder of Penny Whistle Toys, Inc., in New York
City, and is the author of children's books. She is a director of Conservation
International, Washington, D.C. She has been a director since 1983.
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SAMUEL J. PALMISANO
Mr. Palmisano, 49, is President and Chief Operating Officer of IBM and
serves on IBM's board of directors and is a trustee of The Johns Hopkins
University. He was Senior Vice President and Group Executive for IBM Enterprise
Systems Group from 1998 to August 2000. He held various other senior executive
positions since 1994, with responsibility for IBM's global services. He has been
a director since 1998.
THE FOLLOWING DIRECTORS ARE SERVING ON THE BOARD FOR A TERM THAT ENDS AT
THE 2003 ANNUAL MEETING:
H. JESSE ARNELLE
Mr. Arnelle, 67, is of counsel to Womble, Carlyle, Sandridge & Rice,
Winston-Salem, North Carolina. He was senior partner at the law firm of Arnelle,
Hastie, McGee, Willis & Greene from 1985 to 1995, and was of counsel to that
firm from 1995 to 1997. He is the Immediate Past Chairman of the Board of
Trustees of Pennsylvania State University and is a director of FPL Group, Inc.,
Textron Corporation, Eastman Chemical Co., Armstrong World Industries, and Waste
Management, Inc. He has been a director since 1999.
KAREN HASTIE WILLIAMS
Ms. Williams, 56, is a Partner at the law firm of Crowell & Moring,
Washington, D.C. Ms. Williams is a director of The Chubb Corporation,
Continential Airlines, Inc., and Washington Gas Light Company, and a trustee of
the Fannie Mae Foundation. She has been a director since 1997.
SECURITIES OWNED BY GANNETT MANAGEMENT
The following table shows the number of shares of Gannett common stock
beneficially owned by all directors and by the five most highly compensated
executive officers. The table is correct as of March 9, 2001:
NAME OF OFFICER OR DIRECTOR TITLE SHARES OWNED
--------------------------- ----- ------------
John J. Curley.............................. Former Chairman and CEO 1,781,460
Douglas H. McCorkindale..................... Chairman, President and CEO 1,538,720
Gary L. Watson.............................. President/Newspaper Division 387,634
Cecil L. Walker............................. President/Broadcasting Division 136,060
Larry F. Miller............................. Executive Vice President and CFO 89,121
H. Jesse Arnelle............................ Director 1,459
Meredith A. Brokaw.......................... Director 2,416
James A. Johnson............................ Director 1,282
Stephen P. Munn............................. Director 1,000
Samuel J. Palmisano......................... Director 3,359
Karen H. Williams........................... Director 1,000
All directors and executive officers as
a group (36 persons including those
named above).............................. 5,819,416
Each person listed owns less than 1% of Gannett's outstanding shares. All
directors and executive officers as a group beneficially owned 5,819,416 shares
on March 9, 2001. This represents 2% of the outstanding shares. The following
shares are included because they may be acquired under stock options by May 8,
2001: Mr. Curley -- 1,338,750; Mr. McCorkindale -- 1,091,250; Mr.
Watson -- 329,110; Mr. Walker -- 89,265; Mr. Miller -- 74,795; all executive
officers as a group -- 4,375,360. For all shares owned, each director or
executive officer possesses sole voting power and sole investment power.
Some shares have not been listed above because the director or executive
officer has disclaimed beneficial ownership. Ownership of the following shares
is disclaimed because they are
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held in the names of family members or in trust: Mr. McCorkindale -- 874; Mr.
Watson -- 24; Mr. Miller -- 1,834; all directors and executive officers as a
group -- 41,841.
Also included among the shares listed above are the following shares which
are held for individual deferred compensation accounts by The Northern Trust
Company, as Trustee of the Gannett 1987 Deferred Compensation Plan: Mr.
McCorkindale -- 84,850; Mr. Watson -- 18,976; Mr. Walker -- 18,190; Mr.
Miller -- 13,285; Mr. Arnelle -- 437; Mrs. Brokaw -- 10,416; Mr. Johnson -- 282;
Mr. Palmisano -- 2,359; all directors and executive officers as a
group -- 286,867.
The shares reported above do not include 1,242,254 shares owned on March 9,
2001 by the Gannett Retirement Plan Trust. The following officers of the Company
serve on the Benefit Plans Committee, which has the power to direct the voting
of those shares: Douglas H. McCorkindale, Richard L. Clapp (Senior Vice
President, Human Resources), Larry F. Miller and Gracia C. Martore (Treasurer
and Vice President/Investor Relations).
COMPENSATION OF DIRECTORS
The Company pays its directors an annual fee and meeting fees. The annual
fee is $45,000. Each director receives $1,500 for each Board meeting attended.
Each committee chair also receives an annual fee of $5,000 and each committee
member, including the chair, receives $1,000 for each committee meeting
attended. Directors who are employees of the Company receive no director fees.
Directors may elect to defer their fees under the 1987 Deferred Compensation
Plan, which provides for eight investment options, including mutual funds and a
Gannett Common Stock fund. If shareholders approve the 2001 Omnibus Incentive
Compensation Plan described below, then the non-employee directors of the
Company will receive an option to purchase 3,500 shares of Gannett common stock
for the 2001 fiscal year. Other awards may be granted to directors in the
future.
In 1987, the Company established a Retirement Plan for Directors in which
non-employee members of the Board of Directors could participate. In 1996, the
Board terminated this Plan as to any new directors. Only one current director,
Meredith Brokaw, participates in the Plan, and her annual benefit under the Plan
is equal to 100% of her highest annual compensation during the ten years of
service preceding her retirement from the Board. The annual benefit will be paid
each quarter for 10 years except for lump sum payments in the event of death.
COMPENSATION OF GANNETT MANAGEMENT
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the "Committee") is responsible for
compensation and stock ownership programs for executive officers. The Committee
is composed entirely of independent outside directors. In 2000, the Committee
consisted of Stuart T.K. Ho, Chair, Samuel J. Palmisano and Karen Hastie
Williams. In January, 2001, Mr. Ho retired from the Board of Directors, and
James A. Johnson joined the Committee as its Chair.
In addition to its regular activities, the Committee accomplished several
objectives in 2000. These included (i) establishing the appropriate compensation
level for the new chief executive officer, (ii) completing a study of
competitive compensation levels for the Company's senior executives, (iii)
increasing the stock ownership guidelines for Gannett's senior executives, (iv)
initiating the 2001 Omnibus Incentive Compensation Plan (see page 18), and (v)
granting stock options where stock incentive rights had previously been used.
Each of these will be discussed in more detail below.
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THE ELEMENTS OF COMPENSATION AT GANNETT
The compensation program for executive officers is composed of three
elements: salaries, annual bonuses under the Company's 1968 Executive Incentive
Bonus Plan, and long-term stock awards under the 1978 Executive Long-Term
Incentive Plan (the "1978 Plan"). As noted beginning on page 18 of this proxy
statement, if shareholders approve the 2001 Omnibus Incentive Compensation Plan,
future bonuses and stock grants will be made under that plan and no further
grants will be made under the 1968 Executive Incentive Bonus Plan or the 1978
Plan.
During 2000 the Committee, with the assistance of Hewitt Associates, an
independent compensation consultant, conducted a competitive compensation study
regarding Gannett's more senior executives, using 1999 as the comparison year.
The competitive group of companies used for the comparison were companies with
revenues and shareholder return over the past five years similar to Gannett's,
taking into consideration Gannett's increase in revenues during the past 24
months due to its internal growth and substantial acquisitions. The Committee
concluded that base salaries for the relevant Gannett executive group are lower
than the size-adjusted median for the competitive group of companies and that,
while annual bonuses are competitive, the latter to some extent reflects that
1999 was a very good year for Gannett, which resulted in strong bonuses. The
Committee concluded that, while the competitiveness of total cash compensation
among the relevant executive group is mixed, when the Black-Scholes value of the
1999 stock awards is taken into account, total compensation for the group (cash
plus long-term stock grants) is lower than the size-adjusted median for the
competitive group of companies. The Hewitt study indicated that stock grants at
other companies generally have increased significantly in the past three years,
even in traditional, non-dot.com, companies. Reviewing this study and other
relevant considerations, the Committee made various salary adjustments to begin
bringing total compensation for the more undercompensated executives into line.
The following Compensation Policy guides the Committee in its compensation
decisions:
COMPENSATION POLICY
The Board of Directors of Gannett believes that compensation of employees
should be fair to both employees and shareholders, externally competitive,
and designed to align very closely the interests of employees with those of
the shareholders.
The Gannett executive compensation program is designed to attract,
motivate, reward, and retain superior management talent.
The Executive Compensation Committee places heavy emphasis on pay for
performance. We believe substantial portions of total compensation should
be at risk. Likewise, outstanding performance should lead to substantial
increases in compensation.
COMPENSATION DECISIONS IN 2000
In making its compensation decisions for 2000, the Committee considered the
Company's performance in the following areas: earnings per share, operating
income as a percentage of sales, return on assets, return on equity, operating
cash flow, stock price, and market value. In addition, the Committee considered
management's recommendations for individual compensation awards. The Committee
also compared the Company's performance to that of its competitors and noted the
Company's record revenues, profits and earnings per share. Companies with
comparable revenues or profits in other industries also were surveyed to ensure
that executive compensation was competitive in the overall marketplace. The
Committee believes that the Company should compensate its executives better than
its competitors in order to continue to attract and retain the most talented
people. (References to "competitors" are to the peer group companies named on
page 11.)
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While the Committee considered these individual and Company performance
factors in making individual compensation decisions, the Committee applied its
own subjective good judgment in making final determinations.
In 2000, the Committee continued to emphasize key executives' ownership of
Gannett common stock as a component of their compensation. Stock compensation
includes (i) minimum stock ownership guidelines for all executive officers, (ii)
long-term awards under the 1978 Plan, (iii) payment of 25% of an executive's
bonus in Gannett stock, and (iv) stock option grants in lieu of stock incentive
rights. In July, 2000 the Committee increased the executive stock ownership
guidelines for the five highest-paid officers from three to five times their
salary range midpoint and increased the guideline for other key executives from
one to two times their salary range midpoint. Although these executives are
expected to comply with the revised guidelines by the end of 2003, most of them
presently exceed the guidelines.
Historically, the loss of deductibility under Internal Revenue Code Section
162(m) of certain portions of executive compensation has not been a
determinative factor in setting compensation levels. Under the proposed 2001
Omnibus Incentive Compensation Plan, however, the Company intends to structure
bonuses for the five highest-paid officers so as to comply with the Section
162(m) deductibility requirements.
BASE SALARIES: TO ATTRACT AND RETAIN MANAGEMENT TALENT
Base salaries are designed to help attract and retain management talent. To
ensure that salary ranges are competitive in the overall marketplace, salary
ranges are periodically compared to the salaries paid for comparable positions
by the Company's competitors, with other companies of comparable size in the
media industry and with companies with comparable revenues or profits in other
industries. The Company is significantly larger than its competitors and in 2000
had record revenues, profits and earnings per share. These factors and general
compensation practices in the media industry have led the Company to attempt to
place its management salaries above the median for the comparative companies.
In establishing salaries for executive officers, the Committee also
considered the Company's performance, individual performance and experience, and
the chief executive officer's recommendations. The most important factor,
however, was the Committee members' judgment about the appropriate level of
salary to retain, motivate and reward individual executives. The salaries for
the five highest paid officers of the Company, including John J. Curley, the
former chief executive officer, and Douglas H. McCorkindale, the new chief
executive officer, are as follows:
NAME 1999 SALARY 2000 SALARY
---- ----------- -----------
John J. Curley.............................. $1,000,000 $1,100,000
Douglas H. McCorkindale..................... $ 900,000 $1,058,000
Gary L. Watson.............................. $ 560,000 $ 585,000
Cecil L. Walker............................. $ 475,000 $ 500,000
Larry F. Miller............................. $ 450,000 $ 495,000
EXECUTIVE INCENTIVE BONUSES: TO MOTIVATE YEAR-TO-YEAR
Annual bonuses motivate executive officers and reward them for good
performance. The goal of the 1968 Executive Incentive Bonus Plan has been to
reward higher performing operating units and individuals with a greater
percentage of the total available bonus pool. Bonus awards are volatile and are
principally determined by individual performance. The chief executive officer's
performance bonus is based solely on Company performance.
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The bonuses for 2000 were determined on the basis of individual performance
in the areas of profit, product and people and, depending on the executive's
responsibilities, the performance of the executive's business unit and/or the
Company's overall performance. The Committee's review of the bonuses was based
on its knowledge of the Company, its contact with the executives throughout the
year and a review of performance. No relative ranking of these various factors
was applied.
To further the Committee's goal of increasing the stock ownership by key
executives, 25% of the bonuses for 2000 for the 33 senior executives were paid
to them in the form of Gannett common stock rather than cash. This continues a
practice established in 1994. The pre-tax value of the bonuses awarded to the
five highest paid officers of the Company are as follows:
1999 BONUS 2000 BONUS
----------------------- -----------------------
NAME CASH GCI SHARES CASH GCI SHARES
---- ---------- ---------- ---------- ----------
John J. Curley............... $1,500,000 7,952 $2,000,000 --
Douglas H. McCorkindale...... $1,293,750 6,858 $1,500,000 7,407
Gary L. Watson............... $ 412,500 2,186 $ 468,750 2,315
Cecil L. Walker.............. $ 356,250 1,888 $ 397,500 1,963
Larry F. Miller.............. $ 303,750 1,610 $ 375,000 1,852
LONG-TERM STOCK GRANTS: TO PROMOTE LONG-TERM GROWTH
Long-term stock awards are based on the performance of Gannett common stock
and are designed to align the executives' interests with those of the Company's
shareholders. Until last year, the Committee used two kinds of long-term stock
awards: non-qualified stock options and stock incentive rights ("SIRs"). A
non-qualified stock option is the right to purchase shares of common stock of
the Company within a fixed period of time (eight years for grants through 1995
and ten years thereafter) at the fair market value on the date of grant. A stock
incentive right is the right to receive shares of common stock of the Company
conditioned on continued employment throughout a specified period (typically
four years). The Committee decided not to award SIRs in 2000 and instead awarded
stock options to those executives who previously received SIRs. This change is
intended to place heavier emphasis on long-term stock price growth.
The Committee decides whether to grant individual long-term stock awards
and determines the amount of the awards. Long-term stock awards are based on the
grade level of the executive, after an annual examination of the competitive
marketplace. As is the case with annual bonuses, the Committee relies in large
part on the recommendations of senior management as to the appropriate level of
individual awards to lower level executives. Awards are based on past and
expected performance as subjectively evaluated by management in making
recommendations and by the Committee in approving them. Executives who can more
directly influence the overall performance of the Company are the principal
recipients of long-term awards.
The following chart shows the number of stock options awarded to the five
highest paid officers of the Company. Mr. McCorkindale was promoted to chief
executive officer of the Company on June 1, 2000.
NAME 1999 OPTIONS 2000 OPTIONS
---- ------------ ------------
John J. Curley..................................... 275,000 -0-
Douglas H. McCorkindale............................ 225,000 346,000
Gary L. Watson..................................... 84,000 110,000
Cecil L. Walker.................................... 68,000 91,000
Larry F. Miller.................................... 55,000 81,000
8
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GANNETT 2001 OMNIBUS INCENTIVE PLAN
The Committee reviewed and approved the new 2001 Omnibus Incentive
Compensation Plan being submitted to shareholders for approval. The Committee
believes that the new plan is consistent with the strategy and overall
objectives of Gannett's executive compensation program, and that it will enable
Gannett to attract and retain a highly qualified management team.
CHIEF EXECUTIVE OFFICER COMPENSATION
As noted above, on June 1, 2000, Mr. Curley relinquished the chief
executive officer position and Mr. McCorkindale was elected Chief Executive
Officer, as well as Vice Chairman and President. Mr. Curley continued as the
Company's Chairman until January 31, 2001, and Mr. McCorkindale became Chairman
on February 1, 2001.
In determining the compensation of Mr. Curley and Mr. McCorkindale for
2000, the Committee reviewed the performance of the Company and its earnings per
share, return on assets, return on equity, operating cash flow, operating income
as a percent of sales, stock price, and market value. For the 2000 fiscal year,
diluted earnings per share from continuing operations were $3.63, an increase of
15% over 1999 results of $3.15 (which excludes a net non-operating gain of $.11
principally from the Company's exchange of television stations in that year).
Operating income from continuing operations as a percent of sales was 30.7% in
1999 and 29.2% in 2000. In addition, the Company completed substantial
acquisitions during 2000 which the Company believes will position it for future
growth. Despite achieving record earnings and revenues for the ninth consecutive
year, the Company's stock price, excluding dividends, decreased 22.7%, from
$81.56 to $63.06. The stock price of the Company's peer group, consisting of the
S&P Publishing/Newspaper Index and the S&P Publishing Index, excluding
dividends, decreased 15.0%. Cumulatively, over the last five years, excluding
dividends, the Company's stock price increased 105.5%, and the peer group
increased 110.7%. Each of these factors was subjectively evaluated by the
Committee members when determining chief executive officer compensation without
giving particular weight to any one or more factors. Despite the stock price
decrease in 2000 due to the overall market downturn, the Company achieved record
earnings and revenue levels. The Committee considered these and other factors
when determining chief executive officer incentive compensation for 2000.
Mr. McCorkindale's compensation, and that of Mr. Curley when he served as
the Company's Chief Executive Officer, was above the median for the chief
executive officers surveyed. The Committee determined that the level of Mr.
Curley's and Mr. McCorkindale's compensation was appropriate given their
performance, the Company's size and performance, and the industries in which it
operates. As a general matter, media industry companies, particularly
broadcasting companies, tend to compensate executives at a higher level than
industrial or commercial enterprises. In particular, the Committee noted that
the Company's revenues are significantly larger than that of its competitors
listed on page 11 and that 2000 was another year of record revenues and earnings
for the Company. Mr. Curley's and Mr. McCorkindale's bonus and salary reflect
these results.
Mr. Curley received no stock option grants in 2000. In recognition of Mr.
McCorkindale's superior performance, his promotion to Chief Executive Officer
and consistent with the Committee's goal of increasing the ownership of Gannett
Common Stock by key officers as discussed above, the Committee awarded Mr.
McCorkindale 346,000 stock options in 2000. It is the Committee's view that the
award of these stock options is an effective way of continuing to tie Mr.
McCorkindale's financial interests to those of the Company's shareholders, since
the value of these stock options is directly linked to increases in shareholder
value.
As discussed on page 14, the Committee negotiated a renewal of Mr.
McCorkindale's employment contract in 2000, and the renewed contract became
effective on January 1, 2001. During the term of his new contract, Mr.
McCorkindale will receive an annual salary of $1.6 million or such
9
13
greater amount as the Board of Directors determines and an annual bonus at the
discretion of the Board. Gannett has changed dramatically during the past 24
months -- a 21% increase in revenues, an increase from 75 daily and 256
non-daily newspapers to 114 daily and 618 non-daily newspapers, a 25% increase
in daily newspaper circulation from 6.7 million to 8.4 million, and the
completion of $6.3 billion of major strategic acquisitions. All of these changes
combine to present Gannett with significant competitive challenges that will
require its chief executive officer to develop and implement new and creative
strategies to continue moving the Company forward. In recognition of Mr.
McCorkindale's promotion to Chairman, President and Chief Executive Officer and
the new challenges facing the Company, the Committee decided it was appropriate
to increase Mr. McCorkindale's compensation so that it is commensurate with
these challenges.
Executive Compensation Committee
James A. Johnson, Chair
Samuel J. Palmisano
Karen Hastie Williams
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COMPARISON OF SHAREHOLDER RETURN
The following graph compares the performance of the Company's Common Stock
during the period December 31, 1995 to December 31, 2000 with the S&P 500 Index
and a "peer group" combining the companies on the S&P Publishing/Newspaper Index
(Dow Jones & Co., Inc., Gannett Co., Inc., Knight-Ridder, Inc., The New York
Times Company and Tribune Company) and on the S&P Publishing Index (The
McGraw-Hill Companies, Inc. and Meredith Corporation).
The S&P 500 Index includes 500 U.S. companies in the industrial,
transportation, utilities and financial sectors and is weighted by market
capitalization. The S&P Publishing/Newspaper Index and the S&P Publishing Index
also are weighted by market capitalization.
The graph depicts the results of investing $100 in the Company's Common
Stock, the S&P 500 Index, and the peer group at closing prices on December 31,
1995. It assumes that dividends were reinvested quarterly with respect to the
Company's Common Stock, daily with respect to the S&P 500 Index and monthly with
respect to the S&P Publishing/Newspaper Index and the S&P Publishing Index.
[line graph]
GANNETT CO., INC. S&P 500 INDEX PEER GROUP
----------------- ------------- ----------
Dec 1995 100.00 100.00 100.00
Dec 1996 124.46 122.96 117.85
Dec 1997 208.48 163.98 186.14
Dec 1998 220.20 210.85 201.64
Dec 1999 281.69 255.21 265.94
Dec 2000 220.89 231.98 229.23
11
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SUMMARY COMPENSATION TABLE
The following table summarizes compensation paid to the CEO and the four
other most highly compensated executive officers of the Company for services
rendered to the Company over the past three fiscal years.
LONG-
TERM
COMPEN-
SATION
ANNUAL COMPENSATION AWARDS(3)
---------------------------------------- ----------
OTHER
ANNUAL SECURITIES ALL OTHER
COMPEN- UNDERLYING COMPEN-
NAME AND SALARY BONUS(1) SATION(2) OPTIONS SATION(4)
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
------------------ ---- --------- --------- --------- ---------- ---------
John J. Curley................................ 2000 1,100,000 2,000,000 4,800 0 85,300
(Former Chairman and CEO) 1999 1,000,000 2,000,000 4,800 275,000 97,928
1998 900,000 1,500,000 6,866 225,000 92,408
Douglas H. McCorkindale....................... 2000 1,058,000 2,000,000 7,731 346,000 78,268
(Chairman, President and CEO) 1999 900,000 1,725,000 8,608 225,000 70,974
1998 800,000 1,425,000 12,883 175,000 60,768
Gary L. Watson................................ 2000 585,000 625,000 4,800 110,000 39,900
(President/Newspaper Division) 1999 560,000 550,000 4,800 84,000 36,709
1998 525,000 475,000 8,557 82,500 34,628
Cecil L. Walker............................... 2000 500,000 530,000 4,800 91,000 44,500
(President/Broadcasting Division) 1999 475,000 475,000 5,187 68,000 41,245
1998 440,000 420,000 4,800 49,500 35,973
Larry F. Miller............................... 2000 495,000 500,000 4,800 81,000 33,300
(Executive Vice President and CFO) 1999 450,000 405,000 5,826 55,000 29,482
1998 400,000 340,000 4,800 49,500 26,307
- ---------------
(1) Bonus awards may be in the form of cash or shares of Gannett Common Stock.
Bonuses to executive officers were paid 25% in Gannett Common Stock and 75%
in cash, both of which could be deferred.
(2) This column includes amounts paid by the Company under the Medical
Reimbursement Plan and amounts paid in cash to reimburse the five named
officers for the tax impact of certain perquisites.
(3) Under the Company's 1978 Executive Long-Term Incentive Plan, stock awards in
the form of stock options, performance bonus units, and option surrender
rights may be granted to key members of management who are in a position to
make a substantial contribution to the long-term success of the Company.
(4) This column includes the annual premiums paid by the Company on life
insurance policies which are individually owned by the five named officers,
as follows: Mr. Curley--$80,500; Mr. McCorkindale--$73,468; Mr.
Watson--$35,100; Mr. Walker--$39,700; and Mr. Miller--$28,500. The column
also includes a matching contribution of $4,800 in Gannett Common Stock
received by each of the five named officers under the Company's 401(k) plan.
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OPTION GRANT TABLE
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO OR BASE
GRANT GRANTED EMPLOYEES PRICE EXPIRATION GRANT DATE
NAME DATE (#) IN FISCAL YEAR ($/SH) DATE PRESENT VALUE ($)
---- ----- ---------- -------------- -------- ---------- -----------------
John J. Curley............... -- -- 0.00% -- -- --
Douglas H. McCorkindale...... 05/02/00 50,000 0.89% $62.56 12/07/09 $1,252,000
07/24/00 131,000 2.32% $56.25 07/24/10 $2,701,220
12/05/00 165,000 2.92% $54.31 12/05/10 $3,169,650
Gary L. Watson............... 07/24/00 47,000 0.83% $56.25 07/24/10 $ 969,140
12/05/00 63,000 1.12% $54.31 12/05/10 $1,210,230
Cecil L. Walker.............. 07/24/00 39,000 0.69% $56.25 07/24/10 $ 804,180
12/05/00 52,000 0.92% $54.31 12/05/10 $ 998,920
Larry F. Miller.............. 07/24/00 29,000 0.51% $56.25 07/24/10 $ 597,980
12/05/00 52,000 0.92% $54.31 12/05/10 $ 998,920
This table shows stock options awarded to the five named officers in 2000.
The stock options granted on July 24, 2000 and December 5, 2000 are exercisable
with respect to 25% of the covered shares on each of the first four
anniversaries of the grant date. The stock option granted on May 2, 2000 is
exercisable with respect to 25% of the covered shares on each of December 7,
2000, December 7, 2001, December 7, 2002 and December 7, 2003. Executive
officers may transfer stock options to family members. For each stock option
granted last year, an option surrender right ("OSR") was granted in tandem. In
the event of a change in control of the Company, the holder of an OSR has the
right to receive the difference between the exercise price of the accompanying
stock option and the fair market value of the underlying stock at that time.
Upon the exercise of an OSR or a stock option, the accompanying stock option or
OSR is automatically cancelled.
"Grant Date Present Value" has been calculated using the Black-Scholes
model of option valuation. The assumptions used in calculating these values for
options granted on May 2, 2000 are: a dividend yield of 1.38%, expected
volatility of 22.31%, a risk-free interest rate of 6.34% and a 7-year expected
life. The assumptions used in calculating these values for options granted on
July 24, 2000 are: a dividend yield of 1.26%, expected volatility of 26.56%, a
risk-free interest rate of 6.16%, and a 7-year expected life; and the
assumptions used in calculating these values for options granted on December 5,
2000 are: a dividend yield of 1.2%, expected volatility of 27.25%, a risk-free
interest rate of 5.41% and a 7-year expected life. The calculated value of the
options on the grant date was determined to be $25.04 per option for options
granted on May 2, 2000, $20.62 per option for options granted on July 24, 2000
and $19.21 per option for options granted on December 5, 2000.
On December 31, 2000, 11,721,088 shares of Gannett common stock were
available for grants under the 1978 Executive Long-Term Incentive Plan. At that
time, there were 17,181,923 options outstanding with a weighted average exercise
price of $54.19. The expiration dates range from December 14, 2001 to December
5, 2010.
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STOCK OPTION TABLE
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END AT FY-END
SHARES (#) ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
John J. Curley....... 200,000 $5,814,500 1,338,750 361,250 $34,096,950 $ 151,300
Douglas H.
McCorkindale....... 150,000 $4,284,375 1,091,250 624,750 $27,448,569 $2,479,116
Gary L. Watson....... 0 $ 0 329,110 228,150 $ 7,227,369 $ 920,804
Cecil L. Walker...... 5,000 $ 192,500 133,065 175,175 $ 1,865,766 $ 750,583
Larry F. Miller...... 0 $ 0 74,795 156,500 $ 301,675 $ 686,310
EMPLOYMENT CONTRACTS, RETIREMENT AND CHANGE IN CONTROL ARRANGEMENTS
As noted above, John J. Curley relinquished the CEO position on June 1,
2000 and retired as Chairman of the Board effective January 31, 2001. In 2000
the Company had a contract with Mr. Curley that provided for his employment as
Chairman, President and Chief Executive Officer, or in such other senior
executive position as was mutually agreed upon, until January 1, 2004 (his
normal retirement date). During his employment pursuant to this contract, Mr.
Curley received an annual salary of $800,000 or such greater amount as the Board
of Directors determined and an annual bonus at the discretion of the Board of
Directors. If Mr. Curley's employment was terminated by the Company without
cause, he would have been entitled to receive his salary for the balance of the
term, subject to certain conditions. The contract also allowed him to terminate
his employment if there had been a change in control of the Company, as defined
in the contract. If within two years after a change in control he terminated his
employment or if his employment had been terminated by the Company without
cause, he would have been entitled to: (i) continued payment of his salary and
bonus; (ii) continued insurance and similar benefits; (iii) a supplemental
retirement benefit to make up the difference between his actual payments under
the Company's retirement plans and the payments that would have been made under
the plans if he had remained an employee through the contract term; (iv) to the
extent allowed under the 1978 Executive Long-Term Incentive Plan or other plans,
he also would have been entitled immediately to exercise in full, or receive the
value of, all stock options under those plans; and (v) a "gross-up" payment for
taxes payable by Mr. Curley as a result of all these benefits. The
post-employment benefits and payments described in this paragraph are in
addition to Mr. Curley's benefits under the Gannett Retirement Plan and Gannett
Supplemental Retirement Plan. During his retirement, Mr. Curley will continue to
represent Gannett on the Board of the Associated Press and in activities of the
Newspaper Association of America. Mr. Curley also will continue to receive
certain benefits he received as the chief executive officer of the Company,
including the use of a car, country club membership, life insurance coverage,
financial planning and legal services and other similar benefits.
In 2000, the Company and Mr. McCorkindale renegotiated his employment
contract, following his promotion to Chairman, President and Chief Executive
Officer. The new contract became effective on January 1, 2001, with a term that
continues until July 1, 2004 (his normal retirement date), and thereafter from
year to year until either the Board or Mr. McCorkindale terminates it on 90 days
notice before the end of any term. During his employment, he will receive an
annual salary of $1.6 million or such greater amount as the Board of Directors
determines and an annual bonus at the discretion of the Board of Directors. The
contract also provides for various executive perquisites prior to and following
his retirement, consistent with those received by prior chief executive officers
of the Company. Gannett may terminate the contract upon death, illness,
disability or for "good
14
18
cause", as defined in the contract. If the contract is terminated due to death,
illness or disability, Mr. McCorkindale or his estate will be entitled to
receive the present value of his projected salary and bonuses, plus the value of
all fringe benefits, for the balance of the term. Mr. McCorkindale has the right
to terminate his employment for "good reason" as defined in the contract. If Mr.
McCorkindale terminates the contract for good reason, or if Gannett terminates
his employment in any way that constitutes a breach of the contract, he will
receive a payment equal to the greater of (1) his total compensation in the year
preceding the year of termination (comprised of salary, bonuses and the value of
fringe benefits and deferred compensation) or (2) the present value of his
projected salary, bonuses and the deemed value of fringe benefits for the
balance of the term of the contract. Mr. McCorkindale also will have his
benefits under any non-qualified supplemental retirement plan calculated by
assuming his termination date were the normal expiration date of the contract
and by taking into account the full service and compensation that he would have
had if he had continued to work until the expiration of the contract. If Mr.
McCorkindale remains in Gannett's employ to or beyond July 1, 2004, then upon
the expiration of the contract Gannett has agreed to retain him as a consultant
for a period of five years. Mr. McCorkindale also would receive benefits under
the Gannett Retirement Plan and Gannett Supplemental Retirement Plan.
In the event of a change in control of Gannett, as defined in his contract,
Mr. McCorkindale will receive a lump sum cash payment equal to four times his
total annual compensation paid in the calendar year immediately preceding the
change in control. To the extent permitted under the applicable plan, all of his
incentive pay, stock options and any other contingent executive compensation
will be treated as if all targets were achieved on the date of the change in
control and as if all otherwise unvested benefits became fully vested on such
date. He also will receive continued credit toward retirement benefits as in the
case of wrongful termination of the contract. The tax laws deny an income tax
deduction to a company for payments that are contingent upon a change in control
if those payments have a present value of more than three times the employee's
average annual compensation for the last five years and are made under an
agreement like the employment agreements described in this Proxy Statement.
Further, if this rule disallows an income tax deduction for any portion of these
change in control payments to Mr. McCorkindale, the amount of the disallowance
will increase the portion of his annual compensation that would be nondeductible
under Section 162(m) of the Internal Revenue Code. Mr. McCorkindale also is
entitled to receive payment of an amount sufficient to make him whole for any
excise tax imposed on any severance payment under Section 4999 of the Internal
Revenue Code of 1986.
The Company has a Transitional Compensation Plan that provides certain
payments to key executives of the Company and its subsidiaries who are
terminated without cause within two years after a change in control. All
executive officers included in the Compensation Tables are covered by the
Transitional Compensation Plan. Participants who choose to leave their
employment within 30 days after the first anniversary of the change in control
also qualify for payments under the Transitional Compensation Plan. A
participant entitled to compensation will receive (i) all payments and benefits
earned through the date of termination; (ii) a severance payment of two to three
years' salary and bonus compensation, depending on length of service; (iii) life
insurance and medical benefits for the same period; and (iv) extra retirement
plan benefits as though employment had continued for such two-to-three-year
period. Participants also are entitled to receive payment of an amount
sufficient to make them whole for any excise tax imposed on the severance
payment under Section 4999 of the Internal Revenue Code. If there is a change in
control of the Company, as defined in the Transitional Compensation Plan,
options become exercisable in full and stock incentive rights become payable. In
addition, the 1978 Executive Long-Term Incentive Plan provides for option
surrender rights to be granted in tandem with stock options. In the event of a
change in control, option surrender rights permit the employee to receive a
payment equal to the spread between the option exercise price and the highest
price paid for Company shares in connection with the change in control. If
option surrender rights are exercised, the related options are canceled. To
avoid double payments upon a change in control, any compensation and benefits
received by
15
19
Mr. McCorkindale under the terms of the Transitional Compensation Plan will be
reduced (but not below zero) by any compensation and benefits received by him
under the terms of his employment contract.
PENSION PLANS
The Company's executive officers participate in the Gannett Retirement
Plan, a defined benefit pension plan which is qualified under Section 401 of the
Internal Revenue Code, and the Gannett Supplemental Retirement Plan, an
unfunded, nonqualified plan. The annual pension benefit under the plans, taken
together, is largely determined by the number of years of employment multiplied
by a percentage of the participant's final average earnings (during the
executive officer's five highest consecutive years). The Internal Revenue Code
places limitations on the amount of pension benefits that may be paid under
qualified plans. Any benefits payable above those limitations will be paid under
the Gannett Supplemental Retirement Plan.
The table below may be used to calculate the approximate annual benefits
payable at retirement at age 65 under these two retirement plans to the
individuals named in the above Summary Compensation Table in specified
compensation and years-of-service classifications (subject to a reduction equal
to 50% of the Social Security Primary Insurance Amount payable).
FINAL 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
AVERAGE OF CREDITED OF CREDITED OF CREDITED OF CREDITED OF CREDITED
EARNINGS SERVICE SERVICE SERVICE SERVICE SERVICE
-------- ----------- ----------- ----------- ----------- -----------
700,000 210,000 280,000 350,000 374,500 399,000
800,000 240,000 320,000 400,000 428,000 456,000
900,000 270,000 360,000 450,000 481,500 513,000
1,000,000 300,000 400,000 500,000 535,000 570,000
1,500,000 450,000 600,000 750,000 802,500 855,000
2,000,000 600,000 800,000 1,000,000 1,070,000 1,140,000
2,500,000 750,000 1,000,000 1,250,000 1,330,000 1,415,000
3,000,000 900,000 1,200,000 1,500,000 1,600,000 1,700,000
Final Average Earnings includes salaries and bonuses shown on page 12. The
credited years of service as of the end of the last fiscal year for the five
executive officers named in the Compensation Tables are as follows: Mr.
Curley--31, Mr. McCorkindale--29, Mr. Watson--31, Mr. Walker--28, and Mr.
Miller--39.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is responsible for reviewing
Gannett's auditing practices and procedures and recommends independent auditors
to be elected by the shareholders. The Audit Committee operates under a formal
written charter that has been adopted by the Board of Directors (see Appendix
A).
The Audit Committee members are Karen Hastie Williams, Chair, H. Jesse
Arnelle, and Samuel J. Palmisano, who are all independent outside directors.
Under New York Stock Exchange rules, a director who is an executive officer of
an organization that has a business relationship with the Company may serve on
the Audit Committee if the Board of Directors determines in its business
judgment that the relationship does not interfere with the director's exercise
of independent judgment. Mr. Palmisano, who serves on the Audit Committee, is
President and Chief Operating Officer of IBM. IBM is an information technology
vendor of Gannett. The Board of Directors has determined that Gannett's
relationship with IBM has not interfered and will not interfere with Mr.
Palmisano's exercise of independent judgment in his capacity as a member of the
Audit Committee because purchases of IBM products and services are pursuant to
arm's-length negotiations between Gannett and IBM and would not involve Mr.
Palmisano.
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20
The Audit Committee has received from PricewaterhouseCoopers ("PwC")
written disclosures regarding its independence as set forth in Independence
Standards Board Standard No. 1, including a detailed statement of the
relationships between PwC and the Company that might bear on PwC's independence,
and has discussed with PwC its independence. The Audit Committee has considered
whether the provision of information technology services or other non-audit
services by PwC is compatible with maintaining PwC's independence. PwC believes
that it is in full compliance with all of the independence standards established
under generally accepted auditing standards and the rules of the Securities and
Exchange Commission. The Audit Committee concurs. The Audit Committee also has
discussed with PwC the matters required to be discussed by Statements on
Auditing Standards No. 61 and No. 90, including the selection of and changes in
the Company's significant accounting policies, the basis for management's
accounting estimates, the auditors' conclusions regarding the reasonableness of
those estimates, and the disclosures included in the financial statements. The
Audit Committee has reviewed and discussed the Company's audited financial
statements with the internal auditors, PwC and management. The Audit Committee
also recommended the appointment, subject to shareholder approval, of PwC as the
Company's independent auditors for the 2001 fiscal year, and the Board concurred
in such recommendation.
Fees billed to the Company by PwC in fiscal year 2000:
Audit fees.--$1,135,150
Financial Information Systems Design and Implementation fees.--None
All Other fees.--$1,152,180
In connection with its activities, the Audit Committee has advised the
Board as follows:
The Audit Committee met with management, the Company's internal auditors
and representatives of PwC in connection with its review of the Company's
audited financial statements for the year ended December 31, 2000. Based on such
review and discussion, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Form 10-K and
the Board has done so.
The Audit Committee of the Board:
Karen Hastie Williams
H. Jesse Arnelle
Samuel J. Palmisano
PROPOSAL 2--ELECTION OF INDEPENDENT AUDITORS
The Company's independent auditors are PricewaterhouseCoopers, independent
accountants. At the Annual Meeting, the shareholders will vote on a proposal to
elect independent auditors for the Company's fiscal year ending December 30,
2001. The Audit Committee of the Board has recommended that
PricewaterhouseCoopers be re-elected as independent auditors for 2001. The Board
unanimously recommends that shareholders vote FOR this proposal. Proxies
solicited by the Board will be voted FOR PricewaterhouseCoopers unless otherwise
indicated. Representatives of PricewaterhouseCoopers will be present at the
Annual Meeting to make a statement, if they wish, and to respond to appropriate
questions from shareholders.
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PROPOSAL 3--2001 OMNIBUS INCENTIVE COMPENSATION PLAN
INTRODUCTION.
Executive incentive plans are, as the name implies, designed to attract and
retain a top-notch management team and board of directors and motivate them to
achieve a company's business goals. Virtually every American corporation of any
size has such a plan.
Before we get into the information the lawyers make us include, let us tell
you in this section, in plain English, why the Board of Directors believes a new
executive incentive plan is a good thing.
Times have changed in the past 30 years. That's pretty obvious. The tax
laws have changed, and Gannett has changed.
In 1968 -- more than three decades ago -- Lyndon Johnson was President. The
war in Vietnam was in full swing. And Gannett's shareholders adopted the 1968
Executive Incentive Bonus Plan (the "1968 Plan"). The 1968 Plan provides for
annual cash bonuses for executives who earn them. While the 1968 Plan has served
the Company's interests well in motivating executives to achieve top-notch
performance, it has not kept pace with changes in the tax laws.
In 1978 -- more than two decades ago -- Jimmy Carter was President. The Dow
Jones average was 805. And Gannett's shareholders adopted the 1978 Long Term
Incentive Plan (the "1978 Plan"), under which stock options and other long-term
grants have been made. Though the 1978 Plan has served as the Company's long
term incentive plan throughout that period, it is now something of a
patchwork -- it has been amended 11 times in the past twenty years -- and it is
out of date in many respects.
In addition, Gannett has grown rapidly in recent years due to major
acquisitions of newspaper companies in the United States and the United Kingdom.
Two years ago Gannett operated 75 daily newspapers and 21 television stations,
its annual revenues were roughly $5.1 billion, and it had 39,400 employees. Now,
the Company operates 114 daily newspapers and 22 television stations, its 2000
annual revenues were $6.2 billion, and it has over 53,400 employees. That
represents a 52% increase in newspapers, a 21% increase in annual revenues, and
a 36% increase in employees. There no longer are enough shares reserved for
future grants to match the incentive requirements this growth entails.
The Gannett Board of Directors believes it is time to adopt a unified plan
that reflects modern incentive compensation practices and fits the increased
size of the Company. The Board has approved a new executive compensation plan to
replace the 1968 Plan and the 1978 Plan. The new plan, called the 2001 Omnibus
Incentive Compensation Plan ("Omnibus Incentive Plan"), is subject to
shareholder approval and the Board of Directors unanimously recommends that
shareholders approve it.
Obviously, with a thirty-three year old bonus plan, and a twenty-three year
old long-term incentive plan, Gannett does not rush willy nilly into adopting
new executive compensation programs. With the advice of Hewitt Associates,
Gannett's outside compensation consultants, that plans like the proposed Omnibus
Incentive Plan are common today, the Board has decided to keep pace with modern
incentive practice and propose it to shareholders.
One thing the Board particularly likes about the Omnibus Incentive Plan is
that it is more flexible and would allow the Board to more closely tailor
compensation to specific areas of business performance the Board wants to
achieve. These "performance based awards" can be a big help in motivating
executives to achieve very specific objectives, which is one reason omnibus
plans are commonplace today.
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Another modern practice that the new plan would add is director
participation in awards. Although, according to The Conference Board's recent
Board of Directors Compensation Survey, 74% of major corporations pay their
directors in part with stock options, the 1978 Plan does not allow it. Director
stock compensation has become pervasive -- and is popular with shareholders --
because increasing a director's equity interest in a company's stock aligns his
or her financial interests more closely with other shareholders. This is
discussed in more detail below.
As we said, the Company has been fortunate to be able to acquire some very
fine and profitable companies, but its significant growth in employees has meant
that the pool of shares available for incentive stock awards no longer is enough
for Gannett's needs. So the Omnibus Incentive Plan includes a modest addition in
the stock reserved for future incentive grants, from 11.7 million shares to 12
million shares. Based on our present annual award practice, we estimate that
this reserve will last only about two years and we will be returning to ask for
shareholder approval of additional shares at the 2003 annual meeting.
The Omnibus Incentive Plan would replace the 1968 Plan and provide for
annual cash bonuses. The 1968 Plan has never been updated to meet the
requirements of Internal Revenue Code Section 162(m) -- which provides that
compensation over $1 million for the five highest paid executives will not be
deductible unless the compensation is "performance based". Although the wisdom
of Section 162(m) is itself questionable in our view, under the 1968 Plan
valuable tax deductions have been lost in recent years. The Omnibus Incentive
Plan would fix that and save the Company and its shareholders money. More on
that below, too.
You should note that the 1978 Plan already has many of the features of the
proposed Omnibus Incentive Plan. Both plans provide for stock options,
restricted stock, performance units, and stock appreciation rights. The proposed
Omnibus Incentive Plan still would be administered by the Board's Executive
Compensation Committee (the "Committee"), a committee of outside directors. One
difference is that the limit on stock option awards that may be made in a given
year to an executive would increase from 350,000 to 1,000,000 shares. Hewitt
Associates has recommended that a 5 million share maximum would be more
consistent with modern practice, but the Board believes a 1 million-share
ceiling would be sufficient. Mr. McCorkindale received grants of 346,000 stock
options in 2000 -- only 4,000 short of the current ceiling. That leaves little
room for the future. We are also including limits on other types of awards, such
as restricted stock awards, which are not imposed under the 1978 Plan.
In addition to these specifics, the discussion below describes other
changes the Omnibus Incentive Plan would make.
If the shareholders approve the proposed Omnibus Incentive Plan, it will
become effective as of January 1, 2001.
Shareholders are always interested in the amount of "dilution" that
executive incentive plans might bring to shares already held by the public. The
300,000 share increase, with the new 12 million share total, when added to the
approximately 17,000,000 stock awards already granted and unexercised, would
total about 10.8% of Gannett's outstanding stock, or 9.72% if calculated on a
fully diluted basis. We believe this is well within acceptable norms for such
plans at major corporations. The Omnibus Incentive Plan contains features that
the Board of Directors believes are consistent with shareholder protection and
sound corporate governance practices. See the section below called "Shareholder
Protection and Corporate Governance Practices."
We appreciate our shareholders giving this proposal their independent
thought.
And now it's the lawyers' turn --
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A. SUMMARY OF THE OMNIBUS INCENTIVE PLAN.
The following summary description of the Omnibus Incentive Plan is
qualified in its entirety by reference to the full text of the Omnibus Incentive
Plan, which is attached to this proxy statement as Appendix B. The parenthetical
article and section references that follow refer to articles and sections of the
Omnibus Incentive Plan that relate to this summary. The Omnibus Incentive Plan
will (1) increase by approximately 300,000 the number of shares of common stock
that could otherwise be issued under the 1978 Plan; (2) raise the annual limit
on the number of stock options that may be granted to a participant under the
existing plans from 350,000 to 1,000,000; (3) permit the grant of awards to
directors of Gannett; and (4) permit certain awards granted under the plan to
qualify as "performance-based" compensation (i.e. tax deductible), as described
below.
Eligibility. Awards may be granted to employees of Gannett, its
subsidiaries and affiliates, and directors of Gannett. The Committee will decide
who should receive awards and what kind they should receive. The Omnibus
Incentive Plan does not limit the number of employees and affiliates who may
receive awards. (Sections 5.1 and 5.2)
Number of Shares. The Omnibus Incentive Plan provides for the issuance of
up to 12 million shares of Company common stock for awards granted on or after
May 8, 2001, the date of the annual shareholders meeting. This is approximately
300,000 shares more than the 11,700,000 shares already approved by shareholders
and available for issuance for new awards under the 1978 Plan. The 11,700,000
shares will essentially be transferred to the Omnibus Incentive Plan and are
included in the 12 million shares available for issuance under the Omnibus
Incentive Plan. If shareholders approve the Omnibus Incentive Plan, no
additional awards will be made under the 1978 Plan or the 1968 Plan.
The common stock issued may be authorized but unissued shares or treasury
shares. (Section 4.1) Although new awards may be made using forfeited shares or
shares from lapsed awards, shares tendered to exercise an award, shares withheld
for taxes in connection with an award and shares which are settled in cash, the
number of shares of Gannett common stock issued under the Omnibus Incentive Plan
will not exceed 12 million. In addition, the Omnibus Incentive Plan limits to
1,500,000 the number of shares of common stock that may be issued for awards,
other than stock options and SARs. (Section 4.1)
Types of Awards. The Committee may grant the following types of awards
under the Omnibus Incentive Plan: stock options; stock appreciation rights;
restricted stock; and other equity-based and cash-based awards. (Article 4)
Stock Options. This type of award is already available under the 1978
Plan. A stock option is the right to purchase one or more shares of common stock
at a specified price, as determined by the Committee. The Committee may grant
non-qualified stock options and incentive stock options. (Article 6) A stock
option is exercisable at such times and subject to such terms and conditions as
the Committee determines. No more than one million shares of common stock
subject to stock options may be granted to any participant in a fiscal year.
(Section 4.1(a)) The 1978 Plan and the Omnibus Incentive Plan both provide that
the exercise price of a stock option shall not be less than 100% of the fair
market value of a share of common stock on the date that the option is granted.
(Section 6.3)
Stock Appreciation Rights. A type of stock appreciation right, called an
alternate appreciation right, is available under the 1978 Plan. A stock
appreciation right ("SAR") is a right to receive an amount in any combination of
cash or common stock (as determined by the Committee) equal in value to the
excess of the fair market value of the shares covered by such SAR on the date of
exercise over the aggregate exercise price of the SAR for such shares. SARs may
be granted in tandem with related options or freestanding. The exercise price of
an SAR granted in tandem with an option will be equal to the exercise price of
the related option, and may be exercised for all or
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part of the shares covered by such option upon surrender of the right to
exercise the equivalent portion of the related option. The exercise price of a
freestanding SAR will be equal to the fair market value of a share of common
stock on the date the SAR is granted. No more than one million shares of common
stock may be granted in the form of SARs to any participant in a fiscal year.
(Section 4.1(b))
Restricted Stock. This type of award is already available under the 1978
Plan, although the Omnibus Incentive Plan would allow restrictions other than
simply a minimum holding period, as is now the case. Restricted stock is an
award of common stock that is subject to restrictions and such other terms and
conditions as the Committee determines. The Omnibus Incentive Plan severely
restricts the number of shares that can be granted as Restricted Stock. Under
the 1978 Plan there is no limit. Under the Omnibus Incentive Plan, no more than
five hundred thousand restricted shares may be granted to any participant in a
fiscal year. (Section 4.1(c))
Performance Units/Shares and Cash-Based Awards. The 1978 Plan already
provides for "performance bonus units", but these awards do not meet the
requirements of Section 162(m). The Omnibus Incentive Plan is submitted to
shareholders for approval so that certain awards granted under the new plan may
qualify as "performance-based" compensation under Section 162(m) of the Internal
Revenue Code. Section 162(m) generally limits to $1 million the annual corporate
federal income tax deduction for "non-performance-based" compensation paid to
the chief executive officer or any of the four other highest paid officers of a
publicly-held corporation. The 1968 Plan was not structured so as to protect
these tax deductions. The Omnibus Incentive Plan is.
The Committee also may grant other types of awards that are valued in whole
or in part by reference to, or are otherwise based on, the fair market value of
the Company's common stock or other criteria established by the Committee and
the achievement of performance goals. These awards are subject to such terms and
conditions as the Committee determines. (Article 9) Payment of earned
performance units/shares and cash-based awards may be made in any combination of
cash or shares of common stock (as determined by the Committee) that have an
aggregate fair market value equal to the value of the earned awards at the close
of the applicable performance period. The maximum aggregate grant of performance
shares that may be awarded to any participant in any fiscal year shall not
exceed the value of five hundred thousand shares of common stock. (Section
4.1(d)) The maximum aggregate amount of performance units or cash-based awards
that may be awarded to any participant in any fiscal year shall not exceed
$10,000,000.
Performance Measures. The Omnibus Incentive Plan lists the performance
measures the Committee may use to make performance-based awards under Section
162(m). These performance measures include (1) financial measures, such as
earnings per share; net income (before or after taxes); net income from
continuing operations; return on equity, assets, capital or investment; cash
flows, including operating cash flow, and free cash flow; internal rates of
return; dividends paid; gross revenues; and gross margins; and (2) operating
measures, such as growth in circulation, television ratings and advertising
lineage. The performance measures may be determined by reference to (1) the
performance of Gannett, one or more of its subsidiaries, or a division or unit
of Gannett or one or more of its subsidiaries; or (2) comparisons of any of the
performance measures relative to other companies. (Article 10)
Administration. The Omnibus Incentive Plan will be administered by the
Executive Compensation Committee or another committee of the Board of Directors
designated by the Board of Directors. Subject to the terms of the Omnibus
Incentive Plan, the Committee may grant awards under the Omnibus Incentive Plan;
establish the terms and conditions of those awards; construe and interpret the
Omnibus Incentive Plan and any agreement or instrument entered into under the
Omnibus Incentive Plan; establish, amend or waive rules and regulations for the
Omnibus Incentive Plan's administration; amend the terms and conditions of any
outstanding award as provided in the
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Omnibus Incentive Plan; and take all other actions it deems necessary for the
proper operation or administration of the Omnibus Incentive Plan. The Committee
may delegate its authority, subject to certain limitations. (Section 3.2) The
Company reserves the right to impose more stringent requirements than those
specified in the Omnibus Incentive Plan with respect to the administration and
amendment of the plan and the grant of awards under the plan, if the Company
determines that more stringent requirements are appropriate.
Adjustments. In the event of a change in the outstanding shares of common
stock due to a stock split, stock dividend, recapitalization, merger,
consolidation, spin-off, reorganization, repurchase or exchange of common stock
or other securities, or other corporate transaction or event, the Committee may
take certain actions to prevent the dilution or enlargement of benefits under
the Omnibus Incentive Plan. These actions include adjusting (1) the number of
shares of common stock that may be issued under the Omnibus Incentive Plan
(including the share limitations in Section 4.1); (2) the number of shares or
price of shares subject to outstanding awards; and (3) the consideration to be
paid upon the grant or exercise of any award. (Section 4.2)
Change in Control. In the event of a change in control of the Company, as
defined in the Omnibus Incentive Plan, (1) all outstanding options and SARs will
become immediately exercisable in full, (2) all restriction periods and
restrictions imposed on non-performance based restricted stock awards will lapse
and (3) target payout opportunities attainable under all outstanding awards of
performance-based restricted stock, performance units and performance shares
will be paid on a prorated basis as specified in the Omnibus Incentive Plan. The
definition of change in control used in the Omnibus Incentive Plan is the same
as the definition in the 1978 Plan. The Transitional Compensation Plan will
continue to govern the extent to which cash-based awards are impacted by a
change in control for Transitional Compensation Plan participants. The Omnibus
Incentive Plan does not provide for the grant of option surrender rights in
tandem with stock options, as was the case under the 1978 Plan, and has
eliminated the requirement under the 1978 Plan that awards that were accelerated
as a result of a change in control could only be exercised during certain window
periods. (Article 14)
Amendment and Termination. The Committee may amend or terminate the
Omnibus Incentive Plan at any time, but no such amendment or termination may
adversely affect in any material way the rights of a participant with respect to
an outstanding award without that participant's consent. No awards may be
granted after January 1, 2011. As discussed in the next section, shareholder
approval is required for certain amendments to the Omnibus Incentive Plan.
(Section 16.3)
B. SHAREHOLDER PROTECTION AND CORPORATE GOVERNANCE PRACTICES.
The Omnibus Incentive Plan contains a number of features that the Board of
Directors believes are consistent with shareholder protection and sound
corporate governance practices.
Limitation on Shares Issued Other Than for Stock Options and SARs. The
Omnibus Incentive Plan limits to 1,500,000 the number of shares of common stock
that may be granted in the aggregate in the form of Restricted Stock,
Performance Shares and/or Performance Units. (Section 4.1)
No Discount Stock Options. The Omnibus Incentive Plan prohibits the grant
of a stock option with an exercise price of less than the fair market value of
the common stock on the date the stock option is granted. This restriction may
not be changed without shareholder approval. (Sections 6.3 and 16.3)
No Stock Option Repricings. The Omnibus Incentive Plan prohibits stock
option repricings absent shareholder approval. This provision applies to both
direct repricings -- lowering the exercise price of an outstanding stock
option -- and indirect repricings -- canceling an outstanding stock option and
granting a replacement stock option with a lower exercise price. (Section 16.3)
Gannett has never repriced an option granted under the 1978 Plan.
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No Evergreen Provision. The Omnibus Incentive Plan does not contain an
"evergreen provision" -- there is no automatic provision to replenish the 12
million shares of common stock authorized for issuance under the Omnibus
Incentive Plan based on the number or percentage of shares of common stock
outstanding. See "Summary of the Omnibus Incentive Plan -- Number of Shares."
C. FEDERAL INCOME TAX ASPECTS OF THE OMNIBUS INCENTIVE PLAN.
For those of you still plowing through this narrative, the following tax
summary should present a new level of challenge.
This is a brief summary of the federal income tax aspects of awards that
may be made under the Omnibus Incentive Plan based on existing U.S. federal
income tax laws. This summary is not complete and does not describe a number of
special tax rules, including the alternative minimum tax and various elections
that may be applicable under certain circumstances.
A participant who receives a cash bonus or other cash-based award will
realize ordinary income equal to the amount of the incentive award in the year
of receipt, and Gannett will generally be entitled to a corresponding deduction.
A participant who has been granted a stock option or restricted stock will
not realize taxable income at the date of grant, and Gannett will not be
entitled to a deduction at that time.
A participant who exercises a non-qualified stock option will realize
ordinary income in an amount measured by the excess of the fair market value of
the shares on the date of exercise over the exercise price. Gannett generally
will be entitled to a corresponding deduction for federal income tax purposes.
A participant who exercises an incentive stock option will not be subject
to taxation at the time of exercise, nor will Gannett be entitled to a
deduction. The difference between the exercise price and the fair market value
of shares on the date of exercise is a tax preference item for purposes of
determining a participant's alternative minimum tax. A disposition of the
purchased shares after the expiration of the required holding periods will
subject the participant to taxation at long-term capital gains rates in the year
of disposition in an amount determined under the Internal Revenue Code, and
Gannett will not be entitled to a deduction for federal income tax purposes. A
disposition of the purchased shares prior to the expiration of the applicable
holding periods will subject the participant to taxation at ordinary income
rates in the year of disposition in an amount determined under the Internal
Revenue Code, and Gannett generally will be entitled to a corresponding
deduction.
A participant holding restricted stock will, at the time the shares become
no longer subject to a substantial risk of forfeiture, realize ordinary income
in an amount equal to the fair market value of the shares and any cash received
at such time. Gannett generally will be entitled to a corresponding deduction
for federal income tax purposes.
The federal income tax consequences of other equity-based awards will
depend on the form of such awards.
As discussed above and elsewhere in this proxy statement, Section 162(m)
limits the corporate federal income tax deduction for pay to executives in
certain circumstances.
D. OTHER MATTERS.
The Committee has discretion to determine the type, terms and conditions
and recipients of awards granted under the Omnibus Incentive Plan. Accordingly,
it is not possible to determine the amount of the awards that will be received
by any director, officer or other employee of Gannett under the Omnibus
Incentive Plan, except that non-employee Directors will receive a 3,500 share
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grant for the 2001 fiscal year if shareholders approve the Omnibus Incentive
Plan. Non-employee Directors of Gannett were not eligible to receive awards
under the 1978 Plan or the 1968 Plan.
The "Bonus" column in the Summary Compensation Table on page 12 of this
proxy statement sets forth the awards paid under the 1968 Plan for fiscal 2000
to each of the named executive officers. All executive officers as a group (30
persons) received $10,568,000 under the 1968 Plan for fiscal 2000. A total of
858 other officers and employees received $18,088,050 under the 1968 Plan for
that year.
The Option Grants In Last Fiscal Year table on page 13 of this proxy
statement contains information concerning the non-qualified stock option awards
granted under the 1978 Plan during fiscal 2000 to each of the named executive
officers. All executive officers as a group received non-qualified stock options
covering 1,398,050 shares of common stock during fiscal 2000. A total of 1,853
other officers and employees received options covering 4,313,330 shares of
common stock under the 1978 Plan during fiscal 2000. No awards of alternate
appreciation rights, (which are similar to SARs), stock incentive rights (which
are similar to restricted stock grants) or performance bonus units (which are
similar to performance units/shares) were made under the 1978 Plan in fiscal
2000, except for 10,700 stock incentive rights.
The Board of Directors adopted the Omnibus Incentive Plan subject to
shareholder approval. Absent such approval: the Omnibus Incentive Plan would not
become effective; no stock awards would be made under the Omnibus Incentive
Plan; and the 1978 Plan and the 1968 Plan would not be amended as described in
this proxy statement. The latter two plans would continue on. Prior to the date
of the annual meeting, approximately 11.7 million shares of common stock were
available for issuance for new awards under the 1978 Plan. On March 9, 2001, the
closing price of the Company's common stock on the New York Stock Exchange was
$61.17 per share.
E. BOARD RECOMMENDATION AND VOTE REQUIRED.
The Board of Directors believes the Omnibus Incentive Plan is in the best
interests of Gannett and its shareholders because the Omnibus Incentive Plan
will enable Gannett to attract and retain a highly qualified management team,
enhance Gannett's pay for performance practices, maximize favorable tax
treatment of incentive compensation paid by the Company, and reinforce
management's focus on shareholder value. ACCORDINGLY, THE BOARD RECOMMENDS A
VOTE "FOR" APPROVAL OF THE OMNIBUS INCENTIVE PLAN, AND YOUR PROXY WILL BE SO
VOTED UNLESS YOU SPECIFY OTHERWISE.
The affirmative vote of a majority of the shares present in person or by
proxy and entitled to vote will be necessary to approve the Omnibus Incentive
Plan, provided that the total votes cast on such proposal represent over 50% in
interest of all securities entitled to vote on such proposal. Proxies solicited
by the Board of Directors will be voted FOR approval of the Omnibus Incentive
Plan, unless otherwise indicated. If a shareholder, present in person or by
proxy, abstains from voting, the shareholder's shares will not be voted. An
abstention from voting has the same legal effect as a vote "against" approval of
the Omnibus Incentive Plan. If a shareholder holds shares in a broker's account
and has given specific voting instructions, the shares will be voted in
accordance with those instructions. If no voting instructions have been given,
under New York Stock Exchange Rules the broker may decide how to vote on the
Omnibus Incentive Plan.
SHAREHOLDER PROPOSALS
The Company has received the following shareholder proposals. The Board of
Directors recommends a vote AGAINST these proposals, and your proxy will be so
voted unless you specify otherwise.
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PROPOSAL 4--EEO REPORTING AND AMERICAN INDIANS
Mercy Health Services, 34605 Twelve Mile Road, Farmington Hills, Michigan
48331-3221, beneficial owner of 3,000 shares of Gannett Common Stock, has
notified the Company that it intends to present the following proposal for
consideration at the meeting. Other shareholders co-sponsoring this proposal
are: Sisters of The Holy Names of Jesus & Mary, 2911 West Fort Wright Drive,
Spokane, Washington 99224, beneficial owner of 3,600 shares of Gannett Common
Stock; Sisters of St. Francis, 3390 Windsor Avenue, Dubuque, Iowa 52001,
beneficial owner of approximately 1,800 shares of Gannett Common Stock; and the
Grand Rapids Dominicans, 2025 E. Fulton Street, Grand Rapids, Michigan
49503-3895, beneficial owner of 4,600 shares of Gannett Common Stock.
RESOLVED: The company prepare at reasonable cost a report, omitting where
appropriate confidential information, that includes the following:
1. A report shall include the EEO-1 report in the standard federal
government categories according to their gender and races in each
of the nine major EEOC defined job categories for the previous
three years.
2. A description of how the company is working to increase its
business with female and minority suppliers and service providers.
3. Report any federal audit, Corporate Management Review, and Letter
of Compliance with corrective measures enacted to protect the
company's government contracts and legal penalties.
Statement by Shareholder in Support of the Resolution
Equal Employment Opportunity is a key issue for many shareholders. The 1995
bipartisan Glass Ceiling Commission study explains that a positive diversity
record has a positive impact on the bottom line. While women and minorities
comprise 57 percent of the U.S. workforce the Commission found that they
represent only 3 percent of executive management positions. By far the most
vulnerable and most excluded from corporate diversity initiatives are American
Indians.
Corporations have discontinued discriminating images and names like Black
Sambo and Frito Bandito while similar discriminatory images and names against
American Indians, like "Redskins" and "chief wahoo," remain in use. "Redskin"
originated from 1800s businessmen who coined the term from their dealing with
animal skins (deerskin and bearskin) and "red" from the dried blood of the
scalps of Indian men, women and children. Businesses used actual heads of Indian
men, women and children or images and names to attract their customers.
Every major American Indian organization including the National Congress of
American Indians, National Indian Education Association and Society of American
Indian Psychiatrists has called for an end to American Indian negative
images/names.
Workplace discrimination has created a significant burden for shareholders
because of the high cost of litigation, potential loss of government contracts,
and the financial consequences of a damaged corporate image resulting from
discrimination complaints. For example:
1) In 1996 Texaco settled the largest racial discrimination lawsuit in
U.S. history, costing a reported $170 million to the company and
stockholders. Texaco's public image was tarnished and the company
faced a consumer boycott.
2) In 1997 Denny's reported it was still trying to win back its
minority customers, dating back to the 1992 discrimination
complaints against Denny's.
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3) A U.S. Patent and Trademark lawsuit by American Indians resulted in
the Washington football team losing nine corporate patents because
of the offensive name and images.
4) Chicago area American Indian fireman won a 1998 discrimination case
because six supervisors failed to stop offensive negative names and
images about American Indians in the workplace.
5) The Los Angeles School district, largest in the country, banned
derogatory consumer products, names and images of American Indians
from the school system.
We believe negative images and names of American Indians are contrary to
corporate business interests and create a negative social, educational and
working environment for Indian and non-Indian people.
Statement by the Board of Directors Against the Resolution
Your Board of Directors believes that the Company's diversity efforts are
exemplary and that the actions outlined in this proposal are unnecessary. As you
may recall, this same proposal was included in the Company's proxy statement
last year, and it was overwhelmingly defeated. More than 8 out of 10 shares
voting on this proposal last year voted against it.
We continue to agree with the shareholder proponent that a positive
diversity record has a positive impact on a company's bottom line. The Company's
efforts in achieving a diverse workforce have been recognized by, among others,
Working Mother magazine by its inclusion of Gannett on its list of the 100 Best
Companies for Working Mothers during all 15 years of this survey. Also, Fortune
magazine has named the Company one of the 50 Best Companies for Asians, Blacks
and Hispanics.
With respect to the specific diversity-related actions recommended by the
shareholder proponent:
1. The Company continues to file annual EEO-1 reports on the gender
and race of Company employees with Federal agencies.
2. The Company, through its purchasing subsidiary, Gannett Supply
Corporation, continues to encourage and monitor the efforts of the
Company's operating units to use female and minority suppliers. In
fact, in 2000, the Company purchased goods and services from over
21,000 female- and minority-owned suppliers.
3. Those operating units of the Company that have contracts with the
federal government are obligated to adhere to the applicable
federal compliance regulations.
In light of the foregoing, your Board believes that the actions proposed by
the shareholder proponent remain unnecessary and recommends that shareholders
vote against this proposal.
PROPOSAL 5--NOMINATION OF ADDITIONAL DIRECTOR CANDIDATES
Mr. Bartlett Naylor, 1255 N. Buchanan, Arlington, VA 22205, beneficial
owner of 100 shares of Gannett Common Stock, has notified the Company that he
intends to present the following proposal for consideration at the meeting.
RESOLVED: The shareholders urge our board of directors to take the
necessary steps to nominate at least two candidates for each open board
position, and that the names, biographical sketches, SEC-required declarations
and photographs of such candidates shall appear in the company's proxy materials
(or other required disclosures) to the same extent that such information is
required by law and is our company's current practice with the single candidates
it now proposes for each position.
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Statement by Shareholder in Support of the Resolution
Although our company's board appreciates the importance of qualified people
overseeing management, we believe that the process for electing directors can be
improved.
Our company currently nominates for election only one candidate for each
board seat thus leaving shareholders no practical choice in most director
elections. Shareholders who oppose a candidate have no easy way to do so unless
they are willing to undertake the considerable expense of running an independent
candidate for the board. The only other way to register dissent about a given
candidate is to withhold support for that nominee, but that process rarely
affects the outcome of director elections. The current system thus provides no
readily effective way for shareholders to oppose a candidate that has failed to
attend board meetings; or serves on so many boards as to be unable to supervise
our company management diligently; or who serves as a consultant to the company
that could compromise independence; or poses other problems. As a result, while
directors legally serve as the shareholder agent in overseeing management, the
election of directors at the annual meeting is largely perfunctory. Even
directors of near bankrupt companies enjoy re-election with 90%+ pluralities.
The "real" selection comes through the nominating committee, a process too often
influenced, if not controlled, by the very management the board is expected to
scrutinize critically.
Our company should offer a rational choice when shareholders elect
directors. Such a process could abate the problem of a chair "choosing" his own
board, that is, selecting those directors he expects will reflexively support
his initiatives, and shedding those who may sometimes dissent. Such a process
could create healthy and more rigorous shareholder evaluation about which
specific nominees are best qualified.
Would such a process lead to board discontinuity? Perhaps, but only with
shareholder approval. Presumably an incumbent would be defeated only because
shareholders considered the alternative a superior choice. Would such a
procedure discourage some candidates? Surely our board should not be made of
those intolerant of competition. Would such a procedure be "awkward" for
management when it recruits candidates? Hopefully so. (Management could print a
nominee's name advanced by an independent shareholder to limit such
embarrassment.). The point is to remove the "final" decision on who serves as a
board director from the hands of management, and place it firmly in those of
shareholders.
We urge you to vote FOR this proposal.
Statement by the Board of Directors Against the Resolution
The Company's by-laws already permit shareholders to nominate candidates
for election to the Board of Directors. This proposal calls upon the Company to
adopt a procedure that would involve contested elections for each position on
the Board of Directors, with the incumbent Board being prohibited from providing
any meaningful guidance to shareholders in choosing between the contestants. As
far as the Board is aware, no other publicly held company has adopted a
procedure of this kind. For good reason.
In the Board's judgment, the adoption of this approach would seriously
impede the Board's ability to exercise its fiduciary responsibilities to all of
the Company's shareholders, by restricting its ability to identify and support
candidates for election to the Board. The Board currently has a Management
Continuity Committee, comprised of a majority of outside directors, charged with
the responsibility for soliciting recommendations for Board candidates;
developing and reviewing background information; and making recommendations to
the Board. This Committee reviews and makes recommendations to the Board with
respect to any candidates proposed by shareholders. The Board believes this
procedure best serves the interests of the Company's shareholders.
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Moreover, as a practical matter, it is difficult to understand how any
board of directors would be able to identify qualified candidates of the highest
caliber who would be willing to take on the burden of an election contest,
without the recommendation and backing of the incumbent Board. The proposal does
not suggest how these contests would be conducted, financed or regulated, but
any such contests would likely entail substantial additional costs that would
have to be borne by the Company, and thus indirectly by the shareholders.
In addition, requiring that positions on the Board of Directors be
contested would create risks of promoting instability, potentially depriving the
Company of the benefits of accumulated experience and knowledge of the Company
and its businesses and could adversely affect the Board's ability to maintain
and develop diversity in its composition. In the Board's judgment, these risks
make this proposal inadvisable and contrary to the interest of the Company's
shareholders.
Accordingly, your Board recommends that shareholders vote against this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSALS 4 AND 5, AND
YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
The affirmative vote of a majority of the shares present in person or by
proxy and entitled to vote on each shareholder proposal at the meeting will
constitute approval of such proposal. Proxies solicited by the Board of
Directors will be voted AGAINST each of the shareholder proposals unless
otherwise indicated. If a shareholder, present in person or by proxy, abstains
from voting, the shareholder's shares will not be voted. An abstention from
voting has the same legal effect as a vote "against" a proposal. If a
shareholder holds shares in a broker's account and has given specific voting
instructions, the shares will be voted in accordance with those instructions. If
no voting instructions are given, the shareholder's shares will not be voted
with respect to the proposals and will not be counted in determining the number
of shares entitled to vote on each of the proposals.
PRINCIPAL HOLDERS OF COMMON STOCK
As of March 9, 2001, the only person or group known to the Company to be
the beneficial owner of more than 5% of the outstanding shares of Gannett Common
Stock was Wellington Management Company, LLP, 75 State Street, Boston,
Massachusetts 02109. As of December 31, 2000, Wellington Management Company, LLP
exercised investment discretion over various institutional accounts that held
16,076,197 shares of Gannett Common Stock, which then constituted 6.1% of the
total outstanding shares. Wellington Management Company, LLP holds shared power
to dispose of all of these shares, shared power to vote 10,933,827 of these
shares and no voting power with respect to the remainder of the shares.
In February 2001, Wellington Management Company, LLP filed a report with
the Securities and Exchange Commission indicating that the shares were held
solely for investment purposes in the ordinary course of business and not for
the purpose or effect of changing or influencing control of the Company.
OTHER MATTERS
As of the date of this Proxy Statement, the Board does not intend to
present any matter for action at the Annual Meeting other than as set forth in
the Notice of Annual Meeting. If any other matters properly come before the
meeting, it is intended that the holders of the proxies will act in accordance
with their best judgment.
To be eligible for inclusion in the proxy materials for the Company's 2002
Annual Meeting, shareholder proposals must be received at the Company's
principal executive offices by November 23, 2001. A shareholder who wishes to
present a proposal at the Company's 2002 Annual
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Meeting, but who does not request that the Company solicit proxies for the
proposal, must submit the proposal to the Company's principal executive offices
by February 7, 2002.
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation of proxies by mail, certain of the officers and employees of
the Company, without extra compensation, may solicit proxies personally, by
telephone or other means. The Company also will request brokerage houses,
nominees, custodians and fiduciaries to forward soliciting materials to the
beneficial owners of stock held of record and will reimburse them for forwarding
the materials. In addition, Georgeson Shareholder Communications, Inc., New
York, New York, has been retained to aid in the solicitation of proxies at a fee
of $15,000, plus out of pocket expenses.
Copies of the 2000 Annual Report have been mailed to shareholders.
Additional copies may be obtained from the Secretary, Gannett Co., Inc., 1100
Wilson Boulevard, Arlington, Virginia 22234.
March 23, 2001
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APPENDIX A
GANNETT CO., INC.
AUDIT COMMITTEE
CHARTER
ORGANIZATION
The Board of Directors shall designate an Audit Committee, which shall be
composed of at least three directors, all of whom have no relationship to the
company that may interfere with the exercise of their independence from
management and the company.
Each member of the Audit Committee shall be financially literate, as such
qualification is interpreted by the Board of Directors in its business judgment,
or must become financially literate within a reasonable period of time after his
or her appointment to the Audit Committee.
At least one member of the Audit Committee must have accounting or related
financial management expertise, as the Board of Directors interprets such
qualification in its business judgment.
It is the intention of the Board that its Audit Committee shall satisfy the
requirements and standards set forth in the rules of the New York Stock Exchange
applicable to audit committees.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling its responsibility to the company and its shareholders relating to
its oversight of management and its auditors in respect of corporate accounting,
financial reporting practices, and the quality and integrity of the financial
reports of the company. It is not the role of the Audit Committee to guarantee
the accuracy or quality of the company's financial statements but to oversee the
work of management, the independent auditors and internal auditors. In so doing,
it is the responsibility of the Audit Committee to maintain regular and open
communication among the directors, the independent auditors, the internal
auditors, and the financial management of the company.
The outside auditor for the company is ultimately accountable to the Board
of Directors and Audit Committee of the company. The Audit Committee and Board
of Directors have the ultimate authority and responsibility to select, evaluate
and, where appropriate, replace the outside auditor (or to nominate the outside
auditor to be proposed for shareholder approval in any proxy statement).
The Audit Committee is responsible for obtaining from the outside auditor
on a periodic basis a formal written statement delineating all relationships
between the auditor and the company. The Audit Committee shall be responsible
for conferring with the outside auditor with respect to any disclosed
relationships or services that may affect the objectivity and independence of
the outside auditor and for recommending to the Board of Directors such
appropriate action as may be necessary to satisfy itself as to the independence
of the outside auditor.
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible in order to best react to
changing conditions and to oversee management's implementation of prudent
corporate accounting and reporting policies.
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In carrying out these responsibilities, the Audit Committee will:
- Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the company and its
divisions and subsidiaries.
- Meet with the independent auditors and financial management of the
company to review the scope of the proposed audit plan for the current
year and the audit procedures to be utilized, and at the conclusion
thereof review such audit, including any comments or recommendations of
the independent auditors.
- Obtain from the independent auditors a written statement detailing all
relationships between the auditors and the company, discuss any such
relationships with the auditors, consider whether the provision of
non-audit services is compatible with maintaining the auditor's
independence and, if so determined by the Audit Committee, recommend that
the Board of Directors take appropriate action to satisfy itself as to
the auditors' independence.
- Review with the independent auditors, the company's internal auditor, and
appropriate financial and accounting personnel the adequacy and
effectiveness of the accounting and financial controls of the company,
and elicit any recommendations for the improvement of such internal
control procedures or particular areas where new or more detailed
controls or procedures are desirable.
- Review the internal audit function of the company including the
independence and authority of its reporting obligations, the proposed
audit plans for the coming year, and the coordination of such plans with
the independent auditors.
- Receive as necessary notification of material adverse findings from
internal audits and a progress report on the proposed internal audit
plan, as appropriate, with explanations for changes from the original
plan.
- Review quarterly financial results with the Chairman prior to the release
of the company's quarterly financial statements.
- Review with management and the independent auditors the financial
statements contained in the annual report to shareholders to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the shareholders.
Changes in accounting principles also should be reviewed.
- Provide sufficient opportunity for the internal and independent auditors
to meet with the members of the Audit Committee without members of
management present. Among the items to be discussed in these meetings are
the independent auditors' evaluation of the company's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors receive during the course of the audit.
- Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
- Review accounting and financial staffing and succession planning within
the company as necessary.
- Review the matters discussed at each committee meeting with the Board of
Directors.
- Investigate any matter brought to its attention within the scope of its
duties to the extent and in such manner as it considers appropriate.
- Review compliance with the company's ethics policy annually.
- Review compliance with the company's legal compliance policy annually.
- Recommend approval of the initial Audit Committee charter by the Board of
Directors. Review the Audit Committee charter annually and include it in
the company's proxy statement at least once every three years.
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APPENDIX B
GANNETT CO, INC. 2001 OMNIBUS INCENTIVE COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Gannett Co., Inc., a Delaware corporation
(hereinafter referred to as the "Company"), hereby establishes an incentive
compensation plan to be known as the "Gannett Co., Inc. 2001 Omnibus Incentive
Compensation Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Nonqualified Stock Options, Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares,
Performance Units, and Cash-Based Awards.
Subject to approval by the Company's stockholders, the Plan shall become
effective as of January 1, 2001 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.
1.2 OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize the
profitability and growth of the Company through annual and long-term incentives
that are consistent with the Company's goals and that link the personal
interests of Participants to those of the Company's stockholders, to provide
Participants with an incentive for excellence in individual performance, and to
promote teamwork among Participants.
The Plan is further intended to provide flexibility to the Company and its
Affiliates in their ability to motivate, attract, and retain the services of
Participants who make significant contributions to the Company's success and to
allow Participants to share in that success.
1.3 DURATION OF THE PLAN. The Plan shall commence on the Effective Date
and shall remain in effect, subject to the right of the Committee to amend or
terminate the Plan at any time pursuant to Article 16 hereof, until all Shares
subject to it shall have been purchased or acquired according to the Plan's
provisions. However, in no event may an Award be granted under the Plan on or
after the tenth (10th) anniversary of the Effective Date.
1.4 PRIOR PLANS. Effective on May 8, 2001, no further awards shall be made
under the Company's 1978 Executive Long-Term Incentive Plan or the 1968
Executive Incentive Bonus Plan; provided, however, that any rights theretofore
granted under either such plan shall not be affected.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations of the Exchange Act.
2.2 "AWARD" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares, Performance Units, or Cash-Based Awards.
2.3 "AWARD AGREEMENT" means a written or electronic agreement entered into
by the Company and each Participant setting forth the terms and provisions
applicable to Awards granted under this Plan.
2.4 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
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2.6 "CASH-BASED AWARD" means an Award granted to a Participant as described
in Article 9 hereof.
2.7 "CHANGE IN CONTROL" shall be deemed to have occurred under any one or
more of the following conditions:
i. if, within three years of any merger, consolidation, sale of a
substantial part of Gannett's assets, or contested election, or any
combination of the foregoing transactions (a "Transaction"), the persons
who were directors of Gannett immediately before the Transaction shall
cease to constitute a majority of the Board of Directors (x) of Gannett or
(y) of any successor to Gannett, or (z) if Gannett becomes a subsidiary of
or is merged into or consolidated with another corporation, of such
corporation (Gannett shall be deemed a subsidiary of such other corporation
if such other corporation owns or controls, directly or indirectly, a
majority of the combined voting power of the outstanding shares of the
capital stock of Gannett entitled to vote generally in the election of
directors ("Voting Stock"));
ii. if, as a result of a Transaction, Gannett does not survive as an
entity, or its shares are changed into the shares of another corporation;
iii. if any "person" (as that term is used in Section 13(d) or
14(d)(2) of the Exchange Act) becomes a beneficial owner directly or
indirectly of securities of Gannett representing 20% or more of the
combined voting power of Gannett's Voting Stock;
iv. if three or more persons are elected directors of Gannett despite
the opposition of a majority of the directors of Gannett then in office; or
v. upon determination by the Committee that a Change in Control has
occurred, if such a person as defined in subparagraph (iii) above becomes
the beneficial owner directly or indirectly of securities of Gannett
representing from 12% up to 20% of the combined voting power of Gannett's
Voting Stock.
2.8 "CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
2.9 "COMMITTEE" means any committee appointed by the Board to administer
Awards to Employees or Directors, as specified in Article 3 hereof.
2.10 "COMPANY" means Gannett Co., Inc., a Delaware corporation and any
successor thereto as provided in Article 18 hereof.
2.11 "COVERED EMPLOYEE" means a Participant who, as of the date of vesting
and/or payout of an Award, as applicable, is one of the group of "covered
employees," as defined in the regulations promulgated under Code Section 162(m),
or any successor statute.
2.12 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company; provided, however, that any Director who is employed
by the Company shall be considered an Employee under the Plan.
2.13 "DISABILITY" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists, at
the discretion of the Committee, or if different, as defined in the Employee's
employment contract with the Company or any of its Affiliates or Subsidiaries.
2.14 "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.15 "EMPLOYEE" means any employee of the Company or its Subsidiaries or
Affiliates.
2.16 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
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2.17 "FAIR MARKET VALUE" as of any date and in respect of any Share means
the then most recent closing price of a Share reflected in the consolidated
trading tables of USA Today or any other publication selected by the Committee,
provided that, if Shares shall not have been traded on the New York Stock
Exchange for more than 10 days immediately preceding such date or if deemed
appropriate by the Committee for any other reason, the fair market value of
Shares shall be as determined by the Committee in such other manner as it may
deem appropriate. In no event shall the fair market value of any Share be less
than its par value.
2.18 "FREESTANDING SAR" means an SAR that is granted independently of any
Options, as described in Article 7 hereof.
2.19 "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares
granted under Article 6 hereof and that is designated as an Incentive Stock
Option and that is intended to meet the requirements of Code Section 422.
2.20 "INSIDER" shall mean an individual who is, on the relevant date, an
executive officer, director or ten percent (10%) beneficial owner of any class
of the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act.
2.21 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares granted under Article 6 hereof and that is not intended to meet the
requirements of Code Section 422, or that otherwise does not meet such
requirements.
2.22 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 hereof.
2.23 "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.24 "PARTICIPANT" means an Employee or Director who has been selected to
receive an Award or who has outstanding an Award granted under the Plan.
2.25 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.26 "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 9 hereof.
2.27 "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 9 hereof.
2.28 "PERIOD OF RESTRICTION" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, pursuant to the Restricted Stock Award
Agreement, as provided in Article 8 hereof.
2.29 "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.30 "RESTRICTED STOCK" means an Award granted to a Participant pursuant to
Article 8 hereof.
2.31 "RETIREMENT" means any retirement recognized under the Gannett
Retirement Plan or any successor plan thereto.
2.32 "SHARES" means the Company's common stock, par value $1.00 per share.
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2.33 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the terms
of Article 7 hereof.
2.34 "SUBSIDIARY" means any corporation, partnership, joint venture, or
other entity in which the Company has a majority voting interest.
2.35 "TANDEM SAR" means an SAR that is granted in connection with a related
Option pursuant to Article 7 hereof, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
canceled).
ARTICLE 3. ADMINISTRATION
3.1 GENERAL. Subject to the terms and conditions of the Plan, the Plan
shall be administered by the Committee. The members of the Committee shall be
appointed from time to time by, and shall serve at the discretion of, the Board
of Directors. The Committee shall have the authority to delegate administrative
duties to officers of the Company.
3.2 AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions hereof, the Committee shall have full power to select Employees and
Directors who shall participate in the Plan; determine the sizes and types of
Awards; determine the terms and conditions of Awards in a manner consistent with
the Plan; construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend, or waive rules and regulations
for the Plan's administration; and amend the terms and conditions of any
outstanding Award as provided in the Plan. Further, the Committee shall make all
other determinations that it deems necessary or advisable for the administration
of the Plan. As permitted by law and the terms of the Plan, the Committee may
delegate its authority herein. No member of the Committee shall be liable for
any action taken or decision made in good faith relating to the Plan or any
Award granted hereunder.
3.3 DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee shall be final, conclusive, and binding on all
persons, including the Company, its stockholders, Directors, Employees,
Participants, and their estates and beneficiaries, unless changed by the Board.
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to adjustment as
provided in Section 4.2 hereof, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be twelve million (12,000,000), no
more than one million five hundred thousand (1,500,000) of which may be granted
in the aggregate in the form of Restricted Stock, Performance Shares and/or
Performance Units. These shares shall consist of approximately 11,700,000 shares
that remain available under the Company's 1978 Executive Long-Term Incentive
Plan and approximately 300,000 additional shares. The Committee shall determine
the appropriate methodology for calculating the number of shares issued pursuant
to the Plan. Shares issued under the Plan may be authorized but unissued shares
or treasury shares. The Plan also amends and restates the 1978 Executive
Long-Term Incentive Plan and the 1968 Executive Incentive Bonus Plan, each in
its entirety (it being noted that awards under such plans prior to May 8, 2001,
shall not be impacted by this amendment).
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Unless the Committee determines that an Award to a Covered Employee shall
not be designed to comply with the Performance-Based Exception, the following
rules shall apply to grants of such Awards under the Plan:
(a)STOCK OPTIONS: The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted
in any one fiscal year to any one Participant shall be one million
(1,000,000).
(b)SARS: The maximum aggregate number of Shares that may be granted in
the form of Stock Appreciation Rights, pursuant to any Award
granted in any one fiscal year to any one Participant shall be one
million (1,000,000).
(c)RESTRICTED STOCK: The maximum aggregate grant with respect to
Awards of Restricted Stock granted in any one fiscal year to any
one Participant shall be five hundred thousand (500,000).
(d)PERFORMANCE SHARES/PERFORMANCE UNITS AND CASH-BASED AWARDS: The
maximum aggregate grant with respect to Awards of Performance
Shares made in any one fiscal year to any one Participant shall be
equal to the value of five hundred thousand (500,000) shares; the
maximum aggregate amount awarded with respect to Cash-Based Awards
or Performance Units to any one Participant in any one fiscal year
may not exceed ten million dollars ($10,000,000).
4.2 ADJUSTMENTS IN AUTHORIZED SHARES. Upon a change in corporate
capitalization, such as a stock split, stock dividend or a corporate
transaction, such as any merger, consolidation, combination, exchange of shares
or the like, separation, including a spin-off, or other distribution of stock or
property of the Company, any reorganization (whether or not such reorganization
comes within the definition of such term in Code Section 368) or any partial or
complete liquidation of the Company, such adjustment shall be made in the number
and class of Shares that may be delivered under Section 4.1, in the number and
class of and/or price of Shares subject to outstanding Awards granted under the
Plan, and in the Award limits set forth in Section 4.1, as may be determined to
be appropriate and equitable by the Committee, in its sole discretion, to
prevent dilution or enlargement of rights.
4.3 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that, unless the
Committee determines otherwise at the time such adjustment is considered, no
such adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan's or any Award's meeting the requirements of Section
162(m) of the Code, as from time to time amended.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Persons eligible to participate in this Plan include all
Employees and Directors.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees and
Directors, those to whom Awards shall be granted and shall determine the nature
and amount of each Award.
5.3 NEWLY ELIGIBLE EMPLOYEES. The Committee shall be entitled to make such
rules, regulations, determinations and awards as it deems appropriate in respect
of any Employee who becomes
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eligible to participate in the Plan or any portion thereof after the
commencement of an award or incentive period.
5.4 LEAVES OF ABSENCE. The Committee shall be entitled to make such rules,
regulations, and determinations as it deems appropriate under the Plan in
respect of any leave of absence taken by the recipient of any award. Without
limiting the generality of the foregoing, the Committee shall be entitled to
determine: (a) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan; and (b) the impact, if
any, of such leave of absence on awards under the Plan theretofore made to any
recipient who takes such leave of absence.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine which are not inconsistent with the terms of the Plan.
6.3 OPTION PRICE. The Option Price for each grant of an Option under this
Plan shall be as determined by the Committee; provided, however, the per-share
exercise price shall not be less than 100 percent of the Fair Market Value of
the Shares on the date the Option is granted.
6.4 DURATION OF OPTIONS. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant.
6.5 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.6 PAYMENT. Options granted under this Article 6 shall be exercised by
the delivery of a written, electronic or telephonic notice of exercise to the
Company, setting forth the number of Shares with respect to which the Option is
to be exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent; or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares that are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price); or (c) by a combination of
(a) and (b); or (d) any other method approved by the Committee in its sole
discretion. The tendering of previously acquired shares may be done through
attestation. No fractional shares may be tendered or accepted in payment of the
Option Price.
Cashless exercises are permitted pursuant to Federal Reserve Board's
Regulation T, subject to applicable securities law restrictions, or by any other
means which the Committee determines to be consistent with the Plan's purpose
and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of notification of exercise and full payment, the Company shall deliver
to the Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased under the
Option(s).
Unless otherwise determined by the Committee, all payments under all of the
methods indicated above shall be paid in United States dollars.
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6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, or under any blue sky or state securities laws applicable
to such Shares.
6.8 NONTRANSFERABILITY OF OPTIONS.
(a)INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant.
(b)NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6
may be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a
Participant's Award Agreement, all NQSOs granted to a Participant
under this Article 6 shall be exercisable during his or her
lifetime only by such Participant or such Participant's legal
representative.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.
Subject to the terms and conditions of the Plan, the Committee shall have
complete discretion in determining the number of SARs granted to each
Participant and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such SARs.
The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2 SAR AGREEMENT. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.
7.3 TERM OF SARS. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion.
7.4 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.
7.5 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
7.6 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the
date of exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
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In the sole discretion of the Committee, the payment upon SAR exercise may
be in cash, in Shares of equivalent value, in some combination thereof, or in
any other manner approved by the Committee. The Committee's determination
regarding the form of SAR payout shall be set forth in the Award Agreement
pertaining to the grant of the SAR.
7.7 NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant or such Participant's legal representative.
ARTICLE 8. RESTRICTED STOCK
8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts, as the Committee shall
determine.
8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine.
8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned,
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Award Agreement. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be available during his or
her lifetime only to such Participant or such Participant's legal
representative.
8.4 OTHER RESTRICTIONS. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance goals, time-
based restrictions on vesting following the attainment of the performance goals,
time-based restrictions, and/or restrictions under applicable federal or state
securities laws.
To the extent deemed appropriate by the Committee, the Company may retain
the certificates representing Shares of Restricted Stock in the Company's
possession until such time as all conditions and/or restrictions applicable to
such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.
8.5 VOTING RIGHTS. If the Committee so determines, Participants holding
Shares of Restricted Stock granted hereunder may be granted the right to
exercise full voting rights with respect to those Shares during the Period of
Restriction.
8.6 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may, if the
Committee so determines, be credited with dividends paid with respect to the
underlying Shares while they are so held. The Committee may apply any
restrictions to the dividends that the Committee deems appropriate. Without
limiting the generality of the preceding sentence, if the grant or vesting of
Restricted Shares granted to a Covered Employee is designed to comply with the
requirements of the Performance-Based
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Exception, the Committee may apply any restrictions it deems appropriate to the
payment of dividends declared with respect to such Restricted Shares, such that
the dividends and/or the Restricted Shares maintain eligibility for the
Performance-Based Exception.
ARTICLE 9. PERFORMANCE UNITS, PERFORMANCE SHARES, AND CASH-BASED AWARDS
9.1 GRANT OF PERFORMANCE UNITS/SHARES AND CASH-BASED AWARDS. Subject to
the terms of the Plan, Performance Units, Performance Shares, and/or Cash-Based
Awards may be granted to Participants in such amounts and upon such terms, and
at any time and from time to time, as shall be determined by the Committee.
9.2 AWARD AGREEMENT. At the Committee's discretion, each grant of
Performance Units/ Shares and Cash-Based Awards may be evidenced by an Award
Agreement that shall specify the initial value, the duration of the Award, the
performance measures, if any, applicable to the Award, and such other provisions
as the Committee shall determine which are not inconsistent with the terms of
the Plan.
9.3 VALUE OF PERFORMANCE UNITS/SHARES AND CASH-BASED AWARDS. Each
Performance Unit shall have an initial value that is established by the
Committee at the time of grant. Each Performance Share shall have an initial
value equal to the Fair Market Value of a Share on the date of grant. Each
Cash-Based Award shall have a value as may be determined by the Committee. The
Committee shall set performance goals in its discretion which, depending on the
extent to which they are met, will determine the number and/or value of
Performance Units/Shares and Cash-Based Awards that will be paid out to the
Participant. For purposes of this Article 9, the time period during which the
performance goals must be met shall be called a "Performance Period."
9.4 EARNING OF PERFORMANCE UNITS/SHARES AND CASH-BASED AWARDS. Subject to
the terms of this Plan, after the applicable Performance Period has ended, the
holder of Performance Units/ Shares and Cash-Based Awards shall be entitled to
receive payout on the number and value of Performance Units/Shares and
Cash-Based Awards earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding performance
goals have been achieved. Unless otherwise determined by the Committee,
notwithstanding any other provision of the Plan, payment of Cash-Based Awards
shall only be made for those Participants who are Directors or in the employ of
the Company at the end of the Performance Period or, if none has been specified,
the end of the applicable award year.
9.5 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES AND CASH-BASED
AWARDS. Payment of earned Performance Units/Shares and Cash-Based Awards shall
be as determined by the Committee and, if applicable, as evidenced in the
related Award Agreement. Subject to the terms of the Plan, the Committee, in its
sole discretion, may pay earned Performance Units/Shares and Cash-Based Awards
in the form of cash or in Shares (or in a combination thereof) that have an
aggregate Fair Market Value equal to the value of the earned Performance
Units/Shares and Cash-Based Awards at the close of the applicable Performance
Period. Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee. No fractional shares will be issued. The
determination of the Committee with respect to the form of payout of such Awards
shall be set forth in the Award Agreement pertaining to the grant of the Award.
Unless otherwise provided by the Committee, Participants holding
Performance Units/Shares may be entitled to receive dividend units with respect
to dividends declared with respect to the Shares. Such dividends may be subject
to the same accrual, forfeiture, and payout restrictions as apply to dividends
earned with respect to Shares of Restricted Stock, as set forth in Section 8.6
hereof, as determined by the Committee.
9.6 NONTRANSFERABILITY. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares and Cash-Based Awards may not be sold,
transferred, pledged,
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assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement, a Participant's rights under the Plan shall be
exercisable during the Participant's lifetime only by such Participant or such
Participant's legal representative.
ARTICLE 10. PERFORMANCE MEASURES
Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Covered Employees that are designed to
qualify for the Performance-Based Exception, the performance measure(s) to be
used for purposes of such grants shall be chosen from among:
(a) Earnings per share;
(b) Net income (before or after taxes);
(c) Net income from continuing operations;
(d) Return measures (including, but not limited to, return on assets,
equity, capital or investment);
(e) Cash flow (including, but not limited to, operating cash flow and
free cash flow);
(f) Cash flow return on investments, which equals net cash flows
divided by owner's equity;
(g) Earnings before or after taxes, interest, depreciation and/or
amortization;
(h) Internal rate of return or increase in net present value;
(i) Dividend payments;
(j) Gross revenues;
(k) Gross margins;
(l) Operating measures such as growth in circulation, television
ratings and advertising lineage;
(m) Internal measures such as achieving a diverse workforce;
(n) Share price (including, but not limited to, growth measures and
total shareholder return); and
(o) Any of the above measures compared to peer or other companies.
Performance measures may be set either at the corporate level, division
level, or the business unit level.
Awards that are designed to qualify for the Performance-Based Exception,
and that are held by Covered Employees, may not be adjusted upward (the
Committee shall retain the discretion to adjust such Awards downward).
If applicable tax and/or securities laws change to permit Committee
discretion to alter the governing performance measures without obtaining
shareholder approval of such changes, the Committee shall have sole discretion
to make such changes without obtaining shareholder approval.
ARTICLE 11. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid
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in case of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be effective
only when filed by the Participant in writing with the Company during the
Participant's lifetime. If a beneficiary designation has not been made, or the
beneficiary was not properly designated (in the sole discretion of the
Committee), has died or cannot be found, all payments after death shall be paid
to the Participant's estate. In case of disputes over the proper beneficiary,
the Company reserves the right to make any or all payments to the Participant's
estate.
ARTICLE 12. DEFERRALS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares and Cash-Based Awards. If any such deferral election is
required or permitted, the Committee shall, in its sole discretion, establish
rules and procedures for such payment deferrals.
ARTICLE 13. RIGHTS OF EMPLOYEES/DIRECTORS
13.1 EMPLOYMENT. Nothing in the Plan shall confer upon any Participant any
right to continue in the Company's employ, or as a Director, or interfere with
or limit in any way the right of the Company to terminate any Participant's
employment or directorship at any time.
13.2 PARTICIPATION. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
13.3 RIGHTS AS A STOCKHOLDER. Except as provided in Sections 8.5, 8.6 and
9.5, a Participant shall have none of the rights of a shareholder with respect
to shares of Common Stock covered by any Award until the Participant becomes the
record holder of such shares.
ARTICLE 14. TERMINATION OF EMPLOYMENT/DIRECTORSHIP
Each Participant's Award Agreement shall set forth the extent to which the
Participant shall have the right to such Participant's outstanding Award(s)
following termination of the Participant's employment or directorship with the
Company. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreements entered into with each
Participant, need not be uniform among all Awards issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination.
ARTICLE 15. CHANGE IN CONTROL
15.1 TREATMENT OF OUTSTANDING AWARDS OTHER THAN CASH-BASED AWARDS. In the
event of a Change in Control, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governing governmental
agencies or national securities exchanges, or unless the Board shall determine
otherwise in the Award Agreement:
(a) Any and all Options and SARs granted hereunder shall become fully
exercisable during their remaining term;
(b) Any restriction periods and restrictions imposed on Restricted
Stock that are not performance-based shall lapse; and
(c) The target payout opportunities attainable under all outstanding
Awards of performance-based Restricted Stock, Performance Units
and Performance Shares shall be deemed to have been fully earned
for the entire Performance Period(s) as of the effective date of
the Change in Control. The vesting of all such Awards denominated
in
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Shares shall be accelerated as of the effective date of the Change in
Control and, subject to Section 15.4, there shall be paid out to
Participants within thirty (30) days following the effective date of
the Change in Control, a pro rata number of shares based upon an
assumed achievement of all relevant targeted performance goals and
upon the length of time within the Performance Period that has
elapsed prior to the Change in Control. Subject to Section 15.4, such
Awards denominated in cash shall be paid pro rata to Participants in
cash within thirty (30) days following the effective date of the
Change in Control, with the proration determined as a function of the
length of time within the Performance Period that has elapsed prior
to the Change in Control, and based on an assumed achievement of all
relevant targeted performance goals.
15.2 TREATMENT OF CASH-BASED AWARDS. Any outstanding Cash-Based Awards
shall not accelerate or vest as a result of a Change in Control. The extent to
which any outstanding Cash-Based Awards are impacted by a Change in Control
shall be governed by the Company's Transitional Compensation Plan, as the same
may be amended from time to time.
15.3 LIMITATION ON ACCELERATION.
(a)INTENTION OF SECTION 15.3: The acceleration or payment of Awards
could, in certain circumstances, subject the Participant to the
excise tax provided under Section 4999 of the Code. It is the
object of this Section 15.3 to enable each Participant to retain in
full the benefits of the Plan and to provide for the maximum
after-tax income to each Participant. Accordingly, the Participant
must determine, before any payments are made on Awards governed by
Section 15.1, which of two alternative forms of acceleration will
maximize the Participant's after-tax proceeds, and must notify the
Company in writing of his or her determination. The first
alternative is the payment in full of all Awards governed by
Section 15.1. The second alternative is the payment of only a part
of the Participant's Awards so that the Participant receives the
largest payment possible without causing an excise tax to be
payable by the Participant under Section 4999 of the Code. This
second alternative is referred to in this Section as "Limited
Vesting".
(b)LIMITATION ON PARTICIPANT'S RIGHTS: The Participant's Awards shall
be paid only to the extent permitted under the alternative
determined by the Participant to maximize his or her after-tax
proceeds, and the Participant shall have no rights to any greater
payments on his or her Awards.
(c)DETERMINATION TO BE CONCLUSIVE: The determination of whether
Limited Vesting is required and the application of the rules in
Section 15.4 shall initially be made by the Participant and all
such determinations shall be conclusive and binding on the Company
unless the Company proves that they are clearly erroneous. In the
latter event, such determinations shall be made by the Company.
15.4 LIMITATION ON PAYMENT. Notwithstanding Section 15.1, if Limited
Vesting applies then the amount paid on exercise or payment of an Award shall
not exceed the largest amount that can be paid without causing an excise tax to
be payable by the Participant under Section 4999 of the Code. If payments are so
limited, awards shall be deemed paid in the following order:
(a) all exercised Options or SARs that were accelerated pursuant to
Section 15.1(a) shall be deemed paid first;
(b) all awards of Performance Units, Performance Shares and
performance-based Restricted Stock shall then be deemed paid; and
(c) finally, all awards of Restricted Stock that are not
performance-based shall be deemed paid.
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As among awards or portions of awards of the same type, those vesting at
the most distant time in the future (absent a Change in Control) shall be deemed
paid first.
15.5 EXPENSES. The Company shall pay all legal fees, court costs, fees of
experts and other costs and expenses when incurred by a Participant in
connection with any actual, threatened or contemplated litigation or legal,
administrative or other proceeding involving the provisions of Section 15.4,
whether or not initiated by the Participant.
15.6 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE-IN-CONTROL
PROVISIONS. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 15 may not be terminated,
amended, or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior written
consent of the Participant with respect to said Participant's outstanding
Awards; provided, however, the Committee may terminate, amend, or modify this
Article 15 at any time and from time to time prior to the date of a Change in
Control.
ARTICLE 16. AMENDMENT, MODIFICATION, AND TERMINATION
16.1 AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms of the
Plan, the Committee or the Board may at any time and from time to time, alter,
amend, suspend, or terminate the Plan in whole or in part.
16.2 AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of the
Plan to the contrary, no termination, amendment, or modification of the Plan
shall adversely affect in any material way any Award previously granted under
the Plan, without the written consent of the Participant holding such Award.
16.3 SHAREHOLDER APPROVAL REQUIRED FOR CERTAIN AMENDMENTS. Shareholder
approval will be required for any amendment of the Plan that does any of the
following: (a) permits the grant of any Option with an Option Price less than
the Fair Market Value of the Shares on the date of grant; or (b) reduces the
Option Price of an outstanding Option, either by lowering the Option Price or by
canceling an outstanding Option and granting a replacement Option with a lower
exercise price.
16.4 COMPLIANCE WITH CODE SECTION 162(M). At all times when Code Section
162(m) is applicable, to the extent the Committee so determines, all Awards
granted under this Plan to Employees who are or could reasonably become Covered
Employees as determined by the Committee shall comply with the requirements of
Code Section 162(m). In addition, if changes are made to Code Section 162(m) to
permit greater flexibility with respect to any Award or Awards available under
the Plan, the Committee may, subject to this Article 16, make any adjustments it
deems appropriate.
ARTICLE 17. WITHHOLDING
17.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy the Federal statutory minimum, state, and local taxes,
domestic or foreign, required by law or regulation to be withheld with respect
to any taxable event arising as a result of this Plan. The Participant may
satisfy, totally or in part, his obligations pursuant to this Section 17.1 by
electing to have Shares withheld, to redeliver Shares acquired under an Award,
or to deliver previously owned Shares, provided that the election is made in
writing on or prior to (i) the date of exercise, in the case of Options and
SAR's (ii) the date of payment, in respect of Performance Units/Shares, or
Cash-Based Awards, and (iii) the expiration of the incentive period, in respect
of Restricted Stock. Any election made under this Section 17.1 shall be
irrevocable by the Participant and may be disapproved by the Committee at any
time in its sole discretion. If an election is disapproved by the Committee, the
Participant must satisfy his obligations pursuant to this paragraph in cash.
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ARTICLE 18. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business, stock and/or assets of the Company.
ARTICLE 19. GENERAL PROVISIONS
19.1 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
19.2 SEVERABILITY. If any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
19.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
19.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act, unless determined otherwise by
the Board. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Board.
19.5 LISTING. The Company may use reasonable endeavors to register Shares
allotted pursuant to the exercise of an Option with the United States Securities
and Exchange Commission or to effect compliance with the registration,
qualification, and listing requirements of any national securities laws, stock
exchange, or automated quotation system.
19.6 INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
19.7 NO ADDITIONAL RIGHTS. Neither the Award nor any benefits arising
under this Plan shall constitute part of an employment contract between the
Participant and the Company or any Subsidiary or Affiliate, and accordingly,
subject to Section 16.2, this Plan and the benefits hereunder may be terminated
at any time in the sole and exclusive discretion of the Committee without giving
rise to liability on the part of the Company or any Affiliate for severance
payments.
19.8 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES. Notwithstanding any
provision of the Plan to the contrary, to comply with provisions of laws in
other countries in which the Company, its Affiliates, and its Subsidiaries
operate or have Employees, the Committee, in its sole discretion, shall have the
power and authority to:
(a) Determine which Affiliates and Subsidiaries will be covered by the
Plan or relevant subplans;
(b) Determine which Employees employed outside the United States are
eligible to become Participants in the Plan;
(c) Modify the terms and conditions of any Award granted to
Participants who are employed outside the United States;
B-14
49
(d) Establish subplans, modified exercise procedures, and other terms
and procedures to the extent such actions may be necessary,
advisable or convenient, or to the extent appropriate to provide
maximum flexibility for the Participant's financial planning. Any
subplans and modifications to the Plan terms or procedures
established under this Section 19.8 by the Committee shall be
filed with the Plan document as Appendices; and
(e) Take any action, before or after an Award is made, which the
Committee deems advisable to obtain, comply with, or otherwise
reflect any necessary governmental regulatory procedures,
exemptions or approvals, as they may affect this Plan, any
subplan, or any Participant.
19.9 UNCERTIFICATED SHARES. To the extent that the Plan provides for
issuance of certificates to reflect the transfer of Shares, the transfer of such
Shares may be effected on a noncertificated basis, to the extent not prohibited
by applicable law or the rules of any stock exchange.
19.10 GOVERNING LAW. The Plan and each Award Agreement shall be governed
by the laws of the State of Delaware, excluding any conflicts or choice of law
rule or principle that might otherwise refer construction or interpretation of
the Plan to the substantive law of another jurisdiction. Unless otherwise
provided in the Award Agreement, recipients of an Award under the Plan are
deemed to submit to the exclusive jurisdiction and venue of the federal or state
courts located in the Commonwealth of Virginia, County of Fairfax, to resolve
any and all issues that may arise out of or relate to the Plan or any related
Award Agreement.
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GANNETT CO., INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS--MAY 8, 2001
The undersigned hereby appoints Douglas H. McCorkindale and Thomas L.
Chapple or either of them, attorneys and proxies each with power of
substitution to represent the undersigned at the Annual Meeting of Shareholders
of the Company to be held on May 8, 2001 and at any adjournment or
adjournments thereof, with all the power that the undersigned would possess if
personally present, and to vote all shares of stock that the undersigned may
be entitled to vote at said meeting, as designated on the reverse, and in
accordance with their best judgment in connection with such other business as
may come before the meeting.
PLEASE CAST YOUR VOTES ON THE REVERSE SIDE, BY TELEPHONE OR ONLINE AS
DESCRIBED ON THE REVERSE SIDE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4 AND 5. TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST SIGN THE REVERSE SIDE; NO BOXES
NEED TO BE CHECKED. UNLESS MARKED OTHERWISE, THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS.
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SEE REVERSE
SIDE
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51
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COMPANY#
CONTROL#
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VOTING INSTRUCTIONS FOR GANNETT CO., INC.'S
2001 ANNUAL MEETING OF SHAREHOLDERS
Gannett Co., Inc. shareholders may vote their shares for matters to be covered
at the Company's 2001 Annual Meeting of Shareholders using a toll-free
telephone number, via the Internet or using the attached proxy card. Below are
the voting instructions for all three options.
VOTE BY PHONE--1-800-240-6326
Use any touch tone telephone to vote your proxy at any time 24 hours a day, 7
days a week, until 10:00 a.m. on May 7, 2001. Have your proxy card in hand
when you call. You will be prompted to enter the 3-digit Company Number and
your 7-digit Control Number which are located above, and then to follow the
simple voting instructions. If you would like to attend the meeting, you will
have the opportunity to request a ticket at the end of the telephone call.
VOTE BY INTERNET--http://www.eproxy.com/gci/
Use the Internet to vote your shares at any time 24 hours a day, 7 days a week,
until 10:00 a.m. on May 7, 2001. Have your proxy card in hand. You will be
prompted to enter the 3-digit Company Number and your 7-digit Control Number
which are located above, and then to follow the simple voting instructions.
You will have the option to receive all future materials via the Internet. If
you would like to attend the meeting, you can request a ticket online.
VOTE BY MAIL
Mark, sign and date the attached proxy card and return it in the enclosed
postage-paid envelope.
IF YOU VOTE BY PHONE OR THE INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD.
THANK YOU FOR VOTING.
- Please detach here -
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
1. ELECTION OF DIRECTORS: Nominees are: [ ] VOTE FOR all nominees [ ] VOTE WITHHELD
except those I have from all nominees
01 James A.Johnson 02 Douglas H.McCorkindale 03 Stephen P.Munn listed below
(Instructions: To withhold authority to vote for any individual
nominee, write the number(s) in the box provided to the right.) [ ]
2. PROPOSAL TO ELECT PricewaterhouseCoopers as the Company's Auditors. [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE the 2001 Omnibus Incentive Compensation Plan. [ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD RECOMMENDS A VOTE "AGAINST" PROPOSALS 4 and 5.
4. SHAREHOLDER PROPOSAL concerning EEO Reporting and American Indians. [ ] FOR [ ] AGAINST [ ] ABSTAIN
5. SHAREHOLDER PROPOSAL concerning Additional Director Candidates. [ ] FOR [ ] AGAINST [ ] ABSTAIN
THE PROXIES are authorized to vote in their discretion upon such other business,
if any, as may properly come before the meeting.
Address Change? Mark Box [ ] Indicate changes below. [ ] I PLAN TO ATTEND THE MEETING, AND I REQUEST A TICKET.
Date
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SIGNATURE(S) IN BOX
Please sign EXACTLY as
name appears at the left.
Joint owners each should
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
related title.